Is Ben Bernanke in a state of denial? Despite the almost daily deluge of bleak
US economic news, the Fed Chairman insisted yesterday that he was still “not
ready to say” that the world’s biggest economy faces recession.<br/>
<br/>
He should get ready to say it. Mr Bernanke’s reluctance to use the “R” word
may be understandable, given his need to offer reassurance to markets and
consumers, yet almost every serious commentator now accepts that recession
is already a reality for America, the only question being how deep and
prolonged the condition will prove.<br/>
<br/>
On this issue, the Fed Chairman’s startlingly upbeat prognosis also looks
curiously rose-tinted. We can only hope he is vindicated, but Mr Bernanke’s
assessment suggests that, whether or not the “R” word applies, the letter
that he does think pertains is “V” - the apparent shape he thinks that the
US economy is now on track to mimic.<br/>
<br/>
In other words, the Fed’s chief indicated that after its downward slide in
the first half of this year, it expects a robust rebound through the autumn
and winter, followed by growth at or a little above the long-term average
pace in 2009.<br/>
<br/>
While this is not impossible, many will, justifiably, see it as implausible.
The reasons are numerous. History suggests that housing slumps on the scale
being endured by America have a protracted impact. And there is little sign
of the credit crisis dissipating. On the contrary, US unemployment looks set
to climb this year, adding to the toll on consumer sentiment and demand. And
the boost from tax rebates about to kick in is far smaller than the stimulus
put in place to counter the 2001 recession.<br/>
<br/>
Mr Bernanke’s judgment that the worst will soon be over for America looks
even more dubious, coming a day after it emerged that the International
Monetary Fund (IMF) is about to <a href="http://business.timesonline.co.uk/tol/business/economics/article3663457.ece">cut
drastically its forecasts for US growth</a>. If leaked drafts are confirmed,
the IMF will suggest the US faces a recession almost as severe as that of
the early 1990s. The Fed Chairman may be reluctant to utter the “R” word,
but it is much too soon for his declaration of “V” for victory to be at all
convincing. Source: Latest Business News from Times Online | 3 Apr 2008 | 6:56 pm
NEW YORK (Reuters) - Stock index futures dropped on Thursday after a report showed jobless claims rose more than expected last week, diminishing confidence in the job market the day before a widely anticipated government employment report.
Marks & Spencer is poised to go public with a shareholder letter
explaining the rationale behind the controversial elevation of Sir Stuart
Rose to the dual role of chairman and chief executive. Source: Latest Business News from Times Online | 3 Apr 2008 | 12:32 pm
WASHINGTON (Reuters) - The number of U.S. workers applying for unemployment benefit soared by 38,000 last week, posting the highest reading since September 2005 and reinforcing fears that the U.S. economy has stalled, government data on Thursday showed.
Senate Democrats and Republicans, under pressure in an election year to do more about the housing crisis, worked around the clock Wednesday to draft a bipartisan housing stimulus bill that's being fast-tracked for a debate and vote.
Vical, Incorporated (NASDAQ: VICL) has been awarded a $2 million Phase II small business technology transfer grant from the US National Institute of Allergy and Infectious Diseases department from the National Institues of Health. The grant is to fund an ongoing development of Vical's plasmid DNA vaccine against Herpes simplex virus type 2. This is none other than the sexually transmitted virus that causes genital herpes. Research is being conducted at the University of Wasington and the University of Texas. The goal of the study is to be used in people who already have HSV-2 with a primary goal of...
NEW YORK (MarketWatch) -- ATA Airlines Inc. discontinued operations on Thursday after filing for bankruptcy, resulting in wholesale layoffs and leaving passengers on their own to seek alternative travel arrangements.
There are other analyst calls affecting shares this morning, but these are ten of the top calls that we are focusing on this Thursday in pre-market trading: AFLAC (NYSE: AFL) cut to Neutral from Buy at Banc of America Sec Cisco Systems (NASDAQ: CSCO) cut to Neutral from Buy at UBS. Devon Energy (NYSE: DVN) raised to Overweight at JP Morgan. Jamba (NASDAQ: JMBA) started as Hold at Jefferies. KBW inc. (NYSE: KBW) started as Sell at Stern Agee. Marathon Oil (NYSE: MRO) raised to Outperform at Oppenheimer. National City (NYSE: NCC) raised to Outperform at Bear Stearns; raised to...
Defence company BAE is to cut 600 jobs at Brough, near Hull and Woodford, near Manchester. Source: BBC News | Business | World Edition | 3 Apr 2008 | 12:05 pm
London shares fell on Thursday as investors continued to worry about the prospects for the housing-market sensitive economy, although gains from miners and oil companies helped to limit losses.
BEIJING (Reuters) - China is too far down the road toward a market economy to turn back from reforms now, even if U.S. financial market turmoil is causing it some qualms, U.S. Treasury Secretary Henry Paulson said on Thursday.
Reuters - The collapse and forced sale of Wall
Street giant Bear Stearns exposed the dangerous
interconectedness of financial markets and the faulty oversight
now in place, U.S. regulators said in prepared congressional
testimony on Thursday.
Reuters - The collapse and forced sale of Wall
Street giant Bear Stearns exposed the dangerous
interconectedness of financial markets and the faulty oversight
now in place, U.S. regulators said in prepared congressional
testimony on Thursday.
WASHINGTON (Reuters) - The collapse and forced sale of Wall Street giant Bear Stearns exposed the dangerous interconectedness of financial markets and the faulty oversight now in place, U.S. regulators said in prepared congressional testimony on Thursday.
Mortgage borrowers today faced long delays and the risk of being pushed onto
higher rates because lenders are facing huge back-logs of loan applications. Source: Latest Business News from Times Online | 3 Apr 2008 | 11:51 am
NEW YORK (Reuters) - The Federal Reserve has stationed itself inside brokerages including Goldman Sachs Group Inc and Bear Stearns Cos to monitor their financial state, the Wall Street Journal reported on its Web site on Thursday.
ATA Airlines has ceased all flights as it files for bankruptcy, apologizing to its customers for the airline's "sudden shutdown," according to a company statement released Thursday.
Ailing Alitalia holds an emergency board meeting as takeover talks with Air France-KLM collapse. Source: BBC News | Business | World Edition | 3 Apr 2008 | 11:42 am
PARIS (Reuters) - Jerome Kerviel, at the centre of a rogue trading scandal at French bank Societe Generale, has not launched any legal action against his past employer for now, a lawyer representing the former trader said.
U.S. stock futures pointed to a limp start on Thursday on day two of Federal Reserve Chairman Ben Bernanke’s testimony to Congress, with mixed news in the technology sector after above-forecast earnings from BlackBerry maker Research In Motion and a broker downgrade of networking giant Cisco Systems.
U.S. stocks were poised for a slightly lower open Thursday, but trading could be volatile as investors wait for more comments from Federal Reserve Chairman Ben Bernanke, news of a possible Senate deal to provide help to homeowners facing problems with their mortgages and Friday's jobs report.
