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Nick'Otin
post Sep 22, 2009, 04:34 PM
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post Sep 22, 2009, 04:34 PM
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Unemployment benefits: Bill could help more than 1 million jobless
NEW YORK (CNNMoney.com) -- More than a million people could receive an additional 13 weeks of unemployment benefits under a bill the House is set to take up on Tuesday.

The bill would extend benefits for those living in states with jobless rates higher than 8.5%. Some 27 states, plus the District of Columbia and Puerto Rico, fall into this category. The national unemployment rate hit 9.7% in August, the highest in 26 years.

The extended benefits would apply to an estimated 314,000 people set to exhaust their benefits by month's end and to more than a million who will stop getting checks by the end of the year, according to the House Ways and Means Committee. Workers in other states could qualify if their state is expected to hit an 8.5% unemployment rate soon or meets other criteria.

"Decent, hard-working Americans from North Carolina to California have been calling my office to tell me they still cannot find work after a year or more after becoming unemployed and they need some additional help to keep their heads above water," said Rep. Jim McDermott, D-Wash., when he introduced the legislation earlier this month.

An estimated 400,000 people are expected to lose their checks by the end of this month and 1.4 million will by the end of the year, according to the National Employment Law Project. McDermott said he will push for more comprehensive legislation in the near future.

In most states, unemployed people receive 26 weeks of state-funded benefits. Depending on where they live, they could get federally funded extensions for a total of 79 weeks.

The bill will be fast-tracked though the House, where it is expected to pass easily. Senate Democrats said they will try to address the measure soon after the House votes. A spokesman for Senate Republicans could not be reached for comment, though at least one lawmaker has said he'd support the legislation.

The cost of the additional benefits would be offset by extending for one year an employer-paid federal unemployment tax that has been in place for the past three decades, and by requiring that reporting on newly hired employees include a start date, which would reduce unemployment insurance overpayments.
Calls to extend benefits

Over the past year, Congress has twice voted to extend benefits. Still, pressure has been building on Capitol Hill to extend them again as the recession wears on and unemployment continues to rise. Governors of 22 states appealed to congressional leaders last week to quickly pass extended benefits.



A record 50.7% of the unemployed failed to find work within six months of receiving benefits, according to the National Employment Law Project. There are now more than six potential workers for each opening, up from 1.7 in December 2007.

Extending benefits is crucial since unemployment often continues to rise even after the economy starts to turn around, said Chad Stone, chief economist for the Center on Budget and Policy Priorities, which advocates for workers. Also, lengthening benefits helps boost the economy since the jobless usually spend their checks.

The bill is well-targeted since it would apply to more than 80% of those about to exhaust their benefits, Stone said. They will likely continue to have the hardest time finding a new job.

The states with unemployment rates greater than 8.5% are Alabama, Arizona, California, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Maine, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, New York, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Washington, Wisconsin and West Virginia.
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Nick'Otin
post Sep 23, 2009, 04:54 PM
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post Sep 23, 2009, 04:54 PM
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G-20: Do global summits matter?
Leaders of the world's biggest economies converge again. They will call for strengthening the financial system that collapsed - just like they did twice before.
WASHINGTON (CNNMoney.com) -- Let's try this again.

When Group of 20 leaders meet in Pittsburgh this week, they will call for a coordinated global effort to tighten financial regulation to prevent future financial collapse.

That sounds a lot like the same thing they said at the previous two meetings they convened over the past year in April and last November.

"We'll discuss some of the steps that are required to safeguard our global financial system and close gaps in regulation around the world -- gaps that permitted the kinds of reckless risk-taking and irresponsibility that led to the crisis," President Obama said last week.

Leaders will probably walk away from the Pittsburgh summit with a general agreement on at least two priorities: Requiring banks to build stronger safety nets for their balance sheets and getting tougher on executive pay in order to curb risky practices. They may even set some deadlines -- as in next year or several years from now.

"There's little more you can expect from a meeting like this," said Benn Steill, director of International Economics at the Council of Foreign Relations. "Even I'd be a little uncomfortable with them trying to do more, because we're a ways away from a consensus domestically on what the numbers should be."
European concern at pace of change

A White House senior adviser, speaking to reporters last week, defended G-20 progress on global regulatory reforms. For one thing, nations have been focused on the more immediate task of stabilizing their economies.

"If you asked people then what they thought the situation would be in September, they probably thought it would be worse than it is now," said Michael Froman, deputy national security adviser for international economic affairs.

Froman also stressed that just getting all the nations to agree on regulatory reform principles is an accomplishment.

"We should not necessarily underestimate what the significance of countries coming together and saying, 'Given the lessons of this crisis, here are the policies we agree to pursue going forward, some of which require adjustment in our approach to our economic policy,' " Froman said. "That's a fairly significant innovation in international cooperation."

However, some European officials are worried about what they see as a lack of progress.

A group of regulators and academics called the European Shadow Financial Regulatory Committee sent the G-20 a letter this week warning that proposals on the table "are not likely to substantially reduce the likelihood of future crises."

"We are concerned that not enough has been done," said Harald Benink, a banking professor at Tilburg University in the Netherlands who chairs the group.
What will they do?

Earlier this month, U.S. Treasury Secretary Tim Geithner lobbied G-20 finance ministers to endorse a key reform effort: Requiring bigger capital cushions at financial firms. Such reserves can protect banks against losses and are considered important for preventing another financial crisis.

The idea is among those at the top of the list for the Pittsburgh meeting.

While nations agree about the need for boosting reserves, the debate will likely center around how best to do it. The more controversial question of how big capital reserves should be is not expected to be decided.

The United States would prefer to pass its own capital rules and have other countries follow suit, said Eswar Prasad, an international economist at Cornell University. The Europeans would prefer a multi-national process with all nations work together, more or less, as equals.

"The Europeans want to be very involved in developing those standards, so they're not going to be as enthusiastic as they might be," Prasad said.

The more high-profile regulatory proposal will be over executive pay -- and how to tackle it.

The French, among others, have been calling for global caps on executive pay, but the Obama administration isn't budging on that issue.

"I think the president has been pretty clear that he supports a robust approach to executive compensation, but has been reluctant to sort of set individual compensation levels," Froman said.

International experts say they don't expect the G-20 to endorse pay caps. Instead, the leaders are likely to give a nod to a set of principles that would encourage countries to decouple bonuses from risky behavior, while adding more disclosure of pay to regulators or shareholders.

Morris Goldstein of the Peterson Institute for International Economics said that the G-20 could create a compromise that satisfies all members by linking executive pay issues to stronger capital requirements. If financial firms are forced to increase capital requirements, it means they'll have fewer profits, and less available for bonuses linked to profits.

Experts also say that the G-20 will also talk about the need for coordinated regulation of some of the kinds of complex financial products that were sold by Lehman Brothers and AIG (AIG, Fortune 500). However, the countries are not likely to reach agreement on how to do it.
Finally, experts believe the Pittsburgh meeting will feature discussion of broad, tricky issues of rebalancing different G-20 member economies.

The United States wants China to spend more and depend less on exports, and other nations want the United States to quit living on debt. But the meeting is not expected to produce a concrete plan for rejiggering the imbalances.
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Nick'Otin
post Sep 23, 2009, 05:07 PM
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post Sep 23, 2009, 05:07 PM
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The Fed's dollar conundrum
The central bank has flooded the world with dollars to avert collapse and start a recovery. But what if the U.S. economy doesn't reap the rewards?
NEW YORK (Fortune) -- Whose recovery is the Fed stimulating, anyway?

A year after the near collapse of the financial markets, the global economy has stabilized. Job losses have slowed and stocks have posted a sharp rally.

Yet skeptics warn that a major driver of the recovery in stock and bond markets -- a round of unprecedented emergency money printing by the Federal Reserve -- could actually slow the healing of the real economy.

In this view, the Fed's decision to hold short-term interest rates near zero has temporarily revived financial markets without addressing the economy's underlying problems. The danger is that with bank lending remaining anemic and consumer balance sheets still bloated, the low U.S. rates could end up supporting overseas growth without fortifying domestic health.

