Proinvestiment

Bank of America: $2.2 billion loss

2009-10-17T09:16:00.000-07:00

Bank of America proved no match for the ongoing recession as the nation's biggest bank reported a steep loss Friday.

With Americans continuing to default on their credit cards and mortgages, the company said it lost $2.2 billion in the third quarter, which included several charges related to the government's move to rescue the firm over the past year.

Bank of America's results come at a particularly difficult time for the Charlotte, N.C.-based lender and its CEO Ken Lewis.

Last month, the company's embattled leader announced plans to step down amid ongoing scrutiny over his role in the company's controversial purchase of Merrill Lynch.

Friday's results also come just a day after Lewis agreed to a deal not to accept a salary or bonus in his final year as CEO in an effort to deflect some of scrutiny the firm faces.

During a conference call with analysts, Lewis thanked the investment community for its support over the years, adding that he felt confident that Bank of America's board would find a suitable replacement. The company has provided no indication when a new CEO might be named.

"I have no doubt that Bank of America will thrive in my absence," he said.
Credit fallout

Lewis' outlook, however, did little to soften the blow of the firm's latest results. During the quarter, the company said it lost 26 cents. Analysts were anticipating BofA to fare slightly better, expecting a loss of 21 cents a share, according to Thomson Reuters.

Experiencing the bulk of the quarter's losses was Bank of America's mortgage and credit card businesses. Both divisions lost more than $1 billion during the July-September period, as more and more Americans found themselves out of work and unable to keep up with their loan payments.

Loan troubles also intensified within Bank of America's commercial real estate portfolio, amid slower spending by both businesses and consumers.
0:00 /5:25Blankfein: Uneven recovery

Still, there were some encouraging signs. In the latest quarter, the company set $11.7 billion for bad loans, down from $13.4 billion in the previous quarter.

"If you look at underlying numbers, credit quality is improving," said Alan Villalon, a senior research analyst at Minneapolis-based First American Funds

Bank of America's Lewis acknowledged that credit issues remained the biggest challenge facing the company going forward, but added that the company may have reached a peak in loan losses.

One bright spot was its wealth management division, one of the key businesses that led Bank of America to complete its controversial deal with Merrill Lynch last year. Both revenues and profits within the division were more than double the previous year's levels and held steady from last quarter.
Challenges remain

One key question that continues to swirl around the company is when it might be able to get out from under the government's thumb.

In exchange for accepting $45 billion in bailout money over the past year, the company is required to make hefty dividend payments. In the latest quarter, it paid $1.2 billion in preferred share dividends, with much of it going to the government.

The company's pay practices for its top 100 highest paid employees are also currently under review by the Obama administration's so-called "pay czar". Kenneth Feinberg, the man charged with handling the task, is expected to rule on the matter by the end of the month.

And that's not including the numerous high-profile state and federal investigations the company is facing related to its controversial purchase of Merrill Lynch. It is also engaged in a legal battle with the Securities and Exchange Commission over its alleged failure to notify shareholders of its decision to pay Merrill executives outsized bonuses last year.

Hoping to deflect some of that scrutiny, Bank of America agreed earlier this week to share previously undisclosed information related to its purchase of Merrill Lynch with regulators.

The agreement would give regulators access to details concerning the bank's failure to disclose what it knew about pending losses at Merrill when it bought the troubled brokerage last year.

Bank of America (BAC, Fortune 500) shares fell more than 4% in late Friday trading.

Deficit: What caused it, why it matters

2009-08-06T07:35:00.000-07:00

When George Bush took office at the beginning of 2001, the federal government was running a substantial budget surplus and projected rising surpluses "as far as the eye could see." Now, the United States is facing massive current deficits -- as a share of the economy, the largest since World War II -- and an increasingly dire and unsustainable outlook over the next 10 years and beyond.

How did we get into this fiscal mess? To quote a character in Ernest Hemingway's classic novel, "The Sun Also Rises," when asked by another how he lost his wealth, "Two ways. Gradually and then suddenly."

The gradual part was a series of policy actions adopted during the Bush administration. In 2001, the Congressional Budget Office projected that the 2008 budget would show a surplus equal to 4.5% of gross domestic product. The actual 2008 budget ran a deficit of 3.2% of GDP. Almost all of the reversal was the result of policy changes -- tax cuts and spending increases.

Then, in 2009, the bottom fell out.

Financial markets collapsed and the economy went into a free fall. While the economy is beginning to show signs of stabilizing, the deficit has deepened and is on course to be roughly 13% of GDP this year. About two-thirds of the swing is due to the troubled economy and the other third due to policy responses to the downturn.

During a strong cyclical downturn, big deficits are not just a necessary evil but can actually do a fair amount of good. So, while the current deficit is striking, it is not a problem in and of itself, especially if it falls to more typical levels in the next few years.
Looking into the future, it ain't pretty

The real problem is the medium- and long-term outlook.

Analysts have long emphasized that the country faces a long-term budget problem as a consequence of our rapidly growing old-age entitlement programs.

But now even the 10-year outlook is unsustainable. By 2019, even if everything goes the way the Obama administration wants, and the economy recovers and grows steadily over the next decade, the deficit will be 5.5% of GDP, an extremely high figure in good times, and the debt-to-GDP ratio will hit 82%, its highest level since just after World War II, and will keep rising.

And things aren't as likely to go as well as President Obama hopes. The economy has already performed worse than was assumed in the budget projections, and the projections are based on heroically optimistic assumptions about the political discipline Congress will impose on itself. And, of course, the problem will deepen, continually and inexorably, after 2019, as spending on Medicare, Medicaid and Social Security will grow rapidly.

Large chronic deficits are a serious economic problem. While much attention is given to the effect of deficits on interest rates, that effect is a symptom of a problem, not the problem itself.

If they are financed domestically, deficits will gradually divert capital from productive domestic uses, through a rise in interest rates. This diversion reduces the amount of capital available to U.S. workers, lowering their wages and hence their living standards. If our deficits are financed from abroad, interest rates may not rise as much, but interest payments on these deficits will flow back abroad.

In either case, the future national income of the United States and its citizens is reduced, businesses will find it harder to expand and homeowners will find it tougher to get credit.

Deficits can also affect the economy more suddenly. The prospect of large or out-of-control deficits can spark investors' fears and cause a run on the dollar and a sharp rise in interest rates.
Time to act, but it won't be easy

President Obama and Congress need to address these looming fiscal shortfalls. But it's not that simple. The economy's health must be their primary concern, particularly with most projections seemingly pointing toward a slow, muted recovery after the current recession ends.

And this continuing economic weakness creates a difficult balancing act. Fiscal stimulus can help the economy in the short run, but fiscal discipline is needed in the long run.

So when should policymakers make the switch?

Imposing fiscal discipline too late risks precipitating a crisis in financial markets. Imposing fiscal discipline too soon risks weakening the recovery or worsening the recession, as actually happened in the United States in the 1930s.

The Great Depression actually consisted of two severe downturns, the second starting in 1937 when the federal government imposed fiscal restraint.

Policymakers can thread this needle by committing now to future spending cuts and tax increases, while at the same time being careful not to undo the current stimulus or hurt economic prospects right now. Getting this mix right will require luck, discipline, imagination and leadership.

Obama turns up heat on mortgage servicers

2009-07-17T10:02:00.000-07:00

As complaints mount about President Obama's foreclosure prevention program, the administration is ratcheting up the pressure on mortgage servicers.

Financial executives will meet with Treasury Department and administration housing officials on July 28 to discuss how the loan modification and refinancing plan has been implemented. The administration plans to grill servicers that have done few modifications or have had many complaints.

Officials also want financial institutions to hire more people and train them better, expand their call centers, and send more mailings to eligible borrowers, according to a letter sent to servicers last week. The government also said servicers need to establish a way for borrowers to contest their treatment or denial.

"There is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," according to the letter, signed by Treasury Secretary Tim Geithner and Housing Secretary Shaun Donovan. "We are asking all servicers expand their servicing capacity and improve the execution quality of loan modifications."

Loan servicers' efforts will be made public on Aug. 4, when the Obama administration plans to start issuing monthly progress reports.

The updates will include data for each servicer participating Obama's $75 billion program. Specifically, they will feature the number of trial modification offers extended and underway by each institution, as well as the number of final modifications and the success of those adjustments.

So far, participating servicers have extended 325,000 loan modification offers and have 160,000 three-month trial adjustments underway, said Herbert Allison, who heads Treasury's financial stability efforts, at a Senate Banking Committee hearing Thursday.

Under the plan, eligible borrowers who are in or at risk of default may be able to lower their monthly payments to no more than 31% of their pre-tax income through a loan modification. The modifications are made permanent after the homeowner makes three on-time payments.

Servicers have also refinanced 43,000 loans under the administration's program that allows people with little or no equity in their home to refinance and take advantage of today's low mortgage rates. People can participate even if they have loans of up to 125% of the value of their property, as long as they meet other criteria.

"Even though we are making rapid progress, we think we can do even more," Allison told lawmakers.

Many industry insiders fear that the foreclosure crisis in outpacing efforts to help troubled borrowers. Thursday's hearing came on the same day as a report revealed a record 1.53 million properties were in the foreclosure process during the first half of 2009, up 15% more than the same period of 2008. One out of every 84 homes received at least one filing between January and June, according to RealtyTrac.

The Obama program has been plagued by problems since its February debut. As soon as most servicers started processing applications in April and May, borrowers began reporting that their paperwork was being lost, their calls were going unreturned and decisions on their cases were being delayed.

"This is disgraceful," said Sen. Christopher Dodd, D-Conn., head of the banking committee. "Why am I still reading about lost files, under-staffed and under-trained servicers, and hours spent on hold on the phone?"

When the president unveiled his program on Feb. 18, he said it could help up to 9 million people. Allison said that goal was still attainable by the end of 2012.

To achieve those figures, the administration is trying to make sure borrowers in need know where to turn. It is pressing banks to do more outreach, as well as holding its own educational events.

Among the issues holding up loan modifications are second liens, which are often owned by banks as opposed to investors. The administration issued revised guidelines in April saying that participating servicers had to modify or extinguish second liens if they adjust the first. But banks are waiting for additional information, which officials say will be available in coming weeks.

After lawmakers grilled administration officials, the committee heard from a borrower and consumer advocates reiterating problems with the program. Mortgage executives from Wells Fargo and Bank of America also spoke, defended their efforts to assist troubled homeowners.

Wells Fargo was in the process of finalizing 52,000 loan modifications under the president's program, as of June 30, said Mary Coffin, head of mortgage servicing for the bank. Only 55% of its seriously delinquent borrowers are eligible for it. During the first half of this year, it boosted its default team staff by 54% to 11,500.

Some 80,000 Bank of America customers, meanwhile, are in trial modifications or are responding to offers, said Allen Jones, the bank's default management executive. Bank of America also has funded nearly 40,000 refinances applications. It has 7,400 people dedicated to home retention, double the number a year ago. They respond to an average of 80,000 calls a day.

Jittery investors dump stocks

2009-07-07T08:12:00.001-07:00

Stocks tumbled Tuesday morning, as jittery investors dumped shares ahead of the start of the G8 summit and the second-quarter corporate reporting period.

The Dow Jones industrial average (INDU) lost 80 points, or 1% roughly 90 minutes into the session. The S&P 500 (SPX) index lost 8 points, or 0.9% and the Nasdaq (COMP) fell 18 points, or 1%.

Stocks were mixed Monday as investors drifted back in after the long holiday weekend. Stocks have been inching lower since mid-June as a three-month stock market rally has lost steam.

The S&P 500 spiked 40% on bets that the economy is stabilizing, but a recent bout of mixed news has stalled the advance, culminating with last week's weaker-than-expected June jobs report.

Economic news due later this week includes readings on retail sales, the job market, import and export prices and consumer sentiment.

Investors are also primed for the start of the second-quarter reporting period, which unofficially kicks off after the close Wednesday with Dow component Alcoa. The aluminum maker is expected to post a loss of 37 cents per share, according to Thomson Reuters estimates. Alcoa earned 65 cents a year ago.

However, most quarterly financial reports are due out later in the month. Market participants will be looking to see not only that companies beat forecasts, but that they provide an encouraging outlook for future quarters.

Also in focus: The G8 summit of the world's leading industrialized nations, beginning Wednesday in L'Aquila, Italy. President Obama is expected to speak about the economic outlook. Leaders of Japan, Britain, France, Italy, Germany, Canada and Russia will also speak.
0:00 /1:12The G8's new guest list

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.51% from 3.52% late Thursday. Bond markets were closed Friday. Treasury prices and yields move in opposite directions.

Other markets: In global trade, Asian markets tumbled and European markets were mixed in the afternoon.

Energy prices tumbled, with U.S. light crude oil for August delivery falling 97 cents to $63.08 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar fell versus the euro and the yen.

COMEX gold for August delivery fell 80 cents to $923.50 an ounce.

Market breadth was negative and volume was light. On the New York Stock Exchange, decliners beat advancers five to two on volume of 250 million shares. On the Nasdaq, losers topped winners three to two on volume of 580 million shares.

States lock in highway stimulus funds

2009-06-26T09:09:00.000-07:00

Every state has committed at least half its highway stimulus funds so none will lose any of its allocation, the Obama administration said Thursday.

States had until June 29 to obligate the funds or risk losing half the leftover money. Only a month ago, some 14 states had yet to satisfy that goal. Hawaii was the last to meet the mark, hitting it on June 19.

Maine has secured 100% of its funds and 15 states have more than 80% of their money committed.

"By delivering on these projects ahead of schedule and under-budget, we have been able to do even more than we expected," said Vice President Joe Biden.

The Federal Highway Administration has approved a total of $15.8 billion for more than 4,800 projects, as of June 25. States, however, have spent less than $190 million, as of June 19, according to federal data.

To commit the funds, states had to gain approval for their projects from the Federal Highway Administration, an agency of the Department of Transportation. The money doesn't actually have to be spent, which can take months as projects go through the contracting and construction process.

Some states -- Florida, Georgia, Hawaii, Arizona, Virginia and New Mexico -- have yet to claim any funds. Illinois has spent the most, claiming more than $47.6 million of the $664 million allocated so far.
0:00 /3:00States' budget bummers

Republicans in Congress said they were concerned by the slow pace of spending.

"This is pitiful that we can't get people working, we can't get the stimulus money out," said Rep. John Mica, (R-Fla.), the top Republican on the House Committee on Transportation and Infrastructure. "People want jobs and they want them now."

The administration did not report how many jobs have been created or saved thanks to the infrastructure funding. The issue has become a source of controversy, with Republicans on Capitol Hill questioning the the recovery act's effectiveness in stemming the unemployment tidal wave.

States are sharing $26.6 billion for highway infrastructure projects, though only $18.6 billion is subject to the June deadline. The road allocations are among the earliest of the $280 billion in funds going to states and municipalities as part of the $787 billion recovery act.

Including transit and airport construction, the federal Department of Transportation is making $48.1 billion available, of which $19 billion has already been committed to more than 5,300 projects, according to the administration. Currently, more than 1,900 projects are underway.

A total of $369 million has been spent, Mica said. Only $11 million has flowed to the 10 states with the highest unemployment rates, he said.

Stocks try to rise

2009-06-09T09:56:00.001-07:00

Stocks edged higher Tuesday afternoon on news that 10 of the banks that received government loans will be allowed to give the money back, adding to bets that the worst of the financial crisis is over.

The Dow Jones industrial average (INDU) was barely changed 3 hours into the session. The S&P 500 (SPX) index added 3 points, or 0.3%.

The Nasdaq composite (COMP) added 16 points, or 0.9%, with technology shares rising after chipmaker Texas Instruments (TXN, Fortune 500) boosted its quarterly sales and earnings outlook late Monday.

Stocks have been on the rise since early March, with the Dow having risen more than 32%, the S&P 39% and the Nasdaq 46%, as of Monday's close.

The gains have been sparked by a series of not-as-bad-as-expected economic reports.

After such a run, it's not surprising to see markets drifting a bit, said Steven Goldman, market strategist at Weeden & Co. Overall, the trend should remain up, he said.

"The market has had a nice run of around 40%, and so a pullback is to be expected," he said. "But overall, I think stocks will continue to find buyers on pullbacks and the trend will remain up."

He said that historically, stocks tend to gain six months ahead of the end of a recession and for the first three months after a recession is over. Using data that goes back to 1901, he found that the S&P was always higher in the three months after a recession ended.

Banks: The U.S. government said Tuesday morning that 10 banks that received TARP loans last fall can repay a total of $68 billion to the government.

The news shows that the fear of an implosion has subsided and that the risk factor in financial markets has diminished, Goldman said.

Morgan Stanley (MS, Fortune 500), American Express (AXP, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500), Bank of New York Mellon (BK, Fortune 500), BB&T (BBT, Fortune 500), Capital One (COF, Fortune 500), Northern Trust (NTRS, Fortune 500), State Street (STT, Fortune 500) and US Bancorp (USB, Fortune 500) have confirmed that they are allowed to repay loans.

But banks that were stress-tested earlier this year should undergo another round of tests, a U.S. watchdog group said Tuesday.

The Congressional Oversight Panel said that recent signs that the recession could be worsening show the tests did not go far enough. In particular, the group pointed to the May employment report, which showed a slower pace of job losses but also that the unemployment rate rose to a 26-year high of 9.4%.

Chrysler: The Supreme Court delayed the sale of Chrysler's assets to Italian automaker Fiat, in a late-Monday move that threw a wrench into the automaker's plans for a quick exit from bankruptcy.

Under terms of the agreement, Fiat can ditch the deal if it is not finished by June 15. However, the company said Tuesday that it won't walk away from Chrysler.

Economy: Wholesale inventories fell 1.4% in April, the Census Bureau reported, after falling 1.8% in the previous month. Economists surveyed by Briefing.com expected a decline of 1.1%, on average.
0:00 /5:11Getting tough on Treasury

Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note yield to 3.85% from 3.82% late Monday. Treasury bond prices and yields move in opposite directions.

The Treasury is set to auction $65 billion this week, including 3-year and 10-year notes. It will also reopen 30-year bonds.

The recent rise in the 2-year note has raised concerns that the Federal Reserve will need to lift interest rates again before the end of the year, something stock investors don't like.

And the spike in the 10-year has caused worries that it may stunt a burgeoning recovery, as the longer-term bond yields are tied to mortgage rates. Higher mortgage rates could dissuade home buyers at a time when the housing market is just starting to stabilize in some areas.

Other markets: In global trading, Asian markets ended lower and European markets were mixed in late trading.

In currency trading, the dollar fell versus the euro and the yen.

U.S. light crude oil for July delivery rose $1.05 to $68.14 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery rose $5.50 to $958 an ounce.

GM moves step closer to bankruptcy

2009-05-27T13:22:00.001-07:00

General Motors said Wednesday that it has fallen far short of the bondholder support it needed for its proposed debt-for-stock offer, virtually guaranteeing that the nation's largest automaker will be forced to file for bankruptcy court protection within the next five days.

The bondholders were not satisfied with the prospect of owning only 10% of the company when the U.S. government would own nearly 70% and a union-controlled trust fund up to 20%.

The bondholders own $27 billion in corporate notes. GM (GM, Fortune 500) needed owners of 90% of those bonds to accept stock in return for the debt in order to reduce its interest expenses to a more manageable level.

But GM's announcement said that bondholders who took the company's offer were "substantially less than the amount required."

The company owes the bondholders $1 billion in interest payments on June 1 - money it says it does not have.

The company also faces a June 1 deadline to win concessions from its union, creditors and other parties or be forced into bankruptcy by the U.S. Treasury Department, which is funding GM's operations through direct federal help.

"The GM board of directors will be meeting to discuss GM's next steps in light of the expiration of the exchange offers," said the company's statement.

In another sign that a bankruptcy filing could come as soon as Friday, GM moved up the pay date for its U.S. employees this week.

Hourly employees represented by the United Auto Workers union were paid Wednesday, and salaried employees will be paid Thursday, said GM spokesman Chris Lee. Both normally would have been paid Friday.

"Obviously there's a lot of anxiety as we approach the June 1 deadline," said Lee. "We just moved the payroll up as a way to reassure our employees that payroll will continue regardless of what takes place next week."

GM had previously announced that it would make about $2 billion in payments due to suppliers on Thursday, rather than waiting for the normally scheduled payment on June 2. If the company files for bankruptcy, it would need court approval to make payments to employees and suppliers.

Lee said the early payroll payments should not be taken as an indication that the filing would come on Friday.
What next for bondholders?

The ad hoc committee of major bondholders had no immediate comment on the vote. The group, which includes major pension funds and mutual funds that own large blocks of the bonds, had proposed the bondholders as a group receive 58% of the stock in GM, rather than the 10% being offered.

The major bondholders have also said they want to continue negotiating with Treasury's auto industry task force overseeing the federal bailout of GM and Chrysler LLC.

A source with knowledge of GM's restructuring discussions said Treasury is willing to hold negotiations up until June 1.

"We've said consistently that we were happy to talk to any stakeholder any time about anything," the source said. "Recently there have been far more constructive and orderly conversations."
0:00 /02:53Remove GM from the Dow

But the source added that Treasury believed the offer made to GM creditors, which would give them 225 shares of GM stock for every $1,000 they are owed, is fair and equitable, and that it is not likely to be substantially increased. The 225 shares would be worth $324 based on Tuesday's closing price, although the value of these shares could be significantly less after a reorganization.

However, if GM does go into bankruptcy, the source said that Treasury believes the bondholders would likely get even less than what was offered.

"In any kind of liquidation scenario, they would get nothing or something unbelievably small," said the source.

It is estimated that about 20% of the $27 billion in debt, between $5 billion and $6 billion, is held by individual investors who bought the bonds for the steady revenue stream they provided. Most of the bonds pay better than 7% interest, and those that were purchased at a discount since GM debt was downgraded to junk bond status in 2005 pay an even better return.

GM stock does not pay any dividend and will not do so for the foreseeable future. Stock is also a riskier investment than bonds because stockholders are certain to be wiped out if there is a bankruptcy filing, while bondholders can hope that they will recover some of their investment in court.

But rating agency Standard & Poor's estimates that the bondholders, whose debt is not secured by specific company assets, will get between 0% and 10% of their investment back in bankruptcy court.

The stock being offered bondholders would be equal to only about 10% of the company. GM's stated plan is for the government and a union-controlled trust fund to own 89% of the company between them.

The UAW disclosed to its local presidents Tuesday that it has agreed to accept 17.5% of GM's common stock to cover future retiree health care costs, as well as warrants for an additional 2.5% that give the trust fund the right to buy shares at a very low price.

Previously, many had expected the union to control nearly 40% of GM shares, rather than 20%. But the source familiar with the restructuring discussions said the lower stake for the UAW does not open the way for bondholders to get a larger stake in GM.

The source said the Canadian government will own a small percentage of GM, as it does of Chrysler. The source added that a Treasury stake well above 50% is fair given that the government has provided GM with $19.4 billion in help so far and will likely give the company tens of billions of dollars more to fund its operations during bankruptcy.

General Motors' U.S. operations are not the only ones experiencing trouble. The company is looking to sell a majority stake in its money-losing European business, which operates under the Opel and Vauxhall brands.

On Wednesday, GM spun off those brands - including plants, sales organizations and patents - into a new company. GM said the move will allow the German government to place those assets into a trusteeship and provide its own bailout to continue operations until a sale can be finalized.

Economy to resume growth this year

2009-05-21T09:31:00.000-07:00

The economy will start growing in the second half of 2009, but it will be several years before the positive effects of a turnaround will be felt, the Congressional Budget Office said Thursday.

"Even if the economy returns to positive growth this year, the loss in output, income and employment during the recession and the next few years will be huge," said Douglas Elmendorf, director of the CBO, in testimony before the House Budget Committee.

The CBO is updating its economic forecasts and will release new estimates in August. Elmendorf expects the new numbers will be less optimistic than the estimates the agency released in March.

"CBO's forecast in August is likely to show even larger shortfalls in output over the next few years," he said.

The agency is expecting that the unemployment rate will continue to rise into the second half of next year and will peak at 10.5%. In March, CBO forecast unemployment would peak in the first half of next year at 9.5%.

The $787 billion economic stimulus package enacted in February is helping to boost GDP this year and, to a lesser extent, will do so in 2010 as well. Thereafter, economic growth will be hindered if private demand does not pick up, he told lawmakers.

And even if private demand picks up, "it still takes a long time to catch up with the weak growth last year and this year," Elmendorf said.

Elmendorf was asked to lay out what he saw as potential risks going forward. "The number of sandpits we see ahead would scare a good golfer," he said.

Among them is the exposure of small- and medium-sized banks to the fortunes of commercial real estate.

"The fundamentals in the market are very weak," Elmendorf said. He said current price declines of between 35% and 45% exceed those of the early 1990s, when commercial property collapsed. Meanwhile, delinquency rates are up.

With estimates of commercial real estate losses totaling more than $200 billion, that could exceed the revenue small and mid-size banks take in, thereby reducing their capital.
As goes Britain?

This week, Standard & Poor's lowered its ratings outlook to negative for the United Kingdom, in great part due to its growing debt levels.

House Budget Committee Ranking Member Paul Ryan, R-Wisc., asked Elmendorf to assess whether the United States is likely to suffer the same fate.

The U.S. government and others around the world flood the debt markets with government issues. That, in turn, can cause interest rates to rise as investors start to demand greater reward for the risk they're taking.

"Certainly in the next several years, there's likely to be significant upward pressure on interest rates," Elmendorf said. But any increase "is likely to be delayed until the economy comes out of its [downturn]."

CBO projects that, under the current congressional budget resolution for fiscal year 2010, the debt held by the public could rise to more than 60% of GDP over the next 5 years. Under the president's budget proposals, it could rise more than 80% over the next 10 years.

"This is a grim outlook for the federal budget," Elmendorf said. "At some point investors may decide the United States is not the safest haven. [But there's great] uncertainty when sentiment will turn." If it does, it could turn more quickly than expected, he noted.

GM falls to 76-year low as execs sell stock

2009-05-12T09:21:00.001-07:00

General Motors Corp. stock plunged more than 22% to a 76-year low Tuesday, a day after a group of GM executives disclosed they had sold shares in the struggling automaker.

Six GM executives, led by former GM Vice Chairman and product chief Bob Lutz, disclosed Monday that they sold almost $315,000 in stock and liquidated their remaining direct holdings in the automaker.

The stock sale underscores the extreme pressure on GM with less than three weeks remaining for the embattled automaker to win deals to slash debt and operating costs with its major union and bondholders to avoid bankruptcy.

GM (GM, Fortune 500) is headed for either a bankruptcy filing or an out-of-court restructuring that would wipe out current stockholders by flooding the market with new shares to pay off creditors.
0:00 /00:49GM CEO: Bankruptcy is an option

The automaker's stock could be worthless in a bankruptcy or worth less than 2 cents apiece if it proceeds with plans to issue shares to creditors led by the U.S. Treasury Department, the company has said.

"It's a lose-lose situation as far as we see it, and the shares kind of seem to have been doing a levitating magic trick and just staying up there in the $1.50 to $2.00 range," Standard & Poor's equity analyst Efraim Levy said.
0:00 /2:09GM brands, jobs junkyard-bound

"Given that there is a two-week deadline coming there should be additional downside pressure," Levy said.

The automaker has historically been one of the powerhouses in the best-known measurement of U.S. stocks, the Dow Jones Industrial Average. It has been on the index for 83 consecutive years and despite the dramatic fall in the price of its shares, Dow has still kept the stock as part of the index.

GM's market capitalization as of Tuesday was about $690 million, making it one of the smaller Dow members.

The company has lost $88 billion since its turnaround efforts began in 2005 under former Chief Executive Rick Wagoner.

The automaker's shares were down 21% or 30 cents, at $1.14 on the New York Stock Exchange. The stock had fallen to as low as $1.09 earlier in the day, the lowest since 1933.

GM was first listed on the Dow in 1915. Journal editors removed it - as they did more frequently back then - adding it again in 1925, and it has remained ever since. Only General Electric Co. (GE, Fortune 500), which joined in 1907, has been there longer.

Stocks flip-flop in early trade

2009-05-05T07:57:00.001-07:00

Stocks were mixed Tuesday as investors were cautious after the previous session's big run and ahead of comments from Federal Reserve Chairman Ben Bernanke.

The Dow Jones industrial average (INDU) added a few points in the early going. The S&P 500 (SPX) index was barely changed. The Nasdaq composite (COMP) fell 6 points, or 0.4%.

U.S. stocks climbed Monday, buoyed by optimism about the economic recovery. The Nasdaq rose to a six-month peak while the Dow and S&P 500 reached their highest levels in almost four months.

"It's going to take a powerful catalyst to [continue to] move us forward," said Art Hogan, chief market strategist at Jefferies & Co.

Economy: Federal Reserve Chairman Ben Bernanke is due to give his outlook on the economy to the Joint Economic Committee.

A reading on the services sector of the economy from the Institute for Supply Management, a purchasing managers' group, is also due out.

Banks: The financial sector will remain in focus as investors await the release of the results of the U.S. government's stress tests on banks, which are due out Thursday.

At least 10 of the 19 big banks under review -- including Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) -- may need to boost their capital, according to a report in The Wall Street Journal. The number of reported banks that may need to boost their capital requirements has been fluctuating in the runup to the release of the results.

Companies: Swiss bank UBS (UBS) reported a $1.76 billion quarterly loss and said it remains cautious about the outlook because the global economy has continued to worsen.

Dow component Kraft Foods (KFT, Fortune 500) reported higher quarterly earnings that topped estimates. But revenue fell as the stronger U.S. dollar hurt sales overseas. Kraft shares rallied 6% Tuesday morning.

Fellow Dow component Walt Disney (DIS, Fortune 500) was expected to release results after the closing bell.

New Chrysler auto incentives coming

2009-05-05T07:56:00.000-07:00

With bankruptcy threatening to further weigh down the carmaker's sales, Chrysler is expected to announce a new incentive program Tuesday.

Chrysler's "Employee Pricing Plus Plus," program ended just days after the carmaker declared Chapter 11 bankruptcy. That program combined cash rebates with price reductions and cut-rate financing for qualified customers.

The new sales program is expected to rely heavily on giving dealers cash incentives, which means that customers will see big price reductions at the dealership, said Jessica Caldwell, an industry analyst with the automotive Website Edmunds.com.

Dealer incentives give auto dealers extra cash that can, in turn, be used to offset price reductions negotiated with customers. Dealer cash incentives are more subtle than straight cash rebates, so they aren't as damaging to a car brand's image and they don't reduce resale value of cars the way more straightforward customer rebates do.

But incentive money for dealers will likely be paired with limited customer rebates as well, Caldwell said. The carmaker announced in a conference call on Friday that the incentive plan would include some "loyalty" incentives for returning Chrysler, Dodge and Jeep buyers.

Chrysler has been the biggest spender among all auto manufacturers on incentives in the U.S. market. Last month, Chrysler spent $4,288 per vehicle on incentives.
0:00 /2:06Chrysler then and now

The next highest spender was General Motors, which is also undergoing a government-driven restructuring and may declare bankruptcy later this month. GM spent $4,063 per sale.

Despite the incentive spending, Chrysler sales were down 48% last month compared to April, 2008. Reduced fleet sales were a big part of the drop, the carmaker said.

Chrysler will probably not follow the lead of GM (GM, Fortune 500) and Ford (F, Fortune 500) by offering payment protection to buyers who might lose their jobs, Chrysler vice president of sales Steve Landry said in the Friday call. Those sorts of incentives didn't seem to be working well for other automakers, he said.

Media reports have drawn conflicting pictures of the bankruptcy announcement's impact on sales with some dealers reporting empty showrooms over the weekend and others higher-than-normal customer traffic.
12 cars that made Chrysler

Not everyone sees bankruptcy as a disaster for Chrysler sales. Some customers are optimistic, focusing more on the possibility of a Fiat deal and on the fact that Chrysler isn't going out of business, said Scott Painter, chief executive of Zag.com, an automotive buying service provider, and Truecar.com, an auto pricing Website.

Interest in Chrysler, Dodge and Jeep products has actually gone up, he said.

Chrysler rolled out a new print advertising campaign over the weekend aimed at reassuring customers that the carmaker will not be going away anytime soon.

Over the tagline "Come see what we're building for you," the ad describes Chrysler's planned relationship with Fiat and points out that the carmaker's warranties are now backed by the federal government.

Are consumers back from the dead?

2009-05-04T20:16:00.000-07:00

This Thursday is D-Day for the nation's biggest banks. That's when regulators will release the eagerly awaited results of the stress tests conducted on the 19 largest financial institutions.

But that's not the only important news that will be out that day. It's also when most top retailers will be releasing sales figures for April.

Investors should pay close attention because it will be the first real glimpse into whether consumers really are feeling more confident about the economy.

Even though the stock market has rallied sharply in the past two months on hopes that the recession may soon be over, it's still unclear whether the economy can quickly bounce back or if the road to recovery will be a slow, tough slog.

One thing is certain, though. For the economy to rebound, consumers are going to have to lead the way. Consumer spending makes up about two-thirds of the nation's overall economy.
Talkback: Are you feeling more confident about the economy?

There are some tentative signs that consumers are no longer paralyzed by fear as they were after the collapse of Lehman Brothers in September.

Although the government reported last week that the economy dipped at an annualized pace of 6.1% in the first quarter, personal consumption expenditures rose 2.2%. That's encouraging since it comes on the heels of consumer spending declines of about 4% in both the third and fourth quarters of last year.

"Barring some nasty surprise, the negative adjustment in consumer spending is largely over. The big declines are behind us," said Chris Probyn, chief economist with State Street Global Advisors in Boston.

Investors are definitely betting that the consumer is back. The S&P Retail Index is up nearly 45% since the market's low point in early March, outperforming the broader S&P 500's gain of about 30%. Shares of some prominent retailers, including Macy's (M, Fortune 500) and J.C. Penney (JCP, Fortune 500), have doubled.

Still, some fear that investors may be getting ahead of themselves. Are consumers, which have begun to save more in the wake of last fall's credit crisis, really going to return to their spendthrift ways? Is there really that much pent-up demand for goods?
0:00 /02:49Commercial real estate trouble

There is a good chance that consumers really have learned their lesson and that people will stop relying so much on debt.

