Bloomberg:
- Some of Treasury Secretary Timothy Geithner’s closest aides, none of whom faced Senate confirmation, earned millions of dollars a year working for Goldman Sachs Group Inc.(GS), Citigroup Inc.(C) and other Wall Street firms, according to financial disclosure forms. The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund. As part of Geithner’s kitchen cabinet, Sperling and Sachs wield influence behind the scenes at the Treasury Department, where they help oversee the $700 billion banking rescue and craft executive pay rules and the revamp of financial regulations. Yet they haven’t faced the public scrutiny given to Senate-confirmed appointees, nor are they compelled to testify in Congress to defend or explain the Treasury’s policies. Sachs, 46, withdrew earlier this year from consideration to be the Treasury’s top domestic finance official, a job that would have required Senate confirmation. The use of unconfirmed counselors can cut both ways. It allows Geithner to bring in staff quickly by avoiding the arduous confirmation process. On the other hand, the aides don’t get as tough a vetting by the White House or Congress and remain less accountable than Senate-confirmed officials. Herb Allison, who runs the office that administers the financial rescue. He had been chief executive officer of mortgage finance company Fannie Mae and retirement- services firm TIAA-CREF, and before that was a longtime executive at Merrill Lynch & Co. in New York. Along with Sperling and Sachs, Geithner’s inner circle also includes counselor Lewis Alexander, the former chief economist at Citigroup; Chief of Staff Mark Patterson, who was a lobbyist at Goldman Sachs, and Matthew Kabaker, a deputy assistant secretary who worked at private equity firm Blackstone Group LP. Patterson’s and Kabaker’s jobs did not require confirmation. Alexander, who left Citigroup in March to join the Treasury, was paid $2.4 million in 2008 and the first few months of 2009, according to his financial-disclosure form. Kabaker, who works on domestic finance policy and helped craft the Treasury plan to spur banks to sell their toxic assets, earned $5.8 million working on private equity deals at Blackstone in 2008 and 2009 before joining the Treasury at the end of January, his disclosure form shows. On his disclosure, Sachs estimated that he would receive $3.4 million in income from Mariner. As of Feb. 23, when he signed the document, Sachs said he was also owed a 2008 bonus where the value was “not ascertainable.” Sachs’s former firm also had agreed to repurchase his shares in Mariner Partners Inc., an investment fund. Sachs estimated his income from the fund at $1 million to $5 million. In Sperling’s primary job, he was paid $116,653 by the Council on Foreign Relations for work related to education in developing countries. Sperling’s disclosure shows he supplemented his salary through a variety of consulting jobs, board seats, speaking fees and fellowships, to bring his total income to more than $2.2 million in the 13 months ending in January. He was paid $480,051 as a director of the Philadelphia Stock Exchange and $250,000 for providing quarterly economic briefings to two hedge fund firms, Brevan Howard Asset Management LLP and Sterling Stamos Capital Management. Sperling spoke at a Washington event hosted by the Houston- based Stanford Group Co. in November 2008, three months before its chairman was sued by the Securities and Exchange Commission for allegedly bilking investors of $7 billion. He also spoke at a Washington event in October 2007 that was sponsored by Citigroup, which has received $45 billion in government assistance. Sperling also drew a $137,500 salary from Bloomberg News for writing a monthly column and appearing on television, according to his disclosure. Goldman Sachs paid Sperling the $887,727 for advice on its charitable giving. That made the bank his highest-paying employer. Even Geithner’s chief of staff Patterson, who was a full-time lobbyist at the firm, did not make as much as Sperling did on a part-time basis. Patterson reported earning $637,492 from Goldman Sachs last year. “My sole work for Goldman Sachs was as lead consultant on the creation, design, and initial implementation of ‘10,000 Women,’ their $100 million philanthropic effort to give business and leadership education to poor women around the world,” Sperling said. His total income of $2.2 million was unusually high, Sperling added. The Wall Street ties are troubling to some advocates for investors. “Where is the transparency this administration promised?” asked Lynn Turner, a former chief accountant at the SEC. “You just wonder, who is representing middle Americans?”
- Blackstone Group LP(BX) Chief Executive Officer Stephen Schwarzman said the worst is behind the private equity industry, as sales at companies it owns stabilize and the firm weighs selling shares through public offerings. “After virtually no realizations over the last year, we’re seeing the beginnings of realizations through sales and equity offerings,” Schwarzman told a private equity conference in Dubai today. “Revenues of most portfolio companies are no longer declining.”
