U.S. offers 1% second-mortgage rates via modification plan

The Obama administration is trying yet another program to stem home foreclosures -- this time by offering lenders incentives to cut payments on second mortgages.

The taxpayer-funded plan aims to slash second-mortgage interest rates to as low as 1% for the next five years for qualifying borrowers.

The Treasury said the program would work in tandem with the Making Home Affordable plan it launched in February, which focused on incentives to get lenders to modify first mortgages for people who have a fighting chance of holding on to their homes.

The problem for many distressed homeowners is that they have both first and second mortgages -- and can’t afford either. Treasury now wants lenders and loan servicers to agree to modify both loans as part of a "comprehensive" solution.

"Up to 50% of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien," Treasury said in its announcement today.

Under the new program, the government would share lenders’ cost of reducing second-mortgage interest rates. For amortizing second-mortgage loans (those with monthly payments that include principal and interest) the loan rate would be cut to 1% for five years. For interest-only loans the rate would be cut to 2%.

The fact sheet for the program is here.

Lenders also could opt to forgive a second mortgage entirely in exchange for a one-time government payment.

The Treasury estimated the plan could help up to 1.5 million second-mortgage borrowers, although it didn’t say how it arrived at that number.

In one example the Treasury provided, a homeowner with a $44,000 second-mortgage loan at 8.6% would see his monthly payment slashed from $349 to $155 with the new rate at 1%, for an annual savings of $2,336.

The risk with the new program: After five years, loan rates would step up again. This could be just another case of delaying foreclosure, not preventing it.

-- Tom Petruno

Photo credit: Brian Vander Brug / Los Angeles Times

Flu fears in weak economy

NEW YORKTHE swine flu outbreak is unleashing a side effect the global economy is in no condition to handle: fear.

Travellers are cancelling or delaying trips to Mexico, and on Tuesday Cuba became the first nation to ban all flights to its neighbor. China, Russia and South Korea have banned imports of some North American pork, despite assurances that the flu is not spread through meat. Investors just starting to regain their nerve have again caught the jitters.
Utilities can begin cutoffs, PSC says
But companies ordered to devise interest-free plans to allow bill payment without service disruption But companies must devise interest-free plans to allow bill payment without disruption

19 years on, the ghost of Bofors refuses to die
Whether it counts for any votes any more may be debatable but Bofors is a scandal that refuses to die out and it seems almost inevitable that it has reared up in the midst of a heated poll battle.

Still open: The First Bank of Beverly Hills in Beverly Hills

Still open: The First Bank of Beverly Hills in Beverly Hills

In a simple and rational world, a financial firm called First Bank of Beverly Hills would be located in Beverly Hills. But then, nothing in banking is simple or rational these days.

So when the Times reported on Friday that the First Bank of Beverly Hills had been seized by regulators, the blog item noted that the one-branch commercial lender, with $1.5 billion in assets, was actually in Calabasas.

Unfortunately, that point didn’t register with every customer of First Banks Inc., a privately held St. Louis company with $10.7 billion in assets, which operates 214 First Bank offices in five states. The branches include 61 in California -- two of which are in, you guessed it, Beverly Hills.

And so dozens of depositors at the healthy institution started lighting up the phones after seeing the Times headline that said First Bank of Beverly Hills had been shut down.

"We have a lot of confused customers," said Joel Schwartz, a senior vice president and Southern California regional manager for the St. Louis banking firm. "And some of the confused customers have become worried and even panicked."

The failed First Bank had moved its headquarters to Calabasas from Beverly Hills in 2000.

The larger St. Louis bank, as part of its expansion in California, purchased the Beverly Hills branch of Calabasas-based First Bank of Beverly Hills in 2006.

That’s why the now-defunct First Bank of Beverly Hills has "no location in Beverly Hills," explained Schwartz. "They had one, but we bought it."

All clear, everyone?

-- E. Scott Reckard

GM Canada to cut 5,900 jobs

MONTREALTHE Canadian branch of troubled US automaker General Motors said on Monday it would cut 5,900 jobs in Canada by 2014nearly 60 per cent of its workforce herein a restructuring bid.

The measures came as the company announced a fresh US viability plan that featured a debt swap to give effective control of the automaker to its main union and the US government.
General Motors to cut 21,000 factory jobs, shed Pontiac
General Motors Corp. could be majority owned by the federal government under a broad restructuring plan laid out Monday that will cut 21,000 U.S. factory jobs by next year and phase out the storied Pontiac brand.

Crisis turning into 'calamity'

WASHINGTONTHE global economic crisis is turning into 'a human and development calamity', with poorer countries being hit increasingly hard, the IMF and World Bank said on Sunday.

The crisis 'has already driven more than 50 million people into extreme poverty ... We must alleviate its impact on developing countries and facilitate their contribution to global recovery'. How to help the developing world cope with the worst global slump since the 1930s Great Depression was top of the agenda for the joint International Monetary Fund and World Bank Development Committee meeting on Sunday.
Despite BGE's lower prices, competitor still wise choice
R eaders want to know: Now that regulators say BGE's standard household electricity price will be lower for the 2009-2010 winter than it was for the 2008-2009 winter, does it still make sense to switch to a competing offer from Washington Gas Energy Services?

Emerging nations hit worst

THE global economic and financial crisis is disproportionately hurting developing countries, which will have to deal with the fallout long after advanced economies, said the Group of 24 (G-24) nations last Friday.

The G-24, made up of emerging and developing countries from Asia, Latin America and Africa, said sharp declines in growth and falling currency reserves were leading to rising unemployment and poverty levels.
Investors, Dow up
Investors set aside some of their worries about banks and the economy Friday after the government unveiled its methods for testing the health of banks.

High cost of lost laptops

Regulators shut down First Bank of Beverly Hills

Federal regulators closed First Bank of Beverly Hillslate today and said they would send checks to insured depositors at the one-branch bank -- which, despite its name, is in Calabasas.

After a planned takeover by an Illinois financial firm fell apart last week, no buyer emerged for the bank, which is owned by Beverly Hills Bancorp. It had few local depositors, according to the Federal Deposit Insurance Corp., which will take over the institution’s loans and other assets.

First Bank of Beverly Hills, a commercial lender beaten up by California’s real estate downturn, had $1.5 billion in assets at the end of last year and total deposits of $1 billion -- much of which was brought in via financial brokers. The FDIC estimated that just $179,000 of the deposits were uninsured.

The agency estimated that the bank's collapse would cost the insurance fund $349 million. First Bank is the 28th bank failure of the year and the fourth in California.

Read the FDIC’s news release on the takeover here for more about what depositors and loan customers should expect.

-- E. Scott Reckard

High cost of lost laptops

SAN FRANCISCOTODAY'S mobile workforce is putting precious business secrets at risk, with lost or stolen laptop computers costing companies dearly, according to the Ponemon Institute.

A Ponemon study backed by chip giant Intel found that losing a laptop costs a firm on average US$49,246 (S$73,371) after accounting for data loss, intellectual property, replacement, lost work time and legal expenses.
McCormick recalling Lawry's spices containing milk
McCormick says it is recalling Lawry's fajitas spices and seasonings because the products contain unlabeled milk ingredients.

'Mass layoffs' hit new high, but pace slows

'Mass layoffs' hit new high, but pace slows

The U.S. recorded 2,933 mass layoffs in March, up 6% from February and the largest number since the government began keeping records in 1995, the Labor Department said today.

The report is another sign that employers have continued to slash jobs even amid other signs that the recession may be bottoming.

Still, there was some relative good news in the report: Although the number of jobs cut via mass layoffs was a record 299,388 last month (seasonally adjusted), that was a modest 1.3% increase from February.

By contrast, the February total of 295,477 was up 24% from January.

A "mass layoff" is the loss of at least 50 jobs at any individual employer. The government collects the data by tracking claims for unemployment benefits filed against employers.

Mass layoffs began to rise sharply in August, a month before the financial-system meltdown kicked into high gear. But the number of mass layoffs had held steady, at around 2,300 a month, from September through January â€" before soaring to 2,769 in February.

California, the largest state by population, recorded the biggest number of mass layoffs in March, at 498. That was down from 515 in February and 651 in January, but the data aren’t seasonally adjusted.

