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.

New York's high-income earners facing big tax increase

New York's high-income earners facing big tax increase

Everyone wants Wall Street moguls to pay for their sins. Cash-strapped New York state is moving closer to enacting a tax penalty on wealthy financiers -- although the non-financier well-off also will have to pay up.

From Bloomberg News:

New York Gov. David Paterson agreed with legislative leaders on a budget plan that calls for higher income taxes on households earning more than $300,000, according to a person familiar with the negotiations.

New York, the third-largest U.S. state, faces a deficit of at least $16.2 billion for the year beginning April 1, as the economic recession and layoffs on Wall Street cut tax collections.

The tentative resolution was reached Saturday during discussions between Paterson, Senate Majority Leader Malcolm Smith and Assembly Speaker Sheldon Silver, the person said.

The higher tax rates are proposed to end after three years. Joint-filers earning more than $300,000 would pay a top 7.85%, and those earning above $500,000 would pay 8.97%, the same top rate as neighboring New Jersey, the person said. The possibility that a higher tax rate would lead wealthy New Yorkers to leave the state was debated in the months leading to the budget agreement.

New York’s current maximum tax rate is 6.85% for joint filers with adjusted gross incomes above $40,000.

California is taking a more egalitarian approach to plugging its budget hole: Everybody will pay more.

The budget deal reached last month will mean an across-the-board increase in personal income tax rates effective with this tax year, as my colleague Eric Bailey reported in this update Saturday. The rate in each tax bracket will rise 0.25 of a percentage point.

The new top tax rate for 2009 will be 9.55%, up from 9.3%. The top rate kicks in at taxable income of $94,110 for joint filers and $47,055 for singles.

There’s also a 1 percentage point surtax on Californians making more than $1 million. That surtax was approved by voters in 2004 to fund mental health services.

-- Tom Petruno

Photo: New York Gov. David Paterson. Credit: Mike Groll / Associated Press

GM Boss Wagoner to Resign, Source Says

ABC News' Jake Tapper, Zunaira Zaki and Charles Herman report: A White House official tells ABC News that the Obama administration asked GM chairman and CEO Rick Wagoner to step down, and Wagoner agreed to do so.

GM had no official comment.

The move is part of the administration's plans to restructure the auto industry, which President Obama is expected to announce Monday.

"We think we can have a successful U.S. auto industry. But it's got tobe one that's realistically designed to weather this storm and toemerge at the other end much more lean, mean and competitive than itcurrently is," President Obama said in a taped interview broadcast today on CBS' "Face the Nation."

Since late last year, General Motorsand Chrysler, the No. 1 and No. 3 automakers in the country,respectively, have received more than $17 billion total in aid as thetwo companies struggled to stay afloat amid plummeting auto sales and adifficult credit market. Last month, GM and Chrysler requested an additional $22 billion.

UK house prices fall in March

LONDONHOUSE prices in England and Wales are a record 10.3 per cent lower than a year ago, even though the prices fell at their slowest pace for 10 months in March, property data company Hometrack said on Monday.

March's annual fall was the biggest yet in Hometrack's monthly survey of estate agents and surveyors, which started in 2000 and has persistently reported lower price falls than official government data and that from mortgage lenders.
Tax havens face increased pressure from governments
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TDP-CPM stand off over seats intensifies
Newly-formed "grand alliance" of TDP, Left and TRS in Andhra Pradesh, which appeared to be floundering following a stand-off between TDP and the CPM over seat-sharing of assembly constituencies, went further into crisis.

Madoff Citi Field seats on sale?

NEW YORKTHE prime seats that Bernard Madoff's company bought at Citi Field, the new Mets stadium, could soon be available.

The New York Mets season tickets, just behind home plate, will likely be resold by the trustee for Bernard L. Madoff Investment Securities LLC.
Jobless rate keeps rising
State unemployment is highest since April 1992, but still below U.S. level Maryland's jobless rate rose to a nearly 17-year high of 6.7 percent last month, reflecting continuing economic woes in a deepening recession, the Labor Department said Friday.

Zardari's olive branch to India as US unveils Af-Pak policy
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Rotunda Cinematheque in Hampden will not reopen

CalPERS wants concessions from hedge fund managers

California's biggest pension fund is putting the squeeze on hedge funds that manage a chunk of the giant portfolio, seeking to cut better deals.

The $173-billion California Public Employees’ Retirement System today said it told more than two dozen hedge funds that it wants to "restructure relationships" to gain "better alignment of interests, more control of its assets and enhanced transparency."

CalPERS has a total of $5.9 billion invested with hedge fund managers.

"We can dictate terms that are more suitable" for a major investor, said Pat Macht, a spokeswoman for the Sacramento-based fund that provides retirement and healthcare benefits for 1.6 million government workers, retirees and their families.

The crash in global financial markets in the last year has wounded the hedge fund industry and has caused many investors to pull cash from the funds. The industry’s notoriously high fees have long been a source of irritation with clients, who now are in a stronger position to push back.

In a news release, CalPERS said the fees it pays fund managers "should be based on long-term rather than short-term performance."

As an example of what the pension giant sees as an inequity in the fee structure, it noted that "the present model provides the possibility of a hedge fund manager realizing a 20% performance fee at the end of a bonanza year. If the fund suffers a significant decline the next year, the manager could still have a large net gain at the end of the two years, but the investor may break even or even lose money."

Hedge fund fees "should better reflect the cost associated with generating performance and not be an invitation for asset-gathering," CalPERS said.

The pension fund also wants "the most timely disclosure of information possible" about where its hedge fund managers have invested CalPERS' dollars. Hedge funds typically prefer to be secretive about what they're buying and selling, for fear of tipping off rival investors.

CalPERS’ move to tighten its control of hedge fund investments comes ahead of a planned asset allocation study aimed at repositioning the pension portfolio.

Amid the markets’ meltdown, the fund has lost about 32% of its value since hitting a high of $253 billion in June 2007.

-- Marc Lifsher

Fiat chief slams state aid

TURIN (Italy)THE head of Italian auto giant Fiat on Friday slammed state aid given to the car industry in Britain, France and Sweden, saying it was 'very dangerous' and hurt competition in the sector.

'These are very dangerous unilateral decisions,' Sergio Marchionne said at the company's annual general meeting in the northern Italian city of Turin, which was targeted by workers protesting layoff conditions.
Rotunda Cinematheque in Hampden will not reopen
Kiefaber to concentrate on saving the Senator Theatre The Rotunda Cinematheque will not be re-opening, as operator Tom Kiefaber focuses his attention on saving the troubled Senator theater.

Obama pledges $7.5 bn "down payment" to Pak for US security
''Make no mistake: al-Qaida and its extremist allies are a cancer that risks killing Pakistan from within,'' Obama warned, even as he repeatedly expressed support for the Pakistani people and outlined policies to stabilize the troubled country.

