WASHINGTON — The $8,000 federal tax credit for first-time home buyers is about to morph into a ready-cash down payment source, thanks to a new federal policy change.
Buyers eligible for the credit who apply for mortgages insured by the Federal Housing Administration may soon also be eligible for bridge loans or cash advances — up to $8,000 — that they can use for the down payment, closing costs or other loan expenses pending receipt of their tax credit check.
Housing and Urban Development Secretary Shaun Donovan announced the FHA change May 12 in a speech to the midyear convention of the National Association of Realtors. The idea, he said, is to "monetize” — turn into immediately spendable cash — a tax credit that often is not received until months after the settlement date.
As many as half of all would-be first-time buyers do not have enough cash on hand for a down payment and closing costs, according to building and real estate industry estimates. By advancing these consumers as much as $8,000 at closing, many more would be able to afford the purchase.
Officials at the National Association of Home Builders said the bridge loan feature could double the total number of home purchases stimulated by the 2009 tax credit program to more than 300,000.
Getting bridge loans
Under guidance drafted by the FHA, all lenders approved to do business with the agency will be authorized to provide bridge loans at closing — secured solely by the tax credit the borrower anticipates receiving from the federal government.
State and local government agencies and nonprofit organizations approved by FHA will be allowed to offer either bridge loans or second mortgages secured by the house.
Though the $8,000 tax credit carries the name "first-time home buyer,” eligibility extends to anyone who hasn’t owned a principal residence during the past three years. The credit amount from the government is the lesser of 10 percent of the purchase price of the dwelling or $8,000.
The credit only covers purchases closed by Nov. 30. Unless Congress extends the credit, it will disappear Dec. 1.
by the associated press
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Saturday, May 30, 2009
Judge could to rule by Monday whether Chrysler can sell assets
NEW YORK — A bankruptcy judge says he will rule by Monday on whether Chrysler can sell most of the company to a group headed by Italy’s Fiat.
U.S. Judge Arthur Gonzalez heard 11 hours of testimony and arguments Friday following marathon sessions the two previous days.
Chrysler says the only way it can avoid liquidation is through a deal where it would sell most of its assets to a group lead by Fiat Group SpA and create a new company.
But attorneys for a trio of Indiana state pension and construction funds opposed the sale, saying that Chrysler’s secured debtholders deserve more than the $2 billion that was offered for their $6.9 billion in debt.
If Gonzalez approves the sale, the funds are expected to appeal.
by the associated press
U.S. Judge Arthur Gonzalez heard 11 hours of testimony and arguments Friday following marathon sessions the two previous days.
Chrysler says the only way it can avoid liquidation is through a deal where it would sell most of its assets to a group lead by Fiat Group SpA and create a new company.
But attorneys for a trio of Indiana state pension and construction funds opposed the sale, saying that Chrysler’s secured debtholders deserve more than the $2 billion that was offered for their $6.9 billion in debt.
If Gonzalez approves the sale, the funds are expected to appeal.
by the associated press
ID-theft protection
SAN JOSE, Calif. — Companies that sell "identity-theft protection” present an alluring but questionable proposition.
For as much as about $100 per year, the main thing they do is set fraud alerts that force banks to call people before new lines of credit are opened in their names. The alerts can be useful — but people can set them themselves, for free.
Now even that function could be taken away from the ID theft-prevention services.
A federal court in California has blocked Tempe, Ariz.-based LifeLock, one of the industry’s biggest players, from setting fraud alerts with Experian, one of the three main credit-reporting agencies that manage the fraud alerts.
Experian is suing LifeLock, claiming that LifeLock’s automatic renewal of customers’ fraud alerts — which happens every 90 days, when they expire — costs Experian millions of dollars in processing expenses.
In a ruling last week, a judge agreed with one of Experian’s central arguments, which is that LifeLock isn’t authorized to set alerts for consumers, and that federal law requires consumers to set alerts themselves by contacting credit bureaus directly.
The ruling has caused at least one ID-theft prevention service, Debix, to announce it plans to drop fraud alerts and offer credit monitoring instead. The trend is likely to play out across the industry.
"It’s going to be a game changer,” said Jay Foley, executive director of the Identity Theft Resource Center.
Service more costly?
For consumers, this means "identity theft protection” services could get more expensive — and less useful. Credit monitoring services can cost $180 a year, and they don’t always detect a fraud before it happens.
In contrast, fraud alerts are supposed to make it much harder for identity theft to be pulled off in the first place.
When a bank or retailer runs a credit check on someone for a new account, if a fraud alert pops up, the bank or retailer is required to call that person or use any other "reasonable policies and procedures” to verify their identity.
That is meant to stop a scammer who goes into a retail store and tries, for example, to get instant credit under someone else’s name and then walk out with a TV the other guy would be on the hook for.
LifeLock’s CEO, Todd Davis, who is known for plastering his Social Security number on billboards in a dangerous advertising gimmick, says his company will fight the court ruling and won’t stop setting fraud alerts with the other two credit bureaus, Equifax and TransUnion.
Placing an alert at one bureau means an alert is placed at all three, because they have to notify each other.
by the associated press
For as much as about $100 per year, the main thing they do is set fraud alerts that force banks to call people before new lines of credit are opened in their names. The alerts can be useful — but people can set them themselves, for free.
Now even that function could be taken away from the ID theft-prevention services.
A federal court in California has blocked Tempe, Ariz.-based LifeLock, one of the industry’s biggest players, from setting fraud alerts with Experian, one of the three main credit-reporting agencies that manage the fraud alerts.
Experian is suing LifeLock, claiming that LifeLock’s automatic renewal of customers’ fraud alerts — which happens every 90 days, when they expire — costs Experian millions of dollars in processing expenses.
In a ruling last week, a judge agreed with one of Experian’s central arguments, which is that LifeLock isn’t authorized to set alerts for consumers, and that federal law requires consumers to set alerts themselves by contacting credit bureaus directly.
The ruling has caused at least one ID-theft prevention service, Debix, to announce it plans to drop fraud alerts and offer credit monitoring instead. The trend is likely to play out across the industry.
"It’s going to be a game changer,” said Jay Foley, executive director of the Identity Theft Resource Center.
Service more costly?
For consumers, this means "identity theft protection” services could get more expensive — and less useful. Credit monitoring services can cost $180 a year, and they don’t always detect a fraud before it happens.
In contrast, fraud alerts are supposed to make it much harder for identity theft to be pulled off in the first place.
When a bank or retailer runs a credit check on someone for a new account, if a fraud alert pops up, the bank or retailer is required to call that person or use any other "reasonable policies and procedures” to verify their identity.
That is meant to stop a scammer who goes into a retail store and tries, for example, to get instant credit under someone else’s name and then walk out with a TV the other guy would be on the hook for.
LifeLock’s CEO, Todd Davis, who is known for plastering his Social Security number on billboards in a dangerous advertising gimmick, says his company will fight the court ruling and won’t stop setting fraud alerts with the other two credit bureaus, Equifax and TransUnion.
Placing an alert at one bureau means an alert is placed at all three, because they have to notify each other.
by the associated press
Canadian auto parts maker might come to Opel’s rescue
BERLIN — Germany’s finance minister said after a high-level meeting in Berlin that a plan was approved for Canadian auto parts maker Magna International Inc. to move ahead with a rescue of General Motor Corp’s Opel unit.
Peer Steinbrueck said the agreement was reached early today after the second round of high-level talks in as many days.
"A solution has been found to keep Opel running,” Steinbrueck told reporters.
The agreement will see Adam Opel GmbH put under the care of a trustee today, shielding the German automaker from GM’s likely filing for bankruptcy protection early next week.
The German government will provide a $2.1 billion bridge loan, part of which will be available immediately.
Siegfried Wolf, a co-CEO of Magna, said he expected the agreements with GM would be signed in five weeks time, but insisted that the deal would prevent Opel from being touched by whatever happens to GM.
Friday, Economy Minister Karl-Theodor zu Guttenberg said that GM and Magna were negotiating on "new ideas” from the bidder, which also were being examined by the German government.
Wolf said his company had taken a risk in seeking to acquire the German automaker, but was eager to show it was committed to its future success.
The German government held the second round of top-level negotiations after talks snagged Thursday over new short-term funding needed to move Opel into an independent legal structure.
The other suitor for Opel, Fiat Group SpA, stayed away from the talks, which began late Friday, saying that it faced "unreasonable” funding demands.
by the associated press
Peer Steinbrueck said the agreement was reached early today after the second round of high-level talks in as many days.
"A solution has been found to keep Opel running,” Steinbrueck told reporters.
The agreement will see Adam Opel GmbH put under the care of a trustee today, shielding the German automaker from GM’s likely filing for bankruptcy protection early next week.
The German government will provide a $2.1 billion bridge loan, part of which will be available immediately.
Siegfried Wolf, a co-CEO of Magna, said he expected the agreements with GM would be signed in five weeks time, but insisted that the deal would prevent Opel from being touched by whatever happens to GM.
Friday, Economy Minister Karl-Theodor zu Guttenberg said that GM and Magna were negotiating on "new ideas” from the bidder, which also were being examined by the German government.
Wolf said his company had taken a risk in seeking to acquire the German automaker, but was eager to show it was committed to its future success.
The German government held the second round of top-level negotiations after talks snagged Thursday over new short-term funding needed to move Opel into an independent legal structure.
The other suitor for Opel, Fiat Group SpA, stayed away from the talks, which began late Friday, saying that it faced "unreasonable” funding demands.
by the associated press
Judge OKs $45 million settlement
DENVER — A federal judge has approved a class-action settlement of Qwest shareholders’ claims against former executives of the telecommunications company.
An order signed Wednesday approves a $45 million settlement of claims against former Qwest Communications International Inc. CEO Joe Nacchio and former Chief Financial Officer Robert Woodruff. The order makes effective an earlier $400 million settlement with Denver-based Qwest.
The settlement generally covers people who bought Qwest stock from May 24, 1999, to July 28, 2002.
The New England Health Care Employees Pension Fund, as lead plaintiff, had accused the defendants of artificially boosting Qwest’s stock price through accounting tricks and by making misleading statements about Qwest’s business.
No one admits any wrongdoing under the settlement.
by the associated press
An order signed Wednesday approves a $45 million settlement of claims against former Qwest Communications International Inc. CEO Joe Nacchio and former Chief Financial Officer Robert Woodruff. The order makes effective an earlier $400 million settlement with Denver-based Qwest.
The settlement generally covers people who bought Qwest stock from May 24, 1999, to July 28, 2002.
The New England Health Care Employees Pension Fund, as lead plaintiff, had accused the defendants of artificially boosting Qwest’s stock price through accounting tricks and by making misleading statements about Qwest’s business.
No one admits any wrongdoing under the settlement.
by the associated press
Government puttingmore thought in farm worker regulation
WASHINGTON — The Labor Department on Friday suspended a regulation adopted shortly before President George W. Bush left office that would have made it easier for farmers to bring in foreign workers.
Many immigration and labor advocacy groups had opposed the new rule for lowering wages and eliminating some protections for temporary farm workers. But farm owners supported the Bush administration changes, saying they eliminated red tape that made it harder to bring in foreign workers to help harvest crops.
The rule affects the H-2A guest worker program, which lets employers hire foreign workers if they can’t first find American workers. The new regulation took effect Jan. 17, just days before President Barack Obama was sworn into office.
Labor Secretary Hilda Solis had proposed suspending the regulation in March. The suspension restores the old regulations governing the program while officials craft new rules.
Democrats cheered the move, saying the regulation cut oversight of the H-2A program and made it much easier for employers to hire foreign workers over available American workers.
"I commend Labor Secretary Hilda Solis for suspending this destructive midnight regulation that slashed already low wages for farm workers,” said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee.
As many as 1 million people work in the nation’s farms each year, and the Labor Department estimates that more than half are in the country illegally. Efforts to curb illegal immigration have left many growers concerned about facing fines for hiring undocumented workers.
Farm owners have long criticized the H-2A guest worker program as cumbersome and inefficient. Suspension of the regulation may pose a problem for some growers who expected to have more guest workers to help out at harvest time.
by the associated press
Many immigration and labor advocacy groups had opposed the new rule for lowering wages and eliminating some protections for temporary farm workers. But farm owners supported the Bush administration changes, saying they eliminated red tape that made it harder to bring in foreign workers to help harvest crops.
The rule affects the H-2A guest worker program, which lets employers hire foreign workers if they can’t first find American workers. The new regulation took effect Jan. 17, just days before President Barack Obama was sworn into office.
Labor Secretary Hilda Solis had proposed suspending the regulation in March. The suspension restores the old regulations governing the program while officials craft new rules.
Democrats cheered the move, saying the regulation cut oversight of the H-2A program and made it much easier for employers to hire foreign workers over available American workers.
"I commend Labor Secretary Hilda Solis for suspending this destructive midnight regulation that slashed already low wages for farm workers,” said Rep. George Miller, D-Calif., chairman of the House Education and Labor Committee.
As many as 1 million people work in the nation’s farms each year, and the Labor Department estimates that more than half are in the country illegally. Efforts to curb illegal immigration have left many growers concerned about facing fines for hiring undocumented workers.
Farm owners have long criticized the H-2A guest worker program as cumbersome and inefficient. Suspension of the regulation may pose a problem for some growers who expected to have more guest workers to help out at harvest time.
by the associated press
Southwest Airlines to add new fees
DALLAS — Southwest Airlines Co., which has bashed competitors for charging fees, said Friday it will add new fees for passengers who bring small pets onboard and for unaccompanied minors.
It also will raise the charge for checking a third piece of luggage or an overweight bag.
Other airlines have raised hundreds of millions of dollars since last year with fees that include charges for checking luggage and talking to agents on the phone.
Southwest fired back by spending heavily on television commercials that blasted other airlines for charging "hidden fees.” Southwest officials said they were winning customers turned off by the new bag fees.
Friday, Southwest officials defended their own new fees, which Chief Executive Gary Kelly called "just the starting point” for more changes later this year.
"It is always our goal to be upfront with our customers and to set the right customer expectations,” Kelly said. "Our changes today associate a charge for items that are truly an extra service.”
New revenue
Southwest has lost money the past three quarters, and it has joined all other airlines in searching for new revenue, a job made more difficult by a downturn in travel during the recession.
Southwest already charges for checking three or more pieces of luggage and for cocktails, and it is testing onboard Internet access for a fee. Kelly hinted new fees were coming, while insisting they wouldn’t be "hidden,” by which he seemed to mean fees on first and second checked bags.