"You end up financing everybody else's expansion but your own," said Howard Simons, a strategist at Bianco Research in Chicago.

Critics focus on the fact that low U.S. interest rates enable investors around the globe to borrow dollars for next to nothing and invest them elsewhere at higher rates.

This bet -- known as the dollar carry trade -- appears to be one of the forces pushing down value of the dollar. Though there are few reliable figures on the size of the carry trade, the dollar's trend has clearly been down since stock and bond markets revived.

The buck recently traded at its lowest level against the euro in a year, while the trade-weighted dollar index has dropped 14% since March.

The resulting investment flows are potentially unstable, prompting talk of new asset price bubbles -- particularly in commodities such as oil and gold, and the economies of faster-growing emerging markets.

That sounds like an unpleasant arrangement, but Americans may have to get used to it. The Fed, which is expected to hold interest rates steady when it wraps up a two-day meeting Wednesday, has said it anticipates keeping its fed funds rate near zero for an extended period.

That could mean months of a currency-depressing, growth-stunting carry trade -- an echo of Japan's experience during two decades of on-again, off-again zero interest rates.
Could have been worse -- but who really benefits?

Of course, the world was a different place then. In the 1990s and the early part of this decade, other rich countries were showing solid growth. Now, other governments -- notably the U.K. -- are following essentially the same spending playbook as the U.S.

"Everyone's doing the same stupid thing now," said Simons. "If everyone's being irresponsible, you end up in a race to be most irresponsible."

None of this means that Fed chief Ben Bernanke and other policymakers had lots of better options at their disposal when they took rates down to zero and began buying bonds in a bid to make credit more available.

The financial sector was on the verge of cataclysm after years of easy money policies led to a surge of bad loans and a flight of capital from wholesale funding markets. Facing a total meltdown, officials enacted programs that supported the mortgage market and stabilized the banking system.

That those decisions were costly and have contributed to soaring government spending is obvious. But without them, the U.S. could have faced a replay of the Great Depression, when unemployment was above 20%.

"How much worse ... would conditions for the average American have been without that handout?" says Tim Duy, an economics professor at the University of Oregon. "That is the relevant question."
Still, the debate over who is reaping the biggest benefits from the financial rescue is hardly a new one.

Most prominently, Goldman Sachs (GS, Fortune 500) -- the securities firm that received $10 billion of Treasury capital last fall under the Troubled Asset Relief Program and has since issued almost $22 billion of government-backed debt -- has rebounded so strongly that it's on pace to pay bonuses on par with those of the boom years.

Meanwhile, two forms of credit creation most relevant to consumers and small businesses -- securitization and bank lending -- have yet to bounce back. Consumer credit dropped at a 10.5% annual rate in July, the Federal Reserve said, and commercial bank loans fell at a $392 billion annual rate in the second quarter.

These are not the makings of a vigorous domestic recovery, said Michael Pento, chief economist at investment adviser Delta Global Advisors.

"The people looking for a V-shaped recovery are living in Candyland," he said. "One of these days we're going to have to stop trying to inflate our way out."
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Nick'Otin
post Sep 25, 2009, 09:39 AM
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post Sep 25, 2009, 09:39 AM
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Bank bailout problem: No easy answers
FDIC has a decision to make: How to replenish its insurance fund. With failures mounting and banks complaining about fees, borrowing from Uncle Sam may be the best way out.
NEW YORK (Fortune) -- It's time for Sheila Bair to stop worrying about bailout politics and hit Uncle Sam up for some dough.

Bair is the chairman of the Federal Deposit Insurance Corp., the federal agency that administers the insurance fund that stands behind the savings of millions of Americans.

The fund is paid for by the banks that benefit from it, but it has been depleted by a wave of bank failures that isn't expected to abate any time soon.

The FDIC board is scheduled to meet Tuesday to discuss how to raise money to restock the fund. There aren't a lot of good options.

Bair could easily borrow the cash from Treasury, where the FDIC has a standing credit line. But the agency hasn't done so in nearly 20 years, since the trough of the last banking crisis. And with bailout rage lingering in the air, Bair has made clear she's not eager to break that precedent.

She said last week that whether to tap the Treasury credit line is a "philosophical question" for bankers and their regulators. The central issue: Is the Treasury backstop there for foreseeable losses or for "unexpected emergencies?"

That comment reminded listeners that as heavy as the FDIC's burden has been -- 94 banks have failed this year, on top of 25 last year -- the agency is still wary about the possible collapse of a giant, multibillion-dollar institution.
But another danger is that if the FDIC fails to take prompt and transparent action, the public could again lose faith in the financial system -- at a time when bad news about failing banks is certain to continue.

"I don't understand why Sheila just does not use her Treasury line to recapitalize the fund in the same way that she encourages banks in similar situations to recapitalize themselves," said Ken Thomas, a Miami-based banking consultant who has testified before Congress on deposit insurance funding.

"By doing this," Thomas added, "she would put an end to all of this growing and troubling uncertainty about the shrinking fund, which does nothing but detract from confidence in the FDIC which is the most important concern."

What Bair would rather do is what the agency typically does -- collect funds directly from banks -- or turn to what she describes as other tools, such as raising money by issuing debt to banks.

The FDIC has warned banks that they may have to pony up another special fee to support the insurance fund, whose balance fell to a 17-year low of $10 billion this summer.

But the banks, which have been socked with one special fee this year, are warning that a tax on their already weakened profits could push a number of them over the edge and stall the economic recovery that has gingerly taken hold since spring.

And for once, they may not just be blowing smoke. The industry posted a $3.7 billion loss in the second quarter, when one in four institutions were unprofitable. The FDIC classifies more than 400 institutions -- nearly 5% of its membership -- as troubled.

Whatever the industry's problems, many commentators have dismissed the prospect of the FDIC using its Treasury credit line as another bailout. The agency has a $100 billion standing credit line with Treasury -- and, thanks to a law passed this year, the authority to borrow as much as $500 billion through 2010 in an emergency.

Given that the industry paid essentially no insurance premiums for a decade, it's easy to see why there might be some resentment over a fresh demand for taxpayer funds.

Between 1997 and 2006, the industry made $1.28 trillion in pretax operating profits, according to FDIC data. During that period, thanks to a 1996 law that prohibited the agency from assessing well capitalized banks, the banks paid just $672 million in insurance premiums.

Yet given the banks' current problems -- and the federal laws that oblige the industry to, over time, fully repay any Treasury borrowings -- the option of drawing on the credit line is gaining backers in unexpected places.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services committee, said this week he believes using the credit line is the "cleanest" way to solve the FDIC's funding questions.

And Thomas -- who twice last decade proposed boosting the minimum size of the deposit insurance fund, so that the FDIC fund would never repeat its brush with insolvency in the early 1990s -- dismisses the bailout talk as a red herring.

"This idea that she does not want to go to the Treasury because of the perception of a federal 'bailout' does not make sense, since everyone knows that FDIC is ultimately backed by the full faith and credit of the U.S.," said Thomas.

Whatever outsiders think, the FDIC board -- led by Bair and staffed by two members of the FDIC and two other federal banking regulators -- will soon decide. An FDIC spokesman said it's likely the agency will put some proposals out for public comment Tuesday, rather than making a decision on the spot.

The shifting debate seems to have left even the politically savvy chairman a bit bemused.

"The political dynamic on this is interesting," Bair said this month after her speech at Georgetown University. "People are shifting from not wanting this to go to taxpayers to wanting it to go to taxpayers."
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Nick'Otin
post Sep 25, 2009, 09:46 AM
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post Sep 25, 2009, 09:46 AM
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Chrysler: Check engine now
Out of bankruptcy but not out of the woods, the automaker is struggling with a stale product line-up and not much new in sight.
NEW YORK (CNNMoney.com) -- Three months after coming through a federally-financed bankruptcy, the new Chrysler Group still faces serious trouble with no quick solution in sight.

The carmaker may have been given a sleek and shiny new balance sheet, but the products on the showroom floor are the same stale cars and trucks from before and there's not much new to look forward to.

In the hyper-competitive American car market, that empty product pipeline is potentially disastrous. Newly designed and engineered cars and trucks are what keep automakers in the game.

