Wednesday, March 25, 2009

ICBC shares rally after 2008 net income rises 36%

Shares of Industrial and Commercial Bank of China stacked up a double-digit percentage gain in Hong Kong trade Thursday after the bank reported a 36% rise in 2008 net profit.Gains in ICBC's share price were also attributed to an agreement struck with Goldman Sachs that will enable the U.S. bank to sell part of its 4.9% stake in the Chinese lender, the world's biggest bank by market value.Goldman Sachs on Wednesday committed to keeping 80% of its investment in ICBC until April 2010. The U.S. bank will be free to sell 20% of its current holding after April 28.

Shares of ICBC (HK:1398: news , chart , profile ) were up 11.5% to HK$3.98 at the lunch break in Hong Kong.ICBC said late Wednesday that 2008 net profit totaled 110.84 billion yen ($16.2 billion) compared to 81.5 billion yuan in the prior year.

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Cheung Kong's Profit Falls First Time Since 2003

Cheung Kong (Holdings) Ltd., Hong Kong billionaire Li Ka-shing's property developer, posted its first drop in full-year profit since 2003 amid lower earnings from its Hutchison Whampoa Ltd. unit and home sales.Net income fell 44 percent to HK$15.5 billion ($2 billion), or HK$6.70 a share, from HK$27.7 billion, or HK$11.95, in 2007, the world’s second-biggest builder by market value said in a statement to the Hong Kong stock exchange today. That is in line with the median HK$16 billion estimate of six analysts compiled by Bloomberg.

Cheung Kong, which grew out of the plastics business Li founded more than 50 years ago, posted steady real estate income as it sold more homes than rivals Sun Hung Kai Properties Ltd. when prices slid 25 percent from last year’s peak. Cheung Kong’s overall profit fell as Hutchison didn’t repeat a HK$35.8 billion year-earlier gain from selling its investment in an Indian mobile-phone carrier.

"Most of it is Hutchison" dragging down Cheung Kong's earnings, Danie Schutte, a Hong Kong-based analyst at CLSA Asia- Pacific Markets, said before the earnings announcement. “On the property side, they locked in a lot of sales before prices came down. There's a question mark over" whether Cheung Kong can repeat this in 2009, he said.Profit excluding earnings from Cheung Kong’s 49.97 percent stake in Hutchison, Li’s telecommunications company, dropped 46 percent to HK$6.69 billion from HK$12.4 billion.

Goldman, Deutsche

Shares of Cheung Kong, the second-worst performer this year in the six-member Hang Seng Property Index, rose 2.1 percent to HK$71.60 at the 12:30 p.m. trading break in Hong Kong, before earnings were announced. The stock has lost 2.3 percent this year, compared with the 3.2 percent decline in the Hang Seng Index.The Hong Kong landlord for companies including Goldman Sachs Group Inc. and Deutsche Bank AG said sales excluding jointly-developed property projects fell 3 percent to HK$12.9 billion from HK$13.3 billion. Cheung Kong will pay a final dividend of HK$1.95 a share, unchanged from 2007.

Cheung Kong was Hong Kong's biggest seller of new private homes last year, at 2,838 units, Centaline Property Agency Ltd., one of the city’s largest real estate agencies, said in January.Li, 80, is ranked No. 16 on Forbes magazine’s list of the world’s richest people with a fortune of $16.2 billion, the publication said earlier this month.

Indian Geek Launch 'Sixth Sense' Device

28-year-old Pranav Mistry, a MIT (Massachusetts Institute of Technology) based researcher hailing from Gujarat has created a digital prototype of a "sixth sense" device that is being currently evaluated by corporations including Google, Microsoft, HP and Samsung.

To briefly describe what this sixth sense is all about, we need to understand how the current dissemination of information from current electronic devices takes place. Most of the information from computers, mobile phones and other devices are confined to screen or paper - if we decide to take a print. However, the sixth sense, according to Mistry, bridges this gap "bringing intangible digital information out into the tangible world, and allowing us to interact with this information via natural hand gestures". The concept falls under "wearable computing" - the same category under which the ubiquitous mobile phone falls as well.

The equipment list for the sixth sense might seem a tad crude, but it does its job quite well. It comprises a pocket projector; mirror and web camera bundled in a wearable pendant-like mobile. With the help of the projector, you can turn any material surface into a touchscreen. The camera is used to "see" the hand gestures. The user will however need to wear color-coded gloves on the index finger and the thumb so that the hand movements can be recorded and decrypted.

Some of the interesting hand gestures include drawing a square frame which will trigger a command to take a picture, drawing the @ sign will let the user access his email. You can even write e-mails with the help of the projector, which projects an image of a virtual keyboard so that you can type. All this costs around $350 (Rs. 17,000) to build - which is not a bad for something as futuristic as this!

Mistry has been approached by a couple of Indian companies who seem to be interested in his project. However, he wants the technology to be a little cheaper before it comes to India.

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Monday, March 23, 2009

Alaska's Mount Redoubt Erupts Three Times

Alaska's Mt. Redoubt volcano erupted late Monday and early Tuesday in "three large explosions," sending an ash plume an estimated 50,000 feet into the air, the Alaska Volcano Observatory reported.
Geologists at the observatory say the volcano, located 100 miles southwest of Anchorage, erupted three times late Sunday and early Monday.

Geophysicist John Power said, "this is a fairly large eruption, close to the larger cities in Alaska."
He says no cities have yet reported any ash fall from the volcano, but noted that it's still early.
Winds were expected to carry the ash plume north toward the Susitna Valley, possibly missing Anchorage to the east, the National Weather Service told the Anchorage Daily News.
"It looks like (Anchorage) might dodge the bullet," Alaska Volcano Observatory geophysicist Peter Cervelli told the paper.

The volcano observatory raised the aviation color code to Red, its highest level, and the alert level to Warning after the eruption began at 10:38 p.m. local time (2:38 a.m. Monday EDT.)
An official at Anchorage International Airport told the Daily News early Monday there were no immediate plans to close the airport.

Residents of south-central Alaska have kept a close eye on Redoubt since the observatory on Jan. 25 warned that an eruption could occur at any moment. The alert level was downgraded last week after nearly two months.

Just after 1 p.m. Sunday, however, seismic activity picked up again."We got a return of this stuff we call volcanic tremors," said geologist Chris Waythomas. "Think of the phenomenon that produces sound in an organ pipe."

Instead of sound waves in a pipe, geologists detect movement of magma within cracks and fractures of the mountain that resonates and produces a distinct signal."We think it's associated with the hydrothermal system there. It's being reinvigorated," Waythomas said.
The tremors lasted about four hours and then settled down.

An observatory flight Sunday reported that a steam and ash plume rose as high as 15,000 feet (4,600 meters) above sea level and produced minor ash fall on the upper south flank of the mountain. Later reports indicated the plume had changed into mostly steam.

Ash emission had not been seen before, Waythomas said, and until samples are taken, geologists will not know whether it's new magma or, more likely, old ground-up material from previous episodes.Other signs that a volcano could erupt are deformities in the landscape and the mix of gases escaping from vents on the side of the mountain.

Alaska volcanos typically explode and shoot ash upward, sometimes to 50,000 feet (15,000 meters), high into the jet stream. An eruption of Redoubt on Dec. 15, 1989, sent ash 150 miles (240 kilometers) away into the path of a KLM jet, stopping its engines. The jet dropped more than two miles (three kilometers) before the crew was able to restart engines and land safely at Anchorage.
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Futures soar on U.S. plan to buy toxic assets

U.S. stock futures rallied early Monday, as investors expressed optimism about the Obama administration's plan to seek the help of private investors as it attempts to rid banks of possibly as much as $1 trillion in bad assets.

At 5:16 a.m. ET, Dow, S&P 500 and Nasdaq 100 futures were sharply higher. Futures measure current index values against perceived future performance and offer an indication of how markets may open when trading begins in New York.

Treasury plan: The U.S. government said late Sunday that it will initially commit up to $100 billion to subsidize private investors' purchase of the so-called toxic assets on bank books that have led to the seizure of the credit markets.

"Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets," Treasury Secretary Tim Geithner wrote in an op-ed in the Wall Street Journal.