- Sales at U.S. retailers fell less than anticipated in September, a sign households will play a greater role in the emerging economic recovery. The 1.5 percent decrease in purchases followed a 2.2 percent gain the prior month, figures from the Commerce Department showed today in Washington. Sales excluding automobiles climbed 0.5 percent, more than the median forecast of economists surveyed by Bloomberg News. The broad-based improvement indicates Americans are becoming more confident that the economy is recovering even as job losses persist. “We are seeing decent, encouraging signs from the consumer,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. “We are optimistic on 2010, but we need to see employment increase.” Inventories at retailers “are lean” and traffic at shopping malls is “a little bit better,” she said, as retailers start to see a “positive pulse.”
- Twenty-seven U.S. labor unions defied White House Chief of Staff Rahm Emanuel and announced their opposition to the $829 billion health-care measure passed yesterday by the Senate Finance Committee. The unions say in a full-page newspaper advertisement today that lawmakers need to make “substantial” changes to the bill or they will urge their members to seek its defeat on the Senate floor. Emanuel asked organized labor not to go public in opposition, said Gerald McEntee, president of the American Federation of State, County and Municipal Employees. “He told us that we really don’t want to be looked upon as the group that stopped meaningful health-care reform,” McEntee said in an interview yesterday. “We would love to be on the exact same page as the White House, but we see ourselves as fighting for our members.” Unions helped elect President Barack Obama and the Democratic majority in Congress, and have made overhauling the health-care system a top priority. They oppose elements of the bill approved by the Senate committee, including a tax on the most-expensive insurance plans. Some union contracts provide health benefits costly enough to be affected. The provision will become “a tax on the middle class,” who “through negotiations or otherwise, have employer-provided coverage,” Randi Weingarten, president of the American Federation of Teachers, said in an e-mailed statement. The measure would impose a 40 percent excise tax on insurers of employer-sponsored health plans with benefits exceeding $8,000 for individual coverage and $21,000 for families. Among groups signing the ad, which appeared today in Washington newspapers, were the United Auto Workers, the Air Line Pilots Association, the United Steel Workers and the AFL- CIO, the world’s biggest labor federation with about 11 million members. The ad’s headline is: “Our Bottom Line for Health Care Reform.” Calling for “good, affordable health care,” it says, “We aren’t there yet. The Senate Finance Committee bill is deeply flawed.” The unions want Congress to create a so-called public option, a government health plan that would compete with private insurers, and to require that almost all employers provide health care or contribute to a fund subsidizing coverage. Neither provision is in the measure that the Finance Committee approved, 14-9.
- JPMorgan Chase & Co.(JPM) posted its highest profit since the subprime mortgage market collapsed in 2007, relying on a surge in investment-banking revenue to weather higher losses on consumer loans. Third-quarter earnings rose to $3.59 billion, or 82 cents a share, from $527 million, or 9 cents, in the same period a year earlier at the height of the financial crisis, the New York- based company said today in a statement. Profit surpassed the highest estimate, 65 cents, among 20 analysts surveyed by Bloomberg.
- The cost of protecting bank bonds from default fell after JPMorgan Chase & Co. fueled speculation the global economy is recovering from the credit crisis by posting earnings that beat analysts’ estimates. Credit-default swaps on New York-based JPMorgan dropped to the lowest in a month, while a benchmark index tied to U.S. investment-grade bonds fell to a two-week low. Contracts linked to debt of European banks declined to the lowest in three weeks. Credit-default swaps on JPMorgan fell 4 basis points to 63.5 basis points, the lowest since Sept. 16, according to CMA DataVision prices at 8:46 a.m. in New York. Contracts on Goldman Sachs Group Inc. dropped 5.5 basis points to 109 basis points and Citigroup Inc. fell 12 basis points to 203 basis points, according to prices from CMA. Credit swaps on the Markit CDX North America Investment- Grade Index, used to speculate on the creditworthiness of 125 companies in the U.S. and Canada or to protect against losses on their debt, declined 2.5 basis points to a mid-price of 97.5 basis points in New York after earlier falling to as low as 96.5 basis points, according to Phoenix Partners Group. That’s the lowest since Sept. 29, according to CMA DataVision. The Markit iTraxx Financial Index of 125 European banks and insurers fell 4 basis points to 74 basis points, JPMorgan prices show. Credit-default swaps on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined the most in three weeks, falling 25 basis points to 516 basis points, JPMorgan prices show. The Markit iTraxx Europe index of 125 companies with investment-grade ratings dropped 3.5 basis points to 82.75 basis points.
