By Ben Sills
Oct. 2 (Bloomberg) -- Registered unemployment in Spain surged by almost a third in September from a year earlier after a decade-long real-estate boom ended, leading to a slump in homebuilding.
The number of people claiming unemployment benefits jumped 30 percent, or 608,005, the Labor Ministry said in an e-mailed statement. Claims rose 3.7 percent, or 95,367, from August, marking a sixth monthly increase.
Spain's economy faces its first recession in 15 years in the second half as the construction slump drags down activity in services and manufacturing, the European Commission said. The number of mortgages for home purchases fell by almost a third in the year to July as banks, starved of capital by the global credit shortage, reined in lending.
Unemployment in service industries rose 3.8 percent, or 56,897, as the summer tourist season ended. Jobless claims among construction workers rose 3.3 percent.
To contact the reporter on this story: Ben Sills in Madrid at bsills@bloomberg.net
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Thursday, October 2, 2008
Australia's Rudd Under Fire for Giving Lenders Leeway on Rates
By Jacob Greber
Oct. 2 (Bloomberg) -- The Australian government has given the nation's banks an argument to withhold part of next week's potential central bank interest-rate cut, Opposition leader Malcolm Turnbull said.
Prime Minister Kevin Rudd said late yesterday Australian lenders ``are not immune from the impacts'' of rising finance costs amid the global credit squeeze and that he expects ``a maximum pass through'' of any cuts to the benchmark rate.
Turnbull, a former Goldman Sachs Group Inc. banker, seized on the comments as evidence the government has ``run up the white flag'' on banks, which are ``profitable enough to pass on in full any rate cut'' by the Reserve Bank of Australia. The debate flared ahead of next week's meeting of policy makers, who are expected to reduce the overnight cash rate by 50 basis points, according to a Bloomberg News survey.
``The government is being brutally honest and saying it how it is, but they're going to get pilloried politically,'' said Joshua Williamson, a senior strategist at TD Securities Ltd.
``Until we see the end of the credit crunch, which isn't likely until next year, we're going to be in an environment where not all of the Reserve Bank's cuts will be passed on.''
Rudd's comments were echoed yesterday by Treasurer Wayne Swan, who said he will be putting pressure on banks to ``ensure they pass on the maximum amount that is economically responsible given events in the global markets.''
The government's statements this week contrast with ones issued in August ahead of the Reserve Bank's Sept. 2 rate decision, when Swan said lenders including Commonwealth Bank of Australia and Westpac Banking Corp. had ``no excuse at all for not following the official cash rate down.''
Half-Point Cut
Reserve Bank Governor Glenn Stevens cut the benchmark rate by a quarter point to 7 percent last month for the first time in seven years on concern that domestic demand ``could weaken more sharply than necessary.''
Speculation has mounted in the past week that Stevens will be forced to cut by a half point next week, rather than a quarter point, as turmoil on financial markets prompts banks to hoard cash.
The interbank offered rate for Australian banks has climbed 65 basis points to 7.93 percent since Steven's interest-rate reduction last month, when the benchmark rate was 7 percent. The interbank rate is a gauge of bank funding.
Australian bank stocks have been buffeted after the U.S. government's $700 billion bailout for Wall Street was rejected by the House of Representatives. Commonwealth Bank has tumbled 23 percent this year, Westpac is down 15 percent, Australia & New Zealand Banking Group has declined 31 percent and National Australia Bank 32 percent.
Emotive Issue
Investors have increased bets on the size of the Reserve Bank's potential rate cut next week, according to a Credit Suisse Group index of interest-rate swaps. The chance of a 50 basis point reduction was 79 percent at 1:15 p.m. in Sydney, compared with 14 percent on Sept. 15.
Eleven of 18 economists surveyed by Bloomberg News yesterday predicted Stevens will cut the rate by half a point and seven expect a quarter-point reduction.
Cuts to the benchmark interest rate are an emotive issue in Australia, where around 90 percent of homeowners have variable- rate mortgages. That contrasts with the U.S., where the most borrowers have fixed-rate loans.
Prior to last month's central bank rate reduction, Australia's major lenders added an average 105 basis points to mortgage rates this year. Stevens had raised the benchmark by a total of 50 basis points in that time.
Bank Defense
``Australian banks have the capacity, given their profitability, given their size, to pass on in full any official interest-rate cut from the Reserve Bank,'' said Turnbull, who heads a coalition of opposition Liberal and National parties.
``Wayne Swan seems to have run up the white flag as far as interest rates are concerned with banks.''
Banks have rejected Turnbull's statement for showing a ``lack of understanding about the funding position of banks,'' according to the Australian Bankers' Association.
Demands by Turnbull to cut rates in full ``would potentially weaken the banks and further undermine the position of non-bank lenders at a crucial time for there to be stability in the sector,'' the association said in a statement.
Mike Smith, chief executive officer of ANZ Bank, signaled last week the nation's fourth-largest lender may not pass to mortgage customers all of any central bank rate cuts.
`Wait and See'
``It's in nobody's interests to keep rates high,'' Smith said. ``I want to reduce rates as well. However, I have to fund a book. We will have to wait and see.''
Commonwealth Bank's mortgages head Jim Sheffield told a parliamentary committee in Canberra on Sept. 25 that the bank would pass on ``as much to our customers as we can afford.
``But you have also got to bear in mind that we are in very turbulent waters at the moment,'' Sheffield said.
Banks and other lenders ``continue to face heightened levels of uncertainty in financial markets and future Reserve Bank rate cuts may not find their way to home loan borrowers,'' Fitch Ratings said in a report today.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
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Oct. 2 (Bloomberg) -- The Australian government has given the nation's banks an argument to withhold part of next week's potential central bank interest-rate cut, Opposition leader Malcolm Turnbull said.
Prime Minister Kevin Rudd said late yesterday Australian lenders ``are not immune from the impacts'' of rising finance costs amid the global credit squeeze and that he expects ``a maximum pass through'' of any cuts to the benchmark rate.
Turnbull, a former Goldman Sachs Group Inc. banker, seized on the comments as evidence the government has ``run up the white flag'' on banks, which are ``profitable enough to pass on in full any rate cut'' by the Reserve Bank of Australia. The debate flared ahead of next week's meeting of policy makers, who are expected to reduce the overnight cash rate by 50 basis points, according to a Bloomberg News survey.
``The government is being brutally honest and saying it how it is, but they're going to get pilloried politically,'' said Joshua Williamson, a senior strategist at TD Securities Ltd.
``Until we see the end of the credit crunch, which isn't likely until next year, we're going to be in an environment where not all of the Reserve Bank's cuts will be passed on.''
Rudd's comments were echoed yesterday by Treasurer Wayne Swan, who said he will be putting pressure on banks to ``ensure they pass on the maximum amount that is economically responsible given events in the global markets.''
The government's statements this week contrast with ones issued in August ahead of the Reserve Bank's Sept. 2 rate decision, when Swan said lenders including Commonwealth Bank of Australia and Westpac Banking Corp. had ``no excuse at all for not following the official cash rate down.''
Half-Point Cut
Reserve Bank Governor Glenn Stevens cut the benchmark rate by a quarter point to 7 percent last month for the first time in seven years on concern that domestic demand ``could weaken more sharply than necessary.''
Speculation has mounted in the past week that Stevens will be forced to cut by a half point next week, rather than a quarter point, as turmoil on financial markets prompts banks to hoard cash.
The interbank offered rate for Australian banks has climbed 65 basis points to 7.93 percent since Steven's interest-rate reduction last month, when the benchmark rate was 7 percent. The interbank rate is a gauge of bank funding.
Australian bank stocks have been buffeted after the U.S. government's $700 billion bailout for Wall Street was rejected by the House of Representatives. Commonwealth Bank has tumbled 23 percent this year, Westpac is down 15 percent, Australia & New Zealand Banking Group has declined 31 percent and National Australia Bank 32 percent.
Emotive Issue
Investors have increased bets on the size of the Reserve Bank's potential rate cut next week, according to a Credit Suisse Group index of interest-rate swaps. The chance of a 50 basis point reduction was 79 percent at 1:15 p.m. in Sydney, compared with 14 percent on Sept. 15.
Eleven of 18 economists surveyed by Bloomberg News yesterday predicted Stevens will cut the rate by half a point and seven expect a quarter-point reduction.
Cuts to the benchmark interest rate are an emotive issue in Australia, where around 90 percent of homeowners have variable- rate mortgages. That contrasts with the U.S., where the most borrowers have fixed-rate loans.
Prior to last month's central bank rate reduction, Australia's major lenders added an average 105 basis points to mortgage rates this year. Stevens had raised the benchmark by a total of 50 basis points in that time.
Bank Defense
``Australian banks have the capacity, given their profitability, given their size, to pass on in full any official interest-rate cut from the Reserve Bank,'' said Turnbull, who heads a coalition of opposition Liberal and National parties.
``Wayne Swan seems to have run up the white flag as far as interest rates are concerned with banks.''
Banks have rejected Turnbull's statement for showing a ``lack of understanding about the funding position of banks,'' according to the Australian Bankers' Association.
Demands by Turnbull to cut rates in full ``would potentially weaken the banks and further undermine the position of non-bank lenders at a crucial time for there to be stability in the sector,'' the association said in a statement.
Mike Smith, chief executive officer of ANZ Bank, signaled last week the nation's fourth-largest lender may not pass to mortgage customers all of any central bank rate cuts.
`Wait and See'
``It's in nobody's interests to keep rates high,'' Smith said. ``I want to reduce rates as well. However, I have to fund a book. We will have to wait and see.''
Commonwealth Bank's mortgages head Jim Sheffield told a parliamentary committee in Canberra on Sept. 25 that the bank would pass on ``as much to our customers as we can afford.
``But you have also got to bear in mind that we are in very turbulent waters at the moment,'' Sheffield said.
Banks and other lenders ``continue to face heightened levels of uncertainty in financial markets and future Reserve Bank rate cuts may not find their way to home loan borrowers,'' Fitch Ratings said in a report today.
To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net
Read more...
Philippines Cuts Growth Forecast, Plans More Spending
By Karl Lester M. Yap
Oct. 2 (Bloomberg) -- The Philippine government cut its growth forecasts a second time this week, saying exports and remittances from overseas workers will falter amid a U.S. economic slowdown.
The economy may expand 4.4 percent to 4.9 percent this year and 4.1 percent to 5.1 percent in 2009, Economic Planning Secretary Ralph Recto said in Manila today. He said Sept. 30 growth would be 4.5 percent to 5 percent in 2008, and 4.5 percent to 5.5 percent next year.
