Economic Calendar

Saturday, June 30, 2012

Republicans May Try Reconciliation for Health Repeal in 2013

By Kathleen Hunter - Jun 30, 2012 2:53 AM GMT+0700

Should they win control of the U.S. Senate and the White House in November, Republicans say they would consider using a fast-track budget process to repeal parts of President Barack Obama’s 2010 health-care overhaul.

“In the House we are prepared to do that and I’m sure if you speak to my colleagues in the Senate they are as well,” House Majority Leader Eric Cantor, a Virginia Republican, said today in an interview with Bloomberg Television. “This is a big deal for the American people. Health care is one of the most personal decisions that families make, that’s what at stake here.”

The fast-track budget procedure, known as reconciliation, allows lawmakers to bypass a Senate filibuster by lowering the threshold for passage of certain legislation in that chamber from 60 votes to a simple majority.

Cantor’s comments came a day after the U.S. Supreme Court upheld the core of the 2010 Patient Protection and Affordable Care Act, ruling that Congress has the authority to require Americans to carry health insurance or pay a penalty.

House Republican leaders immediately announced that the chamber, which has voted 30 times to eliminate, defund or scale back parts or all of the health-care law, will vote again July 11 on repeal. Days after taking control of the House in January 2011, all of the chamber’s Republicans and three Democrats voted to pass a measure ending the health-care law.

Senate Majority

Efforts to repeal or chip away at the health-care law have died in the U.S. Senate, where Democrats have a 53-seat majority.

Republicans say the best chance for success in their repeal efforts lies in winning control of the Senate and electing Republican Mitt Romney as president in November.

Even then it would be a challenge to muster the 60 votes needed to overcome a Democratic filibuster in the Senate. Republicans could try to bypass a filibuster by using the reconciliation process.

“There have never been 60 popularly elected Republican senators,” said Senator Roy Blunt, a Missouri Republican, in an interview. “So whatever we’re able to do legislatively in the Senate, reconciliation becomes really important.”

Senator Bob Corker, a Tennessee Republican, said, “It’s always better if you can deal with something in a normal legislative fashion,” adding that it was premature to discuss options for repeal in 2013 without knowing the outcome of the election.

‘Just Talk’

“Right now, until we know what the makeup of the Senate’s going to be this next year and who’s president, all the talk is just that, just talk,” Corker said in an interview.

The House’s chief tax writer, Ways and Means Committee Chairman Dave Camp, today didn’t rule out the possibility of using reconciliation to repeal the law if Republicans were to control both chambers of Congress and the White House next year.

“I’d like to repeal the bill,” Camp, a Michigan Republican, said in an interview on Bloomberg Television’s “Political Capital With Al Hunt” airing this weekend. “And I’d like to do it however we can, because I do think it -- this -- imposing the federal government between individuals and their doctors is still wrong. And just because something’s constitutional doesn’t make it a good law.”

Gallup Poll

A nationwide USA Today-Gallup poll of 1,012 adults surveyed after yesterday’s Supreme Court ruling showed a 46-46 percent split on whether they agreed with the decision. Seventy-nine percent of Democrats agreed with the ruling, 83 percent of Republicans disagreed, and independents were split with 45 percent in favor and 42 percent opposing the decision.

Democrats, who controlled the House and Senate in 2009 and 2010 when Congress was considering the health care law, turned to reconciliation to pass the law after they lost their 60-seat Senate majority in January 2010 with the election of Massachusetts Republican Scott Brown.

In both chambers of Congress, Democrats provided all of the votes for the health-care measure. They lost control of the House in the 2010 midterm elections.

Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters yesterday that the prospect of a Republican-controlled Senate using the fast-track process to push repeal was “all the more reason that the American people should understand” that Democrats “want to focus on jobs, not taking away benefits that millions of Americans have today for sure.”

Policy Provisions

Because reconciliation applies only to measures that affect spending or revenue, many policy provisions in the health-care law probably would fall outside the scope of it, meaning the tool could be used to repeal part, not all, of the law.

Though Democrats control the Senate’s agenda, Republicans in the chamber have pledged to press ahead with repeal efforts.

“Yesterday’s decision gives us the clearest proof yet that this bill has to go,” Minority Leader Mitch McConnell, a Kentucky Republican, said today. “It needs to be repealed to clear the way for common sense, step-by-step reforms that protect Americans’ access to the care they need, from the doctor they choose, at a lower cost. And that’s precisely what Republicans intend to.”

To contact the reporter on this story: Kathleen Hunter in Washington at

To contact the editor responsible for this story: Jodi Schneider at


Euro Rises After EU Leaders Renounce Spain Loan Seniority

By Joseph Ciolli - Jun 30, 2012 4:23 AM GMT+0700

The euro surged the most this year against the dollar after European leaders eased terms on loans to Spanish banks, taking a step toward resolving the region’s debt crisis and boosting demand for the shared currency.

The 17-nation euro posted its biggest gain in eight months versus the yen as European Union President Herman Van Rompuy said officials meeting in Brussels agreed to drop the condition that emergency loans to Spanish banks give creditor governments preferred status. The Australian and New Zealand dollars advanced as stock gains boosted demand for higher-yielding assets.