Banks and auto makers were among those pressuring European stocks on Thursday against a backdrop of continued worries about the U.S. economy, although gains from miners and oil giants cushioned downside.
AT&T (T) has indicated that it will ship phones with the Google (GOOG) Android operating system. That may happen later this year. The news is bad for Yahoo! (YHOO) which has the search engine partnership with AT&T Wireless. And. the people at Microsoft (MSFT) which makes a portable device OS and Symbian, which dominates the mobile OS market should not view this as their best day. The Android system is open source. AT&T likes that. It can build its own software applications for it cellular products and not pay Google a dime for the operating system platform. The best things...
Mothercare, the maternity and babywear retailer and owner of Early Learning Centr , said that like-for-like sales rose by 3.9pc over the 11 weeks to March 29, bucking the trend of declining sales on the high street. Source: Telegraph Business | 3 Apr 2008 | 11:08 am
Mothercare, the maternity and babywear retailer and owner of Early Learning Centr , said that like-for-like sales rose by 3.9pc over the 11 weeks to March 29, bucking the trend of declining sales on the... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 11:08 am
Markets in Europe were slightly lower at 6.50 AM New York time. The FTSE was off .4% to 5,895. Barclays (BCS) was off 2.9% to 489.5. British Air was down 3% to 240. The DAXX fell .5% to 6,747. Commerzbank was down 4.5% to 21.57. Infineon was off 2.6% to 4.94. The CAC 40 fell .3% to 4,894. AXA (AXA) was down 2.6% to 24.77. Credit Agricole was down 3.7% to 20.88 Data from Reuters Douglas A. McIntyre
Oil prices weakened on Thursday after a strong surge in the previous session while gold briefly regained the $900 level and base metals weakened across the board. Nymex May West Texas Intermediate dipped... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:57 am
European equity markets were weaker on Thursday as banks followed two sessions of strong gains with profit taking, drawing the troubled sector lower.By midday, the FTSE Eurofirst 300 was down 0.3 per cent... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:54 am
The Co-operative Bank, which prides itself on its ethical lending policies, has lost 31.8m on its holdings of structured investment vehicles or SIVs. These vehicles, which bought high-yielding asset-backed... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:54 am
AFP - Europe's main stock markets mostly fell on Thursday after recent bumper gains, with Paris investors digesting a gloomy forecast related to the subprime home loans crisis, analysts said.
Go to an AT&T (T) store. You can still get a Blackberry from Research In Motion (RIMM) for under $300, especially if you press the guy behind the desk. Blackberry had a quarter most companies can only hope for in a recession. Revenue doubled in Q4 to $1.88 billion, much better than Wall St. expected. The company shipped 4.4 million smartphones during the quarter and 24 million for the year. It guidance was awesome. The stuff that dreams are made of. The success of RIMM may tell investors about one pocket of the economy which is still doing OK. Anecdotal...
HONG KONG (MarketWatch) -- Asian stocks mostly advanced Thursday, with resource issues such as Inpex Holdings Inc. and Sumitomo Metal Mining Co. climbing in Tokyo on a rebound in prices for crude oil and metals.
Reuters - Euro zone economies are slowing, and at
very different speeds, but inflation remains consistently high,
according to data that makes the European Central Bank's job of
setting interest rates even tougher. Source: Yahoo! News: Business | 3 Apr 2008 | 10:42 am
LONDON (Reuters) - Euro zone economies are slowing, and at very different speeds, but inflation remains consistently high, according to data that makes the European Central Bank's job of... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 10:42 am
LONDON (Reuters) - Euro zone economies are slowing, and at very different speeds, but inflation remains consistently high, according to data that makes the European Central Bank's job of setting interest rates even tougher.
The European single currency slipped against the dollar on Thursday as official data revealed slowing sales in the eurozone, analysts said. The euro fell to 1.5590 dollars... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 10:42 am
Oil prices retreated from their closing high Thursday after jumping nearly $4 a barrel in the previous session on a U.S. government report of a larger than expected decline in gasoline... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 10:39 am
Menswear firm Moss Bros reports a loss for 2007, hit by rising competition from supermarkets. Source: BBC News | Business | World Edition | 3 Apr 2008 | 10:31 am
A federal judge has approved an investigation into the lending practices of Countrywide (CFC). The mortgage company may have, among other things, charged borrowers large, unjustified fees. That was after they were given loans which the firm might have known they could not repay. If all of this keeps heading down the path of discovering more and more bad behavior at Countrywide, the liabilities for the firm may pile up. Bank of America (BAC) might still walk on its deal to buy CFC. How nice would that be? Douglas A. McIntyre
The availability of mortgages is expected to be squeezed further in the coming months, the Bank of England says. Source: BBC News | Business | World Edition | 3 Apr 2008 | 10:30 am
Rice trades at a record as countries limit exports, leaving traders struggling to meet demand. Source: BBC News | Business | World Edition | 3 Apr 2008 | 10:27 am
TEL AVIV (MarketWatch) -- Among the companies whose shares are expected to see active trade in Thursday's session are Schering-Plough, Borders Group, KKR Financial, Micron Technology, Research In Motion Ltd. and Syngenta.
The Bank of England has warned that banks will withdraw more mortgage deals in coming month as the Co-op Bank today become the latest lender to pull the plug on its best deals Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:20 am
The Bank of England has warned that banks will withdraw more mortgage deals in the coming months, as the Co-op Bank today become the latest lender to pull the plug on its best deals Source: Telegraph Business | 3 Apr 2008 | 10:20 am
The bets that companies will default on their debts is rising. Financials which own junk bonds or have financed junk deals will be on the hook. One S&P executive told Bloomberg ``The markets are pricing in a default rate of 9 or 10 percent for high-yield corporate debt, which is a lot higher than we're forecasting." The rating agency thinks the level of companies not making the note could be over 5% by early next year, so the market is guessing that S&P is wrong on the wrong side of things Credit agencies don't have much credibility left. They screwed...
Italy's national airline, Alitalia, stood on the brink of bankruptcy last night after a planned takeover by Air France-KLM fell apart and the carrier's chairman Maurizio Prato resigned. Source: Telegraph Business | 3 Apr 2008 | 10:15 am
Italy's national airline, Alitalia, stood on the brink of bankruptcy last night after a planned takeover by Air France-KLM fell apart and the carrier's chairman Maurizio Prato resigned. Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:15 am
ATA Airlines has discontinued all flights and filed for bankruptcy. The Indianapolis-based airline says in a statement on its Web site Thursday that it became impossible to continue... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 10:13 am
George Soros, the billionaire investor, has called the current financial
crisis the worst since the Great Depression and predicted that markets will
fall further this year after a brief rebound. Source: Latest Business News from Times Online | 3 Apr 2008 | 10:13 am
The FTSE 100 opened lower on Thursday as Goldman Sachs remained negative on some of the UK's leading banks.Goldman said it was lowering earnings estimates by an average 8 per cent across the sector, slashing... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:11 am
Reuters - Stock futures suggested a flat start to
trade on Wall Street on Thursday after Wednesday's decline
triggered by Federal Reserve Chairman Ben Bernanke saying
recession was possible.