The aim of the public-private partnerships is to buy up at least $500 billion of bad assets, and possibly up to $1 trillion over time. Geithner will unveil details of the plan at 8:45 a.m. ET.
Economy: Investors will be watching a report on manufacturing in New York. The Empire manufacturing report for March is due out at 8:30 a.m. ET. Readings on industrial production and capacity utilization in February are on tap at 9:15 a.m. ET.

Deals: Suncor Energy (SU) agreed to buy rival Petro-Canada (PCZ) for about $14.86 billion. The deal will expand the company's oil sand reserves and create Canada's biggest energy group.
World markets: Stocks around the world rallied as investors awaited full details of Geithner's plan. Japan's Nikkei gained 3.4% while the Hang Seng in Hong Kong surged 4%. In Europe, the FTSE 100 added 1.4% in early trading. The CAC-40 in France and Germany's DAX were also both up more than 1%. To top of page

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Saturday, March 21, 2009

Jobless rate climbs to 10.5 percent in California

The state unemployment rate jumped to 10.5 percent in February, a level not seen since 1983. All told, the recent economic slide has left 1.95 million Californians scrambling for work.

Friday's report from the Employment Development Department charts a sharp rise from January's 10.1 percent rate and brings the state closer to its modern peak of 11 percent, which occurred in late 1982 and early 1983.

The U.S. unemployment rate for February was 8.1 percent. During the Great Depression, unemployment got as high as 25 percent.

"What we're seeing now is not a depression, it's not the end of the world, it's a normal bad recession," said Chris Thornberg with San Rafael's Beacon Economics.

Stephen Levy, with Palo Alto's Center for the Continuing Study of the California Economy, compared the current situation to the long and painful 1980s recession.

"I think this will be a little bit deeper and a little bit longer than the 1982-83 recession," he said.

Back then, unemployment remained above 10 percent for a year and briefly hit 11 percent. This time Levy said unemployment probably will break 11 percent and stay there for months, until the housing market hits bottom and starts to recover, healing the state's biggest economic wound.

But there was no sign of healing in Friday's figures as employers cut 116,000 payroll jobs statewide in February.

"Usually, a very bad month for California is to lose 20,000 to 30,000 jobs," said former EDD commissioner Michael Bernick, now a San Francisco attorney.

Statewide, payroll employment has shrunk 4 percent since February 2008, with nearly 606,000 jobs vanishing.

Virtually every industry in the state has lost jobs on an annual basis, the big exception being health and education services, where payrolls have grown 1.8 percent.

But construction employment has plunged 18.5 percent in 12 months. Manufacturing is down 6.2 percent on an annual basis. Employment in professional and business services is off 4.5 percent while leisure and hospitality payrolls are down 2.8 percent.

Friday's report shows that the Bay Area continues to fare slightly better than the state. But there was considerable variation among the region's three major metropolitan areas and all three zones saw the job market deteriorate.

Metropolitan San Francisco, consisting of San Francisco, San Mateo and Marin counties, had a jobless rate of 7.8 percent in February, better than the state or the nation.

This three-county area has been less afflicted by the housing bust and buoyed by a concentration of jobs in tourism, business services, high-tech and other sectors with fewer payroll losses.

Metropolitan San Jose, made up of Santa Clara and San Benito counties, had the worst rate in the region at 10 percent.

Levy blamed San Jose's jobless rate on a jump in the size of the labor force, as more people went looking for work even as jobs were getting harder to find. The South Bay has lost thousands of jobs in business services and retail.

In the Oakland metropolitan area, made up of Alameda and Contra Costa counties, unemployment stood at 9.6 percent in February.

The two East Bay counties have been hit particularly hard by losses in construction, down 9,900 jobs since last year, and retail trade, where payrolls have shrunk by 7,100 on a year-over-year basis.

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Friday, March 20, 2009

New storage in Apple iTunes

You will now be able to catch high-definition movies at Apple's iTunes store! Apple on Thursday started offering HD movies for rent or purchase at its money-spinning online iTunes store. The Cupertino based company announced that it will be offering HD movies on the iTunes store, and it will offer the future movies in HD format 30 days after their release.

Apple introduced an HD section on iTunes featuring a dozen of HD movies including "Bangkok Dangerous," "The Spirit," "Transporter 3," and "Punisher: War Zone". The company claimed that it has already started taking preorders for several of last year's hit titles, such as James Bond film "Quantum Of Solace" and the teenage vampire film "Twilight".

According to Apple, the HD movies can be purchased and downloaded through the iTunes Store for $19.99. The rental price for new releases of standard-definition movies is $4.99 and for the older titles is $3.99. The rental price for HD movies $1 more than regular titles; thus the HD movies are available for $20 purchase price and $5 rental price.

In a statement, Apple stated that some of the movies listed on the iTunes store are only available for purchasing, couldn't be rented. The company said that its current collection is limited, but soon more HD titles will be added to the store.

Apple explained that the HD movies, standard-definition movies and TV shows downloaded from iTunes can be played on an Apple Mac, iPhone, some iPod models, Windows PC, or on widescreen digital TV through the Apple TV set-top box.

Adding HD movies to its iTunes store for rent and purchase, Apple is competing with Netflix and Blockbuster, which also offer HD movies online. Currently, more than 10 million songs, more than 40,000 TV episodes, and more than 5,000 movies are available for rent and purchase at the iTunes Store. Apple has already sold more than 250 million TV episodes and more than 33 million feature films through its iTunes store.

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Sony Ericsson Sees First-Quarter Loss as Sales Drop

Sony Ericsson Mobile Communications Ltd., the mobile-phone venture of Sony Corp. and Ericsson AB, said it will report a pretax loss of as much as 390 million euros ($534 million) in the first quarter as handset sales fall.

The loss excludes restructuring charges of 10 million euros to 20 million euros, the London-based company said in a statement today. The company said its gross margin in the quarter will fall from the preceding three months and the year- earlier period.

“Net sales and net income before taxes in the first quarter of 2009 continue to be negatively affected by weak consumer demand as well as de-stocking in the retail and distribution channels,” the company said in the release.

Sony Ericsson is cutting at least 2,000 jobs as demand for its handsets shrinks, joining industry leader Nokia Oyj, which announced 1,700 additional job cuts this week. Sony Ericsson, formerly among the biggest profit contributors for its parents, has racked up three consecutive quarterly losses, and the company said today the global handset market may contract at least 10 percent this year, twice as much as previously estimated.

Ericsson declined as much as 5.1 kronor, or 6.7 percent, to 70.7 kronor, and traded at 70.90 kronor as of 9:35 a.m. in Stockholm. Nokia fell as much as 5.3 percent in Helsinki. Sony didn’t trade as Japanese markets are shut today for a holiday.

Phone Shipments

Sony Ericsson plans to ship about 14 million phones in the first quarter, at an average selling price of 120 euros. In the fourth quarter, the venture shipped 24.2 million phones, at an average price of 121 euros.

In the fourth quarter, the gross margin, or sales minus manufacturing costs, fell by more than half to 15 percent. The company plans to release its full earnings for the first quarter on April 17, it said today.

Chief Executive Officer Dick Komiyama, who turned around Sony’s laptop division in the U.S., said Jan. 16 that the company aims to return to profit in the second half of the year, helped by cost cuts and a focus on more expensive phones.

Ericsson CEO Carl-Henric Svanberg, who is chairman of Sony Ericsson, said in an interview March 4 that Ericsson is committed to the business and won’t change its stance based on the division’s performance over a single quarter.

Thursday, March 19, 2009

Bank of America involved in Merrill Q4 writedowns

NEW YORK (Reuters) - Bank of America Corp was involved in accounting for fourth-quarter writedowns at Merrill Lynch & Co before it acquired the brokerage firm, the Financial Times reported on Thursday.

Bank of America's chief accounting officer, Neil Cotty, was influential in determining writedowns for complex debt instruments and leveraged loans among other assets at Merrill, people familiar with the matter told the newspaper.

Charlotte, North Carolina-based Bank of America bought Merrill Lynch in January and sought government assistance to complete the deal after learning of massive losses at Merrill in December.