Traffic passes in front of the Palais Garnier Opera House in Paris. French gross domestic product was probably unchanged from the fourth quarter, matching the government’s previous projection, according to the median estimate of economists in a Bloomberg News survey before the national statistics office releases the figure today.Photographer: Balint Porneczi/Bloomberg

June 29 (Bloomberg) -- Economics Nobel Laureate Joseph Stiglitz, Richard Corbett, an aide to European Union President Herman Van Rompuy and Arnab Das, managing director of market research and strategy at Roubini Global Economics talk about the future of the euro zone and the leaders' summit in Brussels. They speak with Linda Yueh on Bloomberg Television's "Last Word: Economic Edge." (Source: Bloomberg)

June 29 (Bloomberg) -- Kathleen Brooks, research director at, a unit of online currency trading company Gain Capital Holdings Inc., talks about the outlook for the euro after European leaders agreed to relax conditions on emergency loans for Spanish banks. She speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)

“The move that we saw today was a positive step by European leaders,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co. (WU), said in a telephone interview. “It’s not the best-case scenario, but it certainly exceeds the market’s really low expectations heading into the summit.”

The euro advanced 1.8 percent to $1.2667 at 5 p.m. New York time after rising as much as 2 percent, the biggest intraday gain since Oct. 27. The shared currency jumped 2.2 percent to 101.04 yen, gaining as much as 2.6 percent, the most since Oct. 31. The yen fell 0.4 percent to 79.79 per dollar.

Implied volatility among currencies fell, touching the lowest level since May 8, according to a JPMorgan Chase & Co. gauge. The JPMorgan Global FX Volatility Index declined to 9.56, up from this year’s low of 8.84 in April. The high was 12.37 in January and the average this year is 10.36.

Haven Assets

Even as the euro has outperformed the U.S. dollar on demand for higher-risk assets, the currency’s performance against other counterparts has been muted because the EU’s emergency-loan decision did barely enough to meet already-low expectations, Manimbo said.

The euro was little changed against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes. Haven assets were the worst performers, with the greenback slumping 0.7 percent and the Japanese currency falling 1.3 percent. Canada’s dollar was the best performer with a 0.5 percent increase.

The euro was rose 0.1 percent against the New Zealand dollar and dropped 0.1 percent against the Swedish krona and Australian dollar. Hedge funds and other large speculators hold a net-short euro position, or bet that the currency will fall against the dollar, of 141,066 contracts, as of June 19. The speculative positioning reached a euro-era record-high June 5.

“I don’t think that what was announced is a big game changer at this point,” Charles St-Arnaud, a foreign-exchange strategist at Nomura Holdings Inc. in New York, said in a telephone interview. “There’s still no bond-buying framework in place. There’s still a structural problem that hasn’t been addressed yet.”

Quarterly Drop

The euro is still set for its biggest quarterly drop against the dollar and the yen since September. The euro has weakened 8.6 percent versus the yen since March 31, and 5.1 percent against the dollar.

The euro may face resistance at its June 18 high of $1.2748, according to data compiled by Bloomberg based on trading patterns. Resistance refers to an area on a price graph where sell orders may be clustered. The stronger the resistance, the more buying is needed to rise through that level.

The yen fell versus all of its major counterparts as rising U.S. Treasury yields draw more funds into dollar-based securities, helping weaken Japan’s currency. Treasury two-year notes yield about 19 basis points, or 0.19 percentage point, more than Japanese bonds of similar maturity. The spread has widened from 13 basis points in September.

Dollar Index

The market’s risk-on tone has reversed recent safe-haven flows, Eric Theoret, a currency strategist in Toronto at Bank of Nova Scotia (BNS)’s Scotia Capital unit, wrote today in a note to clients. Bank of Japan (8301) policy, domestic fundamentals and a growing global risk appetite should push the U.S. dollar to 83 yen, according to Theoret.

The Dollar Index (DXY) fell as much as 1.7 percent, the most since Oct. 27, ending a two-day rally as the EU’s Spanish bond decision decreased investor appetite for risk-averse assets. The index is used by IntercontinentalExchange Inc. to track the greenback against the currencies of six U.S. trading partners.

The dollar has weakened against nine of its 16 most-traded counterparts this year, with the Mexican peso’s 4.3 percent rise leading gainers. The euro dropped 2.3 percent versus the dollar and the yen fell 3.6 percent, the biggest decline after the Brazilian real’s 7.1 percent plunge.

Spain, Italy

Spain’s 10-year bond yield dropped 61 basis points to 6.33 percent, the biggest decline since Dec. 5. Italy’s 10-year yield slid 38 basis points to 5.82 percent.

EU leaders gathered today for a second day of talks to discuss measures to stem a debt crisis that’s spurred five euro members to seek international bailouts. Euro-bloc finance ministers will enact today’s deal on loans to Spanish banks at a meeting on July 9, Rompuy said, calling the accord a “breakthrough.”

