Today's Headlines

Bloomberg:

- Sales of existing U.S. homes jumped more than forecast in July to the highest level in almost two years, signaling the housing crisis that crippled the world’s largest economy is easing. Purchases climbed 7.2 percent to a 5.24 million annual rate, the most since August 2007, the National Association of Realtors said today in Washington. The gain was the biggest since records began in 1999. The median price fell 15 percent. “More and more buyers are becoming convinced that there is not a lot of downside left in the housing market,” said Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “We can count on housing no longer being a drag. The economic recovery is on track.”

- A.P. Moeller-Maersk A/S, owner of the world’s largest container line, rose as much as 7 percent in Copenhagen as its chief executive officer said world trade is improving and some container rate increases are “sticking.”

- The cost of protecting U.S. corporate bonds from default decreased the most in two weeks as sales of existing homes climbed more than forecast, signaling the housing collapse is easing. Credit-default swaps on the Markit CDX North America Investment-Grade Index, linked to 125 companies in the U.S. and Canada, fell 4.5 basis points to a mid-price of 116 basis points as of 10:52 a.m. in New York, according to broker Phoenix Partners Group. That’s the biggest decline since Aug. 7 and lowest level since Aug. 13, according to CMA DataVision. “Sales are now up for four consecutive months, the first such occurrence since the summer of 2004,” Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York, said in a note to clients. “Existing-home sales have now broken out of a trading range in place for the last several months, indicating that perhaps stabilization has, for now, turned to outright improvement.”

- Crude oil rose above $74 a barrel in New York for the first time in 10 months, following equities higher on speculation that the global recession is easing.

- Unemployment rates rose in 26 U.S. states in July, a sign the labor market will take time to improve and budget crises in capitals across the nation may deepen. California, Nevada, Rhode Island and Georgia all reached their highest level of joblessness since records began in 1976, with California’s rising to 11.9 percent from 11.6 percent the previous month, the Labor Department reported today in Washington. The number of states with at least 10 percent unemployment held at 16.

- Russia’s foreign direct investment plummeted an annual 45 percent, the most on record, to $6.1 billion in the first six months of the year as the economy of the world’s biggest energy producer contracted at a record pace. Overall foreign investment, including credits and flows into securities, fell 30.9 percent from a year earlier to $32.2 billion, the Moscow-based Federal Statistics Service said today.

- Royal Dutch Shell Plc and Exxon Mobil Corp., the world’s biggest energy companies, are rolling out technology intended to eliminate the environmental disadvantage of Canadian oil sands. A new process known as high-temperature froth treatment cuts carbon emissions from extracting crude from sand and mud by 10 to 15 percent, said Brad Komishke, a Shell chemist who leads 50 scientists developing new oil-sands techniques in Calgary. “This means less production of the heaviest, dirtiest part of the crude stream and less pollution,” Komishke said in an interview at the company’s laboratories at the University of Calgary.

- The scenes of jubilation that greeted convicted Lockerbie bomber Abdel Basset Ali al-Megrahi as he returned to his native Libya were condemned by the British and U.S. governments today. “Obviously, the sight of a mass murderer getting a hero’s welcome in Tripoli is deeply upsetting, deeply distressing, above all for the 270 families who grieve every day for the loss of their loved ones 21 years ago,” U.K. Foreign Secretary David Miliband said in a British Broadcasting Corp. radio interview. The U.S. government told Libya that the welcome reception “sends the wrong message and is deeply offensive” to the families of the victims, said Bill Burton, White House deputy press secretary. “It is disturbing to see images suggesting that Megrahi was accorded a hero’s welcome instead of being treated as a convicted murderer,” he said in a statement.

- Germany’s service industry and French manufacturing unexpectedly expanded in August, adding to signs Europe’s worst recession in more than six decades is easing. An index of the German services industry rose to 54.1 this month from 48.1 in July, Markit Economics said today, citing its purchasing managers’ survey. The French manufacturing index increased to 50.2 in August from 48.1 in the prior month. A reading above 50 indicates expansion.