Pennsylvania ranked second last month, with 140 mass layoffs, followed by Texas (112) and Illinois and Wisconsin (tied at 109 each).

--  Tom Petruno

Recovery not in sight

PHILADELPHIA/LONDONHIGHER-THAN-EXPECTED US unemployment claims and mixed news on banks on Thursday suggested the global recession was far from over despite a survey that found euro zone businesses cautiously optimistic about next year.

On the eve of a G7 finance ministers meeting in Washington, Wall Street stocks ended slightly higher while European stock indices vacillated, held back by anxiety about the overall health of the banking sector and poor results from Swiss engineering group ABB.
Marriott International loses $23 million in its first quarter
But adjusted results for Md.-based company surpass analysts' estimates With demand for its hotel rooms and timeshare resorts still deeply depressed, Marriott International Inc. reported a first-quarter loss Thursday, but aggressive cost-cutting boosted its results above Wall Street's expectations.

Just 11.9% of Americans moved last year, a 60-year low

Another casualty of the recession and the housing bust: our national mobility.

The percentage of Americans who changed residences last year fell to the lowest since the government began keeping records in 1948, the Census Bureau reported today.

Just 11.9% of the population moved last year, down from 13.2% in 2007. The rate was as high as 16.1% as recently as 2000.

Most moves in 2008 were from one home or apartment to another in the same county. Just 1.6% of Americans moved between states, down from 1.7% the previous year and 3.1% in 2000.

With the crash in housing prices many people naturally are unable or unwilling to sell their homes. And with unemployment rising nationwide there is less incentive for people to move in search of better jobs.

But the national mobility rate has been in general decline since the mid-1980s. Americans moved much more frequently in the 1950s and 1960s, when the percentage of the population changing residences routinely was around 20% each year, Census data show.

-- Tom Petruno

9-week halt for GM's US plants

DETROITGENERAL Motors Corp is planning to temporarily close most of its US factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles, two people briefed on the plan said on Wednesday.

The exact dates of the closures are not known, but both people said they will occur around the normal two-week shutdown in July to change from one model year to the next. Neither person wanted to be identified because workers have not been told of the shutdowns.
T. Rowe Price to cut 288 jobs, many from Baltimore region
Two-thirds of jobs cut to come from Baltimore region Baltimore money manager T. Rowe Price Group said Wednesday that it is cutting 5.5 percent of its work force, or 288 employees, with almost two-thirds coming from the Baltimore region.

California expected to boost bond sale amid strong demand

California expected to boost bond sale amid strong demand

Once again, a big bond sale by California is shaping up to be a hit with investors -- despite the state’s low credit rating.

Treasurer Bill Lockyer’s plan to sell up to $4 billion in taxable bonds is said to be attracting heavy interest from big investors such as pension funds. Bidding appears to be strong enough to allow the state’s investment banks to supersize the deal, perhaps to as much as $7 billion, according to municipal bond market analysts.

The bonds, which will raise money for infrastructure projects, are expected to be priced Wednesday.

The state is selling taxable, rather than tax-free, bonds in part to take advantage of the federal government’s new Build America Bonds plan. Under that program, which Congress passed as part of the economic-stimulus package, the Treasury picks up 35% of the annual interest cost of bonds sold to finance public works.

The talk in the marketplace today was that the 30-year bonds in the state’s offering would pay an annualized yield of about 7.4%. With the government covering 35% of that, the net interest cost to the state would be about 4.8%.

That would be a significant savings compared with the 6.1% yield California paid on 30-year tax-free bonds it sold March 24.

Debt issuance under the Build America Bonds plan could help Lockyer whittle down the $61-billion backlog of voter-approved infrastructure bonds he has left to sell. More public works projects would mean more jobs, at a time of soaring unemployment in California.

As I noted in this post last week, the state is tailoring the taxable bond sale for big investors. Individual investors, who were voracious buyers of the tax-free bonds sold in March, weren’t given the usual preferential treatment in the taxable-bond sale.

-- Tom Petruno

Photo: California Treasurer Bill Lockyer

Yahoo profits drop 80%

SAN FRANCISCOYAHOO! on Tuesday reported that its net profit slumped nearly 80 per cent in the first three months of the year and that it will trim its workforce by five per cent to cut costs.

Yahoo! said its net income for the first quarter was US$117.6 million (S$177 million), or eight cents per share, compared to US$536.8 million, or 37 cents per share, during the same period last year.
Yahoo to cut 600 to 700 jobs after 1Q results fall
Yahoo says its slump worsened in the first quarter as the recession made it more difficult to sell the ads that generate most of its profits.

How to retire the old 'Concorde' financial system for good

How to retire the old 'Concorde' financial system for good

Best known for his accurate warnings of impending doom in the global economy over the last few years, Nouriel Roubini now opts to deliver some constructive criticism about how to permanently fix the financial system.

His summary advice to global banking regulators: Forget the idea of having the equivalent of a Concorde supersonic plane for a financial system; aim for one that is "somewhat slower but more stable."

The New York University economics professor, writing on his Global EconoMonitor blog over the weekend with colleagues Viral Acharya and Matthew Richardson, suggests four major alterations to the system to reduce risk and avoid a repeat of the catastrophe of the last two years:

--- Change the pay structure for traders and other "profit centers" at major financial institutions to provide bonuses for good performance but also clawbacks of pay for bad performance. The basic idea: Make sure traders etc. know there will be a penalty for taking extreme risks, beyond just losing one's job.

--- Charge institutions appropriately for "socialized risks -- deposit insurance, too big to fail, temporary loan guarantees and the like," so that the net effect is to "discourage size and risk distortions" in the system. In other words, stop rewarding bigness that could destabilize the entire system.

Roubini, Acharya and Richardson note: "Financial institutions will attempt to exploit government guarantees if that is in the interest of shareholders. That is what they are paid to do. So it is imperative to price the guarantees right," which means governments should junk any one-price-fits-all approach.

--- Create a regulatory authority capable of quantifying the systemic risk posed by large financial institutions and with the power to manage their failure.

--- Enforce better transparency of over-the-counter derivatives and off-balance-sheet transactions, including credit default swaps.

"The recent meeting of the Group of 20 went some way to set the system to rights," Roubini, Acharya and Richardson write. "First, there seems to be general agreement that regulators should work together on a core set of principles. Without such an agreement financial institutions will be able to cherry-pick their jurisdictions. Second, at least from our point of view, the G20 has homed in on most of the important threshold issues, especially the focus on systemic risk, opacity and compensation within the financial system.

"We think the issues of implicit and explicit government guarantees (the second point above) warrant far more air-time at future G20 meetings. A solution as simple as pricing these guarantees at the appropriate market rate will help solve the problem, as higher fees for higher systemic risk and leverage will organically lead these institutions to lower their risk profiles."

What about the potential for regulators to go overboard with reforms and stifle financial innovation?

Roubini, Acharya and Richardson respond: "The goal is not to have the most advanced financial system, but one that is reasonably advanced and robust. That is also what we seek in other areas of human activity."

Drawing a parallel between the Concorde and the high-speed financial system that developed over the last 20 years, the academics note that Concorde aircraft finally were retired in 2003 after 27 years in service and ongoing controversy over the program's complexity and cost vs. its benefit of supersonic flight.

So "we do not use the most advanced aircraft to move millions of people around the world" anymore. "We use reasonably advanced aircraft whose designs have proved to be reliable."

-- Tom Petruno

More GM workers laid off

DETROITGENERAL Motors Corp started firing 1,600 white-collar workers Monday, continuing its effort to slash costs and qualify for more government loans on the same day it revealed it spent US$2.8 million (S$4.23 million) in the first three months of this year to lobby federal lawmakers.

Meanwhile, Fiat's CEO left Italy to resume critical talks on an alliance with Chrysler LLC, as deadlines draw closer for GM and Chrysler to finish their restructuring plans.
Lockheed Martin to hire 160 for new Woodlawn facility
Baltimore County Executive James T. Smith (second from right) leads the ribbon cutting by Lockheed Martin's Michael Leff (second from left) and Linda Gooden (center) as Lockheed announced plans to hire 160 workers at a new Woodlawn facility. Looking on (far left) is State Del. Adrienne Jones and William E. Gray (far right), deputy commissioner for systems at Social Security Administration.

