Greek Debt Fears

European Nations Offer $40 Billion to Help Greece

The New York Times - BRUSSELS — European leaders sought Sunday to quash any doubts about their resolve to help Greece, offering the country a one-year aid package of up to €30 billion at a much lower interest rate than investors have been demanding.

The plan, under which countries in the euro zone would lend Greece money at 5 percent interest — compared with as much as 7.5 percent the government paid on the bond markets last week — brought the currency union significantly closer to what would be the first rescue of a member in its history.

At the same time, the size of the financial commitment, the equivalent of $40.5 billion, which was above market expectations, could at least postpone the need for aid by reassuring investors and helping Greece refinance debt that comes due by the end of May.

Interest Rates Have No Where to Go But Up

The New York Times - Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.

The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.

“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”

The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.

Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”

Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.

The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.

Another area in which higher rates are likely to affect consumers is credit card use.

And last week, the Federal Reserve reported that the average interest rate on credit cards reached 14.26 percent in February, the highest since 2001. That is up from 12.03 percent when rates bottomed in the fourth quarter of 2008 — a jump that amounts to about $200 a year in additional interest payments for the typical American household.

With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.

Bernanke Says U.S. Should Tackle Debt

Federal Reserve Chairman Ben Bernanke said Wednesday that huge U.S. budget deficits threaten the nation's long-term economic health and should be addressed soon. Obama administration officials have argued that the economy, while improving, is still too weak to bear all the new taxes and spending cuts that would come with an aggressive deficit-reduction campaign. In remarks to the Dallas Chamber of Commerce Wednesday, Mr. Bernanke agreed, but said merely articulating a plan for reducing the deficit in the long run would help the economy now."The economist John Maynard Keynes said that in the long run, we are all dead. If he were around today he might say that, in the long run, we are all on Social Security and Medicare," Mr. Bernanke said.
Cutting the deficit ultimately will mean choosing between cutting those entitlements, raising taxes, or other spending cuts

Greenspan on Capitol Hot Seat

Former Fed chief Alan Greenspan faced some of the toughest questioning yet about his role in the financial crisis at a hearing Wednesday marked by tense exchanges with a longtime foe. Later in the day, members of the congressionally chartered Financial Crisis Inquiry Commission also ripped Citigroup Inc. executives for their role in the subprime meltdown, where Citigroup was a major casualty. The commission is holding three days of hearings on the evolution of the subprime market. Panel members repeatedly questioned why Mr. Greenspan didn't do more to stem the flow of risky subprime loans, pop the resulting real-estate bubble or prevent use of exotic derivatives to expand the market. Commissioner Brooksley Born, a former federal regulator, said the Fed "utterly failed to prevent the financial crisis." She used the word "fail" nine times in a lengthy series of questions.
"Didn't the Federal Reserve System fail to meet its responsibilities, fail to carry [out] its mandates?" she said.
Commission Chairman Phil Angelides added his own criticisms of the Fed's approach to subprime regulation. "My view is…you could have, you should have, and you didn't," he told Mr. Greenspan.

New Ways to Read the Economy

SAN FRANCISCO—When the city's top economist needs a rough prediction of sales tax revenues, he watches the number of subway passengers emerging from the Powell Street Station on Saturdays.
Ted Egan, chief economist in the San Francisco Controller's Office, said he could wait six months for California to release the detailed sales-tax data he needs for city revenue projections. But it's quicker to look at passenger tallies from the station closest to the Union Square shopping district, which generates roughly 10% of the city's sales-tax revenue. The Bay Area Rapid Transit District releases the data within three days, he said: "Why should I have to wait?" Mr. Egan is among a growing number of economists and urban planners who scour for economic clues in unconventional urban data—oddball measures of how people are moving, spending and working.

Consumer Lending Sagged in February

More consumers are keeping up with payments on their credit cards and other loans. But that is coming at a cost: They are cutting back sharply on borrowing as they pare back debt. While that is good for the long-term financial health of households, the development could slow spending and the overall economic recovery.
Consumer borrowing declined at a 5.6% annual rate in February to $2.45 trillion, the Federal Reserve said Wednesday. Consumer borrowing, which includes most loans outside of real estate, had increased 2.1% in January, reflecting how borrowers typically slow payments after running up card balances over the December holidays. Revolving credit, largely credit-card borrowing, declined at a 13.1% annual pace in February. Nonrevolving credit—including loans for cars, boats and education—fell at a 1.6% annual rate that month. Analysts attributed part of the February decline to winter storms that kept consumers at home.