- President Barack Obama and his advisers are taking a hands-off approach to the review of pay packages at companies receiving taxpayer aid, a senior adviser said, leaving the politically sensitive task of dealing with the fallout to Kenneth Feinberg. Companies including New York-based American International Group Inc. and Citigroup Inc. submitted executive-pay proposals last week to Feinberg, the administration’s so-called special master on executive pay, for a 60-day review. White House Press Secretary Robert Gibbs illustrated the hands-off approach when asked about AIG CEO Robert Benmosche’s $7 million annual salary earlier this week. “The president has talked about we’re not micromanaging these companies,” Gibbs said Aug. 18. Under the package, which was preliminarily approved by Feinberg, according to AIG, Benmosche, 65, will get $3 million in cash and $4 million in common stock. He is also eligible for as much as $3.5 million a year in long-term incentive awards, according to a regulatory filing by the company.

Wall Street Journal:

- BYD Co., the Chinese auto maker part-owned by Warren Buffett's company, is finalizing plans for a new all-electric battery car model to sell in the U.S. next year.

- With votes being tallied, the two top contenders for Afghanistan's presidency -- incumbent Hamid Karzai and former foreign minister Abdullah Abdullah -- each declared themselves well ahead in the count Friday, seeking to position themselves as the eventual victor. Both Mr. Karzai's and Dr. Abdullah's supporters said reports from their observers, who were monitoring the vote tally, indicated that they had won more than 50 percent of the vote and would not need to face each other in a runoff election.

- Right now Mr. Obama's gift is his curse, a Congress dominated by his party. While the country worries about the economy and two wars, the Democrats of Congress are preoccupied with the idea that this is their moment, now is their time, health care now, "Never let a good crisis go to waste," the only blazingly memorable phrase to be uttered in the new era. It's not especially pleasurable to see history held hostage to ideological vanity, but it's not the first time. And if they keep it up, they'll help solve the president's problem. He'll have a Republican congress soon enough.

- President Obama's Justice Department continues to stonewall inquiries about why it dropped a voter intimidation case against the New Black Panther Party. The episode—which Bartle Bull, a former civil rights lawyer and publisher of the left-wing Village Voice, calls "the most blatant form of voter intimidation I've ever seen"—began on Election Day 2008. Mr. Bull and others witnessed two Black Panthers in paramilitary garb at a polling place near downtown Philadelphia. (Some of this behavior is on YouTube.)

CNBC:

- Ben Bernanke deserves reappointment as chairman of the Federal Reserve, former Dallas Fed president Robert McTeer said. “To me it’s a no-brainer,” McTeer said. “I think he recued the financial system, which in turn kept us out of a great depression. So, I think he certainly should be, and I think he probably will be.”

NY Times:

- Faced with a growing wave of bank failures, the Federal Deposit Insurance Corporation is taking extraordinary steps to attract buyers for troubled institutions to keep the fund that makes depositors whole from being drained. Federal regulators are planning next week to make it easier for private equity firms to buy insolvent lenders, according to people briefed on the situation, a move that would reduce the number of failed banks that the fund would have to support. It is also trying to entice buyers by agreeing to share some of the potential losses from failed banks. And it is retooling one of its main financing programs to make it cheaper for bidders to buy the toxic assets of closed lenders.

MarketWatch:
- Contrarians are no longer sure that the stock market's very short-term trend is down. And that represents a big shift from what contrarians were saying as recently as just one week ago, when almost all of the sentiment indicators seemed to be saying that the rally was entering into dangerous territory. But in the wake of the stock market's struggles over the last week, the mood has soured quite quickly --so quickly, in fact, that at least some contrarians are now willing to entertain the possibility that the rally that began on March 9 has further upside potential.

Forbes:

- A gauge of future economic growth made steady gains in the latest week, sending its yearly growth rate to a fresh 26-year high and suggesting a strong recovery is already in motion, a research group said on Friday. The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to nearly a year-high of 125.0 in the week to Aug. 14 from an upwardly revised 124.4 the prior week, which ECRI originally reported at 123.9. The index's annualized growth rate ticked up to 17.5 percent after hitting a 26-year high of 14.3 percent last week, which was also revised higher from 13.4 percent. It was the highest yearly growth rate the index has seen since the week to July 29, 1983, when it was 17.8 percent. 'It is high time to break from the herd of pessimistic analysts, who will continue to bemoan economic weakness long after the Great Recession is history,' said Lakshman Achuthan, Managing Director at ECRI. Achuthan told Reuters last week that he expects the recovery to take hold at a stronger pace than any the U.S. has seen since the early 1980s.