Solar stocks soar after China offers to subsidize projects

The bear market apparently didn't kill off the last speculator: They were out in force today in solar stocks after China offered new subsidies to promote solar power.

From Bloomberg News:

Chinese solar stocks rose the most ever in New York trading after China, the world’s biggest greenhouse-gas emitter, introduced a subsidy to promote the use of alternative energy.

The government will offer this year 20 yuan ($2.93) per watt for solar projects with generating capacity of at least 50 kilowatts, the Ministry of Finance said in a statement posted today on its website.

“We believe meaningful upside potential exists if government support for domestic solar sector continues,” Barclays PLC analyst Vishal Shah wrote in a note to clients.

Among the day's big gainers: Suntech Power Holdings, China's largest solar-components maker, soared $3.44, or 44%,to $11.29; LDK Solar, which manufactures solar wafers, jumped $1.87, or 32%, to $7.76; Yingli Green Energy, which makes photovoltaic cells, surged $1.86, or 45%, to $6.01.

U.S. solar companies also got a lift on the news. First Solar jumped $16.41, or 12.2%, to $150.39.

Besides China's new incentives, growing optimism about the Obama administration's plans to boost renewable energy projects also may be pulling investors back to solar stocks.

Chinese solar stocks had been one of the market's biggest bubbles in 2007, before collapsing last year. Suntech had reached a high of $88.35 at the end of 2007. Yingli's record high was $41.40, also at the end of 2007.

But as manias go, that one at least had a fundamental underpinning: Suntech, LDK, Yingli, First Solar and many other solar players have been making real money for the last two years as sales have boomed.

Suntech is expected to earn 60 cents a share this year, the median estimate of 25 analysts who cover the company. That gives the stock an estimated price-to-earnings ratio of 19. First Solar's estimated 2009 P/E is 23. If these still qualify as long-term growth stocks, the P/Es aren't outlandish.

The Motley Fool has some details on the Chinese subsidy announcement, and some cautionary notes. Click here.

-- Tom Petruno

G-20 must act: Rudd

WASHINGTONTHE Australian premier called on Thursday for the biggest shake-up of the international financial order since World War II, warning that failure to act at next week's G-20 summit could worsen the crisis.

Prime Minister Kevin Rudd, visiting Washington to consult with President Barack Obama ahead of the London summit, urged revamping the International Monetary Fund (IMF) to give more power to China and other emerging economies.
NY Times, Washington Post to cut costs even more
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Losing allies, Cong counts on ‘hardliners’
A desperate Congress is now turning to hardline elements in the minority community for support.

Bond investors show who's boss on long-term rates

It's a rough day for the bond market, and that has helped drag the stock market down after an early rally.

In Britain, the government failed to find enough buyers for an offering of $2.55 billion in 40-year bonds.

In the U.S., the Treasury’s auction of $34 billion in five-year notes drew weaker-than-expected demand, driving the yield up to 1.85%, compared with the 1.80% that many traders had anticipated.

Britain, the U.S. and many other countries are borrowing heavily to try and spend their economies out of recession. Those spending plans depend on investors’ willingness to keep buying government bonds.

Even with the Bank of England and the Federal Reserve each pledging to buy some of their own government's bonds as a show of support, the bond markets are demonstrating today that investors call the shots on the direction of long-term interest rates.

In Britain, investors placed orders for about 93% of the bonds in today’s sale, according to Bloomberg News. It marked the first time in almost seven years that a sale failed to draw enough demand to complete the deal in full.

"This is a warning signal investors are sending to the government," Neil Mackinnon, chief economist at hedge fund ECU Group in London, told Bloomberg. "Investors are giving the thumbs down to the gilt market."

But a spokesman for Prime Minister Gordon Brown asserted that "the underlying strength of the market in gilts is there, reflected by the fact that our yields remain low. The shortfall in funding today can be made good in future auctions."  British bond yields initially rose on news of the sale today, but then came back down.

The U.S. Treasury sale of five-year notes attracted plenty of bids -- $69 billion for the $34 billion in notes offered -- but the higher-than-expected yield that investors demanded has spooked the Treasury market overall.

The 10-year T-note yield was at 2.76% about 12:15 p.m. PDT, up from 2.65% on Tuesday -- even though the Federal Reserve today began buying Treasuries for its own account, as promised a week ago.

On Wall Street, interest-rate worries have helped turn a 204-point rally in the Dow Jones industrial average into a 57-point loss with about 45 minutes of trading to go.

-- Tom Petruno

Photo: British Prime Minister Gordon Brown. Credit: Emmanuel Dunand / AFP Getty Images

Geithner wants action quickly

WASHINGTONTHE administration wants Congress to act quickly on legislation that would give it sweeping new powers to seize financial firms whose collapse could jeopardize the US economy, Treasury Secretary Timothy Geithner said on Wednesday.
Former Suburban Federal customers warned of fraud
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Lalu and Mulayam may join hands: Amar Singh
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Fund manager Western Asset cuts 10% of staff

Fund manager Western Asset cuts 10% of staff
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Goldman to pay back soon?

NEW YORKGOLDMAN Sachs Group said on Tuesday it hopes to return its US$10 billion (S$15 billion) investment from the government as soon as possible. Media reports said the repayment could come as soon as next month.

Goldman Sachs spokesman Lucas Van Praag said late Tuesday the bank wants to pay the money back as soon as possible, but that the company needs the approval of federal regulators first.
Arbitron to trim 10% of work force; 80 jobs cut locally
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Just 4 cr internet users, but parties already savvy
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To lure buyers to toxic assets, Geithner lowers their risk

To lure buyers to toxic assets, Geithner lowers their risk

The stock market's wild enthusiasm for Treasury Secretary Timothy F. Geithner's bank toxic-asset-disposal plan shows some investors believe it will work wonders to ease the banking system's financial woes.

But at what additional price to the taxpayer, and at what additional benefit to Wall Street?

At a news conference today, Geithner made clear that big investors that partner with the government to buy troubled assets would not be subject to federal oversight of what they pay their employees, except in the case of banks that also have gotten government aid.

From the Q&A with reporters:

Q. On the executive pay parts of this, the plan is to have passive investors not subject to that. But what about the asset managers?  Will they be subject to any pay restrictions?

Geithner: "I'm going to answer this carefully.  The basic answer is no.  If you're already an institution that's received TARP assistance, then you would be covered by the conditions -- the range of conditions that will apply to people who receive capital from the government.

"But these programs are different programs.  These are generally available programs.  They're designed -- like our housing plan, like the small business plan -- to get these broader markets working again.  And for those reasons the [compensation] conditions will not apply to the asset managers and investors in the program."

Despite the public outrage over the American International Group bonuses, the Obama administration knows that any attempt to rein in pay at firms (including hedge funds) that step up to buy or manage bank assets would almost certainly make the plan DOA.