For example, Paul Nolte, director of investments for Hinsdale Associates, a money-management firm based in Hinsdale, Ill., said that when he asks a lot of clients what they would do if someone gave them an extra $5,000, most indicated they would pay down debt and put money into savings.

"There is a shift in mentality. Consumers will spend when they have to. But you won't see that level of debt-driven spending like you did in the past," said Nolte.

And if people are more cautious with their money, that's likely to mean that the economy will take longer to start growing again than the market now seems to think.

"People are looking for the light at the end of the tunnel, but investors are kidding themselves if they think this will be a normal quick V-shaped recovery," said Stephanie Giroux, chief investment strategist with TD Ameritrade. "There are excesses that built up over 20 to 30 years. That's not going to unwind in a one to two year period."

Retailers likely endured another tough month in April. According to estimates from Thomson Reuters, same-store sales are expected to be flat. And if you exclude the expected 3% increase from Wal-Mart (WMT, Fortune 500), which has a big impact on the overall results, sales are forecast to be down 3%.

Department store chains Kohl's is expected to post 7% declines in sales at stores open at least a year, while analysts are projecting a 9% drop for JW Nordstrom (JWN, Fortune 500).

It also goes without saying that consumer spending patterns are tied closely to the health of the job market. And there are no signs that companies are going to hire en masse anytime soon.

The government will release employment figures for April on Friday. Economists are forecasting a loss of 620,000 jobs and an increase in the unemployment rate to 8.9% from 8.5% in March.

And with many banks still reluctant to lend, it may be tough for consumers to spend more -- even if they wanted to. That means that any boost to spending is likely to be more modest.

"Will consumers be able to increase spending 3% to 4% like they were heading into this recession? No," said Tom Higgins, chief economist with Payden & Rygel, a Los Angeles-based money management firm. "Increases are likely to be in the 1% to 2% range. You may get temporary pops but that is not going to be sustained given limited access to credit."

Now don't get me wrong. If consumers moderately increase their spending, that's great news for the economy in the long-term. That's because it will lessen the chances of another credit bubble-induced recession as ugly as this one taking place anytime soon.

But the market's big bounce does not seem to be predicated on hopes of economic stabilization over the long haul, but a rapid rebound by the end of the summer.

That's why the April retail sales numbers are so crucial. We already know that spending was up in the first quarter. Has it carried over into the second quarter? If a couple of big name retailers report better-than-expected sales for April on Thursday, then that could be a sign that this market rally is for real.

If not, hopes of an imminent recovery could fade. Nolte worries that earnings estimates for many companies may be too high because of unreasonable hopes about how much people will really spend.

"Historically, you should never bet against the consumer. But this time might finally be the time," Nolte said.

Buffett fans set for 'capitalist Woodstock'

2009-05-01T09:16:00.001-07:00

Warren Buffett's Berkshire Hathaway had its worst year ever in 2008. But for the throng gathering in Omaha for Saturday's annual shareholder meeting, that's ancient history.

Berkshire fans are far more interested in learning how Buffett sizes up the investing opportunities arising out of the global economic slowdown, and how the downgrade earlier this month of Berkshire's credit rating might affect the firm.

Mostly, they expect to hear how Berkshire (BRKA, Fortune 500) will get back on track following a year in which its net worth dropped by $11.5 billion and its shares gave back five years of gains.

"There are lots of opportunities out there right now," said Mohnish Pabrai, the managing partner at Berkshire shareholder Pabrai Investment funds in Irvine, Calif. "I'd love to see Warren give us some color on things like where they have been active in the debt markets."

There should be ample time for color this year, even with attendance at the meeting expected to reach a record 35,000. One key is a shift in the format for the question-and-answer session with Buffett and Berkshire Vice Chairman Charlie Munger.
0:00 /4:58Buffett's annus horribilis

The Berkshire meeting has long been a bit of a free-for-all, with Buffett and Munger fielding questions from anyone who took the microphones on the floor. In 1997, a year in which annual meeting attendance was estimated at 7,000, he dubbed the event "our capitalist's version of Woodstock" -- a label that has stuck.

But this year's event should be a bit more orderly. The early morning rush to line up at the microphones has been replaced by a lottery, and Buffett and Munger will answer some questions that were submitted online and filtered by three journalists - including Carol Loomis of Fortune.

The idea, Buffett has said, is to cut down on the non-Berkshire-related questions that had grown more prevalent as Buffett's profile rose.

Last year he fielded one question on whether he believes in Christ ("I am agnostic") and three on environmental issues tied to the dams that Berkshire's Pacificorp unit operates on the Klamath River in Oregon. Buffett said regulators would have the final say there.

"In recent years, we have received only a handful of questions directly related to Berkshire and its operations. Last year there were practically none," Buffett said in the guide to this year's annual meeting. "So we need to steer the discussion back to Berkshire's businesses."
'Tailwinds' in insurance

The story there, Berkshire shareholders say, is largely upbeat, despite the downgrades earlier this month that stripped Berkshire of its triple-A credit rating. One of the downgrades came from Moody's (MCO) - the New York-based bond rater of which Berkshire owns 20%.

Many investors brushed off the downgrades, coming as they did from ratings agencies that failed to warn investors of the credit meltdown. Still, some will be paying attention to any comments Buffett might make on the subject.

"I'd be interested to hear how the ratings actions could affect the business," said Glenn Tongue, managing partner at Berkshire shareholder T2 Partners.

Meanwhile, there's little doubt that the third of Berkshire's industrial portfolio that focuses on economically sensitive businesses like retail and homebuilding will be hit hard by the recession.

But as Buffett pointed out in February's release of his 2008 letter to shareholders, two-thirds of the company's businesses are in utilities and insurance -- which are less apt to suffer in an economic downturn.

Berkshire holders such as Pabrai say the insurance business, which has been strong in recent years, could be in for even bigger gains as capital-impaired rivals raise prices to restore their financial health.

"There could be some real tailwinds in some of the insurance lines," said Pabrai.

Others note the regular income Berkshire shareholders stand to reap from the flurry of investments Buffett has made in blue-chip companies such as Goldman Sachs (GS, Fortune 500), General Electric (GE, Fortune 500) and Tiffany (TIF).

They also see room for a substantial rise in Berkshire shares. At a recent $94,000 each, the class A shares have jumped more than 30% since the financial sector hit a recent low in early March -- but remain 38% below their all-time high from December 2007.

The company's less-expensive Class B shares, which have far fewer voting rights, have also bounced back lately. But at about $3,100 a share, they are also well below their peak from December 2007.

At last month's low, Tongue says investors in the A shares were essentially paying for the value of Berkshire's investment portfolio and getting the company's operating businesses -- such as insurer Geico and ice cream chain Dairy Queen -- for free.

"Would you pay $70,000 for an envelope that contained $70,000 in cash and $50,000 worth of businesses?" he asked. "I think you would."

This weekend in Omaha, it may be difficult to find anyone who wouldn't

Stocks choppy after strong month

2009-05-01T09:15:00.001-07:00

Stocks seesawed Friday morning, despite a few better-than-expected economic reports, as investors took a breather after a strong month on Wall Street.

The Dow Jones industrial average (INDU) lost a few points around 90 minutes into the session. The S&P 500 (SPX) index was barely lower. The Nasdaq composite (COMP) fell 3 points, or 0.2%.

Declines had been bigger in the first 30 minutes of the session.

Stocks are coming off a strong April in which bets that the economy is close to stabilizing fueled a big run up. For the month, the Nasdaq gained 12.3%, the S&P 500 gained 9.4% and the Dow Jones gained 7.3%.

Economy: The Institute for Supply Management's manufacturing index rose to 40.1 in April from 36.3 in March versus forecasts for a rise to 38.4. Any reading under 50 indicates the sector is still contracting, but the report was consistent with other recent signs that the pace of the economic slowdown is easing.

Another report showed that consumer sentiment improved in April. The University of Michigan's consumer sentiment index was revised up to 65.1 from a previous reading of 61.9. Economists thought it would hold steady.

A third report showed March factory orders fell 0.9% after rising 0.7% in April. Economists thought orders would fall 0.6%, on average.

Corporate news: Dow component Chevron (CVX, Fortune 500) reported a big drop in first-quarter sales and earnings, that missed expectations, due to a steep drop in energy prices. Shares of the No. 2 oil services firm were little changed.

Fellow Dow component Exxon Mobil (XOM, Fortune 500) reported weaker sales and earnings Thursday.

MasterCard (MA, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker revenue that missed expectations.

Citigroup (C, Fortune 500) is selling its Japanese retail brokerage business to Sumitomo Mitsui Financial Group in a deal worth $7.9 billion.

In other news, the release of the results of the "stress tests" of the nation's largest banks is expected late Thursday, a government source told Reuters. Results were initially expected to be released on Monday.

Autos: Chrysler filed for Chapter 11 bankruptcy protection Thursday after failing to reach a deal with some of its smaller lenders to cut debt. But a deal has been negotiated to combine the company with Italian automaker Fiat, allowing Chrysler to stay in business.

Chrysler is privately owned. Shares of rivals General Motors (GM, Fortune 500) and Ford Motor (F, Fortune 500) slipped Friday after rallying Thursday.

Automakers are due to report April sales figures later in the day.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.17% from 3.14% Thursday. Treasury prices and yields move in opposite directions.

Lending rates were mixed. The 3-month Libor rate fell to 1.01% from 1.02% Thursday, according to Bloomberg.com. The overnight Libor rate rose to 0.24% from 0.23%. Libor is a bank-to-bank lending rate.
0:00 /2:29Chrysler breakdown

Other markets: In global trading, Asian markets ended higher and European markets rallied in afternoon trading.

In currency trading, the dollar fell versus the euro and gained against the yen.

U.S. light crude oil for June delivery rose $1.36 to $52.48 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $6.70 to $884.50 an ounce.

Millionaires Aren’t Sleeping Well, Either

2009-04-30T12:02:00.000-07:00

If financial misery loves company, you’ve got a surprising amount of it among wealthy folks–the people who you’d think would feel comfortably insulated from the current economic crisis.

That’s a key takeaway from a survey just released by the Phoenix Companies, a financial services firm which conducts an annual poll of well-off Americans–those whose net worth, excluding the value of their primary home, amounts to at least $1 million.

In the survey, conducted by Harris Interactive, participants were probed about one of those primal fears that affect anyone thinking about retirement–the possibility that your money won’t last as long as you do. Specifically, they were asked whether they agreed with the statement, “I am very concerned about outliving my money in retirement.”

The response was surprising. Forty-five percent of these millionaires said yes: They either “agreed” or “agreed strongly” with that idea.

Okay, maybe you’re thinking that’s not so surprising. Say, for example, you’re a 55-year-old with $1 million, you have a mortgage, you have three kids to send to college, and you’re wondering whether you’ll be laid off next week. In that case, One…Million…Dollars may seem laughably inadequate, just as it was in the first Austin Powers movie.

But you can’t explain away all the numbers that easily. Thirty-five percent of respondents worth $5 million or more were concerned about outliving their money. Think about it: One-third of the people worth at least five million bucks are just as worried retirement as you or I (assuming, of course, that you, like me, aren’t among the penta-millionaires). If you ever needed proof that, once you’re above poverty level, money doesn’t buy peace of mind–well, there it is.

Also surprising is the pessimism among younger millionaires: Sixty-one percent of the rich folk age 45 or younger fear outliving their money, compared to a mere 32% of millionaires age 65 or older–the very age group for whom running out of money in retirement is a real, immediate concern, not just a theoretical possibility somewhere off in the future. And, again, it’s not a question of money: Sixty-percent of younger millionaires worth more than $2 million are worriers, compared to 42% of older millionaires worth less than $2 million.

Why are the youngsters so glum? It’s likely a bunch of reasons, says Walt Zultowski, senior v.p. of research and concept development at Phoenix. Thanks to advances in medical technology, these younger millionaires will likely live to an advanced age, and thus have to pay for an extended retirement. They’re worried they’ll have to support elderly parents, too. They’re expecting Social Security benefits to be cut back. They’re worried about major economic downturns between now and their retirement. And they’re getting hit with a vivid, first-hand look at an older generation forced to scale back its retirement plans because of an economic meltdown.

So what’s more justified–youthful pessimism about retirement savings, or elderly optimism on the same subject? The answer, unfortunately, is unclear. “The younger folks’ concerns are legitimate,” says Zultowski. “On the other hand, maybe they underestimate their own earnings power and the power of wise investments over several decades.”

Source: Cnn

Shovels in the ground: Stimulus at work

2009-04-29T08:57:00.001-07:00

Thanks to federal stimulus funds, Rhode Island's pockmarked Route 138 in Tiverton is getting repaved. The state's 97,000 food stamp recipients are getting more money. And some 2,000 local youths will have summer jobs.

The tiny Ocean State has already started spending part of its $1.1 billion share of the $787 billion recovery program. It was one of the first states to put more money in the pockets of the jobless, pumping an additional $1 million a month into the local economy by increasing weekly unemployment benefits by $25. And it is moving quickly to get $137 million in infrastructure projects up and running.

"Rhode Island has moved aggressively in participating in the Recovery Act, especially in those programs that help those most in need," said Gov. Donald Carcieri. "Transportation projects have an immediate impact on jobs and we are well ahead of schedule to use the available stimulus dollars."

State officials around the nation are scrambling to access the $499 billion the stimulus program has allocated for economic recovery efforts. So far, the federal government has made available $75 billion, and $14.5 billion has been spent, mainly for Medicaid payments.

Some money, such as assistance for the needy and the unemployed, has been easier to access. But the bulk of the funding must wait for the federal government to issue regulations or for states to determine how to use the money and apply for it.
0:00 /4:23Bill Clinton on stimulus

CNNMoney.com is looking at the national recession -- and recovery -- through the lens of one state: Rhode Island. In January, we detailed the impact of the economic meltdown on the state and its residents. This article kicks off a series that will chronicle how Rhode Island spends its stimulus money.
Repaving already underway

Rhode Island's Department of Transportation has already authorized 30 of the 54 projects to be funded by the stimulus program, well ahead of the June deadline to commit 50% of the money. And it has sped up the timetable for awarding contracts, shaving two weeks or more off the typical 120-day process.

"By the time the bill was passed and the president signed it, we were ready to go," said Michael Lewis, director of the state's transportation department.

The state has awarded eight contracts worth a total of $8.9 billion so far. In addition to the Route 138 repaving, they include landscaping Route 1's median in South Kingstown, improving drainage statewide and constructing a seawall along the shoreline of the Seekonk River in East Providence.

The projects will spur the creation of 1,500 jobs and employ another 3,500 people to support those jobs, Lewis said. The wide range of upgrades -- from signage to sidewalk repair -- will provide opportunities for many types of contractors.

"That's a big shot in the arm for the construction industry, which has suffered considerably," Lewis said.

The need for jobs in Rhode Island is evident. Its 10.5% unemployment rate ranks it sixth in the nation. When the transportation department recently announced it was hiring 89 workers to help manage the stimulus program, more than 1,200 people applied.

The department expects to commit all the stimulus funds by July. Much of the construction work will be completed by year-end, though some will carry over to 2010.
Other money flowing in

State agencies are also working to implement other stimulus programs in coming months.

For instance, the state Department of Labor and Training is scheduled to announce later this week a summer jobs program for disadvantaged youths using $4 million in stimulus funds. Some 2,000 youths, ages 14 to 24, are expected to participate.

The money is part of $17.2 million the state is receiving in workforce training grants, with the other funds slated for job training and career services for the unemployed. The youth program is the first to get off the ground.

Meanwhile, arts organizations have until Friday to submit applications to obtain a piece of the $291,500 in stimulus funding for preserving jobs in the field. Groups can apply to the Rhode Island State Council on the Arts for grants of either $12,500 or $25,000, which should be awarded in July.

Also in July, the Rhode Island Airport Corporation expects to award contracts for $6.2 million to reconstruct, mark and light a taxiway at the Quonset airport and a runway at Newport airport. The initiatives are expected to employ 150 people.
Much more to go

Like other states, Rhode Island has yet to receive the majority of its stimulus funding. Among the money still to come is more than $200 million for various education programs and $20.5 million for weatherization.

State agencies are working on securing more funds. The Department of Education, for instance, is meeting this week with local school districts to discuss the $83 million Rhode Island should receive in funding for disadvantaged and special needs children. And officials are working on grant proposals to obtain $55 million in energy-related funding.

"A lot of this is still coming down from Washington," said Amy Kempe, the governor's spokeswoman. "Some of the money is coming down quickly. Other money will take a little bit longer."

Optimism about economy grows

2009-04-29T08:56:00.002-07:00

Americans are becoming slightly more optimistic about the nation's economy, a CNN/Opinion Research Corporation survey showed Wednesday, but the glow surrounding President Obama is wearing off for some as the president marks his first 100 days in office.

Some 37% of the people questioned in the poll say the current economic conditions in the country are very poor -- a figure that's down from 48% last month and 66% in December. Another 17% now say economic conditions are good, up six points from last month. (How economists view Obama's performance)

Fifty-five percent say the economy is the most important issue facing the country today, down eight points from March.
0:00 /00:59100 Days: Rating Obama

"When the economy is bad, it is the top issue on the public's mind," said CNN Polling Director Keating Holland. "So when the number who say the economy is the number-one problem facing the country goes down, it may be a leading indicator that things are looking up a bit."

The survey also suggests that nearly two in three Americans think Obama has the right priorities and has paid enough attention to the country's most important problems. The 63% who feel that way is 17 points higher than those who felt that way about George W. Bush's performance 100 days into his presidency in 2001 and 26 points higher than the numbers for Bill Clinton in 1993.

About 68% also say Obama is doing a good job keeping important promises he made during his campaign for the White House, with three in 10 saying he's doing a poor job. Only one in three thought Clinton did a good job keeping his promises.

"On almost every measure, Obama is having a much better first hundred days than Bill Clinton, the last Democrat in the White House. Clinton was seen as unfocused and unable to keep his promises. Obama isn't getting criticized on either of those measures," added Holland.

The poll suggests that 19% of those questioned are personally thrilled that Obama is president. That's down nine points from January, when Obama was inaugurated. Forty-two percent are happy with Obama as president, 20% unhappy, 7% depressed and 11% don't care.

"For about one in ten Americans, the thrill is gone," said Holland.

The CNN/Opinion Research Corporation poll was conducted Thursday through Sunday, with 2,019 adult Americans questioned by telephone. The survey's sampling error is plus or minus two percentage points.

Economy falls more than expected

2009-04-29T08:56:00.001-07:00

The U.S. economy shrank at an annual pace of 6.1% in the first quarter -- almost as much as it did in the fourth quarter of 2008, according to a government report Wednesday.

The drop was much worse than expected. According to economists surveyed by Briefing.com, expectations were for a drop of 4.7% in gross domestic product, the broadest measure of the nation's economic activity.

The first quarter decline was the second biggest drop recorded in 26 years, behind only the fourth quarter reading. GDP fell 6.3% in the last three months of last year.

Still, investors didn't appear to be too upset by the news. Major U.S. stock indexes were all up more than 1% in the first half hour of trading Wednesday.

While the overall GDP figure was disappointing, there were some signs of improvement in the report's other readings.

Purchases by individuals rose at an annual 2.2% rate, the first time personal spending rose since the second quarter of 2008. A smaller trade gap also limited the rate of economic decline.
0:00 /00:59100 Days: Rating Obama

But businesses pulled back on spending a great deal in the first quarter, as purchases of equipment and software declined at a 34% annual rate, the sharpest decline in 50 years. This drop accounted for 2.6 percentage points of the overall decline in GDP.

Businesses also slashed their inventories by more than $100 billion during the quarter, the biggest drop on record. That contributed another 2.8 percentage points to the drop in GDP. State and local governments also cut back on spending.

Robert Brusca of FAO Economics said the huge drop in inventories is good news for the economy going forward, because it will force businesses to start ramping up production again quickly once there are more signs of increased demand from consumers.

So even though the declines in GDP reported in the fourth and first quarter were similar, Brusca thinks this latest report is far more positive.

"This is the best minus 6% reading we've ever had," he said.

Wachovia economist Adam York said the sharp plunge in inventories needed to take place in order for the economy to be able to turn around.

Now that businesses have made that adjustment, York said there could be growth in the overall economy as soon as the second quarter. But he cautioned that growth was more likely to resume in the second half of this year.

"We're in the light at the end of the tunnel camp," he said. "This sets us up for a traditional business cycle recovery."

Still, the economic decline during this recession, which started in December 2007, has been one of the deepest since the Great Depression.

Since the second quarter of 2008, when nearly $100 billion in stimulus checks sent to taxpayers caused a spike in spending, overall economic activity has dropped by 3.3%. That's the biggest three-quarter decline since the government started calculating GDP on a quarterly basis in 1947.

The first quarter report comes as the Federal Reserve is set to wrap up a two-day meeting later Wednesday. Investors will be watching closely to see what the central bank, which has cut rates to nearly 0% and taken other measures to try to revive the economy, says about the economic outlook.

Best of the best awards

2009-04-29T08:52:00.000-07:00

One of my favorite actors that become my inspiration is Nicole Kidman. In my opinion, she is the next favorite actor that should be nominating as the best actor. The reason is quite simple; I like her performance in several movies that I watched. However, I also have to thank to Directsattv, since because of its service I can watch my favorite Nicole Kidman plays without any trouble.

Directsattv is one of the leading dealers and satellite services which famous over the internet. I choose this dealer because they can provide me various TV channels without problem and I can order for my custom channels too. I quite interest with movies channels since I like to spend my time watching movies. In the other hand, I often watch Nicole Kidman on Movies channels that I had watched; somehow, that woman is never regretting me. I also like when she played ‘the forgotten’ movies, I guess she played it totally. Best of the Best Awards could belong any time to her no matter it is.

In the other hand, BoB Awards could belong to anyone including my favorite one. However, Awards is not merely for actors or movies but it can be for the best blog or the best website design, or anything as long as it is worth. As Nicole Kidman whom always has possibility as best actor, through here I want you all choose me, please nominate me in the Best of the Best Awards!

How Bernie did it

2009-04-25T09:42:00.001-07:00

The employees were transfixed. Standing on the mid-Manhattan trading floor of Bernard L. Madoff Investment Securities in late 2007, a half-dozen staffers stared up at the ceiling-mounted TV as CNBC aired a report on the mysterious Palm Beach death of a hedge fund manager who had been leading a double life. The police, it appeared, were even considering the possibility that he had been murdered. "Bernie," someone casually asked as Madoff happened to walk by, "have you heard of this guy?"

Madoff glanced at the screen, blanched, and exploded: "Why the fuck would I be interested in some shit like that?" The employees recoiled. "I never saw him react like that before," says a Madoff trader who witnessed the outburst. "It obviously hit a nerve."
0:00 /2:48Minnesota's Madoff mess

Such a loss of control was highly out of character for the boss. But the traders didn't know at the time that Madoff had an extraordinarily elaborate second life going on just two floors below them, one that was building toward an epic, and inevitable, explosion. It took a special pass to get into the "back office" on 17, where Madoff was conducting his $65 billion Ponzi scheme. And even if a person could get in, there wasn't much to see: an antiquated IBM computer server kept in a locked room, piles of trading statements, and a staff of about 20 paper pushers and clerks.
Talkback: What do you think of the Madoff scandal?

In retrospect, of course, there were clues, as a Fortune investigation has discovered. The IBM server, for instance, an AS/400 that dated from the 1980s, was so old that some data had to be keyed in by hand, yet Madoff refused to replace it. The machine -- which has been autopsied by the government -- was the nerve center of the fraud. The thousands of pages of statements printed out from it showed trades that were never made.

Then there was the man who ran the floor, Frank DiPascali, Madoff's chief deputy on 17. He was a 33-year veteran of the firm, with a rough Queens accent and a high-school education, but nobody was quite sure what he did or what his title was. "He was like a ninja," says a former trader in the legitimate operation upstairs. "Everyone knew he was a big deal, but he was like a shadow."

There were other mysteries, as we shall see. But even after it detonated five months ago in a fireworks display of betrayal and recrimination, Madoff's scheme -- possibly the biggest investment fraud in the nation's history -- has remained among the hardest to penetrate. Most commonly, white-collar cases begin with a quiet, behind-the-scenes investigation, followed by a series of deals with junior employees, who are squeezed by prosecutors to cough up details about their superiors. Step by step, the prosecutors move up. Finally comes the denouement: the ringmaster hauled into court in handcuffs.

But with Madoff every aspect of that traditional narrative has been inverted. The case began with his flabbergasting confession, which set off the investigation. Madoff claimed he committed his crimes all by himself, but because they spanned decades and continents, a fog of suspicion immediately engulfed Madoff family members who worked at the firm, as well as employees and business associates.

Now that fog may be about to lift. Fortune has learned that Frank DiPascali is trying to negotiate a plea deal with federal prosecutors in which, in exchange for a reduced sentence, he would divulge his encyclopedic knowledge of Madoff's scheme. And unlike his boss, DiPascali is willing to name names.

According to a person familiar with the matter, DiPascali has no evidence that other Madoff family members were participants in the fraud. However, he is prepared to testify that he manipulated phony returns on behalf of some key Madoff investors, including Frank Avellino, who used to run a so-called feeder fund, Jeffry Picower, whose foundation had to close as a result of Madoff-related losses, and others. If, for example, one of these special customers had large gains on other investments, he would tell DiPascali, who would fabricate a loss to reduce the tax bill. If true, that would mean these investors knew their returns were fishy. (Lawyers for Avellino and Picower declined to comment. Marc Mukasey, DiPascali's attorney, says, "We expect and encourage a thorough investigation.")

The emergence of this potential star witness may well stand assumptions about the case on their heads: Some people widely assumed by the public to have been involved in the fraud may not have been, and a small group of Madoff investors who appeared to be innocent victims may not have been entirely innocent after all. But then, few things about the life of Bernie Madoff turn out to be as they seem.
A business dynasty

Before it all went to pieces, Bernard L. Madoff Investment Securities appeared to be a charmed firm run by a tight clan. People believed in Bernie. Nasdaq made him its chairman; the SEC appointed him to industry panels; Congress invited him to testify. New York Senator Charles Schumer stopped by the office in the run-up to the Iraq war and gave a rousing talk on the trading floor. Everywhere you looked, there were signs that Madoff -- and by extension his firm -- had special status. Bernie was even able to arrange with his friends the Wilpons, owners of the New York Mets, for staffers to play charity softball games on the field at Shea Stadium.

If Bernie was the center of the firm's solar system, the nearest planet was his brother Peter, the head of compliance and de facto chief operating officer for the Madoffs' original, legitimate trading business. They were a savvy pair with a long-established dynamic. "They were the ultimate good cop/bad cop duo," says Christopher Keith, a former chief technology officer of the New York Stock Exchange who worked for the Madoffs on a side project (and who acknowledges that he clashed with them). Peter was the hands-on brother, the one immersed in detail, and most of all, the designated tough guy. "Peter was like five miles of bad road," Keith says.

Bernie's role was to glide in at the end and make peace, says Keith, who compares him to the biblical Solomon: "He was the type of person who was sort of above the fray -- the wise man."

Peter, now 63, was tethered to his BlackBerry. A lawyer by training, he was the driving force behind the firm's technology innovations. Though he couldn't write code, he could discuss software algorithms with surprising facility.

Bernie didn't have a BlackBerry. He didn't even use e-mail -- he could barely turn his computer on. His PC was configured essentially just to give him financial news, says Nader Ibrahim, who used to work on the technology help desk at Madoff's firm. "It was set up in a manner that the computer never shut off," Ibrahim explains. "So the format on the screens, how his windows were set up, and everything like that would just come up the same way. If he were to touch the stock menu and something [unexpected] came up in front of his system, he would get all flustered and call us."

Bernie and Peter were the first generation of the dynasty. The second was dominated by another set of brothers, Bernie's sons, Mark and Andy, now 45 and 43. Andy was the more cerebral one, with a better understanding of complex technological issues. But many viewed him as haughty and unapproachable, though those who know him say a kind person is concealed behind the reserved exterior. Andy survived a bout of lymphoma a few years ago (he is now in remission), and when he returned to the office, he ceased working on the firm's original trading operation and focused on other projects, such as the Madoffs' foray into energy trading, a business neither the company nor Bernie was involved in.

Mark was in charge of the main trading business at the time the firm collapsed. If he didn't have his younger brother's intellect, he had the people skills that marked him as heir to the Madoff throne. A frat boy, he was easygoing and low-key, occasionally driving his Vespa to work from his SoHo apartment. In his younger days, he would accompany his fellow traders to the topless bar Scores.

There was no question that the Madoffs were the firm's royal family. Mark and Andy worked among their colleagues on the trading floor, but they sat on a raised platform, a few feet above everybody else. And even star employees knew that they could rise only so high.

Still, for the most part people loved working for the Madoffs -- a surprising number stayed for decades. Bernie's wife, Ruth, was effervescent and gracious. She wrote lovely personal notes to employees. Bernie himself could be charming, even compassionate. In 2002 a rookie trader was seriously injured when he got hit by a car while training for the New York City marathon. "I passed out and woke up in the emergency room," the trader remembers. When he came to, he says, "I looked to one side of my bed, and my mom and dad were there. On the other side was Bernie."

But Bernie was moody, and he could make people uncomfortable. At times he would stare wordlessly into space. One former trader remembers being at a holiday party when he noticed that Madoff was glaring at him from across the room. And glaring. And glaring. "You in trouble?" the trader's fiancée whispered to him when she noticed the boss's icy gaze. Uncomfortable, the couple left early; they never got an explanation.

And Madoff could be less than sensitive. One day a female trader remarked to a colleague that she'd had a nightmare about being raped, not realizing that the boss was listening behind her. Bernie piped in: "That's not a nightmare, that's a fantasy."

Bernie had his quirks, and to a startling extent they colored the firm -- quite literally when it came to the décor. Virtually every piece of furniture, equipment, or decoration was black or gray. That extended even to the pushpins in employees' cubicles. "Bernie had the manufacturer just send boxes of black ones," says Bob McMahon, a former employee.

Madoff was even more obsessed, if that's possible, with cleanliness. Even while he was responsible for billions of dollars, it was not uncommon to see him dusting his office or the two-foot sculpture of a screw behind his desk. One staffer recalls getting off the elevator to find Madoff, clad in one of his innumerable tailored suits, on his hands and knees in the lobby, straightening the rugs so that they were aligned perfectly.

That was Madoff's third fixation. Everything needed to be symmetrical and in straight lines. When Madoff was in the office, all window blinds had to be aligned at the same height, all computer screens had to be arrayed at the same angle and position, and on and on. So insistent was he on perfect alignment that, more than once, he dropped his trousers in the office -- startling female employees -- to ensure that the line of his shirt buttons was precisely vertical. More than one writer has pointed out how odd it was that Madoff, a seeker of the parallel and the perpendicular, should have chosen to house his firm in the Lipstick Building, designed by Philip Johnson and John Burgee in the form of an ellipse.

The Madoff firm had 2-1/2 floors in that building. The trading floor was on 19, and the software programmers worked on 18. Employees in those parts of the firm knew there was a different, lucrative business on half of the 17th floor, but they didn't know exactly what it did. "We were all aware of this hedge fund that had had great returns for 20 years," recalls one trader. "We knew it was statistically impossible [to have the steady gains for which Madoff became famous]. As a collective, we always kind of wondered: How the hell does he do it? Every person was curious. But that's where it stopped. You'd stop yourself from wondering. You'd say, There couldn't be anything bad. The Madoffs had such a name -- and such an aura."
Mom, Dad and the SEC

Peter Madoff, a trustee of the Lower East Side Tenement Museum, wrote a line on that institution's website about his family's roots: "My grandparents ran a Turkish bath in the area that served as a focal point for many new immigrants of different nationalities." Census and marriage records show that the Madoff grandparents came to the U.S. from Poland, Romania, and Austria between 1900 and 1905.

Bernie, when he rode through the area many decades later, would occasionally point out places where his family had lived or worked. But though he embraced the family's gritty immigrant success story, he avoided talking about his own parents and his more suburban upbringing. Bernie and Peter Madoff were raised in Laurelton, a middle-class area of Queens. Located beyond the end of the subway line on the border of Long Island's Nassau County, Laurelton felt more like a village in those days than a part of New York City. Families would run into each other at the local Chinese restaurant, the ice-cream parlor, and the Laurelton Jewish Center. The Madoffs -- the parents, Ralph and Sylvia; the boys, Bernie and Peter; and their older sister, Sondra -- lived in a modest three-bedroom brick house with a detached garage on 228th Street, a broad, tree-lined street with a grassy median.

Little is known about the career of Ralph Madoff, and no member of the extended Madoff clan would discuss the family. Ralph gave his occupation as "credit" on his marriage license, and one of Bernie's high school classmates, Ed Heiberger, recalls that he "was either a stockbroker or a customer's man" (the latter is the equivalent of a client or account representative). Years later he would work for his son Bernie's firm. "Ralph looked like a truck driver," adds Joe Kavanau, an old friend of Bernie's. "Kind of a rough-and-tumble kind of guy --not the kind of guy you screw with."

Ralph Madoff wrangled with the government on one occasion. Along with three people, he owed a tax debt of $13,245.28 (about $100,000 in today's dollars) that caused the IRS to place a lien on the Madoff home. The taxes were assessed in 1956, but the lien was not paid off until 1965 after the house was sold, suggesting that Ralph was either fighting the tax bill or unable to pay it.

Like Ralph, Sylvia had a run-in with the government. In August 1963, the Securities and Exchange Commission announced it was instituting proceedings to determine whether 48 broker-dealers, including "Sylvia R. Madoff [doing business as] Gibraltar Securities," had "failed to file reports of their financial condition ... and if so, whether their registrations should be revoked." Then, in January 1964, the SEC dismissed administrative proceedings against a number of the firms, including Madoff's, in what appeared to be a deal: No penalties if you promise to stay out of business.

What's mysterious is that Bernie Madoff's childhood friends don't recall his mother's being involved in stocks or bonds. For a woman to head her own securities firm in the early '60s was unusual. And given that the company's address was listed as the Madoff home in Laurelton, Bernie's friends would seem likely to have noticed the business. Yet they didn't and it's impossible to know why not. One could speculate that Ralph, his name tarnished by federal tax troubles, decided to put his wife's name on the application to open a stock brokerage.