Finance Secretary Gary Teves said on Sept. 30 that growth may slow to as little as 3.8 percent under a worst-case scenario, signaling uncertainty about the extent of the slowdown as the U.S. financial crisis worsens. That may prompt Philippine policy makers to avoid further interest-rate increases after raising borrowing costs in the past three meetings.
``There has been writing on the wall for quite a long time now,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. ``The risks are still tilted toward more softness. There is some consensus among policy makers that they should address growth first.''
The government maintains worst-, middle- and best-case outlooks for the economy at any given time, and it usually provides a forecast growth range based on the middle scenario.
The Philippines has cut its growth targets four times this year as a credit-market crisis hurts demand for made-in-Asia Intel Corp. computer chips and other goods. Two out of three economists surveyed by Bloomberg News today expect the central bank to leave its benchmark interest rate at 6 percent on Oct. 6.
Easing Rates
``There's pressure for easing interest rates,'' Recto told reporters in Manila today. ``Inflation has peaked.''
Philippine consumer prices probably climbed between 11.8 percent and 12.7 percent from a year earlier after rising 12.5 percent in August, central bank Governor Amando Tetangco said this week.
The government plans to boost infrastructure and agriculture spending to spur growth, Teves said today. The budget deficit may be as much as 100 billion pesos ($2.1 billion) this year, a third higher than the original forecast of 75 billion pesos, Teves said on Sept. 30.
``They recognize they have to ramp up spending to buffer the economy,'' Varathan said. ``The need to boost government spending is quite broad-based in Asia.''
President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year.
Asset Sales
The Philippine government may sell its stakes in Petron Corp., the nation's largest refiner, and PNOC Exploration Corp., an oil and gas explorer, for 41 billion pesos to help fund its spending plans, Teves said today. He is also asking Congress to reduce company tax breaks by 10 billion pesos and raise excise taxes by 12 billion to 25 billion pesos.
The government still plans to balance its budget by 2010, Budget Secretary Rolando Andaya said today.
Growth in the $144 billion Southeast Asian economy slowed to 4.6 percent in the second quarter, the weakest pace in three years. It expanded 7.2 percent in 2007.
To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net
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Oct. 2 (Bloomberg) -- The Philippine government cut its growth forecasts a second time this week, saying exports and remittances from overseas workers will falter amid a U.S. economic slowdown.
The economy may expand 4.4 percent to 4.9 percent this year and 4.1 percent to 5.1 percent in 2009, Economic Planning Secretary Ralph Recto said in Manila today. He said Sept. 30 growth would be 4.5 percent to 5 percent in 2008, and 4.5 percent to 5.5 percent next year.
Finance Secretary Gary Teves said on Sept. 30 that growth may slow to as little as 3.8 percent under a worst-case scenario, signaling uncertainty about the extent of the slowdown as the U.S. financial crisis worsens. That may prompt Philippine policy makers to avoid further interest-rate increases after raising borrowing costs in the past three meetings.
``There has been writing on the wall for quite a long time now,'' said Vishnu Varathan, an economist at Forecast Singapore Pte. ``The risks are still tilted toward more softness. There is some consensus among policy makers that they should address growth first.''
The government maintains worst-, middle- and best-case outlooks for the economy at any given time, and it usually provides a forecast growth range based on the middle scenario.
The Philippines has cut its growth targets four times this year as a credit-market crisis hurts demand for made-in-Asia Intel Corp. computer chips and other goods. Two out of three economists surveyed by Bloomberg News today expect the central bank to leave its benchmark interest rate at 6 percent on Oct. 6.
Easing Rates
``There's pressure for easing interest rates,'' Recto told reporters in Manila today. ``Inflation has peaked.''
Philippine consumer prices probably climbed between 11.8 percent and 12.7 percent from a year earlier after rising 12.5 percent in August, central bank Governor Amando Tetangco said this week.
The government plans to boost infrastructure and agriculture spending to spur growth, Teves said today. The budget deficit may be as much as 100 billion pesos ($2.1 billion) this year, a third higher than the original forecast of 75 billion pesos, Teves said on Sept. 30.
``They recognize they have to ramp up spending to buffer the economy,'' Varathan said. ``The need to boost government spending is quite broad-based in Asia.''
President Gloria Arroyo in May pledged to boost investment and lift spending on rice and other subsidies to help Filipinos cope with soaring prices, abandoning her plan to balance the budget this year.
Asset Sales
The Philippine government may sell its stakes in Petron Corp., the nation's largest refiner, and PNOC Exploration Corp., an oil and gas explorer, for 41 billion pesos to help fund its spending plans, Teves said today. He is also asking Congress to reduce company tax breaks by 10 billion pesos and raise excise taxes by 12 billion to 25 billion pesos.
The government still plans to balance its budget by 2010, Budget Secretary Rolando Andaya said today.
Growth in the $144 billion Southeast Asian economy slowed to 4.6 percent in the second quarter, the weakest pace in three years. It expanded 7.2 percent in 2007.
To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net
Read more...
Latin America Economic Boom Threatened as Credit Freeze Deepens
By Joshua Goodman and Sebastian Boyd
Oct. 2 (Bloomberg) -- Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities.
``We're in a serious economic crisis,'' Colombian Vice President Francisco Santos said in an interview in his Bogota office. ``Financing is going to get scarcer and scarcer, and that means that investment is going to be difficult to attract.''
The region's growth in 2009 may be cut to less than 3.3 percent, from 4.6 percent this year, according to economists at Barclays Capital. The slowdown will make it harder to further reduce poverty that's fallen to its lowest levels since before the ``Lost Decade'' of the 1980s in which countries borrowed more than they could repay.
The crisis will test Latin America's decade-old commitment to debt reduction and open markets. Mexico this week shelved plans to privatize an airport, citing the U.S. crisis, while Costa Rican President Oscar Arias warned the country's growth rate may halve as investment drops. In Brazil, lending that has powered the country's fastest expansion in more than a decade is drying up, said Ricardo Espirito Santo, head of the Brazilian unit of Portugal's Banco Espirito Santo SA.
``The last four or five years were very good for Latin America, but that cycle is coming to an end,'' said Rodrigo Valdes, chief Latin America economist at Barclays Capital in New York. ``We expect a deceleration in practically all economies.''
Cutting Forecasts
Brazilian economists lowered 2009 growth projections to 3.6 percent on Sept. 26, from 4 percent two months earlier, according to a central bank survey. JPMorgan Chase & Co. cut its forecast for Latin America's largest economy to 3.2 percent from 3.8 percent.
Mexico, the second-biggest economy, may expand 2.5 percent next year, according to the average estimate of 33 economists surveyed by the central bank, which released its report yesterday. They had previously forecast 3 percent.
The region has posted average growth of 5.5 percent a year during the past five years, a pace not seen since 1970 to 1974, according to International Monetary Fund statistics.
Latin America may also see a drop in remittances from emigrants living in the U.S. Money transfers from Mexicans living outside the country dropped a record 12.2 percent in August, the central bank said yesterday. Remittances accounted for almost 3 percent of Mexico's gross domestic product last year.
``Mexico is very tied to the U.S., and they're going to get hammered,'' said Mark Weisbrot, co-director of the Washington- based Center for Economic and Policy Research.
Plane Purchases Suffer
Empresa Brasileira de Aeronautica SA, the world's fourth- largest aircraft maker, said last week that tightening credit markets are making plane purchases difficult for some buyers.
Brazil's Localiza Rent a Car SA, the region's biggest car- rental company, delayed this week a 300 million real ($157.6 million) bond sale because of ``adverse market conditions.''
Central banks are injecting liquidity as foreign credit lines dry up. Chile's central bank canceled planned purchases of dollars and opened up a $500 million foreign currency swap window as the cost of borrowing dollars climbed.
``Local banks had counterparties overseas who provide them with dollars, but those banks have failed, been bought or tightened credit,'' said Ricardo Gomez, head of fixed-income sales and trading at Larrain Vial SA in Santiago.
Commodity Rout
Prices for commodities such as soy, gold, copper and oil, which helped fund the region's boom, have fallen 28 percent since their July 2 high, according to the RJ/CRB Commodity Price Index. Should prices return to their 10-year average, Latin America's balanced budgets would quickly revert to a deficit of 4.1 percent of gross domestic product, Morgan Stanley said in a Sept. 29 report.
Venezuelan President Hugo Chavez, who has relied on oil to fund his ``21st-century socialism,'' said the U.S. crisis will hit the region with the force of a ``hundred hurricanes'' and that ``no country can say it won't be affected.''
Venezuela is the country most vulnerable to a commodity slowdown, having seen its terms of trade, a measure of export earnings, more than double since 2001, according to a study by Brazil's national development bank. Brazil and Mexico's trading terms improved less than the 22 percent regional average, according to the same study based on United Nations data.
``The big question for Latin America is how long and deep is this cyclical downturn going to be, and how much is it going to reduce commodity prices,'' said Nicholas Field, who helps oversee about $18 billion in emerging-market equities at London- based Schroders Plc.
Building Reserves
Analysts including Paulo Leme, chief Latin American economist at Goldman Sachs Group, Inc. say the slowdown may be milder than in previous crises. Many regional governments have used revenue from the commodity boom to pay down debt and build reserves.
The eight largest South American economies shrank their debt as a proportion of gross domestic product from 2001 to 2008, according to Merrill Lynch research. Merrill expects growth to slow to 3.4 percent next year from 4.6 percent in 2008.
``It was a good ride,'' said Gray Newman, chief Latin American economist at Morgan Stanley in New York. ``But the era of abundance is over.''
To contact the reporters on this story: Joshua Goodman in Rio De Janeiro at jgoodman19@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities.
``We're in a serious economic crisis,'' Colombian Vice President Francisco Santos said in an interview in his Bogota office. ``Financing is going to get scarcer and scarcer, and that means that investment is going to be difficult to attract.''
The region's growth in 2009 may be cut to less than 3.3 percent, from 4.6 percent this year, according to economists at Barclays Capital. The slowdown will make it harder to further reduce poverty that's fallen to its lowest levels since before the ``Lost Decade'' of the 1980s in which countries borrowed more than they could repay.