The dollar extended its gains on Thursday, buoyed a recent run of stronger-than-expected US data that caused expectations for further cuts in US interest rates to be scaled back.Following Tuesday's expectation-beating... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 10:06 am
SMG, the Scottish Media Group, ran up a loss of £84.6 million last year. Heavy
writedowns relating to Virgin Radio and Pearl & Dean, coupled with
detoriating ITV advertising revenues meant that the business had a difficult
year. Source: Latest Business News from Times Online | 3 Apr 2008 | 10:03 am
Business activity in the UK services sector rose at its slowest rate in four
months during March as downbeat companies struggled with price inflation at
a 12-year high and forecast harder times ahead. Source: Latest Business News from Times Online | 3 Apr 2008 | 10:00 am
As the subprime mess morphed from crisis to near panic, class-action lawsuits have started to flood in. And this time the targets are not dodgy companies that collapsed in accounting scandals but first-rank firms on Wall Street.
Investors and their lawyers filed 70 securities-fraud class actions in the first quarter—almost the same number that were filed in the first half of 2007, according to NERA Economic Consulting, which tracks the filing of these complaints.
The increase in filings continues a trend that began in the second half of last year, NERA says. That spike pushed class-action filings up 58 percent in 2007, compared with the year earlier. Plaintiffs filed 207 cases last year, versus 131 in 2006.
"Right now, the upswing we are observing is related to the subprime meltdown," NERA consultant Svetlana Starykh says. The targets aren't only obvious ones like mortgage lenders and credit-rating agencies, either. They now include securities underwriters and mutual funds.
NERA says 19 of the 70 new cases are tied to subprime lending. Aside from the most obvious target—Bear Stearns, whose stock fell more than 90 percent in value during the last 15 months—the subprime-related class-action suits include cases against J.P. Morgan Chase, Lehman Brothers, Regions Morgan Keegan funds, and TD Ameritrade, as well as two class actions against Morgan Stanley.
Investors have also filed two new cases on stock-option backdating, the scandal du jour of 2006.
NERA will release formal reports on litigation tallies midyear and at the year's end.
"What I expect to see in the next quarter or two is the wave of the smaller fish that have had to take financial write-downs," Starykh says.
She adds that she anticipates 2008's number to be "at or above" the number of cases filed in 2007. "I cannot tell you by how much," she added. "I don't have a crystal ball, unfortunately."
But Gerald Silk, a partner with Bernstein Litowitz Berger & Grossman, a law firm that represents many pension funds in securities-fraud class actions, predicts a lot more to come. "My view is that we are still in the first half of the game," Silk says.
Silk adds that subprime lending will not be the only target. He expects cases to be filed over losses on other "nontraditional" mortgage products, such as near-prime Alt-A mortgages, as well as cases relating to collateralized debt obligations and asset-backed securities.
Also on Portfolio.com:
Toxic LawsuitsDodgy mortgage lending isn't the only thing keeping lawyers busy. Remember the deadly pet food, defective tires, tainted toothpaste, and lead-contaminated toys imported from China?
"The disclosures and write-offs relating to those are all coming out and working their way through the system," Silk says. "There is going to be litigation."
Silk's firm is representing the lead plaintiff in the American Home Mortgage class action and has filed cases against MBIA, Citigroup, and Ambac Financial Group. The firm's pension-fund clients are "looking at the Bear Stearns situation" with an eye to litigation.
"I see the trend continuing," he says. "The damage, collateral and direct, is going to continue for the foreseeable future. There was a fundamental breakdown in the risk controls and corporate transparency that investors are entitled to."
Meanwhile, Cornerstone Research, a consulting company that also tracks securities class actions, said on Monday that the number of lawsuits settled out of court rose by 21 percent last year. But, it added, the aggregate value of those settlements plummeted 60 percent from the all-time high of $17.2 billion in 2006.
The 2006 figure, however, was inflated by a $7.2 billion Enron settlement and a $3.7 billion payout in a class action against Tyco International.
Those kinds of blockbuster accounting-fraud cases may be gone, but it looks as though class-action lawyers will be targeting the cream of Wall Street for the remainder of the year.
The dollar rallied against the euro in early Thursday trading as markets seemingly ignored comments the previous day from the U.S. Federal Reserve suggesting the U.S. economy may slip... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 9:59 am
Live Nation (LYV) is about to sign over $150 million to rapper and serial business start-up master Jay-Z. For the privilege the NYSE listed company gets a piece of all Jay-Z's business enterprises over the next ten years. According to The New York Times "the arrangement would position Live Nation to participate in a range of new deals with Jay-Z, one of music’s most entrepreneurial stars, whose past ventures have included the Rocawear clothing line, which he sold last year for $204 million, and the chain of 40/40 nightclubs." The deal won't work on a number of levels. Jay-Z is...
NEW YORK (Reuters) - The Federal Reserve has stationed itself inside brokerages including Goldman Sachs Group Inc and Bear Stearns Cos to monitor their financial state, the Wall Street... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 9:50 am
Reuters - The Federal Reserve has stationed
itself inside brokerages including Goldman Sachs Group Inc
and Bear Stearns Cos to monitor their financial
state, the Wall Street Journal reported on its Web site on
Thursday.
Congress on Thursday will scrutinize JPMorgan Chase's controversial acquisition of Bear Stearns and quiz top executives from both firms as well as the regulators who helped engineer the rescue.
Protesting Chinese airline pilots turn back mid-flight in a row over pay deals, according to state media. Source: BBC News | Business | World Edition | 3 Apr 2008 | 9:44 am
The era of U.S. economic dominance is over, pundits say, and the future of your money is international. Take our quiz to see whether you're really ready.
Taiwan's financial regulator cleared the way on Thursday for the first of the island's 38 banks to invest in China.The Financial Supervisory Commission said it approved an application by Fubon Financial,... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 9:40 am
In two bestselling books, "Fooled by Randomness" and "The Black Swan," Nassim Nicholas Taleb has explored the ways people misunderstand randomness and risk. At the heart of his thinking is the idea of a "Black Swan" - an unlikely but not impossible catastrophe that no one ever seems to plan for. In an e-mail and telephone exchange with Fortune's Eric Gelman that began with Taleb in the Yucatán for the equinox, the New York City-based former trader turned scholar and essayist expounds on the role of Black Swans in the current market crisis.
At Aloha Airlines the reason for Chapter 11 was high fuel costs and too much competition. Overnight ATA Airlines went into bankruptcy because it lost a key military contract. As the reasons add up, filing Chapter 11 is back for the industry. Carriers like AMR (AMR) and Delta (DAL) are still near 52-week lows. High fuel costs and falling passenger bookings due to a recession could make those stock prices worse. Most airlines have too much debt and are heading toward a period of too little cash flow. The airline industry is one were going into bankruptcy is almost a...