"It's the most important thing," industry analyst Jesse Toprak of Truecar.com said of new product offerings. "It's the lifeline."

Besides a new heavy-duty version of the well-regarded Dodge Ram pick-up on sale now, there's nothing new coming from any of Chrysler Group's brands before the middle of next year.

"I think they will run out of steam quickly," Matt Stone, executive editor of Motor Trend magazine, said of Chrysler Group. "How long could they prop it up with color changes and incentives? Another year or two, maybe."

New car and truck models are important because consumers are always interested in the newest stuff, Toprak said, but all-new products with the latest engineering and the trendiest designs take years to develop -- time which many experts say Chrysler does not have.

To try to turn its own situation around before it's too late, Chrysler Group is expected to release a new revitalization plan in November. Interviews published recently by the industry newspaper Automotive News provide some insight into what Chrysler Group executives might be thinking.

Under the new plan, both the Chrysler and Dodge brands will undergo serious image makeovers.

Dodge will continue to be a performance-oriented brand but now focus more on fun-to-drive qualities than on raw engine power. Chrysler, meanwhile, will move upscale. Way upscale, setting its sights on competing with Cadillac, BMW and Mercedes.
A Chrysler spokesman would not officially confirm anything that was said in the Automotive News report.

When pressed by reporter at the Frankfurt Motor Show recently about Chrysler Group's dry product pipeline, Fiat and Chrysler CEO Sergio Marchionne replied "Who says?" and told reporters to "wait until November."

New directions: In order to crank out new products quickly, Chrysler will likely depend on Fiat for much of the vehicle engineering needed. The Italian automaker's CEO now runs the show in Detroit after it took a 20% ownership stake in the new Chrysler Group.

Dodge's new image as a more fuel-efficient, but still sporty, car brand could benefit from Fiat engineering, said James Bell, an industry analyst with the Web site KBB.com. Fiat is well known for building just that sort of product and Dodge will only be following a larger trend in the U.S. away from big cars and big engines.

"I think it's where the business is going to go, anyway," he said.

While he agrees this strategy could work for Dodge, Motor Trend's Stone thinks a quicker path to profit for Dodge would be to just ditch cars altogether.

"I still think the best strategy for Dodge would still be to become an all-truck division," he said.

Gary Fong, who heads the Chrysler brand, as well as handling sales for all of the Chrysler Group brands, told Automotive News he wants the Chrysler brand to reach toward the high-end luxury car market. He described the goal as "a notch above Cadillac, a notch above Lincoln."

That idea is more controversial.

"Chrysler did used to be an upscale brand, but that is so ancient history," said Michelle Krebs, a senior industry analyst with the automotive Web site Edmunds.com.

Even in those days, Motor Trend's Stone said, Chrysler wasn't really in the luxury big leagues. Back in the 1950s, '60s and '70s -- remember Ricardo Montalban boasting of "soft Corinthian leather" -- it was more of a value-oriented alternative.

That's something Chrysler could shoot for again, he said, as it did with the current Chrysler 300, a car that offers luxury car looks for mass-market money.

"I think there's people proving there's room in that space," he said. Hyundai, for instance, is succeeding with its new Genesis sedan.

Under the best of circumstances, a luxury-leading Chrysler brand will take a long time to build, said Bell.

"To do what they're trotting out here is at minimum a decade-long project," he said, "and that's with killer product."

Another problem is that Fiat could do little to help Chrysler build real luxury cars, said Stone. Even Fiat's upper-end European brands like Alfa-Romeo and Lancia don't have cars that could readily be turned into American-style luxury cruisers, he said. Chrysler will have to start from nothing.

"You're talking scratch-built stuff here."

Gary Dilts, senior vice president of global automotive operations at J.D. Power and Associates, sees luxury aspirations for Chrysler brand cars as more of a vague, long term target than something anyone realistically expects in the near term.

"That doesn't mean you shouldn't shoot for it," he said.

"If there was ever a time to get out of jail, it's now," Dilts said.
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Nick'Otin
post Sep 28, 2009, 07:54 PM
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post Sep 28, 2009, 07:54 PM
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Australia gets OK to sue Lehman
Town councils and other investors in Australia can pursue financial claims against the U.S. investment bank, according to a firm representing 60 claimants.
SYDNEY (Reuters) -- An Australian court has ruled that local governments can pursue financial claims against collapsed U.S. investment bank Lehman Brothers in Australia and elsewhere, a firm that is funding the litigation said on Monday.

IMF (Australia) Ltd. said the Federal Court ruled on Friday in favor of town councils and others which had lost money in collateralized debt obligations marketed and issued by Lehman, opening the door to legal claims to recover their losses.

However, the judgment does not set a precedent for the many other Lehman investors and creditors worldwide who are seeking hundreds of millions of dollars from the bankrupt bank's estate, said Susanna Khouri, investment manager at IMF.

"This does not have implications beyond Australian law. It is not going to be a precedent for creditors to other Lehman entities around the world," Khouri told Reuters.

The firm said in a short statement to the stock exchange that the court had found against the validity of a Deed of Company Arrangement which had prevented the councils and others from pursuing claims against Lehman entities and from pursuing payment under various insurance policies.

"IMF will now fund those councils and other parties in litigation to recover monies lost when they invested in collateralized debt obligations arranged, issued and promoted by those Lehman entities," the statement said.

IMF is representing about 60 clients.

Lawsuits abound. Lehman's estate is facing a slew of claims from creditors worldwide, including bondholders, derivatives counterparties, states, towns and individuals.

Administrators of the London arm of Lehman Brothers said last month the claims it is handling against the collapsed Wall Street bank could total as much as $100 billion.

Lehman's demise a year ago brought the global financial system to the brink of collapse, and accountants and lawyers expect to have to work for years to sort out billions of dollars worth of assets left locked in its accounts.

About 35 councils in Australia invested $22 million in Federation CDO, a long-term, synthetic instrument based on a list of 40 residential mortgage-backed securities linked to the U.S. subprime market, financial magazine the Government News said in a report in April.
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Nick'Otin
post Sep 28, 2009, 07:54 PM
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The last bank left standing for small businesses
As other major players fell away, Wells Fargo has remained a stalwart, increasing its lending this year through SBA programs.
NEW YORK (CNNMoney.com) -- The landscape of lenders willing to work with small business owners has changed dramatically in the last year, but one bank -- Wells Fargo -- has emerged stronger than ever.

While other financiers that were historically major players took a knee, Wells Fargo (WFC, Fortune 500) increased its lending, emerging as the new number-one lender through the Small Business Administration's loan programs.

CIT Group (CIT, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Banco Popular of North America and others that once held top spots have cut their SBA lending by more than 70% this year. Meanwhile, Wells Fargo upped its loan volume 4%, from $583.4 million in 2008 to $605 million this year.

Some of that gain may be fueled by Wells Fargo's late-2008 acquisition of Wachovia, another bank that traditionally made many SBA-backed small business loans. The acquisition closed three months into the 2009 fiscal year (which the SBA began Oct. 1), leading Wachovia and Wells Fargo to report their loans separately through part of the year.

Taken together, the two banks lent $742.3 million this year -- down 24% from what they collectively lent as independent banks last year, but still far more than any other bank put into the small business market. The next runner-up, U.S. Bank (USB, Fortune 500), made $249.5 million in loans through the SBA's flagship lending program.

Given the retraction of a number of key lenders, Wells Fargo's leap to the top is not a major surprise. "I don't see anything shocking with Wells Fargo being number one," says Bob Coleman, editor of the Coleman Report, which monitors small business lending trends.

What Wells Fargo did right: Wells Fargo's ascendance isn't solely due to its competition's collapse. The bank made two key strategic decisions that turned into major advantages.

First, Wells Fargo doesn't resell its loans on the secondary market, where many banks unload bundles of the SBA-backed loans that they've made. That market froze last fall after Lehman Brothers' collapse, leaving many banks unable to find buyers for their loans -- and without those sales, the banks lacked the capital to make new small business loans.