The crisis will test Latin America's decade-old commitment to debt reduction and open markets. Mexico this week shelved plans to privatize an airport, citing the U.S. crisis, while Costa Rican President Oscar Arias warned the country's growth rate may halve as investment drops. In Brazil, lending that has powered the country's fastest expansion in more than a decade is drying up, said Ricardo Espirito Santo, head of the Brazilian unit of Portugal's Banco Espirito Santo SA.
``The last four or five years were very good for Latin America, but that cycle is coming to an end,'' said Rodrigo Valdes, chief Latin America economist at Barclays Capital in New York. ``We expect a deceleration in practically all economies.''
Cutting Forecasts
Brazilian economists lowered 2009 growth projections to 3.6 percent on Sept. 26, from 4 percent two months earlier, according to a central bank survey. JPMorgan Chase & Co. cut its forecast for Latin America's largest economy to 3.2 percent from 3.8 percent.
Mexico, the second-biggest economy, may expand 2.5 percent next year, according to the average estimate of 33 economists surveyed by the central bank, which released its report yesterday. They had previously forecast 3 percent.
The region has posted average growth of 5.5 percent a year during the past five years, a pace not seen since 1970 to 1974, according to International Monetary Fund statistics.
Latin America may also see a drop in remittances from emigrants living in the U.S. Money transfers from Mexicans living outside the country dropped a record 12.2 percent in August, the central bank said yesterday. Remittances accounted for almost 3 percent of Mexico's gross domestic product last year.
``Mexico is very tied to the U.S., and they're going to get hammered,'' said Mark Weisbrot, co-director of the Washington- based Center for Economic and Policy Research.
Plane Purchases Suffer
Empresa Brasileira de Aeronautica SA, the world's fourth- largest aircraft maker, said last week that tightening credit markets are making plane purchases difficult for some buyers.
Brazil's Localiza Rent a Car SA, the region's biggest car- rental company, delayed this week a 300 million real ($157.6 million) bond sale because of ``adverse market conditions.''
Central banks are injecting liquidity as foreign credit lines dry up. Chile's central bank canceled planned purchases of dollars and opened up a $500 million foreign currency swap window as the cost of borrowing dollars climbed.
``Local banks had counterparties overseas who provide them with dollars, but those banks have failed, been bought or tightened credit,'' said Ricardo Gomez, head of fixed-income sales and trading at Larrain Vial SA in Santiago.
Commodity Rout
Prices for commodities such as soy, gold, copper and oil, which helped fund the region's boom, have fallen 28 percent since their July 2 high, according to the RJ/CRB Commodity Price Index. Should prices return to their 10-year average, Latin America's balanced budgets would quickly revert to a deficit of 4.1 percent of gross domestic product, Morgan Stanley said in a Sept. 29 report.
Venezuelan President Hugo Chavez, who has relied on oil to fund his ``21st-century socialism,'' said the U.S. crisis will hit the region with the force of a ``hundred hurricanes'' and that ``no country can say it won't be affected.''
Venezuela is the country most vulnerable to a commodity slowdown, having seen its terms of trade, a measure of export earnings, more than double since 2001, according to a study by Brazil's national development bank. Brazil and Mexico's trading terms improved less than the 22 percent regional average, according to the same study based on United Nations data.
``The big question for Latin America is how long and deep is this cyclical downturn going to be, and how much is it going to reduce commodity prices,'' said Nicholas Field, who helps oversee about $18 billion in emerging-market equities at London- based Schroders Plc.
Building Reserves
Analysts including Paulo Leme, chief Latin American economist at Goldman Sachs Group, Inc. say the slowdown may be milder than in previous crises. Many regional governments have used revenue from the commodity boom to pay down debt and build reserves.
The eight largest South American economies shrank their debt as a proportion of gross domestic product from 2001 to 2008, according to Merrill Lynch research. Merrill expects growth to slow to 3.4 percent next year from 4.6 percent in 2008.
``It was a good ride,'' said Gray Newman, chief Latin American economist at Morgan Stanley in New York. ``But the era of abundance is over.''
To contact the reporters on this story: Joshua Goodman in Rio De Janeiro at jgoodman19@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net
Read more...
France, Germany Clash Over Proposal to Bail Out Banks
By James Hertling
Oct. 2 (Bloomberg) -- France and Germany clashed over whether to create a fund to bail out banks pounded by the global credit crunch, kicking off a European version of the debate that has been raging in the U.S. for two weeks.
French Finance Minister Christine Lagarde told the German newspaper Handelsblatt in an interview to be published today that a ``rescue package'' was needed to help ``smaller'' European states ``threatened with a banking failure.'' Germany opposed the proposal, with finance ministry spokesman Torsten Albig saying his government ``doesn't support the plan.''
The conflict between the two biggest euro-region economies undermined efforts to build a consensus European response to the financial crisis as a recession looms. Other fissures emerged, as Ireland's decision to guarantee bank deposits and debts prompted criticism by British bankers yesterday that it ``distorted competition.''
Fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy hit Europe this week, with France, Belgium, Luxembourg and the U.K. rescuing four lenders and Italian Prime Minister Silvio Berlusconi pledging to prevent losses for depositors.
In the U.S., Treasury Secretary Henry Paulson proposed a $700 billion bailout on Sept. 20 that lawmakers have been struggling to pass. The House of Representatives rejected a version of the plan three days ago. The Senate approved the package late yesterday and urged opponents in the House to drop their objections.
`Non-Starter'
A European version of the Paulson plan is a ``non-starter'' because of competing agendas and coordination difficulties, Klaus Baader, chief European economist at Merrill Lynch and Co. in London, said in a Sept. 29 report. Still, he expects increased cooperation among governments confronting the crisis.
French President Nicolas Sarkozy may propose the bailout fund at an Oct. 4 meeting that Luxembourg Prime Minister Jean- Claude Juncker said he's attending with leaders of Great Britain, Italy and Germany, as well as European Central Bank President Jean-Claude Trichet.
The proposed fund would total 300 billion euros ($420 billion), Reuters reported, citing an unidentified European government official.
Lagarde, speaking at an event in Paris last night, disputed that figure, without saying whether it would be bigger or smaller. Henri Guaino, a special adviser to Sarkozy, said in a telephone interview that ``France has neither studied nor proposed a plan of that type to its partners.''
Coordinated Plan
The specifics of a coordinated plan notwithstanding, Germany rejects a Europe-wide approach to bank rescues, said Albig, the finance ministry spokesman.
``The idea of applying one solution, one big bang'' should the banking crisis spread ``is not practicable and would create new, enormous problems,'' he told reporters yesterday in Berlin. ``The tailor-made solution is the right way.''
That contrasts with pleas from European Union officials for less unilateral action. Charlie McCreevy, EU financial-services commissioner, yesterday proposed more coordinated oversight and rules that banks hold more capital for asset-backed bonds.
``Capital and strong financial institutions are the lifeblood of an economy,'' McCreevy said in a Bloomberg Television interview in Brussels.
Hoarded Cash
As banks hoarded cash, the London interbank offered rate, or Libor, that banks charge each other for one-month loans in euros climbed to an all-time high of 5.07 percent yesterday. The equivalent dollar rate surged to the highest level since January, the British Bankers' Association said. Overnight dollar loans slid from a record of 6.88 percent after funding constraints tied to the end of the third quarter passed.
The credit-market turmoil may require a more comprehensive approach in Europe, the Organization for Economic Cooperation and Development said yesterday.
``Considering the exposure of European financial institutions, we might have to start thinking of a systemic plan for Europe if things don't improve on the other side of the Atlantic,'' OECD Secretary General Angel Gurria said in Paris. ``The piecemeal approach may not work in Europe either.''
To contact the reporters on this story: James Hertling in Paris at jhertling@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- France and Germany clashed over whether to create a fund to bail out banks pounded by the global credit crunch, kicking off a European version of the debate that has been raging in the U.S. for two weeks.
French Finance Minister Christine Lagarde told the German newspaper Handelsblatt in an interview to be published today that a ``rescue package'' was needed to help ``smaller'' European states ``threatened with a banking failure.'' Germany opposed the proposal, with finance ministry spokesman Torsten Albig saying his government ``doesn't support the plan.''
The conflict between the two biggest euro-region economies undermined efforts to build a consensus European response to the financial crisis as a recession looms. Other fissures emerged, as Ireland's decision to guarantee bank deposits and debts prompted criticism by British bankers yesterday that it ``distorted competition.''
Fallout from the crisis that drove Lehman Brothers Holdings Inc. into bankruptcy hit Europe this week, with France, Belgium, Luxembourg and the U.K. rescuing four lenders and Italian Prime Minister Silvio Berlusconi pledging to prevent losses for depositors.
In the U.S., Treasury Secretary Henry Paulson proposed a $700 billion bailout on Sept. 20 that lawmakers have been struggling to pass. The House of Representatives rejected a version of the plan three days ago. The Senate approved the package late yesterday and urged opponents in the House to drop their objections.
`Non-Starter'
A European version of the Paulson plan is a ``non-starter'' because of competing agendas and coordination difficulties, Klaus Baader, chief European economist at Merrill Lynch and Co. in London, said in a Sept. 29 report. Still, he expects increased cooperation among governments confronting the crisis.
French President Nicolas Sarkozy may propose the bailout fund at an Oct. 4 meeting that Luxembourg Prime Minister Jean- Claude Juncker said he's attending with leaders of Great Britain, Italy and Germany, as well as European Central Bank President Jean-Claude Trichet.
The proposed fund would total 300 billion euros ($420 billion), Reuters reported, citing an unidentified European government official.
Lagarde, speaking at an event in Paris last night, disputed that figure, without saying whether it would be bigger or smaller. Henri Guaino, a special adviser to Sarkozy, said in a telephone interview that ``France has neither studied nor proposed a plan of that type to its partners.''
Coordinated Plan
The specifics of a coordinated plan notwithstanding, Germany rejects a Europe-wide approach to bank rescues, said Albig, the finance ministry spokesman.
``The idea of applying one solution, one big bang'' should the banking crisis spread ``is not practicable and would create new, enormous problems,'' he told reporters yesterday in Berlin. ``The tailor-made solution is the right way.''
That contrasts with pleas from European Union officials for less unilateral action. Charlie McCreevy, EU financial-services commissioner, yesterday proposed more coordinated oversight and rules that banks hold more capital for asset-backed bonds.
``Capital and strong financial institutions are the lifeblood of an economy,'' McCreevy said in a Bloomberg Television interview in Brussels.