Sony said that it hoped to mitigate the impact of a strong yen against the dollar and weak US demand on its profits by cutting costs and boosting exports to emerging markets."We will lower production costs... Source: Infocious RSS raw feed - channel BNPaperBusiness | 3 Apr 2008 | 9:32 am
Bavarian regional bank BayernLB has taken charges totalling 4.3 billion euros (6.7 billion dollars) in connection with the international financial crisis, it said on Thursday. Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 9:28 am
Private-equity owned British music firm EMI said on Thursday that it had recruited Google executive Douglas Merrill to head its digital music arm. "EMI Music has appointed... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 9:24 am
The mortgage famine is set to get worse, a closely watched Bank of England
study revealed today. Source: Latest Business News from Times Online | 3 Apr 2008 | 9:21 am
Tokyo stocks rose for a third straight day Thursday, with commodity- related shares gaining on higher raw material prices and electronics names buoyed by a stronger dollar against the... Source: Infocious RSS raw feed - channel BNewsBusiness | 3 Apr 2008 | 9:21 am
NEW YORK (Reuters) - The U.S. office market showed the first indication of a slowdown in the first quarter as tenants occupied less space for the first time in more than four years, according to real estate research firm Reis.
Reuters - The U.S. office market showed the
first indication of a slowdown in the first quarter as tenants
occupied less space for the first time in more than four years,
according to real estate research firm Reis.
The Co-op Bank has become the latest lender to pull the plug on its best mortgage deals after being swamped by demand. Source: Telegraph Business | 3 Apr 2008 | 9:00 am
George Soros, the billionaire investor, has described the current credit crunch as the biggest financial crisis since the Great Depression. Mr Soros, who believes asset prices have yet to bottom, made the comments in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. Source: Telegraph Business | 3 Apr 2008 | 8:34 am
The toxic influence of the credit crunch has even reached the co-operative
movement, with the Co-op Bank today revealing it has lost £31.8 million
buying structured investment products linked to US mortgages. Source: Latest Business News from Times Online | 3 Apr 2008 | 8:07 am
Jérôme Kerviel is challenging Société Générale for firing him over an alleged €4.9bn rogue trading scandal, saying the bank failed to respect French labour law Source: FT.com - US homepage | 3 Apr 2008 | 7:53 am
According to Reuters, The Treasury said that regulators saved Bear Stearns (BSC) to help the markets. Reuters writes that Sony (SNE) will cut costs and boost order to fight the strong yen. Reuters writes that LG Telecom may offer 3G service on a Google (GOOG) platform. Reuters reports that RIM (RIMM) earnings did much better than expected. The Wall Street Journal writes that the Senate agreed on a $15 billion housing stimulation bill. The Wall Street Journal writes that GM (GM) may do more to help Delphi out of bankruptcy. The Wall Street Journal writes that Live Nation (LYV) is...
Mothercare, the baby and children's retailer, defied the gloom on the high
street to produce a strong trading performance in the fourth quarter, on the
back of the successful integration of the Early Learning Centre chain and
its programme of international openings. Source: Latest Business News from Times Online | 3 Apr 2008 | 7:38 am
NEW YORK (Reuters) - Capital One Financial Corp recently changed interest rates on several of its credit cards to a fixed rate from a variable one for new customers, the Wall Street Journal reported on Thursday in its online edition.
Venezuela is preparing to tax what it calls "excessive" oil revenues in order to boost state revenues. Source: BBC News | Business | World Edition | 3 Apr 2008 | 7:25 am
Fewer catastrophe claims and surplus reserves helps insurance market Lloyd's of London unveil a rise in profits. Source: BBC News | Business | World Edition | 3 Apr 2008 | 7:13 am
The Fed chairman says a recession is possible, but he expects growth to return by year-end.
Federal Reserve Chairman Ben S. Bernanke acknowledged Wednesday that a recession was possible, but he predicted a rebound by year's end, declaring in effect that the central bank had done its job and it now was up to Congress to tackle the still-deepening housing crisis.
The Dow falls 48 after Fed chairman Ben Bernanke testifies that the economy could contract. Crude futures rise $3.85.
Stocks fell for the first time in three days Wednesday after Federal Reserve Chairman Ben S. Bernanke conceded that the U.S. economy could face recession and rising fuel prices snuffed out a rally in retailing stocks.
U.S. firms seek new revenue streams with sites in Asia and the Mideast.
For kids -- and parents too -- it may be the ultimate play land: a 10-square-mile, $64-billion zone with amusement parks by Six Flags, DreamWorks Animation and Universal Studios, plus museums, shopping and 55 hotels.
The network's schedule will include series based on classic tales. Its four broadcast rivals won't present their offerings for six more weeks.
NBC got a jump start on its competitors Wednesday, unveiling a 2008-09 prime-time lineup that leans heavily on heroic tropes and classic tales of adventure.
American Apparel plans to open stores in the Asian giant and sell its L.A.-made clothes.
A local clothing maker is putting a new spin on a sore subject: American Apparel Inc. is opening stores in China this spring, and stocking them with T-shirts, shorts and hoodies made in downtown L.A.
Four U.S. airlines are being investigated for their suspected failure to comply with federal regulations dealing with aircraft maintenance, the Federal Aviation Administration said Wednesday, although it stressed that the nation's air fleet was safe.
A memo says it will stop offering the risky loans in many California counties, but the lender says that was premature.
Wachovia Corp. signaled that it may no longer offer some Californians the controversial "option ARM" mortgages that give borrowers the choice of paying so little that their balances actually rise.
Already a destination for fans, the online community's expected partnership with major record labels would allow them to compete with Apple's download store.
News Corp.'s MySpace, the largest online social networking site, will unveil as early as today a joint venture with the world's top three music labels, according to several people familiar with the matter.
NEW YORK (Reuters) - NorthStar Education Finance Inc, a government-backed lender of student loans, said it will suspend such lending immediately amid the broader credit crunch, the Wall Street Journal said on its Web site on Thursday.
The record label EMI appoints a senior Google executive to run its digital strategy - the first such post at the firm. Source: BBC News | Business | World Edition | 3 Apr 2008 | 6:21 am
The bipartisan Senate bill would offer aid to struggling builders, cities and homeowners facing foreclosure.
Senate Democratic and Republican leaders reached agreement Wednesday on a multibillion-dollar package to address rampant foreclosures and other problems stemming from what may be the worst housing slump since the Great Depression.
WELLINGTON - The New Zealand dollar firmed against the greenback and yen overnight as investors, betting the worst of the credit crisis may be over, grow more tolerant of risk.
By 8am today, the kiwi was buying US79c, having peaked... Source: New Zealand Herald - Business | 3 Apr 2008 | 5:45 am
In an uncertain time for network television, NBC is shaking things up.