Merrill Lynch said in February it lost $15.84 billion in the fourth quarter, about $533 million more than the loss estimated by Bank of America in January.

Wednesday, March 18, 2009

Back Stiffness

For Elise Miller, a longtime Iyengar Yoga teacher who was diagnosed with scoliosis—abnormal lateral curvature of the spine—as a teen, twisting poses are pure bliss. "I love moving from gentle twists into deeper variations," she says. "I think twists can be the most cleansing of all the poses." She's referring to master teacher B.K.S. Iyengar's "squeeze and soak" theory: The action of twisting the spine squeezes the muscles, spinal disks, and abdominal organs. When you release, blood floods back into those areas, bringing nutrients and improving circulation.

Still, Miller can understand why many people don’t enjoy twisting. The problem, she feels, lies in an overzealous approach. "You see people doing twists, and they just go for it. Then they feel stuck, like they have nowhere else to go—and they don't, because they haven’t allowed an opening to happen." Her remedy for this common problem is twofold: First, she says, you must elongate your spine and create space in it before twisting; otherwise you exert pressure on the disks and leave yourself open to injury. Second, she uses props in her twist sequences to gently prepare the body for deeper poses. Being mindful of your alignment and using props will prevent you from powering through the poses, so you can enjoy a spiraling action up the spine and reap the benefits that twists offer.

The first three poses in this sequence are often taught to people with hip or back stiffness, sacroiliac imbalances, degenerative disks, arthritis, or sciatica. With the exception of Paschimottanasana, do each pose in this sequence for five breaths on each side.

1. Bharadvajasana (Bharadvaja’s Twist), with chair
2. Parivrtta Trikonasana (Revolved Triangle), with chair
3. Marichyasana III (Marichi’s Twist III), with chair

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Bernanke Caps Treasury Yields to Cut Consumer Borrowing Rates

Federal Reserve Chairman Ben S. Bernanke may have brought an end to the worst quarterly start for Treasuries since 1980 by establishing a ceiling on yields with plans to buy $300 billion in government debt.

Treasuries lost 3.4 percent since December prior to yesterday’s announcement that the Fed would expand asset purchases to drive consumer borrowing rates lower, and were headed for their worst three-month period since the third quarter of 1980, when they fell 5.06 percent, Merrill Lynch & Co. index data show. Yesterday’s rally pared this year’s losses to 1.38 percent.

“The Fed is capping Treasury yields,” said David Glocke, who manages $65 billion of Treasuries at Vanguard Group Inc. in Valley Forge, Pennsylvania. “I don’t think we will see rates drift back up above three percent; everyone looks at that as being the ceiling.”

Treasury 10-year note yields fell the most since 1962 yesterday, dropping to 2.52 percent, after the Fed surprised investors by expanding the debt purchase portion of its quantitative easing policy, which already includes agency and mortgage debt, to about $1.75 trillion in securities.

While investors anticipated an increase in mortgage and agency debt purchases, firms including Goldman Sachs Group Inc., Morgan Stanley and UBS AG forecast that Bernanke would focus on expanding existing programs before buying Treasuries.

“We were a little surprised about the timing,” said Ira Jersey, head of interest-rate strategy at RBC Capital Markets in New York. “They have to get spreads on consumer rates down.”

Mortgage Rates

Central bankers and Treasury haven’t been able to meet Bernanke’s goal of reducing consumer interest rates along with the borrowing costs paid by banks.

The difference between rates on 30-year fixed mortgages and 10-year Treasuries was 2.1 percentage points yesterday, Bloomberg data show. That’s up from an average of 1.75 percentage points in the decade before the subprime mortgage market collapsed.

Investors have also shunned debt backed by consumer loans as unemployment has climbed in the worst financial crisis since the Great Depression. Sales of the bonds plunged 40 percent last year to $106 billion, according to data compiled by Bloomberg, choking off funding to lenders. About $2.3 billion of debt backed by auto loans has been sold this year, compared with more than $9.6 billion in the same period of 2008, according to data from JPMorgan Chase & Co.

Yield Ceiling

Ten-year Treasury yields tumbled 47 basis points yesterday to 2.53 percent after the Fed’s announcement. The note’s yield touched 3.02 percent yesterday and has failed to break 3.05 percent three separate times since March 4.

“If rates drifted to that level I’d be a buyer,” Vanguard’s Glocke said.

Investor concern about rising supplies of debt and stock gains had pushed yields up from record lows in the fourth quarter. Goldman Sachs estimates that Treasury sales will almost triple this year to as much as $2.5 trillion as President Barack Obama looks to finance a budget deficit that his administration forecasts may expand to $1.75 trillion.

The Fed said it will increase its purchases of agency debt this year by up to $100 billion to a total of as much as $200 billion and will buy $750 billion in mortgage-backed securities on top of the already-announced $500 billion program, according to the central bank’s policy statement. The Fed also said it will consider expanding the Term Asset-Backed Securities Loan Facility to include "other financial assets."

‘Reinforces the Case’

Bernanke first mentioned the option of buying longer-term Treasuries on Dec. 1. Less than three weeks later, 10- and 30- year yields touched record lows. The Fed trimmed the target rate for overnight loans between banks to a range of zero to 0.25 percent at the Dec. 16 meeting to help unfreeze credit markets.

"Our medium-term expectation of lower 10-year Treasury yields has been premised upon quantitative easing," JPMorgan Chase & Co. strategists led by Srini Ramaswamy wrote in a note to clients yesterday. "Today's FOMC statement reinforces the case for lower yield levels over a longer term horizon."

The Fed may also buy Treasury Inflation-Protected Securities, or TIPS, used by investors to guard against inflation. The purchases will begin "late next week" and will take place two to three times a week thereafter, according to a statement on the Fed Bank of New York’s Web site.

‘Exit Strategy’

"The big concern in Treasuries is, 'What will the Fed do if we see inflation coming back and what is the strategy for reversing these purchases,' said Mustafa Chowdhury, head of U.S. interest-rates research in New York at Deutsche Bank AG, one of 16 primary dealers that trade government securities with the Fed. “If a clear exit strategy is not spelled out for the market, it will cause a huge reaction."

The consumer price index climbed 0.4 percent after a 0.3 percent rise in January, the Labor Department said yesterday. Excluding food and fuel, the so-called core rate advanced 0.2 percent. The gains pushed the annual core inflation rate up to 1.8 percent, within the range that most Fed officials say is their objective.

"The Fed has employed its shock and awe policy," said Richard Schlanger, a vice president who helps invest $13 billion in fixed-income securities at Pioneer Investment Management in Boston. "This has to have a profound impact on credit spreads going forward."

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A.I.G. Seeking Return of Half of Its Bonuses

Two chief executives with much on the line in the furor over Wall Street bonuses President Obama and Edward M. Liddy of the American International Group made concerted efforts on Wednesday to tamp down the populist anger, but faced continued outrage on Capitol Hill and elsewhere.

At a highly charged Congressional hearing, Mr. Liddy said he had asked employees making more than $100,000 a year who just shared in a $165 million bonus payout to give half the money back, reflecting the public and political disgust at the idea of rewarding the same people who had helped drive the company and the economy into distress.

"Some have already volunteered to give back 100 percent," said Mr. Liddy, who was installed by the Federal Reserve when it rescued A.I.G. last September and is being paid $1 a year. But he did not provide any details, and resisted releasing the names of those who had received the bonuses, saying some employees had received death threats.

Mr. Obama, at the White House, said his goal was to "channel our anger in a constructive way" and called for legislative authority to take over and close troubled nonbank financial institutions like A.I.G.

Even as he said that "nobody here" had drafted the bonus deals A.I.G. agreed to last year, the president said he took responsibility for cleaning up the mess, deflecting some of the criticism being directed at Treasury Secretary Timothy F. Geithner and trying to limit any damage to his ability to get more money from Congress for bank bailouts.

"The buck stops with me," Mr. Obama said. "And my goal is to make sure that we never put ourselves in this kind of position again."

But furious Democratic leaders in Congress said they would not wait for A.I.G. to act on good faith, and instead said they would head to the House floor on Thursday with a bill to tax 90 percent of bonuses paid out since Jan. 1 by A.I.G. or any other company that had accepted more than $5 billion in government bailout funds.