Either way, one of Bernie Madoff's parents was involved in securities -- and got into trouble for it. And according to his friend Joe Kavanau, who attended law school with Madoff (before both dropped out), Madoff knew he was going to go into that line of work from a young age. "Bernie," he says, "was always going to have this business."
'Cash on hand $200'

Perhaps that explains why most people's memories of the young Bernie Madoff concern his extracurricular activities rather than anything having to do with academics. Most of them, for example, recall his side business of installing sprinkler systems, which he launched as a teenager. "He was a very aggressive kind of kid that wanted to get ahead in life," says his high school classmate Heiberger. "He was a regular guy who was always hustling."

Madoff achieved little distinction at Far Rockaway High School. He was a lifeguard and made the swim team, specializing in the butterfly. But even in this, he didn't excel enough to compete in individual races on a regular basis, according to the team's co-captain, Fletcher Eberle. Instead, Madoff swam in the team relays.

The only other activity that Madoff cited in his senior yearbook entry was "locker guard." This, according to classmates, was a variation on the role of hall monitor. During a more innocent time, the mid-1950s, when fears of student misbehavior centered on truancy and pranks rather than drug use and shootings, the future Ponzi schemer was deputized by school authorities to prevent horseplay in the locker area.

One constant in high school was Ruth Alpern, Madoff's sweetheart. They were a couple, says Jane Kavanau, one of Ruth's old friends, "from early high school, maybe even from when she was in eighth grade." Bernie was smitten by the ebullient, energetic girl who also had an excellent head for numbers. Every morning he would pick Ruth up at home, and they would ride the train together to high school.

Madoff left home to attend college, passed a lonely semester at the University of Alabama, and then returned, according to two sources, because he was pining for Ruth.

He began commuting to what was then Hofstra College, 10 miles across the city line in Long Island. His studies seemed almost incidental. What mattered to him were work and family. The day before Thanksgiving in 1959, he married Ruth at the Laurelton Jewish Center. Two days later he found the time to fill out an SEC application to register his own self-named broker-dealer firm. He later appended a "financial statement" to the application. It consisted of seven words: "Assets: Cash on hand $200. Liabilities None."

Madoff hadn't even graduated -- that came in 1960 --and he had a tendency to get flustered or tongue-tied around people. But he didn't lack for determination. And he had another quality, which Joe Kavanau puts in earthy terms: "I guess the word is 'balls.' "
The 'under-the-counter market'

Even as Madoff continued his schooling -- he spent a year at Brooklyn Law School -- he plunged into the securities business. Six months in, he reported a single stock position: 12 shares of a company called Electronics Capital, worth a total of $300. But by the end of 1961, his initial $200 stake had grown to $16,140, according to his SEC disclosures -- a significant sum in those days for a firm that consisted solely of Bernie and his wife/bookkeeper, operating at first from a shared desk at her father's accounting firm.

Madoff specialized in over-the-counter stocks, the unglamorous, mostly small-company shares that didn't trade on an exchange. He was a wholesaler, a person who would buy and sell small-company stocks to brokers whose clients were looking to invest or to exit a position. "In those days," Madoff explained in a 2007 panel discussion, "over-the-counter stocks were traded always over the telephone with no automation. So you would call a broker; the broker would call up over the telephone any number of dealers like myself, and there were hundreds of dealers around the country that were making these markets."

This was not the staid institutionalized world of the New York Stock Exchange. Since they didn't trade on a centralized exchange and there was no technology to provide up-to-date prices, over-the-counter dealers could -- and did -- take all sorts of liberties with their quotes. "A lot of people started referring to the over-the-counter market as the under-the-counter market," said Gordon Macklin, the late president of Nasdaq, in the Wall Street history What Goes Up.

Madoff was successful from the beginning, and his capital account began mounting: By 1967 he was reporting $127,517 to the SEC. In 1969 it had reached $555,157, and in 1973 it was listed as $1.1 million.

By this point Madoff had also been quietly managing money for years. There was no hint of this on his SEC forms. But beginning sometime in the early 1960s, he had started taking on investors. It originated with a small nucleus of family and friends, and then spread outward in larger and larger circles. For example, Carl Shapiro, an apparel executive who had met the young investor and been impressed by him, gave him tens of thousands to invest in the early '60s. Shapiro would stick with him for close to half a century, losing around $545 million when Madoff's scheme collapsed.

Another key figure was Ruth's father, Saul Alpern. He not only let his son-in-law share a desk at his accounting firm but also channeled clients and friends to Madoff. Eventually, according to Michael Bienes, who joined Alpern's firm in 1968, Alpern began gathering smaller investors together and creating a fund that invested with Madoff as a single account. This was among the first of what came to be called feeder funds.

Madoff was adept at subtly cultivating relationships with people like Bienes. The accountant had represented Madoff in a successful audit in the late 1960s. Then, little by little, Madoff began drawing him in. "I got to know him," Bienes says. "I once went swimming naked with him. He invited me to the New York Athletic Club on Central Park South [where members swam in the nude at the time]. He asked me to come and meet him and get a rubdown ... We didn't discuss anything, really. I think he wanted to get the feel of me, you know, and bring me into his orbit." Bienes evidently won Madoff's trust, and when Alpern retired in the mid-1970s, his feeder fund was passed to his accounting partners and became known as Avellino & Bienes.

Around this time, Bienes recalls, Madoff invited him to the bar mitzvah of one of his sons. "It was a lunch," Bienes recalls, "a buffet lunch. And I was very impressed because he didn't go over the top. He was a wealthy guy, you know, but he did it in a very moderate way. And I remember my partner, Frank Avellino, and myself and Bernie meeting in the middle of the dance floor, and we were saying, 'Thanks for having us,' and he said, 'Hey, come on -- we're family, aren't we?' And at that moment, he had me. He had me. We were family. Oh, my God! I was in! It really took me because he had a presence about him, an aura. He really captivated you." Bienes, who ultimately lost his entire savings to Madoff, still seems dazzled decades later. (Another part of the appeal, according to Bienes's lawyer, Mark Raymond, was that Madoff led Avellino & Bienes to believe they were his only investing client. "I honestly thought we were the one and only," says Bienes, who says that he and his partner jokingly referred to Madoff as "our boyfriend.")

In those days Madoff would tell investors he was employing a much different investing strategy from the split-strike conversion approach that would later become synonymous with his fraud. Madoff explained the early strategy in a 1992 Wall Street Journal article: Before 1982 or so, "Mr. Madoff confirms ... [investors'] money was being used to engage in so-called convertible arbitrage in securities of such companies as Occidental Petroleum Corp., Limited Stores Inc. and Continental Corp." Madoff invested in high-yield issues that were convertible into common stocks while simultaneously short-selling the common stock, the article explained. Investors then earned "the spread between the higher dividend paid on the convertible securities and the lower dividend on the common stock, plus interest from investing the proceeds of the stock short sale."

Even as Madoff was planting the first seeds for his future role as a Ponzi schemer, he got a firsthand lesson in fraud: He was fleeced by one of the great charlatans of the 1960s. The perpetrator was a con artist with the evocative name of Jack Dick, who was sanctioned by the authorities multiple times and yet regularly managed to launch new schemes. His largest and most famous operation was known as Black Watch Farms, which sold investments in Angus bulls in the days when tax shelters were the rage. Dick himself became a wealthy and prominent figure in society. The New York Times' Gay Talese chronicled a 1964 bull auction conducted by Dick that was attended by the likes of U.S. Senator Al Gore Sr. and a representative for former President Dwight Eisenhower. Newspapers described Dick's "opulent" life in a mansion that had formerly belonged to the mother of an owner of the New York Yankees.

Then it all collapsed. Dick was accused of embezzling $3.2 million from Black Watch's bank but died before the case could be resolved. Madoff, who had committed $85,000, was one of many left holding the bag. The press descriptions of Dick's downfall resonate today. "He's one of the most brilliant persons I ever met," said one victim quoted in a 1971 Wall Street Journal article. The article noted, "If he has any flaw, one critic says, it's confidence in his own judgment that is so excessive it borders on a belief in his own infallibility."
A bonanza in software

Long before Madoff attained infamy as a criminal mastermind, he earned respect as a pioneer in electronic trading. Yet Madoff apparently wasn't satisfied with his place in history and was prone to embellish it on occasion. Such fibbing may be the moral equivalent of failing to plug the parking meter for your getaway car while you're inside -- in Madoff's case, robbing a bank of $65 billion. Still, he felt the need to puff up his credentials.

Consider how he described the creation of Nasdaq. Launched in 1971, it was a primitive computer system that displayed stock quotes -- hence the name National Association of Securities Dealers Automated Quotations. The system simply listed the bids and offers; it was not until a decade later that it became possible to use Nasdaq to trade stocks. Said Madoff at a 2007 panel: "In about 1971 computers were showing up and being used. So we -- meaning my brother and myself -- saw that there was an opportunity to bring automation in the over-the-counter marketplace and create some visibility and transparency in the marketplace. So we came up with the concept of developing a screen-based trading mechanism where prices would appear on a computer screen. That was the start of Nasdaq." The way Madoff told it, his firm and four others "made a proposal to build a screen-based trading system, which then became Nasdaq. Then that went through various stages of automation, so that you were able to turn on your computer screen and any brokerage firm in the country would list all the dealers that were willing to trade the security and the prices. Then that eventually went on to where you could actually trade the security automatically."

That account is largely correct -- except for Madoff's role in it. Says Charles "Dick" Justice, who started with the National Association of Securities Dealers in 1968 and was its chief technology officer for decades (and knows Madoff), "he wasn't involved in the founding of Nasdaq at all." Asked about a separate Madoff comment that he was "involved in the design of the Nasdaq technology," Justice says, "No, he wasn't."

According to Justice and others who played roles in early electronic trading, it was only in the late 1970s and early 1980s that Madoff made his mark. And when he did so, it wasn't because his firm created the concept of electronic trading -- it was because the Madoffs were among the first to recognize the value of the idea and designed software that could trade stocks electronically in seconds. "If you have a brokerage firm that advertises they will get their trade done with you in five seconds," says one longtime Madoff tech employee, "that's because our system will get it back to them in two. That's the innovation."

Trading through Madoff was not only fast -- it was cheap. Actually, "cheap" understates the matter. Rather than taking a fee for trading stocks, as NYSE specialists did, Madoff paid firms like Charles Schwab and Fidelity a penny or two a share for their orders, a practice known as "payment for order flow." In those days, there was a prevailing spread of at least 12.5¢ between the price that a "market maker" like Madoff's firm paid to buy shares and the price at which it would sell the same shares. Using its own software, Madoff's firm was adept at hedging the risk that buy-and-sell orders would be out of balance, preserving its profit. So even if he gave away a penny, Madoff could still make a tidy sum.

The allure for customers was obvious. And these ultra-cheap, fast electronic trades were among the things that helped discount brokers like Schwab and Fidelity slash commissions and bring stock trading to the masses.

By the early 1990s, Madoff's firm alone was executing 9% of the daily trading volume of stocks listed on the New York Stock Exchange. Madoff's realm was known as the "third market." His firm specialized in trading Big Board shares outside of the exchange. Such trading had existed for decades, but Madoff's firm led the charge as it went electronic. "He was viewed as the leading third-market firm on the Street," says former Nasdaq president Joseph Hardiman, who became close to Madoff. "He was very much respected and listened to by his peers."

His peers did not include the specialists of the New York Stock Exchange. That group viewed Madoff with disdain. They likened order payments to kickbacks. And they were incensed at being placed at a competitive disadvantage by this outsider. "We are being forced to play full-contact football in tennis whites," sniffed one specialist to the Wall Street Journal in 1990. The anger and condescension still linger today. "The Madoffs were poaching scallops from my plate," says one retired NYSE director. He dismisses Madoff himself as nothing more than a "chiffonnier" -- a ragpicker.

Call it shabby if you want. Payment for order flow was legal, and Madoff fought to keep it so. Under pressure from the SEC, the NASD, the securities industry's self-regulatory body, assembled a panel to study the issue in 1990. At the time, payment for order flow was highly controversial, and opposition was intense.

Madoff, who was named chairman of Nasdaq that year, played a key role. Not only did he serve on the panel, but he also suggested witnesses to interview. Managing to cast himself as a statesman who just happened to be the most knowledgeable man in the room rather than as an advocate fighting to protect his livelihood, Madoff took the lead in the discussions.

Slowly and subtly, he steered the group to his line of thinking, four members recall. "He wasn't pushy about his view," says David Ruder, a former SEC chairman and head of the panel. "He wouldn't say, 'We've got to protect my business.'" Instead, Madoff would tell the members, "You have just got to understand it." During the process, says Ruder, "we got pretty chummy."

When all was said and done, Madoff prevailed. The panel endorsed payment for order flow in its 1991 report, concluding that the practice was no different from other inducements offered on Wall Street. "The report put the NASD imprint on the process," says Norman Pessin, a committee member who admires Madoff's political skills. "It legitimized his business." Eventually the SEC followed, giving its own imprimatur to the payments as long as they were disclosed.

For Madoff it was a sweet victory, one that cemented his role as a force in trading. The years that followed marked the lucrative peak for Madoff's market-making firm, earning him millions in honest profits.

But beginning in 1997, the rules governing trading spreads changed. They were slashed from 12.5¢ a share to 6.25¢ that year and then dropped to a penny in 2001. Madoff's firm, which had eschewed traditional commissions and made its money on the spread, watched its profit margins evaporate. Madoff's market-making operation would never again be the prodigious cash generator it had been. Indeed, there were times after the turn of the century when it would dip into the red.
A private club

One of the reasons Madoff was able to perpetrate his fraud for so long was his preference for marketing his investment business by word of mouth. Until the scam's later years, people heard about it from friends. It was a private club, one that, famously, became only more desirable because of Madoff's seeming reluctance to admit new investors. One of the tacit conditions, as we know now, was an understanding that information about Madoff investments -- including their existence -- was to be held closely. Most investors complied. Who would want to anger Madoff and risk losing their privileges?

Still, despite his best efforts, every so often Madoff's secret investment business would emerge publicly. Each time Madoff would spring into action, showing a characteristic mix of reactions. He would take direct control, responding personally. And he would employ his self-deprecating charm.

In 1992, for example, Madoff's name surfaced in a major SEC investigation involving one of his feeder funds. Avellino & Bienes was accused of running an unregistered securities operation, issuing $441 million of notes that promised returns of 13.5% to 20%. SEC officials feared it was a Ponzi scheme. They raced into court, won an injunction to shut the firm down -- and discovered that all the investors' money was safely in the hands of one Bernard L. Madoff. According to court records, Madoff was able to return all the money to Avellino & Bienes in a matter of eight days. (The two men ultimately paid a combined $350,000 in civil penalties to the SEC.)

Once the money was produced, essentially, the SEC exhaled. It didn't occur to the agency to investigate Madoff. Much of the rest of the case was handed over to a court-appointed trustee whose job was to make sure investors were made whole, and to what was then Price Waterhouse, which tried to reconstruct the mostly nonexistent books of Avellino & Bienes.

What's striking is that Madoff appears to have played the role of model citizen in this case. Billing records show that Lee Richards, the trustee, and Joel Whitman, who then worked for Price Waterhouse, held multiple phone conversations and at least one meeting with Madoff, who was able to provide investing records when Avellino & Bienes couldn't. They also show Madoff personally handling requests for computer records and the like, the sort of routine queries that in almost any other firm would have been handed off to the chief technology officer or a more junior person.

Madoff's personal touch seemed to score points. Whitman testified that Madoff was "forthright" in answering his questions. (Whitman said he couldn't comment for this article unless Richards, his client, granted permission. Richards did not respond to e-mails and phone calls.)

In May 2001 a more probing spotlight was shone on Madoff, and once again he escaped. In that month, two articles -- the first in a trade publication called Mar/Hedge, the second in Barron's -- raised serious questions about Madoff's investment operation. For starters, its very existence was surprising: According to Mar/Hedge, its $6 billion to $7 billion in assets under management made it the largest or second-largest hedge fund in the world at the time. Yet it was unknown. The articles went on to note the improbability of Madoff's smooth and steady 15% annual returns. They wondered why Madoff charged no fees to run his seemingly successful investment operation and instead accepted only minimal trading commissions.

Once again, Madoff got personally involved. The Mar/Hedge article noted that "Madoff sounds and appears genuinely amused by the interest and attention aimed at [his] asset-management strategy," and he pooh-poohed his own investing success, waving it off as the benefit of a bull market.

Madoff does not appear to have swayed either reporter, and both articles had a skeptical tone. Barron's asserted, for example, that "some on the Street have begun speculating that Madoff's market-making operation subsidizes and smooths his hedge-fund returns." Madoff was quoted dismissing that notion as "ridiculous." (As it happens, the opposite hypothesis was common among employees of Madoff's legitimate business. "We had a sense he was probably paying rent from the asset management," says a trader who worked for Madoff at the time.)

So what happened when two publications, one of them among the most prominent on the subject of investing in the country, raised questions about Madoff? Nothing. What seemed like clear warnings disappeared into a void of indifference. Even inside Madoff's firm, the reaction was a shrug. "We knew about the Barron's article," recalls the trader. "We went on about our business as if it was another firm that had nothing to do with us."

As it would later turn out, Madoff's illegal investment business was indeed subsidizing his legal trading operation. Among the charges to which Madoff pleaded guilty in March were three counts of money laundering, which involved transferring millions of dollars from Madoff's fraudulent business through his London operation to his legitimate New York business. At least $250 million was transferred in this manner, according to the charges.

Then came the closest call: The SEC launched an investigation in 2006. A whistleblower named Harry Markopolos had spent years trying to persuade the SEC that Madoff was running a Ponzi scheme (he had been a key source for the Mar/Hedge article). The SEC also examined whether Fairfield Greenwich, a giant feeder fund, was properly disclosing the extent of its reliance on Madoff.

Madoff had always been terrified of the SEC. "Every time the SEC came into the office," remembers one longtime employee, "Bernie was a basket case." Wherever Madoff was in the world, he would fly back, even for a routine examination. He peppered employees with questions about their preparedness. "What's up?" he would ask nervously. "What's up? What's up?"

This time Madoff was being asked specifically about his fraudulent investment business. Once again he prepared -- not only himself but also his customer Fairfield Greenwich. A phone conversation with representatives of Fairfield Greenwich in December 2005 was taped, transcribed, and made public as part of a Commonwealth of Massachusetts suit charging Fairfield Greenwich with essentially abdicating its responsibility to protect its investors. The transcript provides a revealing example of Madoff's thinking and his ability to manipulate.

"Obviously, first of all, this conversation never took place ... okay?" Madoff began. ("Yes, of course," was the reply from Fairfield Greenwich's risk manager, though the company has since asserted that it informed the SEC of the conversation at the time.) Madoff proceeded to spin a strange, fragmentary -- he seemed to interrupt himself every few words -- self-contradictory set of talking points for Fairfield to follow in its SEC interview.

In reality, Fairfield's Sentry funds had their entire $6.6 billion stake invested with Madoff, and he controlled every investing decision (though, of course, in this case, "investing decision" meant Madoff simply took whatever money was sent his way). But he reminded them of their cover story: "You've approved the parameters of the strategy, and I've agreed to follow these." Fairfield, he kept repeating, had selected the strategy and a range of stocks, and Madoff's only role was to control the timing of when these investments were entered into and exited. "[W]e never wanted to be looked at as the investment manager," he said. "So in the past, if we've ever been asked about what our role is with any of these types of funds, it has always been that we are the executing broker for these transactions." Having just said that Fairfield had the sole power to choose the investing strategy, Madoff turned around and explained to them that he had changed the "trading directives" several years ago and was only now getting around to informing Fairfield Greenwich that its strategy had changed. "I'll send you up the new trading instructions today," Madoff said blithely.

Madoff was telling Fairfield to deny the obvious: that he was managing their money. At the same time, he portrayed his firm's role as something well known to the SEC. "They're aware of the fact that we do this," Madoff said, adding later, "The commission knows how we -- how we operate." (An SEC spokesman declined to comment.)

Madoff went on to disparage the SEC investigation as a "fishing expedition," saying that "these girls" -- the SEC's lawyers -- might not understand the strategy, and implying that they might not press too hard because SEC lawyers have ambitions to go into lucrative private practice and don't want to alienate the sorts of firms that might hire them. "It's none of their business," he added. Madoff, who appeared at times to be reading from a list of bullet points, also advised the Fairfield Greenwich team on the tone they should take. "You don't want them to think that you're concerned about anything ... You're best off [if] you just be, you know, casual." Fairfield has said it told the truth to the SEC.

When it was his turn to be interviewed by the SEC, in May 2006, Madoff flat-out lied. When he was asked, for example, "Is it correct, then, that the equities are traded in Europe?" he responded, "Yes." (Madoff often told people he made all sorts of trades in Europe, where it would be harder to verify what he was doing.) Needless to say, there were no equities being traded in Europe or anywhere else.

Madoff's lies paid off -- at least, at the time. The SEC "found no evidence of fraud," as a staff attorney wrote in a "case closing recommendation" (this despite the fact that the SEC had previously noted that Madoff's firm "misled the examination staff" and withheld information). The punishment: Madoff's firm had to register as an investment adviser.
'Bernie's world'

Today, the radio announcer intoned solemnly, the New York Mets have lost one of their greatest fans: Roger Madoff. Bernard Madoff's 32-year-old nephew, Peter's son, had died on April 15, 2006, from complications related to leukemia. The announcement, aired on the Mets' radio station, was an unusual acknowledgement of a fervent Mets fan. It also reflected the decades-long bond between the team's owners, the Wilpon family, and the Madoffs. (The Wilpons also had millions invested with Madoff, and lost the money.)

Roger's protracted illness shook the entire Madoff family. It was especially devastating for his sister, Shana, a compliance lawyer at the firm. Roger and Shana "were like stamp and envelope," recalls one employee. "You couldn't separate them." Peter Madoff was in even worse shape. Peter had been a frequent visitor to the hospital, bringing bagels for the nurses and newspapers for his son. A doctor once entered Roger's hospital room to find Peter tenderly applying ointment to his dying son's feet. Chauffeured home in his BMW on the Long Island Expressway, Peter would weep quietly in the back seat.

Cancer reached deep into the Madoff family. Peter had survived a bout of bladder cancer in 2000, and Bernie's son Andrew was in treatment for lymphoma. Another nephew, who also worked at the firm, was preoccupied with his young daughter's leukemia treatment. "We should curse the Madoff bloodline," Roger wrote in a posthumously published book on his struggle with the disease.

As Roger got sicker and sicker, the family channeled most of its philanthropy, which swelled into eight figures, into cancer research. "I hadn't realized the extent of the wealth that existed there," Roger noted with some surprise in his book.

By then, Bernie Madoff's "investment business" had ballooned. According to research by Harry Markopolos, it grew from as much as $7 billion in 2000 to as much as $50 billion by the end of 2005. What had started decades before as a small-time recruiting effort by Madoff agents at country clubs had gone global. Massive international institutions such as Grupo Santander, Fortis Bank, and Union Bancaire Privée were all funneling billions -- sometimes through intermediaries -- to Madoff, lured by the call of steady 10% to 12% returns. Even one of the world's biggest sovereign funds, the Abu Dhabi Investment Authority, ended up sinking tens of millions of dollars into the Ponzi scheme run by the guy from Queens on the Lipstick Building's 17th floor.

"Bernie's world" is the phrase Bob McMahon uses to describe the operations on 17. McMahon, a project manager specializing in information technology, was brought in to help rationalize the company's systems from 2007 to 2008. The situation he found was odd, especially for a firm whose legitimate business had been built on software prowess.

Traders had begun grousing about the firm's proprietary MISS software and the decades-old mainframe it ran on. The system was designed to trade equities; reconfiguring it to trade anything new was cumbersome. But replacing the mainframe wasn't so simple, says McMahon. It would also entail replacing a venerable IBM server, the AS/400, which served as the investment business's main computer backbone.

"Managing the AS/400 was getting to be a very, very hands-on, manual process," recalls McMahon. But "Bernie never wanted to get rid of [it]. That was the books and records of quote 'the company.'"

There were other idiosyncrasies in Bernie's world that might have raised suspicions. Around 2002 he proposed eliminating e-mail throughout his firm but was persuaded not to. Lots of Wall Street firms were talking about restricting it in the wake of corporate scandals featuring incendiary messages, but Madoff ultimately did the opposite of what you'd expect. He allowed e-mail for staffers at his trading business -- the one the SEC regulated -- while abolishing it for the people working in the unregulated investment business on 17.

Madoff took another step. He decreed that e-mails would no longer be stored electronically. First he decided that each of the firm's e-mails would be printed and then stored in boxes, but he was persuaded by others that such a plan was impractical. In the end, Madoff ordered that old e-mails be transferred to microfiche, a cumbersome process that costs much more than archiving the records digitally. Why would Madoff want to increase his archiving costs? Perhaps it had to do with the fact that microfiche is orders of magnitude more difficult to search than electronic records.

The 17th floor seemed like a galaxy far removed from the rest of the company. Most of the people there were a different breed from the overachievers upstairs. Many had arrived at Madoff's firm straight out of high school. "This was the only world they ever knew," says McMahon. "It was the old analogy of mushrooms: You keep them well fed and happy in the dark."

For weeks at a time, it was a torpid operation. Employees tended to disappear for long stretches of time -- for lunch, for vacation, for anything. Then, six to eight times a year, a frenzy would erupt. Madoff's purported investing strategy was the "split-strike conversion." We'll spare you the details -- they seem beside the point, given that Madoff didn't actually execute this strategy -- other than to note that he claimed it consisted of a "basket" of 35 or so large-company stocks hedged with stock options. In theory Madoff's investing genius consisted of knowing the best time to enter or leave the market. Ostensibly, every so often Madoff's team was "buying" or "selling" massive quantities of stocks and options. Each time that happened, the 17th floor team would spring into action and spend all-nighters churning out trade confirmations for thousands of customers.

Presiding over this process was Frank DiPascali. Raised in the blue-collar Queens community of Howard Beach, he was a high school graduate who had arrived at Madoff's firm in 1975 -- and then spent the next three-plus decades there moving through an unusual combination of legitimate jobs (at various times he was a gofer, a stock trader, and the person who coordinated the firm's move to new offices in 1987) before assuming his ultimate role as the chief lieutenant in Madoff's investment business.

DiPascali shared his boss's love of the sea, and like Madoff, he spoke with a distinct New York accent. In his mouth, the word "three" had no "h." DiPascali came to work in an incongruously starched version of a slacker's uniform: pressed jeans, a sweatshirt, and pristine white sneakers or boat shoes. He could often be found outside the building, smoking a cigarette.

Some customers found DiPascali off-putting. "I'd call Madoff and they would put me on with Frank," recalls Carl Englebardt, a longtime investor. "Quite frankly, when I was talking to him, I thought I was talking to someone in the Mafia. He didn't sound very professional to me. He never inspired a lot of confidence."

He may not have looked or acted like a financier, but when giant customers like Fairfield Greenwich came in to talk, DiPascali was usually the only Madoff employee in the room with Bernie. Madoff told the visitors that DiPascali was "primarily responsible" for the investment operation, according to a Fairfield memo.

As the business ballooned to ever more massive proportions in its final years, DiPascali complained of overwork. He even begged Madoff not to add more customers. "No more! No more!" he was heard pleading on several occasions. But the boss kept signing them up until the very end.
'I'm a steady and true investor'

The storm broke in 2008. The markets began a calamitous and accelerating decline. With their non-Madoff investments pulverized, more and more customers turned to what they thought was their most solid holding: They began requesting withdrawals from Madoff's fund.

For a time, Madoff seemed to defy the worst collapse since the Great Depression. While double-digit monthly drops suddenly became common, Madoff was somehow eking out a heroic positive return, ostensibly 4.5% through October.

Madoff's investors nervously hung on the firm's every word in e-mails that read now as tragicomedy. On Sept. 15, when Lehman Brothers collapsed and Merrill Lynch announced its sale, Fairfield Greenwich executives circulated e-mails describing Frank DiPascali's reassurances that Madoff wasn't using those firms as counterparties and his assertion that Madoff did "not want to sell into weakness." On Nov. 4, another Fairfield executive reported that DiPascali had told him that "they have their buying hats on."

Madoff appeared to be his smooth old self. In November he sat down with members of the investment committee for the American Jewish Congress, one of the nation's oldest Jewish philanthropic organizations. The group's president, Richard Gordon, asked how Madoff could be making money in one of the worst markets in history. "I could explain it to you, Richard, but it's really complicated," Madoff replied evenly. "I'm a steady and true investor." He gently tried to put Gordon on the defensive. "Aren't you happy with the returns?" Madoff asked. Gordon left the meeting as confused as he had been when he arrived. But he had no reason to doubt Madoff's integrity, he says, or to imagine there was a problem. Madoff, he says, was "extraordinarily avuncular -- calm, direct, and to the point."

Madoff was keeping up his façade at work. But at home his desperation had begun to show. In November and early December, he asked his wife to make two transfers totaling $15.5 million from a brokerage account to her personal bank account so that the cash would be at hand. Madoff had never made such a request before, two sources say. Ruth has insisted her husband didn't inform her of the fraud until the day before he was arrested. She maintains, according to one of these sources, that Bernie said he needed the cash to pay customer redemptions.

By this point, $15.5 million was a pittance compared with what he needed. As of early December, investors had demanded the return of some $7 billion. If Madoff truly withdrew his wife's money for that purpose, he had reached the point where he was rooting around in the sofa cushions for loose change.

The man once famous for rebuffing potential investors was now openly soliciting the ultrawealthy: Ken Langone, the Pritzker family, and others were invited to invest. And Madoff leaned on some of his most loyal investors for cash infusions. Carl Shapiro ponied up $250 million. Some of the principals at Fairfield Greenwich added another $15 million. But it just wasn't enough.

On Dec. 8, Madoff's cool veneer finally cracked. He berated Jeffrey Tucker of Fairfield Greenwich over that fund's inability to replenish the money that had been withdrawn from the firm. He threatened to close Fairfield's account and warned that there were plenty of other institutions that could take its place. His traders, Madoff said, were "tired of dealing with these hedge funds."

There is no better indication of the hold that Madoff exerted over his investors than Tucker's response. Tucker, after all, was co-founder of a $6.6 billion investor in Madoff's firm. In normal circumstances, a client of that magnitude would expect to be coddled. Instead, Tucker fretted about what he could do to placate Madoff. "We best talk," he told colleagues in a worried e-mail that day. "I think he is sincere."

Two days later Tucker sent a pleading letter to Madoff. He apologized for not keeping him better informed. "Our firm is very dependent on its relationship with your firm," he continued. "You are our most important business partner and an immensely respected friend ... Our mission is to remain in business with you and keep your trust." Tucker's lawyer, Marc Kasowitz, says his client "was deceived by Bernie Madoff just like the SEC and hundreds of other very sophisticated investors."

Madoff may never have seen the letter, for that was the day his fraud came apart. That afternoon Madoff drove up to his apartment with his two sons. There, as the world would soon learn, he apparently confessed his entire crime.

Afterward the sons proceeded to their lawyer's office, setting in motion the chain of events that led to their father's arrest. Madoff himself came downstairs a few minutes after the sons. According to one person who saw him then, he was as "calm as ever." Madoff returned to the office and then joined his wife at the company's holiday party at a local Mexican restaurant. According to employees who were present, Madoff seemed his usual self. But Mark and Andy never showed up.
Tabloid Bernie

As his black Mercedes S550 made its way north from Manhattan's federal courthouse to his apartment the afternoon after the holiday party -- the day he was arrested -- Bernie Madoff told his driver nothing about why he had been at the judicial complex for hours. It wasn't uncommon for Madoff to be silent, and only later did the driver grasp the meaning of the one observation Madoff did make: "All my life, I've watched the evening news. But tonight I sure won't be watching."

Within hours, Bernard Madoff, wise man of Nasdaq, had been transformed into Tabloid Bernie, the $65 Billion Villain. Almost as fast, Madoff's life collapsed into isolation. Only two people would visit him and his wife during his three months under house arrest, and neither was a close family member. Mark and Andy haven't called since Bernie's arrest. "They've had no desire to talk to their parents," says a person close to the sons.

Dozens of agents from the Federal Bureau of Investigation, the SEC, and the Securities Investor Protection Commission descended on the offices of Madoff's firm. The 17th floor was designated a crime scene, and guards were posted. The staffers who worked on 17 were herded to a small conference room near the coffee machines on the 18th floor, where they sat nervously in what some of them called "office arrest." One by one they were taken to be questioned by the FBI. The company's computer and e-mail systems were shut down, so dozens of staffers passed the time watching movies, playing cards, and talking.

Several days after the feds had locked down the office and told staffers not to remove anything, Peter instructed several employees to carry four boxes and two shopping bags filled with documents downstairs, where his driver was waiting with his own Ford Explorer (the company vehicles were now off-limits). The driver was halfway to the offices of Peter's lawyer when the authorities discovered what was happening. An agitated federal agent called the driver and told him to turn around immediately. When the driver arrived back at the Madoff offices with his cargo, a teary Peter told him, "Sorry I got you involved in this." Peter was assigned an armed FBI "escort" to accompany him wherever he went on the premises that day and later was told not to return at all. A lawyer for Peter Madoff, John Wing, calls the incident "a misunderstanding" between Madoff's office and the FBI over "the removal of his personal files and other personal items."
Where's the money?

The Bernie Madoff who appeared in court in March was a diminished figure, a sad version of the vital, regal person he'd been just a few months before. Gone was the smirk that some had detected in the videos of him right after his arrest. From 10 feet away in the jury box, where a handful of reporters were seated, one could detect what looked like turbulent currents under the placid exterior. Even with his eyes closed, Madoff blinked furiously at moments, his eyebrows spasming above the top of his rimless glasses. His hands betrayed his tension: At times he gripped and twisted his pen; he cracked his knuckles; he steepled his hands so hard that his fingers trembled.

The impression was of a mighty attempt at control. And somehow, Madoff managed to preserve a modicum of dignity, even as he pleaded guilty to 11 charges of fraud, theft, money-laundering, and perjury and absorbed the anger directed at him from the audience, where his victims watched. One of them addressed Madoff directly: "I don't know whether you had a chance to turn around and look at the victims," he said angrily. Madoff hesitated and then wheeled awkwardly in his seat as the judge admonished the victim for speaking to Madoff rather than to the court.