Glaxo to buy private US firm

NEW YORKBRITISH drugmaker GlaxoSmithKline PLC is reportedly nearing a deal to purchase privately held US skincare products maker Stiefel Laboratories Inc for about US$3 billion (S$4.5 billion).

The Wall Street Journal, citing unnamed people familiar with the matter, said on Sunday that the deal could be announced on Monday, but is not etched in stone.
Shanghai Auto Show a showdown for automakers zeroing in on world's only major growth market
SHANGHAI — International automakers are converging on China's commercial capital for a show that, once marginal, is now a key showcase — and battleground — for the world's only major growing car market.

NPR's 'Planet Money,' live from Santa Monica

NPR's 'Planet Money,' live from Santa Monica

Fans of NPR's Alex Blumberg and Adam Davidson, who produced the award-winning housing-crisis explainer "The Giant Pool of Money," will want to tune in to KCRW on Sunday from 6 to 7 p.m. PDT: The two will be broadcasting their "Planet Money" show live from the Broad Stage in Santa Monica.

Following on the success of "The Giant Pool of Money" in May 2008, Blumberg and Davidson launched Planet Money in early September to blog on the nation’s economic crisis. Their timing was perfect: Planet Money began on Sept. 7 -- the day the government seized Fannie Mae and Freddie Mac, the first dominoes to fall in the financial-system collapse.

-- Tom Petruno

Worst of downturn over?

NASHVILLE (Tenn)TOP US officials on Saturday offered reassurances that the worst of the economic downturn is likely over, helped by unprecedented efforts to keep credit flowing, though the recovery will be slow.

Two Federal Reserve policy-makers, Vice Chairman Donald Kohn and New York Fed chief William Dudley, both pointed to signs that measures taken by the US central bank are indeed working to help revive the economy.
Obama auto adviser embroiled in probe

California jobless at 33-yr high

It's OK to look at your investment statements again

Go ahead -- check your 401(k) this weekend. You deserve some good news.

Stock markets worldwide mostly racked up another week of gains, with Wall Street extending its winning streak to six weeks. That’s the longest stretch of green ink since the spring of 2007.

The Standard & Poor’s 500 index, which added 0.5% today to close at 869.60, was up 1.5% for the week. The index has rebounded 28.5% from its 12-year low March 9.

Other market sectors -- including small and mid-sized stocks and emerging markets such as Russia and Mexico -- have staged even more impressive bounces over the last six weeks, as investors have become much more hopeful that the global economy is in the process of bottoming.

Domestic stock mutual funds today reached a milestone, of sorts, according to data tracker Morningstar Inc.: Averaging the performances of all U.S. fund categories, the year-to-date net change now is zero -- meaning, the average fund has recouped all of its first-quarter losses.

That may or may not apply to your individual funds, of course. Among the largest portfolios, for example, American Funds’ Growth Fund of America is up 4% this year and Fidelity Magellan is up 8.4%. But Dodge & Cox Stock still is off 3.9%.

The recovery of the last six weeks hasn’t just been built on blind faith. Plenty of economic reports have offered reason to be less pessimistic, if not actually optimistic. On Friday, the University of Michigan said its index of U.S. consumer confidence edged up to 61.5 this month from 57.3 in March

The confidence data followed better-than-expected reports Thursday on new claims for unemployment benefits and mid-Atlantic manufacturing activity.

As for corporate earnings, first-quarter results for many major companies (General Electric Co., Nokia, Google Inc. and JPMorgan Chase & Co., among others) have been lousy -- but better than analysts’ worst fears. That’s all many market bulls were hoping to see.

Things also continue to improve in the credit markets. The average annualized yield on an index of 100 junk bonds fell to 12.4% on Friday, down from 12.52% on Thursday and the lowest since early October. The yield has tumbled from 14.88% on March 9.

Companies issued $3.1 billion in new junk debt this week, the most since at least July, according to Bloomberg News.

There still is enormous doubt on Wall Street that the stock market can sustain this rebound. The test of the rally’s staying power will be how doubting investors react when the next significant pullback occurs: Will they rush at the chance to get in at lower prices -- or stay away, convinced that they were right to remain on the sidelines all along?

-- Tom Petruno

California jobless at 33-yr high

LOS ANGELESCALIFORNIA'S unemployment rate soared to its highest level in more than 30 years in March, climbing to 11.2 per cent as 62,100 jobs vanished, official figures showed on Friday.

US Department of Labor figures showed the number of unemployed increased sharply from 10.6 per cent in February, giving California the highest jobless rate in the nation behind Michigan, Oregon and South Carolina.
More workers file lawsuits over popcorn flavoring
Dozens of plant workers who claim their health was damaged by exposure to a chemical used to give a buttery flavor to microwave popcorn have filed lawsuits in Cincinnati against makers of the flavoring.

For stocks, all news isn't good news, but it's good enough

For stocks, all news isn't good news, but it's good enough

Every day, investors get a new chance to decide whether the economy glass is half full or half empty. Today, the vote was heavily in favor of half full.

Major stock indexes rose to their best levels of the spring rally after another round of mixed economic data and corporate earnings reports that were lousy, just not lousier than investors already had expected.

The Dow Jones industrial average closed up 95.81 points, or 1.2%, to 8,125.43, extending the six-week rally to a gain of 1,547 points, or 24.1%, from the 12-year low reached March 9.

The government reported that the number of Americans receiving unemployment benefits last week topped six million for the first time -- a gruesome piece of data. But the number of new benefit claims slid 53,000 to 610,000 last week from the previous week, the second consecutive decline.

The latest drop in claims may have been skewed by the Easter holiday. But for the glass-half-full crowd, the data offered another reason to believe that the recession is bottoming. Ditto for the Philadelphia Federal Reserve’s report today on its index of manufacturing activity in April, which came in much better than expected.

As for corporate earnings, first-quarter reporting season is shaping up exactly as market bulls had hoped: Many companies are reporting dismal results for the quarter, but are tempering the numbers with forecasts that are at least modestly hopeful.

Cell phone giant Nokia, for example, reported that first-quarter profit dived 91% from a year earlier, but said it still expected to meet previous profit margin forecasts for 2009 as a whole. The stock surged $1.52 to $14.88.

Harley-Davidson Inc. reported a 37% drop in quarterly earnings but said it still expected to ship between 264,000 and 273,000 cycles this year, in line with its previous forecast. The stock added 98 cents to $18.11. The shares are up 121% since March 5.

It’s entirely possible that corporate executives are in dreamland, and that any upbeat (or less-downbeat) projections will be blown out of the water in a matter of months.

The problem for disbelieving investors is that, the higher the market goes, the more afraid they become of staying on the sidelines.

"The pressure on brokers who couldn’t bring themselves to buy four or five weeks ago is enormous," said Jeffrey Saut, chief investment strategist at brokerage Raymond James & Associates. The Standard & Poor’s 500 index is up 28% from its low on March 9.

Understandably, many investors now are praying for some kind of sharp reversal so they can get in at cheaper prices. But the market hasn’t give up much since the rally began on March 10. The biggest pullback in the S&P 500 was the 5.4% drop that occurred over the March 27 and March 30 sessions (a Friday and a Monday).

In the last 12 sessions, the S&P has closed lower on just three days.

Many analysts continue to assert that the market is "overbought" and needs a rest. Itchy money on the sidelines can only hope they’re right.

-- Tom Petruno

Carrefour Q1 sales drop

PARISFRENCH retailer Carrefour on Thursday reported a 2.8 per cent decline in first quarter sales to 22.71 billion euros (S$46 million) against last year, a fall it blamed on a weak performance in Europe.

Sales in Europe, excluding France, were down 5.9 per cent from first quarter 2008 while those in France fell 5.1 per cent.
JPMorgan Chase posts better-than-expected profit
JPMorgan Chase & Co.'s first-quarter profit was not as good as last year's, but it told investors what they wanted to hear: Banking is not dead.

As copper surges, Wall St. wonders: What's the message?

As copper surges, Wall St. wonders: What's the message?

Lowly copper has a reputation for heralding economic turning points. So with the metal’s price up 57% this year, to a six-month high on Wednesday, some stock market bulls see copper as underpinning the case that the economy is bottoming.