Hoarded Cash
As banks hoarded cash, the London interbank offered rate, or Libor, that banks charge each other for one-month loans in euros climbed to an all-time high of 5.07 percent yesterday. The equivalent dollar rate surged to the highest level since January, the British Bankers' Association said. Overnight dollar loans slid from a record of 6.88 percent after funding constraints tied to the end of the third quarter passed.
The credit-market turmoil may require a more comprehensive approach in Europe, the Organization for Economic Cooperation and Development said yesterday.
``Considering the exposure of European financial institutions, we might have to start thinking of a systemic plan for Europe if things don't improve on the other side of the Atlantic,'' OECD Secretary General Angel Gurria said in Paris. ``The piecemeal approach may not work in Europe either.''
To contact the reporters on this story: James Hertling in Paris at jhertling@bloomberg.net
Read more...
Bailout Bill Sent Back to House After Senate Passage
By James Rowley and Nicholas Johnston
Oct. 2 (Bloomberg) -- The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure, following the House's rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
``The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation ``has a much better chance'' of passage this time, he said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote ``will send a very strong signal even to the Asian markets and others.''
The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3880 per euro at 8:51 a.m. in London, from $1.4009 late yesterday in New York.
Asian stocks and U.S. futures fell on concern the package won't be enough to avert a recession, with futures on the Standard & Poor's 500 Index falling 1.3 percent and the MSCI Asia Pacific Index slipping 1.7 percent. Europe's Dow Jones Stoxx 600 Index added 1 percent to 260.59 as of 9:02 a.m. in London.
Only 12 Votes
The extra measures may help sway some Republicans.
``They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. ``If they put these few fundamental reforms in there,'' congressional leaders ``would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
No Done Deal
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. ``We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
``The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. ``Why would I turn around and vote for it tomorrow evening or Friday?''
President George W. Bush said in a written statement after the vote that ``the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
Sweeteners
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
``There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was ``personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
``I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
``At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. ``We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net and Nicholas Johnston at njohnston3@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure, following the House's rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
``The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation ``has a much better chance'' of passage this time, he said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote ``will send a very strong signal even to the Asian markets and others.''
The dollar rose against the euro, approaching a one-year high, after the Senate approval, bolstering expectations the U.S. will act faster than Europe to address the seizure in credit markets. The dollar advanced to $1.3880 per euro at 8:51 a.m. in London, from $1.4009 late yesterday in New York.
Asian stocks and U.S. futures fell on concern the package won't be enough to avert a recession, with futures on the Standard & Poor's 500 Index falling 1.3 percent and the MSCI Asia Pacific Index slipping 1.7 percent. Europe's Dow Jones Stoxx 600 Index added 1 percent to 260.59 as of 9:02 a.m. in London.
Only 12 Votes
The extra measures may help sway some Republicans.
``They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. ``If they put these few fundamental reforms in there,'' congressional leaders ``would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
No Done Deal
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. ``We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
``The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. ``Why would I turn around and vote for it tomorrow evening or Friday?''
President George W. Bush said in a written statement after the vote that ``the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
Sweeteners
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
``There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was ``personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
``I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
``At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. ``We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net and Nicholas Johnston at njohnston3@bloomberg.net
Read more...
Swiss Government Sees Increased Growth Risks in 2009
By Simone Meier
Oct. 2 (Bloomberg) -- The Swiss government said it sees ``significantly'' higher risks to economic growth next year as the credit crunch weighs on a global expansion.
Swiss gross domestic product will rise 1.9 percent this year and 1.3 percent in 2009, the Bern-based State Secretariat for Economic Affairs said today in a statement, maintaining its forecasts from June. Risks to the 2009 outlook have ``significantly increased,'' the state secretariat said.
Switzerland's economy is cooling as financial-market turmoil hurts earnings at banks including UBS AG and Credit Suisse Group and a U.S.-led global slowdown weighs on export demand. The Swiss economy may slip into a recession early next year, the KOF economic research institute said on Sept. 29.
``We see a considerable economic slowdown, but not a recession,'' said Fabian Heller, an economist at Credit Suisse Group in Zurich. Still, the government's 2009 forecast ``seems a little bit on the optimistic side overall.''
The Swiss economy may expand just 0.3 percent next year after growing 1.9 percent in 2008, Zurich-based KOF said. The Swiss National Bank last month maintained its growth forecast for this year of between 1.5 percent and 2 percent, when keeping its key rate at 2.75 percent. It didn't give a 2009 projection.
`No Real Recession'
Aymo Brunetti, who heads the Economy Ministry's economic division, said in a telephone interview that while the government still expects a ``moderate recovery'' in the second half of 2009, risks to the forecast are ``clearly pointing downward.'' Growth could be ``considerably'' less than 1 percent next year if the European slowdown deepens, he said.
The European Commission last month cut its growth forecast for the economy of the 15 euro nations to 1.3 percent from 1.7 percent and predicted a recession in Germany, Switzerland's largest trading partner. The Brussels-based commission said it may also trim its 2009 forecast next month.
``Uncertainty regarding the economic outlook has increased,'' Brunetti said. ``We don't expect the economy to slip into a real recession, however.''
With the financial-services industry accounting for about 16 percent of GDP, the Swiss economy is more vulnerable to the global credit crunch sparked by the U.S. housing slump. The SNB along with the world's largest central banks has injected billions into the financial system to facilitate lending.
Largest Losses
UBS, the European bank with the largest losses from the global credit crisis, today posted its first quarterly profit in more than a year after cutting holdings of mortgage-related securities. Josef Ackermann, chief executive officer of German rival Deutsche Bank AG, said on Sept. 30 that it's important that ``trust returns to markets.''
In Switzerland, a slowdown is already deepening. Manufacturing contracted for the first time in more than three years in September. A gauge of consumption dropped in August and leading economic indicators declined to a five-year low.
Swiss exports may rise 3.4 percent this year and 2.3 percent in 2009, the state secretariat said. Spending on equipment may increase 3 percent in 2008 before stalling in 2009. Consumer spending may weaken to 1.6 percent in 2009 from 1.9 percent.
The Swiss government's forecasts are based on estimates of the euro region expanding 1.4 percent this year and next. The German economy is seen growing 1.6 percent in 2008 and 1.4 percent in 2009 and the U.S. 1.6 percent and 1.3 percent.
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
Oct. 2 (Bloomberg) -- The Swiss government said it sees ``significantly'' higher risks to economic growth next year as the credit crunch weighs on a global expansion.
Swiss gross domestic product will rise 1.9 percent this year and 1.3 percent in 2009, the Bern-based State Secretariat for Economic Affairs said today in a statement, maintaining its forecasts from June. Risks to the 2009 outlook have ``significantly increased,'' the state secretariat said.
Switzerland's economy is cooling as financial-market turmoil hurts earnings at banks including UBS AG and Credit Suisse Group and a U.S.-led global slowdown weighs on export demand. The Swiss economy may slip into a recession early next year, the KOF economic research institute said on Sept. 29.
``We see a considerable economic slowdown, but not a recession,'' said Fabian Heller, an economist at Credit Suisse Group in Zurich. Still, the government's 2009 forecast ``seems a little bit on the optimistic side overall.''
The Swiss economy may expand just 0.3 percent next year after growing 1.9 percent in 2008, Zurich-based KOF said. The Swiss National Bank last month maintained its growth forecast for this year of between 1.5 percent and 2 percent, when keeping its key rate at 2.75 percent. It didn't give a 2009 projection.
`No Real Recession'
Aymo Brunetti, who heads the Economy Ministry's economic division, said in a telephone interview that while the government still expects a ``moderate recovery'' in the second half of 2009, risks to the forecast are ``clearly pointing downward.'' Growth could be ``considerably'' less than 1 percent next year if the European slowdown deepens, he said.
The European Commission last month cut its growth forecast for the economy of the 15 euro nations to 1.3 percent from 1.7 percent and predicted a recession in Germany, Switzerland's largest trading partner. The Brussels-based commission said it may also trim its 2009 forecast next month.
``Uncertainty regarding the economic outlook has increased,'' Brunetti said. ``We don't expect the economy to slip into a real recession, however.''
With the financial-services industry accounting for about 16 percent of GDP, the Swiss economy is more vulnerable to the global credit crunch sparked by the U.S. housing slump. The SNB along with the world's largest central banks has injected billions into the financial system to facilitate lending.
Largest Losses
UBS, the European bank with the largest losses from the global credit crisis, today posted its first quarterly profit in more than a year after cutting holdings of mortgage-related securities. Josef Ackermann, chief executive officer of German rival Deutsche Bank AG, said on Sept. 30 that it's important that ``trust returns to markets.''
In Switzerland, a slowdown is already deepening. Manufacturing contracted for the first time in more than three years in September. A gauge of consumption dropped in August and leading economic indicators declined to a five-year low.
Swiss exports may rise 3.4 percent this year and 2.3 percent in 2009, the state secretariat said. Spending on equipment may increase 3 percent in 2008 before stalling in 2009. Consumer spending may weaken to 1.6 percent in 2009 from 1.9 percent.
The Swiss government's forecasts are based on estimates of the euro region expanding 1.4 percent this year and next. The German economy is seen growing 1.6 percent in 2008 and 1.4 percent in 2009 and the U.S. 1.6 percent and 1.3 percent.
To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net.
Read more...
Palin May Find the Bubba Vote Isn't Enough: Margaret Carlson
Commentary by Margaret Carlson
Oct. 2 (Bloomberg) -- Just as every Super Bowl is going to be the game of the century, tonight's face-off between Governor Sarah Palin and Senator Joe Biden is touted as settling once and for all, well, nothing. History tells us that no one but family members cast votes for vice president.
This one should matter, given that the next president may be a 72-year-old, four-time cancer survivor who lately is behaving more like a cocky fighter pilot than captain of the ship of state. Palin could be president on Day Two, Three or Four, before she had time to learn on the job, if such learning is possible.
Palin with a prepared text on a large stage does fine. Without a script, not so fine. Expectations for her at the debate in St. Louis are at about curb level because of some rocky interviews. The press complains that John McCain's handlers have kept Palin in a cocoon when actually she's been spending every waking minute with Katie Couric, an inexplicable decision whose proponent may be looking for other work now.
No matter what Palin does tonight it may not erase the impression left by Tina Fey and You Tube clips of Couric patiently asking, ``Can you be specific?'' without success. Many of Palin's answers floated a familiar noun (experience, reform, terrorists, maverick) untethered to an object or verb, let alone a principle or a policy.