As for the risk-to-reward ratio for the investors that participate, Geithner acknowledged that the government's capital contribution toward asset purchases, and the easy financing it will provide to private investors, substantially limited the investors' risk. Here's how the question was put to him today, and how he answered:

Q. Looking at the example you give in the fact sheet -- the first program -- you start with talking about $100 in bank loans, but the private investor only has to kick in $6 for -- seems to be on the hook for $6 at the end of the day, and the FDIC guarantees between there and whatever was paid for the bad loan.

Do you think a person outside this room, outside the Beltway, looking at that would feel like that's a -- you know, you've gotten a good deal by getting someone to kick in $6 for a loan that is valued at a $100, that's being purchased for $84?

Geithner: "I'm very confident you and your colleagues will do a good job of framing this thing -- (laughter) -- but let me just come back to the basic point. Okay? The point is, relative to what? What our job is, is to try to fix this problem in our financial system at least cost to the taxpayer and ways to get the incentives right so we can have private capital come in and not have the government do all of it.

"And the alternative strategies would have the government either taking on all that risk ourselves, having all those losses on our balance sheet -- or, sitting back and letting this process of deleveraging continue to weigh on the American economy, pushing viable businesses closer to the edge, where they have to shrink their businesses to get through this. And that's not an alternative we're prepared to support.

"The key thing is, again, that  . . . people have to compete for the right to get access to financing in this context and they have to put money at risk for it to work."

As for taxpayers' potential reward, Geithner of course couldn't quantify it. That will depend on how smart the investors are about buying the assets and collecting on them over time or selling them later to another investor. Taxpayers won't know what they've earned, if anything, for a long time.

Q. Can you clarify under both plans who is actually holding the assets at the end of the day, and explain to taxpayers what the upside is to all of that?  How are they going to share in the upside of this program?

Geithner: "These funds -- purchase assets -- they're managed by professionals who know how to do this for a living.  If there is a return to these over time, which we expect there will be, taxpayers will share in that return.  So taxpayers are getting to take the benefits of providing this financing to the market.  Now, of course investors will share, too, in that return, as you would expect.  That's the simplest way to describe it, I think."

-- Tom Petruno

Photo: Treasury Secretary Timothy Geithner. Credit: Ron Edmonds / Associated Press

Most agree to return bonuses

NEW YORKNINE of the 10 executives who received top bonuses from American International Group have agreed to return them, New York's top legal officer said on Monday.

New York Attorney General Andrew Cuomo told reporters on a conference call that he hopes to recoup US$80 million (S$120 million) of bonus payments, or about half of the US$165 million paid by the giant insurer on March 15.
Retailers, malls cutting hours as fewer customers shop
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No Marathi PM for now
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'US will rebound this year'

WASHINGTONPRESIDENT Barack Obama's administration is 'incredibly confident' the US economy will rebound within a year, a top adviser said on Sunday, before a critical week in efforts to flesh out and sell its recovery agenda.

'We will be seeing signs the economy is turning around,' Christina Romer, head of the White House Council of Economic Advisers, told the 'Fox News Sunday' programme.
Experts say splitting up FDA could speed drug approvals while improving food safety
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US mulls 'political role' for Taliban to end protracted stalemate
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Morgan Stanley's CEO got less

NEW YORKMORGAN Stanley Chief Executive John Mack received no raise, bonus or stock options last year, and the bank leader's total compensation of US$1.2 million (S$1.8 million) sank by more than US$40 million compared with 2007, according to a Securities and Exchange Commission filing.

Mr Mack, 64, earned an US$800,000 base salary and US$435,097 in other compensation, which largely involved personal use of company aircraft. But the CEO told Morgan Stanley's board that, as of March 10, he will reimburse the company for that.
Documents show AIG paid out $218 million in bonuses
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Congress, TMC to launch joint poll campaign
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AIG suing US govt

High yields in California bond sale could tempt investors

California may be forced to pay some rich yields next week to sell $4 billion in tax-free general obligation bonds.

That could present an opportunity for income-hungry investors in mid- to upper-income tax brackets.

As of Thursday, the talk in the market was for annualized yields of about 4% on the five-year bond in the deal and about 5% on the 10-year issue, just to give two examples.

Because that interest is exempt from state and federal income tax for California residents, the yields are equivalent to much higher interest rates on taxable investments, such as corporate or U.S. Treasury bonds, depending on your tax bracket.

For a married couple filing a joint return, taxable income of about $71,000 puts you in the 31% combined federal and state marginal tax bracket. A 4% tax-free yield in that bracket is equivalent to a 5.8% fully taxable yield.

If you're tempted, first note that to order the bonds you must have a brokerage account. The long list of brokerages participating in the deal is available on the bond prospectus, which you can reach via the state's buycaliforniabonds.com website.

Treasurer Bill Lockyer is actively courting individual investors via print and radio ads for the bonds, which will be sold in maturities of one year to 30 years. The minimum investment is $5,000.

Lockyer is hoping for a big turnout by individuals; the more they buy, the less power institutional investors may have to force up yields.

Institutions such as mutual funds and insurance companies are more likely than individuals to focus on the state's low credit rating, a byproduct of Sacramento's ongoing budget woes. Standard & Poor's and Moody's Investors Service both give California the lowest rating of any of the 50 states -- A and A2, respectively.

But as Lockyer is quick to note, the state constitution mandates that principal and interest payments must be made. California, he vows, would never default on its debts, short of Armageddon.

When the state sold $5 billion in short-term IOUs last fall, individual investors grabbed 80% of the securities. In the state's last bond sale, in June, individuals bought about half of the offering.

Here's how the deal will work: Individuals will have a chance to place orders with brokerages on Monday and Tuesday. The state will give an expected range of yields for each maturity, but won't guarantee them at that point.

On Wednesday, institutional investors will put in their orders, and the yields will be set. Individual investors who don't like the final yields will be able to cancel their orders. Typically, though, the final yields are pretty close to the initial estimates.

-- Tom Petruno

Photo: The state Capitol in Sacramento. Credit: Justin Sullivan / Getty Images

AIG suing US govt

NEW YORKWHILE the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of US$306 million (S$464 million) in tax payments, The New York Times reported on Friday.

AIG sued the government in February in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company's financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.
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Liddy: AIG Name 'So Thoroughly Disgraced' It'll Have to Change

California's credit rating cut by Moody's and Fitch

California's credit rating took another hit today, ahead of the state's mammoth bond offering scheduled for next week.

But the rating cuts by Moody’s Investors Service and Fitch Ratings just matched the move by rival Standard & Poor’s last month, when S&P dropped the state to the lowest credit grade of all 50 states.

Moody’s today reduced its rating to "A2" from "A1"; Fitch trimmed its rating to "A" from "A-plus."

S&P last month cut the state to "A" from "A-plus."

California’s budget woes are legendary, of course, so the ratings firms aren’t telling most investors anything they didn’t already know.