But copper’s ascent could just be the result of some old-fashioned hoarding by China -- the one major government with loads of money to spend on something other than a banking-system rescue.

Near-term copper futures in New York rose to $2.20 a pound Wednesday, up from $2.11 on Tuesday and the highest since mid-October. The price has surged from $1.41 a pound at the end of 2008.

By contrast, raw materials prices overall, as measured by the Reuters/Jefferies CRB index of 19 commodities, are down slightly this year.

"What’s happening in copper now is a reflection of the broader global economic story," Michael Cuggino, chief executive of Pacific Heights Asset Management, told Bloomberg News. "We’re still expecting to see long-term global growth that’s going to drive demand for copper and the other commodities."

But is the price of copper really a good early-warning signal for the rest of the economy? The historical evidence isn’t very convincing, as Guy Lerner points out on this post at the MarketOracle website.

And this time around, stockpiling by China -- rather than fundamental demand for the metal from a broad range of industrial users -- may be skewing the price.

From a Financial Times of London report on March 22:

Industry reports point to buying by Beijing’s State Reserves Bureau, which manages the country’s strategic stockpiles.

SRB’s decisions are shrouded in secrecy, making it virtually impossible to assess accurately how much the Chinese government has bought. Traders estimate that the SRB is in the process of securing 300,000 tons and speculate that it could buy up to 1.2 million tons this year. Global copper production last year stood at 18 million tons.

"Real demand has played little part in the current copper price rally and remains notably weak as global manufacturing activity continues to decline," David Wilson, metals analyst at Societe Generale, told the Times.

Of course, copper traders may not care what’s fueling the metal’s bull move. But stock traders may want to be careful about drawing conclusions about the economy based on copper’s current hot streak.

-- Tom Petruno

Photo: Uploading copper ore at the Prominent Hill mine in Australia. Credit: Coober Pedy News / AFP Getty Images

British retail sales drop 1.2%

LONDONRETAIL sales in Britain fell for the ninth time in ten months during March as demand for furniture slumped to its lowest level for at least nine years, a leading industry lobby group said on Thursday.

In its monthly survey, the British Retail Consortium (BRC) said like-for-like retail salesthose that exclude new stores and spacedeclined by 1.2 per cent in March from the year before, when sales were depressed by extremely cold weather.
Hundreds stage 'tea party' to protest economic policies
Hundreds of rain-soaked protesters filled the Annapolis docks Wednesday to stage a mock tea party -- one of hundreds held across Maryland and the nation -- to toss tea bags into the Chesapeake Bay and object to President Barack Obama's economic policies.

At Six Flags, bankruptcy could mean a 'success bonus'

At Six Flags, bankruptcy could mean a 'success bonus'

Roller-coaster riders at the Six Flags theme parks live for the unexpected thrill. Not so the chief executive of the parks’ parent company: His employment agreement now calls for payment of a $3-million bonus whichever way the financially strapped company ends up reorganizing -- in bankruptcy court or outside of court.

New York-based Six Flags Inc. has agreed to give CEO Mark Shapiro and other top executives "success bonuses" tied to the company’s workout of its debt problems, according to a company financial filing this week.

From Bloomberg News:

The bonus is part of an employment agreement with Shapiro extended through April 1, 2013, Six Flags said. Five other managers also had contracts extended with such bonuses. The accords keep the base salaries at current levels.

Shapiro receives a base salary of $1.3 million a year. Chief Financial Officer Jeffrey Speed, who earns $775,000, would get another $750,000 as a "success bonus." The plan would also give the executives stock options and restricted shares.

Six Flags has lost money every year of this decade. Its shares, which closed at 19 cents on Tuesday, will be delisted from the New York Stock Exchange on April 20.

Shapiro is trying to turn the company around by talking bondholders into swapping debt for equity. If they agree, he and other executives will qualify for their "success bonuses."

But even if bondholders balk, and Six Flags chooses to reorganize via Chapter 11 of the bankruptcy code, the execs still will qualify for the bonuses after the company emerges from bankruptcy.

Shareholders, of course, get no guarantees. With the stock at 19 cents, the market is pricing the shares for a total wipeout.

Executive-pay analyst Graef Crystal, author of  "The Crystal Report on Executive Compensation," is not amused. He told Bloomberg: "A ‘success bonus’ -- it just makes a profanation of the word ‘success.’ Success is going bankrupt? Success is coming out of bankruptcy?"

CFO Speed’s response, in an e-mail to Bloomberg:

"The success fee is based on a successful restructuring and substantial deleveraging of our balance sheet." The restructuring "is intended to provide the company with operational and financial flexibility to enable it to generate long-term growth."

-- Tom Petruno

Photo: Aboard the Tatsu coaster at Six Flags Magic Mountain in Valencia. Credit: Myung J. Chun / Los Angeles Times

Mexico unveils oil refining plan

MEXICO CITYMEXICO'S state oil company Pemex said on Tuesday it would invest US$12.2 billion (S$18.3 billion) to build a new refinery outside Mexico City and revamp another to tackle the country's mounting refined products deficit.

The new refinery, which is scheduled to begin operations in 2015, will be built in Tula, a city north of the capital, which is already home to a Pemex refinery. Another refinery in the central city of Salamanca will be modernised at a cost of US$3.076 billion.
Gasoline prices expected to remain cheap this summer
Drop in U.S. consumption of petroleum products also seen Gasoline prices are expected to be relatively low this summer, so motorists might want to take to the road despite the dismal economy if the federal government projections hold.

Goldman plans stock sale -- and an exit from U.S. bailout

Goldman plans stock sale -- and an exit from U.S. bailout

At Goldman Sachs Group, the U.S. Treasury became one managing director too many.

The Wall Street giant late today confirmed rumors that had been bubbling in recent days: It plans to raise $5 billion in new capital via a stock offering, and use those proceeds and other funds to repay the $10 billion the company got last fall as part of the Treasury’s financial-system rescue.

That could make Goldman the first major bank to repay the bailout money -- and thus the first to get out from under the government’s restrictions on executive compensation and dividend payments, among other things.

Exiting so-called TARP (the Troubled Asset Relief Program) won’t be as simple as writing a check, however. Goldman must pass the "stress test" that regulators now are conducting at major banks, to assure that they have the capital to survive a worsening economy.

"After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman Sachs would like to use the capital raised plus additional resources to redeem all of the TARP capital," the company said in a statement today.

Goldman Chairman Lloyd Blankfein had made clear in recent weeks that he wanted out of the government partnership necessitated by the Treasury’s TARP investment.

But of course, Blankfein couched this in terms of what would be best for taxpayers, not just what would be best for Goldman and its legendary franchise.

He said last week said that banks had "not a choice, but an obligation to taxpayers" to repay the government as soon as possible.

It will help that Goldman also today reported much-better-than-expected earnings for its first fiscal quarter ended March 27, reinforcing investors’ faith that the company will remain Wall Street’s premier money machine.

Goldman said profit was $1.66 billion, or $3.39 a share, compared with $1.47 billion, or $3.23 a share, a year earlier. Analysts had expected the firm to earn about $1.60 a share.

It appears that Goldman benefited from investors’ hunger for bonds in the first quarter, as stock markets worldwide sank for most of the period. The company said revenue in its unit that trades and invests in bonds, currencies and commodities soared to a record $6.56 billion, more than double the $3.14 billion of a year earlier.

By contrast, Goldman reported lower revenue year-over-year in every other division, including stock trading, investment banking and asset management.

Goldman shares were down modestly in after-hours trading, following the earnings report and stock-sale announcement. The price eased to $127.85 after rising $5.82 to a six-month high of $130.15 in regular trading.

Some profit-taking wouldn’t be a surprise, given the stock’s recent performance: It’s up 54% this year, while the average financial stock in the Standard & Poor’s 500 index still is down 11%, even after the 84% surge since March 6.

-- Tom Petruno

Photo: Goldman Sachs Chairman Lloyd Blankfein. Credit: Saul Loeb / AFP Getty Images

Stocks end mostly higher amid optimism on profit data
Stocks ended mostly higher Monday ahead of a flurry of earnings reports that could determine whether the economy is really getting better, as investors have been hoping over the past month as they drove the market higher.