Just a routine question about what Supreme Court rulings she disagrees with other than Roe v. Wade set Palin off on a winding highway. ``There's, of course, in the great history of American rulings, there have been rulings, that's never going to be absolute consensus by every American. And there are those issues, again, like Roe v Wade, where I believe are best held on a state level and addressed there. So you know going through the history of America, there would be others.'' And that's just the half of it.
Sizing Up Russia
Surely, Palin knows that proximity to Russia as a basis for foreign-policy experience is laughable. Yet here is her explanation: ``As Putin rears his head and comes into the airspace of the United States... it's from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there next to our state.''
The performances have been so poor that several conservative pundits have said she isn't prepared for the job. Columnist Kathleen Parker suggested she step aside and cite the need to spend more time with her family, a claim that would ring truer for Palin than for most politicians who've used it.
Palin isn't likely to perform similarly in tonight's highly structured format. She's shown she can deliver zingers at earlier debates in Alaska. Even if the setting by a creek in Arizona seems low-key, the coaching has been intense by McCain's team. Their stated goal is to let Sarah be Sarah, to get her off ill- fitting talking points and on to even greater generalities like freedom, strength, prosperity, fairness.
Play the Refs
In case she bombs, the campaign has an excuse ready. Although the campaign signed off on PBS's Gwen Ifill well after it was known she has a book on race and the '08 campaign coming out in January, aides now contend that renders her a poor choice to moderate.
And let's not forget that Palin is personable, especially to Wal-Mart Moms. I'm more a Target Mom but I'd like to go shopping with her. In a Marist poll, 65 percent found her more likeable than Biden.
She described her constituency in an interview with radio host conservative talk-show host Hugh Hewitt: ``It's time that normal Joe Six-Pack American is finally represented in the position of vice presidency.''
No disrespect for Joe -- my family's full of them -- but were Palin asked to spell ``cat'' and miss by two letters, the ``base'' would likely love her more.
Winning Bubba's Heart
But Palin isn't just winning the Bubba vote. She's won Bubba himself, Bill Clinton.
Part of the explanation is that a two-term Barack Obama administration makes a Clinton restoration almost impossible. Women age in dog years, and Hillary Clinton will be 69 times seven in 2016. The other is that Bill likes Palin's type. He's spoken excitedly of her (``I come from Arkansas, I get why she's hot out there''), but in a barely audible monotone regarding Obama.
Perhaps the endless two-ways with Couric weren't a mistake. They deflected attention from McCain's sputtering: The economy is sound. No it isn't. The only way to save the country is to ``suspend'' his campaign, except for a few interviews and a New York photo-op before arriving 22 hours later at the White House to save the plan he was too busy to read.
Debate? Not without getting a bailout deal. No Deal? OK, just kidding. Back to Washington from Ole Miss because it's not right to ``phone it in.'' Arrive and spend the weekend phoning it in from his Arlington, Virginia, headquarters. To top it off, take credit for getting emergency legislation passed just before it didn't.
Tending to the Elite
Yesterday McCain said he's pleased Palin doesn't appeal to the ``Georgetown cocktail party person who calls themselves conservative,'' that her not going to Harvard ``is a plus.'' George W. Bush proved this can be a winning tactic.
Bush quietly made the elite more so by tending to their economic interests while playing up his love for Nascar Dads and barbecue. As long as you drop your g's, you can be way wealthier than Wal-Mart patrons (the Palins earn more than $200,000 a year) as long as you aspire to the same cultural class.
Obama's problem isn't only that he's black, it's that he speaks like the detached, analytic law professor he was.
With people's jobs, houses and retirement at stake, the elitist strategy might not work this time. After eight years of Bush, we may want to vote for the smart one this time, no matter where he shops.
(Margaret Carlson, author of ``Anyone Can Grow Up: How George Bush and I Made It to the White House'' and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Margaret Carlson in Washington at mcarlson3@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- Just as every Super Bowl is going to be the game of the century, tonight's face-off between Governor Sarah Palin and Senator Joe Biden is touted as settling once and for all, well, nothing. History tells us that no one but family members cast votes for vice president.
This one should matter, given that the next president may be a 72-year-old, four-time cancer survivor who lately is behaving more like a cocky fighter pilot than captain of the ship of state. Palin could be president on Day Two, Three or Four, before she had time to learn on the job, if such learning is possible.
Palin with a prepared text on a large stage does fine. Without a script, not so fine. Expectations for her at the debate in St. Louis are at about curb level because of some rocky interviews. The press complains that John McCain's handlers have kept Palin in a cocoon when actually she's been spending every waking minute with Katie Couric, an inexplicable decision whose proponent may be looking for other work now.
No matter what Palin does tonight it may not erase the impression left by Tina Fey and You Tube clips of Couric patiently asking, ``Can you be specific?'' without success. Many of Palin's answers floated a familiar noun (experience, reform, terrorists, maverick) untethered to an object or verb, let alone a principle or a policy.
Just a routine question about what Supreme Court rulings she disagrees with other than Roe v. Wade set Palin off on a winding highway. ``There's, of course, in the great history of American rulings, there have been rulings, that's never going to be absolute consensus by every American. And there are those issues, again, like Roe v Wade, where I believe are best held on a state level and addressed there. So you know going through the history of America, there would be others.'' And that's just the half of it.
Sizing Up Russia
Surely, Palin knows that proximity to Russia as a basis for foreign-policy experience is laughable. Yet here is her explanation: ``As Putin rears his head and comes into the airspace of the United States... it's from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there next to our state.''
The performances have been so poor that several conservative pundits have said she isn't prepared for the job. Columnist Kathleen Parker suggested she step aside and cite the need to spend more time with her family, a claim that would ring truer for Palin than for most politicians who've used it.
Palin isn't likely to perform similarly in tonight's highly structured format. She's shown she can deliver zingers at earlier debates in Alaska. Even if the setting by a creek in Arizona seems low-key, the coaching has been intense by McCain's team. Their stated goal is to let Sarah be Sarah, to get her off ill- fitting talking points and on to even greater generalities like freedom, strength, prosperity, fairness.
Play the Refs
In case she bombs, the campaign has an excuse ready. Although the campaign signed off on PBS's Gwen Ifill well after it was known she has a book on race and the '08 campaign coming out in January, aides now contend that renders her a poor choice to moderate.
And let's not forget that Palin is personable, especially to Wal-Mart Moms. I'm more a Target Mom but I'd like to go shopping with her. In a Marist poll, 65 percent found her more likeable than Biden.
She described her constituency in an interview with radio host conservative talk-show host Hugh Hewitt: ``It's time that normal Joe Six-Pack American is finally represented in the position of vice presidency.''
No disrespect for Joe -- my family's full of them -- but were Palin asked to spell ``cat'' and miss by two letters, the ``base'' would likely love her more.
Winning Bubba's Heart
But Palin isn't just winning the Bubba vote. She's won Bubba himself, Bill Clinton.
Part of the explanation is that a two-term Barack Obama administration makes a Clinton restoration almost impossible. Women age in dog years, and Hillary Clinton will be 69 times seven in 2016. The other is that Bill likes Palin's type. He's spoken excitedly of her (``I come from Arkansas, I get why she's hot out there''), but in a barely audible monotone regarding Obama.
Perhaps the endless two-ways with Couric weren't a mistake. They deflected attention from McCain's sputtering: The economy is sound. No it isn't. The only way to save the country is to ``suspend'' his campaign, except for a few interviews and a New York photo-op before arriving 22 hours later at the White House to save the plan he was too busy to read.
Debate? Not without getting a bailout deal. No Deal? OK, just kidding. Back to Washington from Ole Miss because it's not right to ``phone it in.'' Arrive and spend the weekend phoning it in from his Arlington, Virginia, headquarters. To top it off, take credit for getting emergency legislation passed just before it didn't.
Tending to the Elite
Yesterday McCain said he's pleased Palin doesn't appeal to the ``Georgetown cocktail party person who calls themselves conservative,'' that her not going to Harvard ``is a plus.'' George W. Bush proved this can be a winning tactic.
Bush quietly made the elite more so by tending to their economic interests while playing up his love for Nascar Dads and barbecue. As long as you drop your g's, you can be way wealthier than Wal-Mart patrons (the Palins earn more than $200,000 a year) as long as you aspire to the same cultural class.
Obama's problem isn't only that he's black, it's that he speaks like the detached, analytic law professor he was.
With people's jobs, houses and retirement at stake, the elitist strategy might not work this time. After eight years of Bush, we may want to vote for the smart one this time, no matter where he shops.
(Margaret Carlson, author of ``Anyone Can Grow Up: How George Bush and I Made It to the White House'' and former White House correspondent for Time magazine, is a Bloomberg News columnist. The opinions expressed are her own.)
To contact the writer of this column: Margaret Carlson in Washington at mcarlson3@bloomberg.net
Read more...
European Coal for 2009 Settlement Trades Unchanged at $151.25
By Alistair Holloway
Oct. 2 (Bloomberg) -- Benchmark European coal derivatives traded unchanged from yesterday's three-session high compared with closing prices.
The fuel for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year was at $151.25 a metric ton as of 7:42 a.m. in London. The data reflect actual trades supplied by ICAP Plc, GFI Group Inc., Spectron Group Ltd., Tullett Prebon Plc and TFS.
To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- Benchmark European coal derivatives traded unchanged from yesterday's three-session high compared with closing prices.
The fuel for delivery to Amsterdam, Rotterdam or Antwerp with settlement next year was at $151.25 a metric ton as of 7:42 a.m. in London. The data reflect actual trades supplied by ICAP Plc, GFI Group Inc., Spectron Group Ltd., Tullett Prebon Plc and TFS.
To contact the reporter on this story: Alistair Holloway in London at aholloway1@bloomberg.net
Read more...
Chinese Demand, Saudi Control Will Dictate Oil Price, WSJ Says
By Chris Peterson
Oct. 2 (Bloomberg) -- Continuing Chinese demand and the ability of Saudi Arabia to control output will be instrumental in keeping the price of oil resilient, despite the uncertainty caused by U.S. congressional wrangling over the financial rescue package, the Wall Street Journal reported, citing analysts.
Although some analysts had been predicting that the credit market turmoil and recession fears would precipitate a fall in prices because of a drop in demand, prices have hovered around the $100 mark; key to this is Chinese demand and Saudi control, the Journal reported.
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Oct. 2 (Bloomberg) -- Continuing Chinese demand and the ability of Saudi Arabia to control output will be instrumental in keeping the price of oil resilient, despite the uncertainty caused by U.S. congressional wrangling over the financial rescue package, the Wall Street Journal reported, citing analysts.