The European Union has “addressed the issues on the seniority of Spanish loans,” said Roy Teo, a currency strategist in Singapore at ABN Amro Private Bank. “The fact that right now they are renouncing the seniority status means private bondholders will have similar, equal, weighting. It’s positive for the euro.”

‘Raising Funds’

South Africa’s rand rose against all but one of its major counterparts, rallying the most in more than nine months as stocks and commodities surged after the decision to support Spain’s banks boosted demand for riskier assets. The currency gained 2.8 percent to 8.1642 per dollar after rising as much as 3.4 percent, its biggest increase since Sept. 27.

Canada’s dollar also advanced the most since Nov. 30 versus the dollar as rising stocks and commodities increased demand for higher yielding assets. The so-called loonie appreciated 1.6 percent to C$1.0166.

The Australian dollar appreciated 1.9 percent to $1.0238 and gained 1.7 percent for the week. New Zealand’s dollar rose 1.7 percent to 80.13 U.S. cents.

“Anything that looks to be supportive of Spain and Italy in raising funds is going to be positive,” said Sacha Tihanyi, a strategist in Hong Kong at Scotiabank, a unit of Bank of Nova Scotia. “As long as these headlines continue to come out with this sort of flavor, we can see the Aussie and kiwi get squeezed a bit higher.”

To contact the reporter on this story: Joseph Ciolli in New York at

To contact the editor responsible for this story: Dave Liedtka at


RIM’s Plunge Adds Pressure to ‘Sell, Break Up or Die’

By Hugo Miller and Serena Saitto - Jun 30, 2012 3:37 AM GMT+0700

Research In Motion Ltd. (RIM) plunged 19 percent, the biggest decline in more than a year, after posting a loss and delaying the next BlackBerry operating system, increasing pressure on the company to find an acquirer.

RIM reported a first-quarter loss yesterday of 37 cents a share, excluding some items, more than five times bigger than what analysts had predicted. Sales tumbled 43 percent to $2.8 billion, missing a prediction of $3.05 billion, and the company said it would cut 5,000 jobs.

The Waterloo, Ontario-based smartphone maker had been waiting for a release of the BlackBerry 10 in the fall to decide on its strategic options, betting that the success of the product would let it avoid a sale, according to two people familiar with the situation. With no new lineup this year -- and the next version of Apple Inc. (AAPL)’s better-selling iPhone looming -- RIM may have to seek a buyer now.

“They either sell, break up the company or die,” said Matt Thornton, an analyst at Avian Securities LLC in Boston who has a neutral rating on RIM. “It is just a question of when.”

Chief Executive Officer Thorsten Heins said in May that RIM had hired JPMorgan Chase & Co. (JPM) and RBC Capital Markets to help evaluate its strategic options, though he said a sale wasn’t the company’s goal. RIM would prefer to find a partner or license its operating system. Heins reiterated that notion yesterday, saying he was “convinced” that RIM has a future as a maker of hardware and software.

Not Ready

RIM declined to comment on takeover speculation.

“RIM will comment on any detail from its strategic review when it’s ready,” said Heidi Davidson, a company spokeswoman.

The stock fell to $7.39 at the close in New York. The shares have now lost 95 percent of their value since peaking in mid-2008, cutting the business’s market value to $3.9 billion.

The company has struggled to keep pace with Apple’s iPhone and devices based on Google Inc. (GOOG)’s Android platform, spurring customers to flee the BlackBerry platform. The new BB10 software -- the linchpin of its comeback plan -- now won’t arrive until the first quarter of next year, RIM said yesterday. That’s more than a year later than originally planned.

“The delay increases the likelihood of a sale,” said Michael Walkley, an analyst at Canaccord Genuity Inc. in Minneapolis. “Even if BB10 launched in the fall against iPhone 5, it would be very, very tough to get consumers to try it out.”

Microsoft, IBM

Some investors were already pushing RIM to put itself on the block before the latest results.

“We would like to see a sale of the company or a breakup, and if a breakup, the sale of each of the parts,” Vic Alboini, chairman of the Toronto-based investment firm Jaguar Financial Corp. (JFC), said last month. He sees Microsoft Corp. (MSFT) or International Business Machines Corp. as potential buyers.

“We’re pushing and cajoling RIM to get to the promised land of a sale or breakup,” he said.

The job cuts will shrink RIM’s workforce by about 30 percent, cutting it from 16,500 to 11,500 by March, RIM said.

The company also reported a pretax writedown of $335 million and expects to post an additional operating loss in the second quarter. The first-quarter net loss was $518 million, or 99 cents a share, compared with a profit of $695 million, or $1.33, a year earlier.

Cost Savings

The company is trying to save $1 billion in annual operating costs by eliminating workers and manufacturing sites. The effort so far has saved RIM $300 million, Chief Financial Officer Brian Bidulka said yesterday on a conference call. The company’s cash investments rose to $2.2 billion last quarter, from $2.1 billion in the previous three months.

Still, future operating losses and severance payments will force RIM to burn through much of that money, said Walkley, who has a hold rating on the shares.

The situation may come to a head in the coming months, said Brian Blair, an analyst at Wedge Partners Corp. in New York.