Picking up the pieces
Lackluster results mark another dismal period for investors. But there are some signs of hope. The two best-performing Maryland mutual diversified stock funds were boosted in the first quarter by their holdings in consumer-oriented stocks, such as Apple and Amazon. Ellicott City-based Hussman Strategic Growth fund gained 7 percent while T. Rowe Price Group's New America Growth fund posted a positive return of 3.4 percent during the quarter. That may be surprising, given declining consumer confidence in a deepening recession. But consumers are still buying, just not as much.

China's bank lending soars -- and fuels worry

China's stimulus program is getting money into the economy. Now the government may be wondering whether the cash infusion could be too much of a good thing.

From Bloomberg News:

China’s new lending surged more than sixfold from a year earlier to a record 1.89 trillion yuan ($277 billion) in March, adding to signs that growth in the world’s third-biggest economy is gathering pace.

M2, the broadest measure of money supply, grew 25.5%, the central bank said on its website today. That’s the fastest since Bloomberg began compiling data in 1998.

China’s banks, which are mostly state-owned, have already met the bulk of the government’s target of at least 5 trillion yuan of new loans this year. Lending may top that level by as much as 3 trillion yuan, according to JPMorgan Chase & Co.

But some analysts, and government officials, are concerned about the risk inherent in this explosion of lending. One worry is that some of the money has just flowed directly into the stock market, via speculators.

The Shanghai stock market has been one of the world’s best performers this year, with a gain of 34.2%.

From Bloomberg:

"The central bank had to ensure it did enough to reflate the economy," said Kevin Lai, an economist with Daiwa Institute of Research in Hong Kong. "The question now is whether it has done more than is needed. Some of the money has gone to the property market, some to the stock market. It is not what the central bank wants to see.”

A concentration of loans in infrastructure projects is a potential hazard for banks, China Banking Regulatory Commission Vice Chairman Jiang Dingzhi wrote in the April 1 edition of China Finance, a magazine affiliated with the central bank. Unusual growth in discounted bills, which are used for working capital and dilute banks’ lending profits, "deserves high attention," Jiang said.

"The biggest dangers to China’s economy and financial system come from within, not from outside," Jiang Zhenghua, former vice chairman of China’s parliamentary standing committee, said at a financial conference in Beijing today. "The biggest of these hidden dangers is the degree of bad loans in China."

With the world starved for growth, the rest of us can only hope that China’s day of reckoning for the lending surge is a long way off.

-- Tom Petruno

Photo: An investor reacts in Shanghai Thursday as the stock market rebounds, after profit-taking hit on Wednesday. Credit: Eugene Hoshiko / Associated Press

China's reserves at $1.9 trillion
BEIJING China's central bank says its foreign exchange reserves rose 16 percent year-on-year to $1.954 trillion by the end of March. In a notice on its Web site Saturday the bank said reserves increased by $7.7 billion in the first quarter, $146.2 billion lower than the same period last year. Analysts believe China holds up to 70 percent of its foreign reserves in U.S. dollar-denominated assets, including Treasury securities.

It may be just a bear market rally, but it's the best one yet

Wall Street's search for "green shoots" in markets and the economy turned up enough for a decent salad Thursday.

That fueled a broad stock rally that surprised traders who were expecting a quiet session ahead of the three-day weekend.

Major U.S. share indexes were up between 3% and 6% on the day, after Wells Fargo & Co.’s upbeat earnings forecast and reports showing smaller-than-expected March sales declines at key retailers, a rise in U.S. exports in February and a drop in new weekly claims for unemployment benefits.

The market now is up five consecutive weeks since blue-chip shares sank to 12-year lows March 9.

You’d be hard-pressed to find someone on Wall Street who isn’t fearful this is just another short-term rally in an ongoing bear market. That’s only natural, after the last four rallies of 10% or more since Oct. 2007 all gave way to new market lows.

Trading volume was up Thursday from the low levels of recent days, but many market pros would have been suspicious of any big moves in stocks this week, with players’ ranks thinned by the Easter and Passover holidays.

Still, this now is the biggest rally since the bear market began 18 months ago. The Standard & Poor’s 500 index, which jumped 3.8% to 856.56 for the day, is up 26.6% since March 9, cutting its year-to-date loss to a modest 5.2%.

The last rally, which ran from Nov. 20 to Jan. 6, pushed the S&P up 24.2% before it fizzled.

Bespoke Investment Group analysts Justin Walters and Paul Hickey, who pore over market historical data for a living, say the action Thursday helped cement the view that "the current uptrend is the real deal."

"Just as investors played the prior downtrend by selling on big up days, investors now are playing the new uptrend by buying on pullbacks," Walters and Hickey said in a report.

Yet they, too, are nervous about the latest run-up. In technical parlance, the market is "overbought," they say, adding: "We remain comfortable with the longer-term implications of this rally, but we would still exercise extreme caution at current levels and wouldn’t recommend getting long until we once again pull back from overbought levels."

The question is how much cheaper of an entry point antsy bulls will want before jumping in, if "green shoots" keep appearing.

That was the term Federal Reserve Chairman Ben S. Bernanke used last month to describe the improvements he saw in some corners of financial markets. The term also has been applied to very modest signs of improvement in the economy -- including data showing that things still are getting worse, but at a slower pace.

President Obama’s chief economic advisor, Larry Summers, said Thursday that the economy was nearing a point where "you’ll no longer have that sense of free-fall."

That hardly seems justification for a wild new bull market. But it may be a good enough excuse to lift stocks a bit more from price levels that may have implied Armageddon.

"We’re starting to see what we’ve been asking for," said Anthony Conroy, head trader at brokerage BNY ConvergEx in New York. That includes "signs that the financials are getting back on their feet, and that maybe there’s a bottom in the housing market."

So, happy holiday weekend -- until the hunt for green shoots begins again Monday.

-- Tom Petruno

 

Obama: Economy starting to show 'glimmers of hope'
But president also acknowledges high rate of joblessness President Barack Obama declared Friday that the slumping economy has begun to show "glimmers of hope," but cautioned that it remains severely stressed and will require lots more work to turn it around.

Despite Wells' profit stunner, some analysts have doubts

Despite Wells' profit stunner, some analysts have doubts

Did a turning point for Wells Fargo & Co. and the entire banking industry arrive this morning with Wells' announcement that it would report first-quarter earnings of $3 billion? The market seemed to think so, but not all analysts were convinced.

The projected profit of about 55 cents a share, disclosed in a sneak peek at the San Francisco bank’s official earnings release next week, was more than double Wall Street’s consensus prediction of 23 cents.

While Wells provided relatively few details, Chief Financial Officer Howard Atkins said the company's mortgage business was booming and its takeover of Wachovia Corp. was working out better than expected.

Wells also said its ratio of tangible common equity to assets -- a conservative net-worth gauge that analysts have been focusing on this year -- would exceed 3.1%, above the 3% level often considered a benchmark of strength.

Not only were Wells’ shares up 32% for the day, to $19.61, but also the BKX index of major bank stocks jumped 20%. As my colleague Tom Petruno noted in this post, covering by "short sellers" probably played a role in the action. Nonetheless, the bank rally drove the broader market higher as well, with the Dow Jones industrials gaining 246.27 points, or 3.1%, to 8,083.38.

The big surprise for analysts was Wells’ first-quarter provision of $4.6 billion for potential loan losses -- a huge amount, to be sure, but markedly lower than Wall Street had expected.

For example, FBR Capital Markets number crunchers had projected a set-aside of $6.25 billion for losses. In a skeptical note to investors, FBR -- which has a "sell" rating on Wells -- said, "We believe that credit quality materially deteriorated in the first quarter and that Wells Fargo is under-reserving for expected future losses."

The FBR analysts, led by Paul Miller, said they were withholding judgment until they could see how accounting adjustments for the Wachovia takeover had affected the results. They also wanted to assess details of problems in Wells’ loan portfolio, particularly the tricky adjustable-rate mortgages that were largely responsible for Wachovia’s downfall.

At Keefe, Bruyette & Woods, analysts who rate Wells a "hold" said they were "positively surprised" that major cost savings from the Wachovia deal already appear to be kicking in. The KBW team, led by Frederick Cannon, had expected a credit-loss provision of $5.4 billion.