The House speaker, Nancy Pelosi, at a hastily called news conference with Representative Charles B. Rangel of New York, the chairman of the tax-writing Ways and Means Committee, and other leaders, said Congress would do what was necessary to assure that taxpayers did not pay for bonuses.

"This money doesn’t belong to A.I.G.," said Representative Steve Israel, Democrat of New York. "It belongs to the American taxpayer and we are going to get it back." Senate leaders have proposed legislation that would impose a 35 percent tax on recipients of the A.I.G. bonuses, and a 35 percent tax on the company. House leaders said that they had kept the White House informed of their plans, but that the administration had not been involved in developing the legislation.

Faced with demands for disclosure of the names of the people who received the bonuses, Mr. Liddy said hesitantly at the Congressional hearing, before a subcommittee of the House Financial Services Committee, that he would be willing to supply the names, but only if they were not released publicly. He explained that there had been death threats, and read an example: "All the executives and their families should be executed with piano wire around their necks," it said. "That is our only hope."

The committee’s chairman, Representative Barney Frank, Democrat of Massachusetts, said he was dismayed to hear about the threats, but he was unwilling to guarantee the confidentiality of the names. He warned that if he did not get the information, he would try to have Mr. Liddy subpoenaed. "I think the time has come for the federal government to assert greater ownership rights," Mr. Frank said.

Likewise, the New York attorney general, Andrew M. Cuomo, signaled that he would make the names public when he received them in response to a subpoena.Another uproar could emerge if Fannie Mae and Freddie Mac, the mortgage-finance giants that have been taken over by the government and have received billions in taxpayer money, pay similar retention bonuses to top executives, as they have indicated that they would do in recent regulatory filings.

As Congress sought to tighten its grip on A.I.G. and other companies aided by the taxpayers, Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Senate banking committee, sought to explain how legislation aimed at limiting executive compensation at firms receiving bailout help was changed at the last minute to allow certain bonuses that were contained in employment contracts before Feb. 11, 2009.

Mr. Dodd initially said he did not know how that change was made to the compensation limits that were included in the economic recovery bill adopted by Congress last month. But in an interview Wednesday with CNN, he said that the Treasury Department had requested the change and that his staff had helped to write it into the bill, as part of a deal to keep other pay limits in the legislation.

"It was their suggestion," Mr. Dodd told CNN. "We wrote it together at the time." But it is far from clear that the change mattered in the case of A.I.G. The payouts have roused particular fury because they went to employees of A.I.G.'s financial products unit the part of A.I.G. that dealt in the credit derivatives that were its downfall.

A horde of cameras and reporters awaited Mr. Liddy outside the hearing room, subjecting him to the sort of gantlet reserved for major felons and celebrities after an unfortunate night out.But Mr. Liddy, who chatted with protesters as he entered the session for hours of testimony, repeatedly tried to make clear that he was not responsible for getting A.I.G. into this mess.

"Six months ago I came out of retirement to help my country," said Mr. Liddy, a former Allstate executive who no doubt has questioned that decision on more than one occasion."At the government's request I've had the duty and extraordinary challenge of serving as chairman and chief executive officer of American International Group, or A.I.G."

Representative Paul E. Kanjorski, the Pennsylvania Democrat who is chairman of the subcommittee, sought to make the distinction clear as well, saying that Mr. Liddy had responded to a plea to help out and should be spared any abuse."We do not intend to harass you,Mr. Kanjorski said.Yet members of both parties sharply questioned Mr. Liddy.

"This is like the captain and the crew of the ship reserving the lifeboats saying to hell with the passengers," said Representative Stephen F. Lynch, Democrat of Massachusetts.To Mr. Liddy, Mr. Lynch’s observation went too far."I take offense, sir,” he responded, reminding lawmakers that he was not in charge when the bonuses were arranged but believed he was legally bound to pay them.

“Well, offense was intended,” Mr. Lynch retorted. “So you take it rightfully, sir.”In response to questions about who in the federal government A.I.G. consulted with on its business decisions, Mr. Liddy said that he normally spoke with the Fed, and believed the Fed then kept the Treasury in the loop. The Fed has appointed three trustees to represent the government’s stake in A.I.G., but when asked their names Mr. Liddy could not recall them.He said it was his impression that Mr. Geithner had not known about the bonuses until two weeks ago.

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Dollar hit, Asian stocks rally on Fed move

Hongkong (Reuters) - The U.S. dollar nursed big losses on Thursday and Asian government bonds rallied after the Federal Reserve vowed to buy long dated U.S. Treasuries, reviving a practice not used in decades to revive an ailing economy.The Fed surprised investors on Wednesday by announcing it would buy $300 billion worth of these U.S. Treasuries for the first time since the early 1960s as part of a move to inject an additional $1 trillion into the U.S. economy by also purchasing more U.S. mortgage and agency debt.

The move sent Asian stocks a five-week high, as bank shares helped extend a recent rally, and on broader investor optimism that a stronger U.S. economy will help the continent's export-dependent economies.But analysts were also warning of the risks to the Fed's quantitative easing. Gold fell on profit-taking after surging the previous session on concerns about the potential inflationary effects from the Fed's efforts, even if the near-term concern is deflation.

The move to expand the Fed's balance sheet is also sparking doubts about the dollar's status as the world's reserve currency, and concerns that it will be followed by similar moves from other central banks, creating a domino effect of weakening currencies.Central banks in Britain and Japan have already announced they would purchase their respective government debt, while the Swiss National Bank last week said outright it would sell francs to weaken its currency.

"With the Fed now effectively undermining the dollar, the worry is that central banks are playing competitive devaluations," said Tony Morriss, senior rates strategist at ANZ. "The Fed won't say it outright, but they would likely welcome a weaker currency."The announcement following a policy meeting that kept U.S. interest rates at nearly zero effectively seeks to print money to revive an economy in a practice known as quantitative easing.

The move to purchase longer-dated U.S. government debt, on top of regular purchases of short-term Treasury bills, is intended to feed into the U.S. economy via a lower array of credit costs for consumers and businesses.The euro climbed as high as $1.3536 against the dollar on trading platform EBS, marking the highest since early January, but later shed its gains and was down 0.2 percent at $1.3444 from late U.S. trading on Wednesday

That followed the euro's 3.9 percent jump against the dollar on Wednesday according to Reuters data, its biggest one-day percentage gain since the launch of the single currency in 1999.The dollar initially dipped against the yen, but later rebounded, rising 0.2 percent to 96.40 yen after dropping nearly 3 percent against the Japanese currency on Wednesday.

"The dollar was taken to the woodshed and beaten like a dog," said David Watt, senior currency strategist at RBC Capital Markets. "And after a short rest, beaten like a dog again. Market sentiment on the Fed's maneuver was crystal clear."In bond markets, U.S. Treasury yields remained sharply lower in Asia on Thursday, after plunging in the previous session by the most since the day after the U.S. stock market crash in 1987.

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China's statement on rejecting Coke's Huiyuan bid

BEIJING, March 18 (Reuters) - Following are highlights of a statement by the Chinese Ministry of Commerce on its decision to reject Coca-Cola's (KO.N) $2.4 billion bid for China's top juice maker, Huiyuan Juice (1886.HK).

The ministry released the statement on its website.

(For a more detailed text, in Chinese, please double-click on: here )


"Following an investigation, the Ministry of Commerce determined: the concentration involved in this proposal would have an unfavourable impact on competition.

"Following concentration, Coca-Cola may have been able to use its dominant status in the carbonated soft-drinks market to use bundling and tie-ins of juice beverage sales or to set other exclusionary transactional terms, with the concentration restricting market competition in the juice beverage market and leading to consumers being forced to accept higher prices and fewer choices of products.

"In addition, due to restrictions on market entry by existing brands, potential competitors would have found it hard to surmount an outcome tantamount to restricting competition.

"Furthermore, the concentration would have narrowed the room for survival of medium and small-sized domestic juice firms, creating an unhealthy impact on the competitive structure of China's juice beverage market.