In a statement, Fitch said that, "Despite recent major [budget] balancing actions, the downgrade reflects the ongoing weakness of the state's economic and revenue performance and Fitch's expectation that the state will experience continued budgetary and cash flow stress going forward."

Still, in a relatively positive sign, Fitch said its ratings outlook for the state now was "stable," indicating that it didn’t expect to come back with another downgrade soon.

State Treasurer Bill Lockyer plans to issue $4 billion in tax-free general obligation bonds next week to fund infrastructure projects. It will be the state’s first long-term bond sale since June, and Lockyer is counting on heavy demand from individual investors.

Lockyer has been in a long-running battle with the ratings firms. He asserts that their grading methods don’t give the state’s bonds proper credit for the constitutional guarantees of interest and principal payments.

Tom Dresslar, a spokesman for Lockyer, said the state wasn’t put off by the Moody’s and Fitch moves because the ratings firms "have no credibility."

It’s unlikely the AAA-rated states, including North Carolina, Virginia and Utah, feel exactly the same.

-- Tom Petruno

Liddy: AIG Name 'So Thoroughly Disgraced' It'll Have to Change

ABC News’ Alice Gomstyn reports: The government bailout of AIG is of historic proportions, but will the name AIG become history too?

According to the embattled insurance giant’s CEO, the answer is yes.

Late into Wednesday’s House Financial Services hearing on AIG -- in between the spirited and sometimes testy exchanges over the AIGFP bonus controversy -- CEO Edward Liddy revealed that while the company’s healthy businesses would survive, its name probably wouldn’t.

“I think the AIG name is so thoroughly wounded and disgraced that we're probably going to have to change it,” he said.

Liddy cited one example: AIG’s U.S. property casualty business, American International Underwriters,  which is being “rebranded” as AIU. The AIG cord for AIU hasn’t been cut completely yet -- the business’ Web site, near the top, reads “a member company of American International Group Inc.”

Many of AIG’s life insurance businesses already have distinct names, Liddy said.

“So where there may have been an approach to use one single name like AIG,” he said, “we're reversing that and going back to some of their individual brand names.”

AIG won’t be unique in trying to save face through a name change: Phillip Morris Cos. distanced itself from its increasingly controversial tobacco products by reemerging as Altria, while discount airliner ValuJet -- which saw its reputation disintegrate after the crash of one of its planes in 1996 -- flies today as AirTran Airways.

While the AIG name remains in use, some are having a bit of snarky fun with the abbreviation, which is short for American International Group.

AIG stands for “arrogance, incompetence and greed,” Rep. Paul Hodes, D-N.H., said during Wednesday’s House hearing.

“Who cares what their name is,” one ABC News reader recently posted on the Political Punch blog. “They could (c)all themselves An Irrelevant Gaffe for all I care.”

BBC needs to cut $877m

LONDONTHE BBC needs to make 400 million pounds (S$877 million) in budget cuts over the next three years, its director-general said on Thursday, forecasting 'painful' reductions.

The reductions, required to balance its books and not exceed its borrowing limits, would including freezing pay for senior management as well as much-criticised multi-million pound deals for top stars.
Hunt Valley video game maker to be closed or sold
Big Huge Games, owned by Calif.-based THQ, designing role-playing game The California owner of a Hunt Valley video game maker says the Maryland company will be closed if it doesn't find a buyer in 60 days.

No pressure on India on troop pullback: US
The US on Thursday denied putting pressure on India to pull back its troops from the Pakistan border in the wake of the 26/11 Mumbai terror strikes.

Source: IBM in talks to buy Sun Microsystems

Mortgage rates expected to slide with Fed's new moves

Home loan rates should fall further with the Federal Reserve's latest moves to pull down long-term interest rates -- offering new hope to home buyers and to homeowners looking to refinance.

But how much lower loan rates might drop is a matter of debate on Wall Street. Although the Fed directly controls short-term interest rates, it merely influences long-term rates.

Some experts see mortgage rates tumbling another half-percentage-point in the next few weeks. Others see a smaller decline. Any move lower would be the right direction for the housing market, of course.

The Fed said today it would take two big steps to boost its influence over long-term rates: It will expand its purchases of mortgage-backed bonds to $1.25 trillion from its current commitment of $500 billion, and it also will buy $300 billion of longer-term Treasury securities.

The idea, with both programs, is to try to push up the market value of mortgage bonds and Treasuries, which in turn would pull down interest rates on the securities.

The Fed began buying mortgage bonds at the start of this year, and is credited with helping to keep downward pressure on loan rates. The average 30-year mortgage rate was 4.89% last week, compared with 6.5% last fall, according to the Mortgage Bankers Assn.

Direct purchases of Treasuries would add more firepower to the Fed’s efforts on interest rates, because Treasury bond yields are benchmarks for other long-term rates, such as on mortgages and corporate bonds.

The Fed’s announcement today had the desired effect: The 10-year Treasury note yield plunged to 2.54% from 3% on Tuesday. Treasury yields had been edging higher in recent weeks, but the Fed put the kibosh on that trend.

Ethan Harris, an economist at Barclays Capital in New York, said his firm figures that the Fed’s new commitment to damping long-term rates could bring mortgage rates down about a half-percentage-point in the next few weeks or so. That could mean rates below 4.5%.

Some mortgage brokers were already quoting rates in the 4.5% to 4.75% range today, not including upfront fees, or points, on the loans.

Still, the Fed can only succeed in keeping rates down if private investors are willing to buy mortgage and Treasury securities at the same yields the central bank is willing to accept.

"The risk in driving down [Treasury] yields is that investors might still choose not to buy riskier assets," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. "We simply don’t know how this will play out, because there is no prior experience to use as a route map."

If investors worry that the Fed’s unprecedented efforts to pump money into the economy will mean a surge in inflation in 2010 or 2011, they may be reluctant to lock in much lower interest rates on fixed-income securities.

Keith Gumbinger, vice president at mortgage research firm HSH Associates in Pompton Plains, N.J., noted that although mortgage rates have historically shadowed moves in 10-year T-note yields, that relationship has become "fractured" in recent months. Mortgage rates have declined year-to-date even though Treasury yields have rebounded from record lows in December.

Even so, he is encouraged by the Fed’s commitment to extend mortgage-bond purchases, Gumbinger said. He figures mortgage rates could be down about a quarter of a percentage point in the next few weeks thanks to the Fed’s announcement.

But he warned that another wave of refinancing activity could vex homeowners who are trying to get through to banks or mortgage brokers. The severe shrinkage of the mortgage industry over the last two years has left the business short of capacity to handle a crush of loan requests.

"We are probably going to run into that repeatedly" if loan rates keep dropping, Gumbinger said.

-- Tom Petruno

AIG mulls sale of NY HQ

NEW YORKSCANDAL-RAVAGED insurance giant AIG said on Wednesday it was considering the sale of its New York headquarters building and another Manhattan office tower to help the ailing firm raise cash.