Bank analyst Bart Narter, a senior vice president at research firm Celent, said Wells benefited by acquiring wobbly Wachovia -- which with its huge East Coast presence gave Wells a national footprint -- and from the complications of rivals' mergers.

Wells is "twice the bank it was last year, due to the Wachovia acquisition," Narter noted, going on:

Wells boosted confidence in the Wachovia network, stopping the flight of deposits. In the meantime, two competitors in its key West Coast markets were distracted: Washington Mutual was acquired [by JPMorgan Chase & Co.] and Bank of America had the Merrill [Lynch] acquisition to contend with. Combine this with a flight to quality, and Wells wins big on both coasts.

Of other banks, Narter said, "Few will see so many factors working in their favor at the same time."

-- E. Scott Reckard

Photo: Wells Fargo Chief Financial Officer Howard Atkins. Credit: Bloomberg News

Govt on HRE takeover bid

BERLINTHE German government has launched a takeover offer for troubled lender Hypo Real Estate Holding AG.

The government's bank rescue fund says Thursday that it is offering shareholders of the battered commercial property lender 1.39 euro (S$2.79) per share.
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Microsoft infringed patent

NEW YORKA FEDERAL jury ordered US computer software giant Microsoft on Wednesday to pay US$388 million (S$589 million) to Uniloc for infringing on an anti-piracy software patent held by the company.

The award was made by a jury hearing the case in a district court in the US state of Rhode Island.
Eminent domain Preakness bill likely to pass
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Fed program to boost consumer lending sees low response

The Federal Reserve's attempt to jump-start consumer lending needs a jump-start itself.

The Fed today said investors requested $1.7 billion in low-rate financing from the central bank to buy securities backed by auto and credit-card loans. That was a sharp drop from the $4.7 billion investors sought in the first round of the so-called Term Asset-Backed Securities Loan Facility, or TALF, last month.

Fed Chairman Ben S. Bernanke had high hopes for this program, which is aimed at encouraging banks to expand consumer lending by reviving the securitization market for such loans. The central bank has said the program could fund up to $1 trillion in new lending over time.

The basic idea: Investors can get cheap Fed money to buy up securities backed by consumer loans and funnel cash back to banks for additional lending.

But investors appear to be balking, despite the easy financing -- and the potentially high returns that implies for buyers of the securities.

From Reuters:

"The expectation was that it would be bigger in the second round," said Ron D'Vari, chief executive and co-founder of New York asset management firm NewOak Capital. "At the current level it would take something like 60 years to fill the $1-trillion size of the Fed's program."

Analysts said worry that terms of the program could be retroactively changed, combined with uncertainty about whether other government programs might offer up a better deal, kept investors on the sidelines.

Lingering issues surrounding the terms of participation, including restrictions on borrowers on the hiring of foreign workers, likely also dampened appetite for the loans.

But another issue is that the raw material for the program is lacking: There’s no rush to create new asset-backed securities that could be financed under the TALF program, a sign lending remains limited.

From Reuters:

Issuance of TALF-eligible securities was minimal, with only five deals worth a total of about $3.2 billion. That was substantially short of last month's $8.2 billion of eligible securities.

The tough economic backdrop may also have contributed to the anemic showing, with consumers fretting about their jobs likely to hunker down rather than take out the new loans that could be packaged into asset-backed securities, analysts said.

Separately, the Fed reported today that consumer credit outstanding fell $7.5 billion in February, led by a decline in credit card debt. It’s impossible to tell, though, how much of that decline is related to consumers who decided to reduce debt on their own and how much is tied to banks’ moves to cut off borrowers.

-- Tom Petruno

Photo: Fed Chairman Ben S. Bernanke on Capitol Hill last month. Credit: Brendan Smialowski / Getty Images

 

Advice to ailing newspapers

WASHINGTONGOOGLE chief executive Eric Schmidt told worried US newspaper owners on Tuesday they need to work with the Web giant as they struggle to find a new business model for the ailing industry.

Speaking to a meeting of the Newspaper Association of America in San Diego, California, Mr Schmidt praised the role the press plays in a democratic society and stressed that newspapers should see Google as a partner not a rival.
Middle River cosmetics company files for bankruptcy
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If shoe is any sign, Cong may have to run for coverIf shoe is any sign, Cong may have to run for cover

Gold at lowest since January as traders flee again

Gold at lowest since January as traders flee again

Gold tumbled today to its lowest price in more than two months as traders fled the metal, dashing hopes for another run soon to the $1,000 mark.

Near-term gold futures in New York slumped $24.10, or 2.7%, to $871.50 an ounce, the cheapest price since January 22.

Today’s sell-off was attributed by some analysts to a further unraveling of the "fear trade" that briefly helped drive gold above $1,000 in February. In theory, investors’ growing sense of hope about an economic recovery in the second half of the year -- as signaled by the stock market’s rebound -- is reducing the appetite for havens including gold and Treasury securities.

Many other commodities, including oil, have gotten a lift in recent weeks from economic optimism along with the stock market. Gold has been odd man out, and has tanked in the last three trading sessions.

Short-term momentum players were in control today, said Joel Crane, metals strategist at Deutsche Bank in New York. He said some traders were driven out after gold sank through its 100-day moving average price, a key technical level for chart-watchers.

He thinks the metal could rally again in the next few months. For one, Indian gold jewelry demand, a crucial element in the market, has dived this year but could revive with the latest drop in prices and with a big national festival coming up late this month.

But Crane sees the price fading again by year’s end to around $850 an ounce.

Despite rising fears that the Federal Reserve’s massive dump of money into the financial system will stoke serious inflation down the road, Crane believes that gold’s fans are too optimistic about a huge segment of the population turning to precious metals to protect themselves against inflation.

It’s more likely, he says, that many investors will look elsewhere to make a reflation bet -- the stock market, for example, or inflation-protected Treasury bonds.

His lack of faith in gold, he says, also is predicated on the idea that the dollar isn’t headed for collapse (an event many gold bugs are sure is on the horizon).

"Unless we’re going to see sustained weakness in the dollar, I don’t think gold is going to be super exciting" from here, Crane said.

-- Tom Petruno

Photo: Double Eagle U.S. gold coin. Credit: Matt Rourke / Associated Press

Aussie to get $46b broadband

CANBERRAAUSTRALIA announced a A$43 billion (S$46 billion) national broadband network on Tuesday, in what Prime Minister Kevin Rudd described as the biggest infrastructure project in the country's history.

'Today I'm announcing that the Australian government will move ahead to establish, in partnership with the private sector, a company that will build and operate a fibre to the home national broadband network.'
Government vows to crack down on mortgage scams
The Obama administration warned Monday that scams targeting distressed homeowners struggling to modify their mortgages or avoid foreclosure are on the rise across the United States.

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IBM-Sun merger in trouble

IBM-Sun merger in trouble

WASHINGTONIBM's US$7 billion (S$10.5 billion) takeover bid of Sun Microsystems Inc appears to be on the verge of collapse, the Wall Street Journal reported on its website on Sunday, citing people familiar with the talks.

The daily reported that 'a person familiar with the situation' said that Sun has sent a notice terminating IBM's agreement for exclusive negotiations on a buyout, effectively breaking off the talks.
Looking out for the consumer
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Dayanidhi, Raja, Azhagiri, Baalu in DMK list
M K Azhagiri, son of DMK chief and chief minister M Karunanidhi, former IT minister Dayanidhi Maran, sitting ministers A Raja, T R Baalu, S S Palanimanickam and business magnet S Jagathrakshakan of Accord Group figure among the 21 candidates for the LS elections released by the party.

MGM hires banker to shop

NEW YORKCASINO operator MGM Mirage, struggling under a heavy debt burden and waning consumer spending, has hired Morgan Stanley to help it shop assets, The Wall Street Journal reported on Saturday.

According to the report, which cited unnamed people familiar with the matter, the Las Vegas-based company is considering selling the MGM Grand Detroit in Michigan and the Biloxi Beau Rivage in Mississippi, potentially fetching up to US$2 billion (S$3 billion).
Lawmakers seek legal means to keep Preakness here
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Gross domestic happiness: After Bhutan, its Sikkim
This remains the main commitment of the Sikkim CM on behalf of his party, Sikkim Democratic Front (SDF), just before assembly elections in the state.

