tag:blogger.com,1999:blog-82890768820400387952024-03-07T21:54:00.790-08:00ProinvestimentB. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.comBlogger247125tag:blogger.com,1999:blog-8289076882040038795.post-33750369986647985642009-10-17T09:16:00.000-07:002009-10-17T09:17:24.170-07:00Bank of America: $2.2 billion lossBank of America proved no match for the ongoing recession as the nation's biggest bank reported a steep loss Friday.<br /><br />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.<br /><br />Bank of America's results come at a particularly difficult time for the Charlotte, N.C.-based lender and its CEO Ken Lewis.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"I have no doubt that Bank of America will thrive in my absence," he said.<br />Credit fallout<br /><br />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.<br /><br />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.<br /><br />Loan troubles also intensified within Bank of America's commercial real estate portfolio, amid slower spending by both businesses and consumers.<br />0:00 /5:25Blankfein: Uneven recovery<br /><br />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.<br /><br />"If you look at underlying numbers, credit quality is improving," said Alan Villalon, a senior research analyst at Minneapolis-based First American Funds<br /><br />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.<br /><br />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.<br />Challenges remain<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />Bank of America (BAC, Fortune 500) shares fell more than 4% in late Friday trading.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-54237107759023423712009-08-06T07:35:00.000-07:002009-08-06T07:36:06.687-07:00Deficit: What caused it, why it mattersWhen 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.<br /><br />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."<br /><br />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.<br /><br />Then, in 2009, the bottom fell out.<br /><br />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.<br /><br />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.<br />Looking into the future, it ain't pretty<br /><br />The real problem is the medium- and long-term outlook.<br /><br />Analysts have long emphasized that the country faces a long-term budget problem as a consequence of our rapidly growing old-age entitlement programs.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br />Time to act, but it won't be easy<br /><br />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.<br /><br />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.<br /><br />So when should policymakers make the switch?<br /><br />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.<br /><br />The Great Depression actually consisted of two severe downturns, the second starting in 1937 when the federal government imposed fiscal restraint.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-64569520799451150332009-07-17T10:02:00.000-07:002009-07-17T10:03:29.490-07:00Obama turns up heat on mortgage servicersAs complaints mount about President Obama's foreclosure prevention program, the administration is ratcheting up the pressure on mortgage servicers.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />Loan servicers' efforts will be made public on Aug. 4, when the Obama administration plans to start issuing monthly progress reports.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br /><br />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.<br /><br />"Even though we are making rapid progress, we think we can do even more," Allison told lawmakers.<br /><br />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.<br /><br />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.<br /><br />"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?"<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com3tag:blogger.com,1999:blog-8289076882040038795.post-63982161355611415802009-07-07T08:12:00.001-07:002009-07-07T08:12:57.803-07:00Jittery investors dump stocksStocks tumbled Tuesday morning, as jittery investors dumped shares ahead of the start of the G8 summit and the second-quarter corporate reporting period.<br /><br />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%.<br /><br />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.<br /><br />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.<br /><br />Economic news due later this week includes readings on retail sales, the job market, import and export prices and consumer sentiment.<br /><br />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.<br /><br />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.<br /><br />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.<br />0:00 /1:12The G8's new guest list<br /><br />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.<br /><br />Other markets: In global trade, Asian markets tumbled and European markets were mixed in the afternoon.<br /><br />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.<br /><br />In currency trading, the dollar fell versus the euro and the yen.<br /><br />COMEX gold for August delivery fell 80 cents to $923.50 an ounce.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-28972550843727970472009-06-26T09:09:00.000-07:002009-06-26T09:10:38.830-07:00States lock in highway stimulus fundsEvery state has committed at least half its highway stimulus funds so none will lose any of its allocation, the Obama administration said Thursday.<br /><br />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.<br /><br />Maine has secured 100% of its funds and 15 states have more than 80% of their money committed.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />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.<br />0:00 /3:00States' budget bummers<br /><br />Republicans in Congress said they were concerned by the slow pace of spending.<br /><br />"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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-17431672529826702822009-06-09T09:56:00.001-07:002009-06-09T09:56:48.135-07:00Stocks try to riseStocks 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.<br /><br />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%.<br /><br />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.<br /><br />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.<br /><br />The gains have been sparked by a series of not-as-bad-as-expected economic reports.