Washington Post:

- Public confidence in President Obama's leadership has declined sharply over the summer, amid intensifying opposition to health-care reform that threatens to undercut his attempt to enact major changes to the system, according to a new Washington Post-ABC News poll. Among all Americans, 49 percent now express confidence that Obama will make the right decisions for the country, down from 60 percent at the 100-day mark in his presidency. Forty-nine percent now say they think he will be able to spearhead significant improvements in the system, down nearly 20 percentage points from before he took office. As challenges to Obama's initiatives have mounted over the summer, pessimism in the nation's direction has risen: Fifty-five percent see things as pretty seriously on the wrong track, up from 48 percent in April. A majority, 53 percent, now disapprove of his handling of the federal budget deficit, and his ratings on health care continue to deteriorate. Disapproval of Obama's handling of the health-care issue reached 50 percent in the new poll, the highest of his presidency, and 42 percent of those surveyed say they now "strongly disapprove" of the way he is dealing with his main domestic priority. Views of the president's actions on reform have dropped most sharply among seniors and independents. In June, seniors were evenly split on the “public option” portion of the health care plan, but now a majority strongly oppose the idea. Obama faces an increasingly polarized environment as he campaigns for his health-care initiatives. Fifty percent of those surveyed say they oppose the set of proposals advanced by the president and congressional Democrats, while 45 percent support them. Intensity is on the side of the detractors: Forty percent of all Americans strongly oppose the plans, while 27 percent are solidly behind them. Positive feelings about reform drop significantly by age, with 57 percent of seniors holding negative feelings, including 29 percent who say they are outright angry. The lack of energy behind broad change stems in part from widespread skepticism that the proposed overhaul would make things better. Only 19 percent envision the quality of their care improving or their costs going down if the system is changed, and few of those who now carry health insurance (the vast majority of Americans) say they think their coverage or costs would improve. Seniors are more than five times as likely to believe their care will deteriorate under projected modifications than to believe it will improve. The overall drop in support for government action on health care is notable among political independents, who now divide evenly between whether government reform is even necessary or would do more harm than good. Disapproval of Obama's handling of the reform issue has spiked to 57 percent among independents, a new high, with nearly half giving him strongly negative marks. Nearly six in 10 independents oppose the proposals. Looking ahead to the 2010 midterm elections, half of independents say a congressional candidate's support for the proposed health-care changes will not affect their vote, but among the other half, twice as many say they are less apt to back such a contender than say they would be more likely to vote that way. Seniors tilt even more negatively on the question.

- Thousands of employees in the Department of Veterans Affairs' technology office received a total of $24 million in bonuses over a two-year period, some under questionable circumstances, the agency's inspector general said in scathing reports that also detail abuses including nepotism and an inappropriate relationship.

LA Times:

- Despite President Obama's promise that only taxpayers earning more than $250,000 a year will pay higher taxes to support the healthcare initiative that he is proposing, the vast majority of Americans surveyed believe that they will pay higher income taxes by the final year of Obama's term in 2012. The apparently pervasive fear of higher taxes with 68 percent of all Americans surveyed by the Gallup Poll saying they expect higher taxes by the end of Obama's term could help explain widespread uncertainty about the president's plans for overhauling the delivery of health care and insurance. More than one-third of all surveyed say they expect their taxes to be "a lot higher'' despite the president's assertion that 95 percent of all Americans are getting tax relief under his economic stimulus program and health-care plans for the future. "Most Americans remain skeptical that the administration can pay for healthcare reform and its other programs without raising their taxes,'' Gallup's Jeffrey Jones reports today.

The Daily Beast:

- How worried are Goldman Sachs executives about their ability to manage the coming media tsunami when bonus season comes around? Paranoia might not be too strong a word to describe the mind-set. People inside Goldman tell me that some senior executives say they believe the onslaught of negative stories detailing Goldman’s manifold ties to upper levels of government, charges that it somehow fraudulently profited from the subprime crisis, and now the press about the firm’s record earnings is so out of proportion to reality that the coverage contains an element of anti-Semitism—subtly playing off the racist myth of a conspiracy of Jewish bankers controlling the world for their own benefit. Blankfein, I am told, isn’t paranoid but really concerned about being placed in an untenable position for any CEO who needs to retain talent. If he doesn’t pay his people, many will simply jump ship to other firms—including private-equity firms—that will. If he does, he faces endless negative coverage about how Goldman is making its partners rich at the expense of taxpayers who bailed out the firm last year. Goldman has suddenly replaced Citigroup, Merrill, and even Lehman as the leading culprit of Wall Street greed and abuse committed during the financial crisis. In the good old days, Goldman could just ignore the chattering class, make a lot of money, and tell the rest of the world to screw off.