Fannie, Freddie plan bonuses

Bank shareholders to ex-CEO: 'Give back your pension'

How would William Wallace have handled this?

Fed up shareholders at the Royal Bank of Scotland Group today voted more than 9-to-1 to, in effect, demand that former CEO Fred Goodwin give back his $1-million annual pension.

Goodwin, 50, has been the target of popular rage following his ouster last year, after soaring losses forced the bank to accept a bailout that gave the U.K. government a 58% stake in the company.

The vote rejecting Goodwin’s pay package was non-binding, as is typical with such shareholder measures. But it at least allowed investors to vent without resorting to physical violence -- unlike the vandals who stoned Goodwin's home in Edinburgh last month.

From Bloomberg News:

Kenneth Watt, a shareholder from Helensburgh, Scotland, said he voted against the remuneration plan.

"It was outrageous," Watt, 69, said. "There must have been alternatives."

RBS says the pension payments were required by Goodwin’s contract. The bank has asked lawyers to review the contract and RBS is "leaving no stone unturned" to see if any changes can be made, Chairman Philip Hampton said.

In an interview before the company's annual meeting, Hampton said he had asked Goodwin to give up a portion of the pension.

"A voluntary contribution from him either to the bank or a charity, or whatever, would be well received," he said in an interview with Bloomberg TV. "He said that he would think about that. How deep his thoughts are I am not sure."

Sky News cited unidentified sources saying that Goodwin isn’t considering the request. Phil Hall, Goodwin’s spokesman, declined to comment.

-- Tom Petruno

Photo: A glazier measures a vandalized window at the home of former Royal Bank of Scotland chief Fred Goodwin on March 25. Credit: Jeff J. Mitchell / Getty Images

Fannie, Freddie plan bonuses

WASHINGTONMORE than 7,600 employees of US government-rescued mortgage finance giants Fannie Mae and Freddie Mac are to receive US$210 million (S$316 million) in bonuses to keep them in their jobs, according to documents released by a lawmaker on Friday.

Of the total retention bonuses planned over the next 18 months by the two companies, seized by the government last September to prevent their collapse, more than US$50 million have already been paid, the Federal Housing Finance Agency (FHFA) said in a letter to Senator Charles Grassley
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New York immigrant center shooting leaves 14 dead
A man armed with two handguns walked into an immigration services center and killed 13 people before apparently turning the gun on himself, police in Binghamton, New York, said on Friday.

Laboratory supplier to add 50 jobs at its plant in Frederick

China's Changyou.com scores with its U.S. IPO

Online game developer Changyou.com Ltd. picked a great day to launch its U.S. initial public stock offering.

Amid a broad market advance today, investors bid the company’s new shares as high as $23.93 from the IPO price of $16. The stock closed at $20.02 on Nasdaq, up 25%.

Changyou.com, which raised $60 million in the stock sale, is just the second IPO in U.S. markets this year. Wall Street’s meltdown in January and February caused most IPO hopefuls to shelve their plans.

The only deal to be priced in the first quarter was from well-known infant-formula company Mead Johnson Nutrition, which was spun off from drug giant Bristol-Myers Squibb. Mead Johnson sold 30 million shares at $24 each on Feb. 10. The stock has gained 14% since then, to $27.35 today.

Changyou.com is a unit of Sohu.com Inc., which bills itself as China’s leading online media company. Of the 7.5 million shares issued in the IPO, half were from Changyou.com and half were from Sohu.com, which remains Changyou.com's controlling shareholder.

Changyou.com is a developer of so-called massively multi-player online role-playing games (MMORPGs).

I asked my Times colleague Alex Pham to explain MMORPGs. She writes:

The best-known example is World of Warcraft, developed by Irvine-based Blizzard Entertainment. Like other MMOs, World of Warcraft is an online game that can be played by millions of people simultaneously, pursuing fantasy-themed quests or explorations. More than 11.5 million people worldwide pay about $15 a month to play the game, giving Blizzard's owner, Vivendi, a highly stable and hugely profitable stream of revenue. While the game requires players to buy a packaged disc to begin playing, it's an attractive business because its online nature makes it piracy-proof -- only players who pay their monthly fees are allowed to play.

It's also a risky and highly competitive area of games. MMOs are expensive to build and even more costly to maintain (Blizzard employs more than 1,700 people to monitor the game and provide customer service). Dozens of publishers have attempted to launch MMOs over the years, only to see their sizable investments disappear. Examples include LucasArt's Star Wars Galaxies, The Matrix Online (based on the movie franchise), and The Sims Online, created by Electronic Arts.

In China, Changyou.com has a hit on its hands with a martial-arts game called Tian Long Ba Bu ("Novel of Eight Demigods"). The company reported net income of $108 million last year on sales of $202 million -- and 94% of those sales were derived from Tian Long Ba Bu. The company said the game had 1.8 million active paying accounts at year-end.

Although Changyou.com says it has three new games in the pipeline, it’s still reliant for now on its one big hit, and "we cannot guarantee how long TLBB will continue to sustain its current level of popularity," the company says in its prospectus for the IPO.

The Changyou.com IPO is the biggest U.S. offering by a Chinese company since Gushan Environmental Energy Ltd.’s $185-million deal in December 2007, according to Bloomberg News data.

-- Tom Petruno

Photo: From the game Tian Long Ba Bu. Credit: Changyou.com

RIM reports strong Q4 profits

NEW YORKCANADA'S Research In Motion, maker of the popular BlackBerry handheld devices, reported strong quarterly earnings on Thursday despite the slowing economy.

RIM reported net profit in the fourth quarter of its fiscal year of US$518.3 million (S$778), or 90 cents per share, up 25 per cent compared with the same period last year.
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IMF's counter-terror fund

U.S. oil supplies hit new 15-year high as demand ebbs

Oil prices have resumed their decline today after the government reported that U.S. crude stockpiles hit a fresh 15-year high last week.

Crude oil inventories rose 2.84 million barrels to 359.4 million in the week ended March 27, the highest since July 1993, the Energy Department said.

Gasoline inventories also rose, unexpectedly.

From Bloomberg News:

The gain in oil stockpiles left supplies 13% higher than the five-year average for the period, according to the department. Gasoline inventories were 2.7% above the average.

"The tanks are brimming," said Adam Sieminski, the chief energy economist at Deutsche Bank AG in Washington. "The numbers today show there’s plenty of supply."

Near-term oil futures fell as low as $47.26 a barrel during today’s trading session, and most recently were off $1.31 to $48.35. The price has slumped from a four-month high of $54.34 last Thursday.

Total U.S. daily fuel demand was 18.9 million barrels, on average, over the last four weeks, down 4.4% from a year earlier, Bloomberg reported. That was the lowest consumption for a four-week period since October.

"We will need to see demand come back before there is any sustained rally in this market," Kyle Cooper, an analyst at energy consultant IAF Advisors in Houston, told Bloomberg. "At this point demand is still falling."

If the economy is turning, it isn't showing up so far in fuel consumption.

-- Tom Petruno

 

Just How Much Bailout Money Is Left?

ABC News’ Charles Herman reports: Congress provided $700 billion to the Treasury to stabilize the financial system through the Emergency Economic Stabilization Act. 

As of March 27, the Treasury had announced programs with a maximum total funding of $667.4 billion (leaving $32.6 billion). 

George Stephanopoulos asked Treasury Secretary Tim Geithner Sunday on “This Week” how much money the department had left. 

"George, we have roughly $135 billion left of uncommitted resources," Geithner said. 

As this was the secretary’s first public announcement about the remaining TARP funds, the Government Accountability Office â€" GAO -- sat down Monday and crunched the numbers and reviewed them with Treasury and found Treasury’s projected use of funds stood at $590.4 billion.  That means $109.5 billion remains to be spent.

The $25 billion difference between the GAO figure and Secretary Geithner comes from whether or not banks return the money they have already received.  Geithner told Stephanopoulos, "Now that, that estimate includes a judgment, a very conservative judgment, about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession. But that's a reasonably conservative estimate. And it gives us, and this is very important, substantial resources to move ahead with this broad based sweep of initiatives to help get the financial system back in the business of providing credit.”