"It’s disingenuous on our part to say that there are no, quote, fees,” Kelly said. "We just try to be as honest and straightforward and have the right expectation with our customers on fees as we can.”
Kelly said hidden fees are ones "that people don’t think are right.”
Starting with flights June 17, Southwest will let small dogs and cats onboard — now only service animals are allowed — for $75 each way.
The Dallas-based discount airline also will begin charging $25 each way for unaccompanied children ages 5 through 11. That fee will apply to tickets bought after May 31 for travel June 17 or later.
And the fee for a third checked bag or a bag over 50 pounds but less than 71 pounds will rise to $50 from $25.
"The fees for pets is something all airlines have — in fact, some are close to $150 one way, so at $75 Southwest is pretty low,” travel industry expert Terry Trippler said.
by the associated press
It also will raise the charge for checking a third piece of luggage or an overweight bag.
Other airlines have raised hundreds of millions of dollars since last year with fees that include charges for checking luggage and talking to agents on the phone.
Southwest fired back by spending heavily on television commercials that blasted other airlines for charging "hidden fees.” Southwest officials said they were winning customers turned off by the new bag fees.
Friday, Southwest officials defended their own new fees, which Chief Executive Gary Kelly called "just the starting point” for more changes later this year.
"It is always our goal to be upfront with our customers and to set the right customer expectations,” Kelly said. "Our changes today associate a charge for items that are truly an extra service.”
New revenue
Southwest has lost money the past three quarters, and it has joined all other airlines in searching for new revenue, a job made more difficult by a downturn in travel during the recession.
Southwest already charges for checking three or more pieces of luggage and for cocktails, and it is testing onboard Internet access for a fee. Kelly hinted new fees were coming, while insisting they wouldn’t be "hidden,” by which he seemed to mean fees on first and second checked bags.
"It’s disingenuous on our part to say that there are no, quote, fees,” Kelly said. "We just try to be as honest and straightforward and have the right expectation with our customers on fees as we can.”
Kelly said hidden fees are ones "that people don’t think are right.”
Starting with flights June 17, Southwest will let small dogs and cats onboard — now only service animals are allowed — for $75 each way.
The Dallas-based discount airline also will begin charging $25 each way for unaccompanied children ages 5 through 11. That fee will apply to tickets bought after May 31 for travel June 17 or later.
And the fee for a third checked bag or a bag over 50 pounds but less than 71 pounds will rise to $50 from $25.
"The fees for pets is something all airlines have — in fact, some are close to $150 one way, so at $75 Southwest is pretty low,” travel industry expert Terry Trippler said.
by the associated press
Bullet train peaks Obama and U.S. interest
MADRID — Spain showed off its bullet train system Friday, giving the U.S. transportation secretary a firsthand glimpse of the high-speed rail grid that President Barack Obama has praised as a model for America.
U.S. Transportation Secretary Ray LaHood boarded a train at Madrid’s Atocha station along with Spanish Development Minister Jose Blanco for an hour-and-a-quarter trip to Zaragoza, a stop on the line heading to Barcelona.
LaHood has been touring Europe this week, riding a TGV bullet-train in France and attending a transportation conference in Germany that also featured officials from the German railway system, Deutsche Bahn.
Obama last month unveiled an $8 billion plan to build a high-speed rail network in the U.S. and upgrade existing services. The U.S. president cited Spain, France, China and Japan as countries with systems for his nation to emulate.
LaHood also was to tour a railway control center in Zaragoza, then return to Madrid, where he meets Saturday with Spanish business leaders and Prime Minister Jose Luis Rodriguez Zapatero.
Spain has become a leader in high-speed rail travel since inaugurating its first AVE line in 1992, from Madrid to Seville. The route has been a huge success, largely replacing road and air travel to the largest city in the southern Andalusia region.
The line to Barcelona, the latest to be completed, gets travelers to Spain’s second-largest city in less than three hours compared to a drive of about six hours. By plane, the trip takes about an hour, not including time to get to the airport and go through security.
Before the high speed rail service began in February 2008, air travelers to Barcelona surpassed train passengers by more than seven to one, but as of this January, the two groups were roughly equal in number, according to government statistics.
by the associated press
U.S. Transportation Secretary Ray LaHood boarded a train at Madrid’s Atocha station along with Spanish Development Minister Jose Blanco for an hour-and-a-quarter trip to Zaragoza, a stop on the line heading to Barcelona.
LaHood has been touring Europe this week, riding a TGV bullet-train in France and attending a transportation conference in Germany that also featured officials from the German railway system, Deutsche Bahn.
Obama last month unveiled an $8 billion plan to build a high-speed rail network in the U.S. and upgrade existing services. The U.S. president cited Spain, France, China and Japan as countries with systems for his nation to emulate.
LaHood also was to tour a railway control center in Zaragoza, then return to Madrid, where he meets Saturday with Spanish business leaders and Prime Minister Jose Luis Rodriguez Zapatero.
Spain has become a leader in high-speed rail travel since inaugurating its first AVE line in 1992, from Madrid to Seville. The route has been a huge success, largely replacing road and air travel to the largest city in the southern Andalusia region.
The line to Barcelona, the latest to be completed, gets travelers to Spain’s second-largest city in less than three hours compared to a drive of about six hours. By plane, the trip takes about an hour, not including time to get to the airport and go through security.
Before the high speed rail service began in February 2008, air travelers to Barcelona surpassed train passengers by more than seven to one, but as of this January, the two groups were roughly equal in number, according to government statistics.
by the associated press
Reinventing GM
DETROIT — With an almost certain bankruptcy filing days away, General Motors is beginning its reinvention, planning to retool one factory to make its smallest vehicles ever in the U.S. and rid itself of the biggest.
As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, GM also was closing in on a sale of its European Opel unit, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon.
Dramatic changes
The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion.
GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.
With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades.
"It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "But in just the past few months, we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.”
GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year.
GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless.
Union savings
The United Auto Workers’ reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.
The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said.
"They’ve eliminated their legacy costs. They’ve already invested in new product that’s coming. They have the ear of the government unlike any time in their history, and the government has said basically ‘we are going to help you survive and thrive,’” Bragman said.
by the associated press
As GM’s board began two days of meetings Friday to make a final decision on the company’s fate, GM also was closing in on a sale of its European Opel unit, and its main union overwhelmingly approved dramatic labor cost cuts. A deal to sell its rugged but inefficient Hummer brand also appeared on the horizon.
Dramatic changes
The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers will eventually own nearly three-quarters of a leaner GM, with a total government commitment of nearly $50 billion.
GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.
With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades.
"It’s been coming to a head for a very long time,” said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "But in just the past few months, we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing.”
GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting some of the 21,000 that will be lost when GM closes 14 factories by the end of next year.
GM’s stock tumbled to the lowest price in the company’s 100-year history, closing at just 75 cents after trading as low as 74 cents. The government plan for GM revealed Thursday would make the shares virtually worthless.
Union savings
The United Auto Workers’ reluctant but overwhelming ratification of concessions will save GM $1.3 billion per year and bring its labor costs down to those of its Japanese competitors. The new UAW deal freezes wages, ends bonuses and eliminates some noncompetitive work rules.
The changes, plus others that will be worked out in court, will shrink GM and position it to be among the world’s most competitive automakers if it can emerge from bankruptcy protection and survive the global auto sales slump, Bragman said.
"They’ve eliminated their legacy costs. They’ve already invested in new product that’s coming. They have the ear of the government unlike any time in their history, and the government has said basically ‘we are going to help you survive and thrive,’” Bragman said.
by the associated press
Friday, May 29, 2009
Foreclosures rises on prime loans
NEW YORK — The mortgageA record 12 percent of homeowners with a mortgage were behind on their payments in the first quarter, the Mortgage Bankers Association said Thursday. And the trend is predicted to continue until the end of next year, about six months after unemployment is expected to peak.
The start of the recession — risky adjustable-rate loans made to borrowers with bad credit — remains a significant factor in foreclosures. Today, almost half of all subprime adjustable-rate loans are past due or in foreclosure. In Florida, New Jersey and New York the number is above 55 percent.
When those borrowers started defaulting in droves in late 2006, it forced dozens of lenders out of business and sparked a credit crisis in the summer of 2007. Businesses nationwide couldn’t get short-term loans to finance new orders or even cover their payrolls.
Economic production began shrinking at the end of 2007 in what has become the longest recession in the United States since World II.
‘Best of the best’ hit
The impact has now filtered out, consuming homeowners who until recently had a good track record of paying their bills on time. Nearly 6 percent of these prime borrowers with fixed-rate mortgages were past due or in foreclosure, nearly doubling in the last year.
"These (borrowers) are the best of the best out there,” said Mike Larson, a real estate analyst who works for Weiss Research in Jupiter, Fla. "Clearly, borrowers far and wide are getting hit by this.”
The worst of the trouble continues to be focused in California, Nevada, Arizona and Florida, which accounted for 46 percent of new foreclosures in the country and reported the worst delinquency and foreclosure rates on prime fixed-rate loans. The four have suffered massive job cuts in the housing industry. There were no signs of improvement.
But experts expect the pain to spread throughout the country as job losses continue to mount.
by the associated press
The start of the recession — risky adjustable-rate loans made to borrowers with bad credit — remains a significant factor in foreclosures. Today, almost half of all subprime adjustable-rate loans are past due or in foreclosure. In Florida, New Jersey and New York the number is above 55 percent.
When those borrowers started defaulting in droves in late 2006, it forced dozens of lenders out of business and sparked a credit crisis in the summer of 2007. Businesses nationwide couldn’t get short-term loans to finance new orders or even cover their payrolls.
Economic production began shrinking at the end of 2007 in what has become the longest recession in the United States since World II.
‘Best of the best’ hit
The impact has now filtered out, consuming homeowners who until recently had a good track record of paying their bills on time. Nearly 6 percent of these prime borrowers with fixed-rate mortgages were past due or in foreclosure, nearly doubling in the last year.
"These (borrowers) are the best of the best out there,” said Mike Larson, a real estate analyst who works for Weiss Research in Jupiter, Fla. "Clearly, borrowers far and wide are getting hit by this.”
The worst of the trouble continues to be focused in California, Nevada, Arizona and Florida, which accounted for 46 percent of new foreclosures in the country and reported the worst delinquency and foreclosure rates on prime fixed-rate loans. The four have suffered massive job cuts in the housing industry. There were no signs of improvement.
But experts expect the pain to spread throughout the country as job losses continue to mount.
by the associated press
HP chief talks about recovery may still be far away
SAN JOSE, Calif. — While other big technology vendors have said they’ve seen demand bottom out and show signs of recovery, Hewlett-Packard Co. has stayed cautious, warning it’s too soon to tell when its business will improve.
HP Chief Executive Mark Hurd reinforced that outlook Thursday. He told investors and financial analysts at a meeting in New York that he’s confident HP can hit its profit forecast, but he wouldn’t speculate on the timing of a turnaround in tech spending. HP also signaled that even recent job cuts won’t be enough.
The recession has generated a lot of pent-up demand, because it has disrupted the normal cycle of tech upgrades, Hurd said, and when that will get back on track is unclear.
"The buildup now of 4-year-old desktops, 4-year-old notebooks, 4-year-old servers, this is creating quite a bubble,” Hurd said at Sanford C. Bernstein & Co.’s "Strategic Decisions” conference.
There is "a little more stability” in the market, particularly in China and U.S. consumer sales, he said. That echoed his comments from HP’s quarterly results last week, when the Palo Alto-based company reported a 17 percent drop in profit and a 3 percent decline in sales.
The company also announced 6,400 more layoffs, or 2 percent of its work force.
The company is indicating it will need to cut more jobs than that. HP said Thursday it plans to slash 5,700 jobs from Europe, the Middle East and Africa over the next two years. Some of those are included in the cuts announced last week, but not all. HP would not offer specifics.
by the associated press
HP Chief Executive Mark Hurd reinforced that outlook Thursday. He told investors and financial analysts at a meeting in New York that he’s confident HP can hit its profit forecast, but he wouldn’t speculate on the timing of a turnaround in tech spending. HP also signaled that even recent job cuts won’t be enough.
The recession has generated a lot of pent-up demand, because it has disrupted the normal cycle of tech upgrades, Hurd said, and when that will get back on track is unclear.
"The buildup now of 4-year-old desktops, 4-year-old notebooks, 4-year-old servers, this is creating quite a bubble,” Hurd said at Sanford C. Bernstein & Co.’s "Strategic Decisions” conference.
There is "a little more stability” in the market, particularly in China and U.S. consumer sales, he said. That echoed his comments from HP’s quarterly results last week, when the Palo Alto-based company reported a 17 percent drop in profit and a 3 percent decline in sales.
The company also announced 6,400 more layoffs, or 2 percent of its work force.
The company is indicating it will need to cut more jobs than that. HP said Thursday it plans to slash 5,700 jobs from Europe, the Middle East and Africa over the next two years. Some of those are included in the cuts announced last week, but not all. HP would not offer specifics.
by the associated press
Time Warner planning to split from AOL
NEW YORK — Time Warner Inc. is dumping AOL after spending nearly a decade trying to build a new-age media empire only to wind up in a weaker position than when the marriage beganThe divorce, announced Thursday, will spin out AOL as a separate company run by former Google Inc. advertising executive Tim Armstrong. He was hired in March to try to restore the luster to a brand once known as America Online.
Although AOL has been eclipsed by Google and other Internet stars, Armstrong still can try to build on a wide-reaching online ad network, as well as AOL’s Web sites, which remain a relatively big draw.
More focus, flexibility
Time Warner owns 95 percent of AOL and will buy out Google’s 5 percent stake during the third quarter for an undisclosed amount. From there, AOL — which has about 7,000 employees — will be spun off into a separate publicly traded company around the end of the year.
"For AOL, becoming a standalone company will give it more focus and strategic flexibility,” Time Warner Chief Executive Jeff Bewkes said at the company’s annual shareholder meeting in New York.
Meanwhile, with AOL jettisoned, Time Warner will focus on movies, cable TV networks such as HBO and CNN, and publishing magazines such as Time, People and Sports Illustrated.
The $147 billion deal in which AOL bought Time Warner in 2001 epitomized the mind-boggling wealth created during the dot-com boom and quickly became one of the worst corporate combinations in history. In 2002 and 2003, Time Warner absorbed nearly $100 billion in charges to account for the rapidly diminishing value of the combined company (which today sports a market value of just $27 billion.) Time Warner even dropped AOL from its corporate name.
About AOL
AOL once defined the Web for millions of people. But much of its original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers, back when the company stuffed free trial CDs in magazines and mailboxes. The march of broadband ate away at the business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter.