Second, Wells Fargo focuses on making traditional 7(a) loans, which can total as much as $2 million each. The Small Business Administration guarantees a portion of its 7(a) loans -- if the business owner defaults, the government pays the bank back for the insured portion.

But the SBA also offers a variety of "Express" loan programs, which involve lower loan amounts, lower government guarantees, and less paperwork. Because banks scrutinize those loans less, they're more prone to go bad when the economy gets rough.

Bank of America (BAC, Fortune 500), in particular, has been hit hard on that front. The bank made 3,296 SBA loans last year, making it the fourth most-active SBA lender based on the number of loans made. But most of those loans were Express loans, with an average loan size of just over $31,000 each.

And many have begun defaulting. A year ago, CEO Ken Lewis called his bank's small business loan portfolio a "damn disaster." Bank of America reacted by sharply pulling back on its SBA lending. So far this year, the bank has made just 303 loans, 269 of which were Express loans.

"Wells Fargo is more of a traditional 7(a) lender. Their loans are larger and there is collateral behind them," says industry observer Coleman. "They do a more extensive underwriting analysis than the SBA Express lenders, which makes them feel more comfortable in assuming risk. For some lenders, the model is broken for those smaller Express markets, and so they have backed out of the market."

The new lending scene: Tom Burke, Wells Fargo's senior vice president of SBA lending, sees his bank's new leading role on the lending scene as a validation of what it has been doing all along. While Wells Fargo never before held the number-one spot, it has routinely been in the top two or three.

"We have been consistent. Our portfolio performs consistently," Burke says. "We always said that we are a player in the market. It is part of our DNA to help our small business customers."

Wells Fargo plans to press its advantage. "We are increasing staff to take advantage of gaps in the marketplace," Burke says. "We saw weakness in our competitors, and we decided to take advantage of what was going on in the marketplace."

One new small business owner is grateful that Wells Fargo is still actively lending. Jennifer Braun obtained an SBA loan from Wells Fargo in June to purchase a five-year old event-planning business called Festivities. Located in Medina, Minn., just outside of Minneapolis, the small business has seven fulltime staffers and a handful of part-timers who work weekends to cover events.

Previously employed at an event-planning firm, Braun knew it was risky to change careers in a recession: "All along, I kept thinking this is the worst time to quit my high-paying corporate job, as the primary breadwinner in our house."

But her doubts didn't stop her from following her instincts. "I just kept having the gut [feeling] that this was the time to act," she says. "You see a trend in downturns that a lot of companies are looking for mergers or consolidations, and that just seemed like something that I needed to capture -- to get a great business at a great price, because everyone is so scared, they are not moving forward on it."

Braun started her research by Googling "How do I get a business loan?" and ended up being directed to Wells Fargo by a broker. Both Braun and her husband quit their jobs and currently devote all of their energy to growing Festivities. She's optimistic that the economy is on the rebound: "I have had a strong belief in next year," she says.
Without the loan from Wells Fargo, Braun wouldn't have been able to take the entrepreneurial leap. "I would still be working at my corporate job," she says. "It would have been a dead dream for now."

The future: Next week, the government wraps up its 2009 fiscal year, and the SBA numbers are likely to be grim. To try to revive the market, Congress allocated funds in February's Recovery Act to temporarily eliminate fees for SBA loans and increase to up to 90% the percentage of the loan that is insured against default.

Those moves have had some effect: "If you look in terms of all the government programs that are out there -- increasing that 7(a) guarantee to the bank has made the greatest impact to getting money to Main Street, in my opinion," says Coleman.

"This is a good time to be making SBA loans," Wells Fargo's Burke says of the added incentives.

Even with the stimulus cash, the number of 7(a) loans made this year is on track to drop 38% from last year, to just over 40,000 loans. The total amount lent is also down sharply: Though mid-September, loans totaled $8.7 billion, down 28% from the same time last year.

But Wells Fargo, at least, expects its coffers to remain open to small business borrowers.

"We are in it for the long term," Burke says. "We would love to continue to be the top SBA performer."
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Nick'Otin
post Sep 28, 2009, 07:55 PM
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post Sep 28, 2009, 07:55 PM
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For new banks, starting up is hard to do
Would-be bankers are finding plenty of regulatory resistance, particularly in hard-hit regions of the country.
NEW YORK (CNNMoney.com) -- What's harder than running a bank these days?

Try starting one of your own.

Even as enterprising bankers try to benefit from a less competitive industry landscape and Americans' new-found love for Main Street banks, many industry hopefuls have had their dreams deferred.

Nearly a year ago, Cindy Delaparte, a veteran of the Florida banking community, had visions of striking out on her own, establishing a de novo, or new bank, in the suburbs of Jacksonville.

Things started out smoothly enough as she and her partner quickly raised the roughly $12 million in start-up capital for their new venture: St. John's Bank.

But with costs mounting by the day and no indications that their business plan would be approved anytime soon by federal and state regulators, Delaparte withdrew her application in March.

"We still believe it would have worked," she said.

Starting a new bank has never been a simple undertaking. Would-be bankers not only have to secure millions of dollars from investors and find a management team with years of experience, but they also have to undergo significant scrutiny from both state and federal regulators. From start to finish, the entire process has known to take two years or more in some instances.

So given the backdrop of the current crisis, industry experts suggest that regulatory scrutiny over prospective banks is as high as it has ever been.

Would-be bankers in states where the local economy has suffered greatly or endured a rash of bank troubles now face a particularly tough time in securing new charters, notes Jerry Blanchard, a partner in the financial institutions practice at the Atlanta offices of the law firm Bryan Cave.

Georgia, for example, was once a virtual boom town for new banks, averaging 14 per year between 2006 and 2008, according to FDIC data. After becoming the nation's leader in bank failures during the crisis, regulators have placed a virtual moratorium on new banks in the state.

"[Regulators] are trying to figure out what went wrong," he said.
But regulators have put the brakes on new banks in other ways. For example, experts believe the Federal Deposit Insurance Corporation, which has the final say on new ventures by choosing whether to extend deposit insurance, has demanded that new lenders raise more capital than they might have in previous years.

Officials have also been vigilant about firms intending to accept brokered deposits or building much of their business through commercial real estate loans, practices that have been problematic.

"You have to have a very solid business plan," said Carey Richardson, director of sales for the Dallas-based Bankmark, which consults de novo banks. "Regulators want to see that an institution is profitable by the end of its second year."
Tougher scrutiny

In a sign of just how reluctant regulators have been to sign off on new banks, about two thirds of the 32 firms that applied to the FDIC for deposit insurance have had their application rejected, according to the most recent agency data.

Compare that to the pre-crisis environment of 2006 and 2007, when four out of every five new bank applications were approved.

Faced with such grim statistics, some bankers have gotten creative in an effort to launch their business.

When plans to open last year came unraveled because of the economic and regulatory environment, Richmond, Va.-based Xenith Bank agreed in May to a merger with First Bankshares (SUFB), which already operated institutions.

What helps keep so many would-be bankers interested, according to experts, is that new institutions can choose to make loans that are safer and more lucrative, particularly as credit remains tough to come by.

That prospect has also helped bring in plenty of private capital to banks looking to launch in the future.

In just three short months of fundraising, Scottsdale, Ariz.-based Paradise Valley National Bank has raised $11 million of the $15 million to $17 million the firm hoped to raise, said company CEO Gary Hickel.

For Hickel, a long-time Arizona banker, this will be the second bank he has launched, the first coming in the mid-1990s. If all goes according to plan, his new venture, which will offer a variety of business, real estate and consumer loans, will launch this spring.

"It is different today than it was back then," he said when comparing his two efforts to launch banks. "We are still meeting with a lot of receptivity, so that is encouraging."
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Nick'Otin
post Sep 29, 2009, 08:08 PM
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post Sep 29, 2009, 08:08 PM
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Chrysler's credibility challenge
The carmaker has to convince suppliers, dealers, and customers that it can be competitive again. Good luck.
NEW YORK (Fortune) -- An auto company high executive who shall remain unnamed chuckled when asked about the competitive prospects of Chrysler:

"What's their market share, 7%? And what do they have to sell for the next two years besides the Ram [pickup truck] and the minivan? Their first new car after that will be the Fiat 500? How many of those are they going to sell? Fiat hasn't sold so much as a bicycle here for 20 years."