<br /><br />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.<br /><br />"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."<br /><br />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.<br /><br />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.<br /><br />The news shows that the fear of an implosion has subsided and that the risk factor in financial markets has diminished, Goldman said.<br /><br />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.<br /><br />But banks that were stress-tested earlier this year should undergo another round of tests, a U.S. watchdog group said Tuesday.<br /><br />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%.<br /><br />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.<br /><br />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.<br /><br />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.<br />0:00 /5:11Getting tough on Treasury<br /><br />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.<br /><br />The Treasury is set to auction $65 billion this week, including 3-year and 10-year notes. It will also reopen 30-year bonds.<br /><br />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.<br /><br />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.<br /><br />Other markets: In global trading, Asian markets ended lower and European markets were mixed in late trading.<br /><br />In currency trading, the dollar fell versus the euro and the yen.<br /><br />U.S. light crude oil for July delivery rose $1.05 to $68.14 a barrel on the New York Mercantile Exchange.<br /><br />COMEX gold for August delivery rose $5.50 to $958 an ounce.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-14835066458043266732009-05-27T13:22:00.001-07:002009-05-27T13:22:56.352-07:00GM moves step closer to bankruptcyGeneral 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.<br /><br />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%.<br /><br />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.<br /><br />But GM's announcement said that bondholders who took the company's offer were "substantially less than the amount required."<br /><br />The company owes the bondholders $1 billion in interest payments on June 1 - money it says it does not have.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />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.<br /><br />Lee said the early payroll payments should not be taken as an indication that the filing would come on Friday.<br />What next for bondholders?<br /><br />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.<br /><br />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.<br /><br />A source with knowledge of GM's restructuring discussions said Treasury is willing to hold negotiations up until June 1.<br /><br />"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."<br />0:00 /02:53Remove GM from the Dow<br /><br />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.<br /><br />However, if GM does go into bankruptcy, the source said that Treasury believes the bondholders would likely get even less than what was offered.<br /><br />"In any kind of liquidation scenario, they would get nothing or something unbelievably small," said the source.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-14818746497982383162009-05-21T09:31:00.000-07:002009-05-21T09:32:57.420-07:00Economy to resume growth this yearThe 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.<br /><br />"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.<br /><br />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.<br /><br />"CBO's forecast in August is likely to show even larger shortfalls in output over the next few years," he said.<br /><br />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%.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />Among them is the exposure of small- and medium-sized banks to the fortunes of commercial real estate.<br /><br />"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.<br /><br />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.<br />As goes Britain?<br /><br />This week, Standard & Poor's lowered its ratings outlook to negative for the United Kingdom, in great part due to its growing debt levels.<br /><br />House Budget Committee Ranking Member Paul Ryan, R-Wisc., asked Elmendorf to assess whether the United States is likely to suffer the same fate.<br /><br />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.<br /><br />"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]."<br /><br />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.<br /><br />"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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-15023861410840175972009-05-12T09:21:00.001-07:002009-05-12T09:21:49.629-07:00GM falls to 76-year low as execs sell stockGeneral 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.<br /><br />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.<br /><br />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.<br /><br />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.<br />0:00 /00:49GM CEO: Bankruptcy is an option<br /><br />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.<br /><br />"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.<br />0:00 /2:09GM brands, jobs junkyard-bound<br /><br />"Given that there is a two-week deadline coming there should be additional downside pressure," Levy said.<br /><br />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.<br /><br />GM's market capitalization as of Tuesday was about $690 million, making it one of the smaller Dow members.<br /><br />The company has lost $88 billion since its turnaround efforts began in 2005 under former Chief Executive Rick Wagoner.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-524014001016800932009-05-05T07:57:00.001-07:002009-05-05T07:57:33.297-07:00Stocks flip-flop in early tradeStocks were mixed Tuesday as investors were cautious after the previous session's big run and ahead of comments from Federal Reserve Chairman Ben Bernanke.<br /><br />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%.<br /><br />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.<br /><br />"It's going to take a powerful catalyst to [continue to] move us forward," said Art Hogan, chief market strategist at Jefferies & Co.<br /><br />Economy: Federal Reserve Chairman Ben Bernanke is due to give his outlook on the economy to the Joint Economic Committee.