"To reduce the negative impact of the concentration on competition, the Ministry of Commerce negotiated with Coca-Cola about appending restrictive terms and asked the bidder to offer a feasible resolution proposal.

"Coca-Cola expressed its own opinions about the issues raised by the Ministry of Commerce, and submitted a preliminary resolution proposal and a revised proposal.

"After evaluation, the Ministry of Commerce believes this revised proposal still could not effectively reduce the negative impact on competition of this concentration. Therefore, based on Article 28 of the Anti-Monopoly Law, the Ministry of Commerce has made the decision to forbid the deal.

"The Anti-Monopoly Law review is meant to protect fair market competition and guard the interests of consumers and the public.

"The Ministry has received 40 applications since the Anti-Monopoly Law was launched on August 1, 2008, and the Ministry has, in accordance with the law, looked into 29 of them, out of which 24 cases have been decided upon (before this case).

"Among those, 23 cases were approved without any conditions; for the one that would have excluded and restricted competition, the Ministry talked with the applicant, and the applicant provided a solution for reducing restrictions on competition and made promises, for which the Ministry finally approved the deal with a restrictive condition of reducing unfavourable impacts on competition."

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Tuesday, March 17, 2009

Geithner Vows to Recoup AIG Bonuses as Lawmakers Express Fury

March 18 (Bloomberg) -- Treasury Secretary Timothy Geithner told congressional leaders the U.S. will recoup executive bonuses paid by American International Group Inc. as outraged lawmakers raced to take back such payments from all companies getting federal bailouts.

Geithner, who has come under fire from Congress over the AIG payments, said in a letter to lawmakers last night the government will recover the money by requiring it be repaid from company operations and deducting the amount from the next $30 billion in aid being provided to the insurer. He also said the government will work to accelerate the “wind down” process of restructuring AIG.

The senior members of the Senate Finance Committee from both parties proposed taxes totaling 70 percent on bonuses at AIG and other companies getting federal money during the U.S. financial meltdown. House Speaker Nancy Pelosi directed committees there to draft several alternatives and said her chamber may consider a bill as early as this week. Other lawmakers introduced their own plans.

“Millions lost their jobs; it’s an outrage that the people who somewhat caused this problem are now paying themselves bonuses,” Senate Finance Chairman Max Baucus, a Montana Democrat, said yesterday in Washington. He and ranking Republican Chuck Grassley of Iowa also proposed limiting some forms of deferred compensation to $1 million at companies getting bailout funds.

New York-based AIG paid $165 million in executive bonuses after taking taxpayer-funded bailouts totaling $173 billion. AIG also budgeted $57 million in “retention” pay for employees who will be dismissed, according to a March 2 filing to the Securities and Exchange Commission.

Liddy Testimony

AIG Chief Executive Officer Edward Liddy testifies today before a subcommittee of the House Financial Services Committee. Panel Chairman Barney Frank said yesterday the government has a stronger legal case to reclaim the AIG bonuses now that the government owns a majority of the company.

“I think the time has to exercise our ownership rights,” Frank told reporters. “And then say, as owner, ‘No, I’m not paying you the bonus. You didn’t perform. You didn’t live up to this contract.’”

Geithner’s letter said Treasury lawyers determined that it would be “legally difficult” to prevent AIG from paying the bonuses because they were required by contracts.

Repayment Requirement

“We will impose on AIG a contractual commitment to pay the Treasury from the operations of the company the amount of retention rewards just paid,” Geithner wrote. “In addition, we will deduct from the $30 billion in assistance an amount equal to the amount of those payments.”

He also said criticism of Liddy is “unjustified” because the contracts were in place before he took over at the company last year.

The political heat generated by AIG bonuses indicates declining public and congressional support for shoring up beleaguered financial institutions with government funds, and may make it tougher for President Barack Obama’s administration to win approval for future bailouts.

Obama this week chastised the insurer for awarding the bonuses to staff of the derivatives unit blamed for the firm’s near collapse in September. New York Attorney General Andrew Cuomo said he’ll subpoena AIG for details on the payouts.

Answers Sought

Senate Banking Committee Chairman Chris Dodd of Connecticut said he wants the Federal Reserve, which is overseeing AIG’s bailout, to explain how it will resolve the situation.

“I would recommend they give back those bonuses,” Senate Majority Leader Harry Reid, a Nevada Democrat, said on the Senate floor. “We as a Congress are not defenseless.”

Pelosi said she directed the Financial Services, Judiciary and Ways and Means committees to draft legislation this week that would recoup misspent public funds from companies that received taxpayer assistance.

She said options include authorizing the U.S. attorney general to reclaim “prior and future excessive compensation” payments, barring retention bonuses at companies getting Treasury funds, and recouping the money through tax laws.

“Most appallingly, while millions of Americans struggle through this economy, those who have received the largest measure of taxpayer assistance from the Treasury Department have shown no restraint,” Pelosi said in a statement.

Taxes on Bonuses

The tax on bonuses proposed by Baucus and Grassley would apply to amounts over $50,000 paid starting Jan. 1, 2009, and to the full amount of any retention bonuses. The proposal would force AIG and other companies to pay overseas employees’ share of the excise tax.

Baucus said he believed the tax would succeed in recouping “most of the bonuses” paid by companies that get federal bailout funds.

House Ways and Means Committee Chairman Charles Rangel said he opposed using the tax code to take back the bonuses.

“It is tough, to me, to think of the tax code as a political weapon,” Rangel said in an interview. “I would hope and assume we have alternatives to the tax code” for taking back bonuses. He said he was working with other lawmakers to develop a “legislative response to this problem.”

Wyden, Snowe

Senators Ron Wyden, an Oregon Democrat, and Olympia Snowe, a Maine Republican, said in a statement the AIG bonuses might have been avoided if Congress had earlier adopted their amendment to force companies that use bailout funds to pay excessive bonuses to either return the money or pay a tax on it.

Also among lawmakers announcing proposals to recoup bonuses paid by AIG and other bailout recipients were Democratic Representatives Carolyn Maloney of New York Earl Blumenauer of Oregon.

Senator Charles Schumer, a New York Democrat, said in a speech on the Senate floor that he, Reid and other lawmakers sent a letter to AIG’s Liddy asking executives to return the bonuses to their “rightful owners.” He said if the money isn’t refunded, Congress will pass laws to “tax these bonuses at a very high rate.”

The disclosure on expenses for “employees expected to be terminated” may signal AIG is planning staff cuts after leaving employment unchanged last year, according to regulatory filings.

“As part of restructuring the company, we will ultimately eliminate jobs that are, at the moment, critical to maintaining ongoing operations and winding down certain businesses,” said Christina Pretto, an AIG spokeswoman.

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Free Tax Help Saturday

Free tax preparation will be available for people earning $42,000 or less this Saturday, March 21, straight from the source itself, the Internal Revenue Service. Such help could be especially valuable for new homeowners -- often buying a home moves you from the simple Form 1040-EZ to the much more complex Form 1040. And this year, tax credits for new buyers could add an additional layer of paperwork.

You can get assistance from more than 250 local IRS offices, which usually don't work weekends, plus about 1,000 community tax-prep volunteer partners. Go to the IRS Web site to find an office near you.

IRS Commissioner Doug Shulman, in a printed statement, also urged taxpayers in financial trouble to seek help from the IRS, regardless of their income. "If you think you owe taxes and can't pay, please come in and talk to us about it. There are steps we can take to help." Those steps might include an installment payment plan or a deferred payment plan. Calling the IRS can help people avoid incurring the extra penalties and interest that make it more difficult to catch up with your tax bill.

The new tax credit for first-time home buyers is only one of the measures that can make filing this year's return more complicated than you're used to. Folks at the IRS say they expect job losses to make more people eligible for the Earned Income Tax Credit, which results in an average benefit of $2,000 to those who qualify.

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Nokia streamlines operations; expects nearly 1,700 employees to be affected globally

Nokia Corp.announced further actions it is taking in Devices and Markets units and also in its Corporate Development Office and global support functions. The company said it expects these plans to affect nearly 1,700 employees globally. Further, Nokia stated that it continues to seek savings in operational expenses.