- Representative Barney Frank said his proposal to regulate the $592 trillion over-the-counter derivatives market won’t give the government authority to ban “abusive swaps.” “There was concern that a broad grant to ban abusive swaps would be unsettling,” Frank, chairman of the House Financial Services Committee, said today as his panel began action on his measure.
- Crude oil rose above $75 a barrel in New York, the highest in a year, on optimism the global economic recovery will boost demand for energy. “This rally today really was prompted by two things: one, the revised demand forecast from OPEC, and the other, the continued weakening of the U.S. dollar,” said Victor Shum, a senior principal at energy consultants Purvin & Gertz Inc. in Singapore.
- U.S. bank regulators, saying losses on souring commercial real-estate loans pose the biggest risk to lenders, will issue guidelines to help the institutions modify the agreements. Reduced demand for space has led to falling rental rates, adding to losses on the loans, leaders of the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and Office of Thrift Supervision said in remarks prepared for delivery at a Senate Banking Committee hearing today. “The most prominent area of risk for rising credit losses at FDIC-insured institutions during the next several quarters is in CRE lending,” FDIC Chairman Sheila Bair said, referring to commercial real estate. “Prudent loan workouts are often in the best interest of financial institutions and borrowers.”
- Investor sentiment slipped in New York, London and Tokyo. Optimism for equities fell in six of 10 countries in the Bloomberg Professional Confidence Survey. Users expect shares to drop during the next six months in the U.S., Japan, France, Spain, and Switzerland, while sentiment deteriorated in the U.K. Investors in Brazil were the most bullish in the survey of 1,117 people from Oct. 5 to Oct. 9.
- House Democrats plan a renewed push to raise taxes on executives at private-equity and venture- capital firms to help pay for year-end economic recovery legislation, a top congressional aide said. Matthew Beck, a spokesman for the House Ways and Means Committee, said the panel will revive an effort to raise the 15 percent tax rate on “carried interest,” a term for the share of a fund’s profit that is paid as compensation to executives. That portion of an executive’s pay, now taxed at lower capital gains rates, would be subject to income tax at rates of as much as 35 percent. The top tax rate is scheduled to rise to 39.6 percent in 2011. “There is strong support for taxing carried interest as ordinary income and I expect this issue to move forward in the coming months,” Beck said.
- The Treasury Department failed to monitor “explosively controversial” executive bonuses paid by American International Group Inc. after bailing out the insurer, said the chief watchdog of the U.S. financial rescue program. “Treasury paid scant attention to the pay structure” for four months after committing $40 billion in November, said Neil Barofsky, special inspector for the Troubled Asset Relief Program, in congressional testimony today. “This was a failure of oversight by Treasury, which essentially abdicated its role” to the Federal Reserve, Barofsky told the House Oversight Committee. AIG awarded about $165 million in March to employees in the unit blamed for the insurer’s near-collapse.
- Google Inc.(GOOG) and Microsoft Corp.(MSFT) boosted their share of the U.S. Internet search market in September, while Yahoo! Inc.(YHOO) lost ground, according to research firm ComScore Inc. Google’s share increased to 64.9 percent from 64.6 percent in August, Reston, Virginia-based ComScore said yesterday. Microsoft rose to 9.4 percent from 9.3 percent, while Yahoo dropped to 18.8 percent from 19.3 percent, ComScore said.
Wall Street Journal:
- Federal Communications Commission Chairman Julius Genachowski is proposing that the agency apply tougher open-Internet rules broadly, raising concerns of cable and phone companies and some lawmakers that the government could try to control efforts to offer products such as digital cable or premium business services. Mr. Genachowski's proposal suggests everything in the Internet pipe is covered by rules prohibiting discrimination against any legal Internet traffic, known as net neutrality, unless the agency says otherwise, according to FCC officials familiar with a draft circulating in the agency. Internet providers could seek exemptions for so-called premium managed services, like private corporate data networks or pay-TV services, which require guaranteed levels of data speed. Phone and cable companies worry Mr. Genachowski is trying to turn their broadband lines into "dumb pipes" of Internet data, instead of highly segmented and managed lines that allow them to offer different sorts of services -- at different prices -- to customers.