<br /><br />A reading on the services sector of the economy from the Institute for Supply Management, a purchasing managers' group, is also due out.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />Fellow Dow component Walt Disney (DIS, Fortune 500) was expected to release results after the closing bell.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-7075879171139960102009-05-05T07:56:00.000-07:002009-05-05T07:57:00.334-07:00New Chrysler auto incentives comingWith bankruptcy threatening to further weigh down the carmaker's sales, Chrysler is expected to announce a new incentive program Tuesday.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br />0:00 /2:06Chrysler then and now<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br />12 cars that made Chrysler<br /><br />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.<br /><br />Interest in Chrysler, Dodge and Jeep products has actually gone up, he said.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-22558874954098341162009-05-04T20:16:00.000-07:002009-05-04T20:17:43.560-07:00Are consumers back from the dead?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.<br /><br />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.<br /><br />Investors should pay close attention because it will be the first real glimpse into whether consumers really are feeling more confident about the economy.<br /><br />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.<br /><br />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.<br />Talkback: Are you feeling more confident about the economy?<br /><br />There are some tentative signs that consumers are no longer paralyzed by fear as they were after the collapse of Lehman Brothers in September.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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?<br />0:00 /02:49Commercial real estate trouble<br /><br />There is a good chance that consumers really have learned their lesson and that people will stop relying so much on debt.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />"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."<br /><br />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%.<br /><br />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).<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"Historically, you should never bet against the consumer. But this time might finally be the time," Nolte said.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-65073362057000088072009-05-01T09:16:00.001-07:002009-05-01T09:16:34.702-07:00Buffett fans set for 'capitalist Woodstock'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.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />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.<br />0:00 /4:58Buffett's annus horribilis<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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."<br />'Tailwinds' in insurance<br /><br />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%.<br /><br />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.<br /><br />"I'd be interested to hear how the ratings actions could affect the business," said Glenn Tongue, managing partner at Berkshire shareholder T2 Partners.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"There could be some real tailwinds in some of the insurance lines," said Pabrai.<br /><br />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).<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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."<br /><br />This weekend in Omaha, it may be difficult to find anyone who wouldn'tB. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-36040067661617113832009-05-01T09:15:00.001-07:002009-05-01T09:15:48.032-07:00Stocks choppy after strong monthStocks seesawed Friday morning, despite a few better-than-expected economic reports, as investors took a breather after a strong month on Wall Street.<br /><br />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%.<br /><br />Declines had been bigger in the first 30 minutes of the session.<br /><br />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%.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />Fellow Dow component Exxon Mobil (XOM, Fortune 500) reported weaker sales and earnings Thursday.<br /><br />MasterCard (MA, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker revenue that missed expectations.<br /><br />Citigroup (C, Fortune 500) is selling its Japanese retail brokerage business to Sumitomo Mitsui Financial Group in a deal worth $7.9 billion.<br /><br />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.<br /><br />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.<br /><br />Chrysler is privately owned. Shares of rivals General Motors (GM, Fortune 500) and Ford Motor (F, Fortune 500) slipped Friday after rallying Thursday.<br /><br />Automakers are due to report April sales figures later in the day.<br /><br />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.<br /><br />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.<br />0:00 /2:29Chrysler breakdown<br /><br />Other markets: In global trading, Asian markets ended higher and European markets rallied in afternoon trading.<br /><br />In currency trading, the dollar fell versus the euro and gained against the yen.<br /><br />U.S. light crude oil for June delivery rose $1.36 to $52.48 a barrel on the New York Mercantile Exchange.<br /><br />COMEX gold for June delivery fell $6.70 to $884.50 an ounce.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-23715615564387694952009-04-30T12:02:00.000-07:002009-04-30T12:03:42.961-07:00Millionaires Aren’t Sleeping Well, EitherIf 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.<br /><br />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.<br /><br />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.”<br /><br />The response was surprising. Forty-five percent of these millionaires said yes: They either “agreed” or “agreed strongly” with that idea.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.”<br /><br /><span style="font-weight: bold;">Source:</span> CnnB. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-16331744857216984072009-04-29T08:57:00.001-07:002009-04-29T08:57:57.527-07:00Shovels in the ground: Stimulus at workThanks 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.<br /><br />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.<br /><br />"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."