When the judge remanded him to custody that day, Madoff silently pulled his shoulders back and allowed himself to be handcuffed. The cuffs, which gleamed as if freshly polished, seemed somehow suited to the fastidious elegance of the defendant. And then Madoff was gone, likely never to take another step on free soil. He awaits sentencing on June 16. And even if he doesn't get the maximum 150 years, whatever he does receive will effectively be a life sentence for a 71-year-old.

The federal investigation proceeds. Less than a week after Madoff's plea, the firm's outside accountant, David Friehling, was charged with criminal fraud for years of signing off on phony statements. (Friehling's lawyer, Andrew Lankler, declined to comment.) The charges did not assert that Friehling knew of the Ponzi scheme. Friehling now appears to be trying to negotiate a deal with prosecutors.

Investigators continue to try to locate Madoff assets -- a bit more than $1 billion has been discovered so far, with specialists now fanning across the world's offshore locations. The court-appointed trustee, whose job it is to gather assets, has hired lawyers in the Cayman Islands, Gibraltar, and Luxembourg, with more jurisdictions likely to come. They're uncovering $50 million here, $75 million there. What isn't going to happen is the miraculous discovery of a giant vault with $65 billion in cash. That's because that $65 billion -- the most widely cited figure for the size of Madoff's heist -- is a fiction and always was. It's a tally of the stated value of all the account statements of every Madoff account holder as of Nov. 30. The total includes, in some cases, decades of fabricated returns. According to experts, the actual amount investors gave to Madoff over the years is probably closer to $20 billion. But even that outlandish sum will never be found; it was chipped away year after year after year. That, after all, is the definition of a Ponzi scheme: Most of the cash put up by new investors went to pay the old ones.

Put another way, if Madoff had still enjoyed access to large sums of cash in December, he would have continued paying his investors. The collapse of a Ponzi scheme means there is no money left. In the end, victims will likely collect only a tiny fraction of what they lost -- and some substantial portion of that will come from other Madoff investors who had appeared lucky enough to pull their cash out before the entire edifice crumbled.

This is arguably the most prominent financial crime ever, and the prosecutors -- who declined to be interviewed -- have to be aware that the public's rage won't be placated with the conviction of Bernie Madoff. So it will likely come as a huge relief to the Madoff family that DiPascali is telling prosecutors they were not participants in the scam. After all, nobody, apart from Bernie Madoff, is better positioned to describe who took part. But it's worth remembering that such a statement represents less than a full exoneration.

One of the most widely made assumptions is that various family members "had to know" what was going on. Frank DiPascali, of course, is not in a position to say what the family knew or didn't know. Representatives for all the family members have declared their innocence.

Even if Bernie Madoff never informed his family members of the fraud, there were a number of events that could have -- perhaps should have -- raised their suspicions. As the people in charge of the legitimate Madoff businesses, Peter, Mark, and Andy knew or should have known, for example, that some $250 million had been transferred from the Madoffs' London office to their business. That cash, Madoff later admitted, was money laundered from the illegitimate operation to the legitimate one. (Those funds, it turns out, were crucial. In court, prosecutor Marc Litt asserted that "at times, his [legitimate] firm would've been unable to operate but for the cash generated by this Ponzi scheme.") A lawyer for Mark and Andy Madoff says, "They had no knowledge whatsoever that their father engaged in any fraudulent activities, including allegedly fraudulent transfers of funds through Madoff Securities International in London."

Whatever happens, Peter, Ruth, and to a lesser extent the other Madoffs have many years of civil litigation to look forward to as various individuals, funds, and government entities try to recover whatever assets they can find.

As for DiPascali, his potential testimony may provide some good news for at least one feeder fund. According to a person familiar with the matter, DiPascali has no evidence that Fairfield Greenwich's top brass knew of the scam.

But DiPascali could spell trouble for certain key Madoff customers. DiPascali, according to this source, admits manipulating the returns of several clients, jiggering them up or down -- phantom gains added or reduced -- to suit their needs. Says the source: "This is a group of inside investors -- all individuals with very, very high net worths who, hypothetically speaking, received a 20% markup or 25% markup or a 15% loss if they needed it." The investors would tell DiPascali, for example, that their other investments had soared and they needed to find some losses to cut their tax bills. DiPascali would adjust their Madoff results accordingly.

According to this source and a second one familiar with the investigation, these special deals for select Madoff investors have become a central focus for federal prosecutors. The second source describes the arrangements as "kickbacks" and "bonuses." A spokesperson for the U.S. Attorney declined to comment. But a little-noticed line in a public filing by the prosecutors in March supports at least part of these sources' account. The document that formally charged Madoff with his crimes asserted that he "promised certain clients annual returns in varying amounts up to at least approximately 46 percent per year." That was quite a boost when most investors were receiving 10% to 15%. It appears to reflect the benefits that accrued to those who helped bring large sums to Madoff.

As for Madoff himself, he has traded a 4,000-square-foot penthouse for a 76-square-foot jail cell. The bespoke charcoal suits have been replaced by an orange jumpsuit. Even so, one person close to the family says he's bearing up well in jail. He's exercising. He is reading a lot of books. "He makes the best of it," adds this person, who says that Madoff looks surprisingly good these days. Perhaps that's because for the first time in decades, Madoff has no secret weighing him down.

That burden has been passed. To his family members, whose name is eternally blackened whether or not they were involved. To his former employees, who lost their livelihoods and are now struggling to get new jobs with the taint of his company's name on their résumés. And most of all, to his victims, many of whom are struggling to make ends meet. Madoff left a historic mess. It's going to take a long time to clean it up.

Is the stress test stressful enough?

2009-04-25T09:41:00.000-07:00

Guidelines revealed Friday renew questions about whether the government's stress tests are stressful enough to account for the losses that might hit banks in a deepening downturn.

Regulators at the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of Comptroller of the Currency have decided whether 19 giant banks - reportedly ranging from giants Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) to regional players such as KeyCorp (KEY, Fortune 500) - need to raise new capital.

Regulators are expected to begin revealing their decisions to banks next week, and to the public the week of May 4. Analysts are bracing for turbulent trading as speculation builds about how individual institutions may fare.

"We expect significant trading volatility in these 19 stocks between now and May 4," FBR Capital analyst Paul Miller wrote in a note to clients Friday.

Policymakers say the stress tests will help to ensure that big institutions are healthy enough to continue lending even if the economy -- which fell by 6.3% in the fourth quarter of 2008 -- weakens further over the next two years.

There were few specifics about individual banks in Friday's documents, though that will change.

"We're not prepared to discuss what will be released," a senior federal official told reporters Friday. But "we recognize it's important that this be a credible, transparent process and are working toward that end."

Yet the credibility of the tests will hinge in part on whether investors believe the tests capture the full brunt of the losses banks might face in a deeper economic downturn. And on that count, there are still reasons to be skeptical.
How bad will it get?

The Fed's paper outlined two stress cases. The so-called baseline scenario is based on the consensus expectation of economists, and the adverse scenario reflects a tougher environment.

Federal officials laid out the assumptions underpinning those cases in February. Since then, unemployment has continued to rise and many economists have downgraded their expectations for economic growth for this year.

But Friday's stress test guidelines show that despite signs of a deepening slump, the government's assumptions haven't changed.
0:00 /5:56Stressing the stress tests

The decision to hold the assumptions steady is sure to raise eyebrows among forecasters who have already questioned whether policymakers aim to produce test results that support a policy of forbearance -- letting the banks earn their way through the recession.

"Both the baseline and more adverse scenarios...are so optimistic that actual data for 2009 are already worse than the adverse scenario," New York University economist Nouriel Roubini wrote earlier this month.

To take one example, the adverse scenario envisions the U.S. jobless rate gradually rising from 6.9% at the end of 2008 to 8.9% at the end of 2009.

But the actual unemployment rate was already at 8.5% in March, according to government data. That's above the rate called for in the baseline scenario and up 3.4 percentage points over the past year.

Policymakers admitted that the odds have increased that joblessness will reach adverse-case levels of 10.3% by 2010.

Still, officials shrugged off concerns that the tests may not be stressful enough. They said that while the unemployment and economic growth trends had indeed darkened, there was no change in what they called a far more important factor in determining banks' credit losses: the pace at which house prices are falling.
Risk of an 'undershoot'?

Not everyone buys into this idea. FBR's Miller said in an interview Friday that his research suggests that if the unemployment rate hits 12%, "all these guys are going to have to raise capital," regardless of what happens to house prices.

The plunge of home prices in the U.S. has been well documented. The most widely watched barometer of U.S. housing price trends, the S&P Case-Shiller national index, dropped 29% between its mid-2006 peak and the end of 2008.

Regulators' adverse case envisions an additional 22% tumble in 2009 and a further 7% decline in 2010.

As it happens, declines of that magnitude would bring the national Case-Shiller index down to 100 -- equal to its level a decade ago, before factoring in inflation.

Buttressing the regulators' case, a decline that steep sounds unlikely.

"To be most useful," they noted in a 21-page document released Friday, "stress tests should reflect conditions that are severe but plausible."

But a plunge in house prices beyond the stress case may not be implausible.

Over the long haul, house prices tend to move in concert with factors such as rental rates and household income -- and some of those numbers suggest a decline that steep may not be unlikely.

The Census Bureau's personal income data show that median household income actually declined, in inflation-adjusted terms, between 1999 and 2007. That was before unemployment began its surge and the economy turned sharply negative. Lower income, if the relationship holds, could mean lower house prices.

Of course, income is only one factor in determining home prices, and efforts to revive the economy may well keep prices from tumbling that far.

But some well-known economic bears have said they expect housing prices -- having risen well above their long-run average during the bubble earlier this decade -- to fall further than such data would predict.

The housing crisis "is likely to get a lot worse than currently anticipated because markets do overshoot," billionaire financier George Soros said last year in an interview in the New York Review of Books. "They overshot on the upside and now they are going to overshoot on the downside."

Of course, officials are aware of the havoc a steeper housing price drop could wreak on banks' balance sheets. The Fed is trying to shore up prices by keeping interest rates low and buying up privately issued mortgage securities, for instance.

Federal Reserve chief Ben Bernanke said last week that policies aim to avoid a "major undershoot" in house prices.

An undershoot could be particularly painful for big banks with substantial mortgage portfolios in big cities where prices haven't fallen as much so far.

In New York, for instance, prices fell 9% in 2008. But they would have to drop an additional 24% to reach the year-end level of the S&P national index -- and more than 30% to reach their inflation-adjusted 2000 level.

Drivers

2009-04-25T09:39:00.001-07:00

A huge problem that most of the computer owners have when upgrading the operating system is to keep up with the most recent drivers.

Sometimes a simple upgrade can make some of your hardware stop working, the drivers that you have just came obsolete in a mater of seconds. I know, because that’s already happen to me.

I have a web cam that when passing from XP to Vista just stopped to work, the Vista system doesn’t have any driver to make it work.

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Economic decay easing - Geithner

2009-04-25T09:27:00.001-07:00

The severe decay in the global economy is easing but serious problems still loom, Treasury Secretary Tim Geithner said Friday.

The pace of deterioration in economic activity and global trade has lessened, he said.

"But it is too early to say risks have receded," he said. "And it is too early to conclude that we're beginning to emerge from this remarkably challenging set of pressures still working its way through the financial system and global economy."

Geithner met with finance chiefs and central bankers from the G-7 countries who have convened in Washington to talk about their continued efforts to stimulate economies.

Since a high-profile G-20 meeting in London earlier this month attended by President Obama and other world leaders, several countries -- particularly Japan -- have boosted their economic recovery programs, Geithner said.

In addition, Poland and Colombia have said they will join Mexico to apply for backstop financing from the International Monetary Fund, a global agency charged with helping countries facing economic distress.

Geithner hammered home the need for nations to work together because of the complex links among national economies.

"I think we all recognize that the recovery of the world depends on recovery of the United States," he said. "Recovery in the United States depends on recovery in the financial systems. But our recovery, in part, will depend on the strength of what we see happening around the world."

For its part, the G-7 ministers and central bankers said Friday that the global economy will "begin to recover later this year" and vowed to continue to act in concert.

"As our leaders underscored in London, we are committed to act together to restore jobs and growth and to prevent a crisis of this magnitude from occurring again," the G-7 officials said in a joint statement.

In a Thursday briefing preceding the G-7 meeting, a top Treasury official acknowledged that banks' troubled assets pose the biggest challenge to getting the markets moving again in the United States and globally.

The G-7 is made up of United States, United Kingdom, Japan, Germany, France, Canada and Italy.

U.S. backs more say for emerging nations

2009-04-25T09:26:00.000-07:00

The United States pledged robust support Saturday for an overhaul of governing power within the International Monetary Fund so key emerging-market nations get more say in how the lender operates.

In a speech to the IMF's steering committee, Treasury Secretary Timothy Geithner also called on the fund to be prepared to offer loans to recapitalize banks or to aid developing countries in rolling over corporate debt.

Geithner's proposals, delivered in a strongly worded address at the IMF's semiannual meeting, are likely to provoke some controversy among the other industralized countries who, with the United States, have long dominated the global lender.

He said, however, it was necessary to retool the IMF to reflect a shift in global economic reality.

"This is essential to strengthening the IMF's legitimacy, ensuring that it remains at the center of the international monetary system and reflects the realities of the 21st century," Geithner said.

Washington's commitment to reform carries special weight because it is the biggest single shareholder within the IMF.

Geithner urged acceleration of a slow-moving bid to realign voting shares, known as quotas, that determine power within the IMF and said fewer members were needed on its governing board.

"Much bolder action is required to realign quotas toward dynamic emerging-market economies, and the next general quota review is an opportunity that must be seized," Geithner said in a strongly worded address at the IMF's semiannual meeting. "Minor adjustments around the edges are inadequate to an IMF for the 21st century."
0:00 /1:32China's economy slows down

Geithner mentioned no countries by name, but China is regularly cited as among countries that qualify for more IMF voting power, especially at a time when the old-line U.S. and European powers that have dominated the lender are trying to get Beijing to put more money into the fund.

With much of the global economy in recession, and emerging markets under severe pressure as their export opportunities dry up, international financial institutions such a the IMF and World Bank have been facing an increase in demands for loans.

Geithner suggested reducing the size of the IMF's board to 22 chairs from 24 by 2010 and to 20 chairs by 2012, but preserving the existing number of chairs for emerging-market and developing countries while doing so.

While this weekend's meetings are in progress, intense behind-the-scenes bargaining is under way to meet a commitment set at a London meeting of political leaders from the Group of 20 developed and emerging nations to raise $500 billion in fresh funds for the IMF.

Well over $300 billion is already pledged but the United States and others are trying to enlist more countries either to become contributors or boost their existing commitments.

"In implementing reforms to the IMF, I pledge my country's support," Geithner said, adding that consultations were under way with the U.S. Congress over more money for the IMF.

It is not clear whether some U.S. lawmakers will try to hold up more financing for the global lender but in the past, many have been skeptical about the value of the institution's work.

While offering to make room for emerging-market countries, Geithner said the IMF needs to step up more forcefully to make the case that countries that have relied on exports to fuel growth need to become stronger consumers to help rebalance an uneven global economy.

He said it was vital for the IMF to "exercise greater candor and clarity on exchange rate issues" and to carry out its functions in monitoring and reporting on member countries' currency practices. Many economists say China has kept its currency, the yuan, undervalued to help protect its export industries.

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2009-04-25T09:23:00.000-07:00

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Detroit's youth: We'll leave if we have to

2009-04-24T09:23:00.001-07:00

Isaiah Brooks expects to graduate soon from Focus: HOPE, a non-profit machinist school in Detroit, where his hopes of getting a job are fading along with the local auto industry.

Machinists are the backbone of automaking, but Brooks might have to leave town to find a job, like many other young people in this city.

"You got to go where the money is," he said during a question and answer session with his classmates at Focus: HOPE. Brooks, 19, is thinking of moving back to his native state of Texas to work as an auto mechanic with his father.

"You can't sit around and wait for an opportunity to happen," he noted. The other students in his class nodded in agreement.
0:00 /1:45Auto repair business is booming

Kenneth Rupert, 19, another machinist-in-training at Focus: HOPE and a former intern for Ford Motor Co., (F, Fortune 500) said he would stay in Detroit if he could find a good job, following in the footsteps of his late grandfather and his uncle, who once worked for the auto industry.

But Rupert said he is feeling the pull of other regions, with stronger job markets. "It's looking like most of the jobs are down South, and most of my family is from South Carolina," he said.

Focus: HOPE was founded in 1981 to provide free training and education to aspiring machinists and engineers, and to feed the workforce of the auto industry, which no longer seems to want them.

"We're finding that the jobs in the auto industry are not there," said Beverly Triplett, job placement supervisor for Focus: Hope. Job placement for program graduates fell to 64% last year, from 85% in 2007, she said. "It's challenging, because you have to make something out of nothing."

Detroit's biggest private employer, General Motors (GM, Fortune 500), plans to reduce its worldwide work force by 37,000 hourly workers and 10,000 salaried workers by the end of the year. The company wouldn't say how many reductions are slated for Motor City, but the impact is inevitable. GM employs some 36,700 workers in Southeast Michigan, out of a worldwide workforce of 243,000.

That's pretty bad news for an already-depressed job market. As of February, the Detroit-Warren-Livonia area was suffering from a 13.6% unemployment rate, the highest of any major metropolitan area in the U.S., according to the most recent figures from the Bureau of Labor Statistics.
Improvise, adapt, overcome

Triplett said that Focus: HOPE and its students, including teenagers training for their first jobs and laid-off line workers looking for a career change, are retooling their training to other fields that need machinists and engineers.

Triplett is trying to place three of the school's students at Glass & Mirror Craft in Wixom, which makes products used in architecture and interior design, and is some 40 miles away from Detroit.

Other new fields include refurbishing parts for military equipment and precision manufacturing for the medical industry.

Frederick Dunbar, a married 23-year-old with two children, used to make parts for the auto industry at Mac-Mold Base, Inc. in nearby Romeo. When his 12-hour days dwindled to six hours, he decided to pursue an associate's degree in manufacturing engineering technology at Focus: HOPE. Now, he's learning how to use laser technology to refurbish submarine parts for the Navy. He said he has no intention of returning to the auto industry, and would leave Detroit if a good job beckoned.

"I'm looking at NASA, the Department of Defense, maybe civil engineering," said Dunbar. "Definitely, I feel more secure pursuing a government job. I'm compelled to go wherever my job takes me."
Should I stay or should I go?

Residents' willingness to just pick up and go doesn't bode well for Detroit's economy. But it doesn't have to be that way, according to Alan Clark, 24, who's studying engineering manufacturing at Focus: HOPE. Clark just accepted an engineering job in Detroit at the Pepsi Bottling Group.

"Just because I live in Detroit, I don't have to go to the automotive industry," he said. "The same concepts you use to make a car, believe or not, are the same concepts and principles you use to make a bottle of Pepsi."
0:00 /2:52Auto town risks extinction

College and high school students interviewed by CNNMoney.com offered a wide variety of responses as to whether they would stay in Michigan, with its 12.6% statewide unemployment rate, the highest in the nation.

Alexandra Ritson of Grand Rapids, a 21-year-old senior in the English and Spanish programs at the University of Michigan in Ann Arbor, said she had accepted a teaching job in Arizona. Considering the Detroit Public Schools' plan to lay off 600 teachers due to its deficit and declining student population, she didn't see much point in getting certified in her home state. "It's one of the hardest states to get a teaching job in the country," she said.

Others see opportunities at home. Samantha Staley, a 22-year-old from Flushing is a senior at Detroit-based Wayne State University, where she's studying pre-medicine and mechanical engineering. Staley said there are plenty of local jobs for doctors, and she has no intention of leaving.

"I'm an optimist," she said. "I see things hopefully turning around. Detroit has a bad rap. But living down here, I actually love Detroit. There's a pride among the people who live here. The feeling is that we know what it's like to struggle, but we can overcome."

Despite Detroit's bad rap, aspiring architect Dyamond Logan, 15, also wants to stay. Through her involvement with the Better Detroit Youth Movement, a non-profit mentoring organization for young people, Logan said she can learn a lesson from a community that has seen better times.

"Challenge and turmoil are a necessity for growth," she said.

The Better Detroit Youth Movement generally meets in a hair salon owned by co-founder Harlan Bivens, but it had to move to a temporary location in a restaurant after the business was burglarized, its front window smashed in and boarded up, but that failed to stop him.

"We have to be the lions in the jungle, versus lions in the cave," said Bivens, who believes it doesn't matter where his work is done, so long as it's out in the community.

Dyamond Logan understands that she may need to leave that community to begin a career as an architect somewhere else, but she intends to return one day.

"In Detroit, I would like to pursue my dreams," she said. "Detroit, as a whole, is our foundation, and you have to help with your foundation."

Stocks stage late advance

2009-04-23T17:25:00.002-07:00

Stocks staged a late-session rally at the end of a turbulent day, influenced by a weak housing market report, a mix of corporate results and the latest for the automakers.

The Dow Jones industrial average (INDU) added 70 points, or 0.9%. The S&P 500 (SPX) index gained 8 points or 1%. The Nasdaq composite (COMP) gained 6 points, or 0.4%.

After the close, Microsoft (MSFT, Fortune 500) reported lower-than-expected quarterly sales on weaker earnings that met estimates.

Dow component American Express (AXP, Fortune 500) reported weaker quarterly earnings that topped estimates, sending shares almost 7% higher in extended-hours trading.

Biotech Amgen (AMGN, Fortune 500) reported weaker-than-expected quarterly sales and earnings after the close. Amazon.com (AMZN, Fortune 500) reported higher quarterly sales and earnings that topped estimates.

Dow component 3M (MMM, Fortune 500) is due to report results before the start of trade Friday. Honeywell (HON, Fortune 500), Schlumberger (SLB) and Xerox (XRX, Fortune 500) are also due to report.

Also Friday, the Commerce Department releases the March durable goods orders report and the Census Bureau releases the March new home sales report.

Stocks are down for the week as investors have retreated after a six-week advance that propelled the S&P 500 nearly 29%. Stocks zigzagged Thursday as investors sorted through the profit reports and economic news.

"The market is trying to determine whether we've come too far, too fast and it's been getting some mixed signals," said Christopher Colarik, portfolio manager at Glendmede.

"Incrementally, we are getting some economic and earnings reports that are less bad, if not good," he said. "But it might be a two-steps-forward, one-step-back kind of thing, like with the housing data."

Automakers: General Motors (GM, Fortune 500) said in the afternoon that it plans to temporarily shut down 13 of 20 North American plants this summer in order to reduce its inventory. The company has been hit hard by the recession and slowdown in auto demand and has until June 1 to cut its debt and labor costs or face Chapter 11 bankruptcy protection. Shares fell 4%.

Chrysler is reportedly set to enter Chapter 11 as soon as next week, The New York Times reported Thursday. The Treasury Department is overseeing the process, which will reportedly protect union members' pensions and retiree health care benefits.

Italian carmaker Fiat will complete its acquisition of a 20% stake in the company while it is under bankruptcy protection.

Housing: March existing home sales fell to a 4.57 million unit annual rate from a 4.71 million rate in February, the National Association of Realtors said. Economists surveyed by Briefing.com thought sales would fall to a 4.65 million unit annual rate.

The report countered bets that the housing market is nearing a bottom. Such bets were sparked by February housing market reports that showed smaller-than-expected declines in sales and productions.

Movers: Chevron, Exxon Mobil and McDonald's were among the Dow advancers. IBM (IBM, Fortune 500), Home Depot (HD, Fortune 500) and DuPont (DD, Fortune 500) were among the losers.

Chipmakers Intel (INTC, Fortune 500), Applied Materials (AMAT, Fortune 500) and Xilinx (XLNX) dragged on the Nasdaq, while eBay and Fifth Third Bancorp were among the advancers.

Market breadth was mixed. On the New York Stock Exchange, winners topped losers three to two on volume of 1.57 billion shares. On the Nasdaq, decliners topped advancers eight to five on volume of 2.49 billion shares.

Results: Among the companies reporting results Thursday, regional bank Fifth Third Bancorp (FITB, Fortune 500) reported a narrower-than-expected quarterly loss. Shares gained 3.5%.

PNC (PNC, Fortune 500) reported higher quarterly profit due partly to its purchase of National City. Shares gained 7.5%.

eBay (EBAY, Fortune 500) reported lower quarterly sales and earnings that topped forecasts Wednesday, sending shares 12.5% higher Thursday.

Apple (AAPL, Fortune 500) reported higher quarterly sales and earnings that topped estimates late Wednesday, sending shares 3% higher Thursday.

On the downside, UPS (UPS, Fortune 500) reported earnings and revenue that slumped versus a year ago due to the recession. Shares missed analysts' estimates. The stock fell 2.8%.

Jobs: The number of Americans filing new claims for unemployment rose last week to 640,000 from a revised 613,000 the previous week, topping economists' estimates.

Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.91% from 2.94% Wednesday. Treasury prices and yields move in opposite directions.

Lending rates were mixed. The 3-month Libor rate fell to 1.09% from 1.10% Wednesday, according to Bloomberg.com. The overnight Libor rate dipped to 0.20% from 0.21% Wednesday.
0:00 /02:39Life in the pits

Other markets: In global trading, Asian markets ended higher and European markets ended lower.

In currency trading, the dollar fell versus the euro and the yen.

U.S. light crude oil for June delivery settled up 77 cents to $49.62 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $14.10 to settle at $906.60 an ounce.

Pressure builds on BofA's Ken Lewis

2009-04-23T17:25:00.001-07:00

Questions about whether Bank of America breached its duties to shareholders come at an inconvenient time for embattled CEO Ken Lewis.

According to documents released Thursday by a top state prosecutor, the BofA (BAC, Fortune 500) chief met repeatedly late last year with federal regulators and the bank's board to discuss the deteriorating condition of Merrill Lynch, the struggling brokerage BofA had agreed to acquire in September.

At one point, according to an account released by New York Attorney General Andrew Cuomo, Lewis told then Treasury Secretary Henry Paulson that BofA was considering backing out of the Merrill deal -- only to relent when Paulson said regulators, fearing a financial sector collapse, might respond by removing Lewis and his directors.

The Cuomo report certainly won't go down as a shining moment for a government that has twisted itself in knots claiming it wasn't pulling the strings at financial firms it invested in.

But worse, to some observers, is BofA's failure to disclose any of this information to its shareholders -- regardless of Lewis's claim he was being leaned on by Paulson.

The report could increase the pressure on Lewis as he and some members of the BofA board face re-election next week at the company's annual shareholder meeting.

"It's hard for me to believe the Treasury and the Federal Reserve would tell Ken Lewis to violate securities laws," said Jonathan Finger, a longtime BofA investor who has been critical of Lewis' penchant for empire building at shareholder expense. "Regardless of the pressure he may have felt, Ken Lewis still had a duty to protect shareholders and disclose relevant information."

Cuomo wrote in a letter to congressional leaders and other top federal officials Thursday that facts unearthed in his investigation raise questions about "corporate governance and disclosure practices at Bank of America."

BofA dismisses questions about its handling of the deal.

"We believe we acted legally and appropriately in the Merrill Lynch transaction," spokesman Scott Silvestri said.
0:00 /4:30BofA's 'shotgun wedding' regret

But some observers aren't bowled over by Lewis' claim that he was strong-armed by regulators.

Neil Barofsky, the special inspector general of Paulson's Troubled Asset Relief Program, cautions that reports of the discussions among Lewis, Paulson and Fed chief Ben Bernanke may overstate the pressure that was applied to Lewis.

"You need to talk to all the participants in the conversation before you can come up with a conclusion of 100% of what happened," he told CNNMoney.com Thursday.

Paulson generally confirmed Lewis's account, the Cuomo report said.

"Their discussions centered on the Fed lawyers' opinion that the merger contract was binding, and the U.S. Treasury's commitment to ensuring that no systemically important financial institution would be allowed to fail," Paulson's office added in a statement Thursday.

The Federal Reserve said it did not ask Lewis to stay quiet about his concerns.

"No one at the Federal Reserve advised Ken Lewis or Bank of America on any questions of disclosure," said Michelle Smith, a spokeswoman for the Fed. "It has long been the Federal Reserve's view that questions of this nature are best addressed by individual institutions and their legal counsel."
Angry shareholders to grill Lewis

Lewis is due to address BofA's investors -- who have seen the value of their holdings plunge over the past year, as the bank has been buffeted by collapsing asset values and a pair of questionable acquisitions -- next Wednesday at the bank's annual shareholder meeting in Charlotte, N.C.

Finger, a longtime BofA shareholder who is trying to unseat Lewis and some board members at the meeting, said the allegations in the Cuomo report chip away at the already impaired credibility of Lewis and his board.

Finger and other big investors, including giant pension plan operator TIAA-CREF, have said they won't vote for Lewis at the meeting.

"The key issue here is transparency, and shareholders' right to know crucial facts about the acquisition of Merrill Lynch," said Connecticut treasurer Denise Nappier, who runs the $20 billion state retirement fund and has demanded Lewis's resignation. "Our right to transparency trumps any concern Lewis may have had about saving his job or keeping the current board in place."

Gary Lutin, who runs the Shareholder Forum investor advocacy group in New York, says the most damning allegations in the Cuomo report come from the minutes of the BofA board meetings Dec. 22 and 30 of last year.

These minutes describe the "detailed oral assurances" federal regulators supposedly made to BofA executives. The Federal Reserve and Treasury agreed to provide financial support to the bank after it completed its acquisition of Merrill Lynch and before the bank's scheduled Jan. 20 earnings release, the minutes said.

On Jan. 16, the bank and regulators announced that the government did cough up $20 billion in new capital and $118 billion in asset guarantees for Bank of America. BofA had received $25 billion, counting Merrill's allocation, in the first round of TARP funding.

But in late December, before the deal's Jan. 1 completion, regulators couldn't make those promises in writing, according to the minutes, "because any written assurances would require formal action by the Fed and Treasury -- which formal action would require public disclosure."

The lack of formal written agreements at the time BofA decided to go through with the deal suggests neither party was faithful to its own decision making processes and disclosure duties, said Lutin, whose forum has been questioning the reliability of corporate disclosures since the dot-com insanity a decade ago.

An oral promise might be tougher to enforce in a legal dispute -- but if it was made in good faith, Lutin wondered why the bank wouldn't disclose it.

"Secretary Paulson said he could not provide a letter because there was not yet a specific action plan and he believed that Treasury releasing a vague letter reiterating Treasury's public commitment to prevent systemically important institutions from failing would not help Bank of America but would instead rattle markets by creating more questions than it answered," Paulson's statement said. "Questions of BofA's disclosures were left up to Bank of America."

Cynics might venture that BofA didn't disclose the information because it didn't want to further stress out shareholders. The bank lost two-thirds of its market value between October and the middle of December.

Regardless of the ramifications, corporate officers are duty bound to disclose material information. So if the Cuomo report's account is accurate, Lutin said, "it would mean Lewis is a wimp as well as a liar."

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2009-04-23T17:21:00.000-07:00

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Stocks weaken at the start

2009-04-22T07:25:00.001-07:00

Stocks inched lower Wednesday morning after Morgan Stanley's weaker-than-expected quarterly results revived concerns about banking sector profits.

The results overshadowed better-than-expected results from Dow components AT&T, McDonald's and others.

The Dow Jones industrial average (INDU) lost 45 points, or 0.6% in the early going. The S&P 500 (SPX) index gained 6 points, or 0.7%. The Nasdaq composite (COMP) gained 4 points, or 0.3%.

U.S. stock markets advanced Tuesday, staging a late-session rally. The major gauges all gained about 2%.

Despite Tuesday's gains, investors are still wary about the financial sector's results, according to Richard Yamarone, director of economic research at Argus Research.

"The markets are taking their cue from how well the banking situation plays out," he said.
0:00 /2:58Morgan Stanley's bank hunt

Quarterly results: As concerns about the banking sector persist, Morgan Stanley (MS, Fortune 500) reported a bigger-than-expected quarterly loss of $177 million, or 57 cents a share, and cut its dividend. Wells Fargo (WFC, Fortune 500) posted better-than-expected results.

Dow components AT&T (T, Fortune 500), McDonald's (MCD, Fortune 500) and Boeing (BA, Fortune 500) all posted lower first-quarter earnings before the bell. AT&T and McDonald's beat estimates, while Boeing missed by 5 cents a share.

Continental Airlines (CAL, Fortune 500) announced a loss for the first quarter, but results were better than expected. Health insurer WellPoint (WLP, Fortune 500) posted disappointing results.

Other stocks to watch include Yahoo (YHOO, Fortune 500), which announced late Tuesday that it was cutting 5% of its workforce. The company also reported a sharp fall in profit for its latest quarter.

Economy: Treasury Secretary Tim Geithner, speaking Wednesday morning, talked about the need for global cooperation in the face of the unprecedented economic crisis. Geithner spoke at the Economic Club of Washington D.C.

Autos: The White House has spurned a plan put forth by Chrysler's lenders as the deadline for the automaker's restructuring approaches.

Lenders have agreed to write off 35% of the $7 billion they are owed. But in exchange, they reportedly want a stake in the restructured automaker

World markets: Stocks in Asia mostly fell, although Japan's Nikkei ended the session a shade higher. In afternoon trading, European markets tumbled.

Oil and money: Oil prices edged down 25 cents a barrel to $48.30 ahead of the Energy Information Agency's weekly inventory report. The dollar was lower versus the euro and the yen.

Morgan Stanley suffers another loss

2009-04-22T07:24:00.000-07:00

Morgan Stanley reported a much bigger-than-anticipated loss in the first quarter Wednesday, as the revenue at the bank's bread-and-butter equity sales and trading business plunged 74% from a year ago.

The firm was also hit by its exposure to the tanking commercial real estate market. Morgan Stanley (MS, Fortune 500) shares tumbled 6% in early morning trading on the news.

The Wall Street investment bank said it lost $177 million, or 57 cents per share, in the quarter ended March 31. Analysts were expecting a loss of 8 cents a share, according to Thomson Reuters.

Including the payment of $401 million in preferred dividends tied to the government investing in Morgan Stanley last year as part of the bank bailout, the company reported a net loss to common shareholders of $578 million.

The company also slashed its quarterly dividend by 81%, to 5 cents from 27 cents, in a bid to conserve $1 billion in cash annually.