Company spokesman Mark Herr said AIG 'is evaluating the potential sale of its headquarters building at 70 Pine Street and the 72 Wall Street building.
Source: IBM in talks to buy Sun Microsystems
Sun Microsystems shares climb $3.92, or 79 percent IBM Corp. is in talks to buy Sun Microsystems Inc. for at least $6.5 billion in cash, a deal that would shake up Silicon Valley and the corporate computing market, the Associated Press has learned.

Poll panel notices to Varun, BJP
The Commission, in its notice to Varun Gandhi, said it was “of the opinion that the above action on your part amounts to violation of the provisions of the model code of conduct”.

Gujarat moves SC over Bhopal waste disposal order

Wall Street rallies on; S&P 500 now is up 15% from its low

It's getting safer to peek at your 401(k) account.

Wall Street today rallied for the fifth time in six sessions, leaving some key indexes up 15% or more from their recent lows and reversing another chunk of this year’s damage.

The Dow Jones industrial average rose 178.73 points, or 2.5%, to 7,395.70. The blue-chip Dow has gained 848 points, or almost 13%, since it hit a 12-year closing low of 6,547 on March 9.

The broader Standard & Poor’s 500 index jumped 3.2% to 778.12, bringing its gain since March 9 to 15%.

While the American International Group bonus fiasco is stealing the headlines, it’s having no damping effect on the stock market’s improved mood.

As I noted here, Wall Street had been primed for at least a short-term bounce after the deep dive in February and the first few days of March.

But some buyers may be responding to glimmers of hope that the economy has stopped getting worse.

Investors seem to be encouraged by economic data that have been "horrible, but less horrible" than previous numbers, said Fred Dickson, market strategist at brokerage D.A. Davidson & Co. in Lake Oswego, Ore.

The government today said construction of new homes and apartments jumped 22% in February, though that was from extremely depressed levels in January.

The market’s rebound last week was fueled in part by signs that consumer spending had stabilized in January and February after diving in the last four months of 2008.

Technology stocks, a classic bet on economic growth, have been leading the advance from last week’s lows. The Nasdaq 100 index has risen 14.2% since March 9. It got a boost today from Apple Inc., which gained $4.24, or 4.4%, to $99.66 after the company unveiled an updated operating system for its iPhone.

Not surprisingly, many Wall Street pros remain skeptical that this market upturn has staying power. Michael Nasto, senior trader at U.S. Global Investors in San Antonio, Texas, said trading volume has been unimpressive over the last week.

"I’d have to see more volume to believe this rally is for real," he said.

Still, investors’ mood has been so grim, the "contrarian" view is that the market is likely to continue disappointing the bears and the cautious, for a change.

A weekly Bloomberg News survey of strategists at major brokerages asks them for their recommended portfolio allocations to stocks, bonds and cash. In last week’s survey, the mean recommended stock allocation was 51.5% -- the lowest since 1997.

The survey covers just a relative handful of strategists, so it can be skewed if one is particularly bearish. Still, not one recommends holding more than 61% in stocks at this point.

The mean recommended allocation to bonds is 39.1%, and the cash recommendation is 8.1%. Those have been great hiding places this year, but they'll lose their appeal to some investors if confidence rises that the stock market has, at last, hit bottom.

-- Tom Petruno

O'Neill's Prescription for the Financial System

As banks continue to undergo the stress tests announced last month by the Obama administration, former Treasury Secretary Paul O’Neill is advocating his own prescription for the financial system. O’Neill laid out his proposal to ABCNews.com.

I believe there is no hope for a market bottom until we embrace the companion ideas of truth and transparency. If I were in charge I would require each financial institution to classify their assets, by amount, into rating classes, beginning with AAA, and then down through the investment grade ratings. For assets such as credit card debt, I would have them post the dollar amounts, late pays and defaults and update the numbers every day. All of this would be posted on the Internet. For those assets the institutions claim cannot be properly valued, I would have them specify the amount and put them into a separate category called the quarantine account. The expectation would be that such assets would be held to maturity or until some event causes them to be reclassified.

The argument against doing this is that we can't handle the truth. However gruesome the truth may be, I believe the truth would give us a base to build on. ... We can't build a base so long as uncertainty causes the market to act as though there are no valuable assets at any financial institution.

The stress test idea is inside baseball. Is the market going to accept a judgment from people who have no credibility? I don't think so. If we, the people, had the facts I have called for, we could make an informed decision as to what action should be taken next. Without these facts one has to wonder, what is the basis for the actions that are being taken and contemplated by the people in our government?

70% tax on AIG bonuses?

WASHINGTONTWO US senators proposed on Tuesday a 70 per cent tax on bonuses for executives at companies that received money from the US$700 billion (S$1.07 trillion) financial bailout package in a bid to recover millions of dollars in bonuses paid to executives of American International Group Inc.

The proposal by Senators Max Baucus and Chuck Grassley, the Democratic chairman and the top Republican on the Senate Finance Committee, would require the companies to pay a 35 per cent excise tax and the other half would be paid by the recipient.
Record & Tape Traders in Catonsville to close tomorrow
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Gujarat moves SC over Bhopal waste disposal order
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US Airways: Demand stabilising

Cuomo will subpoena to get AIG bonus details

American International Group will be subpoenaed for the names of the employees who were paid retention bonuses, New York Atty. Gen. Andrew Cuomo said today.

Cuomo had demanded that AIG supply the information by 4 p.m. EDT, a deadline the company didn’t meet.

In a conference call with reporters, Cuomo addressed AIG’s stance that the company has employment contracts under which it was liable to make the retention bonus payments -- despite the government’s subsequent bailout of the firm, which has made Uncle Sam the controlling shareholder.

From Bloomberg News:

"If the taxpayer didn’t bail out AIG, those contracts wouldn’t be worth the paper they’re printed on," Cuomo said. "Just because there’s a contract doesn’t mean there’s no way around the contract."

"The whole concept of a performance bonus to me is oxymoronic when it comes to AIG," he said. "These are people especially in the financial products’ division that virtually" bankrupted the company, "that’s why the taxpayer had to come in."

President Obama today vowed the goverment would find a way to get the money back.

House Speaker Nancy Pelosi called on AIG executives to "voluntarily forgo their excessive retention payments."

No word yet whether any AIG employees are offering to be first in the give-back line.

-- Tom Petruno

Former AIG CEO Greenberg Defends Reputation

ABC News’ Alice Gomstyn reports: Former AIG chief executive Hank Greenberg is defending himself against criticism that his creation of AIG’s Financial Products unit was what ultimately led to the company’s spectacular decline.

“I’ve been out of the company for four years,” he said in an interview with ABCNews.com. “How could I be responsible for the problems they are suffering?”

A source close to AIG told ABC News that Greenberg was to blame for creating a unit that "put the whole company and the whole economy at risk.”