Although some analysts had been predicting that the credit market turmoil and recession fears would precipitate a fall in prices because of a drop in demand, prices have hovered around the $100 mark; key to this is Chinese demand and Saudi control, the Journal reported.
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Russian Oil Output Fell 0.4% in September, Continuing Decline
By Greg Walters
Oct. 2 (Bloomberg) -- Russia's oil production declined in September as companies struggled with costs and maturing fields, bringing the world's second-largest crude exporter closer to its first annual drop in output since 1998.
Production fell to 9.83 million barrels of crude a day (40.2 million metric tons a month), 0.4 percent less than a year earlier, according to figures released by the Energy Ministry's CDU-TEK unit.
To contact the reporter on this story: Greg Walters in Moscow gwalters1@bloomberg.net
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Oct. 2 (Bloomberg) -- Russia's oil production declined in September as companies struggled with costs and maturing fields, bringing the world's second-largest crude exporter closer to its first annual drop in output since 1998.
Production fell to 9.83 million barrels of crude a day (40.2 million metric tons a month), 0.4 percent less than a year earlier, according to figures released by the Energy Ministry's CDU-TEK unit.
To contact the reporter on this story: Greg Walters in Moscow gwalters1@bloomberg.net
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Shell May Form $1.7 Billion Siberian Venture, Kommersant Says
By Denis Maternovsky
Oct. 2 (Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil company, is in talks to form a venture with Russian explorer OOO TaasYuriakh Neftegazdobycha, Kommersant reported.
Shell may pay $1.7 billion for half of a venture that will develop the Srednebotuobinskoye field in eastern Siberia, the newspaper reported today, citing an unidentified person with knowledge of the talks.
The deal needs the approval of the Russian government because the field, which may hold 98 million tons of oil, is on a list of ``strategically important'' assets, Kommersant said. Urals Energy Plc, the London-traded oil producer operating in Russia, owns 35 percent of TaasYuriakh, the newspaper said.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net
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Oct. 2 (Bloomberg) -- Royal Dutch Shell Plc, Europe's largest oil company, is in talks to form a venture with Russian explorer OOO TaasYuriakh Neftegazdobycha, Kommersant reported.
Shell may pay $1.7 billion for half of a venture that will develop the Srednebotuobinskoye field in eastern Siberia, the newspaper reported today, citing an unidentified person with knowledge of the talks.
The deal needs the approval of the Russian government because the field, which may hold 98 million tons of oil, is on a list of ``strategically important'' assets, Kommersant said. Urals Energy Plc, the London-traded oil producer operating in Russia, owns 35 percent of TaasYuriakh, the newspaper said.
To contact the reporter on this story: Denis Maternovsky in Moscow at dmaternovsky@bloomberg.net
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Bush Wins Congressional Approval for India Atomic Energy Accord
By Viola Gienger
Oct. 2 (Bloomberg) -- President George W. Bush won final congressional approval for U.S. companies such as General Electric Co. to sell nuclear fuel and technology to India for its energy needs, achieving one of his top foreign policy priorities.
The Senate voted 86-13 late yesterday in favor of a resolution to support the U.S.-India Civil Nuclear Cooperation Agreement. The House approved the measure, sponsored by California Democrat Howard Berman, by a vote of 298-117 on Sept. 27. The legislation now goes to Bush for his signature.
``I look forward to signing this bill into law and continuing to strengthen the U.S.-India strategic partnership,'' Bush said in a statement after the vote.
The agreement allows U.S. companies to provide reactor technology, fuel and other services to help India produce energy in plants outside its atomic-weapons program. The U.S.-India Business Council estimates India will spend at least $175 billion during the next 30 years to expand nuclear-energy supplies and power economic growth of more than 8 percent annually.
``This is something we as a company have been advocating for,'' said Peter O'Toole, a spokesman for Fairfield, Connecticut- based GE, which already supplies non-nuclear technology and services to India. ``We have a long relationship with the Indian government, so we're very pleased with the passage.''
Supporters of the agreement said it creates potential political and economic links with the world's biggest democracy far beyond the nuclear-energy industry.
`Decades of Mistrust'
The agreement will erase decades of mistrust since India's 1974 atomic test prompted other countries to block nuclear exports to the nation, said Ron Somers, president of the Washington-based U.S.-India Business Council, which includes companies such as GE and PepsiCo Inc.
``We're now engaging India in a partnership based on trust and mutual respect,'' Somers said. ``This will affect positively all sectors of our two economies.''
Indian Prime Minister Manmohan Singh told the United Nations General Assembly in New York that his nation is committed to nuclear disarmament and has an ``impeccable record of non-proliferation.''
``India is a very important country for us, and this relationship is sealed in a very significant way by this agreement,'' said Indiana Senator Richard Lugar, the top Republican on the Foreign Relations Committee, who advocated for the approval with acting Chairman Christopher Dodd, a Connecticut Democrat.
Weapons Program
Opponents decried the agreement, saying it doesn't provide enough safeguards to prevent India from diverting domestic fuel and technology to its weapons program after gaining imported supplies.
That might allow India, which has never signed the nuclear Non-Proliferation Treaty, to increase its bomb production rate and spur neighboring Pakistan to accelerate its own, said the Washington-based Arms Control Association.
Dodd rejected such arguments, saying the resolution of approval and other U.S. laws such as the Atomic Energy Act cover potential violations by India.
``No one anywhere wants to see a further proliferation of nuclear weapons,'' Dodd said.
A group of 45 nuclear-supplier nations including the U.S. waived international restrictions on exports to India last month. The Nuclear Suppliers Group was founded in 1974 to prevent countries from copying India's use of imported technology to make its first atomic bomb.
Still, American companies needed the U.S. Congress to ratify the direct agreement with India to join the competition with potential suppliers in France, Russia and elsewhere.
India plans to acquire nuclear equipment worth $14 billion next year, Shreyans Kumar Jain, chairman of state-run monopoly Nuclear Power Corp., said Sept. 8.
Singh and French President Nicolas Sarkozy signed an agreement to cooperate on civil nuclear technology this week.
To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net.
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Oct. 2 (Bloomberg) -- President George W. Bush won final congressional approval for U.S. companies such as General Electric Co. to sell nuclear fuel and technology to India for its energy needs, achieving one of his top foreign policy priorities.
The Senate voted 86-13 late yesterday in favor of a resolution to support the U.S.-India Civil Nuclear Cooperation Agreement. The House approved the measure, sponsored by California Democrat Howard Berman, by a vote of 298-117 on Sept. 27. The legislation now goes to Bush for his signature.
``I look forward to signing this bill into law and continuing to strengthen the U.S.-India strategic partnership,'' Bush said in a statement after the vote.
The agreement allows U.S. companies to provide reactor technology, fuel and other services to help India produce energy in plants outside its atomic-weapons program. The U.S.-India Business Council estimates India will spend at least $175 billion during the next 30 years to expand nuclear-energy supplies and power economic growth of more than 8 percent annually.
``This is something we as a company have been advocating for,'' said Peter O'Toole, a spokesman for Fairfield, Connecticut- based GE, which already supplies non-nuclear technology and services to India. ``We have a long relationship with the Indian government, so we're very pleased with the passage.''
Supporters of the agreement said it creates potential political and economic links with the world's biggest democracy far beyond the nuclear-energy industry.
`Decades of Mistrust'
The agreement will erase decades of mistrust since India's 1974 atomic test prompted other countries to block nuclear exports to the nation, said Ron Somers, president of the Washington-based U.S.-India Business Council, which includes companies such as GE and PepsiCo Inc.
``We're now engaging India in a partnership based on trust and mutual respect,'' Somers said. ``This will affect positively all sectors of our two economies.''
Indian Prime Minister Manmohan Singh told the United Nations General Assembly in New York that his nation is committed to nuclear disarmament and has an ``impeccable record of non-proliferation.''
``India is a very important country for us, and this relationship is sealed in a very significant way by this agreement,'' said Indiana Senator Richard Lugar, the top Republican on the Foreign Relations Committee, who advocated for the approval with acting Chairman Christopher Dodd, a Connecticut Democrat.
Weapons Program
Opponents decried the agreement, saying it doesn't provide enough safeguards to prevent India from diverting domestic fuel and technology to its weapons program after gaining imported supplies.
That might allow India, which has never signed the nuclear Non-Proliferation Treaty, to increase its bomb production rate and spur neighboring Pakistan to accelerate its own, said the Washington-based Arms Control Association.
Dodd rejected such arguments, saying the resolution of approval and other U.S. laws such as the Atomic Energy Act cover potential violations by India.
``No one anywhere wants to see a further proliferation of nuclear weapons,'' Dodd said.
A group of 45 nuclear-supplier nations including the U.S. waived international restrictions on exports to India last month. The Nuclear Suppliers Group was founded in 1974 to prevent countries from copying India's use of imported technology to make its first atomic bomb.
Still, American companies needed the U.S. Congress to ratify the direct agreement with India to join the competition with potential suppliers in France, Russia and elsewhere.
India plans to acquire nuclear equipment worth $14 billion next year, Shreyans Kumar Jain, chairman of state-run monopoly Nuclear Power Corp., said Sept. 8.
Singh and French President Nicolas Sarkozy signed an agreement to cooperate on civil nuclear technology this week.
To contact the reporter on this story: Viola Gienger in Washington at vgienger@bloomberg.net.
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Senate Passes Energy Tax Breaks as Part of Markets Rescue Plan
By Daniel Whitten and Ryan J. Donmoyer
Oct. 2 (Bloomberg) -- The U.S. Senate approved tax cuts valued at more than $100 billion, including a host of alternative energy credits and dozens of breaks for businesses and individuals, as part of its $700 billion bank rescue bill.
The legislation, which the House likely will act on tomorrow, passed the Senate on a 74-25 vote. It would give the Treasury Department authority to buy troubled assets, chiefly mortgage- backed securities that are burdening financial institutions.
The Senate added the tax provisions to woo Republican votes in the House, where an earlier version of the bailout plan failed by 12 votes on Monday. The tax package would spare 24 million American households from a scheduled alternative minimum tax increase this year, renew credits for business research, and extend $17 billion in energy incentives.
House adoption of the provisions would end a 10-month stalemate in Congress over how to deal with the budget impact of the tax breaks. It would also bolster the balance sheets of companies such as Microsoft Corp. and Harley-Davidson Inc. that rely on the research credit, as well as those producing energy from wind and solar sources.