The latest results extend the firm's losing streak, and stand out from the rest of the major banks' earnings, which have been generally better than expected -- if sometimes of questionable quality. Last quarter, Morgan Stanley posted a $2.3 billion loss.

In a statement, CEO John Mack focused on strong performances in Morgan Stanley's fixed-income trading and investment banking businesses.

He said the bank was the top performer in the merger-and-acquisition rankings during the quarter, and like its peers Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), made significant sums trading plain vanilla fixed income products in the interest rate, commodity and credit arenas.

But those gains were offset by $1 billion in losses on real estate investments, and $1.5 billion of lost revenue tied to changes in the value of the bank's liabilities.

Meanwhile, Morgan Stanley said revenue in its equity sales and trading group plunged to just $900 million from $3.4 billion a year earlier.

Those setbacks help to explain part of the huge decline in Morgan Stanley's first-quarter revenue, which plunged 62% from a year ago to $3 billion.

The commercial real estate loss is particularly notable, for analysts have been warning that big banks could take a big hit this year in that once-hot market.

Goldman Sachs analysts wrote earlier this year that they expect commercial real estate to be the biggest problem asset class for banks in 2009. Analyst James Fotheringham forecast a 21%-26% price decline, which he said would lead to tens of billions of dollars of loan losses for banks and brokerage houses.

The results and the dividend cut reflect a decline in the profitability of Morgan's core business. Though Morgan Stanley's capital ratios remain strong - the bank said its Tier 1 capital, a measure favored by regulators, is 16% - it seems clear Morgan Stanley won't be joining the rush to repay the funds it got last fall under the Treasury's Troubled Asset Relief Program.

Mack told Morgan Stanley employees in a conference call last month that he didn't think now is the time for the bank to give back the $10 billion it got in October under TARP. Rivals such as Goldman and JPMorgan have indicated they hope to repay the funds soon.

Morgan Stanley said its Tier 1 capital ratio, excluding the TARP funds, is 13%. That's double the 6% ratio that allows regulators to deem a firm well capitalized.

Mack also said the latest-quarter loss was partly attributable to something that would normally count as good news.

He said Morgan Stanley would actually have reported a first-quarter profit if not for "the dramatic improvement in our credit spreads -- which is a significant positive development."

Tighter credit spreads reflect reduced investor anxiety over the prospect that the company might default on its obligations, and result in lower borrowing costs for the company.

But they also obligate the company to write up the value of those liabilities, in light of the increased amount Morgan Stanley would have to pay to repurchase those debts.

In last year's first quarter, Morgan Stanley posted $1 billion in gains by writing down the value of its obligations as credit spreads widened.

The disappointing first-quarter report comes as investors puzzle over what course Mack will chart in the coming year. Like Goldman, Morgan Stanley became a Federal Reserve-regulated bank holding company last year to ease worries about its access to funding.

But unlike Goldman, which has said it intends to stay focused on its investment business, Mack has said Morgan Stanley might seek to buy a regional bank to expand its deposit base.

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2009-04-22T07:22:00.001-07:00

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From Automobiles to Software, it is possible to talk about everything. There are a lot of networks inside Acobay, if you like animals and have pets you can join the Pet Network, but if you are interested in Movies, than the perfect network to you, is the Movie Network.

And there is much more, book lovers can join the Book Network. Of course that the best way to know all about Acobay is to visit their site and start to look to the stuff that they have on the site and start to share the things that you like with others.

Stocks extend advance

2009-04-17T17:21:00.001-07:00

Stocks inched higher Friday as better-than-expected earnings from Citigroup, General Electric and Google, helped stretch the recent advance to a sixth straight week.

The Dow Jones industrial average (INDU) added 6 points or less than 0.1%. The S&P 500 (SPX) index rose 4 points or 0.5%. Both ended at more than two-month highs.

The Nasdaq composite (COMP) gained 2 points or 0.2%, ending at a more than five-month high.

Stocks, as represented by the S&P 500, have gained 28.5% in the past six weeks, on bets that the economy is closer to stabilizing. The gains followed a selloff that left the S&P 500 at a 12 1/2 year low. A rash of better-than-expected profit reports has helped sentiment this week.

The six week run is the market's best since May 2007, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

"No matter what is thrown at the market, it seems to want to chug higher, which is a big change in psychology from last fall or even earlier this year," Detrick said.

However, he noted that even if the rally proves to be more than a bear market bounce, at six weeks old, it's starting to look ripe for a pullback on a technical basis.

Quarterly results: Citigroup (C, Fortune 500) reported a quarterly profit Friday morning, due to strength in its investment banking division. But after paying out preferred dividends, results amounted to a per-share loss of 18 cents. Nonetheless, that was smaller than the 34-cent per share loss analysts expected. Shares of the Dow component fell 9%.

JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) both reported weaker quarterly profit that beat estimates earlier this week. Last week, Wells Fargo (WFC, Fortune 500) forecast that it would report a $3 billion profit.

Regional Bank BB&T (BBT, Fortune 500) reported a weaker quarterly profit that nonetheless handily topped analysts' forecasts. The company also said loan losses are lessening. Shares gained 11%.

Dow component General Electric (GE, Fortune 500) reported weaker quarterly earnings that beat estimates on weaker quarterly sales that missed forecasts. Weakness in the company's finance unit countered mixed results at other divisions. Shares gained 1%.

After the close Thursday, Google (GOOG, Fortune 500) posted quarterly earnings that rose from a year ago and topped estimates on revenue that rose from a year ago but was shy of forecasts. Shares rose 1% Friday morning.

In other company news, General Motors (GM, Fortune 500) CEO Fritz Henderson said that the company will announce more job cuts and plant closings in the next few weeks. The company has until June 1 to reach agreements with its creditors and unions if it wants to avoid a government-mandated bankruptcy. Shares fell 4%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers two to one on volume of 1.95 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 2.43 billion shares.

Economy: The April consumer sentiment index from the University of Michigan rose to 61.9 from 57.3 in March. Economists surveyed by Briefing.com thought the index would rise to 58.5.

Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.94% from 2.83% Thursday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian and European markets ended higher.

In currency trading, the dollar gained versus the euro and fell against the yen.

U.S. light crude oil for May delivery rose 35 cents to settle at $50.33 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $11.90 to settle at $867.90 an ounce.

Dollar rallies against euro

2009-04-17T17:20:00.000-07:00

The U.S. dollar touched a one-month high against the euro Friday after comments from European Central Bank President Jean-Claude Trichet left investors uncertain about the bank's future policy path.

The dollar was also boosted by a slight rise in risk aversion despite a smaller-than-expected loss from Citigroup (C, Fortune 500) as investors reassessed the sustainability of the recent spate of more upbeat results.

The ECB's Trichet, who is to unveil the bank's plans for unconventional policy steps next month, gave no details of these measures in a speech in Tokyo, saying he did not want to create expectations.

Concerns over a split in the ECB's governing council and uncertainty over the central bank's next move on interest rates and non-standard measures have weighed heavily on the euro in recent sessions.

"The market is getting increasingly disappointed with the ECB's policy stance," said Vassili Serebriakov, currency strategist at Wells Fargo (WFC, Fortune 500) in New York.

"Trichet failed to clarify the central bank's position on either rates or prospects for non-conventional easing measures," he added. "We could see some stand-alone euro weakness across the board."

In late afternoon trading, the euro fell 1.1% to $1.3039, still near the session low of $1.3019, according to Reuters data, its weakest since March 18, when the dollar fell sharply after the Federal Reserve announced its plan to buy government bonds.

Besides the Fed, central banks in Britain and Japan have started quantitative easing measures to fight the deepening recession around the world.

The dollar was little changed against the yen and last traded at ¥99.22.

"A little bit of risk aversion and euro weakness ... is boosting the dollar," said Paresh Upadhyaya, a portfolio manager at Putnam Investments in Boston.

Despite the better-than-expected results from Citigroup, "the market still remains skeptical about what this means going forward for the financial sector," he said.
Trichet, SNB eyed

Also hurting the euro were Trichet's comments in Tokyo, which analysts at Brown Brothers Harriman said were seen as "a possible warning" to ECB members who have recently expressed different views on the bank's next policy move on both rates and nonconventional measures.

In his speech, Trichet said: "Any ambiguity in our medium-term policy direction would delay the return of sustainable prosperity."

"The euro is the star underperformer (in recent sessions) ... because of question marks over the direction of monetary policy." Putnam's Upadhyaya said. "Markets have been questioning the ECB's stubbornness in easing monetary policy or (its) stubbornness to react in a pro-active manner."

Adding to pressure on the euro was a warning from ratings firm Moody's Investors Service that Ireland's 'AAA' rating may be cut to mid-to-high 'Aa' range if it concludes that the country will emerge from the crisis with relatively weak growth prospects and a much higher debt burden.

Against the yen, the euro dropped below 130 to trade down 1.3% at ¥129.25.

The Swiss franc fell sharply against the euro and dollar after Swiss National Bank Chairman Jean-Pierre Roth warned the central bank was ready to intervene should the Swiss franc strengthen.

The dollar last traded up 1.8% at 1.1670 francs after hitting a session peak of 1.1688 francs, according to Reuters data.

Lamps

2009-04-17T17:11:00.000-07:00

Not only functions as the only lighting equipment, lighting is a unique and beautiful for those who understand the meaning of beauty, lights also act as a decorator who can give the room a touch of artistic feeling. In fact, there is a special designed to be consistent with the needs of an interior or exterior space.

There are so many options for lighting decorations that are available in the market. Even the type of lamps are classified through a variety of ways to install or accessories that are used as examples of decorative lights which show more aesthetic value, decorative lights are uniquely shaped and is usually the product of craft and in place on the corner of a room or a table. Then the ceiling lamps are installed under the ceiling with a variety of accessories that can be found in the shops. This usually is installed with the light that functions as a reflector, and many tend to be used for offices.

Then the floor lamps is usually used to provide more lighting, or strengthen a beautiful interior design. This type of lamp can be used for the reading lamp beside the sofa or reading chair, even become a living room ornament. While the sleep lamps have a typical with the light dimmed. That is, the sleep lamps is most suitable to accompany you during a night of rest and the sleep lamps are usually in place near the head so easily turn on or off in this tool.

For the table lamps being used for the activities of reading or other activities at the table or can also be as light decorations, and most of these lamps are only for the table area. This type should be regulated in terms of the quantity of light and light direction can be arranged as needed.

If you already know the type of lights you want to buy then now you need a shop where provides all these lamps. As reference there is online store Farreys.com offers thousands of lamps including table lamps, floor lamps, task lamps, reading lamps, piano lamps and torchieres in a wide range of styles and at the lowest prices from dozens of top manufacturers. Visitors may shop by lamp brand, by lamp application or by style. And their lamp product search tool quickly helps find the perfect lamps for your application.

Obama: Tough choices ahead

2009-04-15T07:59:00.000-07:00

President Obama on Tuesday outlined the administration's efforts to restart the economy and warned that tough times and decisions lie ahead, according to prepared remarks of a speech he'll present in Washington.

Obama pointed to more job losses and foreclosures as well as "difficult and unpopular choices" when it comes to restructuring the auto industry and insurance giant American International Group (AIG, Fortune 500). The government has already sunk $182 billion into propping up AIG.

The Obama administration is under pressure to address the financial crisis on many different fronts. While job losses and foreclosures continue to mount, the credit markets remain frozen.

There's only $135 billion left in the Treasury Department's coffers for bailout measures. The administration is completing stress tests of the nation's 19 largest banks burdened with toxic assets to size up which will need more bailout dollars to survive.

In the meantime, the administration is trying to prepare the nation for the possibility that two of the largest domestic auto makers, General Motors (GM, Fortune 500) and Chrysler LLC, are likely headed for major restructuring's and possible mass layoffs.

Obama discussed all these developments, offering a fierce defense of pricey government actions to prop up tottering banks and clean their books of toxic assets.

"Of course, there are some who argue that the government should stand back and simply let these banks fail - especially since in many cases it was their bad decisions that helped create the crisis in the first place," he said. "The truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth."

Drawing on the biblical parable of two men who built their houses - one on sand and one on rock - Obama said the country need to rebuild the economy on a "new foundation."

That foundation includes many proposals that the Obama administration has unveiled but has yet to detail and will need congressional approval. Among them: stronger regulations of Wall Street and the possibility of more funding to bail out the financial sector and get the economy moving.

Obama also said he wants lawmakers to tackle health care and environmental initiatives, but experts say Congress has a full plate already and may not tackle such legislation until later this year.

Obama said he expects to have a health care bill arrive on his desk before the year is up. He was less definitive on hopes for bills that improve education standards and cap emissions.

"I know how difficult it is for members of Congress in both parties to grapple with some of the big decisions we face right now," Obama said. "It's more than most Congresses and most presidents have to deal with in a lifetime. But we have been called to govern in extraordinary times."

Mortgage rates sink again

2009-04-07T08:06:00.000-07:00

Home mortgage rates continued to march lower, according to two separate reports released on Thursday.

The average 30-year fixed mortgage rate sank to 5.13%, down from 5.19% the week prior, according to Bankrate.com's weekly national survey.

The average 15-year fixed-rate mortgage fell to 4.73% from 4.80% the week prior, according to Bankrate.com.

Bankrate obtains its data by surveying the top 10 banks and thrifts in the top 10 markets every Wednesday.

Meanwhile, a report from Freddie Mac showed that the 30-year fixed-rate mortgage fell to 4.78% in the week ending April 2, down from 4.85% the week prior.

The 4.78% rate is the lowest on record according to the Freddie Mac survey, which dates back to 1971 for that particular mortgage. The 30-year fixed rate averaged 5.88% at this time last year, according to Freddie Mac.

Freddie Mac reports the 15-year fixed rate mortgage fell to 4.52%, down from last week when it stood at 4.58%.
0:00 /3:17Housing on the rebound?

There is a difference in reported rates between Bankrate and Freddie Mac because lending rates are constantly fluctuating and the surveys are conducted at different moments.

The two agencies also report the rates with a different average number of "points," which borrowers can purchase at closing to buy down their lending rates. Therefore, the more points a borrower purchases up front, the lower the lending rate. Bankrate.com's averages have fewer points than Freddie Mac's average.

While rates are already very low, one analyst said that they could potentially dip a little bit more. "They could dip maybe another 20 basis points from where they are, but not a huge amount," said Brian Bethune, chief financial economist at IHS Global Insight.

Bethune also said that he thinks mortgage rates will stay low for a while. "I wouldn't expect them to necessarily jump back up again, but it all depends on the path of the economy."

Mortgage rates follow Treasury rates: No matter which report you look at, the consensus is that mortgage rates are low. The 30-year fixed mortgage rate moves in correlation with the yield on the 10-year Treasury bond. Therefore, lower the yields on government debt weighs on mortgage rates.

"Rates are just coming down as a catch up phenomenon because the 10-year Treasury has come down by 25 to 30 basis points in the past couple weeks," said Bethune. The yield on the benchmark Treasury dropped after the government announced its massive debt-repurchase plan in an effort to encourage lending and spur recovery in the housing market.

The government said two weeks ago that it would be buying more than $1 trillion in debt in an effort to provide liquidity in the credit markets. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.

"Once we start to see a recovery, the Federal Reserve will start to reverse a lot of its liquidity programs," said Bethune. "We will see rates move up simply reflecting the anticipation that the Fed is going to start to pull liquidity out of the system."

But Bethune said that he expects the economic recovery to be slow, and rates should not move up significantly until 2010.

Coming soon: Higher taxes, bigger government

2009-04-06T07:15:00.002-07:00

We've all hunkered down for a pretty lousy year. Maybe 2010 will bring some good economic news, though I don't know anybody who is actually willing to bet on that.

Still, sooner or later - please, please let it be sooner - things are going to get back to something we can call "normal." But what will the next normal look like?

It's hard to picture because we haven't had anything like a normal economy for a very long time. It's spooky: I'm in my late thirties, and I've just realized that almost my entire working life has been spent inside one asset bubble or another (first stocks, then homes).

A generation of Americans grew into middle age thinking that they had more wealth than they really did and that their future was a lot more secure than it really was. This age of fantasy economics changed not just the way we thought about spending and borrowing (leading us to do too much of both) but also the way we thought about politics.

Social safety nets didn't seem so important when even families with modest incomes could get 10% to 20% annual gains on their houses.

Colin Crouch, a professor of governance at the University of Warwick in Britain, has coined a useful name for this situation: privatized Keynesianism.

The economist John Maynard Keynes has been in the news a lot lately. During the Depression his great insight was that government could take on budget deficits to pull the economy back up. The U.S. and parts of Europe embraced Keynesianism for a time as a way of ensuring popular support for a mostly market economy. But under an accidental system of privatized Keynesianism, says Crouch, many rich countries leaned heavily on the deficit spending - that is, the chronic debt - of ordinary families.

Coming into this financial crisis, about 70% of U.S. gross domestic product came from consumer spending, boosted by easy mortgages and unsecured credit card borrowing. The nation wouldn't have recovered from the 2001 recession so quickly without all those loans.

Some optimistic pundits even saw this borrowing spree as a workable solution to the new stresses that were showing up in the economic statistics, such as rising inequality and increasingly unstable middle-class incomes. If you lost your job or didn't get a raise, you could borrow to smooth things over until better times.

It seems unlikely we'll revert to that behavior anytime soon. So one prediction I'll make about the next normal is that voters will look to government to help them manage risk.

That means President Obama might actually push through the national health-care system he campaigned on (although a change that big is still a tough political battle). A safer bet: Social Security will be one of your most solid assets. Whatever the system's internal financing problems, keeping it going is mostly a matter of political will. And with 401(k) balances deep in the tank, the political demand for Social Security is only going to go up. Talk of big benefit cuts will fade. In fact, I suspect benefits may actually increase for those seniors living closest to the bone.

It follows that life in the next normal will carry a higher tax bill - maybe not in the next couple of years, but soon enough. Whether you look at top marginal rates or the effective burden on families, taxes have been at a historically low ebb in recent years. Given the deficits we faced even before the crisis, they were already bound to go up. It's just more obvious now.

You can prepare a bit for higher taxes (for example, by saving in a Roth IRA, which allows tax-free withdrawals in retirement). But should you be upset about it? If we could also get a more reality-based economy in the bargain, it seems to me a fair price to pay.

IBM, Sun talks break down

2009-04-06T07:15:00.001-07:00

IBM's talks to acquire smaller computer and software rival Sun Microsystems Inc broke down on Sunday after Sun rejected IBM's $7 billion offer, a source with knowledge of the matter said.

The collapse of negotiations, if final, is likely to hurt Sun's shares as a buyout was seen as a means of survival for the once-storied Silicon Valley company, which has been losing market share. A deal would also have helped IBM (IBM, Fortune 500) compete more effectively against rivals such as Hewlett-Packard Co (HPQ, Fortune 500).

The source, who was not authorized to speak publicly about the matter, said Sun was unhappy with International Business Machines Corp's offer of $9.40 per share or below, and that it was unclear if talks would resume.

The bid represented a premium of up to 89% on Sun's shares before deal talks were first reported last month.

"Sun is now sort of damaged goods," said Peter Falvey, a technology banker at Revolution Partners. "If IBM got under the covers and didn't like what they saw, then what does that mean for other potential buyers?"

An IBM spokesman declined to comment, while Sun officials did not return calls.

Sources told Reuters last month that IBM was in exclusive talks to buy Sun and had proceeded to the due diligence stage. One source had said on Saturday that IBM lowered its offer price for Sun to $9.50 a share from $9.55 a share and that a deal may be announced this week.

Sun shares had risen to $8.49 on Friday, from $4.97 on March 17, a day before talks between the two technology companies were first reported. The Wall Street Journal had previously said IBM's original bid was $10-$11 a share.
Deal factored in

The collapsed talks are expected to damage the smaller Sun more than IBM, the world's largest technology services provider, which has fared relatively well despite the global economic slump thanks to its outsourcing business and its shift from hardware to higher-margin software sales.

Kaufman Brothers analyst Shaw Wu said it was a mistake for Sun to reject the bid, citing the leap in Sun shares since reports of the deal talks.

"The acquisition is already factored into the market's thinking. To reject it over 50 cents a share, or whatever it may be, doesn't seem like a very prudent move," Wu said.

Sun posted an 11% decline in quarterly revenue for its fiscal quarter ended Dec. 28, while gross margins shrank to 41.9% from 48.5% from a year earlier.

The company rose to prominence selling high-end computer servers in the 1990s but never fully recovered from the dotcom bubble burst earlier this decade. Analysts also say it has failed to fully capitalize on its software assets including Solaris and Java.

Some analysts have thought from the start that a deal between Sun and IBM could prove difficult, particularly due to the likelihood of intense antitrust scrutiny.

The merger would give the combined company 65% of the $17 billion high-end Unix server market, according to market researcher IDC.

Failed negotiations with IBM could mean that Sun will need to look for another buyer, and contend with a lower offer. But no bidder other than IBM has emerged in the months that Sun has been shopping itself.

The Wall Street Journal reported that Sun had demanded assurances from IBM that it would proceed with the deal in the face of regulatory challenges, fearing IBM's offer left too much room for it to walk away.
Negotiation tactic?

While a deal was widely seen as more crucial for Sun than for IBM, many analysts had also said it would help IBM if the company is able to cut costs and make better use of Sun's assets.

IBM shares have also risen 10% since the negotiations were first reported, helped by an upswing in the overall market.

Tim Ghriskey, chief investment officer for Solaris Investment Management, which manages about $2 billion, said the latest developments could be part of negotiating tactics and that Sun is still likely to strike a deal at around $9.40 a share and that IBM was still the most likely buyer.

"Like any acquisition candidate they are trying to force the highest bid possible," Ghriskey said. "IBM doesn't necessarily need these assets. But I think they could probably benefit from them at a reasonable price."

Buying Sun would hand IBM a clear lead at the high end of the $45 billion overall server market fought over with Hewlett-Packard.

It would also broaden IBM's software portfolio, add storage products that vie with EMC Corp and Network Appliance Inc.

Analysts have said Sun's software could also help IBM compete with Microsoft Corp (MSFT, Fortune 500), as well as Cisco Systems Inc (CSCO, Fortune 500), which some see as IBM's biggest rival in the long term.

Both Cisco and IBM have been expanding beyond their traditional products to new technologies like "cloud computing," in which companies store data and computing power in remote data centers accessed over the Internet, rather than buy their own computer equipment.

Gold Made Easy

2009-04-06T07:14:00.001-07:00

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Second home sales slide

2009-03-30T09:06:00.001-07:00

Sales of vacation and investment homes in the United States slipped to 30% of all transactions of existing and new homes in 2008, the National Association of Realtors said on Monday.

However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, with large percentages indicating that portfolio diversification was a factor in their purchase decision, the NAR said in a report.

The market share of homes purchased for investment was 21% last year, unchanged from 2007, while another 9% were vacation homes, compared with a 12% market share in 2007, the NAR said.
0:00 /1:41Reassess property taxes

The total share of second homes declined from 33% of all transactions in 2007, while in 2005, the peak year for home speculation, 40% of sales were second homes, the NAR said.

Down day for stocks at end of up week

2009-03-27T18:03:00.001-07:00

Wall Street tumbled Friday at the end of an otherwise upbeat week, stretching the market rally to three straight weeks, for the best run in a year.

The Dow Jones industrial average (INDU) fell 148 points, or 1.9%. The S&P 500 (SPX) index lost 17 points, or 2%. The Nasdaq composite (COMP) lost 42 points, or 2.6%.

All three major gauges rallied more than 20% in just three weeks, but Wall Street pled exhaustion Friday as investors stepped back.

Still, early week gains were enough to boost the weekly tally. The market gauges have now posted gains for three consecutive weeks, the best stretch since May of last year.

While the run could have another 10% to go, it's likely to peter out after that, said Dean Barber, president at Barber Financial Group.

"I think there is momentum here in the short run, but this is the classic bear market rally and investors need to be careful not to fall into the classic bear-market trap," Barber said.

He said that the advance has been based on hope that the recession will soon end because a lot of money has been thrown at the financial sector and the economy. However, fundamentally, the economy remains in bad shape, as do the state of corporate profits.

Financial and technology shares, which led the advance on Thursday, led the retreat on Friday. But declines were broad based and 24 of 30 Dow stocks fell.

President Obama met Friday with executives from JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and other large banks to discuss the financial crisis.

The bankers gave their approval of Treasury's plan to strip bad assets off bank balance sheets. They also discussed the Obama administration's recent proposal to overhaul the financial regulation system.

On the downside, executives at JPMorgan and BofA said that March business conditions weakened after a more encouraging start to the year.

Upbeat comments about the first two months of the year from a number of executives at the nation's largest banks helped fuel the recent advance.

Rapid rally: Since falling to more than 12-year lows on March 9, the Dow has gained 18.8% and the S&P 500 had gained 20.6% as of Friday's close. Also on March 9, the Nasdaq touched a more than six-year low. Since then, it has gained 21.8%.

Better-than-forecast economic reports on housing and durable goods orders this week have added to hopes that the economy is closer to turning around. Investors have also responded well to the latest plans from the government to stabilize the financial system.

On Thursday, Treasury Secretary Tim Geithner outlined a huge overhaul of the regulatory system. On Monday, he detailed plans to purge bank balance sheets of up to $1 trillion in bad debt that is limiting lending.

Economic news: Personal income fell 0.2% in February after rising 0.2% in January. Economists surveyed by Briefing.com thought it would fall 0.1%. Personal spending rose 0.2% in February after rising 1% in January. Economists thought it would rise 0.2%.

The University of Michigan consumer sentiment index rose to 57.3 in March from 56.3 in February, versus economists' forecasts for a reading of 56.8.

Company news: Google (GOOG, Fortune 500) said late Thursday that it was cutting just under 200 sales and marketing positions worldwide. It is the second round of layoffs in Google history.

General Motors (GM, Fortune 500) shares gained on published reports that the government could extend the automaker's restructuring deadline, giving it more time to gain concessions from unions and qualify for more taxpayer help.

The Wall Street Journal said that the government could extend the March 31 deadline by 30 days. On Thursday, GM said that 12% of its U.S. workforce has taken its latest buyout offer. However, the company is still looking to work with the union to alter retiree health care benefits, among other things.

Market breadth was negative. On the New York Stock Exchange, losers beat winners three to one on volume of 1.44 billion shares. On the Nasdaq, decliners topped advancers by almost three to one on volume of 2.12 billion shares.

Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.76% from 2.73% Thursday. Treasury prices and yields move in opposite directions.

Lending rates declined. The 3-month Libor rate fell to 1.22% from 1.23% Thursday, according to Bloomberg.com. The overnight Libor rate fell to 0.28% from 0.29%. Libor is a bank-to-bank lending rate.
0:00 /02:39Life in the pits

Other markets: In global trading, Asian markets mostly ended higher and European markets ended lower.

In currency trading, the dollar gained against the euro and fell against the yen.

U.S. light crude oil for May delivery fell $1.96 to settle at $52.38 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $16.90 to settle at $925.30 an ounce.

Don't run with the bulls quite yet

2009-03-27T18:01:00.000-07:00

All of a sudden, it's a bull market. The Dow Jones Industrial Index has risen by 21% since March 9, just crossing the traditional 20% threshold that some chart-watchers use to separate a mere rally from the real thing, But this three-week old may not live to a ripe age.

The previous Dow (INDU) rally started after the November 2008 rescue of Citigroup (C, Fortune 500), lasted until the New Year and came a mere 0.8 percentage points short of qualifying as a bull market - before yielding to a 28% rout. The current recovery has largely been a vote of confidence in a subsequent U.S. banking system rescue, along with massive government help.

Will this upward market movement prove more durable than the last? Mathematically, it has the advantage of starting from a much lower base. From Thursday's close, the Dow will have to rise a further 14% just to match the 2009 high, hit on January 2.

The economic case is less clear. True, after the nationalization of financial risk through guarantees and money-printing, panic over a possible imminent financial sector collapse looks overdone. And while GDP in the first quarter of 2009 looks to have been substantially lower than in the fourth quarter of 2008, the pace of decline seems to have slowed.

But the global downward economic momentum remains strong. The International Monetary Fund doesn't expect growth to return until "the course of 2010". While waiting, profits are going to be slaughtered.

Profits at non-financial U.S. corporations fell by 9% in 2008. In severe recessions, the average drop is more like 25%, according to BNP Paribas. Globally, the rate at which analysts are cutting their earnings forecasts - a fairly accurate indicator of current profit, according to Société Générale - suggests a 40% decline for quoted companies this year. That suggests investors are paying 20 times current earnings for stocks.

The bull market will only last if it can trample over a thicket of terrible earnings announcements. That is a lot to ask from investors who have not yet fully recovered from a too-long series of financial shocks.

Email marketing

2009-03-27T18:00:00.001-07:00

Marketing strategy in these times are not only confined to door to door promotion, or those irritating handouts at the mall. The creativity have already surpasses those old time strategies, though effective at times, but limited in scope. Email marketing solution is now the future of marketing strategy, with billions of people all over the world who utilizes the internet, and along with it uses an email account; all you need is an email marketing tool or email marketing software to reach a vast number of people worldwide.

iContact is the best solution for anybody who wants to reach a wide market by sending out promotional materials, surveys, inquiries, newsletters, subscriptions and anything that would boosts up and would let the world know that you have a good business in your hands and you want them to know it. iContact has great inbox deliverability with a friendly interface. They have auto responding features as well as blogging capabilities.

Your website can easily connect with the prospects, customers and members with the iContact’s communication tool and software. They also have a software and solution for larger companies via their Enterprise product that sure to boost up sales in no time. iContact has a user friendly interface in a 300 professionally designed email templates that you can use for your business.

iContact is revolutionizing the way non-profit organizations and businesses corresponds online, by making it easy and productive the way exchanging emails and responding queries through a simple solution and web application.

Art dealer arrested in $88 million fraud

2009-03-27T08:43:00.000-07:00

A Manhattan art dealer was arrested Thursday on an indictment charging that he stole $88 million from clients and investors, including tennis champion John McEnroe, authorities said.

Lawrence B. Salander, 59, owner of the now-defunct Salander-O'Reilly Galleries, was indicted on multiple charges, including grand larceny, securities fraud, forgery, criminal possession of a forged instrument, falsifying business records and perjury.

He defrauded 26 victims, Manhattan District Attorney Robert Morgenthau said in a statement.

"Salander stole from his victims in two primary ways: He sold artwork not owned by him and kept the money, and lured investment money in fraudulent investment opportunities," Morgenthau said.

In other cases, Salander inflated the estimated cost of artwork, oversold shares in works, claimed to own works he did not, and misrepresented or failed to pay the full return on sales when money came in, authorities said.

In one instance, to secure a $2 million personal loan from Bank of America, Salander offered pieces owned by others, including McEnroe, as security by providing phony documents to establish that he and his wife owned the art, Morgenthau said.

Salander's lawyer Charles Ross told CNN affiliate NY - One that his client is trying to raise money for bail, which was set at $1 million.

"He has been aware that there is an investigation for quite some time and he has prepared for this day," Ross told NY - One. "And as I said, he entered a not-guilty plea and we're gonna fight the charges."

The scheme funded a lifestyle that included trips to Europe by private jet, and the purchase of a Manhattan townhouse and a 66-acre estate in upstate New York, officials said.

Salander's indictment points to dealings dating to 1994. If convicted, he would face up to 25 years in prison for grand larceny and additional time for other charges.

Salander-O'Reilly Galleries went bankrupt in 2007 after more than 30 years of operation.

Jobless claims top 5.5 million

2009-03-26T09:21:00.000-07:00

The number of people filing initial claims for unemployment benefits rose last week, while those filing continuing claims hit an all-time high for the ninth straight week, according to a government report released Thursday.

In the week ended March 21, a total of 652,000 people filed initial jobless claims, up 8,000 from the previous week's revised figure of 644,000, the Labor Department reported.

Economists had expected new claims to rise to 650,000, according to a survey by Briefing.com.

The number of people continuing to file for jobless benefits rose 122,000 to 5,560,000 people in the week ended March 11 - the latest week for which data was available. It was the highest number since the government began keeping records in 1967.

Continuing claims have hit record highs as more unemployed Americans struggle to find work. But the 4-week moving average of initial claims, which economists say gives a more accurate indication of unemployment trends, came down for the first time in 10 weeks.

The 4-week moving average for weekly filings, which smoothes out volatile peaks and troughs, was 649,000, down 1,000 from the previous week's revised average.
0:00 /2:17Unemployed banker's journey

Still, the unemployment rate stands at 8.1% - the highest level in 25 years - and many economists expect it to exceed 10% later this year.

"The trend in claims is still upwards, though the rate of increase might be slowing," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research note.

Thursday's jobs data come amid a recent bout of better-than-expected economic reports on housing, manufacturing and other critical areas. These early sings of improvement have helped boost stock prices in recent sessions, but many economists remain skeptical about the prospects for a long-term economic recovery.

"There is no sign of recovery here," Shepherdson said. "And claims are usually one of the very first numbers to turn."

Oil ends lower

2009-03-25T17:06:00.003-07:00

Oil prices remained lower but recovered some losses Wednesday after positive economic data and the Treasury Department's bad-bank plan outweighed a mixed inventory report.

Crude prices settled down $1.21, or more than 2.2%, to $52.77 Tuesday. Oil traded almost 4% lower just prior to the report's release.

The Energy Information Administration said oil supplies soared by 3.3 million barrels in the week ended March 20.

Analysts were expecting an increase of 1.4 million barrels, according to a consensus estimate from Platts, an energy information provider. Crude supplies are above average for this time of year.

Surprisingly strong economic data released Tuesday helped oil prices recover losses, said Phil Flynn, an analyst at Alaron Trading. Durable goods orders jumped 3.4% after tumbling the previous month, and new home sales rose almost 5%.
Market cheers government action

On Monday, the Treasury Department unveiled its "Public-Private Investment Program," in which taxpayer money will be used to seed partnerships with private investors that will buy up toxic assets of banks' balance sheets.

Major actions from the government have weakened the greenback, which push crude prices higher because oil is priced in U.S. dollars across the world.

"Inflationary action is happening right in front of our eyes, and it's changed the rules of the game," Flynn said. "For now, this is what's affecting the market - not supply and demand anymore."

Crude investors are optimistic about the Fed and Treasury actions, as well as the economic stimulus package, Flynn said.