But Greenberg, who also criticized AIG for its retention bonuses today, said that under his tenure, the unit earned $5 billion by writing credit default swaps -- financial instruments that essentially act as insurance policies on other investments -- that passed the standards set by “the best risk management (departments) in the damn industry.”

Greenberg said after he left the company in 2005, AIGFP wrote double the number of credit default swaps but those swaps, he said, were of a lower quality than before.

“The losses didn’t come from what we did -- the losses came from what they did afterwards,” he said.

Greenberg also dismissed criticism that he created a culture of extreme risk-taking at AIG that later led to its calamitous investments.

“We had a culture of being innovative but prudent,” he said. “You rewarded creativity, not stupidity.”

--With reports from ABC News’ Matt Jaffe.

US Airways: Demand stabilising

MINNEOLISEXECUTIVES from US Airways Group Inc said on Monday that demand and airfares seem to be stabilising after sharp drops in January and early February.

US Airways President Scott Kirby told investors on a conference call that it's still difficult to tell where bookings are headed.
Stocks end lower after gain in financial stock fizzles
NEW YORK — Wall Street is ending lower as a gain in financial stocks fizzles and investors lock in profits. A retreat in stocks late in the session Monday comes after four straight sessions of gains last week. Stocks jumped more than 10 percent in the prior four sessions on easing worries about banks.

Hey parties, don't leave those kids alone!
While issues like physical security and economic well being are taken up in big way during elections, the issues of a young mind growing up in an increasingly demanding and challenging world, have often been left out.

Shoots of revival evident

WASHINGTONIN his first television interview, Federal Reserve chairman Ben Bernanke predicted that America's worst recession in decades likely will end this year, and that the economic recovery would gather steam next year.

In the '60 Minutes' interview broadcast by CBS late on Sunday, which the network said was the first by a sitting Fed chairman in 20 years, Mr Bernanke said the 'green shoots' of economic revival were already evident.
Insurance giant AIG pays out millions in bonuses
WASHINGTON — American International Group is giving executives in its most troubled business unit tens of millions of dollars in new bonuses even though it received a taxpayer bailout of more than $170 billion dollars.

Democracy is certainly good for the economy
Satin and cotton cloth in red, blue, green and saffron lie strewn all over a mud floor under a makeshift roof at a slum in Aliganj, Lucknow.

Madoff's lawyers want him freed pending sentencing

Madoff's lawyers want him freed pending sentencing

If he stays in jail while awaiting sentencing, swindler Bernie Madoff can looking forward to breakfasts of oatmeal and a banana -- and the company of accused drug dealers, mobsters and terrorists.

But his lawyers are trying to persuade a federal court that the 70-year-old Madoff should be free until his June 16 sentencing.

From Bloomberg News:

Bernard Madoff’s lawyers, seeking to have the convicted money-manager released from a high-security prison before he’s sentenced in June, asked a federal appeals court set aside a judge’s order that he be jailed.

Ira Sorkin, Madoff’s lawyer, filed an appeal Friday with the U.S. Court of Appeals in New York. The legal brief came a day after a lower-court judge ordered Madoff jailed after he pleaded guilty to masterminding the largest Ponzi scheme in history.

"Since his arrest, Mr. Madoff has complied at all times with the extraordinarily restrictive bail conditions imposed upon him," Sorkin wrote in the 19-page brief. "He has not attempted to flee nor has he attempted to harm any individual or the community."

The lawyer asked for an expedited ruling and renewed bail under the previous conditions. He argued that the lower-court judge applied the wrong legal standard for bail. The court scheduled arguments for March 19. Madoff won’t attend.

While incarcerated at the Metropolitan Correctional Center in Manhattan, Madoff will be inmate number 61727-054. The facility, Bloomberg says, also houses accused drug dealers, mobsters and terrorists.

Asked to provide some examples from the prison menu, spokesman Scott Sussman said a typical breakfast is oatmeal and a banana. Lunch could be baked chicken and collard greens. Dinner options include spaghetti with meat sauce and spinach.

When he’s finally sentenced, Madoff faces a prison term of as long as 150 years.

-- Tom Petruno

Photo: A typical cell at the Metropolitan Correctional Center in Manhattan. Credit: AFP / Getty Images

'Absolute confidence' in US

WASHINGTONUS PRESIDENT Barack Obama said on Saturday that China could have 'absolute confidence' in the US economy, after Premier Wen Jiabao expressed concern about Chinese investments in the United States.

'Not just the Chinese government, but every investor can have absolute confidence in the soundness of investments in the United States,' Mr Obama said after meeting Brazilian President Luiz Inacio Lula da Silva at the White House.
Chapter 11 fears drop Six Flags shares
NEW YORK Shares of Six Flags Inc. fell yesterday on growing speculation that the theme park operator might be forced to file for Chapter 11 bankruptcy protection after the company said it could not meet a looming financing obligation. Six Flags shares, which have traded under $1 since last September, lost 3 cents, or 15.8 percent, to close at 16 cents yesterday. The stock has traded between 16 cents and $2.50 during the past 52 weeks. In its annual report Wednesday, the company said a Chapter 11 filing is possible if the New York-based company cannot reach a deal to restructure its debt.

Amar changes tone, says secular govt without Sonia impossible
Samajwadi Party national general secretary Amar Singh questioned the secular credentials of the newly-formed Third Front saying there can be no secular government without Sonia Gandhi.

Despite China's jitters, Treasury bond market stays calm

The Treasury bond market hiccuped early today after Chinese Premier Wen Jiabao expressed nervousness about the "safety" of U.S. debt.

But a modest rise in yields on long-term Treasury bonds quickly brought buyers back into the market, which has been remarkably resilient in recent weeks despite Uncle Sam's huge ongoing borrowing wave.

The 10-year T-note yield, which jumped as high as 2.97% this morning, ended the day at about 2.89%, flat with Thursday's closing yield. The 30-year T-bond edged up to 3.67% from 3.63% on Thursday. Yields on shorter-term Treasuries ended mostly lower for the day.

At a press briefing in Beijing today, Wen noted that China had "lent huge amounts of money to the United States," making China America's single biggest creditor.

"To be honest, we are a little bit worried," Wen said. "We hope the United States honors its word and ensures the safety of Chinese assets."

What was his point? The Chinese may be legitimately worried about record U.S. borrowing this year to fund the Obama administration’s rescues of the economy and the financial system. Government stimulus spending is expected to be a key discussion point at this weekend’s meeting of finance ministers of the Group of 20 nations in London.

If investors begin to balk at Treasury debt, forcing yields up dramatically, that would devalue China's holdings of older fixed-rate Treasuries.

Wen also may have been warning the U.S. against badgering China on the issue of its currency’s value against the dollar. China has resisted allowing its currency to appreciate quickly against the greenback, for fear of driving up prices of Chinese imports for U.S. buyers.

"I think it’s a lot of political posturing for currency purposes," said John Spinello, a market strategist at brokerage Jefferies & Co. in New York.