<br /><br />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.<br /><br />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.<br />0:00 /4:23Bill Clinton on stimulus<br /><br />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.<br />Repaving already underway<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />"That's a big shot in the arm for the construction industry, which has suffered considerably," Lewis said.<br /><br />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.<br /><br />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.<br />Other money flowing in<br /><br />State agencies are also working to implement other stimulus programs in coming months.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br />Much more to go<br /><br />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.<br /><br />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.<br /><br />"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."B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-78366789677310346072009-04-29T08:56:00.002-07:002009-04-29T08:57:13.342-07:00Optimism about economy growsAmericans 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.<br /><br />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)<br /><br />Fifty-five percent say the economy is the most important issue facing the country today, down eight points from March.<br />0:00 /00:59100 Days: Rating Obama<br /><br />"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."<br /><br />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.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />"For about one in ten Americans, the thrill is gone," said Holland.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-21157195791644161572009-04-29T08:56:00.001-07:002009-04-29T08:56:51.223-07:00Economy falls more than expectedThe 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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />While the overall GDP figure was disappointing, there were some signs of improvement in the report's other readings.<br /><br />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.<br />0:00 /00:59100 Days: Rating Obama<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"This is the best minus 6% reading we've ever had," he said.<br /><br />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.<br /><br />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.<br /><br />"We're in the light at the end of the tunnel camp," he said. "This sets us up for a traditional business cycle recovery."<br /><br />Still, the economic decline during this recession, which started in December 2007, has been one of the deepest since the Great Depression.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-38911039097640354782009-04-29T08:52:00.000-07:002009-04-29T08:54:48.796-07:00Best of the best awardsOne 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.<br /><br />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. <a href="http://www.directsattv.com/">Best of the Best Awards</a> could belong any time to her no matter it is.<br /><br />In the other hand, <a href="http://www.directsattv.com/">BoB Awards</a> 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!B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-50883883326910815112009-04-25T09:42:00.001-07:002009-04-25T09:42:46.046-07:00How Bernie did itThe 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?"<br /><br />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."<br />0:00 /2:48Minnesota's Madoff mess<br /><br />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.<br />Talkback: What do you think of the Madoff scandal?<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.")<br /><br />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.<br />A business dynasty<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br />Mom, Dad and the SEC<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br />'Cash on hand $200'<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.' "<br />The 'under-the-counter market'<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.")<br /><br />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."<br /><br />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.<br /><br />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."<br />A bonanza in software<br /><br />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.<br /><br />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."<br /><br />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."<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br />A private club<br /><br />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?<br /><br />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.<br /><br />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.)<br /><br />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.<br /><br />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.<br /><br />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.)<br /><br />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.<br /><br />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.<br /><br />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.)<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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?"<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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.)<br /><br />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.<br /><br />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.<br /><br />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.<br />'Bernie's world'<br /><br />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.)<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />"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.'"<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br />'I'm a steady and true investor'<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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."<br /><br />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."<br /><br />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.<br /><br />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.<br />Tabloid Bernie<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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."<br />Where's the money?<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-67331234198007378392009-04-25T09:41:00.000-07:002009-04-25T09:42:15.593-07:00Is the stress test stressful enough?