The decline undercut one of the main premises for the AOL-Time Warner deal, which was that Time Warner’s media content would be enhanced by AOL’s Internet reach.
AOL responded to the trend by giving away most of its services, like e-mail, to drive traffic to its free, ad-supported Web sites. It also laid off thousands of employees to try to streamline.
But after a few strong quarters, ad growth slowed and then began declining.
by the associated press
Although AOL has been eclipsed by Google and other Internet stars, Armstrong still can try to build on a wide-reaching online ad network, as well as AOL’s Web sites, which remain a relatively big draw.
More focus, flexibility
Time Warner owns 95 percent of AOL and will buy out Google’s 5 percent stake during the third quarter for an undisclosed amount. From there, AOL — which has about 7,000 employees — will be spun off into a separate publicly traded company around the end of the year.
"For AOL, becoming a standalone company will give it more focus and strategic flexibility,” Time Warner Chief Executive Jeff Bewkes said at the company’s annual shareholder meeting in New York.
Meanwhile, with AOL jettisoned, Time Warner will focus on movies, cable TV networks such as HBO and CNN, and publishing magazines such as Time, People and Sports Illustrated.
The $147 billion deal in which AOL bought Time Warner in 2001 epitomized the mind-boggling wealth created during the dot-com boom and quickly became one of the worst corporate combinations in history. In 2002 and 2003, Time Warner absorbed nearly $100 billion in charges to account for the rapidly diminishing value of the combined company (which today sports a market value of just $27 billion.) Time Warner even dropped AOL from its corporate name.
About AOL
AOL once defined the Web for millions of people. But much of its original revenue came from providing dial-up access, a business that peaked for AOL in 2002 at 26.7 million subscribers, back when the company stuffed free trial CDs in magazines and mailboxes. The march of broadband ate away at the business, and AOL had just 6.3 million dial-up subscribers at the end of the last quarter.
The decline undercut one of the main premises for the AOL-Time Warner deal, which was that Time Warner’s media content would be enhanced by AOL’s Internet reach.
AOL responded to the trend by giving away most of its services, like e-mail, to drive traffic to its free, ad-supported Web sites. It also laid off thousands of employees to try to streamline.
But after a few strong quarters, ad growth slowed and then began declining.
by the associated press
Google hopes Web surfers might take a ride on its wave
SAN FRANCISCO — Google Inc. is hatching a new species of e-mail and instant messaging, but the Internet search leader first wants the hybrid service to evolve even more with the help of independent computer programmers.
The free tool, called "Google Wave,” runs in a Web browser and combines elements of e-mail, instant messaging, wikis and photo sharing in an effort to make online communication more dynamic. Google hopes Wave simplifies the way people collaborate on projects or exchange opinions about specific topics.
Google offered the first glimpse of its latest offering Thursday during the Mountain View, Calif.-based company’s annual conference for software developers who build programs on top of its services. The rest of the Web-surfing public won’t be able to hop on Google Wave until later in the year. (Go to wave.google.com for a preview.)
By the time Wave rolls out for everyone, Google hopes independent programmers will have found new ways to use the service.
Among other things, Google is counting on outsiders to figure out how to weave Wave into the popular Internet communications service Twitter, social networks such as Facebook and existing Web-based e-mail services, said Lars Rasmussen, a Google engineering manager.
by the associated press
The free tool, called "Google Wave,” runs in a Web browser and combines elements of e-mail, instant messaging, wikis and photo sharing in an effort to make online communication more dynamic. Google hopes Wave simplifies the way people collaborate on projects or exchange opinions about specific topics.
Google offered the first glimpse of its latest offering Thursday during the Mountain View, Calif.-based company’s annual conference for software developers who build programs on top of its services. The rest of the Web-surfing public won’t be able to hop on Google Wave until later in the year. (Go to wave.google.com for a preview.)
By the time Wave rolls out for everyone, Google hopes independent programmers will have found new ways to use the service.
Among other things, Google is counting on outsiders to figure out how to weave Wave into the popular Internet communications service Twitter, social networks such as Facebook and existing Web-based e-mail services, said Lars Rasmussen, a Google engineering manager.
by the associated press
Newspaper executives are meeting to discuss Internet options
About two dozen newspaper industry executives, including David Thompson, publisher of The Oklahoman and president of OPUBCO Communications Group, huddled Thursday to explore how they might be able to boost profits from their online operations and take full advantage of the many new technologies available.
The meeting at a Chicago hotel is the latest indication that many newspapers intend to become more aggressive about protecting their Internet content and, in some cases, charging Web surfers to read the material.
"We are in a period of great transformation. New platforms have allowed us to reach more readers than we ever have. As we reset our business model, we will be ever-mindful of our core first amendment responsibilities. Gathering and producing news has great value. We will innovate and find new ways of funding our journalism,” said Chris Reen, executive vice president of OPUBCO Communications Group. "Meetings like this will move our industry forward. Our content flows too freely across too many Web sites. It’s time to more closely examine the web’s current model.”
Thursday’s meeting was called "Models to Lawfully Monetize Content,” according to an agenda obtained by The Associated Press. James Warren, a former managing editor for the Chicago Tribune, reported about the meeting earlier on The Atlantic’s Web site.
The meeting was held "to discuss how best to support and preserve the traditions of newsgathering that will serve the American public,” according to the Newspaper Association of America, the trade group that organized the gathering. An antitrust lawyer attended the meeting to caution the participants about laws prohibiting collusion or other anticompetitive measures.
The session included presentations by Attributor Inc., a Silicon Valley company that specializes in identifying online copyright violations, and Journalism Online, a startup that hopes to collect Internet fees on behalf of participating newspapers.
Other topics included a possible industrywide solution to classified advertising.
Executives from most of the major U.S. newspaper publishers attended Thursday’s meeting, according to the Newspaper Association of America. Tom Curley, chief executive of The Associated Press, also was on hand. The AP is a news cooperative owned by newspapers.
by the associated press
The meeting at a Chicago hotel is the latest indication that many newspapers intend to become more aggressive about protecting their Internet content and, in some cases, charging Web surfers to read the material.
"We are in a period of great transformation. New platforms have allowed us to reach more readers than we ever have. As we reset our business model, we will be ever-mindful of our core first amendment responsibilities. Gathering and producing news has great value. We will innovate and find new ways of funding our journalism,” said Chris Reen, executive vice president of OPUBCO Communications Group. "Meetings like this will move our industry forward. Our content flows too freely across too many Web sites. It’s time to more closely examine the web’s current model.”
Thursday’s meeting was called "Models to Lawfully Monetize Content,” according to an agenda obtained by The Associated Press. James Warren, a former managing editor for the Chicago Tribune, reported about the meeting earlier on The Atlantic’s Web site.
The meeting was held "to discuss how best to support and preserve the traditions of newsgathering that will serve the American public,” according to the Newspaper Association of America, the trade group that organized the gathering. An antitrust lawyer attended the meeting to caution the participants about laws prohibiting collusion or other anticompetitive measures.
The session included presentations by Attributor Inc., a Silicon Valley company that specializes in identifying online copyright violations, and Journalism Online, a startup that hopes to collect Internet fees on behalf of participating newspapers.
Other topics included a possible industrywide solution to classified advertising.
Executives from most of the major U.S. newspaper publishers attended Thursday’s meeting, according to the Newspaper Association of America. Tom Curley, chief executive of The Associated Press, also was on hand. The AP is a news cooperative owned by newspapers.
by the associated press
Oil hits $65 a barrel as supplies remains high and usage stays low
Oil hits $65 a barrel as supplies remain high and usage stays low
Oil prices closed above $65 per barrel Thursday for the first time in six months as OPEC maintained crude production levels as expected and a pair of reports suggested a slightly brighter economic picture. Benchmark crude for July delivery added $1.63 to settle at $65.08 a barrel on the New York Mercantile Exchange. Retail gasoline prices have shadowed oil prices, ticking higher every day this month. Gasoline prices are not only rising because of crude. Refiners, stung by falling demand for gasoline, have cut back sharply on production this year. U.S. energy consumption still hovers at its lowest level in a decade, however, because of the recession. The Energy Information Administration said Thursday that U.S. storage facilities added another 106 billion cubic feet of natural gas last week, putting the overall surplus well above the five-year average. That’s largely because manufacturers and other big industrial power users have been slashing production and cutting jobs.
by the associated press
Oil prices closed above $65 per barrel Thursday for the first time in six months as OPEC maintained crude production levels as expected and a pair of reports suggested a slightly brighter economic picture. Benchmark crude for July delivery added $1.63 to settle at $65.08 a barrel on the New York Mercantile Exchange. Retail gasoline prices have shadowed oil prices, ticking higher every day this month. Gasoline prices are not only rising because of crude. Refiners, stung by falling demand for gasoline, have cut back sharply on production this year. U.S. energy consumption still hovers at its lowest level in a decade, however, because of the recession. The Energy Information Administration said Thursday that U.S. storage facilities added another 106 billion cubic feet of natural gas last week, putting the overall surplus well above the five-year average. That’s largely because manufacturers and other big industrial power users have been slashing production and cutting jobs.
by the associated press
GM focuses on its furture
DETROIT — The government’s new road map for General Motors would briefly send it into bankruptcy, erase most of its debt and eventually have it emerge leaner and stronger — and almost three-quarters owned by the taxpayers.
The outline came together Thursday after a bloc of GM’s biggest bondholders agreed to a sweetened deal proposed by the Treasury Department to wipe out the automaker’s unsecured debt in exchange for company stock.
But GM still must settle on a buyer for its European Opel unit and decide the fate of its Hummer and Saturn brands, while workers across the country await news expected Monday on which 14 plants the company will close, shedding 21,000 more jobs.
A person familiar with GM’s plans said it was "probable” that the company will file for bankruptcy protection Monday — the government’s deadline for GM to restructure. The person did not want to be identified because the plans were still under discussion with the U.S. and Canadian governments.
What’s in the plan
Under the proposal, outlined in a regulatory filing, GM’s good and bad assets would be separated under what the Obama administration hopes will be a speedy Chapter 11 reorganization that will let GM thrive when people are ready to buy cars again.
The U.S. Treasury, which already has loaned GM $19.4 billion, would get 72.5 percent of the new company’s stock and provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.
Canada’s government is expected to provide an additional $9 billion, a senior Obama administration official said. The official spoke on condition of anonymity because of the sensitivity of the negotiations.
A United Auto Workers trust that will take over retiree health care expenses will get 17.5 percent, and the old GM, effectively owned by the bondholders, will get a 10 percent stake.
GM’s existing shareholders will probably lose everything. "It’s fair to say that there would be little to no recovery,” the administration official said.
The proposal is similar to what has happened to Chrysler, already in Chapter 11 protection. A bankruptcy judge is weighing whether to approve the sale of most of its assets to Italian carmaker Fiat.
The administration official estimated that GM would be under bankruptcy protection for 60 to 90 days, longer than Chrysler’s expected reorganization because GM is bigger and more complex.
The official said that although the government hopes to get back as much of the money loaned to GM and Chrysler as possible, it never envisioned recovering much of the aid.
Return of profits
Eventually, the government hopes, GM can return to profitability, which would allow the government to sell its GM stock. But the risks for taxpayers are daunting, with U.S. auto sales near their lowest level in 27 years.
"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so,” GM Vice Chairman Bob Lutz said Thursday at an Automotive Press Association luncheon in Detroit. "We will come out of it with an all new focus on product development.”
GM plans to cut the nameplates it sells in North America by one-fourth and keep only four brands — Chevrolet, Cadillac, GMC and Buick.
by the associated press
The outline came together Thursday after a bloc of GM’s biggest bondholders agreed to a sweetened deal proposed by the Treasury Department to wipe out the automaker’s unsecured debt in exchange for company stock.
But GM still must settle on a buyer for its European Opel unit and decide the fate of its Hummer and Saturn brands, while workers across the country await news expected Monday on which 14 plants the company will close, shedding 21,000 more jobs.
A person familiar with GM’s plans said it was "probable” that the company will file for bankruptcy protection Monday — the government’s deadline for GM to restructure. The person did not want to be identified because the plans were still under discussion with the U.S. and Canadian governments.
What’s in the plan
Under the proposal, outlined in a regulatory filing, GM’s good and bad assets would be separated under what the Obama administration hopes will be a speedy Chapter 11 reorganization that will let GM thrive when people are ready to buy cars again.
The U.S. Treasury, which already has loaned GM $19.4 billion, would get 72.5 percent of the new company’s stock and provide $30 billion in additional financing to keep the new GM operating under bankruptcy protection.
Canada’s government is expected to provide an additional $9 billion, a senior Obama administration official said. The official spoke on condition of anonymity because of the sensitivity of the negotiations.
A United Auto Workers trust that will take over retiree health care expenses will get 17.5 percent, and the old GM, effectively owned by the bondholders, will get a 10 percent stake.
GM’s existing shareholders will probably lose everything. "It’s fair to say that there would be little to no recovery,” the administration official said.
The proposal is similar to what has happened to Chrysler, already in Chapter 11 protection. A bankruptcy judge is weighing whether to approve the sale of most of its assets to Italian carmaker Fiat.
The administration official estimated that GM would be under bankruptcy protection for 60 to 90 days, longer than Chrysler’s expected reorganization because GM is bigger and more complex.
The official said that although the government hopes to get back as much of the money loaned to GM and Chrysler as possible, it never envisioned recovering much of the aid.
Return of profits
Eventually, the government hopes, GM can return to profitability, which would allow the government to sell its GM stock. But the risks for taxpayers are daunting, with U.S. auto sales near their lowest level in 27 years.
"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so,” GM Vice Chairman Bob Lutz said Thursday at an Automotive Press Association luncheon in Detroit. "We will come out of it with an all new focus on product development.”
GM plans to cut the nameplates it sells in North America by one-fourth and keep only four brands — Chevrolet, Cadillac, GMC and Buick.
by the associated press
Debt auction spuring surge in markets
NEW YORK — Interest rate movements called the shots on Wall Street for the second straight day.
The bond market recovered Thursday, bringing stocks along with it, a day after panicky selling pushed long-term borrowing rates to their highest level in six months.
Stock indicators rose more than 1 percent, including the Dow Jones industrial average, which gained almost 104 points.
The yield on the 10-year Treasury note, a widely used benchmark for loans, moved decisively lower to 3.62 percent from 3.75 percent the day before as investors were relieved to see ample demand at an auction for Treasury debt.