Despite Wen’s jitters, the Treasury market still is basking in the glow of surprisingly strong investor demand this week as the government sold $18 billion in new 10-year T-notes and $11 billion in 30-year T-bonds Wednesday and Thursday, respectively.

A wild card that continues to buoy the market is the possibility of the Federal Reserve stepping in to buy Treasury bonds for its own account. The Fed has said in recent months that it was considering the move as a way to push long-term interest rates lower, to help the economy. Fed policymakers are expected to provide an update on their thinking when they meet Wednesday.

The Bank of England last week said it would begin buying British government bonds -- and the market reaction was dramatic: The yield on 10-year British bonds has plunged to 2.94% from 3.64% on March 4.

With that kind of response, bond traders are reluctant to sell Treasuries now, figuring the Fed could work some of the same magic if it decides to jump into the market, said Lou Crandall, chief economist at bond research firm Wrightson IC in Jersey City, N.J.

-- Tom Petruno

Photo: Chinese Premier Wen Jiabao. Credit: Diego Azubel / European Pressphoto Agency

Madoff appeals for bail

NEW YORKLAWYERS for Bernard Madoff argued that a US court erred in jailing him pending sentencing and will ask an appeals court to reinstate his bail and house arrest, according to court papers filed on Friday.

Madoff, 70, was jailed on Thursday after pleading guilty to running the biggest investment fraud in Wall Street history. His sentencing on 11 criminal charges is scheduled for June 16, when he could be imprisoned for the rest of his life.
Geithner: Crisis has led to 'excess of fear' in markets
WASHINGTON — President Barack Obama's top economic adviser said Friday the nation's economic crisis has led to an "excess of fear" among Americans that must be broken to reverse the downturn.

For BJP, the fight is within
Arun Jaitley stayed away from party's Central election committee meeting.

In a rarity, Bernanke to appear on "60 Minutes"

In a rarity, Bernanke to appear on "60 Minutes"

What's next -- a gig on "Dancing With the Stars?"

Federal Reserve Chairman Ben S. Bernanke will be interviewed at length on CBS’ "60 Minutes" on Sunday, an unusual forum for a central bank chief.

Bernanke "tells correspondent Scott Pelley what he thinks went wrong with America's financial system, how it caused the economic crisis, what the Federal Reserve is doing to help fix it and when he expects the crippling recession to end," CBS says.

Doesn’t sound like a real news-breaker. Rather, Bernanke seems to be making a conscious effort to humanize himself for public consumption.

It will be interesting to see how much he tries to instill confidence in the economy -- i.e., cheerleading -- as opposed to reminding us how bad things are.

CBS says the segment "also includes an interview in Dillon, S.C., where Bernanke grew up. '60 Minutes' accompanied the Fed chairman to his home town, where he visited his old high school and talked to Pelley about how the current financial crisis is taking its toll on Main Street America."

Asked why Bernanke agreed to the interview, Fed spokeswoman Michelle Smith told the Associated Press: "Chairman Bernanke believed the invitation from `60 Minutes' presented a useful opportunity for the Federal Reserve to communicate broadly during this extraordinary economic time."

-- Tom Petruno

Photo: Ben S. Bernanke

GE stripped of AAA rating

NEW YORKGENERAL Electric Co was stripped of its AAA credit rating by Standard & Poor's, which cited the performance of GE's finance unit, but its shares rose 12.7 per cent as investors breathed a sigh of relief the cut was not deeper.

S&P said a sharp deterioration in world economies would lead to rising credit losses across GE's finance portfolio. However, S&P raised its outlook to stable from negative.
Jobless claims rise as retail sales slip
With layoffs spreading, the number of initial claims for jobless benefits rose last week, while the total number of people continuing to receive benefits set a record high, the government said today.

States refuse to pad up for revised IPL
Punching a hole in IPL commissioner Lalit Modi’s claims that government clearance for Season 2 was on track, almost all states have rejected the revised tournament schedule or sought elaborate cover from Central para-military forces for the matches.

FPA funds' Rodriguez plans to take a leave from the firm

Veteran L.A. mutual fund manager Robert Rodriguez is planning to hand over day-to-day fund operations to his partners at the end of 2009 and take a one-year sabbatical.

As CEO of First Pacific Advisors, the 60-year-old Rodriguez has built a great reputation over the last 25 years as a boutique money manager: The firm is relatively small, with $8 billion in total assets, but Rodriguez has earned high marks as a manager of both stocks and bonds -- an industry rarity.

His FPA Capital stock fund gained 5.1% a year, on average, over the last decade, compared with a 3.4% average annual loss for the Standard & Poor’s 500 index in that period.

Rodriguez’s FPA New Income bond fund was up 5.6% a year over the last decade, ranking it near the top of all fixed-income funds. Unlike fund managers who bought into the subprime mortgage bond boom, Rodriguez was an outspoken critic of the subprime mania, warning repeatedly that investors had no clue about the risks they were taking in the securities.

As a classic "value" investor, Rodriguez has a Warren Buffett-style aversion to losing money. But preserving capital has been an impossible task for nearly all stock fund managers in this bear market. FPA Capital slumped nearly 35% last year, which was less than the S&P 500 but still a bruising decline. The fund is down almost 14% this year, still much better than the market overall.

Rodriguez said his decision to step away wasn’t a market-related issue, but stemmed from his desire to take "my first time off since I was 8 and after 39 years of continuous work in the industry and 35 in money management."

An avid amateur race-car driver, Rodriguez said he hoped to use his year off to "travel, read, race and possibly think about how I might become a positive contributor to the serious challenges facing our country. I’m not sure of the last and want to give it some thought."

Even once he returns in 2011, Rodriguez plans to leave his funds in the hands of his partners.

Beginning next year, the FPA Capital fund will be managed by Dennis Bryan and Rikard Ekstrand, who have worked with Rodriguez for the last 16 years and 10 years, respectively.

At FPA New Income, current co-manager Thomas Atteberry will take the reins.

-- Tom Petruno

Photo: Robert Rodriguez. Credit: Anne Cusack / Los Angeles Times

Miami Herald sacks 175

MIAMITHE Miami Herald on Wednesday said it will sack 19 per cent of its workforce, and slash the wages of its remaining staff, two days after parent McClatchy Co announced major cuts due to falling revenues.

The daily's publisher David Landsberg also said the remaining workforce will have to to take one week off without pay, as the newspaper seeks cost-cutting measures to deal with the nationwide loss of readership and revenues.
Apple launches new model of iPod shuffle that can speak
New model will be smaller, speak names of artists and songs Apple Inc. is launching a smaller version of the iPod shuffle. It has a new feature that speaks the names of artists and songs.

Pakistan in grip of unrest as govt, Oppn fight it out
Pak govt on Wednesday launched a crackdown on opposition activists.

Mamata gives 2 days to Congress

Stocks get their long-awaited bounce. But can it last?

This may qualify as the most anticipated stock market rally in history.

