Bloomberg:
- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said. Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York. “If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.” At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc. “It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said. Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work. “I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.” The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue. “If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said. “Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
- Goldman Sachs Group Inc.(GS) reported a surge in third-quarter profit driven by trading and investments with the firm’s own money. The shares declined as earnings fell short of the bank’s record. Compensation, the company’s biggest single expense, accounted for 43 percent of revenue to total $5.35 billion in the third quarter. So far this year, Goldman Sachs has set aside $16.7 billion to pay employees, compared with $11.4 billion after the first three quarters of last year. The firm allocated $16.9 billion in the first three quarters of 2007, a year that proved to be an all-time high for pay. The prospect of record year-end bonus payments at Goldman Sachs has sparked criticism from lawmakers even after the firm repaid $10 billion it received from the U.S. Treasury last year plus dividends. Goldman Sachs has also benefited from Federal Reserve support, government backing on about $30 billion of debt, and was one of the largest recipients of funds from the bailout of American International Group Inc. Revenue from fixed-income, currency and commodity trading, or FICC, surged to $5.99 billion from $1.60 billion in last year’s third quarter.
- The House Financial Service Committee approved legislation today to rein in the $592 trillion derivatives industry, after adopting amendments in response to regulators who called an initial version too lax. The measure, which must be reconciled with a similar bill pending in the House Agriculture Committee, was approved 43-26.
- Crude oil rose above $77 a barrel to a one-year high in New York after an Energy Department report showed an unexpected decline in U.S. gasoline stockpiles as refineries idled units for maintenance. Inventories of the motor fuel tumbled 5.23 million barrels last week, the biggest drop since September 2008, the department said. A 1.13 million-barrel increase was forecast by analysts surveyed by Bloomberg News. Gasoline output declined 10 percent, the most in 13 months. Refineries operated at 80.9 percent of capacity, the lowest level since April. “Utilization fell a great deal and the gasoline production number really grabs you by the neck,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “This will obviously eat into stocks. If refinery utilization stays at this level and demand doesn’t drop, we will see 4- and 5-million-barrel draws for weeks to come.” Fuel imports plunged 13 percent to 2.53 million barrels a day, the report showed. Crude oil imports fell 4 percent to 8.73 million barrels a day, the lowest since Aug. 14.
- As the Dow Jones Industrial Average posted its steepest advance in seven decades to rally above 10,000, investors were pouring money into bonds. The nation’s fixed-income funds have attracted 18 times more money than stocks in 2009, even as the Dow surged 53 percent after sinking to a 12-year low in March, according to data compiled by Morningstar Inc. and Bloomberg. Americans who stashed $1.45 trillion in money-market accounts in 2007 and 2008 as the financial crisis intensified have redeployed a quarter of that cash. That’s a bullish sign to some money managers. A net $254.6 billion was added to bond funds during the first nine months of 2009, compared with $14.5 billion for stock managers, according to Chicago-based Morningstar. Almost $3.45 trillion remains in U.S. money-market accounts, data from Washington-based Investment Company Institute show.
- A year after venture capitalists backed Barack Obama’s election campaign, supporting his spending plans for energy and research, the industry’s relations with the president are deteriorating. Obama’s plan to double some taxes on venture firms’ profits and a Treasury Department proposal for tighter regulation would hurt innovation without raising significant revenue, said Paul Maeder, a partner at venture firm Highland Capital Partners in Cambridge, Massachusetts. Venture firms say the changes threaten an industry that has helped create 12.1 million U.S. jobs. “You’re messing with a formula that has served the country extraordinarily well,” said Jack Lasersohn, a partner at Vertical Group, a Summit, New Jersey-based venture firm that has sold four startups for $9.8 billion since 2007. “People in VC can do other things. I think they will.” At issue is a government plan to treat venture capital firms’ profits as ordinary income rather than capital gains, which would increase the tax rate to 35 percent from 15 percent. The venture industry’s other complaint is a Treasury proposal that would require firms to keep e-mails for five years, hire compliance officers and be subject to surprise audits. Venture firms are concerned the administration’s plans will hurt an industry that’s already suffering from a near standstill in initial public offerings and acquisitions of startups -- the two ways for venture investors to make money.
- China Investment Corp., the country’s $200 billion sovereign wealth fund, has agreed to pay $300 million for a 45 percent stake in Nobel Oil Group of Russia, according to a statement today.