The note’s yield had surged the day before, triggering a selloff in stocks, on concerns that a flood of U.S. government debt coming to market this year would overwhelm demand. In addition to raising borrowing costs for the government, higher yields on long-term Treasurys could drive up borrowing costs for consumers.
The Federal Reserve has said it will buy large amounts of Treasurys and other kinds of debt in an effort to keep borrowing costs low.
What’s ahead?
Stock trading could remain jumpy going forward as investors look at interest rates and economic data for confirmation that the market’s aggressive bet on an economic recovery is still sound. The Standard & Poor’s 500 index is still up 34 percent from a 12-year low in early March.
"The market is absolutely being held hostage to the data,” said David Joy, chief market strategist at Ameriprise Financial Inc.’s RiverSource Investments.
The Dow rose 103.78, or 1.3 percent, to 8,403.8. Meanwhile the S&P 500 index rose 13.77, or 1.5 percent, to 906.83, and the Nasdaq composite index advanced 20.71, or 1.2 percent, to 1,751.79.
by the associated press
The bond market recovered Thursday, bringing stocks along with it, a day after panicky selling pushed long-term borrowing rates to their highest level in six months.
Stock indicators rose more than 1 percent, including the Dow Jones industrial average, which gained almost 104 points.
The yield on the 10-year Treasury note, a widely used benchmark for loans, moved decisively lower to 3.62 percent from 3.75 percent the day before as investors were relieved to see ample demand at an auction for Treasury debt.
The note’s yield had surged the day before, triggering a selloff in stocks, on concerns that a flood of U.S. government debt coming to market this year would overwhelm demand. In addition to raising borrowing costs for the government, higher yields on long-term Treasurys could drive up borrowing costs for consumers.
The Federal Reserve has said it will buy large amounts of Treasurys and other kinds of debt in an effort to keep borrowing costs low.
What’s ahead?
Stock trading could remain jumpy going forward as investors look at interest rates and economic data for confirmation that the market’s aggressive bet on an economic recovery is still sound. The Standard & Poor’s 500 index is still up 34 percent from a 12-year low in early March.
"The market is absolutely being held hostage to the data,” said David Joy, chief market strategist at Ameriprise Financial Inc.’s RiverSource Investments.
The Dow rose 103.78, or 1.3 percent, to 8,403.8. Meanwhile the S&P 500 index rose 13.77, or 1.5 percent, to 906.83, and the Nasdaq composite index advanced 20.71, or 1.2 percent, to 1,751.79.
by the associated press
Thursday, May 28, 2009
GM expected to find court protection
DETROIT — General Motors bondholders felt they deserved something like a 58 percent stake in the company in exchange for their billions of dollars in debt. What they were offered wasn’t even close.
As a result, the largest industrial bankruptcy in U.S. history is now all but certain. The bondholder rejection virtually ensures GM will file for Chapter 11 bankruptcy protection within days.
The government, which has already extended nearly $20 billion in loans to GM, ordered the company to come up with a plan that 90 percent of its bondholders would agree to. But the government allowed it to offer only 10 percent of the company’s stock. GM was forced to withdraw the offer Wednesday after it fell short.
A person familiar with discussions between GM and the government told The Associated Press any bankruptcy filing would probably come around the government’s Monday deadline for GM to finish restructuring or enter protection. The person asked not to be identified because the talks are private.
To avoid bankruptcy, the government said GM must shed debt, cut labor costs and close plants.
GM bondholders are owed about $27 billion, the largest chunk of GM’s roughly $58 billion in debt. They were offered the 10 percent stake to wipe out the debt, well short of the 58 percent they wanted.
Like its crosstown rival Chrysler, which was angling Wednesday for a judge’s permission to sell most of its assets to a group headed by an Italian automaker, GM was pulled down by debt, high labor costs and a devastating sales slump.
The government has poured billions into the two companies, fearing the ripple effects of catastrophic job losses might push the economy into a depression. The pair employ more than 126,000 people in the U.S., and hundreds of thousands of others rely on the companies working for parts suppliers, dealerships and other businesses.
GM spokesman Tom Wilkinson said the board would meet later this week to decide its next move
by the associated press
As a result, the largest industrial bankruptcy in U.S. history is now all but certain. The bondholder rejection virtually ensures GM will file for Chapter 11 bankruptcy protection within days.
The government, which has already extended nearly $20 billion in loans to GM, ordered the company to come up with a plan that 90 percent of its bondholders would agree to. But the government allowed it to offer only 10 percent of the company’s stock. GM was forced to withdraw the offer Wednesday after it fell short.
A person familiar with discussions between GM and the government told The Associated Press any bankruptcy filing would probably come around the government’s Monday deadline for GM to finish restructuring or enter protection. The person asked not to be identified because the talks are private.
To avoid bankruptcy, the government said GM must shed debt, cut labor costs and close plants.
GM bondholders are owed about $27 billion, the largest chunk of GM’s roughly $58 billion in debt. They were offered the 10 percent stake to wipe out the debt, well short of the 58 percent they wanted.
Like its crosstown rival Chrysler, which was angling Wednesday for a judge’s permission to sell most of its assets to a group headed by an Italian automaker, GM was pulled down by debt, high labor costs and a devastating sales slump.
The government has poured billions into the two companies, fearing the ripple effects of catastrophic job losses might push the economy into a depression. The pair employ more than 126,000 people in the U.S., and hundreds of thousands of others rely on the companies working for parts suppliers, dealerships and other businesses.
GM spokesman Tom Wilkinson said the board would meet later this week to decide its next move
by the associated press
medical pricing cuts
WASHINGTON — A major health insurer says the government can save more than $500 billion in Medicare spending by sending patients to cheaper, more efficient doctors, reducing hospital visits by the elderly and cutting down on unnecessary care.
Those are among 15 suggestions made Wednesday by UnitedHealth Group Inc., a Minnesota-based health management company that is the biggest participant in the government’s Medicare insurance program for the elderly. United said the proposals added up to $540 billion in savings over 10 years.
Savings or rations?
The proposals come as Congress and the Obama administration are working on a major health care overhaul aimed at reducing costs and extending coverage to 50 million uninsured Americans.
Some of the proposals could be cast as attempts to ration health care — one of the attack lines some conservatives have been using against emerging proposals from the D e m o c r a t i c - c o n t r o l l e d Congress.
Like other groups with an interest in the outcome, UnitedHealth is trying to position itself as a constructive voice in the debate — and avoid becoming a target itself as lawmakers try to reshape the nation’s $2.5 trillion health care system.
"The political debate, in part, is about how do you produce savings that can be used to fund other aspects of health reform legislation, and it’s that part of the political debate that this is a contribution to,” said Simon Stevens, United executive vice president and head of its center for health reform.
Stevens and Dr. Lew Sandy, United’s senior vice president for clinical advancement, said the company had successfully used those techniques to drive down costs and promote quality care.
by the associated press
Those are among 15 suggestions made Wednesday by UnitedHealth Group Inc., a Minnesota-based health management company that is the biggest participant in the government’s Medicare insurance program for the elderly. United said the proposals added up to $540 billion in savings over 10 years.
Savings or rations?
The proposals come as Congress and the Obama administration are working on a major health care overhaul aimed at reducing costs and extending coverage to 50 million uninsured Americans.
Some of the proposals could be cast as attempts to ration health care — one of the attack lines some conservatives have been using against emerging proposals from the D e m o c r a t i c - c o n t r o l l e d Congress.
Like other groups with an interest in the outcome, UnitedHealth is trying to position itself as a constructive voice in the debate — and avoid becoming a target itself as lawmakers try to reshape the nation’s $2.5 trillion health care system.
"The political debate, in part, is about how do you produce savings that can be used to fund other aspects of health reform legislation, and it’s that part of the political debate that this is a contribution to,” said Simon Stevens, United executive vice president and head of its center for health reform.
Stevens and Dr. Lew Sandy, United’s senior vice president for clinical advancement, said the company had successfully used those techniques to drive down costs and promote quality care.
by the associated press
Wednesday, May 27, 2009
Target on Wal-Mart
NEW YORK — Target Corp. is going bananas to keep up with Walmart Stores Inc.
The discounter, known for stylish towels and jeans, has long sold groceries. But it is barely holding onto its customers while its chief rival, Walmart, is rapidly picking up new shoppers as its powerful low-cost message resonates in the recession. So Minneapolis-based Target plans to stock more fresh food — including bananas — and play up its low prices.
Meanwhile, Walmart, the world’s largest retailer, is expanding its selection of nonessentials such as home furnishings, while improving the quality of its store-brand foods.
Activist shareholder William Ackman has for several months been using Target’s struggle with Walmart as ammunition to push Target shareholders to change its board. He has said his five picks, including himself, would provide fresh perspective, increase profitability and re-energize stock, which has dropped 42 percent from its $70 high in July 2007, though it since has rallied.
What should they do?
Facing criticism from Wall Street analysts who believe it’s been late to respond to the recession, Target is becoming more vulnerable. But New York-based retail consultant Walter Loeb is not convinced that Ackman should get involved.
Target’s cheap chic mantra — its advantage in boom times — became a drag in late 2007, as the recession began and shoppers focused on basics.
At the same time, Walmart, based in Bentonville, Ark., found a balance of merchandise and marketing to enhance its renewed focus on price.
by the associated press
The discounter, known for stylish towels and jeans, has long sold groceries. But it is barely holding onto its customers while its chief rival, Walmart, is rapidly picking up new shoppers as its powerful low-cost message resonates in the recession. So Minneapolis-based Target plans to stock more fresh food — including bananas — and play up its low prices.
Meanwhile, Walmart, the world’s largest retailer, is expanding its selection of nonessentials such as home furnishings, while improving the quality of its store-brand foods.
Activist shareholder William Ackman has for several months been using Target’s struggle with Walmart as ammunition to push Target shareholders to change its board. He has said his five picks, including himself, would provide fresh perspective, increase profitability and re-energize stock, which has dropped 42 percent from its $70 high in July 2007, though it since has rallied.
What should they do?
Facing criticism from Wall Street analysts who believe it’s been late to respond to the recession, Target is becoming more vulnerable. But New York-based retail consultant Walter Loeb is not convinced that Ackman should get involved.
Target’s cheap chic mantra — its advantage in boom times — became a drag in late 2007, as the recession began and shoppers focused on basics.
At the same time, Walmart, based in Bentonville, Ark., found a balance of merchandise and marketing to enhance its renewed focus on price.
by the associated press
Union deal could sweeten GM’s offer to bondholders
DETROIT — A cost-cutting deal between the United Auto Workers and General Motors Corp. will give a union-run health care trust fund a smaller stake in the automaker than previously expected, but it also could be the catalyst that allows the company to restructure outside of bankruptcy court.
GM, which faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 percent of the company’s shares while freezing wages and cutting performance bonuses and cost-of-living raises.
Factory-level union leaders from across the U.S. unanimously endorsed the deal at a meeting Tuesday in Detroit. The union’s GM workers must vote on the agreement by Thursday.
In a summary of the deal, the union said it would get 17.5 percent of GM’s common stock, plus a warrant for another 2.5 percent, as partial payment of the $20 billion that GM must put into a trust that will start paying retiree health care costs next year. The trust will get $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note. The remaining $10 billion will come from health care trust funds that GM already has set up. The trust will get a seat on GM’s board, although it will have to vote at the direction of GM’s other independent directors.
GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. Analysts say it’s unlikely enough bondholders will approve the offer, meaning GM would still be forced to file for Chapter 11.
But the UAW trust is getting far less than 39 percent in stock GM said it would get previously. With the UAW’s share at 20 percent, that frees 19 percent to go to either the government or the bondholders, who had until 11:59 p.m. Tuesday to accept or reject the exchange offer.
GM has said it could extend the deadline for the bond exchange and will decide that today.
by the assiated press
GM, which faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 percent of the company’s shares while freezing wages and cutting performance bonuses and cost-of-living raises.
Factory-level union leaders from across the U.S. unanimously endorsed the deal at a meeting Tuesday in Detroit. The union’s GM workers must vote on the agreement by Thursday.
In a summary of the deal, the union said it would get 17.5 percent of GM’s common stock, plus a warrant for another 2.5 percent, as partial payment of the $20 billion that GM must put into a trust that will start paying retiree health care costs next year. The trust will get $6.5 billion of preferred shares that pay 9 percent interest, plus a $2.5 billion note. The remaining $10 billion will come from health care trust funds that GM already has set up. The trust will get a seat on GM’s board, although it will have to vote at the direction of GM’s other independent directors.
GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. Analysts say it’s unlikely enough bondholders will approve the offer, meaning GM would still be forced to file for Chapter 11.
But the UAW trust is getting far less than 39 percent in stock GM said it would get previously. With the UAW’s share at 20 percent, that frees 19 percent to go to either the government or the bondholders, who had until 11:59 p.m. Tuesday to accept or reject the exchange offer.
GM has said it could extend the deadline for the bond exchange and will decide that today.
by the assiated press
End to recession
WASHINGTON — More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy.
That assessment came from leading forecasters in a survey by the National Association for Business Economics to be released today. It is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues.
About 74 percent of the forecasters expect the recession — which started in December 2007 and is the longest since War World II — to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of 2010.
"While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president Chris Varvares, head of Macroeconomic Advisers.
"The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines,” he said.
One of the major forces that plunged the economy into a recession was the financial crisis that struck with force last fall and was the worst since the 1930s. Economists say recoveries after financial crises tend to be slower.
Rising unemployment
Against that backdrop, unemployment will climb this year even if the economy is rebounding, the NABE forecasters predict. Companies won’t be in a rush to hire until they feel certain any recovery is firmly rooted.
For all of this year, the forecasters said the unemployment rate should average 9.1 percent, a big jump from 5.8 percent last year and up from its current quarter-century peak of 8.9 percent. If NABE forecasters are right, it would be the highest since a 9.6 percent rate in 1983, when the country was struggling to recover from a severe recession.
Some forecasters thought the unemployment rate could rise as high as 10.7 percent in the second quarter of next year. The NABE outlook from 45 economists was conducted April 27 through May 11.
Seventy-one percent of the forecasters believe a more-thrifty consumer will be around for at least the next five years.
Even as the NABE forecasters believe the country will emerge from recession later this year, they also predict the economy’s overall performance in 2009 will be rotten.
The economy should contract by 2.8 percent this year, the forecasters said in updated projections. That’s worse than the 1.9 percent drop under their old forecast. If they are right, it would mark the worst annual contraction since 1946, when economic activity fell by 11 percent.
Still, the forecasters believe the worst is already behind the country in terms of lost economic activity.
by the associated press
That assessment came from leading forecasters in a survey by the National Association for Business Economics to be released today. It is generally in line with the outlook from Federal Reserve Chairman Ben Bernanke and his colleagues.