“My view is that things get so bad this year and in early 2013 that they get forced into a sale,” he said. “It gets worse and worse for the next six months, guaranteed.”

RIM can’t expect any assistance from the Canadian government, Jim Flaherty, the country’s finance minister, told reporters today on a conference call.

Choosing a Path

“They need to look at their own options and to choose their path,” Flaherty said. He said he’s not aware of any interest from other companies in acquiring RIM.

A takeover of RIM’s size would trigger a review to determine whether an acquisition is in the national interest. In 2010, Prime Minister Stephen Harper’s government rejected Melbourne-based BHP Billiton Ltd. (BHP)’s $40 billion hostile takeover of Potash Corp. of Saskatchewan Inc. over concerns that the sale would cut jobs and tax revenue.

RIM had previously said that the first of the new BlackBerry 10 phones would come out in the latter part of this year, and the product was originally expected in the first quarter of 2012. Pushing BlackBerry 10 to 2013 means the phones may come out months later than the iPhone 5 and products built on Microsoft’s Windows 8 platform.

In the meantime, sales of the existing lineup are slumping. RIM shipped 7.8 million BlackBerrys and 260,000 PlayBook tablets in its last fiscal quarter, which ended June 2. A year earlier, it shipped 13.2 million BlackBerrys and 500,000 PlayBooks.

“The delay may just be the final nail in the coffin,” said Sameet Kanade, an analyst at Northern Securities in Toronto who has a sell rating on the stock. “This is not just a disappointing quarter, but is a big question mark about the company going forward.”

To contact the reporters on this story: Hugo Miller in Toronto at; Serena Saitto in New York at

To contact the editor responsible for this story: Nick Turner at


Obama’s Health-Care Overhaul Upheld by U.S. Supreme Court

By Greg Stohr - Jun 30, 2012 3:23 AM GMT+0700
Mark Wilson/Getty Images
Obamacare supporters after the U.S. Supreme Court's decision to uphold President Obama's health care law on June 28, 2012 in Washington.

The U.S. Supreme Court affirmed the core of President Barack Obama’s health-care overhaul in an opinion that held two surprises: Chief Justice John Roberts was the deciding vote, and his legal reasoning was unanticipated.

June 28 (Bloomberg) -- U.S. President Barack Obama speaks about the Supreme Court's decision upholding the core provisions of the Affordable Care Act. Supreme Court justices, voting 5-4, said Congress has the power to make Americans carry insurance or pay a penalty. Obama speaks at the White House. (Source: Bloomberg)

June 29 (Bloomberg) -- Ronald Williams, former chief executive officer of Aetna Inc., talks about the Supreme Court's decision yesterday to uphold President Barack Obama's health-care overhaul and the impact on the health industry. Williams speaks with Deirdre Bolton on Bloomberg Television's "In the Loop." (Source: Bloomberg)

June 26 (Bloomberg) -- Republican presidential candidate Mitt Romney talks about the Supreme Court's decision to uphold the core of President Barack Obama’s health-care overhaul and reiterates his pledge to repeal the law if elected. He speaks to reporters in Washington. (Source: Bloomberg)

June 28 (Bloomberg) -- The U.S. Supreme Court upheld the core of President Barack Obama’s health-care overhaul, preserving most of a law that would expand insurance to millions of people and transform an industry that makes up 18 percent of the nation’s economy. Erik Schatzker, Megan Hughes and Hans Nichols reports on Bloomberg Television's "Market Makers." (Source: Bloomberg)

June 28 (Bloomberg) -- Bloomberg's Megan Hughes reports that Supreme Court Chief Justice John Roberts cast the deciding vote to uphold President Barack Obama's health-care overhaul. She speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

June 28 (Bloomberg) -- Bloomberg's Erik Schatzker reports that the U.S. Supreme Court upheld the core of President Barack Obama’s health-care overhaul, giving him an election-year triumph and preserving most of a law that would expand insurance to millions of people and transform an industry that makes up 18 percent of the nation’s economy. He speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

June 28 (Bloomberg) -- Megan Hughes reports on the impact of the U.S. Supreme Court's health-care ruling on the economy. She speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Chart: Court Upholds Individual Mandate, Health-Care Law
Attachment: Full Supreme Court Opinion (PDF)
Attachment: Justice Roberts' Opinion

Supporters of President Obama's health care law celebrate outside the Supreme Court after the justices upheld the law on June 28, 2012. Photographer: Jim Lo Scalzo/EPA

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The 5-4 ruling yesterday gave Obama an election-year triumph by declaring that Congress had the power to make Americans obtain insurance or pay a penalty. That requirement is at the center of the measure and of a political debate over the appropriate role of government in health care that showed no signs of abating with the court’s decision.

Republicans, including presidential candidate Mitt Romney, vowed to redouble their efforts to repeal “Obamacare,” while the president sought to portray the fight as over.

“The highest court in the land has now spoken,” he said from the White House.

Briefs and oral arguments had focused primarily on whether Congress overreached its authority to regulate interstate commerce when it approved the insurance mandate as part of the Patient Protection and Affordable Care Act. Roberts, who wrote the majority opinion, declared that it did and then upheld the provision on the administration’s fallback argument: that the penalty was within congressional power to tax.