- European Central Bank President Jean-Claude Trichet said it is “extremely important” that U.S. authorities pursue policies supporting a strong dollar, and that excessive foreign-exchange volatility is an “enemy.” “It is extremely important that the U.S. authorities, including the Treasury, the Secretary of the Treasury and the chairman of the Fed, would pursue policies that take into account the fact that a strong dollar is in the interest of the U.S.,” Trichet said at an event in Frankfurt today. “Excess volatility is an enemy from the standpoint of the stability and prosperity of the global economy.”
- Manufacturing in the New York region expanded in October for a third straight month, reinforcing signs that factories are helping pull the economy out of the worst recession in seven decades. The Federal Reserve Bank of New York’s general economic index soared to 34.6, the highest since mid-2004, from 18.9 in September, the bank said today, marking the first time the measure has shown expansion for at least three months since a period ending in January 2008. The New York Fed’s gauge of new orders rose to 30.8 from 19.8, while a measure of shipments rose to 35.1 from 5.3. The inventory index rose to minus 18.2 from minus 25, showing a slower pace of drawdown, and a measure of employment rebounded to 10.4 from minus 8.3. A gauge of prices paid dipped to 19.5 from 20.2, while prices received fell to minus 5.2 from minus 3.6.
- EU, Korea Trade Deal May Be ‘Wake-Up Call’ for US.
Wall Street Journal:
- Using taxpayer funds to keep out-of-work homeowners in their homes until they find another job is an option being looked at by some officials in the Obama administration, according to people familiar with government financial rescue programs.
- About 30,000 jobs have been directly created or saved by contractors who received money from the federal stimulus program, according to new reports Thursday. The reports cover only a small portion of the $787 billion package: spending on infrastructure and social programs being carried out by private companies. Those companies had been awarded around $16 billion, of which they had spent $2 billion, by the beginning of this month. In all, contractors reported that they had created or saved 30,383 jobs by the beginning of October, according to data summarized by the Recovery Accountability and Transparency Board, which oversees how the stimulus plan is carried out. Colorado-based contractors reported 4,695 jobs created or saved of any state, from around $550 million of stimulus money awarded, of which $48 million has been spent. Contractors in Michigan, the state with the highest unemployment, reported just 397 jobs created or saved. The low numbers could fuel more attacks by critics of the stimulus plan, who already cite the 9.8% unemployment rate, a 25-year-high, as proof that the plan isn't working.
- China praised its growing energy and trade ties with Iran in remarks that further diminished hopes that China will support efforts by the U.S. and its allies to line up sanctions over Iran's nuclear program. "The Sino-Iran relationship has witnessed rapid development, as the two countries' leaders have had frequent exchanges, and cooperation in trade and energy has widened and deepened," China's Premier Wen Jiabao said Thursday in a meeting with visiting Iranian Vice President Reza Rahimi, according to the state-controlled Xinhua news agency. Resistance from China and Russia could derail any attempts to use sanctions to punish Iran.
- Mayor Michael Bloomberg, a two-term incumbent running against Bill Thomson, a lackluster Democratic challenger all but disavowed by his own party, has already spent at least $70 million funding 336 times as many TV ads as his rival through late last month. Yet the incumbent can barely break 50% in the polls. The standard explanation for Mr. Bloomberg's weakness is anger at his ham-handed repeal of the term-limits law he had once championed. But underlying that, there's a growing civic unease, a foreboding that's remained nameless while the candidates have sidestepped the city's economic problems.
CNBC:
Fox News:
- Russia and the United States have tentatively agreed to a weapons inspection program that would allow Russians to visit nuclear sites in America to count missiles and warheads. The plan, which Fox News has learned was agreed to in principle during negotiations, would constitute the most intrusive weapons inspection program the U.S. has ever accepted. Clinton said the U.S. would be as transparent as possible. "We want to ensure that every question that the Russian military or Russian government asks is answered," she said, calling missile defense "another area for deep cooperation between our countries." On another critical issue, Lavrov declared that it would be counterproductive to threaten Iran with more sanctions over its nuclear program -- as he resisted efforts by Clinton to win agreement for tougher measures should Iran fail to prove its program is peaceful. Clinton visited Moscow on her first trip since becoming America's top diplomat, in an effort to gauge Moscow's willingness to join the U.S. in imposing sanctions.
NY Times:
- The financial services industry has poured more than $220 million into lobbying in 2009, much of it in anticipation of this Congressional effort now beginning. As usual for major financial services legislation, lawmakers have heard an earful from small community banks and large Wall Street banks, as well as from insurance companies, credit card companies, credit unions, mutual funds and hedge funds. But since virtually every imaginable company could be touched by the comprehensive legislation proposed by the Obama administration, the surprisingly broad array of lobbyists trooping to Capitol Hill also includes advocates for airlines, pawnbrokers, real estate developers, farmers, car dealers, manufacturers, retailers and energy and telephone companies.