About 74 percent of the forecasters expect the recession — which started in December 2007 and is the longest since War World II — to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year, and the remaining 7 percent believe the recession will end in the first quarter of 2010.
"While the overall tone remains soft, there are emerging signs that the economy is stabilizing,” said NABE president Chris Varvares, head of Macroeconomic Advisers.
"The economic recovery is likely to be considerably more moderate than those typically experienced following steep declines,” he said.
One of the major forces that plunged the economy into a recession was the financial crisis that struck with force last fall and was the worst since the 1930s. Economists say recoveries after financial crises tend to be slower.
Rising unemployment
Against that backdrop, unemployment will climb this year even if the economy is rebounding, the NABE forecasters predict. Companies won’t be in a rush to hire until they feel certain any recovery is firmly rooted.
For all of this year, the forecasters said the unemployment rate should average 9.1 percent, a big jump from 5.8 percent last year and up from its current quarter-century peak of 8.9 percent. If NABE forecasters are right, it would be the highest since a 9.6 percent rate in 1983, when the country was struggling to recover from a severe recession.
Some forecasters thought the unemployment rate could rise as high as 10.7 percent in the second quarter of next year. The NABE outlook from 45 economists was conducted April 27 through May 11.
Seventy-one percent of the forecasters believe a more-thrifty consumer will be around for at least the next five years.
Even as the NABE forecasters believe the country will emerge from recession later this year, they also predict the economy’s overall performance in 2009 will be rotten.
The economy should contract by 2.8 percent this year, the forecasters said in updated projections. That’s worse than the 1.9 percent drop under their old forecast. If they are right, it would mark the worst annual contraction since 1946, when economic activity fell by 11 percent.
Still, the forecasters believe the worst is already behind the country in terms of lost economic activity.
by the associated press
Shoppers help Wall Street
NEW YORK — Consumers are getting more confident about the economy, and Wall Street is tagging along with them.
Stocks surged Tuesday, posting their first big win in a week after a research group said consumer sentiment rose in May to the highest level recorded since September. Major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 196 points.
The day’s gains nudged the Standard & Poor’s 500 index back into the plus column for the year and leaves the Nasdaq composite index up 11 percent in 2009. The Dow is still down 3.5 percent.
Investors started buying enthusiastically after the Conference Board’s Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters forecast.
Wall Street has been watching the index for signs of whether consumers might start shopping more or buy big-ticket items like cars and homes.
Consumer spendingmakes up more than two-thirds of U.S. economic activity, making their confidence critical for the U.S. to pull out of recession.
"The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” said Jim King, chief investment officer at National Penn Investors Trust Co.
With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.
Traders saw green on their screens on the first day back from a long weekend, but the compressed week still could trip up the market.
The Dow rose 196.17, or 2.4 percent, to 8,473.49. The S&P 500 index rose 23.33, or 2.6 percent, to 910.33, and the Nasdaq rose 58.42, or 3.5 percent, to 1,750.43.
Analysts said the day’s gains reveal just how jumpy the market still is and warned that it could show a similar quick reaction to bad news.
The Conference Board’s report marked the second consecutive month of large gains in its measure of consumer confidence.
by the associated press
Stocks surged Tuesday, posting their first big win in a week after a research group said consumer sentiment rose in May to the highest level recorded since September. Major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 196 points.
The day’s gains nudged the Standard & Poor’s 500 index back into the plus column for the year and leaves the Nasdaq composite index up 11 percent in 2009. The Dow is still down 3.5 percent.
Investors started buying enthusiastically after the Conference Board’s Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters forecast.
Wall Street has been watching the index for signs of whether consumers might start shopping more or buy big-ticket items like cars and homes.
Consumer spendingmakes up more than two-thirds of U.S. economic activity, making their confidence critical for the U.S. to pull out of recession.
"The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” said Jim King, chief investment officer at National Penn Investors Trust Co.
With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.
Traders saw green on their screens on the first day back from a long weekend, but the compressed week still could trip up the market.
The Dow rose 196.17, or 2.4 percent, to 8,473.49. The S&P 500 index rose 23.33, or 2.6 percent, to 910.33, and the Nasdaq rose 58.42, or 3.5 percent, to 1,750.43.
Analysts said the day’s gains reveal just how jumpy the market still is and warned that it could show a similar quick reaction to bad news.
The Conference Board’s report marked the second consecutive month of large gains in its measure of consumer confidence.
by the associated press
Tuesday, May 26, 2009
Gold prices FALL
NEW YORK (AP) — Gold prices retreated Tuesday, pressured by a firmer dollar and a surge in stocks.
Gold for June delivery slipped $5.60 to settle at $953.30 an ounce on the New York Mercantile Exchange. But prices finished well off their intraday low of $936.60.
Dave Meger, a gold analyst at Alaron, partly attributed the decline in prices to some profit taking following a 3 percent jump last week. The profit taking was spurred by a firmer dollar and a rally on Wall Street, he said.
Gold prices have climbed in recent weeks as the dollar falls against other currencies. Investors use gold as a hedge against inflation and a weak greenback. On Tuesday, however, the dollar gained ground against the euro, which put pressure on gold.
At the same time, demand for gold as a safe-haven asset declined as stocks soared. Investors' appetite for risk increased following a report showing an improvement in consumer confidence. A private research group said consumer sentiment soared in May to the highest level since September.
A more upbeat mood on Main Street is a positive sign because it indicates that consumers might be willing to increase their spending. Consumer spending accounts for more than two-thirds of U.S. economic activity.
All the major stock indexes rose more than 2.3 percent in late afternoon trading, with the Dow Jones industrials adding more than 190 points.
Other metals were mixed. July silver fell 9.5 cents to $14.60 an ounce, while July copper futures rose 4.35 cents to $2.1410 a pound.
Oil prices rose on the Nymex as the consumer confidence data helped offset ongoing concerns about tepid energy demand.
Light, sweet crude for July delivery gained 78 cents to $62.45 a barrel. Gasoline futures rose 1.11 cents to $1.8218 a gallon, while heating oil futures rose less than a penny to $1.5710 a gallon.
Grain prices were mixed on the Chicago Board of Trade.
July wheat futures slipped 0.5 cent to $6.12 a bushel, while corn for July delivery fell 2.75 cents to $4.2750 a bushel.
July soybeans jumped 19.5 cents to $11.8550 a bushel.
by the associated press
Gold for June delivery slipped $5.60 to settle at $953.30 an ounce on the New York Mercantile Exchange. But prices finished well off their intraday low of $936.60.
Dave Meger, a gold analyst at Alaron, partly attributed the decline in prices to some profit taking following a 3 percent jump last week. The profit taking was spurred by a firmer dollar and a rally on Wall Street, he said.
Gold prices have climbed in recent weeks as the dollar falls against other currencies. Investors use gold as a hedge against inflation and a weak greenback. On Tuesday, however, the dollar gained ground against the euro, which put pressure on gold.
At the same time, demand for gold as a safe-haven asset declined as stocks soared. Investors' appetite for risk increased following a report showing an improvement in consumer confidence. A private research group said consumer sentiment soared in May to the highest level since September.
A more upbeat mood on Main Street is a positive sign because it indicates that consumers might be willing to increase their spending. Consumer spending accounts for more than two-thirds of U.S. economic activity.
All the major stock indexes rose more than 2.3 percent in late afternoon trading, with the Dow Jones industrials adding more than 190 points.
Other metals were mixed. July silver fell 9.5 cents to $14.60 an ounce, while July copper futures rose 4.35 cents to $2.1410 a pound.
Oil prices rose on the Nymex as the consumer confidence data helped offset ongoing concerns about tepid energy demand.
Light, sweet crude for July delivery gained 78 cents to $62.45 a barrel. Gasoline futures rose 1.11 cents to $1.8218 a gallon, while heating oil futures rose less than a penny to $1.5710 a gallon.
Grain prices were mixed on the Chicago Board of Trade.
July wheat futures slipped 0.5 cent to $6.12 a bushel, while corn for July delivery fell 2.75 cents to $4.2750 a bushel.
July soybeans jumped 19.5 cents to $11.8550 a bushel.
by the associated press
Former journalists admit Watergate tip
NEW YORK — The reporter rushed to his editor, thunderstruck by what the FBI’s acting director had just let him know: The former attorney general — maybe even the president — was complicit in the Watergate break-in two months before.
But The New York Times let the hot tip fall through the cracks, the reporter and editor say after decades of silence about the August 1972 conversation. They say it’s unclear whether the Times pursued information that might have let it beat The Washington Post to the blockbuster story of political espionage, which was described in "All the President’s Men” and helped unravel the presidency of Richard M. Nixon.
"We missed out,” the now-retired editor, Robert H. Phelps, said in an interview Monday, after the Times published a story about the miscue.
Phelps revealed it in "God and the Editor: My Search for Meaning at The New York Times,” a memoir published last month. The former reporter, Robert M. Smith, now a lawyer in San Francisco, confirmed Phelps’ account.
Smith was headed to law school and in his last day at the Times’ Washington, D.C., bureau when he went to lunch with acting FBI Director L. Patrick Gray on Aug. 16, 1972.
Smith had cultivated a professional relationship with the FBI chief through writing several stories about him that year.
As they discussed the intrigue surrounding the June 17 attempt to bug the Democratic National Committee offices at the Watergate complex, Gray volunteered that former Attorney General John Mitchell was involved.
Smith said he asked Gray, "‘Does it go up higher?’ And he said, ‘Yes.’”
Smith said, "I choked and said, ‘The president?’ And he looked me in the eye,” not denying it.
Smith, having moved on to Yale Law School, noticed that no story appeared in the newspaper and figured the information had proved off-base.
Phelps said he can’t recall what effort, if any, was made to flesh out the tip or confirm it with other officials. He went on a monthlong vacation a week after Smith’s departure.
by the associated press
But The New York Times let the hot tip fall through the cracks, the reporter and editor say after decades of silence about the August 1972 conversation. They say it’s unclear whether the Times pursued information that might have let it beat The Washington Post to the blockbuster story of political espionage, which was described in "All the President’s Men” and helped unravel the presidency of Richard M. Nixon.
"We missed out,” the now-retired editor, Robert H. Phelps, said in an interview Monday, after the Times published a story about the miscue.
Phelps revealed it in "God and the Editor: My Search for Meaning at The New York Times,” a memoir published last month. The former reporter, Robert M. Smith, now a lawyer in San Francisco, confirmed Phelps’ account.
Smith was headed to law school and in his last day at the Times’ Washington, D.C., bureau when he went to lunch with acting FBI Director L. Patrick Gray on Aug. 16, 1972.
Smith had cultivated a professional relationship with the FBI chief through writing several stories about him that year.
As they discussed the intrigue surrounding the June 17 attempt to bug the Democratic National Committee offices at the Watergate complex, Gray volunteered that former Attorney General John Mitchell was involved.
Smith said he asked Gray, "‘Does it go up higher?’ And he said, ‘Yes.’”
Smith said, "I choked and said, ‘The president?’ And he looked me in the eye,” not denying it.
Smith, having moved on to Yale Law School, noticed that no story appeared in the newspaper and figured the information had proved off-base.
Phelps said he can’t recall what effort, if any, was made to flesh out the tip or confirm it with other officials. He went on a monthlong vacation a week after Smith’s departure.
by the associated press
Boy who fled chemo
NEW ULM, Minn. — A 13-year-old cancer patient and his mother, who fled Minnesota last week to avoid court-ordered chemotherapy for him, returned voluntarily Monday, and the boy was evaluated by a doctor.
Daniel Hauser was "immediately checked over medically” when he and his mother arrived on a charter flight at 3 a.m., Brown County Sheriff Rich Hoffmann said.
He did not say where the pair have been since they missed a court hearing last Tuesday, prompting a nationwide search, or whether Daniel received medical treatment for his Hodgkin’s lymphoma while they were gone.
"It is a good day as Daniel and Colleen Hauser have been safely returned,” Hoffmann said.
Because Colleen Hauser returned voluntarily, a warrant for her arrest was lifted, and Hoffmann expected a federal fugitive arrest warrant would also be dropped. Daniel was in his parents’ custody.
Daniel Hauser was evaluated at a hospital in the Twin Cities on Monday, according to Tom Hagen, an attorney at the law office representing Daniel’s parents.
Phone messages left with the Hausers on Monday evening were not immediately returned, and two sheriff’s vehicles blocked the road to their home in Sleepy Eye, about 100 miles southwest of the Twin Cities.
by the associated press
Daniel Hauser was "immediately checked over medically” when he and his mother arrived on a charter flight at 3 a.m., Brown County Sheriff Rich Hoffmann said.
He did not say where the pair have been since they missed a court hearing last Tuesday, prompting a nationwide search, or whether Daniel received medical treatment for his Hodgkin’s lymphoma while they were gone.
"It is a good day as Daniel and Colleen Hauser have been safely returned,” Hoffmann said.
Because Colleen Hauser returned voluntarily, a warrant for her arrest was lifted, and Hoffmann expected a federal fugitive arrest warrant would also be dropped. Daniel was in his parents’ custody.
Daniel Hauser was evaluated at a hospital in the Twin Cities on Monday, according to Tom Hagen, an attorney at the law office representing Daniel’s parents.
Phone messages left with the Hausers on Monday evening were not immediately returned, and two sheriff’s vehicles blocked the road to their home in Sleepy Eye, about 100 miles southwest of the Twin Cities.
by the associated press
Secretary of State Hillary Rodham Clinton surprises Yale grads
NEW HAVEN, Conn. — Secretary of State Hillary Rodham Clinton, shown above, made a surprise return to her alma mater on Monday, picking up an honorary degree from Yale University 36 years after earning her law degree at the Ivy League school.
Graduates celebrating commencement at Yale erupted in cheers as Clinton was introduced. In keeping with Yale tradition, the names of honorary degree recipients are a closely held secret, although word began trickling out Sunday.
None of the 10 honorary degree recipients spoke during the ceremony held for the university at large.
Clinton did speak for about five minutes during the Yale Law School’s separate commencement.
She expressed hope that every graduate would "use every creative gene you have” in order to work "on behalf of the public good.”
by the associated press
Graduates celebrating commencement at Yale erupted in cheers as Clinton was introduced. In keeping with Yale tradition, the names of honorary degree recipients are a closely held secret, although word began trickling out Sunday.
None of the 10 honorary degree recipients spoke during the ceremony held for the university at large.
Clinton did speak for about five minutes during the Yale Law School’s separate commencement.