The network is all but dispensing with the traditional "up-front" advertising spectacle—a series of splashy events in New York each May to show off stars and fall prime-time schedules in hopes of luring advertisers and publicity.
Instead, it's trying a pared-down approach, meeting one-on-one with advertisers after a news conference on Wednesday afternoon in which the network announced its year-round—not fall-prime-time—schedule.
Facing an increasingly splintered audience, increased competition from cable networks and the internet, and a recession, NBC executives said in February that their revamped up-front process would let them "create new advertising models, define more effective metrics, and provide a better return on our clients' investments."
Sure, that sounds great—and the network needs a boost, given that it ranked third in household viewers in the 2006-07 broadcast season. Other networks scrambled to react. Fox executives even claimed that they had been introducing year-round schedules for years and should get credit for the idea.
But will all this hoopla about the new formula really help NBC gain a competitive edge?
"Not necessarily," says Charles Rutman, C.E.O. of MPG North America, a media planning and buying company based in New York. "First of all, we don't know if the programs are any good. This is all a great strategy, but you have to deliver the goods."
Rutman said he does see a benefit in terms of advance planning, however. Many clients are already thinking about the fourth quarter of this year and the first quarter of next year, so moving up the up-fronts by a month or more "could be beneficial," he says.
"But is this going to be a major shift in share gain in and of itself?" he asks. "I don't think so."
Ben Silverman, co-chairman of NBC Entertainment, introduced the shows returning to NBC, including Lipstick Jungle, whose fate had been uncertain, and reality shows Celebrity Apprentice and The Biggest Loser. He seized the opportunity to take a jab at Fox, praising NBC's uplifting reality content and eschewing Fox's excruciating, lie-detector-based, marriage-destroying reality show. "We will not be doing Moment of Truth," he said.
In discussing NBC's fall 2008 prime-time lineup, Silverman outlined a programming strategy that emphasized family shows in the 8 p.m. slot, "blockbuster" shows with broad appeal at 9 p.m., and adult themes with "high-end drama" at 10 p.m.
Fall season highlights include the return of Heroes, the science-fiction drama which averaged a relatively strong 11.5 million viewers for the network, and which will debut in a three-hour broadcast on September 15.
Following on the success of Heroes, the network plans to introduce several other escapist or sci-fi-themed shows over the next year. One is My Own Worst Enemy, starring Christian Slater as a man with a Jekyll-and-Hyde complex. (Silverman added that, as part of his campaign to woo Slater to the TV series—part of a broader attempt to lure movie stars to the network—he personally took the actor's mother out to lunch.) Another is Merlin, a family-friendly drama set in a mythical city. A third is The Listener, a Medium-like drama about a tortured young man who can read peoples' minds.
The coming year will also see the return of Friday Night Lights. Silverman said that show attracted the most positive feedback from his casual acquaintances. The show is coming back for a third season through a partnership with DirecTV. Subscribers of the satellite broadcaster will be able to see the new episodes in October; NBC will begin airing the drama shortly after the Super Bowl next winter. (Silverman claimed the deal would be worth it even if the ratings took a hit due to the lag time, just to bring the show back.)
Also in the works is a spin-off of The Office that will premiere after the Super Bowl. Silverman wouldn't comment about the new series except to say that it would come from the same creative team as The Office; but with big episode orders in for both Office shows, speculation of an impending burnout was running rampant in the audience.
To capitalize on the election season, NBC has scheduled four Thursday Night Live prime-time election specials made by Saturday Night Live producer Lorne Michaels. Episodes of The Office will precede each election special, which will be timed to follow campaign debates—presumably to showcase Amy Poehler's Hillary Clinton moue to best effect.
If nothing else, with its new up-front schedule, NBC had the advantage of getting to advertisers first. Wednesday's news conference took place six weeks before competing networks—Fox, CW, CBS, and ABC—hold their traditional up-fronts.
But the early start on selling doesn't mean that NBC will ditch the glitz altogether: The network still plans to hold what it's calling a spotlight event on May 12.
House prices are overvalued by about 30 per cent, BNZ economists warn today.
They said no moves should be taken to increase the supply of houses when the market is diving.
The bank is stopping short of saying house prices will... Source: New Zealand Herald - Business | 3 Apr 2008 | 3:30 am
Gazprom, Russia's state-owned gas group, is likely to secure energy assets in Libya – alongside Eni – gaining a long-sought entry to north African oil and gas fields and tightening its grip on European markets Source: FT.com - US homepage | 3 Apr 2008 | 3:21 am
Freightways Ltd is buying National Records Managers (NRM) in Canberra and Fine Paper Suppliers (FPS) in Melbourne for A$5.9 ($6.9) million in total.
NRM is a document and data storage business and it will be managed in the future... Source: New Zealand Herald - Business | 3 Apr 2008 | 1:30 am
Lombard Group shares plunged 29c to 50c today after the company announced a moratorium of payments by its finance company.
Lombard Group listed on the NZX in December 2005 and its chairman is former National government minister... Source: New Zealand Herald - Business | 3 Apr 2008 | 1:00 am
The US economy will not grow much if at all during the first half of this year and "could even contract slightly", Ben Bernanke said, admitting for the first time that a "recession is possible" Source: FT.com - US homepage | 3 Apr 2008 | 12:29 am
The economic situation in Zimbabwe is desperate. Fiscal, monetary and economic mismanagement has driven Zimbabwe Inc to its knees. Source: Telegraph Business | 3 Apr 2008 | 12:05 am
Lloyd's of London, the world's largest insurance market, has unveiled a record profit of £3.8bn for 2007. Source: Telegraph Business | 3 Apr 2008 | 12:05 am
Kingfisher, the B&Q owner, has poached Euan Sutherland, the chief executive of the Superdrug and Savers health and beauty chains, to head its UK operations. Source: Telegraph Business | 3 Apr 2008 | 12:01 am
Imperial Energy shares plummeted yesterday after the company conceded it has been forced to embark on an emergency rights issue because the debt markets have seized up. Source: Telegraph Business | 3 Apr 2008 | 12:01 am
Every day the news about mortgages grows worse. In the past week alone, almost all of Britain's lenders have increased their best offers by 0.25 percentage points or more. Source: Telegraph Business | 3 Apr 2008 | 12:01 am
Bargain hunters and gloom merchants vied for supremacy in early trading on the share market.
The gloom merchants won because the NZSX-50 benchmark index eased 2.189 points in early trading to 3590.60 after rising 59.22 points,... Source: New Zealand Herald - Business | 3 Apr 2008 | 12:00 am
Dairy giant Fonterra Co-operative will put more options to farmers for changes to its capital structure, despite farmer nervousness about its plans.
"One thing is certain - we can't do nothing", chairman Henry van der Heyden told... Source: New Zealand Herald - Business | 3 Apr 2008 | 12:00 am
A national survey has found many Australian companies are putting their hiring on hold because of growing uncertainty about the economy.