It would be ``virtually impossible'' to expand solar energy without the credit, Madison Grose, a managing director at Starwood Capital Group LLC, said yesterday in an interview before the vote. ``The cost to the rate base for these types of projects is substantially higher without the investment tax credit being part of the capitalization of the projects.''
Power Costs
Power bills from solar facilities would be as much as double those from other power sources, meaning solar power would not be ``economically possible or viable,'' he said. Starwood has an agreement with Lockheed Martin Corp. to finance solar projects.
The breaks for the energy industry include $1.9 billion for an eight-year tax extension for solar energy, $5.8 billion for wind, geothermal, biomass and other alternative energy production and $900 million for retooling refineries to process heavier oils from shale and Canada's tar sands.
The tax legislation also includes $42 billion in incentives for businesses and individuals for two years, including about a $9 billion annual research and development benefit.
House Goes Next
The bailout bill now goes to the House where it may face a close vote. House Republican leaders who support the bailout and tax measure say some members have been swayed by a torrent of calls from voters pressing lawmakers to pass the bill and a 777- point plunge in the Dow Jones Industrial Average Sept. 29 when the House defeated the initial bailout package.
``I can't assure you that the Republicans have the votes,'' House Majority Leader Steny Hoyer said on MSNBC yesterday.
Hoyer and a group of 49 self-described fiscally conservative Democrats, known as Blue Dogs, object that the tax credits are not fully paid for by offsetting new tax revenue.
Twenty-five of the Blue Dogs voted for the failed House version of the bailout legislation on Monday. Five of them said yesterday they would continue to support the measure, even with tax provisions that add to the deficit.
John Berger, chief executive officer of Houston-based Standard Renewable Energy Group LLC, which invests in solar and energy efficiency projects, said he would say to House lawmakers that may defeat the bailout, ``I'd like to have your number because I can't cover payroll next week because I can't borrow money from the banks to cover it.''
Revenue Boost
Berger said in a telephone interview yesterday his company's annual revenue of almost $20 million can be increased by five or six times if the tax credits are passed.
Monica McGuire, executive secretary for the R&D Credit Coalition, said her member companies have been forced to look to other countries while the tax benefit lapsed in the United States for the past 10 months.
``Many of our trading partners offer more generous R&D tax incentives that do not lapse 13 times such as the U.S. R&D tax credit,'' McGuire said.
The measure would pay for all of the energy tax breaks and about half of the business and individual so-called extenders by curtailing tax breaks oil companies get for job creation and overseas production, and by ending the deferral of taxes on profits earned in offshore funds.
The measure also includes dozens of other tax breaks large and small, ranging from the abolition of a 39 cent excise tax on makers of wooden arrows designed for children to a multi billion dollar incentive for U.S.-based financial services companies.
Other tax breaks benefit Hollywood producers, stock-car racetrack owners and Virgin Islands rum-makers. Lawmakers also included more than $8 billion in tax-relief intended to help Americans affected by natural disasters such as hurricanes and floods in recent years.
To contact the reporters on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- The U.S. Senate approved tax cuts valued at more than $100 billion, including a host of alternative energy credits and dozens of breaks for businesses and individuals, as part of its $700 billion bank rescue bill.
The legislation, which the House likely will act on tomorrow, passed the Senate on a 74-25 vote. It would give the Treasury Department authority to buy troubled assets, chiefly mortgage- backed securities that are burdening financial institutions.
The Senate added the tax provisions to woo Republican votes in the House, where an earlier version of the bailout plan failed by 12 votes on Monday. The tax package would spare 24 million American households from a scheduled alternative minimum tax increase this year, renew credits for business research, and extend $17 billion in energy incentives.
House adoption of the provisions would end a 10-month stalemate in Congress over how to deal with the budget impact of the tax breaks. It would also bolster the balance sheets of companies such as Microsoft Corp. and Harley-Davidson Inc. that rely on the research credit, as well as those producing energy from wind and solar sources.
It would be ``virtually impossible'' to expand solar energy without the credit, Madison Grose, a managing director at Starwood Capital Group LLC, said yesterday in an interview before the vote. ``The cost to the rate base for these types of projects is substantially higher without the investment tax credit being part of the capitalization of the projects.''
Power Costs
Power bills from solar facilities would be as much as double those from other power sources, meaning solar power would not be ``economically possible or viable,'' he said. Starwood has an agreement with Lockheed Martin Corp. to finance solar projects.
The breaks for the energy industry include $1.9 billion for an eight-year tax extension for solar energy, $5.8 billion for wind, geothermal, biomass and other alternative energy production and $900 million for retooling refineries to process heavier oils from shale and Canada's tar sands.
The tax legislation also includes $42 billion in incentives for businesses and individuals for two years, including about a $9 billion annual research and development benefit.
House Goes Next
The bailout bill now goes to the House where it may face a close vote. House Republican leaders who support the bailout and tax measure say some members have been swayed by a torrent of calls from voters pressing lawmakers to pass the bill and a 777- point plunge in the Dow Jones Industrial Average Sept. 29 when the House defeated the initial bailout package.
``I can't assure you that the Republicans have the votes,'' House Majority Leader Steny Hoyer said on MSNBC yesterday.
Hoyer and a group of 49 self-described fiscally conservative Democrats, known as Blue Dogs, object that the tax credits are not fully paid for by offsetting new tax revenue.
Twenty-five of the Blue Dogs voted for the failed House version of the bailout legislation on Monday. Five of them said yesterday they would continue to support the measure, even with tax provisions that add to the deficit.
John Berger, chief executive officer of Houston-based Standard Renewable Energy Group LLC, which invests in solar and energy efficiency projects, said he would say to House lawmakers that may defeat the bailout, ``I'd like to have your number because I can't cover payroll next week because I can't borrow money from the banks to cover it.''
Revenue Boost
Berger said in a telephone interview yesterday his company's annual revenue of almost $20 million can be increased by five or six times if the tax credits are passed.
Monica McGuire, executive secretary for the R&D Credit Coalition, said her member companies have been forced to look to other countries while the tax benefit lapsed in the United States for the past 10 months.
``Many of our trading partners offer more generous R&D tax incentives that do not lapse 13 times such as the U.S. R&D tax credit,'' McGuire said.
The measure would pay for all of the energy tax breaks and about half of the business and individual so-called extenders by curtailing tax breaks oil companies get for job creation and overseas production, and by ending the deferral of taxes on profits earned in offshore funds.
The measure also includes dozens of other tax breaks large and small, ranging from the abolition of a 39 cent excise tax on makers of wooden arrows designed for children to a multi billion dollar incentive for U.S.-based financial services companies.
Other tax breaks benefit Hollywood producers, stock-car racetrack owners and Virgin Islands rum-makers. Lawmakers also included more than $8 billion in tax-relief intended to help Americans affected by natural disasters such as hurricanes and floods in recent years.
To contact the reporters on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net
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Nigeria's Chanomi Creek Oil Pipeline Is Ruptured, Punch Reports
By John Viljoen
Oct. 2 (Bloomberg) -- Nigeria's Chanomi Creek oil pipeline in Delta State has been ruptured, potentially forcing the shutdown of the Warri oil refinery by tomorrow, the Punch newspaper reported,
No group has claimed responsibility for the damage, Punch said, citing ``unconfirmed reports'' that it may have been attacked by militants.
The ruptured pipeline is owned by Chevron Corp. and carries crude from Port Harcourt to the Warri and Kaduna refineries, Punch said. A second pipeline across Chanomi Creek, owned by Royal Dutch Shell Plc, carries 130,000 barrels a day for export.
The 125,000 barrel-a-day Warri refinery has supplies for just three days and may be forced to stop operating as soon as tomorrow, Punch cited an unnamed official at the plant as saying.
To contact the reporter on this story: John Viljoen in Sydney at jviljoen@bloomberg.net
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Oct. 2 (Bloomberg) -- Nigeria's Chanomi Creek oil pipeline in Delta State has been ruptured, potentially forcing the shutdown of the Warri oil refinery by tomorrow, the Punch newspaper reported,
No group has claimed responsibility for the damage, Punch said, citing ``unconfirmed reports'' that it may have been attacked by militants.
The ruptured pipeline is owned by Chevron Corp. and carries crude from Port Harcourt to the Warri and Kaduna refineries, Punch said. A second pipeline across Chanomi Creek, owned by Royal Dutch Shell Plc, carries 130,000 barrels a day for export.
The 125,000 barrel-a-day Warri refinery has supplies for just three days and may be forced to stop operating as soon as tomorrow, Punch cited an unnamed official at the plant as saying.
To contact the reporter on this story: John Viljoen in Sydney at jviljoen@bloomberg.net
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Taiwan Dollar Falls on Increasing Risk Aversion; Bonds Decline
By Bob Chen and Yu-huay Sun
Oct. 2 (Bloomberg) -- Taiwan's dollar fell for the fifth time in six days as increased demand for the U.S. currency damped investor appetite for emerging-market assets. Government bonds fell.
The currency weakened after the cost of borrowing U.S. dollars for one month in London rose to the highest level since January on speculation the deepening credit crisis will mean more banks will have to be rescued. Overseas investors were net sellers of Taiwan stocks for the last six days, selling NT$29.3 billion ($913 million) more than they bought during the period, stock exchange data show.
``You are seeing tight liquidity on the domestic currency front as well as the dollar front,'' said Irene Cheung, a corporate director of local-markets trading at ABN Amro Bank NV in Singapore. ``For Taiwan, when you have a U.S. dollar shortage, you just go and look for all the dollars that you can. One way is to get out of the emerging markets.''
The island's currency fell as much as 0.4 percent to NT$32.158 against the U.S. dollar, according to Taipei Forex Inc. It traded 0.3 percent down at NT$32.13 at 3:02 p.m. local time.
The central bank unexpectedly reduced its benchmark interest rate on Sept. 25 for the first time since 2003 to help counter an economic slowdown.
The U.S. Senate approved a $700 billion financial-rescue plan that funds the biggest government intervention in the markets since the Great Depression. The package now goes to the House of Representatives, which rejected an earlier version of the measure.
``There will be continued selling in the Asian markets,'' ABN Amro's Cheung said. ``The possibility of the bailout plan passing has already been factored in by the market, so it's not a new factor.''
Bonds Fall
Ten-year government bonds fell for a third day as traders awaited further progress on the U.S. government's financial- market rescue plan.