She expressed hope that every graduate would "use every creative gene you have” in order to work "on behalf of the public good.”
by the associated press
Livestock tracing plan
PASCO, Wash. — Just 36 percent of ranchers are taking part in a federal program started five years ago to trace livestock in a disease outbreak.
U.S. Department of Agriculture officials found out why last week, when 75 Western livestock producers gave them an earful during a meeting. The "listening session” was one of seven scheduled across the country in May and June to hear ranchers’ concerns, with the goal of increasing participation in the program.
Those concerns haven’t changed much in five years: The cost is too high for small farmers. The regulations amount to bureaucratic suffocation. The program neither prevents nor controls disease. And what’s in a farmer’s pasture is nobody’s business.
"This is the last of your freedom, boys. Freedom restricted is freedom lost,” said Bert Smith, a cattleman from Layton, Utah, who owns Ox Ranch in Ruby Valley, Nev.
The nationwide tracking system, started in 2004, is intended to pinpoint an animal’s location within 48 hours after a disease is discovered. Farmers were to have registered their properties voluntarily with their states by January 2008. Mandatory reporting of livestock movements was to begin one year later.
But just 36 percent of the nation’s estimated 1.4 million farm "premises,” which includes farms’ multiple locations, are registered for the program.
Preventing disease
As of March 31, the USDA has put $119.4 million toward the program, which it says will help ensure the safety of the food supply, particularly for export markets that may refuse to accept U.S. beef, pork or poultry during a disease outbreak.
During the recent swine flu epidemic, several countries banned U.S. pork products, even though there is no evidence the virus is spread by food.
The proposed system does nothing to prevent disease, and animal tracking would be better left for states to handle themselves, said Wade King, president of the Cattle Producers of Washington.
"USDA should be focused on preventing the disease instead of tracing it,” he said. "The feds shouldn’t be getting into this program.”
Carol Osterman of Akyla Farms in LaConner, Wash., said her small farm of cattle, goats, pigs, llamas, poultry and horses would be forced to close if the suggested "regulatory burden” becomes a reality.
She recommended the program be eliminated, or at best, applied only to large, confined-animal feeding operations.
‘It just won’t work’
Electronic tracking systems might not work in the cold, snow and rain that cattlemen and their herds must endure, said Will Wolf, who raises up to 300 head of cattle at his ranch south of Spokane, Wash., and markets 25,000 cattle each year from the region.
"It has to be a system that works at the speed of commerce or close to it,” he said. "There are way too many problems to do it. It just won’t work.”
The ability to trace animals from birth to slaughter became crucial after the discovery of mad cow disease in a Mabton, Wash., dairy cow in December 2003. That cow’s origins later were traced to Canada, but federal authorities were never able to trace all the animal’s herdmates, which may have eaten the same feed.
The only way cattle are known to get the disease is by eating feed containing certain tissues from infected animals.
U.S. Department of Agriculture officials found out why last week, when 75 Western livestock producers gave them an earful during a meeting. The "listening session” was one of seven scheduled across the country in May and June to hear ranchers’ concerns, with the goal of increasing participation in the program.
Those concerns haven’t changed much in five years: The cost is too high for small farmers. The regulations amount to bureaucratic suffocation. The program neither prevents nor controls disease. And what’s in a farmer’s pasture is nobody’s business.
"This is the last of your freedom, boys. Freedom restricted is freedom lost,” said Bert Smith, a cattleman from Layton, Utah, who owns Ox Ranch in Ruby Valley, Nev.
The nationwide tracking system, started in 2004, is intended to pinpoint an animal’s location within 48 hours after a disease is discovered. Farmers were to have registered their properties voluntarily with their states by January 2008. Mandatory reporting of livestock movements was to begin one year later.
But just 36 percent of the nation’s estimated 1.4 million farm "premises,” which includes farms’ multiple locations, are registered for the program.
Preventing disease
As of March 31, the USDA has put $119.4 million toward the program, which it says will help ensure the safety of the food supply, particularly for export markets that may refuse to accept U.S. beef, pork or poultry during a disease outbreak.
During the recent swine flu epidemic, several countries banned U.S. pork products, even though there is no evidence the virus is spread by food.
The proposed system does nothing to prevent disease, and animal tracking would be better left for states to handle themselves, said Wade King, president of the Cattle Producers of Washington.
"USDA should be focused on preventing the disease instead of tracing it,” he said. "The feds shouldn’t be getting into this program.”
Carol Osterman of Akyla Farms in LaConner, Wash., said her small farm of cattle, goats, pigs, llamas, poultry and horses would be forced to close if the suggested "regulatory burden” becomes a reality.
She recommended the program be eliminated, or at best, applied only to large, confined-animal feeding operations.
‘It just won’t work’
Electronic tracking systems might not work in the cold, snow and rain that cattlemen and their herds must endure, said Will Wolf, who raises up to 300 head of cattle at his ranch south of Spokane, Wash., and markets 25,000 cattle each year from the region.
"It has to be a system that works at the speed of commerce or close to it,” he said. "There are way too many problems to do it. It just won’t work.”
The ability to trace animals from birth to slaughter became crucial after the discovery of mad cow disease in a Mabton, Wash., dairy cow in December 2003. That cow’s origins later were traced to Canada, but federal authorities were never able to trace all the animal’s herdmates, which may have eaten the same feed.
The only way cattle are known to get the disease is by eating feed containing certain tissues from infected animals.
by the associated press
Milk Buyer's squeezes farmers
BARNHART, Mo. — A collapse in milk prices has wiped away the profits of dairy farmers, driving many out of business while forcing others to slaughter their herds or dump milk on the ground in protest.
But nine months after prices began tumbling on the farm, consumers aren’t seeing the full benefits of the crash at the checkout counter.
The average price for a gallon of milk at grocery stores last month was down just 19 percent from its peak of $3.83 in July.
Farmers, on the other hand, got $1.04 a gallon in April — 35 percent less than they were paid last fall. This winter, wholesale prices were down as much as 45 percent.
Price disparities are a fact of life both for farmers and anyone who shops at a supermarket, but the nature of milk — how it’s stored, priced and sold around the world — makes the gap all the more dramatic.
Today, frustrations are spilling over as the price crash creates widely divergent fortunes within the milk industry, boosting profits for the middlemen like dairy processors while pushing farmers to the edge of bankruptcy.
Darrell Kraus, a dairyman in Barnhart, spends almost as much today on hay and other supplies for his herd of 160 cows as he did a year ago, but he’s getting paid less for a gallon of milk than his father received in the 1970s.
"Somebody’s getting a cut of this, but it’s not the dairy farmer,” he said.
At the heart of the problem is the nature of milk. Unlike grain farmers who can hold out for better prices by storing crops in a silo, dairymen must sell raw milk to processors or else it spoils. And cows keep on producing whether the national economy’s expanding or in recession.
The price paid by processors to farmers is set by the U.S. Department of Agriculture based on commodity markets, which rise and fall with global demand. Some of the raw milk is processed into milk for stores as well as butter, yogurt and other products for U.S. consumption.
U.S. milk exports soared last year. U.S dairy exports jumped to $3.82 billion, or 11 percent all milk production in 2008 according to the U.S. Dairy Export Council.
But once the global recession accelerated last fall, demand, particularly exports, fell off a cliff.
U.S. farmers were suddenly faced with too much milk and too many cows. Wholesale prices crashed. Farmers found themselves spending more to maintain their herds than they were being paid for raw milk.
by the associated press
But nine months after prices began tumbling on the farm, consumers aren’t seeing the full benefits of the crash at the checkout counter.
The average price for a gallon of milk at grocery stores last month was down just 19 percent from its peak of $3.83 in July.
Farmers, on the other hand, got $1.04 a gallon in April — 35 percent less than they were paid last fall. This winter, wholesale prices were down as much as 45 percent.
Price disparities are a fact of life both for farmers and anyone who shops at a supermarket, but the nature of milk — how it’s stored, priced and sold around the world — makes the gap all the more dramatic.
Today, frustrations are spilling over as the price crash creates widely divergent fortunes within the milk industry, boosting profits for the middlemen like dairy processors while pushing farmers to the edge of bankruptcy.
Darrell Kraus, a dairyman in Barnhart, spends almost as much today on hay and other supplies for his herd of 160 cows as he did a year ago, but he’s getting paid less for a gallon of milk than his father received in the 1970s.
"Somebody’s getting a cut of this, but it’s not the dairy farmer,” he said.
At the heart of the problem is the nature of milk. Unlike grain farmers who can hold out for better prices by storing crops in a silo, dairymen must sell raw milk to processors or else it spoils. And cows keep on producing whether the national economy’s expanding or in recession.
The price paid by processors to farmers is set by the U.S. Department of Agriculture based on commodity markets, which rise and fall with global demand. Some of the raw milk is processed into milk for stores as well as butter, yogurt and other products for U.S. consumption.
U.S. milk exports soared last year. U.S dairy exports jumped to $3.82 billion, or 11 percent all milk production in 2008 according to the U.S. Dairy Export Council.
But once the global recession accelerated last fall, demand, particularly exports, fell off a cliff.
U.S. farmers were suddenly faced with too much milk and too many cows. Wholesale prices crashed. Farmers found themselves spending more to maintain their herds than they were being paid for raw milk.
by the associated press
Cigarette makers come short in appeal
WASHINGTON — A federal appeals court Friday largely agreed with a landmark ruling that found cigarette makers deceived the public for decades about the health hazards of smoking.
The U.S. Court of Appeals in Washington upheld the major elements of a 2006 ruling that found the nation’s top tobacco companies guilty of fraud and violating racketeering laws.
The ruling said manufacturers must change the way they market cigarettes. It bans labels such as "low tar,” "light” or "ultra light,” since such cigarettes have been found to be no safer than others.
It says the companies must publish "corrective statements” on the adverse health effects and addictiveness of smoking and nicotine. The changes have not taken effect while the case has been under appeal.
Throughout the 10 years the case has been litigated, tobacco companies have denied committing fraud. The government filed the civil case under a 1970 racketeering law used primarily to prosecute mobsters in cases in which there has been a group effort to commit fraud.
by the associated press
The U.S. Court of Appeals in Washington upheld the major elements of a 2006 ruling that found the nation’s top tobacco companies guilty of fraud and violating racketeering laws.
The ruling said manufacturers must change the way they market cigarettes. It bans labels such as "low tar,” "light” or "ultra light,” since such cigarettes have been found to be no safer than others.
It says the companies must publish "corrective statements” on the adverse health effects and addictiveness of smoking and nicotine. The changes have not taken effect while the case has been under appeal.
Throughout the 10 years the case has been litigated, tobacco companies have denied committing fraud. The government filed the civil case under a 1970 racketeering law used primarily to prosecute mobsters in cases in which there has been a group effort to commit fraud.
by the associated press
Sunday, May 24, 2009
Verizon and ATT Netbook
Two years ago, the word “netbook” might have conjured images of a paperback about Web sites or online novels.
Today, the term is on its way to becoming a household word as the category of small, lightweight, inexpensive computers has grown from nearly nonexistent to become the hot industry segment.
They don't have the power of full-blooded laptops, but they offer the convenience of extreme portability and the ability to connect to the Internet through Wi-Fi and in some cases cell phones' high-speed data networks.
These attributes make netbooks a growth area in an otherwise down computer market.
With small screens – typically around 8 to 10 inches – netbooks fall in the gray area between smart phones and laptop computers. With two cell phone companies beginning to sell the diminutive computers, the lines are being blurred further.
Using the same strategy as they have for selling phones, Verizon and AT&T have begun selling netbooks at a subsidized, lower price in exchange for a two-year commitment to a data plan.
Although buying a computer at a phone store is a new idea, it's expected to catch on. Speaking to wireless industry executives earlier this year, Microsoft's president of entertainment devices, Robbie Bach, said that by 2012, a third of all netbooks will be sold by wireless phone companies.
The streamlined portable computers are shaking up more than the traditional model of computer retailing. The shift to netbooks is rocking computer manufacturing, as well. Sales of netbooks are forecast to double this year, even as overall PC purchases fall 12 percent, according to the research firm Gartner. By the end of 2009, netbooks could account for close to 10 percent of the PC market, an astonishing rise in a short span.
Low-cost netbooks also generate lower profits for manufacturers. While netbook sales continue to grow, there is concern that the growth comes at the expense of more lucrative laptop sales.
“A broad shift in the consumer market toward low-cost PCs would clearly put pressure on the revenues of nearly every player in the value chain,” according to a Sanford C. Bernstein & Co. research report this year.
In the United States, AT&T started the trend of selling netbooks in April with test marketing in some of its retail outlets. The ultra-portable computers feature modems that link to the company's high-speed, 3G data network. The company said last week that based on customer acceptance, it planned to offer netbooks from Acer, Dell and Lenovo online and in its stores by this summer.
Details such as price and technical specifications remain to be announced, though in the test marketing, the AT&T netbook sold for $50 with a two-year contract.
While AT&T tested the waters, Verizon plunged in. A week ago, the company rolled out a netbook from Hewlett-Packard for $200, discounted significantly from the $520 price of a comparable HP netbook from traditional retailers.
Verizon's required data plans cost $40 or $60 a month.
Verizon's netbook includes Wi-Fi and the ability to log on to 3G data networks worldwide. Early reviews have pointed out that the total cost over two years could be high depending on how heavily an owner uses the Verizon data network.
Some industry analysts expect that at least one U.S. cell phone company will begin offering free netbooks this year.
There is no precise, common definition of a netbook. They are generally described as lightweight, averaging around 2 or 3 pounds, with built-in ability to link wirelessly to the Internet. Netbooks typically contain slower processors than laptops, which reduces the drain on batteries and lowers their cost. The less powerful processors make netbooks ill-suited for heavy lifting such as editing photos.
Netbooks are designed to run online software more than installed programs. This means much of the processing will be handled by the Internet servers, so they don't have as much need for a robust processor. They typically don't have CD or DVD drives, which helps reduce weight.
Some run Linux operating systems, others run Windows XP, and a few run Windows Vista.
Netbooks, by some definitions, typically run on chips made by Intel or AMD. San Diego-based Qualcomm is pushing a similar category of portable devices that run on top-of-the-line cell phone chips. That makes the Qualcomm-based devices more like scaled-up smart phones, while netbooks based on Intel's chips are similar to scaled-down laptops.
To distinguish from the laptop-related netbooks, Qualcomm uses the name “smartbook.” The devices will feature “always on” and “always online” networking, similar to a BlackBerry or iPhone with a bigger screen and keyboard, Qualcomm says.