Recruitment company Hudson surveyed about 7,000 hiring managers and many said they were less... Source: New Zealand Herald - Business | 2 Apr 2008 | 11:30 pm
World Bank President Robert Zoellick calls for a "new deal" to fight hunger as food and energy prices soar. Source: BBC News | Business | World Edition | 2 Apr 2008 | 11:22 pm
Kiwibank has increased its 5 year fixed mortgage rate from 8.95 per cent to 9.3 per cent, joining BNZ in dropping its ultra-competitive long term mortgage rate.
It now means there are no mortgage rates on offer publicly by banks... Source: New Zealand Herald - Business | 2 Apr 2008 | 11:00 pm
Inflation is a problem that cannot be brushed aside amid the clamour for interest rate cuts.
The Reserve Bank of New Zealand is under pressure right now from a wide range of business leaders and commentators who want it to cut... Source: New Zealand Herald - Business | 2 Apr 2008 | 11:00 pm
One of our biggest businesses is worried about what will happen to the New Zealand economy if environmentally conscious tourists stop coming here, simply because it is too far.
Air New Zealand has identified a US$900 ($1.1 billion)... Source: New Zealand Herald - Business | 2 Apr 2008 | 10:00 pm
The chief executive of Wal-Mart has criticised US business for not taking a lead in the debate on the future of US healthcare ahead of the presidential elections in November Source: FT.com - US homepage | 2 Apr 2008 | 9:04 pm
AP - Best Buy ended its year with a 3 percent drop in its fourth-quarter earnings as the nation's largest consumer electronics retailer suffered from a weaker economy.
In Georgia, you can't buy liquor in stores on Sunday. But lawmakers are considering a bill to allow Sunday sales, which has given hope to some Georgians looking to wet their weekend whistles. Susanna Capelouto reports. Source: Marketplace | 2 Apr 2008 | 8:32 pm
An international group that sets computer file standards has made Microsoft's Office 2007 the world standard. Janet Babin tells us what the heck that means and why it matters. Source: Marketplace | 2 Apr 2008 | 8:31 pm
The U.S. Chamber of Commerce is challenging an Arizona immigration law that would allow the state to shut down businesses knowingly hiring illegal immigrants. Dan Grech reports. Source: Marketplace | 2 Apr 2008 | 8:31 pm
The state of Ohio recently changed the rules of the game for its 60,000 employees. As of next month, flex time's not going to be so flexible anymore. Mhari Saito reports. Source: Marketplace | 2 Apr 2008 | 8:31 pm
China may be booming, but commentator David Frum says its growth is more dependent now than ever on the health of the American economy. Source: Marketplace | 2 Apr 2008 | 8:31 pm
A peculiar kind of unregulated financial instrument called a credit default swap was a key factor in why the Fed kept Bear Stearns from failing. Marketplace's John Dimsdale tells Kai Ryssdal about whether Congress might be applying some scrutiny. Source: Marketplace | 2 Apr 2008 | 8:31 pm
Fed Chairman Ben Bernanke told Congress' Joint Economic Committee that he expects the economy to slow even further. And the housing crisis? It's not his problem. Source: Marketplace | 2 Apr 2008 | 8:31 pm
U.S. senators say they are close to a deal on a bill that would include money for counseling people at risk of losing their homes, and incentives for communities and citizens to buy foreclosed properties. Jeremy Hobson reports. Source: Marketplace | 2 Apr 2008 | 8:31 pm
President Robert Mugabe's Zanu-PF party lost control of Zimbabwe's parliament for the first time since independence 28 years ago in a humiliating setback for the veteran autocrat Source: FT.com - US homepage | 2 Apr 2008 | 8:20 pm
Bertie Ahern – one of the architects of the Northern Ireland peace agreement – caved in to the growing pressure about his private financial affairs by announcing his early resignation as Irish prime minister Source: FT.com - US homepage | 2 Apr 2008 | 7:25 pm
In an uncertain time for network television, NBC is shaking things up.
The network is all but dispensing with the traditional "up-front" advertising spectacle—splashy events each May to show off stars and fall prime-time schedules in hopes of luring advertisers and publicity.
Instead, it's trying a pared-down approach, meeting one-on-one with advertisers after a news conference, held today at 1:30 p.m., in which the network's year-round—not fall prime-time—schedule was announced.
Facing an increasingly splintered audience, increased competition from cable networks and the internet, and now a recession, NBC executives said in February that their revamped up-front process would let them "create new advertising models, define more effective metrics, and provide a better return on our clients' investments."
Sure, that sounds great—and other networks scrambled to react. Fox executives even claimed that they had been introducing year-round schedules for years and should get credit for the idea.
But will all this hoopla about the new formula really help give NBC a competitive edge?
"Not necessarily," says Charles Rutman, C.E.O. of MPG–North America, a media planning and buying company based in New York. "First of all, we don't know if the programs are any good. This is all a great strategy, but you have to deliver the goods."
Rutman said he does see a benefit in terms of advance planning, however. Many clients are already thinking about the fourth quarter of this year and the first quarter of next year, so moving up the up-fronts by a month or more "could be beneficial," he says.
"But is this going to be a major shift in share gain in and of itself?" he asks. "I don't think so."
Ben Silverman, co-chairman of NBC Entertainment, introduced the shows returning to NBC, including Lipstick Jungle, whose fate had been uncertain, and reality shows Celebrity Apprentice and The Biggest Loser. Silverman seized the opportunity to take a jab at Fox, praising NBC's uplifting reality content and saying, "We will not be doing Moment of Truth" (Fox's excruciating lie-detector- using and marriage-destroying reality show).
Among the new shows announced was a TheOffice spin-off that will have its premiere after the Super Bowl.
If nothing else, NBC has the advantage of getting to advertisers first. Today's news conference took place six weeks before competing networks—Fox, CW, CBS, and ABC—hold their traditional up-fronts.
But the early start on selling doesn't mean that NBC will ditch the glitz altogether: The network still plans to hold what it's calling a spotlight event on May 12.
Some things, however, never change. The NBC executives who spoke all read from a prompter.
Fannie Mae and Freddie Mac and other government-sponsored mortgage companies have become the backbone of the troubled US mortgage market as purely private sources of finance have all but dried up Source: FT.com - US homepage | 2 Apr 2008 | 6:23 pm
Wall Street banks are working on plans to separate troubled assets from the rest of their businesses in an effort to ring-fence problems and restore investors' confidence in the financial sector Source: FT.com - US homepage | 2 Apr 2008 | 6:20 pm
AFP - The leading share index rallied to close near a session high on Wednesday with banking stocks posting strong gains as investors voiced optimism that the worst of the sub-prime write-downs could be over.
Microsoft has picked up a powerful new online-privacy technology that it says it wants to share ... eventually.