Washington Post:
- The Supreme Court spends a sizable portion of its time dealing with lawyers gone bad: the ones who miss critical filing deadlines, put up halfhearted defenses of clients facing death row, give bad advice with disastrous results. On Wednesday, the court was faced with what to do about lawyers who do good. And also, extremely well. The justices focused on a group of lawyers from a children's rights group and a private law firm who won a transformation of the state of Georgia's dysfunctional foster-care system. Their work on behalf of 3,000 children so impressed the federal judge who presided over the case that he awarded them a bonus of $4.5 million -- on top of the $6 million in legal fees he told the state to pay. It made for an animated debate on the skyrocketing cost of legal work, exorbitant salaries for lawyers, whether judges should grade the lawyers who come before them and whether Congress intended some sort of bonus for lawyers who take on uncertain and sometimes unpopular civil rights cases.
The Business Insider:
- MLB Advanced Media served an average of 350,000 streams per postseason game, through its Postseason.tv package so far, paidContent reports. Of that, 36,000, or roughly 10% were watching on their iPhone or iPod Touch. It's a pretty impressive number considering the service is meant to be complimentary to games.
readmedia:
- In September 2009, the number of seasonally adjusted private sector jobs in New York State decreased by 18,300, or 0.3 percent, to 7,063,300, the State Labor Department reported today. The state's private sector job count has now declined in 12 of the past 13 months. The statewide total nonfarm job count (private plus public sectors) also decreased over the month -- by 81,700, or 0.9 percent, to 8,562,700 -- due to the end of the summer youth employment program. Between August and September 2009, New York State's seasonally adjusted unemployment rate held steady at 8.9 percent. In New York City, the rate inched up from 10.2 percent to 10.3 percent over the same period.
Forbes:
- Lawyers hired by feds seem to be over-billing fraud victims.
LA Times:
- California appears poised to be first to ban “power-guzzling” big-screen TVs. Reporting from Sacramento - The influential lobby group Consumer Electronics Assn. is fighting what appears to be a losing battle to dissuade California regulators from passing the nation's first ban on energy-hungry big-screen televisions. On Tuesday, executives and consultants for the Arlington, Va., trade group asked members of the California Energy Commission to instead let consumers use their wallets to decide whether they want to buy the most energy-saving new models of liquid-crystal display and plasma high-definition TVs. "Voluntary efforts are succeeding without regulations," said Doug Johnson, the association's senior director for technology policy. Too much government interference could hamstring industry innovation and prove expensive to manufacturers and consumers, he warned. If all TVs met state standards, Rider added, California could avoid the $600-million cost of building a natural-gas-fired power plant. Switching to more-efficient TVs could have an estimated net benefit to the state of $8.1 billion, the commission staff reported. Consumer Electronics Assn. officials disputed that figure, arguing that it was based on out-of-date numbers that fail to account for recent industry innovations. "With voluntary compliance, manufacturers can meet the targets over time, managing the cost impact, yet not in any way impeding innovation," said Seth Greenstein, an association consultant.
Chicago Tribune:
- At his home office in Elk Grove Village, Kevin Carney would sit in front of six computers buzzing with stock information, according to his clients. The investment guru never looked for investors; they came to him, learning of his unique software through word of mouth. And investors say he kept them happy by producing monthly statements documenting their steady 20 percent returns. But Carney allegedly was not investing their money. Authorities said he was running a Ponzi scheme that duped more than 300 investors out of millions of dollars.
AllThingsDigital:
- Demand exceeding supply for the Apple iPhone 3GS is one of the big takeaways from Piper Jaffray analyst Gene Munster’s earnings preview for Apple’s September quarter and it obviously bodes well for the company’s investors. Munster sees Apple (AAPL) beating the Street’s estimates thanks to increased sales of both Macs and iPhones. As the analyst notes, NPD data for the first two months of the September quarter show Mac sales up about seven percent year over year. iPhone sales are even more robust. “Our checks indicate that worldwide demand for the iPhone 3GS is outstripping supply,” Munster writes.
Rassmussen:
- The latest Rasmussen Reports telephone survey in New Jersey shows Republican challenger Chris Christie clinging to the lead in a fluid and volatile race that may come down to how many votes independent candidate Chris Daggett gets. Incumbent Democratic Governor Jon Corzine has closed the gap to make the race competitive but still attracts very low levels of support. The latest numbers show Christie getting 45% of the vote, Corzine with 41% and Daggett at nine percent (9%).