- With the Senate Finance Committee passing a health-care bill, action shifts to the full Senate, where Majority Leader Harry Reid and the White House must craft a bill that can win 60 votes to avoid a filibuster. Mr. Reid's challenge is to hold together Democrats and independents of widely varying ideological hues while attracting a Republican or two, if possible. The biggest hurdle: satisfying centrists wary of a government-run public insurance option without losing liberals who insist on one. Here are six key figures to watch in coming weeks as the health-care debate enters its next phase.
- These are the days of miracles and wonders, as the Senate Finance Committee approved its version of ObamaCare yesterday on 14 to 9 vote, including Maine Republican Olympia Snowe. Now their health-care marvel—a new entitlement that will supposedly "reduce the costs of health care," as the President put it in his congratulatory message—will move to the Senate floor, and perhaps then to a doctor or hospital near you.Massachusetts is offering a preview of where all this will end up. The state passed a prototype for ObamaCare in 2006 on the same cost-control theory as Senate Finance, only to see spending explode. So now Beacon Hill is contemplating far more drastic spending-control measures, such as a plan to "require residents to give up their nearly unlimited freedom to go to any hospital and specialist they want," as the Boston Globe reported on Sunday. Paul Levy, the CEO of Beth Israel Deaconess Medical Center, told the Globe that "You can't reap these savings without limiting patients' choices in some way." Meanwhile,
MarketWatch.com:
- Confirmation of this wall of worry comes from the land of investment newsletters: The average recommended equity exposure among short-term market timing newsletters is just 32.3% right now, according to the Hulbert Financial Digest. That's lower than where it stood at the beginning of October, and even lower still than where it stood at the beginning of September. Such behavior is not what is usually seen at major market tops, according to contrarians. The typical pattern, at such tops, is for advisers and investors alike to stubbornly adhere to their bullishness.
CNBC:
ocregister:
- Private economists at California Forecast — with chief economist Mark Schniepp — made this stunning prediction for the Ventura, Santa Barbara, Orange, and San Diego counties’ housing markets in their October newsletter … By mid-2012, selling values return to 2004 levels, a gain of approximately 30 percent from the lowest levels recorded earlier this year.
Rassmussen:
- North Carolina is about to become the second state to penalize its employees for being obese, but just 30% of Americans favor making government workers who are overweight pay more for their health insurance. A new Rasmussen Reports national telephone survey finds that 63% are opposed to making overweight government workers pay more for health coverage.
Politico:
- The long-simmering tension between insurers and congressional Democrats is erupting into open warfare, with lawmakers stepping up their push to revoke a key federal protection for the insurance industry. Sen. Chuck Schumer (D-N.Y.) on Wednesday called for an amendment to the health care reform bill that would remove the long-standing antitrust exemption for insurers, echoing a push by other Democrats to crack down on the industry. Schumer's push comes on the heels of a controversial industry-sponsored report released over the weekend that makes the case that insurance premiums will go up by as much as $4,000 per family by 2019 if the Senate Finance Committee legislation is signed into law. The release of that report by the industry group America’s Health Insurance Plans sparked angry blowback from Democrats in both chambers. Repealing the antitrust exemption would give the federal government more authority to oversee the business side of health insurance companies — something states now have the sole authority to monitor. And the push by Reid and Schumer signals that Democrats are planning to intensify their efforts to paint insurance companies as the villains in the health reform fight, something that could prove useful as President Barack Obama and others try to rally a skeptical public around a sweeping health reform measure. “Health insurance is one of the most regulated industries in America at both the federal and state level,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans. “McCarran-Ferguson has nothing to do with competition in the health insurance market. The focus on this issue is a political ploy designed to distract attention away from the real issue of rising health care costs.”
USAToday:
- A controversial amendment that would require the Census Bureau to ask for the first time whether people are in the USA illegally is headed for a Senate vote Wednesday. Proposed last week by Republican Sens. David Vitter of Louisiana and Bob Bennett of Utah, the amendment would exclude illegal immigrants from the population count used to allocate congressional seats after the 2010 Census. It also would require the Census to ask people whether they are citizens. "Illegal aliens should not be included for the purposes of determining representation in Congress, and that's the bottom line here," Vitter says. If enacted, the amendment to an appropriations bill would stop funding of the 2010 Census unless the changes are made. Some Latino groups such as the National Coalition of Latino Clergy and Christian Leaders are calling for immigrants to boycott the Census unless laws are changed to give those here illegally a chance to gain legal status.