Though harsh and a bit off the mark (Chrysler's market share is closer to 9% nine percent), the executive's comments neatly summarized the challenge faced by CEO Sergio Marchionne and his executive team as they try to reestablish Chrysler as a credible choice for consumers in the U.S. market.

It won't be easy. Turning around car companies takes time -- three years to develop a new model -- and money -- up to $1 billion for a new car or truck and the tools and machinery to build it with.

Chrysler has little of either.

Former owner Daimler hollowed out Chrysler's technical capabilities and scrimped on its products to meet corporate financial targets. Then its last owner Cerberus severed critical operations and crammed distribution channels with unwanted vehicles in a desperate attempt to generate cash and stave off bankruptcy.

Marchionne, who spends half his time in Italy running Fiat, Chrysler's 20% owner, is said to enjoy the challenge of putting Chrysler's pieces back together. He has promised to unveil a five-year plan for Chrysler in November.
That's no small task -- especially since Chrysler sometimes seems to be confused about what it wants to do. At the same time that workers were protesting the decision to close the plant where the underwhelming Chrysler Sebring and Dodge Avenger are made, reports were published that Chrysler now intends to give the cars a facelift and keep the plant open for another two years.

Chrysler will also need a more convincing story in order to convince suppliers to do business with it and dealers to stock its cars.

But the atmosphere currently is one of mistrust. Suppliers have taken a beating lately because industry volumes have been so much lower than anticipated. Making fewer parts with the same overhead crushes profit margins.

And dealers got burned in the weeks before bankruptcy when Chrysler begged them to keep taking more cars in the face of slumping sales. Some dealers did so, only to see their franchise agreements terminated, leaving them with lots full of unsold merchandise.

At least Marchionne appears to be a realist. He's admitted to being surprised by how little product development had been done at Chrysler in the two years before he arrived in June.

And he promised that his five-year plan will show "how we're going to come out of this." The whole auto industry will be watching. Including one particularly skeptical high executive.
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Nick'Otin
post Sep 29, 2009, 08:09 PM
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post Sep 29, 2009, 08:09 PM
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Starbucks instant coffee unveiled
The home of the upscale lattes launches a new brand of instant coffee called Via.
NEW YORK (CNNMoney.com) -- Starbucks unveiled a brand of instant coffee Tuesday that the high-end chain says "will change the way people drink coffee."

The Seattle-based company will begin selling a "ready brew" coffee called Via at all of its U.S. locations in a move designed to tap a growing market for instant coffee.

"With a $21 billion global instant coffee business, and instant coffee representing 40% of overall global coffee sales, we believe Starbucks is uniquely positioned to capture a significant share of this market," said Starbucks chairman Howard Schultz, in a statement.

Starbucks has struggled to compete with lower-priced rivals such as Dunkin Donuts and McDonald's (MCD, Fortune 500) as consumers have become more price-conscious amid the weak economy.

However, the company could face resistance from coffee purists who generally see instant coffee as inferior to brewed.

Starbucks (SBUX, Fortune 500) said Via is made with 100% natural roasted arabica coffee and that it took 20 years to develop "a proprietary, U.S. patent-pending microgrind technology" that preserves the taste of fresh coffee.

To help get Via off the ground, Starbucks said it will offer customers the chance to taste it at U.S. stores from Oct. 2 to Oct. 5. Customers will also be given a coupon for a cup of brewed coffee on their next visit and $1 off on a purchase of the instant brew.

Via is sold in packs of three cup-sized servings for $2.95 or $9.95 for a 12 pack. That makes for a cost of $1 per cup, which is Starbucks' cheapest option.

Starbucks has partnered with a number of other companies that could benefit from Via's portability. The instant brew will be available on United Airlines (UAUA, Fortune 500) flights of more than two hours, and at Omni and Marriott (MAR, Fortune 500) hotels, as well as through outdoor gear retailer REI.
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Nick'Otin
post Sep 29, 2009, 08:09 PM
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post Sep 29, 2009, 08:09 PM
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FDIC asks banks for help
The agency raised its estimated bank failure tab and wants banks to kick in $45 billion to shore up the deposit insurance fund.
NEW YORK (Fortune) -- The banking bust is getting mighty costly.

Bank regulators on Tuesday sharply raised their estimate of the cost of cleaning up after bank failures -- and proposed sending the industry a $45 billion tab to shore up the dwindling deposit insurance fund.

The staff of the Federal Deposit Insurance Corp. said it expects expenses tied to failed banks to surge to $100 billion over five years -- up 43% from the agency's last estimate in May.

As a result of the rising costs and the pressures on the agency's cash position, the FDIC proposed that banks prepay their deposit insurance premiums for the next three years at the end of December.

The move would head off a cash crunch at the fund that stands behind consumers' bank deposits. Under FDIC guidelines, bankers and others will have a month to comment on the proposal before it becomes a rule.

The FDIC said the fund, under strain from 95 bank failures this year, will have a negative balance when the third quarter ends Wednesday and could run out of cash by the end of the first quarter next year. Over the past year, the deposit insurance fund balance has dropped to $10 billion from $45 billion.

As a result, there is a need for banks to pony up cash on hand now to support the fund, which supports more than $4 trillion in insured deposits.

The FDIC said the banks mostly will be able to make the payments out of reserves, so it won't unduly strain their finances or reduce lending.

"Our analysis suggests the industry can step up, so that's what we are asking them to do," said FDIC chief Sheila Bair.

The agency said the banking industry has "substantial liquidity," with some $1.3 trillion in liquid balances -- up 22% from a year ago.

Because the banks won't have to account for their payments to the FDIC all at once, the plan proposed Tuesday "will put the industry's liquid balances to good use in conserving capital and helping to maintain the capacity of banks to lend while they rebuild" the fund, the FDIC said.

The industry, which had been lobbying against another option open to the FDIC -- levying a so-called special assessment on banks, as it did earlier this year -- generally praised the prepayment decision.

"At this critical time, when the economy is just beginning its recovery, looking to options that are less pro-cyclical and that spread the cost over time is the right policy," the American Bankers Association said in a statement.

The FDIC said it wouldn't make any further special assessments on banks for the rest of the year, and ruled out raising the premiums it levies on banks till 2011.

Tuesday's proposal highlights how much money the banks have made over the past decade, while until recently contributing little to the insurance fund.

In the seven years leading up to the bloodbath of 2008, when banking industry profits tumbled 78% as the credit bubble collapsed, FDIC-insured commercial banks made an average pretax operating profit of $142 billion, according to agency data.

Over the same period, the industry paid out just $170 million a year, on average, in deposit insurance premiums, thanks largely to a 1996 law backed by the bankers' friends in Congress. In 2006, President Bush signed into law a measure that restored the FDIC's right to assess premiums on well-capitalized banks.

Since the markets melted down two summers ago, the FDIC has been playing catch-up. It booked $643 million in net assessments in 2007 and $3 billion last year -- and is on track to bring in some $17 billion over the course of 2009.

The FDIC does have some other options to shore up the fund. For instance, it could borrow cash from the Treasury Department.

The agency has a $100 billion standing credit line with Treasury -- and, thanks to a law passed this year, the authority to borrow as much as $500 billion through 2010 in an emergency.

But Bair has been reluctant to tap into this line of credit. She and other officials said Tuesday they prefer to leave the Treasury credit line untapped unless there is what they call an emergency situation -- such as the failure of a massive institution.

"I think that the American people would prefer to see an end to policies that look to the federal balance sheet as a remedy to every problem," Bair said. "That is especially the case with an industry that has the resources to deal with the problem."
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Nick'Otin
post Sep 30, 2009, 05:09 PM
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post Sep 30, 2009, 05:09 PM
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Private sector still losing lots of jobs
Payroll-processing firm says 254,000 jobs were lost in September, more than expected but down slightly from August.
NEW YORK (CNNMoney.com) -- Private sector employment fell more than expected in September, but the pace of job losses continued to slow, according to a report released Wednesday.