Criminals Prey on The Unemployed

Out of work for six months, Mary Long spent hours each day surfing the Web. She found a job listing this fall for a logistics manager that paid $65,000 a year and fired off her resume.But the company, Advanta Transportation Network LLC, appears to be part of an increasingly common scam that has snared Ms. Long and many others, according to cybercrime experts. As U.S. job seekers grow more desperate, criminals are using the Internet to con participants into so-called mule operations.These operations generally follow a formula, say security experts: Cybercriminals post an ad on a job board. Successful job applicants are "hired" or asked to complete a trial project. Scam operators wire stolen money to the applicant's credit card and applicants are asked to purchase such goods as expensive electronics. The applicant ships the goods, often to Eastern Europe, where scam operators sell them. Applicants end up with neither a job nor a paycheck

U.S. Airways-United Airlines Talks Intensify

Merger talks that came to light last week between UAL Corp.'s United Airlines and US Airways Group Inc. have become "very serious," said one person close to the matter. But they remain sensitive and it is just as likely the discussions will fall apart as result in a done deal, this person noted. Any transaction would be an all-stock merger, with United being the surviving entity, this person said. The share premium to be paid to US Airways shareholders hasn't been settled. Another person familiar with the talks said the two sides haven't yet agreed who would run the combination. A deal would create the No. 2 U.S. airline by traffic after Delta Air Lines Inc. If it comes to fruition, it would be announced within two or three weeks. A third person close to the situation suggested that Glenn Tilton, UAL's chief executive officer, recently restarted the talks, not his counterpart at US Airways, Doug Parker.

Light At The End of The Bailout Tunnel

As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates. Treasury Department officials say the tab is likely to reach $89 billion, which includes the Troubled Asset Relief Program, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve moves such as buying mortgage-backed securities and propping up the commercial-paper market. Treasury officials are increasingly optimistic that even American International Group Inc. could be on its own within a year, with officials discussing ways to extricate the government from its 80% stake in the insurer, according to people familiar with the situation. AIG is on track to repay its loan to the Fed through asset sales that will raise $51 billion.

WSJ Current News April 5-7

 
Massey Has History of Safety Violations

Massey Energy Co.'s Upper Big Branch coal mine has been cited more than 100 times since the start of this year for safety violations including failing to properly control methane levels, according to the U.S. mine-safety agency.The cause of an explosion Monday that killed at least 25 miners at the mine has yet to be determined, but federal mine-safety officials say they suspect something ignited methane gas that had built up in the mine. The buildup of the dangerous gas was delaying rescuers' attempts Tuesday to enter the mine to search for victims.
http://online.wsj.com/article/SB10001424052702304172404575168261419876920.html

Mr. Dimon Goes to Washington
As Congress prepares to push finance regulation to the front burner, plenty of bank executives—stung by Washington's Wall Street bashing—are keeping a low profile.James Dimon, chairman and chief executive of J.P. Morgan Chase & Co., isn't one of them. Buoyed by J.P. Morgan's relative good health, he's spent the past year launching his own campaign to stave off government proposals that would rein in profits, boost consumer protections and impose new fees.
http://online.wsj.com/article/SB10001424052748703416204575145743093039972.html?mod=WSJ_hps_LEFTWhatsNews
Euro-zone Growth Accelerates
LONDON—Euro-zone private-sector output grew at its strongest rate for 31 months in March, fueled by a surge in activity in Germany, final data from financial-information firm Markit showed Wednesday.The currency area's composite output index, a measure of private-sector output based on a monthly survey of about 4,500 companies, rose to 55.9 in March from 53.7 in February—the highest reading since August 2007. It marks the eighth consecutive month that the index has been above the "no change" 50.0 level.
http://online.wsj.com/article/SB10001424052702304505204575169272763486034.html?mod=WSJ_hps_LEFTWhatsNews

U.S. Appeals Court Backs Comcast
A U.S. appeals court ruled Tuesday that the Federal Communications Commission overstepped when it cited cable-giant Comcast Corp. for slowing some Internet traffic on its network, dealing a blow to big Web commerce companies and other proponents of "net neutrality."In a unanimous decision, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit said the FCC exceeded its authority when it sanctioned Comcast in 2008 for deliberately preventing some subscribers from using peer-to-peer file-sharing services to download large files.
http://online.wsj.com/article/SB10001424052702303411604575167782845712768.html?mod=WSJ_hps_LEFTWhatsNews

Jury Still Out on Replacing Steel Mill with Casino
BETHLEHEM, Pa.—Five years ago, this former steel town took a gamble on Las Vegas Sands Corp., allowing the company to put a casino on the site of its historic steel mill. Las Vegas Sands promised to build a hotel, shopping mall and events center on a corner of the 126-acre Bethlehem Steel site, which was shuttered in 1995. Anchoring it all would be the casino filled with 5,000 slot machines, where even the ceiling lights, made to look like molten iron rods, would evoke the site's old industrial legacy. But revenue from the slots parlor, which opened last May, has been disappointing. The hotel and events center are both 20% complete, and the planned shopping mall is 70% complete, all stalled because of the economic downturn.
 http://online.wsj.com/article/SB10001424052702303411604575168181715632168.html?mod=WSJ_hps_LEFTWhatsNews