Time:

- It's not just the U.S. government that wants to get its hands on the list of Americans who hold secretive Swiss bank accounts. Ex-wives, creditors and former business partners are also salivating over the idea that a settlement between the U.S., the Swiss government and a Swiss bank may lead to the public disclosure of as many as 4,450 U.S. individuals that used the foreign bank accounts to hide money.

Politico:

- A day after House Speaker Nancy Pelosi said that health reform won’t get through the House without a public option, House Majority Leader Steny Hoyer said Friday that the public option may have to go in order to get a bill passed. “I’m for a public option but I’m also for passing a bill,” Hoyer told reporters on a conference call. “We believe the public option is a necessary, useful and very important aspect of this, but we’ll have to see because there are many other important aspects of the bill as well.” In San Francisco on Thursday, Pelosi said: "There's no way I can pass a bill in the House of Representatives without a public option.” The seemingly contradictory comments highlight the pressure on some Democratic members, particularly those from conservative districts. Members have faced rowdy crowds in town hall meetings across the country during the August recess.

Reuters:
- Those guessing that the severe U.S. recession is on its last legs will be looking for confirmation on Monday from the Chicago Federal Reserve Bank's national activity index. The monthly report, designed to gauge economic activity and inflationary pressure in the U.S. economy from a weighted average of 85 indicators, will be released at 8:30 a.m. ET (1230 GMT) on Monday.

Financial Times:
- As leaders gather this week for the annual Jackson Hole symposium on the economy, they should consider the future of the Federal Reserve as lender of last resort. Over many decades and especially in this financial crisis, the Fed has used its balance sheet to be a classic lender of last resort. But its ability to do so depends upon its economic credibility and political independence, attributes the Fed has compromised in this crisis. As the crisis worsened at the end of 2007, the Fed created new liquidity facilities, some of which involved new recipients, beyond depository institutions, such as investment banks and corporate commercial paper issuers. In addition, in 2008, the Fed made extraordinary “bail-out” loans to avoid the failure of systemically important institutions – a $30bn (£18bn, €21bn) non-recourse loan, with a $1bn deductible, to assist JP Morgan Chase’s acquisition of Bear Stearns and the creation of a two-year $85bn credit facility for AIG. Also, the Fed, in partnership with the Treasury and Federal Deposit Insurance Corporation, guaranteed $424bn of losses on pools of Citigroup and Bank of America bad assets. These actions have had a big impact on the Fed’s balance sheet. As of June 2009, its total assets had risen to over $2,000bn compared with $852bn in 2006, and only 29 per cent of these assets were Treasury securities, compared with 91 per cent in 2006. Traditional loans by a lender of last resort are sufficiently collateralized to prevent moral hazard for borrowers and reduce risk to the central bank. However, the adequacy of the collateral of these new Fed positions is unclear. These actions have not only increased the Fed’s risk, the shortage of Treasuries has hampered the Fed’s ability to conduct its central mission – monetary policy. In order to counter the potential inflationary impact of its credit expansion, the Fed requested that the Treasury sell special issues of Treasuries under the Supplementary Financing Program – not to raise revenue but simply as part of the conduct of monetary policy. As of June 3, 2009, the Supplementary Financing Account of the Treasury was about $200bn compared with Treasury holdings of about $475bn, indicating that the Treasury had become a significant player in monetary policy.

- The global economy looks poised to start growing again, Ben Bernanke said on Friday, declaring that vigorous actions by the world’s central banks and governments have succeeded in averting economic catastrophe. “Prospects for a return to growth in the near term appear good,” the Federal Reserve chairman told fellow central bankers gathered for its annual retreat in Jackson Hole, Wyoming.

Manager Magazin:

- Dell Inc.(DELL) expects the computer industry will recover in 2010 after sales have reached the bottom and stabilized, Steven Felice, head of business with medium-sized companies, said. Felice said there is a great need to replace computers as those in offices are now a year older than was previously the average.