- Democratic members of the House of Representatives now represent most of the nation's wealthiest people, a sharp turnaround from the long-standing dominance that Republicans have held over affluent districts. A USA TODAY analysis of new Census data found that Democrats represent a far different constituency today than they did in 2005, when they were the minority in the House, or in 1990, when they were the majority. The Democratic-controlled House is now an unusual combination of the richest and poorest districts, the best and least educated, and the best and the worst insured. Democrats now represent 57% of the 4.8 million households that had incomes of $200,000 or more in 2008. "Democrats have made enormous gains in affluent, educated suburban districts," says Warren Glimpse, founder of Proximity, a firm that analyzes demographics. "What's not clear is whether this reflects a profound change or a temporary blip."The Democrats' new coalition of extremes could cause friction on issues such as health care and tax policy because of Democratic proposals to raise taxes on affluent households. "We're going to win back the hearts and minds of affluent voters when people see what the left-leaning Democrats do on health care and the economy," says Connecticut Republican Party Chairman Chris Healy.
- A California company Tuesday will announce an iPhone application and car receiver that will enable users to lock, unlock and remotely start their car with the phone rather than the car's key fob. The Viper SmartStart is the latest example of automotive electronics functions migrating into Apple(AAPL) iPhone and other smartphones, including turn-by-turn directions or locating the closest gas station. Such ideas are a challenge for automakers and aftermarket suppliers for whom advanced auto electronics have been highly profitable.
Reuters:
- Two victims of Bernard Madoff's Ponzi scheme filed a federal lawsuit against the U.S. Securities and Exchange Commission on Wednesday, seeking at least the $2.4 million they lost in the fraud. The victims, believed to be the first to sue the SEC over the $65 billion fraud, said in court papers the agency was negligent and breached its duties by failing to investigate Madoff, despite numerous warnings and tips.
- U.S. business inventories fell by a bigger-than-expected 1.5 percent in August, the largest fall since last December, according to a government report on Wednesday. Business sales rose 1.0 percent in August after increasing 0.3 percent the previous month. The rise in sales left the inventory-to-sales-ratio, which measures how long it would take to clear shelves at the current sales pace, at 1.33 months' worth from 1.36 in July. It was the lowest ratio since September last year.
Financial Times:
- Two-thirds of Americans already use Google(GOOG) to look for information on everything from aardvark aromatics to zygotic cleavage. When the company reports third quarter results on Thursday, investors searching for signs of economic recovery should take note. Any pick up in activity by shoppers researching purchases and advertisers bidding for their attention should be reflected immediately in Google’s automated systems. The underlying growth rate in online advertising is still positive – Google never shrank on a year-on-year basis during the downturn. Analysts expect net revenue growth to be broadly similar to the 4.5 per cent rate posted in the previous quarter. The tone from Google though, which provides no guidance and only the skimpiest of details about its business, has become more upbeat recently.
Izvestia:
- Russia reserves the right to launch preemptive nuclear strikes in “critical situations for national security” in an updated military doctrine, Nikolai Patrushev, secretary of the country’s Security Council, said. The draft doctrine, which should be ready to present to President Dmitry Medvedev by the end of this year, also adjusts the “conditions for using nuclear weapons in repelling aggression with conventional weapons in large-scale as well as regional and even local wars,” Patrushev said.
Caijing:
- The U.S. government deficit is expected to swell to US$ 9 trillion over the next 10 years as a result of huge government stimulus and corporate bailout packages. Proposed national health care reform is another potentially costly project. How are U.S. officials confronting these issues? What are they doing to recover, reform, coordinate and rebalance? And what are Washington's positions on issues of concern to China, such as the safety of foreign reserves and international financial institution reform? These and other questions were on a list posed by Caijing's chief editor, Hu Shuli, during a discussion with U.S. Treasury Secretary Timothy Geithner during the recent 2009 annual conference of the World Bank and the International Monetary Fund (IMF). Here are excerpts from the interview: Geithner said China and the United States have a shared interest in safeguarding the value of the dollar.