In a move that could extend its already substantial presence in the realm of identity access and management, the software giant recently announced it had acquired the patents to the U-Prove technology developed by cryptographer Stefan Brands and his colleagues at the Montreal startup, Credentica.
Implemented properly, the U-Prove algorithms could allow users to exercise absolute control over the information they release online; guarantee that whatever information they did release would not linger indefinitely; and make it impossible to hack, link or trace that information back to them.
Unlike other privacy solutions, including Microsoft's current CardSpace system, U-Prove guarantees a user's privacy even in the face of collusion by identity providers and relying parties -- the very organizations that certify our online identities and require us to prove them.
"It allows single sign-on, without every site you sign onto being able to link your account with every other site you sign onto," British privacy guru Ben Laurie writes in an e-mail interview.
Many privacy experts see the acquisition as a shrewd move by the company, and a good thing for online privacy in general. Yet some have also voiced concern that Microsoft might lock Brands' algorithms into what Laurie calls a "proprietary Microsoft-technology silo."
Both Brands and Kim Cameron, Microsoft's chief identity architect, are trying to assuage those fears.
According to Cameron, the company wants to ensure interoperability between Microsoft and non-Microsoft privacy platforms, and has no intention of hoarding U-Prove. Cameron intends to integrate Brands' algorithms into Microsoft's existing identity-access-and-management platform by mid-2009, and plans to open the application programming interface to the world.
Moreover, Brands says Microsoft is placing the technology under its Open Specification Promise, which amounts to a pledge not to sue anyone for patent infringement unless someone tries to sue Microsoft first. The intention, he says, is "to make it possible for anyone to use this technology whether they use Windows or not."
Laurie, however, contends that it is impossible to guarantee both interoperability and unfettered use of the technology. If Microsoft is really willing to let anyone do what they want with Brands' protocols, the company won't be able to guarantee that the resulting applications will play well with Microsoft products. True interoperability, he argues, requires control of intellectual property.
This would all seem like nitpicking if the stakes weren't so high. Brands' technology would go a long way toward addressing mounting concerns over online privacy.
Ultimately, Cameron sees an enormous market for the kind of rock-solid privacy protection that Brands' algorithms can provide, from e-gov and e-health to banking and corporate finance. Time will tell if it's a market that Microsoft is really willing to share.
New Zealand actress Jessica Rose, best known for her role as Bree in YouTube show lonelygirl15, is making a comeback to the LCD-screen with a new web series called Blood Cell.
Sufficiently creepy with a slick production value, the teaser trailer hints at a deep rabbit-hole of murder mystery, from web TV studio 60Frames.
Directed by indie filmmaker Eduardo Rodriguez, the show follows Julia (Rose's character) as she races against time to save her kidnapped friend, aided only by her cellphone.
A launch date for the first of 18 episodes has yet to be set but check out the ominously-titled site for info as it becomes available. The show will debut on 60Frames, which distributes content to MySpaceTV, YouTube, Blip.tv among others.
Washington D.C.’s tourism tagline was ginned up in 1998, but less than a decade later felt stale and flat—especially compared with the sexy campaigns other U.S. cities had launched in the intervening years. So in 2006, local tourism boosters kicked off the search for a new slogan. They started with focus groups and an online survey, asking residents and travelers what they thought of the city. Not surprisingly, the museums came up. And history. But also: power.
After a few months of research, three different concepts were fleshed out into ads and tested on consumers. There was “Secret’s Out,” featuring a younger couple in a club—too dark. In “Powerful Moments,” an emotional tearjerker: A mother and child are moved by the Lincoln Memorial. Ads for “Power Play” used bright colors and images of city monuments.
Officials just couldn’t get past the city’s image as a magnet for the power hungry, so they decided to embrace it. The result, revealed this morning: “Create your own power trip.”
“It plays to the core of who we are,” says Rebecca Pawlowski, communications director at at Destination D.C., formerly the Convention and Tourism Corporation.
For years cities didn’t pay much attention to marketing, focusing instead on things like building convention centers, says Bill Siegel, chairman of advertising research firm Longwoods International and a consultant on D.C.’s campaign. Branding was left to states or regions: Think “Pennsylvania is for Lovers” and “California: Find Yourself Here.” Though “I Love New York” is often associated with the city, the pitch comes from Albany, not Manhattan.
Destination D.C. undertook the new effort because the city was on the verge of losing travel money. Tourism is the capital’s largest private employer, and brings in $564 million in tax dollars annually. But despite a new baseball stadium, the opening of attractions such as Madame Tussauds and the Newseum, and a fresh abundance of hotel rooms, forecasters expected the number of visitors to hold steady at 15 million or even decline during the next few years. That came as weak housing prices, gloomy economic news, and high gas prices began eating away both at city tax bases and consumer appetites for leisure travel. On a positive note, it was also just as the presidential campaigns were getting hot.
Meanwhile, other cities have kicked up their spending. Last year Orlando launched a $68 million ad campaign—a 240 percent increase over the year before. New York boosted its marketing budget by a third, to $45 million. Las Vegas just announced it was spending another $30 million on its new “Experience Vegas” ads, bringing its annual total to $83 million.
Without state coffers to raid, Washington D.C. has only a fraction of the budget. It is spending about $3 million on the whole process, betting on the conventional wisdom that tourism can generate quick returns for locales—nine dollars in tax revenues for every ad dollar, by some measures.
When the city began taking its image temperature, even Siegel was surprised at how positively visitors viewed Washington D.C., going so far as to compare it with Hawaii. The problem was that tourists came for history and monuments: The capital didn’t have the hip factor of New York or even Philadelphia, which has worked hard to get noticed for its dining scene. How to attract young, urbane travelers, while remaining appealing to families? In the end, “power” was what seemed to bridge the gap.
It’s not quite “What happens in Vegas”—though given the city’s constant stream of sex scandals, that might work too—but the low-budget campaign plays to Washington’s strengths.
“The campaign gets to why people go there, because it’s a place where important decisions are being made,” says Siegel, who helped New Orleans, Hawaii, and Ohio create ad campaigns.
The power motif will play out in a series of print ads running in national magazines like Condé Nast Traveler, Saveur, and Black Enterprise, but only from Georgia to New York, from May to August. On television they will be in four cities: Washington, New York, Pittsburgh, and Raleigh-Durham. There is “Seat of Power,” in which a white family gazes up at the Lincoln Memorial. In “Soul Power” a black couple smiles at each other across the table at a jazz club. “Power Play” has a shot of Mayor Adrian Fenty jogging through Rock Creek Park with a friend.
The theme will be applied to various events throughout the year—“Flower Power” for the spring cherry blossoms and “Fire Power” for July fireworks.
When the project started, city officials weren’t looking to leverage the presidential election. In fact, they were wary of reinforcing the city’s wonky CSPAN image. But with the possibility of the first female or black president, the timing couldn’t be better, Pawlowski says. “It’s a great time to show off a different side of power.” Related Links Frequent Flier Fallacies Beers to Beat the Heat Phoning Home
Ben Bernanke, the chairman of the Federal Reserve, today publicly acknowledged for the first the the possibility of a contraction, saying that the economic outlook has weakened significantly in recent months.