It was the first time Roberts had joined with the court’s four Democratic appointees in a 5-4 majority.

Limiting Medicaid

Along with the mandate and its accompanying penalty, the court left intact features that force insurers to cover people with pre-existing medical conditions, keep adult children on their parents’ health plans until age 26 and remove lifetime caps from policies. The justices limited the law’s extension of the Medicaid program for the poor by saying the federal government can’t threaten to withhold existing funds from states that don’t fully comply.

Speculation before the decision had focused on Justice Anthony Kennedy as the likely deciding vote on a court divided between four Democratic appointees and five justices named by Republican presidents, including Roberts.

“Justice Kennedy is the axis around which the court spins in a case like this,” Tom Goldstein, an appellate lawyer, said two weeks ago. Goldstein’s Scotusblog website is sponsored by Bloomberg Law.

Barry Friedman, a New York University Law professor, said he was surprised that Kennedy wound up in the minority. “To the extent they were going to uphold the law, I always believed the chief justice would be a vote to do so,” Friedman said. “But I thought Justice Kennedy would also be in that group.”

Focus on Commerce

The administration’s legal brief in support of the law devoted three times as much space to discussing the commerce power as it did to the tax issue. Yet it was the secondary argument that carried the day.

While the federal government “does not have the power to order people to buy health insurance,” Roberts wrote, “the federal government does have the power to impose a tax on those without health insurance.” The law “is therefore constitutional because it can reasonably be read as a tax.”

Roberts said that, for most Americans, the amount of the penalty will be far less than the cost of insurance.

“It may often be a reasonable financial decision to make the payment rather than purchase insurance,” he wrote. “Although the payment will raise considerable revenue, it is plainly designed to expand health-insurance coverage. But taxes that seek to influence conduct are nothing new.”

Republican Ammunition

That line of reasoning gave Republicans what they portrayed as a powerful new argument against the health plan: that it is a tax increase.

“Now we will let the American people decide if they want this huge tax burden,” said Representative Joe Walsh, of Illinois, one of 87 Republican freshmen elected in 2010.

“The president’s health-care law is hurting our economy by driving up health costs and making it harder for small businesses to hire,” House Speaker John Boehner, an Ohio Republican, said in a statement.

Obama pledged, “We will continue to implement this law” and search for improvements. “What we won’t do, and what the country can’t afford to do, is re-fight the political battles of two years ago or go back to the way things were,” he said in his televised statement.

Republicans vowed to do just that, with House leaders saying they would hold a vote to repeal the act on July 11, though there’s no chance they can succeed as long as Democrats control the Senate and the president is there to veto a bill.

Romney Threat

Romney said he would make overturning the law a top priority in the White House.

“What the court did not do on its last day in session, I will do on my first day if elected president of the United States. And that is: I will act to repeal Obamacare,” Romney said in Washington.

Obama’s health-care law “puts the federal government between you and your doctor,” Romney told reporters. Though he pushed through a similar plan when he was Massachusetts governor, he has said such a law isn’t wise nationally.

In a USAToday/Gallup poll yesterday, 46 percent agreed with the court’s ruling and 46 percent disagreed. With 79 percent of Democrats supporting the decision and 83 percent of Republicans opposing it, independent voters split 45 percent in favor and 42 percent against the decision. The survey had a 4 percentage- point error margin.

Longest Arguments

For a moment, Obama, waiting with every other American for the momentous decision, thought he had lost. He saw an inaccurate television report that the law had been struck down. A staff member quickly relayed word that it had been upheld, said an administration official who asked for anonymity to describe the private meeting.

The decision on the law is the climax to a legal fight that featured the longest high court arguments in 44 years, a record number of briefs and extraordinary public interest in a Supreme Court case. The case tested both the constitutional powers of Congress and the willingness of the Roberts court to overrule the other two branches of the federal government.

Republican-appointed Justices Kennedy, Antonin Scalia, Clarence Thomas and Samuel Alito dissented, saying they would have struck down the entire statute.

‘Liberty at Peril’

“The fragmentation of power produced by the structure of our government is central to liberty, and when we destroy it, we place liberty at peril,” the dissenters wrote. “Today’s decision should have vindicated, should have taught, this truth; instead, our judgment today has disregarded it.”

Among the majority, Justices Ruth Bader Ginsburg and Sonia Sotomayor voted to uphold the entire statute. Justices Stephen Breyer and Elena Kagan agreed with Roberts in limiting the Medicaid expansion.

Kennedy and Ginsburg each took the unusual step of reading a summary of their opinion from the bench. All told, the justices took more than an hour to announce the ruling before a packed courtroom that included members of Congress, retired Justice John Paul Stevens and Solicitor General Donald Verrilli, the Obama administration lawyer whose defense of the law drew criticism.

The dispute marked the first time the Supreme Court had considered a president’s defining legislative accomplishment in the middle of his re-election campaign. The court hadn’t taken up a law of comparable scope since the justices overturned part of the National Industrial Recovery Act in 1935 during President Franklin Roosevelt’s New Deal.