Sereral manufacturers are planning to build smartbooks using Qualcomm's Snapdragon chips. The company has announced deals to sell the chip to at least 15 major device manufacturers, including LG, Acer, Samsung and Asustek.
Qualcomm won't say how many of those manufacturers will make smartbooks, but has said some Snapdragon devices appearing this year would have 10-to 12-inch screens.
The company expects carriers to offer smartbooks this year in addition to netbooks, chip division spokesman Luis Pineda said.
“We're happy that Verizon is selling a notebook with 3G connectivity,” Pineda said. “We're excited that the carriers are looking at selling smartbooks. We're waiting for that first device
by the union-tribune
Today, the term is on its way to becoming a household word as the category of small, lightweight, inexpensive computers has grown from nearly nonexistent to become the hot industry segment.
They don't have the power of full-blooded laptops, but they offer the convenience of extreme portability and the ability to connect to the Internet through Wi-Fi and in some cases cell phones' high-speed data networks.
These attributes make netbooks a growth area in an otherwise down computer market.
With small screens – typically around 8 to 10 inches – netbooks fall in the gray area between smart phones and laptop computers. With two cell phone companies beginning to sell the diminutive computers, the lines are being blurred further.
Using the same strategy as they have for selling phones, Verizon and AT&T have begun selling netbooks at a subsidized, lower price in exchange for a two-year commitment to a data plan.
Although buying a computer at a phone store is a new idea, it's expected to catch on. Speaking to wireless industry executives earlier this year, Microsoft's president of entertainment devices, Robbie Bach, said that by 2012, a third of all netbooks will be sold by wireless phone companies.
The streamlined portable computers are shaking up more than the traditional model of computer retailing. The shift to netbooks is rocking computer manufacturing, as well. Sales of netbooks are forecast to double this year, even as overall PC purchases fall 12 percent, according to the research firm Gartner. By the end of 2009, netbooks could account for close to 10 percent of the PC market, an astonishing rise in a short span.
Low-cost netbooks also generate lower profits for manufacturers. While netbook sales continue to grow, there is concern that the growth comes at the expense of more lucrative laptop sales.
“A broad shift in the consumer market toward low-cost PCs would clearly put pressure on the revenues of nearly every player in the value chain,” according to a Sanford C. Bernstein & Co. research report this year.
In the United States, AT&T started the trend of selling netbooks in April with test marketing in some of its retail outlets. The ultra-portable computers feature modems that link to the company's high-speed, 3G data network. The company said last week that based on customer acceptance, it planned to offer netbooks from Acer, Dell and Lenovo online and in its stores by this summer.
Details such as price and technical specifications remain to be announced, though in the test marketing, the AT&T netbook sold for $50 with a two-year contract.
While AT&T tested the waters, Verizon plunged in. A week ago, the company rolled out a netbook from Hewlett-Packard for $200, discounted significantly from the $520 price of a comparable HP netbook from traditional retailers.
Verizon's required data plans cost $40 or $60 a month.
Verizon's netbook includes Wi-Fi and the ability to log on to 3G data networks worldwide. Early reviews have pointed out that the total cost over two years could be high depending on how heavily an owner uses the Verizon data network.
Some industry analysts expect that at least one U.S. cell phone company will begin offering free netbooks this year.
There is no precise, common definition of a netbook. They are generally described as lightweight, averaging around 2 or 3 pounds, with built-in ability to link wirelessly to the Internet. Netbooks typically contain slower processors than laptops, which reduces the drain on batteries and lowers their cost. The less powerful processors make netbooks ill-suited for heavy lifting such as editing photos.
Netbooks are designed to run online software more than installed programs. This means much of the processing will be handled by the Internet servers, so they don't have as much need for a robust processor. They typically don't have CD or DVD drives, which helps reduce weight.
Some run Linux operating systems, others run Windows XP, and a few run Windows Vista.
Netbooks, by some definitions, typically run on chips made by Intel or AMD. San Diego-based Qualcomm is pushing a similar category of portable devices that run on top-of-the-line cell phone chips. That makes the Qualcomm-based devices more like scaled-up smart phones, while netbooks based on Intel's chips are similar to scaled-down laptops.
To distinguish from the laptop-related netbooks, Qualcomm uses the name “smartbook.” The devices will feature “always on” and “always online” networking, similar to a BlackBerry or iPhone with a bigger screen and keyboard, Qualcomm says.
Sereral manufacturers are planning to build smartbooks using Qualcomm's Snapdragon chips. The company has announced deals to sell the chip to at least 15 major device manufacturers, including LG, Acer, Samsung and Asustek.
Qualcomm won't say how many of those manufacturers will make smartbooks, but has said some Snapdragon devices appearing this year would have 10-to 12-inch screens.
The company expects carriers to offer smartbooks this year in addition to netbooks, chip division spokesman Luis Pineda said.
“We're happy that Verizon is selling a notebook with 3G connectivity,” Pineda said. “We're excited that the carriers are looking at selling smartbooks. We're waiting for that first device
by the union-tribune
‘Slumdog’ child falls ill
MUMBAI, India — The search for new homes for two impoverished child stars from the hit movie "Slumdog Millionaire” has intensified, as one child fell sick days after city authorities demolished the shanty where she lived, family members said.
Nine-year-old Rubina Ali came down with a fever Friday and spent a few hours in a local hospital, they said.
"I’m fine now, but I feel tired,” Rubina said Saturday as she lay in bed, resting at her uncle’s house.
Rubina’s block was razed Wednesday to make way for a planned pedestrian overpass at a commuter train station in Mumbai. Last week, co-star Azharuddin Mohammed Ismail’s home was demolished, part of a pre-monsoon slum clearance drive.
After the runaway success of their film, "Slumdog” director Danny Boyle and producer Christian Colson set up the Jai Ho trust to ensure the children receive proper homes, a decent education and a nest egg when they finish high school. They also donated $747,500 to a charity to help slum children.
by the associated press
Nine-year-old Rubina Ali came down with a fever Friday and spent a few hours in a local hospital, they said.
"I’m fine now, but I feel tired,” Rubina said Saturday as she lay in bed, resting at her uncle’s house.
Rubina’s block was razed Wednesday to make way for a planned pedestrian overpass at a commuter train station in Mumbai. Last week, co-star Azharuddin Mohammed Ismail’s home was demolished, part of a pre-monsoon slum clearance drive.
After the runaway success of their film, "Slumdog” director Danny Boyle and producer Christian Colson set up the Jai Ho trust to ensure the children receive proper homes, a decent education and a nest egg when they finish high school. They also donated $747,500 to a charity to help slum children.
by the associated press
Credit card law aids consumers
CHICAGO — The new credit card law is receiving widespread kudos as a victory for cardholders over the lenders that impose "gotcha” fees and penalties with scant justification and little notice.
Indeed, an industry that has been virtually unregulated will now be reined in many ways, to customers’ benefit. Interest rates no longer will be allowed to be raised retroactively if you pay your bills. Terms will be clearer, over-the-limit fees curtailed and rates will be fairer.
Still, there are pitfalls to the legislation passed by both houses of Congress and signed into law by President Obama on Friday, and some are likely to hurt consumers.
"People can start to feel a lot more comfortable about the rules of the game,” said Adam Levin, chairman and founder of Credit.com, a San Francisco-based company that provides education and information about credit products. "But there will be some fallout, and it might be a short-term negative.”
Here is a closer look at some unintended consequences of the new law that are likely to occur:
Higher rates
Issuers are considered certain to bump up annual percentage rates soon to compensate for the fact they can’t increase them on new customers for one year after the regulations take effect in late February. Not only are introductory rates likely to rise, APRs on existing accounts may well go up, too — especially if you do anything to show that you are a greater credit risk.
If you are late on a payment, exceed your credit limit or even use too much of your limit, you could see an immediate increase in your rate, said Bill Hardekopf, CEO of LowCards.com, which tracks credit card offers. He recommends consumers pay their bills early, send in more than the minimum and not use more than a third of their credit limit.
Even that may not save them. The law does not put a cap on the interest rate that can be charged. Issuers still will have the ability to raise rates at any time for any reason, although that won’t apply to existing balances unless a customer is 60 days overdue with a payment.
Annual fees
The free ride is likely to end for many who use their credit cards as a convenience and pay off their balances in full every month. Squeezed by the economy and further by this law, banks will now target people who have avoided paying an interest charge or an annual fee — until now.
Unlike in many other countries where free cards are rare, only about 20 percent of U.S. credit cards currently carry annual fees, according to LowCards.com. But that figure is expected to climb as more follow the lead of American Express with its green, gold and platinum cards. Expect to pay at least $50 to $100 a year.
Lost grace periods
Trying to make up for lost revenue, banks are considering charging interest from the date of a purchase instead of allowing a grace period, now typically 20 to 25 days. The best that cardholders may be able to hope for is an option from their issuer, according to credit card expert Ben Woolsey: Either pay an annual fee or lose your grace period.
"They’ve got to change the pricing structure of these cards,” said Woolsey, director of marketing and consumer research for CreditCards.com, a privately held company that offers consumers comparisons on credit cards. "They can’t let such a huge portion of their portfolio not contribute any profit any more.”
Other fees and penalties
The new regulations put no restrictions on fees for balance transfer, cash advance or late payment. All are likely to rise, as foreshadowed by Bank of America’s and Discover’s plans to boost their balance transfer fees to 4 from 3 percent June 1.
Being 60 days late could be especially costly for consumers. Currently card companies impose penalty rates averaging about 28 percent, or double the average standard rate.
But that could rise to 30 or 35 percent as the companies scramble to make money where they can, said Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group.
Tighter credit
Consumers with lower credit scores will find it harder to persuade strapped card issuers to give them credit because of the new regulations. Even those with respectable credit histories may have difficulty getting approved for new cards or find their credit limits lower than in the past. That means more people may resort to payday lenders and pawn shops, said Greg McBride, senior analyst with Bankrate.com.
Cutback in rewards programs
Card companies have long used reward programs to retain customers’ loyalty, giving them cash-back rewards, frequent-flier miles and other perks.
Now they won’t be able to subsidize those programs when they are not making as much from finance charges and penalty fees under the new regulations.
Industry officials’ threats during the lobbying process to cut them back sharply could prove to have been a bluff, but analysts and consumer experts still expect them to be trimmed to some extent.
Smaller card issuers may vanish
Six mega-companies issue 80 percent of all credit cards: American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc., JPMorgan Chase & Co. and Discover Financial Services. They are unlikely to pull back from the business because of the new law. But some of the smaller banks and issuers that make up the other 20 percent are likely to stop issuing cards.
That’s because of both the administrative costs of implementing the required changes and the inability to raise rates in some cases, said Mike Brauneis, managing director for Protiviti Inc., a business consulting and auditing firm.
The bottom line of the whole reform effort is that despite the big strides forward taken by the new law, it doesn’t abrogate consumers’ responsibility to handle credit card debt cautiously and read the fine print of their monthly statements.
"Certainly it’s not a silver bullet,” Brauneis said, "to keep consumers from getting in over their heads with credit card debt.”
by the associated press
Indeed, an industry that has been virtually unregulated will now be reined in many ways, to customers’ benefit. Interest rates no longer will be allowed to be raised retroactively if you pay your bills. Terms will be clearer, over-the-limit fees curtailed and rates will be fairer.
Still, there are pitfalls to the legislation passed by both houses of Congress and signed into law by President Obama on Friday, and some are likely to hurt consumers.
"People can start to feel a lot more comfortable about the rules of the game,” said Adam Levin, chairman and founder of Credit.com, a San Francisco-based company that provides education and information about credit products. "But there will be some fallout, and it might be a short-term negative.”
Here is a closer look at some unintended consequences of the new law that are likely to occur:
Higher rates
Issuers are considered certain to bump up annual percentage rates soon to compensate for the fact they can’t increase them on new customers for one year after the regulations take effect in late February. Not only are introductory rates likely to rise, APRs on existing accounts may well go up, too — especially if you do anything to show that you are a greater credit risk.
If you are late on a payment, exceed your credit limit or even use too much of your limit, you could see an immediate increase in your rate, said Bill Hardekopf, CEO of LowCards.com, which tracks credit card offers. He recommends consumers pay their bills early, send in more than the minimum and not use more than a third of their credit limit.
Even that may not save them. The law does not put a cap on the interest rate that can be charged. Issuers still will have the ability to raise rates at any time for any reason, although that won’t apply to existing balances unless a customer is 60 days overdue with a payment.
Annual fees
The free ride is likely to end for many who use their credit cards as a convenience and pay off their balances in full every month. Squeezed by the economy and further by this law, banks will now target people who have avoided paying an interest charge or an annual fee — until now.
Unlike in many other countries where free cards are rare, only about 20 percent of U.S. credit cards currently carry annual fees, according to LowCards.com. But that figure is expected to climb as more follow the lead of American Express with its green, gold and platinum cards. Expect to pay at least $50 to $100 a year.
Lost grace periods
Trying to make up for lost revenue, banks are considering charging interest from the date of a purchase instead of allowing a grace period, now typically 20 to 25 days. The best that cardholders may be able to hope for is an option from their issuer, according to credit card expert Ben Woolsey: Either pay an annual fee or lose your grace period.
"They’ve got to change the pricing structure of these cards,” said Woolsey, director of marketing and consumer research for CreditCards.com, a privately held company that offers consumers comparisons on credit cards. "They can’t let such a huge portion of their portfolio not contribute any profit any more.”
Other fees and penalties
The new regulations put no restrictions on fees for balance transfer, cash advance or late payment. All are likely to rise, as foreshadowed by Bank of America’s and Discover’s plans to boost their balance transfer fees to 4 from 3 percent June 1.
Being 60 days late could be especially costly for consumers. Currently card companies impose penalty rates averaging about 28 percent, or double the average standard rate.
But that could rise to 30 or 35 percent as the companies scramble to make money where they can, said Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group.
Tighter credit
Consumers with lower credit scores will find it harder to persuade strapped card issuers to give them credit because of the new regulations. Even those with respectable credit histories may have difficulty getting approved for new cards or find their credit limits lower than in the past. That means more people may resort to payday lenders and pawn shops, said Greg McBride, senior analyst with Bankrate.com.
Cutback in rewards programs
Card companies have long used reward programs to retain customers’ loyalty, giving them cash-back rewards, frequent-flier miles and other perks.
Now they won’t be able to subsidize those programs when they are not making as much from finance charges and penalty fees under the new regulations.
Industry officials’ threats during the lobbying process to cut them back sharply could prove to have been a bluff, but analysts and consumer experts still expect them to be trimmed to some extent.