The company said it plans to scale sales, marketing and technology management to match the pruned portfolio and global consumer demand, address marketing and other activities that will no longer be integral following Symbian acquisition. The company also plans to streamline the Devices R&D organization and grew efficiency in certain global support functions.

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Obama tries to halt AIG bonuses

President Barack Obama said Monday that he will seek ''every single legal avenue'' to block the payout of $165 million in bonuses to executives of disgraced insurer American International Group, a company that U.S. taxpayers are bailing out.Obama unleashed his criticism in the White House East Room, eclipsing an event where he announced $15 billion in new help for small businesses.

Before promoting those steps, however, Obama went after AIG, blaming its woes on executives' ''recklessness and greed,'' and asking, ``How do they justify this outrage to the taxpayers who are keeping the company afloat?''It was unclear whether Obama thinks the government has authority to take back AIG's bonuses, or instead is primarily seeking to position himself to keep in step with public outrage.

The Financial Products division, which did the most damage to the company's standing, is based in London. It sold billions of dollars worth of credit-default swaps, complex insurance-like financial instruments, which ultimately AIG couldn't fund. Most of the bonus money was earmarked for about 400 employees in that division.AIG officials and administration officials, including Larry Summers, the head of the White House National Economic Council, previously indicated that the bonuses appeared to be protected by contract law, especially British law.


AIG is receiving about $170 billion in taxpayer assistance and is now about 80 percent taxpayer-owned. Federal officials moved to save it in September because they thought its failure would take down the global financial system since AIG insured the assets of so many major financial institutions.

''Under these circumstances, it's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay,'' Obama said.Obama said that given the taxpayer assistance AIG is receiving, he would ask Treasury Secretary Timothy Geithner ``to use that leverage and pursue every single legal avenue to block these bonuses and make the American taxpayers whole. . . . This is not just a matter of dollars and cents, it's about our fundamental values.''

White House spokesman Robert Gibbs said that Obama inherited the contracts AIG signed last year under former President George W. Bush. ``We can't change everything in the past. We will do all that we can.''


Late Sunday night, AIG released the names of companies on the other end of its swap transactions. Its business partners were mainly major U.S. and foreign banks, adding to the public's rising sense of injustice over the bonuses, since taxpayers are now bailing out the banks both through the front door with government loans and the back door via support for AIG.

New York Attorney General Andrew Cuomo also turned up the political heat on AIG on Monday, demanding that it identify all employees receiving the bonuses, their job descriptions, performance records and copies of their work contracts. He issued subpoenas late Monday. In a letter to the company, Cuomo said he wants to determine if the bonuses amount to ''fraudulent conveyances'' under New York law, and that the contracts might be unenforceable because fraud was involved.


Obama used his bully pulpit to push for corporate responsibility. He also was seeking, however, to separate himself from unpopular corporate excesses. A new Pew Center poll released Monday showed that Obama has begun to suffer declining public support because of the economic crisis.

''The president shares the public's outrage on this,'' Gibbs said.Lawmakers on Capitol Hill sounded off, too.

''At a time when millions of Americans are losing their jobs and trying to make ends meet, it is outrageous that a company that has been bailed out by the taxpayers for its mistakes would turn around and pay its executives such a staggering sum of money,'' said Sen. Russ Feingold, D-Wis. Other lawmakers from both parties said much the same.

Added House GOP Leader Rep. John Boehner of Ohio: ``The latest revelation about AIG executives receiving millions in bonuses while taxpayers continue to bail out the company with hundreds of billions of dollars is outrageous and the clearest example yet of why an exit strategy is essential. The administration should pursue all means of recovering these bonus payments and present Congress and, more importantly, taxpayers an exit plan as soon as possible.''

A House Financial Services subcommittee scheduled a Wednesday hearing on AIG.


The AIG flap overshadowed Obama's announcement of help for small businesses, which was warmly welcomed. His latest economic rescue package will waive fees for small-business loans, buy up to $15 billion in securities linked to loans guaranteed by the Small Business Administration, and require monthly reports from large banks and quarterly reports from other banks on small-business lending.

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Bernanke Outshines Obama Team With Defense of Government Effort

March 17 (Bloomberg) - President Barack Obama’s economic team finally found its voice -and it belongs to Federal Reserve Chairman Ben S. Bernanke.

Bernanke’s March 15 appearance on CBS Corp.’s “60 Minutes” - the first televised interview by a Fed chief since 1987 - gained praise from experts who drew a contrast between his defense of government efforts to fix the financial system and the sometimes-floundering efforts of Obama’s top economic aides to explain to the public what they were doing, and why.

“I have been waiting for months for someone in authority to give a straight-talk speech to the American people about how we got into this mess and how we’re going to get out of it,” said Alan Blinder, a former Fed vice chairman who is now a professor at Princeton University in New Jersey.

“Maybe the Fed chairman is not the most natural choice, but someone had to do it,” he added.

Only hours before Bernanke staked his claim as validator- in-chief for Obama’s policies, two of the president’s top economic advisers, National Economic Council Director Lawrence Summers and Council of Economic Advisers head Christina Romer, were strafed with television talk-show questions about insurer American International Group Inc.’s granting of employee bonuses after receiving $173 billion in aid from the government.

Yesterday, Obama, 47, was forced to revisit the issue, pledging to pursue every legal avenue to get AIG to roll back the $165 million in bonuses.

Opposition to Bailouts

For the administration and the economy, more is at stake than message management. Blinder and other economists said a lot more taxpayer money would be needed to rescue the battered banking system. Yet with public opposition to bailouts high and mounting, winning congressional support for such a step won’t be easy.

The administration’s response to the AIG bonuses was the latest misstep for the Obama White House, which has struggled to develop a consistent message on the economy.

On Feb. 10, a speech by Treasury Secretary Timothy Geithner on a plan to repair the banking system disappointed investors, sending the Dow Jones Industrial Average down almost 400 points.

After warning for weeks that the economy was headed for further trouble, the administration recently shifted course as the stock market nosedived, first emphasizing the steps it would take to tackle long-term problems such as health care, then touting the near-term benefits of the economic recovery package.

AIG Bonuses

To spread their message, the president and his top advisers took to the airwaves last week with speeches, forums and interviews, only to end up playing defense this week on AIG.

Obama senior adviser David Axelrod said the administration has two tasks when it comes to tackling the banking problems.

The first, he said, “is to talk honestly with the American people about why it is important to have a stable credit sector.” The second “is to send a very strong message to the financial sector that the days of Gordon Gekko are over,” Axelrod said, referring to the financier in the 1987 film “Wall Street.”

The range and variety of messages in recent weeks demonstrates the challenges facing the White House, said Stuart Rothenberg, editor of the nonpartisan Rothenberg Political Report in Washington. The administration lacks a main messenger on the economy; it is speaking to competing constituencies: Main Street and Wall Street; and it is caught between trying to put a positive spin on the economy while hinting things may get worse, he said.

‘Barrelful of Problems’

Obama has “a whole barrelful of problems both in terms of message and messengers and competing constituencies,” Rothenberg said.

In the interview, Bernanke warned the U.S. would need to take politically difficult steps to fix the financial system. “The biggest risk is that we don’t have the political will,” he said.

Congress approved a $700 billion bank bailout package in October after the House of Representatives rejected a first proposal. The Obama administration has suggested it may need an additional $750 billion.

That will be a hard sell. Only 48 percent of Americans support the initial package, according to a Pew Research Center poll conducted March 9-12. Pew associate director Carroll Doherty said support may erode further following the news about AIG.

Unlike Summers and Romer, Bernanke wasn’t asked about AIG’s decision to hand out bonuses to its employees, which wasn’t reported until after the segment was taped.

‘Slammed the Phone’

Still, Bernanke, 55, said the AIG bailout was the event that made him the angriest since the crisis began in August 2007. “I slammed the phone more than a few times on discussing AIG,” he said.

The Fed chairman said he made the decision to appear on television because of the severity of the economic crisis. “It’s an extraordinary time,” he said. “This is a chance for me, I think, to talk to America directly.”

The approach was successful, said Anita Dunn, a Democratic political consultant and former Obama campaign adviser. Bernanke “articulated the challenge as well as anyone in the administration short of the president has done,” she said.