"In the short term, the market is focused on future of what may be and not what is," he said.
Gasoline

The EIA report said stockpiles of gasoline fell by 1.1 million barrels, while analysts were looking for a decrease of 900,000 barrels. U.S. refineries are running at just 82% of capacity, down slightly from the previous week, the report said.

The national average price for a gallon of regular unleaded gasoline increased to $1.986, up 2 cents from the previous day, according to motorist group AAA.

The EIA report also said distillates, which are used to make heating oil and diesel fuel, decreased by 1.6 million barrels. Analysts expected a fall of 200,000 barrels.
Bullish outlook

"At some point supply and demand will matter again, but the Fed is going to control the markets for the short-term," Flynn said.

Oil prices will likely move toward $60 a barrel, he added.

"I was bearish on oil, thinking it would bottom at $25," Flynn said. "But now that the Fed has devalued the dollar, $45 is the new $25."

Wall Street manages gains

2009-03-25T17:06:00.001-07:00

Stocks gained Wednesday, mustering up a late-session rally after a choppy session that helped push the S&P 500's two-week gains to 20%.

The Dow Jones industrial average (INDU) rose 90 points, or 1.2%. The S&P 500 (SPX) index rose 7 points, or 0.9%. The Nasdaq composite (COMP) rose 12 points, or 0.8%.

Stocks spiked in the morning on better-than-expected readings on new home sales and durable goods orders, but the advance sputtered out through most of the afternoon. A late-session jump in financial stocks and tech shares helped markets finish higher.

Joseph Saluzzi, co-head of equity trading at Themis Trading, said that the market is having trouble as it is bumping up against some key resistance levels around 820 or 825. He said that the perception of a weak 5-year Treasury auction was also having an impact Wednesday.

Stocks have bounced 20% since March 9th, when the Dow and S&P 500 hit roughly 12-year lows.

Equities have been rallying on optimism that the economy and financial markets are getting closer to stabilizing. In addition, many stocks have been hammered so heavily as to make them attractive to investors again.

But that advance has been losing steam, particularly after Monday's spike of roughly 7% for the major stock gauges, said Christopher Colarik, portfolio manager at Glendmede.

"There's meaning behind the rally,and I do think we've seen the lows, but the bottoming process is going to take time," he said.

Thursday preview: The House Financial Services Committee holds a hearing on regulatory reform, with Treasury Secretary Tim Geithner due to testify.

Economic reports include readings on weekly jobless claims and gross domestic product growth.

The number of Americans filing new claims for unemployment is expected to have risen to 650,000 from 646,000 the previous week, economists estimate. Continuing claims, a measure of people who have been receiving unemployment for a week or more, will also be in focus. Last week, continuing claims hit an all-time high of 5.473 million.

Fourth-quarter GDP is expected to have shrunk by a 6.6% annual rate versus the previous reading of a 6.2% rate. The 6.2% rate was a 26-year low.

Best Buy (BBY, Fortune 500) and homebuilder Lennar (LEN, Fortune 500) report quarterly results before the start of trading.

Bank focus: Stocks overall followed financials, with the broad market retreating in the afternoon along with bank stocks and recharging in the late afternoon as the sector found its footing.

"We're again being led by the financials," Themis Trading's Saluzzi said. "If they break down, the market breaks down."

Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) ended higher after a shaky afternoon. Citigroup (C, Fortune 500) cut some losses. The KBW Bank (BKX) sector index rose 5%, erasing a drop of over 5%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers seven to three on volume of 1.77 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 2.5 billion shares.

Economy: A pair of better-than-expected economic reports added to optimism that the economy is getting closer to stabilizing.

February new home sales rose at an annual unit rate of 337,000 versus a revised 322,000 in the previous month. Sales were expected to rise at a 300,000 unit annual rate, according to a consensus of forecasts from Briefing.com.

An earlier report showed that durable goods orders rose 3.4% in February after falling 5.2% in the previous month. Economists surveyed by Briefing.com thought orders would fall 2.5%.

Durable goods orders excluding transportation rose 3.9% after falling 5.9% in January. Economists thought they would fall 2%.

Also, a report from the UCLA Anderson School of Management showed that real domestic product growth is on track to see quarterly growth in 2010 and 2011, although not in 2009.

Washington: On Tuesday, Federal Reserve Chairman Ben Bernanke and Secretary Geithner testified about the government's $180 billion bailout of American International Group. They said AIG (AIG, Fortune 500) demonstrates the need for the government to have broader power over non-bank financial institutions.

Geithner again made his case for broader powers to regulate flailing companies on Wednesday. In a speech in New York, the Treasury Secretary said that the country should never again have to provide a massive bailout or risk seeing a collapse of the financial system.

President Obama, in a primetime news conference Tuesday, said that it is because of a lack of authority that the AIG situation has gotten worse. Obama also defended his $3.6 trillion 2010 federal budget, which he said is "inseparable" from the overall strategy for economic recovery.

Congressional committees began debating the budget Wednesday, with a final budget not expected until at least next fall.

On Monday, Treasury introduced its plan to purge bank balance sheets of up to $1 trillion in bad assets that are limiting lending and prolonging the recession.
0:00 /02:39Life in the pits

Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.79% from 2.70% Tuesday. Treasury prices and yields move in opposite directions.

Lending rates were unchanged. The 3-month Libor rate held steady at 1.23%, where it stood Monday, while the overnight Libor rate held steady at 0.29%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.

Last week, the Federal Reserve announced it was pumping another trillion into the economy to try to get credit flowing, including $300 billion to buy long-term Treasurys. The N.Y. Fed Bank began buying the securities Wednesday.

Other markets: In global trading, Asian markets ended lower and European markets ended higher.

In currency trading, the dollar fell against the euro and the yen, recovering from bigger morning losses following comments from Treasury Secretary Geithner.

U.S. light crude oil for May delivery fell $1.21 to settle at $52.77 a barrel.

COMEX gold for May delivery rose $12 to settle at $936.70 an ounce.

Shoes

2009-03-25T16:59:00.000-07:00

Currently, you can almost find and buy anything online trough internet. From books to car, from bike to shoes. Talking about shoes, I have just bought a new pair of running shoes for my new hobby, yes, running, or should I call it jogging? Whatever you call it, since this is a new hobby for me, I should buy a new shoes, simply because I don’t have one since I never like this activity before.

If you are like me, when you need to buy something the first thing that cross my mind is, is there any online store provide the item I need? For shoes, definitely yes. There are hundreds of online stores provide any kinds of shoes you need. One of my favorite online store is shopwiki since you can find so many products over there, including shoes.

If you go to their shoes store, you will find many detailed information about shoes, including the guide to choose the right shoes for you, the fitting and sizing tips, and also tips on buying the shoes you need. Trough that page you will see many links to their other page directed to their available shoes products.

You can browse thir shoes collection based on several categories, men’s or women’s shoes, casual shoes, classic shoes, sport shoes, and many more. You can also browse their shoes collection by it’s purpose, for example, golf shoes, bike shoes, and more.

Though they have thousands of collection, I am sure you can find the right shoes you need easily. And I can say that while their shoes are high quality, the prices are affordable. And the best thing is, we don’t need to leave our daily routines to buy the shoes we need. We can buy it from our office or home, pay it online and have it delivered to our address.

Bernanke defends big bank bailouts

2009-03-20T18:38:00.001-07:00

Federal Reserve Chairman Ben Bernanke responded to ongoing criticism of the government's efforts to keep alive institutions it has deemed "too big to fail," saying that this is an "enormous problem" that needs to be addressed.

Speaking before a group of community bankers in Phoenix, the central bank chief argued that actions taken thus far to prop up the nation's largest banks have been extremely unpleasant, but necessary to preventing further harm across financial markets and the broader economy.

"I do not think we have had a realistic alternative to preventing such failures," he said.

Many smaller community banks avoided making too many subprime mortgages and also did not own the types of toxic securities backed by these loans that have plagued big banks.

These smaller banks, along with taxpayers, have become increasingly frustrated by the government's stance that major financial institutions like Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and American International Group (AIG, Fortune 500) continue to require billions of dollars in government support because they have been viewed as too big and important to the broader economy to fail.
0:00 /02:30Fed's trillion dollar gamble

Those remarks were echoed by Sheila Bair, chairman of the Federal Deposit Insurance Corp., who addressed the same industry group Friday.

In her prepared comments, Bair reiterated comments she made before the Senate Banking Committee Thursday, adding that ending the "too to big to fail" issue required a number of new tools including a systemic risk regulator and a program that would help resolve problems at a large financial institution, similar to how the FDIC handles other banks that fail.

"I hope Congress acts soon," she said. "Nobody wants to go through another banking crisis like this one."

Bair also reiterated previously made remarks that she expected bank failures to cost about $65 billion over the next five years. The FDIC recently moved to raise assessments fees charged to banks to fund the industry's deposit insurance fund, which is used to cover deposits when a bank fails.

She also repeated an earlier assertion that without "additional revenue beyond the regular assessments, current projections indicate that the fund balance will approach zero."

With that in mind, Senate Banking Committee Chairman Chris Dodd, D-Conn. and Sen. Mike Crapo, R-Idaho have already proposed a bill that would allow the FDIC to borrow up to $500 billion from the government to shore up the fund.

But even though many big banks face significant challenges, Bernanke and Bair urged the community bankers in attendance Friday to keep lending.

Local lenders have become a key source of credit at a time when large banks and other finance firms outside the reach of regulatory agencies have withdrawn massive amounts of credit from the nation's financial system.

Community banks, which typically have $1 billion in assets or less, logged a 1.5% increase in outstanding loans as of the end of the fourth quarter. The largest institutions, with assets of more than $100 billion, suffered a 3.4% decline.

By continuing to make prudent loans, not only will community banks help the U.S. economy recover, but they also stand to benefit from the new business, according to the two regulatory chiefs.

"Community bankers are vitally important to our country and our economy," said Bair.
Hectic week in Washington

Friday's comments by Bernanke and Bair cap what has been a particularly busy week for the Fed chief and other regulators.

On Wednesday, Bernanke and fellow members of the Fed's Federal Open Market Committee, which sets interest rates, unveiled plans to purchase massive amounts of government debt over the next six months to help keep long-term rates low and get credit flowing again.

In a televised interview with 60 Minutes last Sunday, Bernanke said that a "depression" can be avoided, but he acknowledged that a full economic recovery will take time and that the financial system must be fixed in order for the recession to end.

Next week, Bernanke is slated to testify before Congress about the government's extensive efforts to rescue AIG and the controversy over the insurer's decision to pay $165 million in bonuses. Treasury Secretary Timothy Geithner will also appear at that hearing.

Auto parts makers get $5B bailout

2009-03-19T10:50:00.000-07:00

The Treasury Department announced a $5 billion program to help embattled U.S. auto parts makers, the latest attempt to stabilize problems in the nation's troubled auto sector.

The program will insure that parts suppliers get the money owed to them for their products, no matter what happens to their automaker customers. Concerns about whether General Motors (GM, Fortune 500) or Chrysler LLC could be forced into bankruptcy are making it difficult for the parts makers to get loans they need to operate.
0:00 /1:14Will automakers deliver?

The program also allows the parts makers to sell their receivables, or the money owed to them by the automakers, into the program at a modest discount. This is expected to provide them with desperately needed funding and help unlock credit more broadly in the supplier industry.

The $5 billion is coming from the Troubled Asset Relief Program, the fund set up to bailout banks and financial institutions.

A member of the Obama administration's auto industry task force, who spoke to reporters on the condition that his name not be used, said the decision to help suppliers should not be taken as a sign that the task force has made a decision on further support for GM and Chrysler.

GM and Chrysler have already received $17.4 billion in loans and they are asking for up to $21.6 billion more in loans.

The auto task force has until March 31 to determine if the two companies' turnaround plans will allow them to be viable in the future and whether they should get additional funds. The task force member said some announcement would be made by the group before the March 31 deadline.

But the task force member said it was important to put the program to help suppliers in place first because of the risk that they could run out of cash and have to stop operations before there is a decision on the help for GM and Chrysler.

"Unlike GM and Chrysler, they have yet to receive any help at all from the government, even though they are suffering from some of the same problems," said the task force member. "As we've been doing our work, it became clear to us that addressing this particular problem is of great urgency."

Only suppliers identified by the major U.S. automakers will be eligible to participate in the program. GM and Chrysler have agreed to participate in order to get help for their suppliers.

Ford Motor (F, Fortune 500), which has yet to receive a bailout from the federal government, will not participate in the program. If it were to do so, it would have to issue the government warrants for stock in the company and agree to some limitations on pay and restructuring plans. Still, the company said in a statement it supported the program.

"These actions support all automakers that are reliant on a healthy U.S. supply chain," Ford said in the statement. "Ford does not need to participate in the program as we remain viable and expect no issues with continued payment to our suppliers."

The task force member admitted this provision gives GM and Chrysler life-and-death power over their key suppliers, but he said they realistically already have that leverage. He added that it would be impossible for the government to sort through which suppliers are critical and which could be allowed to fail.

"There unfortunately will continue to be failures in the supply base," he said. "This program does not solve fundamental revenue or profitability issues."
Suppliers still have financial problems

Suppliers employ more U.S. workers between them - about 500,000 -- than the three major U.S. automakers do directly. And with job losses continuing to batter the overall U.S. economy, Treasury Secretary Tim Geithner said this was a program that needed to be put in place.

"The Supplier Support Program will help stabilize a critical component of the American auto industry during the difficult period of restructuring that lies ahead," he said in a statement.

The Original Equipment Suppliers Association, a trade group, for the industry praised the new program. The group had asked for up to $18.5 billion in federal help, but Ann Wilson, the group's senior vice president for government affairs, said this was an important stopgap.

"This plan comes at a critical time for suppliers," she said.

GM praised the program in a statement. Chrysler did not have any immediate comment.

When GM and Chrysler shut down much of their production in January due to excess inventory of cars caused by weak sales, it caused a cash crisis for the parts makers who depended on the flow of payments from the automakers.

Widespread bankruptcies were expected in the sector in the coming weeks without government help. Shares of Visteon (VSTN), the major supplier for Ford Motor (F, Fortune 500), fell to a price of below 10 cents this month on reports it was nearly out of cash.

In addition, auditors for American Axle (AXL) have said there is doubt about its ability to stay in business in the current environment. Shares of American Axle soared 43% following Thursday's announcement from the Treasury, while Visteon shares jumped 75% in over the counter trading. The stock still only trades for 28 cents though.

Other parts maker stocks surged as well. Shares of Lear (LEA, Fortune 500) gained 77%, while TRW Automotive (TRW, Fortune 500) gained 30% and ArvinMeritor (ARM, Fortune 500) rose 25%.

Wilson agreed with the auto task force member that the program won't be enough to stop some suppliers from going bankrupt, due to the severe production cutbacks announced by virtually all automakers with U.S. assembly plants.

"This is not going to staunch all the bleeding. There's no doubt about that," she said. "Any plan the government came up with could not address all those concerns."

Directv

2009-03-19T10:47:00.000-07:00

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Oil falls $2 as gasoline supply jumps

2009-03-18T09:08:00.001-07:00

Oil prices fell further Wednesday after a government report said supplies of gasoline soared unexpectedly.

At 11:50 a.m. ET, crude prices were down $2.13, or 4.3%, to $47.03 a barrel. Oil traded down $1.07 just prior to the report's release.

In its weekly inventory report, the Energy Information Administration said stockpiles of gasoline increased by 3.2 million barrels in the week ended March 13.

Analysts were expecting an decrease of 2.1 million barrels, according to a consensus estimate compiled by Platts, an energy information provider.

"These continued increases show the supply-demand balance is tight, which points toward risk for further deterioration in the market," said Chris Lafakis, economist at Moody's Economy.com.

Crude supplies increased by 2 million barrels, matching estimates. The EIA report also said distillates, which are used to make heating oil and diesel fuel, rose by 100,000 barrels. Analysts expected supplies to rise 400,000 barrels.

The sluggish global economy has hammered consumer demand for oil, which in turn has caused a glut in supply.

Amid layoffs, pay cuts and general uncertainty about the future of the economy, consumers have scaled back their use of energy. Oil prices have plummeted from a record high of $147.27 a barrel last summer.

OPEC: In response to growing stockpiles, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - has been pressured to put a floor under prices.

At an OPEC meeting March 15, the group agreed to reduce supply by a further 800,000 barrels a day to complete promised supply cuts.

Saudi Arabia, the largest oil exporter in the world, doesn't need to cut production more in order to account for other OPEC nations, Oil Minister Ali al-Naimi said in an interview in Vienna.

Member countries Iran and Nigeria are overproducing by 50%, Lafakis said.

"Saudi Arabia has cut more than it was asked to," he said, "They're picking up the slack, and they won't want to institute more cuts without more compliance from these cheating nations."

Lafakis said he didn't expect OPEC to institute more production cuts between now and its next meeting in May. Only "material events" - not a mere continuation of the sluggish economy - could spark cuts, he said.

Gasoline: The national average price for a gallon of regular unleaded gasoline increased to $1.92, up 1 cent from the previous day, according to motorist group AAA.

Fed rate decision: The Federal Reserve's Open Market Committee will end a two-day meeting in which policy makers will decide how to stimulate the economy.

The Fed could keep the benchmark interest rate as low as 0%. The group is scheduled to issue a statement at 2:15 p.m. ET.

With the benchmark rate already at a record-low range of 0-0.25%, traders will instead look to the statement for hints on the economic outlook and announcements of additional efforts to boost the financial system.

"More than any other meeting in recent history, this one's baked into the cake already," Lafakis said. "The market always looks at the Fed, but this time they're not expecting too much."

Outlook: Oil prices will likely rise to $56 a barrel by year's end, Lafakis said

"The economy could get worse, but if it does, OPEC will come in with more cuts," he said. "Member countries have shown they can stop inventory from rising if they are focused on it."

Crude prices will probably bottom around $40 a barrel, with a possible decline to $35 - but nothing like the lows of December and January, Lafakis said.

In the long-term, Lafakis said he expects oil prices to rise to $85 in 2011 and decline back to $70 in 2014.

Bernanke: Recovery to begin next year

2009-03-15T19:18:00.003-07:00

Federal Reserve Chairman Ben Bernanke said on Sunday that government officials are laying the groundwork for an economic revival and that a "depression" can be avoided - acknowledging however that a full recovery will take time and that there are still obstacles.

"We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time," Bernanke said in a rare public interview airing on "60 Minutes," according to a transcript released by CBS.

When asked about the risks of a "new American depression," Bernanke responded, "I think we've averted that risk. I think we've gotten past that."

Key to a full recovery, said Bernanke, is stabilization of the banking system -- an argument the Fed chairman has made repeatedly.

Bernanke also defended government actions taken thus far, as well as the decision last fall to let Wall Street firm Lehman Brothers fail while at the same time stepping in to save insurance giant American International Group.

Bernanke said the Fed did not have powers to save Lehman because the firm did not have sufficient assets to post as collateral. In contrast, AIG (AIG, Fortune 500) has vast insurance operations that it can sell off to repay government loans.

AIG has since received $170 billion in bailout funds, in part to cover its obligations to banks worldwide. These banks had taken out insurance from AIG against the default of risky bonds. AIG collected hefty premiums from those contracts, but did not have sufficient reserves to pay out claims.

Though Bernanke said he understands public outrage over using taxpayer dollars to prop up AIG, which made "unconscionable bets," he thinks the government had little choice.

"At that period, I felt we were pretty close to a global financial meltdown," Bernanke said.

Bernanke indicated that similar decisions may be necessary with other big financial institutions, which are now undergoing "stress tests" to evaluate their ability to withstand extreme financial shocks.

He made clear he would seek to avoid massive bank failures - but not that he would seek to prop up sick banks indefinitely.

"They are not going to fail. But what we can do, should it be necessary, is try to wind it down in a safe way. So, for example, in the case of AIG, we've prevented a bankruptcy, because of the chaos that would create. But we're also demanding that AIG divest itself, sell off its - subsidiaries, and use the proceeds to pay back the government."

Bernanke, from a modest background in Dillon, S.C., said his chief aim in focusing on the financial sector is to ultimately help the economy at large. "I've never been on Wall Street. And I care about Wall Street for one reason and one reason only - because what happens on Wall Street matters to Main Street."

Meanwhile, Bernanke indicated some government efforts are already paying off, seen in lower mortgage rates, stable money-market funds and more business lending.

The interview comes at a fragile time for the U.S. economy. Though the U.S. stock market soared 10% in the past week and several economic readings showed some firming, there still is no shortage of anxiety.

At issue: It is still unclear how the financial sector bailout strategy will address the problems caused by mortgages weighing down bank balance sheets. There is also concern about the nation's debt burden because of the $787 billion economic stimulus package enacted last month and other federal spending programs. And job losses and foreclosures continue to mount.

Still, Bernanke sought to look past these immediate problems. "I just have every confidence that as we get through this crisis, that our economy will begin to grow again, and it will remain the most powerful and dynamic economy in the world."

Help is coming for small businesses

2009-03-15T19:18:00.001-07:00

President Barack Obama and Treasury Secretary Tim Geithner on Monday will announce administration plans to make lending to small businesses more attractive, two senior administration officials confirmed.

Many small businesses, drowning from dried up coffers and unpaid bills, are having a tough time getting loans from lenders.

Christina Romer, who heads the Council of Economic Advisers, said Sunday the government would pump "a significant amount" of money into boosting small business lending, but she did not reveal a total figure.

"We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them," Romer said on NBC's "Meet the Press."

The senior administration officials said the administration's plan deals with two programs handled by the Small Business Administration.

The first one, the "7(a) program," allows small businesses to get loans of up to $2 million backed by the federal government through the SBA. Currently, the government guarantees up to 85 percent of loans below $150,000, and up to 75 percent of larger loans. Under the administration's plan, the government will temporarily increase the loan guarantee to 90 percent as an incentive to banks to lend.

The administration believes this increase will reduce the risk lenders face when they make loans to borrowers who cannot find credit elsewhere, and ultimately give the banks more confidence to sell and make more loans, the officials said.

The second program, the "504 program," guarantees up to $4 million worth of economic development projects for small businesses. Starting Monday, the administration will temporarily eliminate fees for lenders and borrowers on any new 504 applications. The aim is to reduce the costs to both borrowers and lenders participating in the program, the officials said.

The administration will also temporarily eliminate the up-front fees for 7(a) loans that banks charge borrowers. These fees go up to 3.75 percent for larger loans. The administration believes this will decrease the cost of borrowing for small businesses and make it easier for them to get the credit they need to make new investments, the officials said.

Satellite Broadband

2009-03-15T19:13:00.001-07:00

You can get satellite broadband company almost everywhere now including the very rural area’s of Australia. I don’t like getting locked into contracts which can charge you high fee’s to break early if you are unhappy. This is why I found that HarbourSat allows you to purchase contract less plans where you can cancel anytime.

I was curious to know what types of broadband satellite service were available to AU residents and was surprised to find some plans as low as $9.95 per month for the first six months, now of course. The other big issue with most Satellite companies is if you use over the bandwidth alloted you can get charged some hefty fee’s per month for going over your bandwidth limit, 500megabytes of data is the typical limit. With HarbourSat they have a flexible plan that will drop your speed to 64kbps/64kbps when you reach your limit for the month and then you incur no extra fee’s or penalties for the over limit usage.

HarbourSat claims to have some of the best technical support and service in the business with live 24×7 support and people who work with you to get your service installed, configured and support you if you need assistance anytime. Their service is always available 24×7 and backed by an Optus D1 Satellite.

If you live in Australia and have no access to cable broadband service, I highly recommend you check out satellite broadband australia to determine if the company and plans are the right fit for your situation.

For Dow, another 12-year low

2009-03-09T20:07:00.001-07:00

Stocks tumbled Monday, with the Dow and S&P 500 ending at fresh 12-year lows, as Merck's $41 billion purchase of Schering-Plough failed to distract investors from worries about the economy.

The Dow Jones industrial average (INDU) lost 80 points, or 1.2%, to end at 6,547.05, its lowest point since April 15, 1997.

The S&P 500 (SPX) index lost nearly 7 points or 1%, to end at 676.53, its lowest point since Sept. 12, 1996.

The Nasdaq composite (COMP) lost 25 points or 2%, to end at 1,268.64, its lowest point since Oct. 9, 2002.

"We're seeing more of the same," said John Buckingham, chief investment officer at Al Frank Asset Management. "With an absence of good news, the path of least resistance is down."

Yet, with the Dow and S&P 500 both down over 25% year to date, and investor sentiment at or near record lows, a short, sharp rally could be in the works, he said.

"To the extent that you get some piece of good news, you could see a big rally," Buckingham said. "But right now every rally attempt is being met with selling."

Since closing at its all-time high of 14,164.53 on Oct. 9, 2007, the Dow has lost nearly 54%. The S&P 500, which also hit its high of 1565.15 on Oct. 9 has lost around 57%.

"Valuations are reasonably attractive outside of financials, but most investors are in defensive mode," said Thomas Nyheim, portfolio manager at Christiana Bank & Trust Company. "They've seen too many losses and are sitting on the sidelines."

Nyheim said stocks aren't likely to make a bigger move up until later in the year. In the short term, investors will be keeping an eye on the fluctuations in the credit markets, and the weekly and monthly employment figures.

Stocks mustered gains Friday - at the end of a rough week - with the Dow and S&P 500 bouncing off 12-year lows following a bleak February jobs report.

On Tuesday morning, Federal Reserve Chairman Ben Bernanke speaks at the Council on Foreign Relations in Washington, D.C. about financial reforms to handle risk in the economy.

In addition, the government will release a report on January wholesale inventories.

Drugmaker Merger: Dow component Merck (MRK, Fortune 500) said it's buying Schering-Plough (SGP, Fortune 500) in a $41.1 billion cash-and-stock deal that is aimed at helping the company better compete with pharmaceutical industry leader Pfizer. Merck shares slipped 7.7% and Schering shares rallied over 14%.

Banks: A variety of bank shares bounced back, with Bank of America (BAC, Fortune 500) leading the way, rising over 19%. Other gainers included Wells Fargo (WFC, Fortune 500) and US Bancorp (DEL). The KBW Bank (BKX) index added 5.3%.

Over the weekend, reports in Fortune and other publications named some of the companies that benefited from the government's multi-billion bailout of insurer American International Group (AIG, Fortune 500).

The counterparties to billions in credit default swaps included U.S. based firm Goldman Sachs (GS, Fortune 500) as well as European firms Deutsche Bank (DB), UBS (UBS) and Société Générale among others.

Other movers: Some of the economically-sensitive stocks that have gotten pummeled lately bounced back, including Dow components Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500), General Motors (GM, Fortune 500) and General Electric (GE, Fortune 500).

GE rallied after it said it was selling bonds guaranteed by the U.S. government.

But other Dow components slumped, including DuPont (DD, Fortune 500), AT&T (T, Fortune 500), Procter & Gamble (PG, Fortune 500), Hewlett-Packard (HPQ, Fortune 500) and IBM (IBM, Fortune 500).

StemCells (STEM) and Geron (GERN), two biotechs that engage in stem cell research, rallied Monday after President Obama reversed a Bush-era policy that limited federal aid for stem cell research.

Market breadth was negative. On the New York Stock Exchange, losers beat winners seven to three on volume of 1.56 billion shares. On the Nasdaq, decliners topped advancers by more than two to one on volume of 2.08 billion shares.

Also in play: Comments from influential investor Warren Buffett that the economy has fallen off a cliff, but that it will recover.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.91% from 2.87% Friday. Treasury prices and yields move in opposite directions.

Lending rates tightened. The 3-month Libor rate rose to 1.31% from 1.29% Friday, while the overnight Libor rate rose to 0.33% from 0.32% Friday, according to Bloomberg.com. Libor is a bank-to-bank lending rate.

Other markets: In global trading, Asian markets ended lower and European markets ended mixed.

In currency trading, the dollar rose versus the euro and the yen.

U.S. light crude oil for April delivery rose $1.55 to settle at $47.07 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $24.70 to settle at $918 an ounce.

Next exit: The Bernanke interchange

2009-03-08T07:50:00.000-07:00

The exit ramp that Ben Bernanke was looking for Saturday had only a little to do with getting the U.S. economy back on the road to recovery.

The Federal Reserve chairman attended a ceremony naming the Interstate-95 interchange that leads travelers into his hometown of Dillon, S.C.

"I must confess that, until recently, I did not realize that highway interchanges were named after people," Bernanke said in remarks prepared for delivery and released by the Federal Reserve. "But, as I thought about it, I realized that it is indeed a high honor for someone whose job is focused on supporting the economy."

"Efficient transportation is crucial to economic development," he added.

The Fed chairman's comments were primarily a review of his years in Dillon, working at odd jobs such as construction and waiting tables at the South of the Border attraction that's the town's main claim to fame.

Bernanke's words are usually scrutinized for indications of his thinking on the economy. But the only relevant remark came after he mentioned another young person from Dillon, Ty'Sheoma Bethea, whose "We are not quitters" letter to President Obama - concerning the poor physical condition of her school - earned her a mention in his speech to Congress last month.

"Well, neither are the American people, despite the economic challenges we now confront," said Bernanke, echoing the girl's comment. "For our part, at the Federal Reserve, we will continue to forcefully deploy all the tools at our disposal as long as necessary to support the restoration of financial stability and the resumption of healthy economic growth."

Bernanke goes back to work in the coming week, speaking Tuesday in Washington on reforms to address financial system risk. The week after, he'll chair the Fed's policy-making body, which has kept interest rates near 0% in an effort to restart liquidity in the financial markets.

11% of mortgages are troubled

2009-03-05T08:18:00.000-08:00

More than 11% of all American homeowners who hold a mortgage are either delinquent or in foreclosure, according to an industry report released Thursday.

The percentage of mortgage borrowers at least one month behind in their payments - but not in foreclosure - rose to nearly 8% during the fourth quarter of 2008, according to the National Delinquency Report from the Mortgage Brokers Association (MBA). That is the highest rate of delinquency ever recorded by the survey, which began in 1972, and reflects a record 13% jump compared to the third quarter.

"Subprime ARM loans and prime ARM loans, which include Alt-A and pay-option ARMs, continue to dominate the delinquency numbers," Jay Brinkman, chief economist for the MBA, said in a prepared statement. "Nationwide, 48% of subprime ARMs were at least one payment past due, and in Florida over 60% of subprime ARMs were at least one payment past due."

The number of homes in the foreclosure process rose to 3.3%, an increase of 0.33 percentage points from the quarter before and up 1.26 percentage points from a year earlier. That represents nearly 1.5 million homes at risk of sliding all the way through foreclosure.

Combined, the number of frequencies and loans in foreclosure came to 11.18%, the highest ever recorded by the MBA.
Delaying tactics

And even though the number of loans entering into the foreclosure process remained steady, the number of loans stuck there was particularly high, according to Brinkman.

"This is mainly attributable to various state and local moratoria on foreclosure sales, the Fannie Mae and Freddie Mac halt on foreclosure sales announced in late November, a general reluctance by servicers to proceed with evictions in the last few weeks of December and a slowing down caused by an overburdened legal process in some areas," he said.

Because of the moratoria, the number of loans very far past due, 90 days or more, jumped sharply to 3% from 2.2% a quarter earlier. In the past, many of those loans would have been cleared out of the system by lenders completing the foreclosure process.

Even though delinquencies are still driven by problems with non-traditional mortgage loans, Brinkman said more fundamental, historic causes of foreclosure are also making an impact.

"The delinquency rates continue to climb across the board for prime fixed-rate and subprime fixed-rate loans - loans whose performance is driven by the loss of jobs or income rather than changes in payments," he said.

Five states - California, Nevada, Arizona, Florida and Michigan - once again dominated delinquency statistics during the quarter, but the number of loans 90 days late or more also increased significantly in New York, Louisiana, Texas, Georgia and Mississippi.

$700M for small business in Obama's budget

2009-03-03T09:59:00.001-08:00

The Small Business Administration is still waiting for a detailed budget and breakdown of its financial priorities for the next fiscal year, but the budget overview President Barack Obama released last week earmarks around $700 million to support the agency in 2010, enough for it to back $28 billion in loans to small businesses.

The money allocated in the 2010 fiscal budget comes on top of the $730 million in funding the SBA received from the stimulus bill, which will support emergency lending initiatives through September 2010.

Though a detailed budget proposal won't be available for several weeks, the $700 million Obama's budget recommends to fund the agency would be enough to sustain the SBA's existing lending and educational programs, and to advance administrative priorities like improving the agency's loan accounting and other IT systems.

"[The budget] is comparatively more than most of the recent years," said SBA spokesman Mike Stamler.

The SBA's budget fluctuates drastically from year to year thanks to the agency's disaster-lending program, which directly makes loans to businesses and homeowners affected by disasters like fires, floods and hurricanes. In years with significant disasters, such as 2005's Hurricane Katrina, the SBA's total budget spikes into the billions.

But the agency's core budget, to fund its administrative programs and its flagship lending initiatives, has been whittled away over the past decade. Programs that once received subsidies, such as the SBA's 7(a) and 504 programs that guarantee a portion of bank loans made to qualifying small companies, are now generally expected to support themselves through the fees they charge participants.

Small business advocate Nydia M. Velázquez, chairwoman of the House Committee on Small Business, offered mild criticism of the proposed funding levels.

"While this [budget] is an important step, more needs to be done," she said in a statement. "Just as the SBA's programs were not created overnight, we cannot expect that they will be revitalized overnight. Still, I know President Obama shares my commitment to our nation's small businesses and I will work with the administration to ensure that SBA has sufficient resources to perform its mission."

Obama's proposed budget supports up to $17.5 billion in loan guarantees through the SBA's 7(a) program, as part of the $28 billion in small business loans from banks that the SBA is authorized to insure.

That's a higher loan volume than the SBA has backed in any other year this decade. Last year, the SBA backed $12.8 billion in loans through the program, a 12% drop from 2007's total. Reduced demand from entrepreneurs and banks' reluctance to issue small business loans, even with the SBA's guarantees, have contributed to the decline.

Ford's sales plunge 48%

2009-03-03T09:58:00.000-08:00

Ford Motor reported Tuesday that sales fell 48% in February, kicking off a series of reports expected to show that last month was the worst yet for the auto industry during this recession.