He also defended the rescue of Bear Stearns, saying that the damage caused by the firm's collapse "could have been severe and extremely difficult to contain."
In testimony before the Joint Economic Committee, the Fed chairman said that the economy "Will not grow much, if at all, over the first half of 2008," he said, and "could even contract slightly."
In the question and answer session that followed his testimony, Bernanke acknowledged that "a recession is possible."
The Fed expects the economy to strengthen in the second half of the year. "However, in light of the recent turbulence in financial markets, the uncertainty attending this forecast is quite high and the risks remain to the downside."
Bernanke added that "inflation has also been a source of concern," pointing to the sharp rise in global commodities prices.
The Calculated Risk blog notes that there was "nothing really new in Bernanke's economic outlook, but historically when the Fed chairman starts talking about the possibility of a recession, the economy is already in a recession."
On the Bear rescue, Bernanke said that the Fed and other government agencies were informed that Bear's liquidity position "had significantly deteriorated and that it would have to file for Chapter 11 bankruptcy the next day unless alternative sources of funds became available."
Questioned about why the government bailed out Bear Stearns but not troubled homeowners, Bernanke denied that it was a bailout and objected to the "false dichotomy" in contrasting Bear's fate with homeowners.
"We did not bail out Bear Stearns," he said, noting that shareholders took a significant loss. The rescue, he said was "necessary to preserve the integrity of the American financial system.”
"Normally, the market sorts out which companies survive and which fail, and that is as it should be. However, the issues raised here extended well beyond the fate of one company. Our financial system is extremely complex and interconnected, and Bear Stearns participated extensively in a range of critical markets. With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The company's failure could also have cast doubt on the financial positions of some of Bear Stearns' thousands of counterparties and perhaps of companies with similar businesses. Given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse effects would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability."
So what might taxpayers end up owning if the Federal Reserve's $29 billion rescue of Bear Stearns should go bad?
Much of what you might expect to find in Bear's collateral: largely "mortgage-backed securities and related hedge investments," the Treasury Department says in a letter to the Senate Finance Committee.
J.P. Morgan Chase, the letter notes, will be financing $1 billion of that pool of assets and "will assume the first loss position."
The Fed loan was undertaken to secure the emergency takeover of Bear by J.P. Morgan on March 16. The Treasury letter is the first official confirmation of what is in Bear's collateral.
Ben Bernanke was asked about the Bear collateral in a hearing before the Joint Economic Committee today. He said that the assets were “entirely investment- grade, entirely current and performing” when they were evaluated by the Federal Reserve Bank of New York's adviser, BlackRock.
“I feel reasonably confident that we will get back the principal and obtain some interest.”
He also said that if the assets deteriorate in value, the Fed cannot go back to Bear, or to J.P. Morgan, for more collateral.
Caroline Baum of Bloomberg News says there is a problem if the Fed has control of Bear's portfolio.
"If the Fed is the residual owner of these securities, which seems likely based on its assumption of both risk and reward, it could be in violation of its charter."
The rescue has been described as largely a Fed operation, but the letter makes it clear that the Treasury played a large role in helping to orchestrate it.
"While the Treasury was not a party to the agreements, Treasury personnel, including the secretary, the undersecretary for domestic finance, the general counsel, and other individuals from their offices, worked closely" with the Federal Reserve Bank of New York, the letter says.
The Bear Stearns rescue will be discussed at two congressional hearings: today before the Joint Economic Committee and tomorrow before the Senate Banking Committee.
While the Bush administration focuses on plans to prevent housing crises in the future, Congress has decided that it is politically important to be seen taking action now.
Senate Republicans and Democrats have agreed to work together on a compromise on housing legislation and may have a bill today.
"The time has come for us to legislate, not continue our bickering," the Senate majority leader, Harry Reid, Democrat of Nevada, said at a joint appearance with the minority leader, Mitch McConnell, Republican of Nevada, the Los Angeles Timesreports. The nonpartisan display was so rare that Reid had to tell reporters that it was not an April Fools' joke.
The new legislative push, the New York Timessays, reflects “the mounting pressure on Congressional Republicans and the White House to extend a helping hand to average Americans after the Federal Reserve’s intervention in the near collapse and proposed sale of Bear Stearns.”
Reid said today that Democrats and Republicans in the Senate have reached an agreement in principle and that draft of the bill could be introduced by 5 p.m. today, Reuters reports. "I think we're moving forward," he said.
Details of the compromise bill are still not known, but they are expected to include allowing state and local governments to issue $10 billion in tax-exempt bonds to refinance subprime mortgages and $200 million to expand counseling programs for homeowners.
There are also proposals in Congress to allow the Federal Housing Administration to insure $300 billion to $400 billion in additional mortgages.
An earlier Democratic proposal to give bankruptcy-court judges the power to modify mortgages is not expected to be included.
Despite the apparent breakup of the legislative logjam, Martin Kady and Victoria McGrane on Politico.com caution that there “are still deep divisions in this Congress over tax cuts, the Bear Stearns bailout, and how far the federal government should intervene on behalf of homeowners facing foreclosure.”
“But Republicans and Democrats alike seem so scared of the political repercussions of doing nothing that they are willing for the moment to cede a few debating points and entertain the type of compromises that may anger their respective political bases.”
Yves Smith on NakedCapitalism.com is skeptical about the legislative effort: “What got us in this mess in the first place is that America has the most heavily subsidized housing market in the world. Is more of the same a wise solution?”
Reuters - The collapse and forced sale of Wall
Street giant Bear Stearns exposed the dangerous
interconectedness of financial markets and the faulty oversight
now in place, U.S. regulators said in prepared congressional
testimony on Thursday.
AFP - Europe's main stock markets mostly fell on Thursday after recent bumper gains, with Paris investors digesting a gloomy forecast related to the subprime home loans crisis, analysts said.
Reuters - Stock futures suggested a flat start to
trade on Wall Street on Thursday after Wednesday's decline
triggered by Federal Reserve Chairman Ben Bernanke saying
recession was possible.
Reuters - The Federal Reserve has stationed
itself inside brokerages including Goldman Sachs Group Inc
and Bear Stearns Cos to monitor their financial
state, the Wall Street Journal reported on its Web site on
Thursday.
Reuters - The U.S. office market showed the
first indication of a slowdown in the first quarter as tenants
occupied less space for the first time in more than four years,
according to real estate research firm Reis.
AP - Best Buy ended its year with a 3 percent drop in its fourth-quarter earnings as the nation's largest consumer electronics retailer suffered from a weaker economy.
AFP - The leading share index rallied to close near a session high on Wednesday with banking stocks posting strong gains as investors voiced optimism that the worst of the sub-prime write-downs could be over.