“Bernanke went a long way in engendering a fair amount of confidence,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $60 billion.

The last time a sitting Fed chairman appeared on television was in October 1987, when Bernanke’s predecessor, Alan Greenspan, was interviewed on ABC’s “This Week with David Brinkley.” Greenspan later said he regretted the interview because he “made some inadvertent news.” Stocks slipped after Greenspan suggested on the program that inflation could become a problem. Two weeks later, on Oct. 19, the index recorded a 22 percent collapse.

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Monday, March 16, 2009

Summers, U.S. Lawmakers Lambaste AIG Bonus Plan as ‘Outrageous’

March 16 (Bloomberg) -Obama administration officials and lawmakers lambasted plans by American International Group Inc., the insurer rescued by the government, to dole out $1 billion in bonuses and retention pay to employees.

Lawrence Summers, director of the White House National Economic Council, called the payments "outrageous" in an interview on ABC's "This Week" program yesterday. AIG is "abusing the system," Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, told "Fox News Sunday."

AIG, which has received $170 billion in taxpayer money, succumbed to demands from the U.S. Treasury to scale back the payments. AIG agreed to reduce some retention payments in 2009 by 30 percent and tie bonuses to the company's recovery. The New York-based insurer still plans to hand out about $165 million on March 15 because of legally binding contracts, according to a person briefed on the matter.

Public anger has been stoked by revelations of bonuses paid by firms at the center of the financial-market meltdown that has plunged the U.S. into what may become the deepest recession since World War II. New York Attorney General Andrew Cuomo is investigating $3.6 billion in bonuses paid by Merrill Lynch & Co. shortly before it was acquired Jan. 1 by Bank of America Corp.

"There are a lot of terrible things that have happened in the last 18 months, but what's happened at AIG is the most outrageous," Summers said yesterday on CBS's "Face the Nation."

Safeguarding Taxpayer

Summers said the Obama administration's priority is safeguarding the U.S. taxpayer. "No one cares about the shareholders of AIG. No one feels the slightest obligation to people who led us into these difficulties."

Even so, the administration can't abrogate existing contractual obligations without shaking confidence in the legal system, Summers said.

“The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts,” he said. “But you have to think about the consequences of breaking contracts for the overall system of law.”

Frank said that starting when the Federal Reserve initiated the AIG rescue last September there should have been stricter rules on executive compensation and clearer guidelines for major financial institutions getting a government bailout.

“Clearly there was a mistake at the beginning,” Frank said on Fox. “These people who were receiving this should have been given much stricter rules at the beginning.”

‘Abusing System’

AIG is “abusing the system,” said Frank. “Any bank that thinks we’re being too tough on compensation, or trying to get foreclosures reduced, or stopping some of the lavish entertaining, they can give the money back.”

“With AIG, I would just say we need to find out, one, are they legally recoverable,” Frank added. “But I do want to find out at what point these illegal obligations were incurred, who said, and at what point, we’re going to give these bonuses no matter what.”

Senate Minority Leader Mitch McConnell, speaking on ABC’s “This Week,” said the example of AIG might be followed by other companies lining up for government assistance.

“The message here, I’m afraid, to any business out there that’s thinking about taking government money, is let’s enter into a bunch of contracts real quick, and we’ll have the taxpayers pay bonuses to our employees,” the Kentucky Republican said. “This is an outrage.”

Treasury Secretary Timothy Geithner was “really upset” by AIG’s plan to distribute the $165 million, Austan Goolsbee, a top White House economist, said on Fox. “You worry about that backlash” from the public, “but you’re also angry,” he said.

‘Not Sensible’

“I don’t know why they would follow a policy that’s really not sensible, is obviously going to ignite the ire of millions of people,” Goolsbee said. “And we’ve done exactly what we can do to prevent this kind of thing from happening again.”

AIG Chief Executive Officer Edward Liddy, who was recruited by the U.S. to run the insurer after the bailout, has vowed that the company will repay “every penny” to the U.S. of its bailout package by selling subsidiaries, and said the retention pay for talented people helps taxpayers by making the units attractive to buyers.

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The Goldman infallibility myth

AIG - the monstrously reckless US insurance and financial group - last night published a list of the counterparties" that benefited from the $85bn emergency loan it received in September from the US central bank, the Federal Reserve. This disclosure of which banks were on the other end of its complicated financial deals came after weeks of pressure from Congress. And it's a remarkable event: such information is typically cloaked in secrecy.

What it shows is why the US authorities felt they had to rescue AIG, while almost simultaneously Lehman to collapse. If AIG had collapsed into bankruptcy, the losses for some of the world's biggest and most important banks would have been life-threatening for them and arguably lethal for the financial system as a whole.

Now, the name that leaps out for me as a leading beneficiary of the AIG bailout is Goldman Sachs. Between 16 September and 31 December last year, Goldman received $2.6bn in collateral from AIG Financial Products which in turn had been provided by the Federal Reserve on credit default swaps (these are a kind of insurance against borrowers defaulting on loans, which are frequently used as a way of speculating on the health of businesses or other creditors).

There were subsequent payments to Goldman of $5.6bn, to purchase from it the securities underlying certain credit default swap contracts.

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U.S. stock futures point to rally's extension

LONDON (MarketWatch) - U.S. stock futures climbed on Monday, as hopes for the financial system continued to fuel markets with Federal Reserve Chairman Ben Bernanke again pledging not to allow a repeat of Lehman Brothers. S&P 500 futures rose 10.3 points to 764.90 and Nasdaq 100 futures added 11 points to 1,179.00. Dow industrial futures rose 81 points.

Led by news that Citigroup was profitable during the first two months of the year and a spate of merger activity in the pharmaceutical sector, U.S. stocks had a strong week, with the S&P 500 charging 10% higher after four weeks of losses.Banks led markets in Europe and Asia higher on Monday, with the Nikkei 225 up 1.8% in Tokyo and the FTSE 100 up 2% in London.

Bernanke said in an interview on 60 Minutes the first sitting Fed chairman to conduct a television interview in 20 years that the U.S. recession will probably come to an end this year, though the nation's 8.1% unemployment rate will continue to rise."The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis," Bernanke said said. "Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis." A G-20 meeting of the world's top finance ministers and central bankers over the weekend produced a pledge to restore growth and boost the International Monetary Fund's resources.

The U.S., meanwhile, is going to attempt to toughen financial market oversight, by giving the Federal Reserve new powers that include heightened capital requirements for banks and the authority to take over a large financial firm that is failing, The Wall Street Journal reported, citing people familiar with the matter.

Oil futures took a hit, down nearly 5% to $44.16 a barrel after the Organization of Petroleum Exporting Countries opted not to cut production quotas over the weekend. OPEC said they would focus instead on compliance with earlier cuts.

"We suspect that this downward move will linger for most of the week, as the markets will surely conclude that there is now less 'insurance' in the system should demand take a turn for the worst, or alternatively, if cartel members step up their cheating, which thus far, has been kept to a respectable minimum," said analysts from MF Global. Monday's docket includes the Empire State index for March, Treasury inflows for January, industrial production for February and the NAHB housing market index for March.

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Fed chief defends banking bailout and predicts early recovery

Ben Bernanke, America's top central banker, predicted that the US recession will end this year if policymakers succeed in repairing the banking sector.

The chairman of the Federal Reserve said last night that he expects economic growth to resume in 2010. But he warned that the recovery could be wrecked if there was insufficient political will to solve the financial crisis.

"We'll see the recession coming to an end probably this year," said Bernanke in an interview with US TV network CBS. "The biggest risk is that we don't have the political will ... the commitment to solve this problem, and that we let it just continue," he added.

The US government will soon unveil details of a plan to mop up toxic financial assets, to encourage the sector to lend again. There is concern that this plan will reward failing banks and risk-taking firms like hedge funds, but Bernanke insisted it was essential to put the banks back on a healthier footing.

"I care about Wall Street for one reason and one reason only - because what happens on Wall Street matters to Main Street," Bernanke said.

The comments follow upbeat forecasts from some of the US's largest banks. Citigroup and Bank of America Merrill Lynch both indicated last week that they were returning to profitability - a sign that they would not need more funds from the government.