Automatic Data Processing, a payroll-processing firm, said private-sector employers cut 254,000 jobs in September, down from a revised 277,000 in August. It was the smallest monthly total since July 2008.

The decline was greater than the 200,000 loss economists surveyed by Briefing.com had forecast. But the difference was "not statistically meaningful," according to Joel Prakken, an ADP spokesman and chairman of Macroeconomic Advisers, LLC.

"The pattern of improvement in headline number is undeniable at this point," Prakken said. Private sector payrolls will continue to decline at a slowing rate for the next few months before modest job growth resumes "in the first few months of 2010," he added.

Large businesses, those with 500 or more workers, let 61,000 workers go. Medium-sized businesses, with between 50 and 499 workers, shed 93,000 jobs. And small businesses, those with less than 50 workers, reduced payrolls by 100,000.

Small businesses held will continue to shed more workers than larger and medium-sized firms, Prakken said. That's because large businesses started shrinking payrolls earlier and therefore will recover sooner, he explained.

The goods-producing sector cut 151,000 jobs in September, while the service sector shed 103,000 jobs. Employment in the manufacturing sector dropped by 74,000 jobs.

The pattern of gradual improvement in the job market has been "fairly wide spread," Prakken said. But employment in the construction and manufacturing sectors will remain weaker than the service sector, he added.

Public sector employment, which ADP excludes from its report, is expected to decline significantly due to "pressure on states to cut costs and meet budgets," Prakken said.

ADP based its report on payroll data from about 500,000 employers across a broad range of industries.

The report is seen as a precursor to Friday's closely watched jobs report from the U.S. Labor Department.

That report is expected to show that the economy shed 180,000 jobs in September, down from the 216,000 reported for August, according to a consensus estimate of economists compiled by Briefing.com. The unemployment rate is predicted to rise to 9.8% from 9.7%.
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Nick'Otin
post Sep 30, 2009, 06:02 PM
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post Sep 30, 2009, 06:02 PM
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Bailout cop on the prowl for perps
Neil Barofsky's job is to root out fraud in the $700 billion rescue program. So far, he has put only one bad guy behind bars. But he says: Stay tuned.
WASHINGTON (CNNMoney.com) -- Bailout cop Neil Barofsky is on the lookout for [Censored]mers and thieves.

The special inspector general will soon release results of an audit of the money given to the nine largest banks, with a focus on the Bank of America-Merrill Lynch merger. He's also involved in a criminal investigation into that merger.

In addition, Barofsky is investigating a now-defunct Alabama bank that applied for but never received bailout funds under the Troubled Asset Relief Program.

In all, he has 35 ongoing criminal and civil investigations underway.

But if you measure an investigator's success by notches in his gunbelt, Barofsky has a ways to go. His biggest win came in August, when he helped put behind bars for 10 years an investment manager who conned investors into buying "TARP-backed securities."

Barofsky is not worried about counting wins. His team is going after complex cases like securities and accounting fraud, even if indictments are years away.

"The cases most important to our mission are those where we investigate those who try to steal money from Treasury," Barofsky said in an interview with CNNMoney.com. "But that means they're complex and take awhile."

And he has time for in-depth investigations. His office, which was established by the 2008 bailout law, exists as long as the Treasury Department still owns assets paid with TARP dollars. Even as new funding winds down next year, some TARP programs are expected to own assets for another 8 to 10 years.
Investigating fraud

Barofsky is one of several watchdogs lurking over the $700 billion federal bailout program.

"At SigTARP, they really do carry a gun and a badge," said Elizabeth Warren, chairwoman of Congressional Oversight Panel, which also oversees the bailout. "They audit the books. They make sure that when a check has been made out to the First National Banks of Sallisaw, Oklahoma, that it really got cashed and the money went into that bank's coffers."

Warren's panel looks at policy and big picture questions about how taxpayer dollars are spent and whether they're helping the economy.

Barofsky's job is different. He focuses on fraud. Yet, he says the loose nature of the TARP law gives banks leeway in how they use the funds that wouldn't be considered fraud.

"They're so few conditions on how they can use the money," he said. "They could use it to support ACORN. They could use it to make a million-dollar contribution to the American Nazi Party or bet all the money on black."

Barofsky is looking beyond the banks that have received funding and is probing companies that may have lied on their bailout applications or used the TARP name to rip off consumers.

"If those numbers are cooked, then there's accounting fraud going on, and there is securities fraud going on, that's a large part of our work," he said.
Dancing with Treasury

Barofsky, 39, a former federal prosecutor from New York, was tapped as bailout overseer by President George W. Bush last December.

His ultimate boss is President Obama, who has the power to dismiss him.

But, unlike most federal inspectors general, Barofsky reports to Congress and not the head of the agency he reviews. Treasury had challenged the question of who Barofsky reports to until dropping the issue in late August.

"You can never rest on your laurels," Barofsky said about his apparent victory in affirming his office's independence. "This challenge has been met and turned away, but we need to stay vigilant."

The question of SigTARP's independence was only the latest of several awkward moments between Treasury and SigTARP, although both sides maintain they have a cordial and professional relationship.

In July, Barofsky made headlines when he said that $23.7 trillion had been committed for all federal rescue programs. Republicans seized on the number and redoubled their criticisms of the TARP-keepers in the Obama administration.

Treasury officials said the figure was inflated. Indeed, Barofsky's calculation included several programs that the government is no longer on the hook for, as well as bailouts that banks paid back. But Barofsky stood by his figure.

A more nuanced punch, counter-punch happened again last week before the Senate Banking Committee over what Barofsky called Treasury's "great failing" -- its lack of transparency in how it's handling TARP.

Treasury's TARP chief, Herb Allison, told lawmakers that the department had implemented the "vast majority" of recommendations made by Barofsky and other watchdogs about reporting bank lending data and other activities.

Barofsky didn't see it that way. "With all due respect to Mr. Allison, the things that he's described and that they're doing falls far, far short of meeting this basic level of transparency," he said.

Treasury spokeswoman Meg Reilly said that when Treasury has declined to implement a SigTARP recommendation, it has nonetheless tried different ways to meet the recommendation's goal.
What's next?

Barofsky's office has kicked into action. He has a staff of 86, on its way to 160. He has drawn investigators from the FBI, Secret Service, homeland security, energy and housing agencies. A team recently went to Texas for an audit on mortgage servicers.

More than half of its investigations come from tips from a telephone hotline, which has had 7,000 inquiries, or over the Internet. The office's Web site has gotten 26 million hits. The rest come from a combination of referrals from other agencies and follow-ups on reports in the news media and on blogs.
In the meantime, he said his office is investigating fraud and [Censored]s. Earlier this year, it worked with the Federal Trade Commission to shut down an Internet company purporting to be the government Web site for a program to help modify home mortgages.

Barofsky said he expects his office to produce a "lot more activity" going after home mortgage modification fraud.

"We've got a pretty good number of investigations underway," he said.
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Nick'Otin
post Oct 1, 2009, 07:25 PM
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post Oct 1, 2009, 07:25 PM
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Auto sales fall as Clunkers rush ends
Without the popular government program and low inventories, Ford's sales slip 5%, while Chrysler and GM sales plunge more than 40%.
NEW YORK (CNNMoney.com) -- The end of the government's popular Cash for Clunkers program and low inventories of vehicles led to drops in sales at the top U.S. automakers, although the declines generally were in line with forecasts.

Ford Motor (F, Fortune 500) reported the best results of Detroit's Big Three Thursday. Its sales slipped only 5% from a year earlier, although they were off 37% from the rush it got from the popular Cash for Clunkers program in August.

Still Ford's results were better than the 10% year-over-year drop forecast by sales tracker Edmunds.com.

Rival General Motors reported a 45% drop in sales compared to a year ago, and a 37% drop from August. Edmunds.com had forecast a 46% decline for the nation's largest automaker.

"September was a tough transitional month for the industry, and a difficult year-over-year comparison for GM," said Mark LaNeve, vice president of U.S. sales for GM, in a statement. "Fortunately, the fourth quarter looks brighter."