Biggest Change

The law represents the biggest change to the U.S. health system since Medicare and Medicaid were established in 1965. It was designed to expand coverage to at least 30 million people -- primarily by expanding Medicaid and setting up online markets where consumers could buy insurance -- while controlling the soaring costs of health care.

The law was challenged by 26 Republican-controlled states and a small-business trade group. They contended the measure exceeded Congress’s constitutional powers to regulate interstate commerce and impose taxes.

The challenge focused on the insurance mandate, which requires Americans to get coverage by 2014 or pay a penalty. The concept was championed by Republicans years ago as an alternative to Democratic proposals for a single government-run health system.

The ruling will shape Roberts’s legacy as much as Obama’s. The 57-year-old chief justice -- whose 2005 nomination Obama opposed as a senator -- has been a leader of the court’s conservative wing on other issues.

Withholding Funds

The Medicaid expansion was designed to extend eligibility to those with incomes up to 133 percent of the federal poverty line. States that didn’t comply with the new expansion would have lost all or part of their federal Medicaid funds.

Roberts said Congress can require states to meet conditions to receive new Medicaid money, though it can’t take away existing funding. He said Medicaid spending accounts for more than 20 percent of the average state’s total budget, with the federal government covering at least half those costs.

“The financial ‘inducement’ Congress has chosen is much more than ‘relatively mild encouragement’ -- it is a gun to the head,” Roberts wrote. “What Congress is not free to do is to penalize states that choose not to participate in that new program by taking away their existing Medicaid funding.”

Industry Uncertainty

The ruling removes some of the uncertainty the health industry had faced about the future of government policy. By upholding the individual mandate, the court left intact a provision that will give insurers such as UnitedHealth Group Inc. (UNH) millions of relatively healthy, low-cost policyholders.

Other parts of the law will help the drug industry, including the Medicaid expansion and the system of online insurance markets that will make it easier for people to buy policies. Hospitals also may benefit, as will insurers that focus on managing states’ Medicaid programs, including Amerigroup Corp. (AGP) and Centene Corp. (CNC)

Hospital companies led by HCA Holdings Inc. (HCA) jumped in New York trading yesterday, and Medicaid insurers paced by Molina Healthcare Inc. (MOH) rose. Commercial carriers such as WellPoint Inc. (WLP) fell in the face of the law’s new regulations. Today, HCA, the biggest U.S. hospital chain, rose 3.3 percent to $30.43 at the close of New York trading.

Tenet Healthcare Corp. (THC), the third-biggest chain, closed today with 0.2 percent decline after gaining 5.4 percent yesterday. Long Beach, California-based Molina rose 1.3 percent. Indianapolis-based WellPoint, the second-largest U.S. health insurer, fell 3.2 percent to close at $63.79.

Prescription Drugs

Some parts of the law have already gone into effect, including provisions that close a gap in prescription-drug coverage under Medicare, allow 2.5 million young adults to stay on their parents’ insurance until age 26, and provide free mammograms, colonoscopies and flu shots.

The health-care measure’s enactment in March 2010 marked the culmination of decades of efforts by Democrats and Republicans alike to put in place a universal health-care program. For Obama, congressional approval marked a victory that had eluded presidents from Harry Truman to Bill Clinton.

Passage in the Democratic-controlled Congress came only after months of lobbying, deal-making and parliamentary maneuvering. In the end, not a single Republican voted in favor of the law.

From the beginning, the law divided the public, with opposition fueling the Tea Party movement and helping produce the 2010 Republican takeover of the House.

An Associated Press-GfK Poll taken before the Supreme Court vote showed that 47 percent of respondents opposed the health- care law and 33 percent supported it, with only 21 percent of political independents backing the measure. The survey of 1,007 adults, taken June 14-18, had a margin of error of plus or minus 4 percentage points.

To contact the reporter on this story: Greg Stohr in Washington at

To contact the editor responsible for this story: Steven Komarow at


EU Banking Debate Shifts to Euro Area After Accord on Spain

By Rebecca Christie and Jim Brunsden - Jun 30, 2012 6:01 AM GMT+0700

The European Union’s push to unify bank oversight moved to the euro area after two days of talks in Brussels, putting the European Central Bank at the center of Spain’s efforts to extract its government from its banking- industry rescue.

Euro-area leaders asked for proposals this year to unify banking supervision and soup up the ECB’s powers. They referred to a clause in the EU treaty that allows them to give the ECB prudential oversight of banks and other non-insurance financial companies.

ECB President Mario Draghi welcomed the summit’s overall conclusions and acknowledged the Brussels-based commission’s mandate to assess the ECB’s role as allowed in the treaty. Photographer: Hannelore Foerster/Bloomberg

The European Central Bank's (ECB) headquarters in Frankfurt. Photographer: Simon Dawson/Bloomberg

The move paves the way for the European Commission, the EU’s regulatory arm, to augment its proposals on deposit insurance, capital requirements and how to handle failing banks. It also acknowledges concerns from the U.K. and Sweden that countries outside the currency area be free from mandates to join the ECB umbrella.