Yesterday, for the first time, three banks returned the money they had received through the TARP program,  giving back a total of $310 million.

So Geithner believes the amount available is larger, while those overseeing the Treasury’s implementation of the program hold to the figure $590.4 billion. 

Whether it’s $32.6 billion, $109 billion or $135 billion, will it be enough for the banks and the auto industry and whatever else needs financial assistance?

"We'll cross that bridge when we come to it in terms of whether we need additional resources,” Geithner said Sunday.  “And, of course, if we come to that point, we'll go to the Congress and give them the strongest case possible and help them understand why this'll be cheaper over the long run to move aggressively."

FINANCIAL STABILITY PLAN FUNDS (nee TARP) as of March 30

To date, $667.4 billion committed of the $700 billion, $109.6 billion remaining.

--  $218 billion available to financial institutions (previously $250 billion).  As of 3/30/09 banks had received $198.8 billion

--  $40 billion for AIG.  AIG received the money on 11/25/08.

--  $20 billion in additional funds for Citigroup (announced 11/23/08, provided 12/31/08)

--  $5 billion committed to any potential losses from Citigroup announced on 11/23/08

--  $45 billion for Term Asset-Backed Securities Loan Facility (previously $100 billion)

--  $5 billion to GMAC on 12/29/08

--  $1 billion for GM related to GMAC on 12/29/08

--  $9.4 billion for GM on 12/31/08 ($4 billion that day and $5.4 billion on 1/16/09)

--  $4 billion to Chrysler on 1/2/09

--  $4 billion to GM promised on 2/17/09 (subject to meeting certain conditions)

--  $20 billion to Bank of America promised (1/16/09)

--  $7.5 billion committed to any potential losses from Bank of America (1/16/09)

--  $1.5 billion loan to a special purpose entity created by Chrysler Financial (1/16/09)

--  $50 billion for Homeowner Affordability and Stability Plan ($25 Freddie/Fannie)

--  $30 billion to AIG (3/2/09)

--  $15 billion SBA loans under the Consumer and Business Lending Initiative to improve terms for securities backed by SBA loans in the TALF (3/16/09)

--  $5 billion Auto Supplier Support Program (3/19/09)

--  $100 billion for Public Private Initiative Fund (3/23/09)

For the latest click here: http://www.financialstability.gov/docs/transaction_report_03-30-2009.pdf

IMF's counter-terror fund

WASHINGTONTHE International Monetary Fund on Wednesday announced the launch of a fund aimed at financing technical assistance in the global fight against money laundering and terrorism financing.

The donor-supported trust fund will start operations on May 1 and provide about US$31 million (S$47 million) over five years to help strengthen efforts to combat the crimes, the IMF said in a statement.
First round of education dollars from stimulus going to schools
Education Secretary Arne Duncan on Wednesday released the first $44 billion in economic stimulus money directed to schools, but said strings will be attached to the next round of aid.

Jharkhand: Classy MLA looks to dazzle Hazaribagh electorate
Saurabh Narayan Singh, 34 is contesting the Lok Sabha elections from Hazaribagh constituency against BJP’s stalwart and former union external affairs minister Yashwant Sinha. He is also a good friend of Rahul Gandhi, who was his senior in the Doon School.

Treasury extends money market fund guarantee to Sept.

No real surprise here, but in case anyone with cash in a money market mutual fund was worried: The Treasury said today it would extend the federal guarantee of money fund assets through Sept. 18.

The guarantee program, put in place last fall as the credit crisis deepened, was to expire April 30 -- but almost nobody figured Uncle Sam would take it away this soon.

The guarantee was offered to the $3.8-trillion money fund industry after a large fund (the Reserve Fund) suffered losses on Lehman Bros. IOUs in September, triggering a run on that portfolio. The government feared that money fund investors would flee en masse.

The Treasury guarantee covers any cash investors had in money funds as of Sept. 19, 2008, but it doesn't apply to money added since then.

Money funds pay a small fee to the Treasury for the insurance coverage. All of the major mutual fund companies have joined the program.

-- Tom Petruno

Honda slashes pay in US

COLUMBUS (Ohio)HONDA Motor Co is offering voluntary buyouts, cutting workers' pay and imposing 13 non-production days at its North American plants to reduce its production this summer by 62,000 vehicles.

Honda spokesman Ron Lietzke said Tuesday that the buyouts will be offered to most of the Japanese automaker's 35,600 employees in the US, Canada and Mexico. He says enhanced retirement packages are also being offered.
Explore Howard Co.: GGP battered by more bad economic news

No talks till Pak cooperates: PM
Prime Minister Manmohan Singh reiterated his government's stand against resuming composite dialogue process with Pakistan till there were "visible signs" of forward movement in Mumbai terror attack investigations.

Stocks fall after automaker plans are rejected

GM bondholders beg for a seat at the table

General Motors Corp.'s bondholders know they're likely to become stockholders, whether the company reorganizes in or out of bankruptcy.

The question is whether the new stock they’d get would have any lasting value.

In that sense, the investors who own nearly $28 billion of GM’s bonds are on the same page as the Obama administration: They both want a GM reorganization that results in a viable company.

But the bond investors say they’re still on the outside looking in: They say they’ve largely been closed out of discussions about what to do with the auto giant.

"We have been very disappointed that the government and the company have had virtually no real dialogue with bondholders while designing the proposed restructuring plan," the ad hoc committee of bondholders said in a statement today.

The members of the committee haven’t made their names public. But Bloomberg News data show that some of major holders of GM debt at the end of last year included Capital Research and Management, which manages the Los Angeles-based American Funds mutual fund group; Fidelity Management in Boston; and Franklin Advisers, the San Mateo, Calif.-based manager of the Franklin funds.

GM’s bonds now mostly trade for between 10 cents and 30 cents on the dollar, depending on the issue.

The previous company proposal on the table was for debt holders to exchange two-thirds of their bonds for new equity in GM, and get cash and new debt for the remaining third.

Investors balked at that exchange because "they didn’t believe GM had a viable plan that would ensure that the equity they receive will be worth something eventually," said Shelly Lombard, senior high yield analyst at Gimme Credit, an independent research service on corporate bonds.

"And if GM still ended up filing bankruptcy after the bondholders had converted their bonds into equity, as holders of equity instead of debt, they would be last in line for any recovery and would have little if any negotiating leverage," she noted.

Now there’s a new proposal that would force an even bigger haircut on bondholders: They would get cash and new debt for just one-quarter of their bonds, and an equity stake for the rest.

From Reuters:

The committee representing GM bondholders plans to meet later on Monday to discuss a debt restructuring plan, according to a source familiar with the situation.

GM has offered bondholders 8 cents on the dollar in cash, 16 cents on the dollar in new, unsecured debt; and a 90% stake in the automaker, said the source, who spoke on condition of not being identified by name.

The offer would translate into $2.2 billion in cash, $4.3 billion in debt and an additional stock-based payout in a recapitalized company that would all but wipe out current stockholders.

The bondholders are in the same pickle as before: The more equity they take, the greater the risk of a total loss if GM eventually collapses despite any restructuring.

Sean Egan, head of bond rating firm Egan-Jones Ratings Co., says he thinks it's a joke to talk about converting any of GM's current debt into new debt.

Given its collapsing sales, he said, "GM can't support any debt service to speak of."

-- Tom Petruno

Photo: President Obama today. Credit: Alex Wong / Getty Images

YouTube, Disney close to deal

WASHINGTONGOOGLE-OWNED YouTube and Walt Disney Co are close to finalising a deal to distribute videos from Disney properties on the video-sharing website, The Wall Street Journal online reported on Monday.

The newspaper, citing 'people familiar with the matter,' said the agreement would involve Disney putting some clips, including sports content from ESPN, on YouTube and sharing advertising revenue.
Stocks fall after automaker plans are rejected
Dow ends session down 254 points Wall Street's March rally is on hold after the White House rejected turnaround plans from General Motors Corp. and Chrysler and gave investors an economic reality check.

Anjali Waghmare withdraws from Kasab's case
Protesters numbering about 50 attacked the lawyer's Mumbai house.