Chrysler's sales plunged 42% from a year ago, and 33% from August. Chrysler, with a heavier reliance on trucks than other automakers, did not get as much of a sales lift from the Clunkers program. But Edmunds.com had expected an even worse year-over-year drop of 48%.

"We believe the remainder of 2009 will continue to be a challenge for the U.S. automotive market," said Peter Fong, the lead sales executive for the Chrysler Group in a statement. "Credit markets have thawed slightly, but still remain tight, and consumer confidence, as we saw in September, is tenuous."

Cash for Clunkers, which paid buyers up to $4,500 for their used cars when they purchased more fuel efficient models, spurred strong sales from late July through the end of the program on Aug. 24.

But it likely pulled ahead sales that might have taken place in September and left dealers with limited supplies of vehicles to sell coming into the fall. With low inventories, automakers also scaled back on incentive offers to buyers.

"There were a lot of things working against sales in September, and very little wind at their back," said Jeff Schuster, director of global forecasting for auto consultant J.D. Power & Associates. The firm estimates that industrywide sales in September would be cut by more than 50,000 vehicles because of sales that got pulled into August due to the Clunkers program.

Ford and other automakers have ramped up production to try to replenish supplies, but inventories remained low throughout September.

George Pipas, director of sales analysis for Ford, said the company had an inventory of about 300,000 vehicles at the end of the month, up about 60,000 from the end of August. But he added that was an historic low and that some of those vehicles are still in transit to dealerships.

Edmunds.com forecasts that industrywide sales will be off 23% from a year ago, while J.D. Power expects September sales will come in at a seasonally adjusted annual rate of 9.2 million, down about 26% from last year.
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Nick'Otin
post Oct 1, 2009, 07:26 PM
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post Oct 1, 2009, 07:26 PM
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TD Bank customers hit by tech glitch
Overnight postings delayed for third time this week as bank combines systems with Commerce Bank.
NEW YORK (CNNMoney.com) -- For a third time this week, TD Bank customers cannot see real-time updates on their account transactions and balances.

In a statement released Thursday, TD Bank (TD) said U.S. customers can only see their account balance and transactions as of Wednesday evening because the bank is "experiencing an unusual delay in [its] overnight batch postings."

TD Bank said it expects to complete processing transactions and have current balances later in the day, and will reverse fees, charges or interest incurred because of the disruption.

The system first malfunctioned Monday night when the Toronto-based bank tried to integrate its operating system with New Jersey-based Commerce bank, which it acquired last year. TD Bank said the problem was resolved Tuesday, resurfaced Tuesday night, was resolved again Wednesday, and then recurred.

TD Bank spokeswoman Jennifer Carlson said that "higher-than-normal transaction volumes are compounding and having to play catch up" and ultimately causing a "computer glitch."

Carlson said the bank is "posting transactions as fast as we can using the system we have in place" and hopes customers will be able to see real-time transactions and balances later Thursday.

While customers temporarily cannot access online banking, Carlson assured that they can still access their funds and continue to make transactions.
Less than a week ago, the bank's New England and upstate New York branches changed their name from TD Banknorth to TD Bank, bringing more than 1,000 of its units between Maine and Florida under the same name.

Lauren Ventola, 23, who started using the bank seven years ago when it was still called Commerce Bank, hasn't found the bank to be as convenient as its "America's Most Convenient Bank" slogan. As a medical student on the Caribbean island of Grenada, she relies on online banking to manage her finances.

"With the TD Bank Web site down I can't check statements, make sure rent money has cleared or determine my credit card balance," Ventola said.
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Nick'Otin
post Oct 1, 2009, 07:26 PM
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post Oct 1, 2009, 07:26 PM
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The dark side of merger talk
Investors need to be wary of getting burned by unsubstantiated takeover chatter.
NEW YORK (CNNMoney.com) -- Psst. Did you hear who Microsoft is going to buy next? No? Me neither. But that hasn't stopped traders from gossiping.

Mergers are starting to make a comeback as the economy and stock market show signs of life. But there is a dark side to the pickup in deals. Takeover rumors with little to no basis in fact have also returned.

Last week, for example, Wall Street and Silicon Valley were awash with the rumor that Microsoft (MSFT, Fortune 500) was in talks to buy video game publisher Electronic Arts (ERTS). Shares of EA spiked as much as 9.6% on the chatter.

A deal for EA wouldn't have been preposterous. Microsoft, after all, has a big interest in gaming with its Xbox franchise, and EA has been frequently cited as a potential acquisition target in the past few years.

But the takeover talk turned out to be just that: talk. Microsoft spokespeople and executives quickly denied the rumors and EA's stock took a hit as a result.

The Microsoft-EA "takeover" is just one example of investors getting their hopes up only to have them dashed.

Earlier this week, The New York Post reported that hedge fund wunderkind John Paulson, who made gobs of money last year shorting financial stocks and is now sifting through the rubble for bargains, was pushing to merge troubled small business lender CIT Group (CIT, Fortune 500) with OneWestBank, the failed mortgage lender previously known as IndyMac. Paulson's firm is an investor in CIT's debt and was part of a group that bought IndyMac from the FDIC this year.

Shares of CIT unsurprisingly shot up on the "news." But this chatter also turned out to be untrue. Reuters later reported from an unnamed source that talk of an IndyMac-CIT merger was "just wrong."

CIT's stock promptly sunk, plunging 45% Wednesday. It now appears that the company is considering a prepackaged bankruptcy. Ouch.

But neither of those bogus M&A stories can hold a candle to the curious case of big screen move theater operator IMAX.

On Wednesday morning, a press release began to float around the Internet saying that IMAX (IMAX) had agreed to be purchased by Walt Disney (DIS, Fortune 500) for $1.5 billion, a handsome premium.

IMAX's stock rose more than 7% Tuesday and was up about 6% in pre-market trading Wednesday. So it seems that some investors believed the reports. But upon further inspection, there were some things that didn't make sense.

While Disney does have an agreement with IMAX where several Disney films will be shown in IMAX theaters, an outright purchase of the company would not really fit Disney's strategy. Plus, Disney just announced a few weeks ago that it was spending $4 billion to buy comic book publisher Marvel Entertainment.

Well guess what? The IMAX press release turned out to be a fake -- and a bad one at that. It was a classic cut and paste job, with mentions of the Marvel deal scattered throughout.

Still, IMAX felt compelled to issue its own legitimate press release shortly after the market opened Wednesday to point out that it had not been acquired and was not in discussions to be bought by Disney. IMAX's stock was flat Wednesday but fell nearly 2% Thursday morning.
Of course, not every fake merger will be a case of someone acting fraudulently and making something up out of thin air as was the case with the IMAX rumor.

Is it possible that Microsoft and EA held talks about a deal at some point? Sure. But that's not the same thing as having a signed merger agreement that's going to be imminently announced. Just look at all the hullabaloo Thursday about Comcast and NBC Universal.

According to a story that surfaced Wednesday evening on TheWrap, a Web site focusing on the entertainment business, Comcast is in advanced discussions to purchase NBC Universal from General Electric for $35 billion.

Considering that the cable giant made a bold, unsolicited $54 billion takeover for Disney back in 2004, it's not entirely shocking that Comcast would be interested in NBC Universal.

But a Comcast spokeswoman denied this later Wednesday night, saying that "the report that Comcast has a deal to purchase NBC Universal is inaccurate."

Other reports suggest that Comcast (CMCSA, Fortune 500) is trying to purchase a stake in NBC Universal, not the whole thing. And the Comcast spokeswoman simply said that Comcast does not have a deal to purchase NBC Universal. So there probably is something to the notion that Comcast and GE (GE, Fortune 500) are talking. It just doesn't seem as if Comcast is about to ink a deal to buy all of NBC Universal.

There will probably be many more stories and rumors of takeovers that are at best slightly off the mark, and at worst just flat-out wrong. It comes with the territory now that companies are showing a willingness to make deals again.

It just goes to show that investors need to be wary of believing everything they read and hear, lest they get burned.
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Nick'Otin
post Oct 1, 2009, 07:27 PM
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post Oct 1, 2009, 07:27 PM
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Jobless claims report is setback to recovery
Initial claims jump 17,000 to 551,000 after three straight weeks of declines, but easing is still seen.
NEW YORK (CNNMoney.com) -- The number of first-time filers for unemployment insurance jumped last week, according to a government report issued Thursday, with the increase exceeding economists' forecasts.