Once Europe establishes a single banking supervisor, leaders said they may allow cash-strapped lenders to be recapitalized directly instead of through their home governments. This could break the link between banks and sovereigns that has plagued the euro area throughout the crisis and become a particular flash point for Spain’s bank rescue.

‘Held Hostage’

“The Spanish sovereign is effectively being held hostage to what is likely to be a tortuous political process in putting the ECB in charge of euro-zone banks,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy in London. He said direct recapitalization of Spanish banks is the summit’s most important achievement and hinges on creation of an independent supervisory authority.

French President Francois Hollande predicted that ECB supervision over euro-area banks wouldn’t be in place before year end. British Prime Minister David Cameron said “the euro- zone countries are well on the way to making the euro-zone bank, the ECB, the regulators of their banks. That will be a good outcome.”

ECB President Mario Draghi welcomed the summit’s overall conclusions and acknowledged the Brussels-based commission’s mandate to assess the ECB’s role as allowed in the treaty. Speaking to reporters today, he did not elaborate on how the commission’s proposals should take shape other than to say “all these things should be, to be credible, accompanied by strict conditionality.”

National Supervisors

The Frankfurt-based ECB might end up serving as an umbrella over national supervisors, rather than building a separate organization, EU officials said in the run-up to this week’s summit. EU members would need to decide how many banks to include and how the ECB would work with the European Banking Authority, which was created to help supervisors coordinate across the 27-nation bloc.

EU Financial Services Commissioner Michel Barnier called on all the bloc’s nations to broker deals on draft financial regulations in the coming weeks as a “cornerstone” of the banking union that EU leaders seek to secure the long-term future of the euro, in an interview in Brussels yesterday. He said decisions on whether the ECB or the London-based EBA gain enhanced powers depends on how all 27 nations agree to further pool their bank-oversight powers.

The EBA, which began work last year, was set up as part of the EU’s response to the crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. It coordinates the work of national regulators and has some power to resolve disputes between them.

Banking Union

Where to place enhanced supervisory power becomes a trickier decision if individual countries opt out of a banking union, Barnier said, in part because the ECB decides monetary policy for the 17 countries of the euro area, and in part because of other aspects of the EBA’s mandate. Should all 27 EU countries sign up for the banking union plans, then the enhanced power for the EU to supervise lenders should “probably” be handed to the EBA, Barnier said.

“If you are fewer than 27 then there is an issue to resolve with the EBA, if you are more than 17 then there is an issue to resolve with the ECB,” he said. “This is why there are a range of possible models, and why we need some weeks or months to work on this.”

The adoption of proposals that the commissioner has made on bank capital requirements, coordination of deposit guarantee programs and the winding-down of failing banks is a “precondition” for the creation of a banking union, Barnier said yesterday in an interview with Bloomberg News in Brussels. The draft laws should be settled “in the weeks to come, or in the case of crisis resolution before the end of the year.”

Depending on the outcome of the summit, the commission will present plans for extra EU supervision of banks, as well as for “the mutualization of deposit guarantee funds and resolution funds” by year end, Barnier said.

To contact the reporter on this story: Jim Brunsden in Brussels at

To contact the editor responsible for this story: Anthony Aarons at


S&P 500 Caps Best June Since 1999 on European Agreement

By Rita Nazareth and Julia Leite - Jun 30, 2012 4:27 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) capped the biggest June rally since 1999 after European leaders reached an agreement that alleviated concern banks will fail.

June 29 (Bloomberg) -- Bloomberg's Sara Eisen reports that as equity markets in the U.S. and Europe rally on news from the EU summit, the crisis is far from over. Markets were encouraged as EU leaders did do more than expected by easing repayment rules for Spanish banks, relaxing conditions for possible aid to Italy and unveiling a $149 billion growth plan for the region’s economy. She speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

The floor of the New York Stock Exchange on June 28, 2012. Photographer: Richard Drew/AP Photo

U.S. stocks rallied even after data showed U.S. consumer spending stalled in May. Photographer: Richard Drew/AP Photo

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All 10 groups in the S&P 500 rose as industrial, technology and commodity shares had the biggest gains. Caterpillar Inc. (CAT), Apple Inc. and Bank of America Corp. (BAC) climbed at least 2.6 percent to pace rallies among the biggest companies. Exxon Mobil (XOM) Corp. jumped 3 percent as oil surged 9.4 percent, the most in more than three years as commodities surged. KB Home climbed 13 percent after the homebuilder reported a narrower loss.

The S&P 500 jumped 2.5 percent, the most in 2012, to 1,362.16 at 4 p.m. New York time. It rallied 4 percent this month for the biggest advance since February. The Dow Jones Industrial Average added 277.83 points, or 2.2 percent, to 12,880.09. It had the biggest monthly advance since October, rising 3.9 percent. The Nasdaq Composite Index and the Russell 2000 Index rose at least 2.9 percent today, the most in 2012. Volume for exchange-listed stocks in the U.S. was 7.9 billion shares, or 16 percent above the three-month average.

“We are getting a pretty nice relief rally,” said Christopher Orndorff, who helps oversee $450 billion as senior portfolio manager at Western Asset Management Co. in Pasadena, California. He spoke in a telephone interview. Europe’s deal “appears to be a step in the right direction in terms of solving the problem from a longer term perspective.”