Ford sold 96,044 cars and light trucks in the U.S. during the month, a bit better than the January sales total.

The weak demand was broadbased -- sales of virtually every model Ford had on the market a year ago fell more than 10%.

Sales forecaster Edmunds.com had estimated that Ford's sales would be down 50% from year-earlier levels, roughly in line with the declines expected at General Motors (GM, Fortune 500) and Chrysler LLC, which will report later in the day.

But Ford (F, Fortune 500) and its U.S. rivals aren't the only automakers expected to be hit by the current downturn.

Edmunds forecasts declines of more than 33% at Japanese automakers Toyota Motor (TM), Honda Motor (HMC) and Nissan (NSANY). Overall industrywide sales are forecast to fall at least 40% to a seasonally adjusted annual rate of between 9.1 million to 9.3 million.

That would be the worst sales rate since December 1981. The sales rate was 9.5 million in January.

"The economic and competitive environment remains challenging," said Ken Czubay, Ford's vice president of sales and marketing, in a statement.

Ford also announced it is cutting production in North America during the second quarter by 38% to keep supply in line with the reduced demand.

The lower outlook for industrywide sales has prompted GM and Chrysler, which have received $17.4 billion in federal loans between them, to ask for another $21.6 billion in federal assistance to see them through the downturn.

Ford, which went into the current crisis with a better cash position, has thus far not asked for federal loans. But it has requested a $9 billion line of credit in case sales don't improve soon.

Construction spending at four-year low

2009-03-02T07:40:00.000-08:00

U.S. construction spending dropped in January to its lowest level in more than four years, according to a government report on Monday, dragged down by the residential slump.

The Commerce Department said spending on construction projects dropped 3.3% to a seasonally adjusted annual rate of $986.2 billion, the lowest since June 2004, after tumbling 2.4% the previous month.

Analysts polled by Reuters were expecting a 1.5% decline in overall construction spending in January. Compared to the same period a year ago, construction spending dived 9.1%.

Private residential spending, at the heart of the U.S. economic contraction, fell 2.9% in January after December's 4.4% drop. Compared to the same period last year, spending was down 28%. The level of spending, at a $291.5 billion rate, was the lowest in more than 10 years.

Spending in the nonresidential private sector on a range of structures from factories, lodging, offices and power plants fell 4.3% in January, versus a 1.2% decline the previous month.

Oil retreats after rally

2009-02-27T07:39:00.000-08:00

Oil fell back on Friday from its three-day bull run, paring nearly $2 in morning trade, but otherwise remaining on course to end the month up more than 4% from January, its first monthly gain since June 2008.

OPEC production cuts and a bounce in U.S. demand for gasoline this week have pushed oil prices up, and analysts at JP Morgan said supply tightness meant "the crude market is finally in balance."

U.S. crude for April delivery was down 1.71 cents to $43.51 a barrel after closing at $45.22 on Thursday, a $2.72 jump.

"With the impact of OPEC production cuts clearly being felt in the markets, we anticipate continued bullishness in the coming week with refinery runs expected to rise sharply, resulting in a crude draw," JP Morgan analysts wrote in their Global Energy Strategy note.

OPEC has been implementing a 5% reduction in its share of global production since September, totaling 4.2 million barrels per day, in order to support falling oil prices.

Oil touched a record high of $147.27 in July, and in the course of six months fell more than $100 to $32.49 in December as the global economy shuddered into a rapid and deep recession.

Signs of recovery from the recession have been lacking, with leading industrialized and developing countries releasing economic data regularly that show slumping consumer demand, rising unemployment and frozen credit liquidity.

Geneva-based consultants Petrologistics track OPEC supply and earlier this week said the Organization of the Petroleum Exporting Countries are on track to deliver 89% compliance with the production cuts by the end of February.
Lightening gloom

A steep 3.4 million barrel drawdown in gasoline stocks announced earlier in the week sparked the rally that has lifted crude prices 13% in this week alone. NYMEX March RBOB registered its highest front-month settlement since November.

The United States will rack up the biggest budget deficit since World War Two, while jobless claims jumped to a record 5.1 million, and in Asia Japan factory output recorded a record monthly fall in January.

OPEC members continue to mull the possibility of another output cut at its meeting in March, with the United Arab Emirates cutting allocations for Asian refiners in April.

Venezuela said it wanted OPEC to agree on a new oil output cut, but relatively small member Ecuador said oil prices were stabilizing now, brushing off possibility it might urge a cut.

Market players are closely eyeing March heating oil and RBOB gasoline contracts that expire on Friday as well as key economic data, including euro zone January inflation and unemployment figures and U.S. fourth-quarter GDP.

The U.S. GDP figures are expected to show the world's largest economy had contracted at a 5.4% annual rate, the deepest slide since the first quarter of 1982.

U.S. durable goods orders, an important gauge of business activity, fell for a sixth month to a six-year low in January, suggesting that dried-up credit markets have had a severe impact on industries around the world.

Dow and S&P 500 at '97 lows

2009-02-23T17:08:00.001-08:00

The Dow and S&P 500 tumbled to levels not seen in nearly 12 years Monday, as investors continue to worry that the government's efforts to slow the recession won't be sufficient.

The Dow Jones industrial average (INDU) lost 250 points, or 3.4%, ending at the lowest point since May 7, 1997.

The S&P 500 (SPX) index lost 26 points, or 3.5%, ending at the lowest point since April 11, 1997.

The Nasdaq composite (COMP) lost 53 points, or 3.7%. The tech-fueled index has held up better than the rest of the market so far this year, closing at the lowest points since Nov. 20, 2008.

"It's fear-based selling," said Dave Hinnenkamp, CEO at KDV Wealth Management. "The fact that we're touching these multi-year lows tells you we don't know where the bottom of this thing is."

Stocks gained in the morning on reports that the government may boost its stake in Citigroup as it briefly assuaged fears that the troubled bank would have to be nationalized. But the early advance quickly petered out, as the worries of the last few weeks returned.

"There is just nobody who wants to buy right now," said Ron Kiddoo, chief investment officer at Cozad Asset Management.

"The skepticism is back," Kiddoo said. "I think we need to hear some optimistic talk from our leaders and soon."

Stocks are now extra vulnerable with the major gauges at the multi-year lows, said Gary Webb, CEO at Webb Financial Group.

"Worries about how long it will take for the government programs to have an impact and worries about the health of the banks and the autos are all there," Webb said.

But there is also just the day-to-day reality that many investors are losing money and don't know when they are going to stop losing money, he said.

After the close of trade, JPMorgan Chase said it was cutting its divided to 5 cents per share from 38 cents per share currently.

Tuesday preview: Economic reports are due on home prices and consumer confidence.

The S&P/CaseShiller Home Price index, which is due before the market open, is expected to have fallen at a record 18.25% annual pace in December, according to a consensus of economists surveyed by Briefing.com. The index tracks home prices in 20 major metropolitan areas.

The Conference Board's February Consumer Confidence index is expected to have fallen to 36.0 in February from 37.7 in January. That reading would be the lowest since the Conference Board began tracking the index in 1967.

A pair of retailers report quarterly earnings Tuesday morning. Dow component Home Depot (HD, Fortune 500) likely earned 15 cents per share versus 40 cents a year ago, according to a consensus of analysts surveyed by Thomson Reuters. Target (TGT, Fortune 500) is expected to have earned 83 cents versus $1.23 a year ago.

Federal Reserve Chairman Ben Bernanke begins the first day of his two-day semi-annual testimony before Congress on monetary policy. On Tuesday, he speaks at a Senate Banking Committee hearing and on Wednesday at a House Financial Services Committee hearing.

On Tuesday evening, President Obama addresses the joint session of Congress, with his speech due to start at 9:00 p.m. ET.

Financials: Stocks have tumbled over the last two weeks on worries that the government won't be able to slow the recession, despite announcing a series of programs. On Friday, stocks slipped on worries that Citigroup and Bank of America might have to be taken over by the government altogether.

Some of those worries were tempered Monday on reports that the government is looking to boost its stake in Citigroup (C, Fortune 500), something that would fall short of full nationalization but would enable it to avoid bankruptcy. Should Citigroup be fully nationalized by the federal government or forced to declare bankruptcy, that would wipe out all shareholder value. Citi gained 9.7%.

Separately, Treasury said in a joint statement with other departments that the government is ready to give more money to banks if they need it. The Capital Assistance Program begins Wednesday.

The program, previously announced by Treasury Secretary Timothy Geithner, involves giving banks "stress tests" to determine how they are doing and whether they need more money.

Company news: Meanwhile, the Treasury is also considering its options as General Motors (GM, Fortune 500) and Chrysler continue to flounder, despite having received billions in federal aid. According to a Wall Street Journal report Monday, the administration believes the possibility of Chapter 11 bankruptcy filings by the two companies must be seriously considered. GM shares ended unchanged.

Fellow automaker, Ford Motor (F, Fortune 500) has reached a tentative deal with its union on changed to retiree health care benefits, considered to be a critical concession on the part of the UAW. Shares rallied 9.5%.

A variety of big tech stocks slumped, including Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500), Oracle (ORCL, Fortune 500), Dell (DELL, Fortune 500) and Apple (AAPL, Fortune 500).

Yahoo (YHOO, Fortune 500) could announce a major management reorganization as early as Wednesday, although more likely next week, according to a published report Monday. Yahoo shares fell 1.4%.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by almost seven to one on volume of 1.61 billion shares. On the Nasdaq, decliners topped advancers by seven to two on volume of 2.07 billion shares.

Economists: A leading group of economists expect a deeper recession in the first half of the year followed by a modest recovery in the second half and a bigger recovery in 2010.

Reports are due later this week on housing, manufacturing and gross domestic product growth.

Bonds: Treasury prices inched higher, with the yield on the benchmark 10-year note falling to 2.77% from 2.79% Friday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, most Asian markets ended mixed, while European shares ended lower.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for April delivery fell $1.59 to settle at $38.44 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $7.20 to settle at $995 an ounce.

The stock rally that wasn't

2009-02-23T17:07:00.000-08:00

It looks like the government isn't going to let Citigroup fail. But that wasn't enough to save the market Monday.

At first, it looked like an explosive rally in Citi (C, Fortune 500) and other bank stocks was going to lead to a jubilant day for stocks, a Wall Street equivalent of the celebratory "Slumdog Millionaire" musical number on the Academy Awards. The Dow shot up about 75 points shortly after the market opened. Jai ho!

But the rally was short-lived. The overall market fell more than 3% by the end of the day, even though the S&P Bank Index had gained more than 2%, led by a 3% pop in Bank of America (BAC, Fortune 500) and 10% gain in shares of Citi.

What gives? Well, for one, the Citi news isn't really so great. The government may save Citi from complete collapse...but probably at the expense of existing shareholders.
Talkback: Would a government takeover of Citi be good or bad for the economy and markets?

And investors have plenty to be worried about beyond the banks.

In the tech sector, Hewlett-Packard (HPQ, Fortune 500) dove about 6%. The computer and printer maker cut its outlook for fiscal 2009 last week. Rival Dell (DELL, Fortune 500), which will report its latest quarterly results Thursday, fell about 5%.

Industrials and materials firms, two groups whose fortunes are closely tied to the economy, also sunk Monday. Dow components Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500) and DuPont (DD, Fortune 500) each fell about 6% to 8%.

"If it's not one thing, it's the other. Even though there may be more certainty about what's going to happen with banks, the focus is back on economic weakness," said Bill Stone, chief investment strategist with PNC Wealth Management in Philadelphia. "Industrials, materials and tech are three very cyclical groups."

It's a disturbing trend. I pointed out last week that even though bank stocks were getting kicked, there were some pockets of strength, particularly in the energy, healthcare and consumer staples sectors.

But now, it is starting to look like worries about how long the recession will last could weigh even on some of the "safer" areas. Companies across all sectors may have to cut back if there are no signs that the economy will at least stabilize, if not recover, soon.

"Investors are worried that economic deterioration will threaten capital spending," said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.

Along those lines, investors seem to be flocking to other types of securities. The price of gold is hovering around $1,000 an ounce. And the yield on the U.S. 10-Year Treasury is now at about 2.78%, down from above 3% earlier this month. (Bond yields and prices move in opposite directions.

"Quite frankly, the worries are that business in general is so weak right now. So there shouldn't be much interest in stocks," said Subodh Kumar, an independent market strategist based in Toronto.

Ablin added that since fixing the banks could require so much attention from the government, investors may now be wondering how successful the broader stimulus bill -- signed into law last week -- will wind up being. In other words, the government may have too many balls in the air at once.

"There may be a perception that these bank bailouts are going to channel resources from broader stimulus," Ablin said. "It's one step forward, two steps back."

Add all that up and you have a decided lack of confidence. Kumar said that even corporate executives, known for being a bit more bullish than most, are starting to talk about how gloomy the economy is. And even though their pessimism is warranted, it's probably not helping the markets.

"Corporate titans are saying thing are getting worse and worse," said Kumar. "To be sure, CEOs are not the best judges of turning points. But they impact investor psychology. CEOs were ebullient a year ago and now in the past three months they have become particularly despondent."

So even though bank stocks are enjoying a moment in the sun -- for a day at least -- the rest of the economic headlines are too bleak to make anything else matter.

"Obviously, we need to get financials taken care of first, but right now, there's a complete lack of confidence," said John Norris, managing director of wealth management with Oakworth Capital Bank in Birmingham, Ala. "People don't see the light of the tunnel. It's a never-ending hit to the face and that is leading more and more to a bunker mentality."

Citi in talks over bigger U.S. stake - report

2009-02-23T08:23:00.001-08:00

Citigroup Inc. is in discussions with regulators about a plan for the federal government to take a larger ownership stake in the bank, according to published reports.

The Wall Street Journal, citing sources familiar with the matter, reported that the government would convert a large portion of its preferred Citigroup shares to common shares.

The government received the preferred shares in return for investing $45 billion in Citi as part of the $700 billion bailout of the financial system.

According to the Journal, the talks involve Citi executives and regulators at the Federal Reserve and Office of the Comptroller of the Currency. Officials in the Obama administration have not said whether they support the plan, the Journal reported.

Citigroup spokesman Michael Hanretta declined to comment on the Journal report. On Friday, the bank issued a statement saying that its capital base is "very strong" and capital reserves were among the highest in the industry at the end of the fourth quarter.

"We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth," Hanretta said.

The Treasury Department, which has spearheaded recovery efforts for the financial system, declined to comment on the report, noting it has a policy of not discussing conversations with specific banks.

Yet the department noted that it was open to allowing financial institutions to covert government's existing preferred shares into new convertible preferred stock - a move that would ultimately allow Citigroup to strengthen its capital levels.

In many ways, that is exactly what government officials are reportedly considering, according to the Journal.

"We've made clear that we will do what is necessary to strengthen and stabilize the financial system so that it can provide the credit necessary to support economic recovery," Treasury spokesman Isaac Baker said in a statement to CNN.

The report is sure to stoke speculation about whether the Obama administration may have to nationalize large banks to stabilize the financial system.

The question of nationalization has weighed on the minds of investors in the two weeks since Treasury Secretary Tim Geithner announced a comprehensive stability plan that fell flat.

The issue came to a head Friday when nationalization fears helped drag down shares of Citi (C, Fortune 500) and Bank of America (BAC, Fortune 500) as much as 36% at one point.

BofA recovered most of its losses to finish down just 3.6%. But Citi's stock closed with a 22% loss.

The Obama administration has said it wants to keep the banking system in private hands, which seems to suggest it isn't aiming to run the likes of Citi and BofA. But that leaves the door open to an "intervention" -- a takeover of a troubled bank for the purpose of breaking it up, bringing in new capital and finding new owners and management.

The term nationalization has been used to cover a range of very different outcomes. Most obviously, it refers to the outright takeover of troubled firms, such as when the Treasury Department put mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) into conservatorship.

But it has also been used by some people to cover sizable investments that give government officials considerable say in a firm's activities -- such as the loan guarantees extended in recent months to Citi and BofA.

Stimulus: Uncle Sam goes green

2009-02-13T06:56:00.000-08:00

The economic stimulus bill aims to create millions of jobs around "shovel-ready" projects.

That's where Paul Prouty says he can help: He has 500 projects ready to go.

Prouty heads the U.S. General Services Administration, an under-the-radar government agency that owns or leases more than 352 million square feet of space in 8,600 federal buildings in 2,200 cities and towns.

Among other responsibilities, the agency is tasked with cutting costs and emissions in the buildings it controls. The stimulus bill provides GSA with $4.5 billion for energy efficiency.

"By investing in our backlog of well-planned, worthy and needed infrastructure projects, we can help stimulate jobs ... while stimulating long-term growth in energy efficient technologies, alternative energy solutions and green buildings," Prouty said in testimony Wednesday before a House committee.

The effort has long been at the top of President Obama's to-do list, dating back to his presidential campaign. It later became one of the key elements of his stimulus plan, as he promised to make 75% of federal buildings more energy efficient.

At a press conference last Monday night, Obama defended the measure from critics, saying it's money well-spent.

"We're creating jobs immediately by retrofitting these buildings. And we are saving taxpayers," Obama said. "Why wouldn't we want to make that kind of investment?"

Experts say the investment could create up to 130,000 jobs, save the government more than $1 billion in annual energy costs and improve worker productivity.

That could help trim the enormous $6.5 billion in energy costs the government spent on its buildings in 2007. And it would cut back on pollution - federal buildings account for nearly 10% of global carbon dioxide emissions, according to the Department of Energy.

To lower those costs and emissions, Congress passed the Energy Independence and Security Act in 2007 to reduce federal buildings' energy consumption by 30% by 2015.

Experts say the stimulus plan could help the government make major strides toward that goal.

"We won't go beyond the 30% goal with this plan, but this stimulus will certainly help them go further to achieve it," said Harry Gordon, chairman of architecture firm Burt Hill. "We achieved it in the past, and this will help to considerably reduce our carbon footprint."
Ready-to-go, ready to work

GSA said many retrofits will be cheap and fast, as energy efficiency improvements can be as simple as placing thicker insulation, installing LED lights, replacing windows and installing water-saving toilets.

The agency also said it is identifying a number of bigger projects that can be quickly deployed in federal buildings, including installation of solar panels on roofs, installing high-tech energy meters and smart lighting systems that adjust to daylight.

"The government is going to go for projects that have a greater impact, which provide a very rapid return on taxpayers' investment," Gordon said. "It will result in substantial energy use reductions, which will benefit taxpayers and reduce climate impact. Improving energy efficiency in buildings is truly the 'low-hanging fruit'."

One example of the 500 ready-to-go projects is the Internal Revenue Service building in Andover, Mass. The building has a structure and location that make it a good candidate for solar roof panels, which GSA said will reduce heating and cooling loads and provide electricity for the building.

Experts say the plan is timely and necessary due to high levels of construction unemployment and historically low levels of construction projects in companies' pipelines. Construction unemployment has risen to 18.2% in the country, with 1.7 million out-of-a-job construction workers waiting for work, according to the Labor Department.

"As soon as these contracts are awarded, contractors are going to beef up their labor force," said Ken Simonson chief economist at the Associated General Contractors of America. "GSA will begin to roll out those contracts within 90 days, and you'll start to see construction workers back to work."
More can be done

But some say the plan does not go far enough. Obama pledged to modernize more than 75% of federal buildings, but the $4.5 billion to update those buildings may be spread too thinly.

"You can certainly change light bulbs in 75% of buildings, but there is an opportunity to do much deeper retrofits in many buildings," said Andrew Goldberg, director of federal relations at the American Institute of Architects. "The question is how deep will those retrofits be."

The original House bill had proposed $7.7 billion for the projects, but the Senate compromise bill knocked it down. Experts say that will result in nearly 60,000 fewer jobs created.

"This decision, made behind closed doors without public consultation or review is short-sighted and contrary to the stated goals of the [stimulus bill], including the primary goal: job creation," said Gordon.

Still, experts say the plan is a good start, but much more needs to be done.

"Overall, agencies have identified far more projects that need funding to restore things to condition they were in, let alone add capacity," said Simonson, who estimates the need exceeds what's in this bill by multiple of five to 10.

"This is a good down payment, and will put several hundred thousand construction workers back to work, but it is not by any means enough to meet our long term goals."

Treasury prices sit tight

2009-02-13T06:55:00.000-08:00

Government debt prices traded in a narrow range Friday as investors assessed the Obama administration's economic rescue efforts and the volume of debt coming to market to fund the operations.

The House and Senate are slated to vote Friday on the $789.5 billion economic stimulus compromise reached earlier this week.

As the stimulus bill moves closer to passage, details were also emerging about President Obama's plan to help struggling homeowners by subsidizing mortgage debt in order to stem the tide of foreclosures. The plan has yet to be announced, but sources say the federal government would devote at least $50 billion to encourage banks to modify loans for struggling homeowners.

Earlier in the week, Treasury Secretary Tim Geithner outlined a rescue plan for the failing banking sector, but that announcement was shrugged off for its lack of clarity.

In order to fund the various rescue measures for the economy mired in recession, the government has had to bring a record volume of Treasurys to market. Treasury completed a record $67 billion quarterly refunding this week, which included the auction of 3-, 10- and 30-year issues.

Debt prices: The price of the newly 10-year note edged up 1/32 to 99-22/32 and its yield dipped to 2.79%. Bond prices and yields move in opposite directions.

The yield of the newly issued 30-year bond rose to 3.55% from 3.50% late Thursday. The 2-year note edged up 1/32 to 99-30/32 and its yield dipped to 0.91%.

The yield on the 3-month note fell to 0.25% from 0.30% the prior day. Demand for the shorter-term note has been seen as a gauge for investor confidence.

Lending rates: Bank-to-bank lending rates were almost unchanged. The 3-month Libor rate was 1.24% Friday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, held steady at 0.30%.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.

Two credit market gauges were showed a decrease in confidence in the lending markets. The "TED" spread widened to 0.99 percentage point from 0.93 percentage point the previous day. The bigger the TED spread, the less willing investors are to take risks.

Another market indicator, the Libor-OIS spread, increased to 0.98 percentage points from 0.96 percentage point the previous day. The wider the spread, the less cash is available for lending.

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2009-02-13T06:52:00.001-08:00

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Bank CEOs flogged in Washington

2009-02-11T17:16:00.000-08:00

Lawmakers grilled the top executives from eight of the nation's largest financial institutions Wednesday about their apparent lack of willingness to lend to consumers and businesses despite taking in billions of dollars in government aid.

At a closely-watched hearing before the House Financial Services Committee, members of Congress blasted the eight CEOs, including the heads of embattled firms Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), for their actions since the eight banks collectively received $165 billion in capital last fall.

"There is a great deal of anger in the country, much of it justified, about past practices," Barney Frank, D-Mass, the chairman of the House Financial Services Committee, noted in his opening remarks.

Public resentment for these banks has soared in recent weeks amid concerns that some financial institutions have used taxpayer money for purposes other than lending at a time when people across the country are struggling to stay in their homes or losing their jobs.

Wells Fargo (WFC, Fortune 500), for example, had planned a trip to Las Vegas for members of its mortgage team until news reports blasted it as a "junket" that wasted taxpayer money. And Citigroup was scheduled to take delivery of a new $50 million corporate jet before the White House convinced the bank otherwise.

Many of the CEOs at Wednesday's hearing defended their actions, noting that while credit standards have tightened, they were continuing to issue loans. Several of the CEOs added that without government assistance, credit would be even harder to obtain.

"We are still lending, and we are lending far more because of the TARP program," Bank of America Chairman and CEO Ken Lewis said in a copy of his prepared remarks.

Lewis, whose firm has received $45 billion in government assistance from the Troubled Asset Relief Program, or TARP, told lawmakers that his company extended more than $115 billion in new credit to consumers and businesses during the fourth quarter.

Those remarks were echoed by the seven other CEOs testifying Wednesday, including Citigroup chief Vikram Pandit, JPMorgan Chase's (JPM, Fortune 500) Jamie Dimon and John Stumpf of Wells Fargo (WFC, Fortune 500).

That trio, as well as BofA, were among the banks that received the bulk of the first round of capital injections. Wall Street firms Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) as well as Bank of New York Mellon (BK, Fortune 500) and State Street (STT, Fortune 500) rounded out the list.

Merrill Lynch, which was subsequently acquired by Bank of America, also received funding at that time.

Lawmakers hardly appeared convinced, citing anecdotes from local business owners who were unable to get access to credit as well as constituents facing stiffer terms on their credit card accounts and having their home equity lines suspended.

"Start loaning the money that we gave you. Get it on the street!" said Rep. Michael Capuano, D-Mass.
Bonuses under fire

Lawmakers were also quick to seize on the issue of compensation within the banking industry, particularly in light of recent reports that Wall Street firms paid out more than $18 billion in bonuses in 2008.

In addition, New York State Attorney General Andrew Cuomo accused Merrill Lynch Wednesday of "secretly" handing out bonuses before its merger with BofA closed.

But some of the executives that appeared before Congress Wednesday were quick to defend their position, pointing out that they gave up their annual bonus. Several even conceded that the way compensation is doled out in the industry needs to be fixed.

Calls for financial firms to change their compensation practices have grown increasingly louder during the crisis, including tying bonuses more to firms' overall performance as well as instituting so-called "clawback" provisions that reclaim pay from workers whose actions may damage the firm's long-term financial health.

President Obama has already instituted new limits on compensation for executives of banks requiring further assistance from the government. But those rules are not retroactive.

Citigroup's Pandit, who collected a salary of $1 million last year and no bonus, told lawmakers that he would accept pay of just $1 a year and no bonus until his firm returned to profitability. Citigroup has lost more than $20 billion in the past five quarters.

"We will hold ourselves accountable for what we do, and that starts with me," said Pandit.
Paying back the government sooner than expected?

The possibility of some of the eight banks paying back the government as soon as possible also came up during the hearing.

Several CEOs testifying Wednesday indicated they would like to repay the government ahead of schedule, partly out of fear of more regulation.

Under the current terms of TARP, banks can only buy out the government's stake as long as the money comes from an equity offering of a similar amount that meets government approval.

"That is a legal impediment at this point," said JPMorgan Chase's Dimon.

When Treasury first announced its capital injection plan in October, JPMorgan Chase and Wells Fargo reportedly scoffed at the idea that they should take government funds.

But they were given little choice as former Treasury Secretary Henry Paulson hoped that providing capital to all of the nation's top banks would keep credit flowing and prevent the economy from deteriorating any further.

Several lawmakers noted they were not opposed to banks returning the funds, adding that they would attempt to find a way that would allow them to pay the money back early, something that would probably require new legislation.

"For anyone who contends that you do not need the money and that you did not ask for it, please find a way to return that money to the Treasury Department before you leave town," said Paul Kanjorski, D-Penn.

UBS reports $7 billion loss

2009-02-10T06:57:00.001-08:00

UBS posted the biggest ever annual loss for a Swiss firm on Tuesday, but said client withdrawals reversed in January and it will axe 2,000 more jobs as it restructures to focus on wealth management.

UBS reported a $7 billion net loss in the fourth quarter, missing a Reuters poll forecast for $6.1 billion. UBS's loss for 2008 came in at $17 billion, above analysts' predictions for $16.2 billion.

The quarterly loss came on the back of a hefty $7.6 billion trading loss, as well as charges it made after selling billions in toxic assets to the Swiss National Bank when it was rescued by the state in October.

Chief Executive Officer Marcel Rohner told journalists that the world's biggest wealth manager was not paying a 2008 dividend but still aims to return to profit in 2009 after seeing some positive signs at the start of the year.

"While we leave a bad year behind us... we can nevertheless report substantial progress," Rohner said.

"Our businesses are well positioned for a challenging future. We had an encouraging start into the new year but the environment will remain difficult and volatile as the real economy has not seen (the) worst yet."

UBS continued to suffer massive outflows in the fourth quarter at its core wealth management business. But the Swiss bank said net new money had turned positive in both wealth management and asset management in January, the first time after a streak of negative quarters. It did not give details.

"In its outlook statement UBS indicates a strong start into 2009 and a reversal of the money flows. We remain skeptical as the clean-up of the mess will take several quarters," Dirk Becker, Kepler Capital Markets analyst, said in a note.

UBS stock swung sharply in early trade, rising as much as 7% before dipping 2% to trade at $10.93 by 4:10 am ET, broadly in line with a 2.3% weaker DJ Stoxx European banking index.

Vontobel analyst Marcel Staub said investors would continue to shun the stock as long as uncertainties remained: "We will have to wait-and-see if management's (overly) optimistic statement regarding the beginning of the year will be enough. Its comments three months ago were similarly positive."
Restructuring

UBS also announced structural changes to refocus the bank on its core Swiss businesses, its global wealth management operation and on the growth potential of its onshore business.

It is creating two new business divisions: Wealth Management & Swiss Bank under the leadership of Franco Morra and Juerg Zeltner, and Wealth Management Americas, led by Marten Hoekstra. All three are members of the board.

UBS said it was continuing to cut the size of its troubled investment bank, saying it aimed to bring its total staff to about 15,000 from 17,171 now.

Rohner, who said the fourth quarter had seen the "worst environment ever for investment banking", said the bank's total staff should fall to around 75,000 by mid-2009 from 77,000 now.

UBS said its Tier 1 capital ratio, a key measure of financial strength, rose to 11.5% at the end of 2008 from 10.8% at the end of the third quarter.

The Swiss bank giant, which made nearly $49 billion of writedowns in the credit crisis, said it had suffered new money outflows of $50.3 billion at its prized wealth management unit, compared to $42.4 billion the previous quarter.

It said it saw wealth management outflows in all regions, except the United States, where it hired nearly 400 financial advisers in the quarter. Source have told Reuters that UBS (UBS) is aggressively poaching advisers from rivals including Morgan Stanley (MS, Fortune 500), Merrill Lynch & Co and Citigroup Inc (C, Fortune 500)'s Smith Barney.

Outflows also continued from its global asset management business in the fourth quarter, but slowed to $23.9 billion from $29.7 billion the previous quarter.

UBS did not give details of whether it was inching towards a settlement in a high-profile U.S. investigation into possible tax fraud, in which the Swiss bank is accused of helping rich Americans hide untaxed money in offshore accounts.

The company decided to stop providing offshore banking services to U.S. citizens last year.

Separately, the Swiss National Bank said it had brought down the number of toxic assets eligible for transfer to a special central-bank run fund announced in October to help prop up UBS to $39.1 billion from $60 billion.

Dollar up as Obama plans move forward

2009-02-10T06:55:00.000-08:00

The dollar got an early boost against most foreign currencies Tuesday before the Obama administration was set to unveil an overhaul of the financial rescue plan and the Senate appeared ready to pass its economic stimulus bill.

The euro fell to $1.2971, down 0.3% from $1.3003 late Monday.

The pound also fell against the dollar, buying $1.4798, down 0.7% from $1.49.

The dollar fell against the yen, however, dropping 0.2% to ¥91.284 from ¥91.47 late Monday.

The dollar has been in an upward trend against the euro and pound since the summer, though it has fallen against the yen during that period. Currency strategists say traders have been rewarding currencies of nations that are promoting the strongest economic recovery efforts.

Accordingly, the dollar fell slightly against the euro and pound Monday after both the stimulus and bank bailout plans faced delays. But traders supported the U.S. currency again Tuesday ahead of a vote and an announcement of two key elements to President Obama's recovery effort.

Treasury Secretary Tim Geithner is scheduled to detail a revision to the financial system rescue plan in an 11 a.m. ET speech Tuesday. President Obama said at a press conference Monday night that Geithner would provide "very clear and specific plans" for loosening up credit markets.

"There is some expectation of positive flows after the Geithner announcement, so traders are buying dollars in anticipation," said Dustin Reid, senior currency strategist at Royal Bank of Scotland.

Reid said traders are betting that Geithner's announcement will provide some relief to the credit markets. But the dollar could fall back if investors are unconvinced that the plan will succeed.

"In general, the theme should continue, but if the plan lacks a lot of detail and there is still some confusion, it might not necessarily work like it has in the past," he said.

A vote on final passage of the Senate stimulus bill - with an estimated pricetag of $838 billion - is scheduled for Tuesday. Negotiators from the Senate and the House of Representatives would then have to hammer out a single bill from their differing versions, but Senate Majority Leader Harry Reid, D-Nev., said he expected that could be done by Friday.

Lawmakers reach tentative stimulus agreement

2009-02-07T10:01:00.001-08:00

U.S. senators debated late into the night Friday on a massive economic-recovery package, after a coalition of Democrats and some Republicans reached a compromise that trimmed billions in spending from an earlier version.

Close to midnight Senate Majority Leader Harry Reid told his colleagues that debate would continue on Saturday and go into Monday. Reid said a vote could come on Tuesday on the plan, which is championed by President Barack Obama as a tonic for a badly battered economy.

The movement came after days of private meetings between centrist Democrats and Republicans -- who felt the price tag on the Senate's nearly $900 billion version of the package was too much.

"There is a winner tonight," said Sen. Joe Lieberman, an Independent from Connecticut and one of the moderates whose support was crucial in efforts to corral enough votes for the plan. "It's the American people and they deserve it."

Senators had trimmed the plan to $827 billion in tax cuts and spending on infrastructure, housing and other programs that would create or save jobs.

"We trimmed the fat, fried the bacon and milked the sacred cows," said Sen. Ben Nelson, a Democrat, as debate began.

According to several senators, the revised version of the plan axed money for school construction and nearly $90 million for fighting pandemic flu, among other things.

The remaining spending includes more than $76 billion for education -- including college Pell grants and help for states struggling to pay for their schools -- $43 billion in transportation infrastructure and more than $3 billion for job training, according to the office of a senator involved in negotiations.

Tax cuts include incentives for small businesses, a one-year fix of the unpopular alternative-minimum tax and tax cuts for low-and-middle-income families, said Sen. Susan Collins of Maine, who was the most prominent Republican negotiator in the bipartisan talks.

"Our country faces a grave economic crisis and the American people want us to work together," she said. "They don't want to see us dividing along partisan lines on the most serious crisis facing our country."

Putting more pressure on senators to act was news Friday that employers slashed another 598,000 jobs off U.S. payrolls in January, pushing the unemployment rate to 7.6 percent.

"On the day when we learned 3.6 million people have lost their jobs since this recession began, we are pleased the process is moving forward and we are closer to getting Americans a plan to create millions of jobs and get people back to work," said White House Press Secretary Robert Gibbs.