Now, the pressure will be on the bulls to keep it from being another one-day wonder.

With blue-chip share prices at 12-year lows -- and the gloom unrelentingly thick for the last few weeks -- even some of the market’s biggest bears had been predicting a sharp snap-back, as I noted here on Monday.

We got the bounce today. The Dow Jones industrials shot up 379.44 points, or 5.8%, to 6,926.49, the biggest percentage gain since the index jumped 6.5% on Nov. 21 -- which marked the end of the autumn market meltdown.

The broader Standard & Poor’s 500 surged 43.07 points, or 6.4%, to 719.60, its largest percentage gain since Nov. 24.

Todd Clark, trading chief at Nollenberger Capital Partners in San Francisco, said that although the market has had other big, one-day bounces this year, "This one does feel a little different. We had good volume, which was very encouraging."

Another positive sign: On the New York Stock Exchange, 2,917 issues rose -- the greatest number in any session since Oct. 13. That shows broad-based buying.

All the market needed was a spark, and it came from (of all places) Citigroup Inc., after the government-supported banking titan said it was profitable in January and February.

That helped drive a spectacular rally in financial stocks in general, sending an index of 81 financial issues in the S&P 500 up 15.6% -- the biggest one-day gain since Nov. 24.

Some of the buying in the financial sector almost certainly was by "short sellers" who were closing out their bets that the stocks would fall even lower.

The shorts had another reason to be wary: Rep. Barney Frank (D-Mass.) told reporters in Washington that he believed the Securities and Exchange Commission soon would reinstate the so-called uptick rule to curb short sales.

Finally, Federal Reserve Chairman Ben S. Bernanke sounded sympathetic to bending "mark-to-market" accounting rules to provide relief to banks from further debilitating mortgage write-downs.

Marc Pado, U.S. market strategist for brokerage Cantor Fitzgerald, said Wall Street still is in the mode of looking for a bottoming of ravaged financial stocks to signal that the rest of the market -- and the economy -- also are at or near the bottom.

If the Treasury’s long-delayed plan to deal with banks’ toxic assets is announced in the next couple of weeks, Pado said, it could give investors confidence to keep piling into battered financial issues, betting that the worst finally has past.

Still, for the moment many market pros just are hoping to string together two back-to-back winning sessions, a feat last accomplished Feb. 11-12. After that, they’ll focus on whether this is yet another rally in an ongoing bear market, or something sustainable.

A critical question for the bulls, in the short-term and the longer-term: Will there be enough of them to overcome selling from people who’ve been waiting desperately for a bounce to exit this market vale of tears, once and for all?

After the worst market losses since the 1930s, "The bigger issue we've got is people now shunning equities as an asset class," and wanting no more part of Wall Street, Clark said.

-- Tom Petruno

Photo: Smiling again on the NYSE floor. Credit: Andrew Harrer / Bloomberg News

Betting on Geithner’s Future

ABC News’ Charles Herman reports:  Complaints about the administration’s response to the worsening economic situation have zeroed in on the Treasury Department and Secretary Timothy Geithner.

Despite all that his overworked department has accomplished in the first 50 days of the new administration, his less-than-successful unveiling of the Financial Stability Plan (or Troubled Assets Relief Program 2.0) and subsequent public appearances and on Capitol Hill have resulted in Geithner receiving low marks for his leadership, as my colleague Jake Tapper reported.

Now the wondering is not just about when Geithner will reveal specifics about how to tackle the toxic mortgage assets still polluting banks’ balance sheets, but whether Geithner will keep his job.

Intrade, which lets you trade in predictions, has set up a futures market on whether or not Geithner will still be in office by the end of June and another one for him leaving office by the end of December.

You can basically look at the trade price as the percentage of people who think that some event will happen.  Accordingly, 22 percent of people trading believe Geithner will leave office by the end of this year.

Intrade has futures markets for a range of topics like whether Apple CEO Steve Jobs will leave by the end of this year (55 percent), whether Osama bin Laden is captured in September (8 percent) and if General Motors files for bankruptcy by December (75 percent).

(Psst ... Adam Lambert is currently predicted to win “American Idol”).

150 years in prison?

NEW YORKFALLEN Wall Street baron Bernard Madoff confirmed on Tuesday he is set to plead guilty to a massive multi-billion dollar fraud and prosecutors said he should spend the rest of his life in prison.

After months of speculation, Madoff confirmed in court through his lawyer Ira Sorkin that he will plead guilty at a hearing on Thursday.
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Banks and allies want 'immediate' fix to accounting rules

The big guns came out blazing today in the battle over "mark-to-market" accounting.

In a letter to the leadership of the House Financial Services Committee -- which will hold a hearing Thursday on mark-to-market rules -- 31 industry groups and financial institutions called for "immediate action" to halt the "spiral of accounting-driven financial losses."

In other words, end mark-to-market as it is now broadly applied to the banking industry.

The letter’s signatories included the American Bankers Assn., the Independent Community Bankers of America, the Mortgage Bankers Assn. and the U.S. Chamber of Commerce.

Thursday's hearing will be chaired by Rep. Paul Kanjorski (D-Pa.), who heads the Financial Services Committee's capital markets subcommittee.

For the last year, the banking industry has asserted that mark-to-market, or fair-value, accounting has worsened the financial crisis by forcing banks to drastically write-down the value of many mortgage securities they hold.

The Financial Accounting Standards Board’s rules basically require financial institutions to value securities on their books at current market prices, even if the securities don't mature for many years.

Bankers say that has unfairly ravaged their balance sheets because, they say, market values of mortgage-related securities have been unrealistically depressed, reflecting the massive uncertainty over the housing market. As banks’ balance sheets have deteriorated so has their ability to lend, they say.

The groups writing today to Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) and to ranking Republican Rep. Spencer Bachus (R-Ala.) demanded that Congress "correct the unintended consequences" of market-to-market accounting.

From the letter:

"Let us be clear, real economic losses should be recognized and are necessary for orderly markets. However, the recognition of losses that do not have a basis in economic reality is unsustainable in any environment. Appropriate changes in mark-to-market accounting should not wait until mid-year or year-end. This will only allow the spiral of accounting-driven financial losses to continue."

Investor groups and others that oppose tinkering with mark-to-market rules fear banks would choose to value mortgage securities at unrealistically optimistic levels, misrepresenting the quality of their balance sheets.

The witness list for the hearing Thursday hasn’t yet been posted. I’ll put it on the blog as soon as I see it.

As I noted Friday, two congressmen last week introduced a bill to create a new federal board to review the "application" of accounting principles dictated by the FASB.

-- Tom Petruno

Photo: Rep. Paul Kanjorski (D-Pa.). Credit: Haraz N. Ghanbari / Associated Press

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The announcement comes as the US government's 'working group' on the automobile industry was meeting with the UAW and top managers of General Motors and Chrysler as they try to chart a way to restructure the two companies to avoid bankruptcy.
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