Politico:
- If President Barack Obama escalates the “disastrous” war in Afghanistan, Arianna Huffington has some advice for Vice President Joe Biden: resign. Planting The Huffington Post, her popular news and aggregation site, in an ever firmer place to the left of the Obama administration, Huffington cited the arguments Biden has made in private against Gen. Stanley McChrystal’s request for 40,000 additional troops in Afghanistan, and wrote that “if the president does decide to escalate, Biden, for the good of the country, should escalate his willingness to act on those reservations.”
Washington Times:
- Senators diverted $2.6 billion in funds in a defense spending bill to pet projects largely at the expense of accounts that pay for fuel, ammunition and training for U.S. troops, including those fighting wars in Iraq and Afghanistan, according to an analysis. Among the 778 such projects, known as earmarks, packed into the bill: $25 million for a new World War II museum at the University of New Orleans and $20 million to launch an educational institute named after the late Sen. Edward M. Kennedy, Massachusetts Democrat. While earmarks are hardly new in Washington, "in 30 years on Capitol Hill, I never saw Congress mangle the defense budget as badly as this year," said Winslow Wheeler, a former Senate staffer who worked on defense funding and oversight for both Republicans and Democrats.
Reuters:
- An index of U.S. manufacturing hit its highest point in a year, an industry survey showed on Thursday, suggesting one of the sectors hit hardest by the recession could improve next year. The Manufacturers Alliance/MAPI said its composite business index -- a weighted sum of shipments, backlogs, inventories and profit-margin indexes -- rose to 38 percent in September following a reading of 24 percent in June. "While many of the individual indexes remain at very low levels, the forward-looking indexes, like that for annual orders, are at much higher levels, indicating that manufacturing activity is expected to increase in 2010," said Donald Norman, MAPI economist and survey coordinator.
- Top U.S. executives are becoming more hopeful about the global economy and the U.S. business outlook, according to a survey of business leaders released on Thursday. More than 60 percent of corporate leaders surveyed by the Business Council in October now expect conditions in their own industry to improve over the next six months. In contrast, almost 90 percent of those surveyed in February said conditions were worsening. The outlook is "better and improving, said James Dimon, Business Council vice chairman and JPMorgan Chase & Co (JPM) chief executive officer. "It's a really dramatic swing."
- General Motors Co [GM.UL] has set its turnaround plan on the assumption that it can maintain slightly more than 19 percent of the U.S. market, board member Stephen Girsky said on Thursday. GM had 19.5 percent of the U.S. auto market in the third quarter and a restructuring plan it announced in May was based on the automaker maintaining an 18.5 percent share in 2009. The automaker has seen its share of the U.S. market erode steadily for decades. GM held almost 29 percent of the U.S. market in 2002.
Financial Times:
- Companies across the globe are re-examining their takeover defences in the face of an anticipated surge in unsolicited bids from predators while share prices remain low. Such reviews come at a time when the vulnerability of companies to hostile bids has increased over recent years in response to corporate governance activists who have criticised traditional takeover defences such as poison pills. “The rapid and significant decrease in the share prices for almost all companies from 2007 means that unsolicited bid concerns are greater than they have been in a decade, yet boards have less takeover protections to defend against these,” said Frank Aquila, mergers partner at international law firm Sullivan & Cromwell. Currently, just 18.2 per cent of the S&P 500, or 91 companies, have a shareholder rights plan in place, according to FactSet SharkRepellent, which tracks corporate takeover defences. Even more worrying, out of a total of 207 shareholder rights plans which were due to expire this year, just 34 per cent have so far been renewed.
- At least 30 people died in a series of attacks across Pakistan on Thursday, raising fresh concerns over internal security in the heartland of the country. Teams of gunmen attacked three security sites in Lahore, Pakistan’s second largest city, while a suicide bomber hit a north-western town. A second explosion in Peshawar damaged government accommodation and left one child dead. Thursday’s attack was the fifth in 10 days and each one has hit a different target across the country - Islamabad, Peshawar, Rawalpindi, Swat valley and now Lahore heightening fears that the militants are expanding their operations to the Punjab. Later on Thursday, Barack Obama, US president, signed legislation that triples non-military aid to Pakistan to about $7.5 billion over the next five years, the White House said. It said that Mr Obama, whose administration has been trying to allay Pakistani concerns over conditions for the extra money, wanted to engage Pakistan on the basis of a strategic partnership ”grounded in support for Pakistan’s democratic institutions and the Pakistani people”.
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