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.<br /><br />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.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />There were few specifics about individual banks in Friday's documents, though that will change.<br /><br />"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."<br /><br />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.<br />How bad will it get?<br /><br />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.<br /><br />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.<br /><br />But Friday's stress test guidelines show that despite signs of a deepening slump, the government's assumptions haven't changed.<br />0:00 /5:56Stressing the stress tests<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />Policymakers admitted that the odds have increased that joblessness will reach adverse-case levels of 10.3% by 2010.<br /><br />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.<br />Risk of an 'undershoot'?<br /><br />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.<br /><br />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.<br /><br />Regulators' adverse case envisions an additional 22% tumble in 2009 and a further 7% decline in 2010.<br /><br />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.<br /><br />Buttressing the regulators' case, a decline that steep sounds unlikely.<br /><br />"To be most useful," they noted in a 21-page document released Friday, "stress tests should reflect conditions that are severe but plausible."<br /><br />But a plunge in house prices beyond the stress case may not be implausible.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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."<br /><br />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.<br /><br />Federal Reserve chief Ben Bernanke said last week that policies aim to avoid a "major undershoot" in house prices.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-30233087277905362902009-04-25T09:39:00.001-07:002009-04-25T09:40:37.527-07:00DriversA huge problem that most of the computer owners have when upgrading the operating system is to keep up with the most recent drivers.<br /><br />Sometimes a simple upgrade can make some of your hardware stop working, the <a href="http://www.driverssoftware.com/">drivers</a> that you have just came obsolete in a mater of seconds. I know, because that’s already happen to me.<br /><br />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.<br /><br />In a quick internet search I have found a website that can help people like me that just lost some of the hardware connected to my computer due to an inexistent driver.<br /><br />As most of computer users knows these problems can occur with equipments of different brands, from the most known to the obscure and small ones. At this site it is possible to find drivers to a huge number of brands, <a href="http://www.driverssoftware.com/companies.php/hp-hewlett-packard-drivers/7209">HP drivers</a>, <a href="http://www.driverssoftware.com/companies.php/ati-drivers/4014">ATI drivers</a> and a lot more of them.<br /><br />Those who have experience with computers are always looking for the most recent drivers so the equipment can work perfectly and that will be possible to take out the best performance from the hardware.<br /><br />The search is easy, you just need to fill up the search box with the magical word, for instance, SONY drivers or nvidia drivers, or you can write the equipment and the brand, like camera and Trust.<br /><br />I think that you need to bookmark this site, if you want to have the best performance to your equipments.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-83044807389325485142009-04-25T09:27:00.001-07:002009-04-25T09:27:34.449-07:00Economic decay easing - GeithnerThe severe decay in the global economy is easing but serious problems still loom, Treasury Secretary Tim Geithner said Friday.<br /><br />The pace of deterioration in economic activity and global trade has lessened, he said.<br /><br />"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."<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />Geithner hammered home the need for nations to work together because of the complex links among national economies.<br /><br />"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."<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />The G-7 is made up of United States, United Kingdom, Japan, Germany, France, Canada and Italy.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-16454231884438639992009-04-25T09:26:00.000-07:002009-04-25T09:27:19.339-07:00U.S. backs more say for emerging nationsThe 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.<br /><br />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.<br /><br />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.<br /><br />He said, however, it was necessary to retool the IMF to reflect a shift in global economic reality.<br /><br />"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.<br /><br />Washington's commitment to reform carries special weight because it is the biggest single shareholder within the IMF.<br /><br />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.<br /><br />"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."<br />0:00 /1:32China's economy slows down<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />"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.<br /><br />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.<br /><br />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.<br /><br />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.B. Manhttp://www.blogger.com/profile/18177728655314057198noreply@blogger.com0tag:blogger.com,1999:blog-8289076882040038795.post-34978183317033024242009-04-25T09:23:00.000-07:002009-04-29T08:52:49.941-07:00Gold CoinsGold is one of those precious metals that every one likes to keep whether in form of ornaments or coins. Coins are peculiar boon of history. It would be really good these are made of pure gold. People have started to invest in gold rather than other scrips available in the market. GoldCoinsGain.com is one of the best Advisors which is offering you to <a href="http://www.goldcoinsgain.com/">buy gold coins</a> and <a href="http://www.goldcoinsgain.com/" rel="nofollow">buy gold bullion</a> online. 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