Bernanke defended the bailout of the banking sector last year, saying it had "averted" the risk of depression, although he also acknowledged public disquiet that taxpayers' money was now supporting companies such as insurance group AIG.

"It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets," he said, adding that the financial system would have suffered further if these companies had not been rescued.

Anger over the rescue of AIG intensified over the weekend when it emerged that its London staff will share bonuses of $450m, despite crippling the company with huge losses on derivative contracts.

Bernanke's optimism that the economic recovery will begin next year is not shared for the UK by accountancy firm BDO Stoy Hayward. It warned today that around 36,000 companies will be claimed by the recession in the UK this year. It said the picture will be even worse in 2010 when up to 39,000 companies are expected to fail.

"The deteriorating economy and expectations of a drawn-out recession has led to a downward revision in the UK outlook and has severely impacted the survival rate of UK businesses," warned Shay Bannon, the firm's head of business restructuring.

Analysts at City firm Numis also predicted the economic crisis has much further to run. In a report to clients this month, it said it "expects the UK to be mired in a deep recession through all of 2010". It added there was a risk that Britain might be pushed into bankruptcy by the government's policy of stimulating the economy by increased spending and lower taxes, which will push up the national debt.

The Centre for Economics and Business Research warned today that tax revenue from the financial services sector will plummet over the next year, badly denting the government's income from taxes.

Thursday, March 12, 2009

Lessons from a Disaster

Amid the wreckage and recriminations, investors are left wondering what might warn them of the next mega-fraud

victims of Bernard Madoff's Ponzi scheme finally had one of their wishes come true. After a judge denied bail, Madoff is going directly to jail, and he isn't passing "go." But Madoff's victims still want answers.

They want to know where the money went. They want to know who else was involved. And they want to know how they got scammed.

At the courthouse, many victims said there were no warning signs and Madoff himself, in his courtroom statement, backed them up on at least one count. "The clients receiving trade confirmations and account statements had no way of knowing by reviewing these documents that I had never engaged in the transactions," Madoff said during his guilty plea.

Maybe not. But to Harry Markopolos, the risk manager who alerted the SEC to Madoff's fraud in 1999 to no avail, the foul play seemed obvious. Madoff was supposedly using a complex trading system to generate returns, a strategy he dubbed the "split-strike conversion strategy." He would buy stocks in the Standard & Poor's 100 and sell options to reduce volatility. But Markopolos' firm was running a similar strategy and couldn't match the returns. A look at the returns was all it took for Markopolos to know something was up.

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Billionaires arenot as rich as they used to be

Don't go looking for them in soup lines just yet, but the world's billionaires have suffered too as the economy has tanked. Where there were 1,125 billionaires on last year's Forbes list, there were 793 when the new list was released Wednesday.

There was some jostling at the top. Bill Gates moved to No. 1 from No. 3, bumping investing guru Warren Buffett and Mexican telecommunications magnate Carlos Slim to No. 2 and No. 3, respectively. All of the top 10 billionaires saw their net worths fall.Forbes reported that those on the list of billionaires had an average net worth of $3 billion, down 23 percent.

American billionaires this year accounted for 44 per-cent of the money and 45 percent of the slots. That's up 7 percentage points and 3 percentage points, respectively.Houston lost two of its billionaires, with money manager Fayez Sarofim and W&T Offshore founder Tracy Krohn falling off the list. But the city gained another: Bud Adams, the former Houston Oilers owner who still takes heat for moving the team to Tennessee more than 10 years later. He broke in at No. 647 with an estimated net worth of $1.1 billion.

Houston's richest man, energy baron Dan Duncan, saw his rank rise to 81st, despite a $2 billion drop in his net worth. Rich Kinder, CEO and chairman of Kinder Morgan, and hedge fund manager John Arnold, were the only Houston billionaires on last year's list whose values increased this year.Oilman Jeffrey Hildebrand and lawyer Joe Jamail held steady at $1.5 billion each but moved up more than 300 spots to No. 468 on the list.

R. Allen Stanford wasn't listed as a Houston resident when Forbes put his worth at $2 billion on last year's list. Now the Mexia native whose company has its headquarters here has been removed from the list.In a note about Stanford's removal, Forbes said that "recent allegations have cast doubt on Stanford Financial Group's purported revenues and returns."

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Wednesday, March 11, 2009

The World's Top 25 Billionaires 2009


William Gates III

United States



United States

Warren Buffett

United States



United States

Carlos Slim Helu & family





Lawrence Ellison

United States



United States

Ingvar Kamprad & family





Karl Albrecht





Mukesh Ambani





Lakshmi Mittal




United Kingdom

Theo Albrecht





Amancio Ortega





Jim Walton

United States



United States

Alice Walton

United States



United States

Christy Walton & family

United States



United States

S Robson Waton

United States



United States

Bernard Arnault





Li Ka-shing

Hong Kong



Hong Kong

Michael Bloomberg

United States



United States

Stefan Persson





Charles Koch

United States



United States

David Koch

United States



United States

Liliane Bettencourt





Prince Alwaleed Bin Talal Alsaud

Saudi Arabia



Saudi Arabia

Michael Otto & family





David Thomson & family





Michael Dell

United States



United States

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Area Jobless Rates Climb to Levels Not Seen in More Than a Decade

Unemployment rates in the Washington region rose again in January to their highest levels in more than a decade, according to numbers released yesterday by the U.S. Bureau of Labor Statistics.

The District's unemployment rate in January jumped to 9.3 percent, from 8.2 percent in December, its highest point since the 1980s. Virginia's January unemployment rate rose to 6 percent, from 5 percent the previous month, the highest level since 1992. And Maryland's rate rose to 6.2 percent, from 5.4 percent, the highest since 1993.

The D.C. increase put the city's unemployment rate on pace to top 10 percent late this year or early next year, according to the Office of the Chief Financial Officer.

About 10,000 jobs were lost since January 2008 in professional services, transportation, utilities and other trades, according to a report by the D.C. Department of Employment Services.

"It's a major concern," said Robert Ebel, the city's chief economist. "We're worried about an accelerating effect."

City officials anticipated the job loss and 9.4 percent unemployment for January last year, said Fitzroy Lee, director of revenue estimation. "We've already built the impact into our revenue estimate," Lee said.

Ebel and Lee said the city's unemployment rate could surpass 11 percent in late 2010, a high not seen since December 1983.

"I don't know that . . . we've hit bottom," Lee said. "We have the unemployment rate going up to 11.5 next year. It's in line with other major urban areas. It means a lot of people are losing jobs."

In Virginia, where Circuit City, the technology retailer headquartered in Richmond, closed Sunday after filing for bankruptcy, the unemployment rate was also expected to continue to rise, though slowly.

"It will probably go over 6 percent," said William F. Mezger, chief economist for the Virginia Employment Commission. "We don't think it will go up a whole bunch above that. In the summer it will be high when the students are out of school, and it should drop again toward the end of the year."

Mezger said a statewide breakdown of unemployment data won't be prepared until tomorrow, so he could not discuss its impact. "I've been here 46 years," he said. "The last time it was this high . . . was in 1993, after the '91 recession. It got up to 8 percent in 1982 and 1983."

In Maryland, assistant secretary for labor, licensing and regulation Andy Moser said the unemployment rate is "the highest I've seen. I've been on the job for 10 years."

The state's unemployment rate rose to 6.8 percent in 1993 and went as high as 8.7 percent a decade before that, after the 1981 recession. Moser said the state had no estimate for how high the unemployment rate might go. "Obviously we're part of the national economy," he said. "We're not on an island."

Reflecting job losses nationwide, Maryland shed workers in construction, manufacturing and retail as consumers stopped spending. "You have to look at the state number in relation to the national number. Compare us to Pennsylvania, which is 7 percent," Moser said.

Michigan, at 11.6 percent, had the highest unemployment rate. Wyoming, at 3.7 percent, had the lowest. Michigan is home to the nation's struggling automakers. Wyoming thrives on agriculture.

South Carolina, Rhode Island, California and Oregon joined Michigan as the states with the five highest unemployment rates. North Dakota, Nebraska, South Dakota and Utah joined Wyoming as the states with the lowest.

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