Greek Bonds Remain Under Pressure
LONDON—The cost of insuring Greek sovereign debt remained elevated after rising dramatically Tuesday, as worries about the lack of resolution of the Greek debt crisis continued to weigh on financial markets.
The euro was also under pressure, trading at $1.3378 against the dollar,reece's five-year sovereign credit default swaps were unchanged in early trading at 3.90 percentage points--nearly 0.50 percentage point wider than last week—according to CMA DataVision, having touched four percentage points at one point Tuesday.The spread between 10-year bonds and the benchmark German bund was 3.868 percentage points, tighter than Tuesday's widest levels, but wider than a spread of 3.789 percentage points at 1500 GMT Tuesday.
http://online.wsj.com/article/SB10001424052702304505204575169330537185858.html?mod=WSJ_hps_MIDDLEThirdNews

No Jobs And When You Do Find One It is For Less Pay

The New York Times - A YEAR ago, I wrote about a job fair at the Sheraton in Midtown Manhattan, where over 5,000 mainly white collar, middle-aged jobless men and women waited in the cold for more than two hours, hoping to find work. The turnout was a sign of desperate times; until then, the organizer, Tory Johnson, who’s been conducting these fairs in 10 cities for a decade, had never had more than 2,000 people at one of these events.

For that column, I interviewed two dozen boomers. Given recent reports from the federal government and Manpower, the employment agency, that the hiring outlook is beginning to improve, I thought it would be worthwhile to go back to those highly motivated people. Among them are Jo Fagan, a former vice president at Crown publishing who had applied for over 500 jobs in 22 months, and Greg Kramer, 54, a former buyer for a video company, who had attended three job fairs a month, typically arriving three hours before doors opened.

I wanted to know how they’re doing a year later.

The short answer is, of the 16 I interviewed again, 9 describe themselves as still struggling. Eight continue to be unemployed or are working part-time jobs that pay near minimum wage. Several were so concerned about bias, they did not want to give their ages.

Unemployment is slightly lower than the national average for workers older than 45 (8.1 percent). But once those people lose a job, it takes them longer to be rehired. In February, jobless workers over 45 were unemployed an average of 34 weeks versus 27 for younger workers.

And while there are no numbers yet for this recession, in past recessions, the older the workers, the bigger the wage loss when they were rehired, according to Steven Hipple, a Bureau of Labor Statistics economist. After the 1991-93 recession, rehired workers age 55 to 64 on average suffered a 27 percent wage loss, versus a 7 percent loss for workers age 25 to 34. After the 2001-3 recession, workers age 45 to 54 had a 23 percent wage loss when rehired, versus 6 percent for younger workers.

Report Shows Lehman hide Its Financial Problems

The Wall Street Journal - A scathing report by a U.S. bankruptcy-court examiner investigating the collapse of Lehman Brothers Holdings Inc. blames senior executives and auditor Ernst & Young for serious lapses that led to the largest bankruptcy in U.S. history and the worst financial crisis since the Great Depression.

In the works for more than a year, and costing more than $30 million, the report by court-appointed examiner Anton Valukas paints the most complete picture yet of the free-wheeling culture inside the 158 year-old firm, whose chief executive Richard S. Fuld Jr. prided himself on his ability to manage market risk.

The document runs thousands of pages and contains fresh allegations. In particular, it alleges that Lehman executives manipulated its balance sheet, withheld information from the board, and inflated the value of toxic real estate assets.

Lehman chose to "disregard or overrule the firm's risk controls on a regular basis,'' even as the credit and real-estate markets were showing signs of strain, the report said.

In one instance from May 2008, a Lehman senior vice president alerted management to potential accounting irregularities, a warning the report says was ignored by Lehman auditors Ernst & Young and never raised with the firm's board.
http://online.wsj.com/article/SB10001424052748703625304575115963009594440.html?mod=WSJ_hps_LEFTWhatsNews

Americans Pare Debt

The Wall Street Journal  - U.S. consumers are shedding debt at the fastest rate in more than six decades, largely through a wave of defaults, in a trend that underscores the depth of their financial troubles but could also help clear the way for a stronger economic recovery.

Total U.S. household debt, including mortgages and credit-card balances, fell 1.7% in 2009 to $13.5 trillion, the Federal Reserve reported Thursday—the first annual drop since records began in 1945. The debt amounts to $43,874 per U.S. resident.

The drop reflects the extent to which job losses and a moribund housing market are forcing people to default on mortgages and other obligations, a painful process that has slammed millions of families and hit banks and investors with hundreds of billions of dollars in losses.