There were 551,000 initial jobless claims filed in the week ended Sept. 26, up 17,000 from an upwardly revised 534,000 the previous week, the Labor Department said in a weekly report.

A consensus estimate of economists surveyed by Briefing.com expected 535,000 new claims.

"We've been holding in a similar pattern the past few weeks, and this could dash some hopes of a quicker recovery," said Adam York, analyst at Wells Fargo.

Ian Shepherdson of High Frequency Economics wrote in a research note that "a correction was overdue" after three consecutive declines in initial claims.

"Progress is slow," Shepherdson said. "There is still no sign of a near-term stabilization in employment."

The 4-week moving average of initial claims was 548,000, down 6,250 from the previous week's revised average of 554,250.

Continuing claims: The government said 6,090,000 people filed continuing claims in the week ended Sept. 19, the most recent data available. That was down 70,000 from the preceding week's ongoing claims.

The 4-week moving average for ongoing claims fell by 39,250 to 6,154,500 from the prior week's revised average of 6,193,750.

The initial claims number identifies those filing for their first week of unemployment benefits. Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks.

The figures do not include those who have moved to state or federal extensions, nor people whose benefits have expired.

State-by-state data: Two states reported a decline in initial claims of more than 1,000 for the week ended Sept. 19, the most recent data available. Claims in Kansas fell by 1,545, while Wisconsin's fell by 1,258.

A total of 12 states said that claims increased by more than 1,000. California reported the most new claims at 5,112.

Fewer layoffs: A separate report from outplacement firm Challenger, Gray & Christmas said its data showed stabilization in the job market.

Monthly layoff announcements fell in September to 66,404 job cuts, down 13% from August. That's the lowest level since March 2008, and the September figure was 30% lower than the same month a year ago, when employers announced 95,094 job cuts.

It was the fourth consecutive month in which job cuts declined from the year-ago level.

Outlook: Thursday's government report "shows we still have job losses to come this year," said Wells Fargo's York.

The rest of 2009's job losses won't come near the levels seen during mass layoffs in January and February, York said, and initial claims could fall below the 500,000 mark by year's end.

High Frequency Economics' Shepherdson wrote that better economic data in the third quarter should boost the job market.

"It would be very surprising not to see claims falling now," he said.
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Nick'Otin
post Oct 2, 2009, 09:59 PM
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post Oct 2, 2009, 09:59 PM
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Dollar rises as on jobs data
Safe-haven greenback gets a boost after data show a bigger-than-expected decline in payrolls in September.
NEW YORK (Reuters) -- The dollar gained against the euro Friday after bigger-than-expected U.S. job losses in September rekindled demand for the greenback as a safe haven.

The Labor Department said U.S. job losses last month totaled 263,000 with the unemployment rate rising to 9.8%, the highest rate since June 1983.

Markets were expecting payroll declines of 180,000.

"A very ugly read. But the reaction today is going to be a serious push and pull between two primary themes," said Boris Schlossberg, director of FX research, at GFT in New York.

"On one hand, there's risk aversion, which should help the dollar."

But on the other hand, Schlossberg said, the report could pressure the dollar as markets realize that the United States is "becoming the laggard in the G-20 as far as recovery goes."

The euro fell to session lows against the dollar to $1.4481 from $1.4539 before the data. It was last at $1.4515, down 0.1%. The dollar slipped against the yen to ?89.18, down 0.4%.
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Nick'Otin
post Oct 2, 2009, 10:00 PM
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post Oct 2, 2009, 10:00 PM
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U.S. broadband lags Asian nations
South Korea edges out Japan for providing top quality broadband service in 2009 study. The U.S. didn't even make the top 10.
NEW YORK (CNNMoney.com) -- South Korea leads the world in providing broadband services, according to a study released on Thursday. The United States did not make the top 10.

South Korea dramatically improved the speed, quality and availability of its Internet service in 2009, pushing past Japan, the former worldwide leader, according to a team of business students from the University of Oxford in England and the University of Oviedo in Spain.

The study, sponsored by Cisco (CSCO, Fortune 500), examined 66 countries and 240 cities. Broadband leadership was measured by various factors, including the number of wired households, where South Korea scored 97%. Hong Kong, which was rated number three in overall broadband leadership, had an even higher penetration, at 99%.

In terms of overall leadership, Hong Kong was followed by Sweden, Switzerland, the Netherlands, Singapore, Luxembourg, Denmark and Norway.

The United States did not make the list's top 10, even though it made "significant, above average improvements" in quality, the study said.

In terms of broadband Internet quality, the U.S. lags behind not only Sweden, which leads Europe, but the island nations of Malta and Iceland, and the former Soviet Bloc country of Lithuania.
The top three cities with the best overall broadband services -- Yokohama, Nagoya and Sapporo -- were all in Japan, the study said.

Japan also led the way for providing quality services outside major cities. But the study showed that the biggest digital quality divide between urban and rural areas was in Lithuania, Russia and Latvia.

"The Broadband Quality Study shows us which countries have made real moves towards the Internet of the future," said Professor Maria Rosalia Vicente of the University of Oviedo, in a written statement. "It also provides fresh evidence of the urban-versus-rural quality divide. The challenge for countries now is to bridge this quality divide."

The study's researchers judged broadband quality by measuring upload and download speeds, network latency and capacity. For their benchmarking, they tested out typical applications used today such as video streaming, Web browsing and social networking.

But they also took a look at which countries have the broadband quality necessary for handling future applications, like high definition Internet television and video communications, which they expect to become common in the next three to five years.

That list features nine countries, including the leaders South Korea, Japan and Sweden, as well as former Soviet nations Lithuania, Bulgaria and Latvia. The U.S. didn't make the cut.
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Nick'Otin
post Oct 2, 2009, 10:04 PM
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post Oct 2, 2009, 10:04 PM
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Chicago loses Olympic bid to Rio
The Windy City would have faced a tough financial challenge experts say. It already spent an estimated $100 million in its failed effort.
NEW YORK (CNNMoney.com) -- Chicago lost its bid to host the 2016 Summer Olympics Friday to Rio de Janeiro, Brazil.

The news was announced by Jacques Rogge, president of the International Olympic Committee, at a meeting in Copenhagen, Denmark.

"Like in every competition, there can be only one winner," said Rogge, just prior to announcing Rio as the host city.

With help from hometown heroes like the Obamas, the Windy City was aggressively lobbying to host the games. The upside to the rejection is that Chicago possibly saved money, as making the Olympics profitable would not have been an easy win.

Chicago was competing with Tokyo, Madrid, Spain and Rio de Janeiro in wooing the International Olympic Committee in Copenhagen.

The IOC also rejected Tokyo and Madrid Friday.

Chicago 2016, the organization leading the effort to host the games, had projected a cost of $3.8 billion, including a "rainy day" fund of $450 million in case of unforeseen increases if the city won the bid.

But there was good reason to be skeptical of that projection, said Robert Livingstone, producer of GamesBids.com and a leading expert in the Olympic selection process. Host cities routinely overrun their Olympic budgets, he said.

"It's going to be more expensive than we think it's going to be, because it typically is," Livingstone said, before the decision was made Friday. "I think every [host] city is going to lose money. It's not an efficient event."

The bidding process alone cost Chicago about $100 million, Livingstone estimated.

An argument often made by host city advocates is that presenting the international spectacle is good for a local economy. But such "trickle-down effects," like benefits to local businesses, are "almost impossible to measure," Livingstone said.

"I think a lot of people look at the Olympics, and they try to justify it by how much money it adds to the economy," said Livingstone. "[But] if you're in this to make money and improve your economy, you're in it for the wrong reasons."

A Chicago 2016 spokesman, who asked not be named, had stood by the $3.8 billion projection. "Our numbers are completely feasible thanks to the infrastructure already in place, the number of venues already built and the temporary nature of the majority of those we're planning to build," he wrote, in an e-mail prior to the IOC rejection.
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