All or nearly all Democrats are expected to support the package. But 60 votes are needed in the 100-member Senate to bring the issue up for a vote.

There are 56 Democrats in the Senate and two independents who caucus with them. Results from Minnesota's senate election -- in which Democrat Al Franken appears to hold a 200-vote lead -- have not been certified amid court challenges.

Democratic Sen. Ted Kennedy, of Massachusetts, was expected to be at the Capitol to vote on the plan, Capitol Hill sources said. Kennedy, who has been diagnosed with brain cancer, has not been on the Senate floor since collapsing during a luncheon on Inauguration Day.

"I always need Senator Kennedy," Reid said when asked if the vote needed to be held off until the liberal icon could be present.

The Senate began considering amendments to the plan shortly before 10 p.m. Friday.

While Democrats appeared to believe they had enough Republican support to push the compromise plan through, most GOP members still were speaking out against the plan -- saying spending is not the answer to cure economic woes.

"This is not bipartisan," said Sen. John McCain, who lost the 2008 election to Obama. "If this legislation is passed, it'll be a very bad day for America."

Minority Leader Sen. Mitch McConnell compared the plan to President Franklin Delano Roosevelt's "New Deal" public works program -- which he said did not help the nation out of the Great Depression.

"We're talking about an extraordinarily large amount of money, and a crushing debt for our grandchildren," said McConnell of Kentucky. "Now, if most Republicans were convinced that this would work, there might be a greater willingness to support it. But all the historical evidence suggests that it's highly unlikely to work."

If the package passes the Senate, yet another compromise -- between the House and Senate versions -- must be hammered out before the legislation is sent to Obama to sign. Obama has said he would like to sign the stimulus by Presidents' Day on February 16.

Fed extends special lending programs

2009-02-03T07:43:00.001-08:00

The U.S. Federal Reserve extended liquidity facilities for domestic financial institutions and currency swap lines with 13 central banks on Tuesday to keep money flowing in a banking system shattered by the worst financial crisis since the Great Depression.

"Continuing substantial strains in many financial markets" made the actions necessary, the Fed said in a statement.

The Fed said it would extend, through Oct. 30, facilities providing loans and liquidity to the commercial paper and money markets. The U.S. central bank is also keeping open through that date facilities providing loans and Treasuries to primary dealers.

The Fed further said it is extending currency swap lines with Australia, Brazil, Canada, Denmark, England, the euro zone, South Korea, Mexico, New Zealand, Norway, Singapore, Sweden and Switzerland. Japan will consider the extension at its next policy meeting, the Fed said.

The liquidity facilities - the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the Commercial Paper Funding Facility (CPFF), the Money Market Investor Funding Facility (MMIFF), the Primary Dealer Credit Facility (PDCF) and the Term Securities Lending Facility (TSLF) - and the swap lines had been set to expire on April 30.

Government debt prices fall

2009-02-03T07:38:00.000-08:00

The Treasury market wasn't able to turn its attention away from the avalanche of supply clogging up the pipelines.

Government debt prices rallied Friday and Monday, but by Tuesday, the potential volume of supply headed to market weighed on debt prices.

The Senate added $64 billion to the tab of the stimulus package and the Treasury announced Monday that its estimates of how much debt would be headed to market in the first quarter were low to the tune of $125 billion.

The Treasury is due to announce its quarterly refunding Wednesday. "The upcoming supply with the refunding announcement is going to be so large that the market needs to prepare to digest that," said Craig Ziegler, Treasury agency trader at Broadpoint Securities Group. "A lot of bonds are coming to market, and to make room for that supply, the market can be very hesitant to rally too much ahead of that."

Supply headed to market: Four times a year, the Treasury department makes an announcement outlining the government's plan for brining debt to market in the quarter. The quarterly refinance, which announces specific debt auctions with amounts and maturities, was due out Wednesday at 9 am ET.

On Monday, the Treasury said that it expects to borrow $493 billion of "marketable debt" in the first three months of the year - $125 billion more than it had originally expected.

In the April to June quarter, the Treasury said it expects to borrow $165 billion of "marketable debt." The release Monday said that Treasury borrowed $569 billion worth of marketable debt in the last three months of 2008.

In a statement for the Treasury Borrowing Advisory Committee, acting assistant secretary for economic policy Ralph M. Monaco said "measures to support the economy coupled with lower revenues as a consequence of the deficit are raising the deficit."

"The budget deficit will continue to grow in FY2009 as expenditures rise sharply and receipts are depressed by falling employment and income and declining asset values," said Monaco. "Outlays to support financial markets and stimulate the economy are expected to push the federal deficit to a record level in FY2009, both in absolute terms and as a share of GDP."

Senate's stimulus plan: The Obama administration has been lobbying hard to get a economic rescue package passed. The stimulus package is intended to spur the economy by building infrastructure and creating jobs.

The House of Representatives passed an $819 billion version of the bill last week, but when the stimulus proposal went to the Senate, it ballooned to $885 billion, according to an analysis released Monday by the Congressional Budget Office.

The federal budget deficit was already projected to top $1 trillion in fiscal 2009, and the Treasury market knows that the more the government looks to spend, the more debt will have to come to market.

Ziegler said that the stimulus bill was a longer term concern for the Treasury market than the refunding announcement. "It is overhanging, and it periodically has an affect, but there is a lot of back and forth in the Senate."

Another $64 billion worth of short term debt was set to go on the block this week, including $34 billion worth of 4-week bills Tuesday and $30 billion worth of 49-day cash management bills Wednesday. The government has already auctioned $58 billion worth of debt this week. Last week, the government sold $135 billion worth of debt, coming on the heels of $120 billion worth of debt brought to market the week before last.

Debt prices: The 10-year benchmark Treasury fell 21/32 to 108-5/32 and its yield rose to 2.79% from 2.72%. Bond prices and yields move in opposite directions.

The 30-year bond declined 1-20/32 to 117-4/32 and its yield rose to 3.56% from 3.48%. Meanwhile, the 2-year note dipped less than 1/32 to 99-31/32 and its yield rose to 0.90%.

The yield on the 3-month Treasury bill rose to 0.28%, just higher than 0.26% the day before. The 3-month bill has been used as a short-term gauge of confidence in the marketplace, because investors tend to shuffle funds in and out of the bill as they assess risk in other places - the lower the yield, the more risk they see.

The Federal Reserve has become caught as its goals push debt prices, and yields, in opposite directions. Pumping the economy with stimulus, which is funded by issuing massive amounts of supply, pushes prices lower and yields higher. Meanwhile, conventional mortgage rates, among other borrowing rates, are tied to the yield on the 10-year Treasury note and so the Fed wants to keep yields low.

"It is definitely a battle," said Ziegler.

Lending: The Federal Reserve released a survey of the nation's banks Monday that showed that while the credit markets were still pretty tight, there were fewer banks that were ramping up their lending restrictions.

Nearly two thirds of the banks surveyed showed that they tightened lending standards on commercial and industrial loans in the last three months of the year, but that was down from 85% in the previous quarter, according to the Fed's report.

The 3-month Libor rate ticked up to 1.23% Tuesday from 1.22% the day prior, according to data available on Bloomberg.com. The overnight Libor rate rose to 0.31% from 0.28% Monday.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London, and it is used to calculate adjustable-rate mortgages. More than $350 billion in assets are tied to Libor.

Two credit market gauges were mixed. The "TED" spread narrowed to 0.95 percentage points Tuesday from 0.96 percentage point Monday. The bigger the TED spread, the less willing investors are to take risks. The rate surged as the credit crisis gripped the economy, but it has since fallen off as central banks around the world have lowered interest rates and pumped liquidity into the economy.

Another market indicator, the Libor-OIS spread, widened to 0.98 percentage point Tuesday from 0.94 percentage point. The Libor-OIS spread measures how much cash is available for lending between banks and is used for determining lending rates. The bigger the spread, the less cash is available for lending.

Bonds extend declines after Fed

2009-01-28T13:37:00.000-08:00

Government debt prices extended declines Wednesday after the Federal Reserve said it is prepared to buy long term Treasurys but did not offer the specific details that many investors were looking for.

The U.S. central bank kept its benchmark target rate in a range between 0% and 0.25%, citing credit conditions that are expected to "remain extremely tight." The Fed also said it is "prepared to purchase longer-term Treasury securities" if necessary.

But the market was expecting the Fed to make a stronger statement on its plans to buy long-term Treasurys, said Kevin Giddis, managing director of fixed income Morgan Keegan.

Wednesday's selling "is mostly about the Fed not saying when they would start buying, if they were to start buying," Giddis said. The market was "counting on language that wasn't exactly there," he added.

Prices for longer-term bonds fell sharply as investors who had flocked to the 30-year note in anticipation of a more clear signal from the Fed rushed to unwind those positions, Giddis said.

Treasury prices came off their lows immediately after the announcement. But prices resumed their decline as investors focused on a major influx of supply expected to keep hitting the market.

Record-breaking auctions: The Treasury is scheduled to auction $135 billion worth of debt this week, on top of the $120 billion worth of debt brought to market last week.

Investors have been paying particular attention to the debt auctions recently as a way to measure demand.

On Thursday, the Treasury is scheduled to sell a record $30 billion worth of 5-year notes.

"Everybody is watching those new auctions to see whether past investor interest in buying those securities remains strong," said Michael Herbst, mutual fund analyst at Morningstar.

On Tuesday, the government auctioned a record $40 billion worth of 2-year notes. But prices rose because the bid-to-cover ratio for the auction was 2.69, meaning there was over $100 billion worth of bidders for $40 billion of debt. Even with the tremendous supply of debt, there is still healthy demand.

The government also auctioned $32 billion worth of 28-day bills Tuesday. On Monday, the government auctioned $29 billion worth of 13-week bills, $28 billion worth of 26-week bills, and $8 billion worth of 20-year TIPS (Treasury Inflation-Protected Securities).

Stimulus and supply: President Obama and House Democrats have come up with a stimulus package for the economy focused on job creation through rebuilding the nation's infrastructure. The $825 billion package, which includes $550 billion in spending and $275 billion in tax cuts, will be voted on by the House of Representatives later on Wednesday.

"There has been so much issuance of Treasurys lately to finance the bailout activity and indications seem to point to that there is more issuance to come," said Herbst. "How that impacts the purchasing of Treasurys is something that the market is looking for more clarity on."

The threat of such massive torrents of supply has already lifted yields significantly since December. At the end of 2008, the 30-year traded above 140 and its yield reached down toward 2.50%. The yield on the 30-year longbond was near 3.25% Wednesday.

"The supply dynamic is a massive issue that will have to be dealt with in 2009," said Brian Edmonds, head of interest rate trading at Cantor Fitzgerald.

Debt prices: The 10-year benchmark Treasury edged 2/32 lower to 109-24/32 and its yield rose to 2.6% from 2.53% late Tuesday. Bond prices and yields move in opposite directions.

The 2-year note, meanwhile, was 6/32 lower at 99-28/32 and its yield rose to 0.91% from 0.81%.

The yield on the 3-month note jumped to 0.19% from 0.14% late Tuesday. The 3-month bill has been used as a gauge of confidence in the marketplace because investors tend to shuffle funds in and out of the bill as they assess risk in other places - the lower the yield, the more risk they see.

Meanwhile, the 30-year bond fell 2-4/32 to 121-15/32 and its yield rose to 3.34% from 3.23%.

Conventional home mortgage rates move in close connection to the yields on the long-term Treasury maturities. When Treasury prices hit record highs and yields sunk to record lows at the end of 2008, mortgage rates sunk. Lower mortgage rates help stimulate the housing sector. As government debt yields rally, so have mortgage rates.

"More drastic efforts will be necessary to stabilize the housing market and one key part of that is to bring mortgage rates down to encourage buyers to buy a house and enter into new mortgages," said Herbst.

Lending rates: The 3-month Libor rate edged slightly lower to 1.17% from 1.18% Tuesday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, held steady at 0.22%, even with Tuesday.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London, and it is used to calculate adjustable-rate mortgages. More than $350 billion in assets are tied to Libor.

Two credit market gauges were mixed. The so-called "TED" spread narrowed to 0.98 percentage point from 1.04 percentage points Tuesday. The bigger the TED spread, the less willing investors are to take risks.

The rate surged as the credit crisis gripped the economy, but has since fallen off as central banks around the world have lowered interest rates and pumped the economy with liquidity.

Another market indicator, the Libor-OIS spread, was unchanged from Tuesday at 0.95 percentage point. The Libor-OIS spread measures how much cash is available for lending between banks, and is used for determining lending rates. The bigger the spread, the less cash is available for lending.

Wall Street cash bonuses fall 44%

2009-01-28T07:07:00.001-08:00

Wall Street firms slashed cash bonuses for New York City employees by 44% in 2008, as they reeled from record losses in the securities industry, New York State's comptroller said in a report issued on Wednesday.

Bonuses fell to $18.4 billion from $32.9 billion in 2007, the largest dollar decline ever and the biggest percentage drop in more than 30 years, Comptroller Thomas DiNapoli said. The size of the bonus pool is the sixth-largest on record, he said.

Losses from traditional broker-dealer operations of New York Stock Exchange member firms topped $35 billion in 2008, more than triple the record set a year earlier, DiNapoli said.

Meanwhile, Wall Street shed 19,200 jobs, or 10.2%, in New York City over the last 14 months, ending the year with 168,600 workers.

The declines reflect the souring of the global economy and credit markets, as well as the disappearance of the traditional Wall Street investment banking model.

What were the five largest Wall Street banks no longer exist in the form they began 2008. Goldman Sachs Group Inc. (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) became commercial banks, Bear Stearns Cos. was bought by JPMorgan Chase & Co. (JPM, Fortune 500), Lehman Brothers Holdings Inc. went bankrupt and Merrill Lynch & Co. was acquired by Bank of America Corp (BAC, Fortune 500).

JPMorgan and the ailing Citigroup Inc. (C, Fortune 500) are also based in New York.

Lower bonuses also cut into tax revenue, at a time when New York Gov. David Paterson and legislators are trying to slash a potential $15.4 billion budget deficit over 14 months. DiNapoli said tax revenue could fall by nearly $1 billion in New York state and $275 million in New York City from lower bonuses.

The comptroller said the industry's problems could worsen, despite an influx of hundreds of billions of dollars of taxpayer money from the federal Troubled Asset Relief Program.

"The industry is still continuing to write off toxic assets," DiNapoli said in a statement. "It's painfully obvious that 2009 will probably be another difficult year."

DiNapoli said the average Wall Street bonus fell 36.7% to $112,000 in 2008. The average decline was smaller than the drop in the overall bonus pool, he said, because the pool was shared among fewer workers as jobs were cut.

Oil falls $4 amid economic jitters

2009-01-27T17:31:00.001-08:00

Oil prices fell more than $4 a barrel Tuesday as worries about a recovery in demand took center stage amid heightened concern that the global recession will continue to drag on.

That feeling was exacerbated by two dismal economic reports out of the United States, the world's largest oil consumer.

By the end of trading, U.S. crude for March delivery had fallen $4.15 to $41.58 a barrel. Falling demand due to the slowing economy has caused oil prices to plummet more than $100 a barrel from a record high of $147.27 a barrel last July.

A turnaround in demand won't occur "until we start seeing an economic expansion in the United States," said Rachel Ziemba, energy analyst with RGE Monitor in New York.

The Labor Department reported a large spike in unemployment in December, and another closely watched report from a private research firm showed consumer confidence sank to an all-time low in January.

Furthermore, stockpiles continue to build in the U.S. so even when demand returns, it may be some time before those get worked off.

Analysts expect the government to show a 3.4 million barrel increase in U.S. crude stocks when it releases its weekly statistics on Wednesday, according to a poll from research firm Platts.

Investors will be keeping a close eye on the $825 billion economic stimulus plan being debated by Congress. However, even if the stimulus plan boosts the economy, oil prices may not start to pick up until at least 2010, Ziemba said.

OPEC cuts: In order to cope with an oversupply of crude oil, the Organization of Petroleum Exporting Countries, an international trade group whose members produce about 40% of the world's oil, pledged last year to cut production in January by 2.2 million barrels a day.

However, as a group, OPEC is notorious for falling short on pledged production cuts.

"They're never really going to lower production to quota levels," said Jim Ritterbusch, president of oil advisory firm Ritterbusch and Associates in Galena, Ill. But he added that "they've done a better job of cutting than I thought they would."

Gas prices: By Tuesday, gasoline retailed at a national average of $1.84 a gallon, down 0.2 cents from the day before, according to a daily survey from motorist group AAA.

Wall Street on the upswing

2009-01-27T17:27:00.002-08:00

Stocks gained Tuesday, rising for the third-straight session, as investors breathed a sigh of relief that some of the quarterly earnings were less terrible than had been expected.

The Dow Jones industrial average (INDU) gained 58 points, or 0.7%, closing higher for the second session in a row.

The Standard & Poor's 500 (SPX) index added 9 points, or 1.1% and the Nasdaq composite (COMP) added 15 points or 1%. Both the S&P 500 and the Nasdaq ended higher for the third session in a row.

After the close, Yahoo (YHOO, Fortune 500) reported quarterly sales and earnings that topped estimates. Including charges, the company reported a loss. Shares gained 4% in extended-hours trading.

Earnings are due Wednesday morning from Dow component AT&T (T, Fortune 500) and financial company Wells Fargo (WFC, Fortune 500). AT&T is expected to have earned 65 cents per share versus 71 cents a year ago. Wells Fargo (WFC, Fortune 500) is expected to report earnings of 33 cents per share, versus 41 cents a year ago.

Tuesday's stock gains occurred despite gloomy economic readings on home prices, employment and consumer confidence - and a slew of disappointing earnings.

"We've had some terrible numbers today, but I think the market is trying to look past the bad news and look toward the stimulus package being put forth by the Obama administration," said Robert Siewert, portfolio manager at investment firm Glenmede.

Also, investors seemed to welcome results that were not as weak as expected from American Express, Texas Instruments and others.

And Timothy Geithner's approval as Treasury secretary seemed to boost confidence that the Obama administration's $825 billion stimulus package could get passed, despite some Republican opposition.

"There's a little bit of cautious optimism in the market today, but people aren't going to make any big bets until they see what happens with the stimulus package and how Obama used the second half of the TARP money," said Paul Brigandi, vice president of trading at Direxion Funds.

"People are also looking to the FOMC meeting, not in terms of interest rates, since the Fed isn't going to do anything, but in terms of the statement and whether they announce any new initiatives," Brigandi said.

The Federal Reserve holds its two-day policy-setting meeting Tuesday and Wednesday, with an announcement expected Wednesday afternoon. The central bank is expected to keep short-term interest rates near zero, where it set them at its last meeting. However, as always, the statement that accompanies the decision will be closely scrutinized.

The negative news on the employment front continued on Tuesday as companies across the economic spectrum announced more than 10,000 job cuts.

On Monday all three major gauges managed to close higher, despite corporations announcing more than 71,000 job cuts. The S&P 500 and the Nasdaq also closed higher Friday, while the Dow closed off its lows.

The recent stock gains have followed a short, sharp retreat that saw the S&P 500 plunge 14% in just over two weeks.

That decline was partly due to a "policy vacuum" ahead of President Obama's inauguration, when it was too late for Bush to do anything and too soon for the new administration to make changes, said Richard Campagna, chief investment officer at 300 North Capital.

"What's driving the market now is that at least the administration has the ability to do something, to try to get the stimulus through," Campagna said.

Quarterly results: Dow component American Express (AXP, Fortune 500) reported lower sales and earnings late Monday that narrowly missed expectations. However, the so-called "whisper" number was much worse and investors seemed relieved that AmEx's results were not weaker. Shares gained 9.7%.

Texas Instruments (TXN, Fortune 500) reported a smaller-than-expected drop in quarterly profit after the close Monday and also said it was cutting 3,400 jobs. Shares gained 3.7% Tuesday.

A number of steel companies reported results as well. U.S. Steel (X, Fortune 500) reported higher fourth-quarter earnings and warned that first-quarter revenue would miss forecasts. But investors focused on the earnings and shares rose almost 7%.

Steel Dynamics (STLD) reported better-than-expected fourth-quarter results and said most of its divisions should see profits in 2009, thanks partly to the proposed economic stimulus plan. Shares jumped 15%.

AK Steel (AKS, Fortune 500) reported a fourth-quarter loss and warned that first-quarter revenue would miss forecasts, sending shares 8% lower.

Netflix (NFLX) also reported higher fourth-quarter revenue and said it should surpass revenue expectations in the current quarter. Shares jumped 15.5%.

Dow component DuPont (DD, Fortune 500) reported a wider quarterly loss that was worse than expected and also cut its 2009 earnings forecast. Shares ended little changed.

Dow component Verizon Communications (VZ, Fortune 500) reported higher quarterly sales and earnings, but said that growth in its mobile phone business slowed and traditional land line customers continued to drop out. Verizon also warned that pension and other retirement costs would hurt earnings in 2009. Shares fell 3.3%.

Delta Air Lines (DAL, Fortune 500) reported a steeper quarterly loss due to costs associated with its merger with Northwest and bad fuel hedges. But the world's largest air carrier said that lower fuel costs and downsizing would enable it to earn profits in 2009. Shares tumbled 20%.

Other air carriers dropped with Delta, with the Amex Airline index falling almost 7%.

Among other movers, a number of big financial stocks rallied, including Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500).

Market breadth was positive. On the New York Stock Exchange, winners topped losers two to one on volume of 1.17 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 1.83 billion shares.

Economy: Home prices in 20 major cities plunged at a record annual pace in November, falling to levels not seen since 2004, according to a report released Tuesday.

A separate report showed that consumer confidence fell to an all-time low in January. The Conference Board, a research group, said its consumer index fell to 37.7 from a revised 38.6 in December, missing economists' forecasts. It was the lowest level on record since the group began tracking confidence in 1967.

A government report showed that unemployment spiked in all 50 states and the District of Columbia in December, as companies cut thousands of positions in the wake of the recession.

Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.54% from 2.63% Monday as investors pulled money out of the safe-haven investment. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.

Lending rates were mixed. The 3-month Libor rate held steady at 1.18%, according to Bloomberg.com. Overnight Libor fell to 0.22% from 0.23% Monday. Libor is a bank-to-bank lending rate.

Other markets: In global trading, Asian markets were mixed and most European markets ended lower.

The dollar fell versus the euro and yen.

U.S. light crude oil for March delivery fell $4.15 to settle at $41.58 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $9.30 to settle at $901.40 an ounce.

Gasoline prices fell two-tenths of a cent to a national average of $1.84 a gallon, according to a survey of credit-card swipes released Tuesday by motorist group AAA.

Oil reaches for $48

2009-01-27T05:12:00.001-08:00

Oil prices rose as much as a dollar, reaching towards $48 a barrel on Tuesday, boosted partly by cold weather in top energy consumer the United States, plus signs OPEC oil supply cuts may have begun to underpin prices.

U.S. light, sweet crude for March delivery rose 72 cents to $46.45 barrel by 6:03 am ET, but had climbed as high as $47.49 a barrel.

U.S. crude has rebounded from below $33 a barrel in the past week.

"People are expecting OPEC to really be serious, and the weather's been cold in the northeast U.S., and here, so we're getting a bit of short-term demand," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.

"We may have found a short-term bottom but nobody is confident that we're heading further up," he said.

Evidence suggests most of OPEC's members are implementing the group's biggest ever 2.2 million barrel per day (bpd) production cut agreed last month.

Oil has fallen more than $100 from a record peak above $147 a barrel in July last year, depressed by falls in demand as the credit crisis has pushed the global economy towards recession.

U.S. fuel inventories, for example, are building as demand shrinks.

U.S. crude oil stocks are expected to have risen a further 2.7 million barrels last week, the fifth straight week of gains. The figures are due out on Wednesday.

Colder weather is expected to help draw down distillate stocks by 800,000 barrels, according to a Reuters poll. Gasoline stocks are likely to have risen by 1.3 million barrels.

Temperatures in the densely populated U.S. northeast are forecast to be below normal this week.

Oil traders will get an early indication of Wednesday's U.S. government data with the release at 4:30 pm ET on Tuesday of inventory figures from the industry group the American Petroleum Institute, as the API shifts to a new, earlier release schedule.

Cyclone Dominic in Australia shut in more than 200,000 barrels per day (bpd) of oil production provided a small measure of support to prices. But output was expected to resume as soon as Wednesday as the storm passes.

Later on Tuesday, U.S. President Barack Obama goes to Capitol Hill to campaign for an $825 billion economic stimulus package to be put to a House vote within days.

Mostly upbeat start seen for stocks

2009-01-27T05:11:00.000-08:00

U.S. stocks appeared set for a mostly higher open Tuesday, as investors looked past economic and earnings gloom, and eyed buying opportunities following the Senate's confirmation of the new Treasury secretary.

At 7:46 a.m. ET, Dow Jones industrial average and Standard & Poor's 500 futures were higher, though Nasdaq 100 futures slipped from their earlier gains. But if the markets on Tuesday follow the lead of the futures, then it could result in a second straight day of gains.

News on the economic front has been dismal, but stocks still managed to gain on Monday. Stocks rose even as about 71,400 job cuts were announced.

Robert Brusca, chief economist at Fact and Opinion Economics, said the approval of Tim Geithner as Treasury secretary on Monday helped to alleviate investor anxiety, despite the "really bad GDP report" that looms on Friday.

"These are the kind of tentative signs that you see," said Brusca. "The market has to stop falling and has to stabilize before it rises. I think this is a good place for people to start making bets."

The gross domestic product is expected to have declined by an annual rate of 5.4% in the fourth quarter, according to a consensus of economist expectations from Briefing.com.

Earnings: DuPont (DD, Fortune 500), a Delaware-based chemical company, reported a loss of $629 million, or 70 cents a share, for the fourth quarter. Without charges related to restructuring, the company reported a loss of 28 cents per share.

Corning (GLW, Fortune 500), a maker of fiber-optic and TV screen glass, said its fourth-quarter sales plunged 30% to $1.1 billion, and earnings plummeted 70% to 13 cents per share, excluding special items. The company said it will cut 13% of its work force, or 3,500 jobs.

Telecom operator Verizon Communications (VZ, Fortune 500) said fourth-quarter revenue rose more than 3% to $24.6 billion, and diluted earnings rose to 43 cents per share, up from 37 cents a year earlier.

Other stocks to watch include Texas Instruments (TXN, Fortune 500), which posted a smaller-than-expected drop in quarterly profit after U.S. markets closed Monday. Shares of the chip maker rose 5% in after-hours trading.

Also late Monday, Dow component American Express (AXP, Fortune 500) reported lower quarterly earnings that missed expectations. Still, shares gained 3% in after-hours trading.

The economy: The Conference Board is due to release its January consumer confidence index.

The S&P/CaseShiller home index for November is also on tap and is expected to show steep declines.

The Federal Reserve begins its two-day policy setting meeting, with an announcement expected Wednesday afternoon.

Retail: The outlook for retail sales doesn't appear to be improving. Retail industry sales are expected to decline 0.5% this year, the National Retail Federation said in its 2009 economic forecast released Tuesday.

World markets: Stocks in Japan soared, with the Nikkei climbing nearly 5%. But the positive sentiment didn't carry over to Europe, where major indexes were lower in morning trading.

Oil and money: Oil prices fell 73 cents a barrel to $45 in electronic trading. The dollar rose versus the euro and the yen, but fell versus the British pound.

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2009-01-27T05:09:00.001-08:00

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Geithner vote looms on Capitol Hill

2009-01-26T07:08:00.001-08:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Geithner acknowledged having made mistakes but insisted the errors were unintentional.

Pfizer to buy Wyeth for $68 billion

2009-01-26T07:07:00.000-08:00

Pfizer announced Monday that it has signed a deal to acquire the smaller drugmaker Wyeth for $68 billion, and thousands of job cuts will follow.

New York-based Pfizer, already the world's leading drugmaker, becomes even larger following the cash-and-stock deal with Wyeth, based in Madison, N.J.

The deal values Wyeth shares at $50.19 each, a nearly 15% premium to Friday's closing price. Pfizer agreed to pay $33 in cash and 0.985 share in Pfizer stock for each Wyeth share.

Pfizer said it would cut 10% of its staff and close five of its manufacturing plants. The company totaled about 48,000 employees at the end of 2007, though job cuts have occurred since then. Pfizer recently announced that it was cutting up to 8% of its research staff, or up to 800 jobs.

Pfizer said the deal would be financed through a combination of cash, debt and stock. The company said it is borrowing $22.5 billion from a consortium of banks.

The board of directors also decided to cut Pfizer's quarterly dividend in half to 16 cents a share.

Pfizer announced that it would ramp up its focus in treatments for Alzheimer's disease, inflammation, cancer, pain and psychosis, and continue to focus on vaccines and biotechnology.

"The new company will be an industry leader in human, animal and consumer health," said Pfizer chief executive Jeffrey Kindler, in a press release. "Its geographic presence in most of the world's developed and developing countries will be unrivaled."

Pfizer also reported a 90% plunge in quarterly net profit. The company said its diluted earnings per share plummeted to 4 cents in the fourth quarter, from 40 cents the prior year.

The company blamed a $2.3 billion charge to resolve allegations from federal prosecutors that it had promoted Bextra for uses not approved by the FDA. Bextra, an anti-arthritis drug, was pulled off the market after Merck's (MRK, Fortune 500) Vioxx was withdrawn in 2005.

Pfizer also reported a slight decline in fourth-quarter revenue to $12.9 billion, from $12.3 billion the year before.

This is the first big merger since 2006, when the telecom giant AT&T (ATT) merged with BellSouth for $67 billion. After that deal, AT&T cut 10,000 jobs.

Miller Tabak analyst Les Funtleyder, author of "Healthcare Investing," said that Wyeth has a "decent pipeline" but with "nothing that immediately jumps out at me as blockbuster." Most promising, he said, is Wyeth's plan to roll out a new form of Prevnar, which combats meningitis and blood infections, with sales totaling $2.1 billion in 2008.

Pfizer's (PFE, Fortune 500) stock price slipped in pre-market trading, while Wyeth's (WYE, Fortune 500) edged up.

One of Pfizer's chief challenges is finding a replacement for the cholesterol-cutting Lipitor, the top-selling drug of all time. The drug's annual sales peaked at nearly $13 billion in 2006, but revenue will plummet when Lipitor's patent expires in 2011.

Ford CEO: 'No more money' needed

2009-01-25T13:04:00.001-08:00

Ford Motor Co has enough liquidity to fund its restructuring plan and despite the deep downturn in auto sales still sees no need to ask for government loans, chief executive Alan Mulally said Saturday.

"We don't want to borrow any more money. We have sufficient liquidity to fund our transformation plan, which means our business is in a relatively good shape," Mulally told reporters on the sidelines of the National Automobile Dealers Association convention.

Ford's U.S. rivals, General Motors Corp (GM, Fortune 500) and Chrysler LLC, won approval in December for $17.4 billion of government loans to avert collapse. Ford has asked for access to a $9 billion credit line from the U.S. government but has not sought loans. Washington has not yet responded to Ford's request.

Mulally said Ford was in a better situation than its rivals because it borrowed more than $23 billion in 2006, using most of the company's assets as security, including its well-known blue oval logo.

Mulally said U.S. industry-wide sales in January had been similar to those in December, when they fell about 36% from a year earlier to 10.3 million units on an annualized basis.

Ford expects an economic stimulus package being pushed by new President Barack Obama to drive a recovery in auto sales starting in the second half of the year and maintains its forecast of U.S. auto sales at 12 million to 12.5 million units, he added.

The forecast represents the high end of prevailing expectations. Analysts have forecast U.S. sales in a range between 10.1 million and 12.5 million units for 2009.

"Right now, I think with everything planned in the fiscal and monetary policy, I am very comfortable that we are going to start to turn things around through the second half of the year," Mulally said.

Bigger bank bailouts coming?

2009-01-25T13:02:00.000-08:00

President Barack Obama's top economic adviser would not rule out Sunday that more money may be needed to stabilize the U.S. financial system as a deep recession increases banks' losses.

Lawrence Summers, head of the National Economic Council, also said there was no question that tax cuts passed under former President George W. Bush needed to be repealed, though he would not be pinned down on exactly when.

"We can make important progress and get started with the support that has been provided," Summers said on NBC's "Meet the Press" when asked whether taxpayers should expect another request for funding to shore up the financial system. "What ultimately will be necessary is something that will play out over time."

House Speaker Nancy Pelosi said earlier that "some increased investment" may be needed beyond the $700 billion approved last fall.

The bailout fund was first pitched as a way to get bad assets off the banks' books in the hope that doing so would help restore normal lending and get the economy going.

Instead, most of the money has gone to buy stakes in banks, and both Democrats and Republicans have complained that the cash was doled out with too few strings attached and insufficient oversight.

But as the economy weakens and unemployment rises, the pile of bad debts on bank balance sheets is likely to grow, which may force Obama's administration to take bolder action.

One idea that has been much discussed on Wall Street is setting up a "bad bank" that would serve as a repository for those assets that are difficult to value or sell. Summers did not comment directly on that concept, although other members of Obama's economic team have mentioned it as an option.
Repeal tax cuts

Summers said Obama and his choice for Treasury secretary, Timothy Geithner, would provide more detail on economic policy in the coming weeks, but they said an $825 billion stimulus package working its way through Congress is the proper size and shape to help revive the economy.

Responding to criticism that the package contained too little immediate help, Summers said Obama was committed to spending three-quarters of that sum in the first 18 months.

"We're not going to rush things to the point of being wasteful," Summers said. Items like tax cuts and aid for state and local government would provide quick assistance, he added.

While Obama has pledged tax reductions for 95% of households, Summers said Bush's tax cuts must be repealed because the country is facing a severe budget gap and a massive longer-term entitlement spending burden.

"I don't think there's any question they have to be repealed," Summers said. "The country can't afford them for the long run. They have to be allowed to expire. What the timing will be, that's something that's got to get worked out through the legislative process."

Summers would not say when he thought the tax cuts should be eliminated, and the leader of the House Republicans said he did not think that would happen this year.

"I've got my doubts whether they'll be bold enough to do that," Rep. John Boehner of Ohio said on "Meet The Press". To top of page
Mr. President...we've got a plan: Crack down on credit-card companies. Help small businesses. Everyday Americans tell Barack Obama how they'd save the economy.