Stocks gained, joining a global rally, as European leaders agreed to relax conditions on emergency loans for Spanish banks and possible help for Italy as an outflanked German Chancellor Angela Merkel gave in on expanded steps to stem the debt crisis.

Second Quarter

Today’s gain trimmed the second-quarter decline in the S&P 500 to 3.3 percent. The index still capped the worst quarter since September. More than $1 trillion was erased from U.S. equity values from the end of March through yesterday on concern about a worsening of Europe’s debt crisis and a global slowdown.

The Dow slumped 2.5 percent this quarter. Over the last century, July has been the best month for the 30-stock gauge, with an average return of 1.4 percent, according to data compiled by Bespoke Investment Group. It has rallied an average 0.8 percent in July over the last 50 years, the data showed.

In the U.S., business activity unexpectedly expanded in June at a faster pace. Other reports showed that consumer spending stalled in May, while household sentiment dropped in June to the lowest level of the year.

The Morgan Stanley Cyclical Index (CYC) of companies most-tied to the economy jumped 2.7 percent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against S&P 500 losses, tumbled 13 percent to 17.08, extending its monthly plunge to 29 percent.

Apple, Exxon

Caterpillar, the world’s largest maker of construction equipment, gained 2.8 percent to $84.91. Apple, the most- valuable company, added 2.6 percent to $584. Bank of America increased 5.7 percent to $8.18. Exxon Mobil jumped 3 percent to $85.57. Alcoa Inc. (AA), the first company in the Dow to report quarterly results on July 9, added 2.8 percent to $8.75.

A measure of homebuilders in S&P indexes jumped 4.8 percent, to the highest level since 2008. KB Home (KBH) climbed 13 percent to $9.80 as the company sold more houses at higher prices during its fiscal second quarter ended May 31.

Constellation Brands Inc. (STZ) surged 24 percent to $27.06 after agreeing to buy the other half of its Crown Imports joint venture with Grupo Modelo SAB (GMODELOC) for about $1.85 billion, becoming the sole U.S. importer of top-selling Corona beer.

ValueClick Inc. (VCLK) soared 16 percent to $16.39. The Internet- advertising company said second-quarter revenue was probably at the higher end of its forecast range.

Truck Engine

Navistar International Corp. (NAV) climbed 11 percent to $28.37. The company, which is trying to get its 13-liter truck engine certified for sale in the U.S., rallied after a report that it may start offering Cummins Inc. engines in addition to its own MaxxForce product.

Nike Inc. (NKE) tumbled 9.4 percent, the most since 2008, to $87.78. Fourth-quarter profit at the world’s largest sporting- goods company unexpectedly declined for the first time since 2009 as marketing costs increased and sales growth slowed.

Car companies had the biggest loss in the S&P 500 among 24 industries, dropping 1 percent. Ford Motor Co. (F) slumped 5 percent to $9.59. The automaker said its pretax operating profit will be “substantially lower” in the second quarter in part because overseas losses tripled from the year’s first three months.

Research In Motion Ltd. (RIMM) plunged 19 percent to $7.39, the lowest since 2003, after posting a loss and delaying the next BlackBerry operating system, increasing pressure on the company to find an acquirer. The Waterloo, Ontario-based smartphone maker also said it would cut 5,000 jobs.

34% Decline

Initial public offerings fell 34 percent this quarter as Facebook Inc.’s disappointing debut and worsening economic conditions rattled investors, pressuring companies to lure buyers with cheaper valuations.

IPOs globally raised $41.3 billion, the worst second quarter since 2009, Bloomberg data show. That compared with $62.7 billion a year ago. At least 50 companies shelved sales as Europe’s debt crisis spread, growth prospects slowed in China and Facebook’s stock sank 18 percent from its May 17 IPO (FB) price.

“With the economy and with Europe, there are more questions than answers in investors’ minds, and they want some clarity before they put their money down,” said Matt McCormick, who helps oversee $6.2 billion at Cincinnati-based Bahl & Gaynor Inc. “After what happened with Facebook, people want IPOs to go off without a hitch.”

Monthlong Drought

Facebook flopped after pricing its IPO at more than 100 times earnings and kicked off a monthlong drought in the U.S. Global IPOs that followed, including Felda Global Ventures Holdings Bhd, a Malaysian palm-oil plantation operator, and EQT Midstream Partners LP, offered discounts to investors.

Coty Inc., the perfume maker that pulled a takeover offer for Avon Products Inc. (AVP), filed for an initial public offering seeking as much as $700 million.

All the shares in the IPO will be offered by existing shareholders, the company said in a filing today. Coty, based in New York, withdrew its sweetened $10.7 billion offer for Avon on May 15, citing the cosmetics seller’s refusal to negotiate. The company hired Bank of America, JPMorgan Chase & Co. and Morgan Stanley to help manage its share sale, it said.

To contact the reporters on this story: Rita Nazareth in New York at; Julia Leite in New York at

To contact the editor responsible for this story: Lynn Thomasson at