At the same time, the defaults are leaving many people with more cash to spend and save, jump-starting the financial rehabilitation, or "deleveraging," that economists see as a crucial prerequisite to robust growth.

Top News - WSJ & NYT

Borrowers Miss Out in Billions in Savings
The Federal Reserve has pushed mortgage rates to near half-century lows, but millions of U.S. homeowners haven't benefited from that because they can't—or won't—refinance.Falling home prices have left many owners with little or no equity, making it harder to qualify for refinancing. Moreover, stricter lending standards and higher fees by banks and mortgage giants Fannie Mae and Freddie Mac and declining incomes have made it tougher and less attractive for borrowers to seek new loans.
http://online.wsj.com/article/SB10001424052748704358004575096020101445724.html?mod=WSJ_hps_LEFTWhatsNews

Apple sues HTC for Alleged Patent Violations
Apple alleged numerous patent violations in lawsuits against HTC Corp., a Taiwan-based manufacturer of smart phones. HTC makes several phones that run Google's Android operating system, including the Nexus One phone that Google is selling directly to consumers.Apple's two complaints—filed Tuesday in federal court in Delaware and the U.S. International Trade Commission—allege HTC devices, including the Nexus One, infringe a total of 20 Apple patents. The complaints claim the patents cover an array of cellphone technologies, everything from power-management functions to a method of unlocking a handset with a finger swipe on a touch screen.
http://online.wsj.com/article/SB10001424052748703807904575097392317555912.html?mod=WSJ_hps_LEFTWhatsNews

Private Sector Sheds 20,000 Jobs
Private payrolls fell less than expected in February and layoff announcements dropped to their lowest level since 2006, according to data released Wednesday.Private-sector jobs in the U.S. fell 20,000 in February, according to a national employment report published Wednesday by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.
The ADP loss is below the 50,000 drop projected by economists in a Dow Jones Newswires survey. The estimated change of employment for January 2010 was revised down, from a decline of 22,000 to a decline of 60,000.
http://online.wsj.com/article/SB10001424052748703862704575099243703727742.html?mod=WSJ_hps_LEFTWhatsNews

U.S. Postal Service Pushes to End Saturday Deliveries
The U.S. Postal Service stepped up its campaign to end Saturday deliveries to help stem losses, but the move met with skepticism that signals an uphill battle for approval by regulators and Congress.Postal officials sought support for a broad restructuring from a gathering in Washington on Tuesday that included big postal clients, congressional aides and postal workers' labor representatives. Without the restructuring, the agency potentially faces $238 billion in projected losses in the next 10 years, Postmaster General John E. Potter warned as he released assessments of the agency's operations from three consulting firms.
http://online.wsj.com/article/SB10001424052748703807904575097204116932126.html?mod=WSJ_WSJ_US_News_5

Britain Grapples With Debt Problem
LONDON — As Greece’s debt troubles batter the euro, Britain has done its utmost to stay above the fray.
Until now, that is. Suddenly, investors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.The pound fell to $1.4954 on Tuesday, its lowest level against the dollar in nearly 10 months. The yield on 10-year government bonds, known as gilts, slid as investors fretted that Parliament would be too fragmented after a crucial election in May to whip Britain’s messy finances back into shape.
http://www.nytimes.com/2010/03/03/business/global/03pound.html?ref=business

WSJ plans New York edition
News Corp. Chairman and Chief Executive Rupert Murdoch confirmed Tuesday that The Wall Street Journal will launch a section devoted to covering New York next month, in the company's first public acknowledgment of the project. The planned section will put the Journal squarely in competition with established New York media organizations, including the New York Times Co. and News Corp.'s own New York Post.The new section comes more than two years after News Corp. bought the Journal's parent company, Dow Jones & Co., and set out to broaden the readership and advertising base of the paper to compete with general-interest national newspapers including the New York Times and Gannett Co.'s USA Today.
http://online.wsj.com/article/SB10001424052748704548604575097662026613580.html?KEYWORDS=New+York+edition

Beige Book Finds Economy Improving
U.S. economic conditions kept improving slightly at the start of 2010, but the blizzards that hit the East Coast in February hurt several areas, the Federal Reserve said in a report Wednesday.In its latest beige book report, the Fed said nine out of its 12 regional districts reported that economic activity improved, but in most cases the increases were modest, with activity held back by the Feb. 4-7 and Feb. 9-11 snowstorms.
The beige book is a summary of economic activity prepared for use at the U.S. central bank's next policy-setting meeting, March 16. The latest report, prepared by the Federal Reserve Bank of Kansas City, examined economic conditions across the Fed's districts based on information collected on or before Feb. 22.
http://online.wsj.com/article/SB10001424052748703862704575099740217465042.html?mod=WSJ_hps_LEFTWhatsNews