Smaller card issuers may vanish
Six mega-companies issue 80 percent of all credit cards: American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc., JPMorgan Chase & Co. and Discover Financial Services. They are unlikely to pull back from the business because of the new law. But some of the smaller banks and issuers that make up the other 20 percent are likely to stop issuing cards.
That’s because of both the administrative costs of implementing the required changes and the inability to raise rates in some cases, said Mike Brauneis, managing director for Protiviti Inc., a business consulting and auditing firm.
The bottom line of the whole reform effort is that despite the big strides forward taken by the new law, it doesn’t abrogate consumers’ responsibility to handle credit card debt cautiously and read the fine print of their monthly statements.
"Certainly it’s not a silver bullet,” Brauneis said, "to keep consumers from getting in over their heads with credit card debt.”
by the associated press
Saturday, May 23, 2009
Bankruptcy might be good thing for GM
DETROIT — With General Motors’ long-anticipated day of reckoning a little more than a week away, nearly all signs are pointing to the wounded auto giant limping its way into bankruptcy court, but experts say that might not be as bad as once expected.
Car and truck buyers, they say, may not be as fearful of Chapter 11 as once thought, as evidenced by Chrysler’s stronger-than-expected sales in the two weeks after it took the dreaded step into court.
"I think in this case and in the eyes of the consumer, uncertainty is the enemy,” said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
GM has received $15.4 billion in federal loans and faces a June 1 government-imposed deadline to finish restructuring or be forced into bankruptcy court. Restructuring demands from President Barack Obama’s administration include cutting labor costs, reducing debt, shedding dealerships and brands, and closing excess factories.
The company this week reached cost-cutting deals with Canadian and U.S. unions that still have to be ratified by members, but GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. They say that’s too small a stake for the amount they are owed.
But even if GM files for Chapter 11, Chrysler’s performance since its April 30 bankruptcy filing has made some analysts optimistic that GM sales won’t "fall off a cliff” as the company’s CEO had predicted in February.
Chrysler’s sales to individual buyers are down 40 percent so far this month when compared with May’s sales of last year, a little worse than the overall market, which is down around 35 percent, the company has said.
Schuster said that’s better than he expected, and he predicted that GM might fare even better if it goes into Chapter 11.
by the associated press
Car and truck buyers, they say, may not be as fearful of Chapter 11 as once thought, as evidenced by Chrysler’s stronger-than-expected sales in the two weeks after it took the dreaded step into court.
"I think in this case and in the eyes of the consumer, uncertainty is the enemy,” said Jeff Schuster, executive director of automotive forecasting for J.D. Power and Associates.
GM has received $15.4 billion in federal loans and faces a June 1 government-imposed deadline to finish restructuring or be forced into bankruptcy court. Restructuring demands from President Barack Obama’s administration include cutting labor costs, reducing debt, shedding dealerships and brands, and closing excess factories.
The company this week reached cost-cutting deals with Canadian and U.S. unions that still have to be ratified by members, but GM’s unsecured bondholders have resisted an offer to take a 10 percent stake in the company to wipe out $27 billion in debt. They say that’s too small a stake for the amount they are owed.
But even if GM files for Chapter 11, Chrysler’s performance since its April 30 bankruptcy filing has made some analysts optimistic that GM sales won’t "fall off a cliff” as the company’s CEO had predicted in February.
Chrysler’s sales to individual buyers are down 40 percent so far this month when compared with May’s sales of last year, a little worse than the overall market, which is down around 35 percent, the company has said.
Schuster said that’s better than he expected, and he predicted that GM might fare even better if it goes into Chapter 11.
by the associated press
Hot dog sales are sizzling
MILWAUKEE — Hot dog sales are set to sizzle as people look for ways to eat on the cheap and the summer grilling season starts. But the scramble to be top dog in the $2.1 billion market has sent the makers of Ball Park franks and Oscar Mayer wieners to court.
The lawsuit filed this week by Sara Lee Corp., the maker of Ball Park Franks, against Oscar Mayer-making rival Kraft Foods Inc. is the latest turn in the summer wiener wars.
The stakes are big as the peak season for franks begins this weekend. Hot dog sales are expected to rise as consumers keep turning to the cheaper meat, said Janet Riley, president of the National Hot Dog & Sausage Council. But the competition is getting particularly tough as shoppers, looking to save even more money, are trading down to store brands.
"Sales do go up in the summer, always. And in a tight economy, I do expect that we’re going to see even better performance,” said Riley, known as the "Queen of Wien.” She said Americans gravitate to hot dogs in tough times. And in summer particularly, with 38 percent of hot dog sales each year occurring between Memorial Day and Labor Day.
‘Staycations’
Todd Hale, senior vice president for consumer and shopper insights at Nielsen, predicts a good summer for hot dogs, especially as people stick around home on "staycations.”
Sales had been fairly stagnant in the past few years. But revenue in the category rose 5.3 percent to $2.1 billion in the 52 weeks ended April 18, according to Nielsen. Part of that was due to higher prices.
Sara Lee and Kraft continually are battling to be top dog, and Riley said store brands are now gaining market share. Private label dogs used to be in the top 10 as far as hot dog sales but now she figures they’re in the top five.
That means less wiggle room for Sara Lee and Kraft, which are embroiled in a lawsuit.
Sara Lee alleges that Oscar Mayer’s claims its Jumbo Beef Franks are "100 percent pure beef” are false and hurting sales and reputation of Ball Park franks, according to the suit filed in the U.S. District Court for the Northern District of Illinois.
Downers Grove, Ill.-based Sara Lee said Oscar Mayer makes the claims "despite its being well aware of the chemical and other nonbeef contents of this product.”
Sara Lee also questions ads claiming that Oscar Mayer wieners outperform Ball Park and Hebrew National hot dogs, made by ConAgra Foods Inc., in taste tests.
The company is asking for corrective advertisements and damages.
"Clearly, Ball Park does wish it was an Oscar Mayer wiener, since we are America’s favorite hot dog brand,” said Syd Lindner, spokeswoman for Oscar Mayer. "We stand by our reputation for accurate advertising to our consumers.”
by the associated press
The lawsuit filed this week by Sara Lee Corp., the maker of Ball Park Franks, against Oscar Mayer-making rival Kraft Foods Inc. is the latest turn in the summer wiener wars.
The stakes are big as the peak season for franks begins this weekend. Hot dog sales are expected to rise as consumers keep turning to the cheaper meat, said Janet Riley, president of the National Hot Dog & Sausage Council. But the competition is getting particularly tough as shoppers, looking to save even more money, are trading down to store brands.
"Sales do go up in the summer, always. And in a tight economy, I do expect that we’re going to see even better performance,” said Riley, known as the "Queen of Wien.” She said Americans gravitate to hot dogs in tough times. And in summer particularly, with 38 percent of hot dog sales each year occurring between Memorial Day and Labor Day.
‘Staycations’
Todd Hale, senior vice president for consumer and shopper insights at Nielsen, predicts a good summer for hot dogs, especially as people stick around home on "staycations.”
Sales had been fairly stagnant in the past few years. But revenue in the category rose 5.3 percent to $2.1 billion in the 52 weeks ended April 18, according to Nielsen. Part of that was due to higher prices.
Sara Lee and Kraft continually are battling to be top dog, and Riley said store brands are now gaining market share. Private label dogs used to be in the top 10 as far as hot dog sales but now she figures they’re in the top five.
That means less wiggle room for Sara Lee and Kraft, which are embroiled in a lawsuit.
Sara Lee alleges that Oscar Mayer’s claims its Jumbo Beef Franks are "100 percent pure beef” are false and hurting sales and reputation of Ball Park franks, according to the suit filed in the U.S. District Court for the Northern District of Illinois.
Downers Grove, Ill.-based Sara Lee said Oscar Mayer makes the claims "despite its being well aware of the chemical and other nonbeef contents of this product.”
Sara Lee also questions ads claiming that Oscar Mayer wieners outperform Ball Park and Hebrew National hot dogs, made by ConAgra Foods Inc., in taste tests.
The company is asking for corrective advertisements and damages.
"Clearly, Ball Park does wish it was an Oscar Mayer wiener, since we are America’s favorite hot dog brand,” said Syd Lindner, spokeswoman for Oscar Mayer. "We stand by our reputation for accurate advertising to our consumers.”
by the associated press
President Obama signs credit card fee law
WASHINGTON — President Barack Obama warned overeager shoppers and greedy credit card companies alike on Friday to act responsibly as he signed into law a bill designed to protect debt-ridden consumers from surprise charges.
The White House staged a signing ceremony in the Rose Garden, an indication of the legislation’s importance to Obama. Though the bill was opposed by many financial companies, it cleared Congress with broad support.
Obama made clear that he didn’t champion the changes with the intention of helping those who buy more than they can afford through "reckless spending or wishful thinking.”
"Some get in over their heads by not using their heads,” the president said. "I want to be clear: We do not excuse or condone folks who’ve acted irresponsibly.”
And yet, he said, for many of the millions of Americans, trying to get out of debt has been made difficult and bewildering by credit card companies.
Gun amendment
Nearly 80 percent of Americans have credit cards and half of those carry a balance, according to the White House. The Federal Reserve estimates the nation is some $2.5 trillion in debt, a figure that does not include home mortgages.
Obama said many people have gotten "trapped” because of the economy. But, he said, "part of it is the practices of the credit card companies.”
He criticized such policies that allowed for confusing fine print; the sudden appearance of unexplained fees on bills; unannounced shifts in payment deadlines, interest charges or rate increases even when payments aren’t late; and payments directed to balances with the lowest interest rates rather than the highest.
One part of the bill Obama did not celebrate at the signing, a gun amendment. The measure by Sen. Tom Coburn, R-Muskogee, allows people to bring loaded guns into national parks and wildlife refuges.
The addition of the amendment to the bill — and Obama’s acceptance of it — was viewed as a bitter disappointment for gun-control advocates.
They watched gun-rights supporters gain a victory from a Democratic-controlled Congress and a Democratic president that they couldn’t achieve under a Republican Congress and president. Many blamed the National Rifle Association, which pushed hard for the gun law.
Democrats lawmakers and aides said they didn’t have enough time to send the bill to the House-Senate conference committee and still get the bill to Obama by the Memorial Day weekend as he requested.
by the associated press
The White House staged a signing ceremony in the Rose Garden, an indication of the legislation’s importance to Obama. Though the bill was opposed by many financial companies, it cleared Congress with broad support.
Obama made clear that he didn’t champion the changes with the intention of helping those who buy more than they can afford through "reckless spending or wishful thinking.”
"Some get in over their heads by not using their heads,” the president said. "I want to be clear: We do not excuse or condone folks who’ve acted irresponsibly.”
And yet, he said, for many of the millions of Americans, trying to get out of debt has been made difficult and bewildering by credit card companies.
Gun amendment
Nearly 80 percent of Americans have credit cards and half of those carry a balance, according to the White House. The Federal Reserve estimates the nation is some $2.5 trillion in debt, a figure that does not include home mortgages.
Obama said many people have gotten "trapped” because of the economy. But, he said, "part of it is the practices of the credit card companies.”
He criticized such policies that allowed for confusing fine print; the sudden appearance of unexplained fees on bills; unannounced shifts in payment deadlines, interest charges or rate increases even when payments aren’t late; and payments directed to balances with the lowest interest rates rather than the highest.
One part of the bill Obama did not celebrate at the signing, a gun amendment. The measure by Sen. Tom Coburn, R-Muskogee, allows people to bring loaded guns into national parks and wildlife refuges.
The addition of the amendment to the bill — and Obama’s acceptance of it — was viewed as a bitter disappointment for gun-control advocates.
They watched gun-rights supporters gain a victory from a Democratic-controlled Congress and a Democratic president that they couldn’t achieve under a Republican Congress and president. Many blamed the National Rifle Association, which pushed hard for the gun law.
Democrats lawmakers and aides said they didn’t have enough time to send the bill to the House-Senate conference committee and still get the bill to Obama by the Memorial Day weekend as he requested.
by the associated press
Bernanke gives students advice
WASHINGTON — Federal Reserve Chairman Ben Bernanke on Friday said that battling the worst financial crisis to hit the United States since the 1930s has "dominated my waking hours” for the last 21 months.
In remarks to graduates of Boston College School of Law in Newton, Mass., the Fed chief offered some rare personal and candid thoughts about dealing with challenges at work and at home.
Bernanke’s advice to graduates: be prepared; stay optimistic, be flexible — even adventurous.
A student of the Great Depression who spent much of his professional career as an economics professor, Bernanke said that it was a series of unpredictable factors that shaped his future.
Bernanke’s history
When he was attending Harvard University, he chose to major in economics as a compromise between math and English.
In graduate school at the Massachusetts Institute of Technology, he became interested in monetary and financial history when one of his professors gave him several books on the subject. Bernanke then became determined to learn more about the causes of financial crises and their impact on the economy.
"Little did I realize then how relevant that subject would become one day,” Bernanke said.
And on a more personal level: it was on a blind date that he met his wife, Anna.
Bernanke, who took over the Fed in February 2006, also spoke of the challenges of trying to predict the economy’s behavior.
"In some ways, predicting the economy is even more difficult than forecasting the weather because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make,” he said.
He urged the graduates to take lessons from both life’s opportunities and obstacles, and not to fear the unknown.
by the associated press
In remarks to graduates of Boston College School of Law in Newton, Mass., the Fed chief offered some rare personal and candid thoughts about dealing with challenges at work and at home.
Bernanke’s advice to graduates: be prepared; stay optimistic, be flexible — even adventurous.
A student of the Great Depression who spent much of his professional career as an economics professor, Bernanke said that it was a series of unpredictable factors that shaped his future.
Bernanke’s history
When he was attending Harvard University, he chose to major in economics as a compromise between math and English.
In graduate school at the Massachusetts Institute of Technology, he became interested in monetary and financial history when one of his professors gave him several books on the subject. Bernanke then became determined to learn more about the causes of financial crises and their impact on the economy.
"Little did I realize then how relevant that subject would become one day,” Bernanke said.
And on a more personal level: it was on a blind date that he met his wife, Anna.
Bernanke, who took over the Fed in February 2006, also spoke of the challenges of trying to predict the economy’s behavior.
"In some ways, predicting the economy is even more difficult than forecasting the weather because an economy is not made up of molecules whose behavior is subject to the laws of physics, but rather of human beings who are themselves thinking about the future and whose behavior may be influenced by the forecasts that they or others make,” he said.
He urged the graduates to take lessons from both life’s opportunities and obstacles, and not to fear the unknown.
by the associated press
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