``There are very few people participating in the bond market,'' said Sharon Chen, a debt trader at KGI Securities Co. in Taipei. ``People are more cautious before the bail-out plan is settled.''
The yield on the benchmark 2.125 percent bond due September 2018 climbed 3.7 basis points to 2.165 percent at the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price fell 0.326, or NT$326 per NT$100,000 face amount, to 99.646. A basis point is 0.01 percentage point.
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net.
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Oct. 2 (Bloomberg) -- Taiwan's dollar fell for the fifth time in six days as increased demand for the U.S. currency damped investor appetite for emerging-market assets. Government bonds fell.
The currency weakened after the cost of borrowing U.S. dollars for one month in London rose to the highest level since January on speculation the deepening credit crisis will mean more banks will have to be rescued. Overseas investors were net sellers of Taiwan stocks for the last six days, selling NT$29.3 billion ($913 million) more than they bought during the period, stock exchange data show.
``You are seeing tight liquidity on the domestic currency front as well as the dollar front,'' said Irene Cheung, a corporate director of local-markets trading at ABN Amro Bank NV in Singapore. ``For Taiwan, when you have a U.S. dollar shortage, you just go and look for all the dollars that you can. One way is to get out of the emerging markets.''
The island's currency fell as much as 0.4 percent to NT$32.158 against the U.S. dollar, according to Taipei Forex Inc. It traded 0.3 percent down at NT$32.13 at 3:02 p.m. local time.
The central bank unexpectedly reduced its benchmark interest rate on Sept. 25 for the first time since 2003 to help counter an economic slowdown.
The U.S. Senate approved a $700 billion financial-rescue plan that funds the biggest government intervention in the markets since the Great Depression. The package now goes to the House of Representatives, which rejected an earlier version of the measure.
``There will be continued selling in the Asian markets,'' ABN Amro's Cheung said. ``The possibility of the bailout plan passing has already been factored in by the market, so it's not a new factor.''
Bonds Fall
Ten-year government bonds fell for a third day as traders awaited further progress on the U.S. government's financial- market rescue plan.
``There are very few people participating in the bond market,'' said Sharon Chen, a debt trader at KGI Securities Co. in Taipei. ``People are more cautious before the bail-out plan is settled.''
The yield on the benchmark 2.125 percent bond due September 2018 climbed 3.7 basis points to 2.165 percent at the 1:30 p.m. close in Taipei, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. The price fell 0.326, or NT$326 per NT$100,000 face amount, to 99.646. A basis point is 0.01 percentage point.
To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Yu-huay Sun in Taipei ysun7@bloomberg.net.
Read more...
Pound Falls Against Dollar; House Prices Drop Most Since 1991
By Agnes Lovasz
Oct. 2 (Bloomberg) -- The pound fell against the dollar after an industry report showed house prices dropped in September by the most since at least 1991, heightening speculation Britain is tipping into a recession.
The U.K. currency traded near the lowest level in three weeks as Nationwide Building Society said property values slid 12.4 percent from a year ago, matching the estimate in a Bloomberg survey of economists. The Bank of England releases its quarterly survey on credit conditions today. The reports may add to speculation policy makers will cut the key interest rate from 5 percent next month.
``The U.K. economy is on the brink of a recession,'' Ben Eldred and Katherine Dann, economists in London at Daiwa Securities SMBC Co., wrote in a research report. ``A move next month does look to be on the cards now, and this will herald an aggressive easing of policy through 2009.''
The U.K. currency fell to $1.7615, near the weakest since Sept. 12, before trading at $1.7633 as of 8:29 a.m. in London, from $1.7697 yesterday. It rose to 78.70 pence per euro, from 79.16 pence.
The European Central Bank decides on interest rates at 1:45 p.m. in Frankfurt. All 58 economists surveyed by Bloomberg expect policy makers to keep the benchmark rate at 4.25 percent.
U.K. house prices also fell 1.7 percent from August, more than predicted by economists, according to Nationwide, the U.K.'s fourth-biggest mortgage lender.
The Bank of England releases its third-quarter survey at 9:30 a.m. in London.
Manufacturing Contracts
The pound fell versus the dollar yesterday after an industry report showed manufacturing contracted last month at the fastest pace in 16 years amid a credit squeeze that has crippled bank lending. The government also said services- industry growth stalled in the three months through July for the first time in six years.
The worst banking crisis since the Great Depression has forced the sale of HBOS Plc, the U.K.'s biggest mortgage lender, prompted the government to seize Bradford & Bingley Plc and led the Bank of England to offer emergency funds to money markets. Banks granted the fewest home loans since at least 1999 in August.
The implied yield on the March short-sterling futures contract fell 4 basis points today to 4.79 percent as traders added to bets policy makers will lower borrowing costs in an effort to revive economic expansion.
Slowing growth will spur the central bank to lower its key rate in the fourth quarter to 4.75 percent from 5 percent now, according to the median forecast of economists in a Bloomberg survey. The next decision is scheduled for Oct. 9, when policy makers will probably keep the rate on hold then, according to a separate survey of economists.
Britain entered a recession in July, according to forecasts by the European Commission and the Confederation of British Industry, the country's biggest business lobby.
U.K. government bonds were little changed, with the yield on the 10-year gilt rising 1 basis point to 4.44 percent. The 5 percent security due June 2010 fell 0.05, or 50 pence per 1,000- pound ($1,766) face amount, to 104.32. The yield on the two-year note was at 3.97 percent. Bond yields move inversely to prices.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- The pound fell against the dollar after an industry report showed house prices dropped in September by the most since at least 1991, heightening speculation Britain is tipping into a recession.
The U.K. currency traded near the lowest level in three weeks as Nationwide Building Society said property values slid 12.4 percent from a year ago, matching the estimate in a Bloomberg survey of economists. The Bank of England releases its quarterly survey on credit conditions today. The reports may add to speculation policy makers will cut the key interest rate from 5 percent next month.
``The U.K. economy is on the brink of a recession,'' Ben Eldred and Katherine Dann, economists in London at Daiwa Securities SMBC Co., wrote in a research report. ``A move next month does look to be on the cards now, and this will herald an aggressive easing of policy through 2009.''
The U.K. currency fell to $1.7615, near the weakest since Sept. 12, before trading at $1.7633 as of 8:29 a.m. in London, from $1.7697 yesterday. It rose to 78.70 pence per euro, from 79.16 pence.
The European Central Bank decides on interest rates at 1:45 p.m. in Frankfurt. All 58 economists surveyed by Bloomberg expect policy makers to keep the benchmark rate at 4.25 percent.
U.K. house prices also fell 1.7 percent from August, more than predicted by economists, according to Nationwide, the U.K.'s fourth-biggest mortgage lender.
The Bank of England releases its third-quarter survey at 9:30 a.m. in London.
Manufacturing Contracts
The pound fell versus the dollar yesterday after an industry report showed manufacturing contracted last month at the fastest pace in 16 years amid a credit squeeze that has crippled bank lending. The government also said services- industry growth stalled in the three months through July for the first time in six years.
The worst banking crisis since the Great Depression has forced the sale of HBOS Plc, the U.K.'s biggest mortgage lender, prompted the government to seize Bradford & Bingley Plc and led the Bank of England to offer emergency funds to money markets. Banks granted the fewest home loans since at least 1999 in August.
The implied yield on the March short-sterling futures contract fell 4 basis points today to 4.79 percent as traders added to bets policy makers will lower borrowing costs in an effort to revive economic expansion.
Slowing growth will spur the central bank to lower its key rate in the fourth quarter to 4.75 percent from 5 percent now, according to the median forecast of economists in a Bloomberg survey. The next decision is scheduled for Oct. 9, when policy makers will probably keep the rate on hold then, according to a separate survey of economists.
Britain entered a recession in July, according to forecasts by the European Commission and the Confederation of British Industry, the country's biggest business lobby.
U.K. government bonds were little changed, with the yield on the 10-year gilt rising 1 basis point to 4.44 percent. The 5 percent security due June 2010 fell 0.05, or 50 pence per 1,000- pound ($1,766) face amount, to 104.32. The yield on the two-year note was at 3.97 percent. Bond yields move inversely to prices.
To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net
Read more...
Buffett Purchases GE, Goldman Stakes in Credit Crunch
By Erik Holm
Oct. 2 (Bloomberg) -- Warren Buffett, the billionaire who says the U.S. economy suffered a heart attack, is betting General Electric Co. and Goldman Sachs Group Inc. are among companies that will thrive when the credit crunch eases.
Buffett, heralded as the world's preeminent stock picker, is striking while the biggest banks find themselves strapped with a shortage of capital. Buffett's Berkshire Hathaway Inc. spent $8 billion in the past week to buy stakes in Fairfield, Connecticut- based GE and New York-based Goldman.
The worst housing slump since the Great Depression has resulted in record mortgage defaults in the U.S. and a yearlong contraction in global credit markets, driving down stock prices and sending firms like GE and Goldman in search of funds. For Buffett, who had $44.3 billion in cash at the start of the year, it's also been a call to action.
``The prices make a lot more sense now,'' Buffett said in an interview from San Diego with PBS's Charlie Rose yesterday in which he described the economy as being ``flat on the floor'' with cardiac arrest. ``You want to be greedy when others are fearful and you want to be fearful when others are greedy.''
As home foreclosures climbed across the U.S., Buffett spent at least $28 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire. Buffett is Berkshire's chairman.
``In my adult lifetime, I don't think I've ever seen people as fearful, economically, as they are right now,'' Buffett, 78, told Rose. ``They are not wrong to be worried.''
Frozen Markets
A lack of short-term credit is ``sucking the blood out of the economic body of the United States,'' Buffett said.
Buffett is pursuing deals at a time when others can't. Frozen credit markets have choked funding for leveraged buyouts and reduced corporations' ability to acquire rivals. The value of announced mergers shrank 28 percent to $2.37 trillion this year from the same period in 2007, data compiled by Bloomberg show.
``We want to use cash,'' Buffett told Rose. ``There are times when cash buys more than other times, and this is one of those times where it buys more.''
Buffett is seizing the opportunity by demanding outsized payments in the form of 10 percent dividends for Berkshire's cash, and the implicit endorsement of the so-called Oracle of Omaha.
The deals suggest that GE, a AAA-rated company that has remained profitable throughout the crisis, and Goldman, the biggest independent U.S. investment bank, meet Buffett's standards as market-leading franchises with capable leadership, said Tom Kersting, an analyst at Edward Jones & Co in St. Louis, who tracks Berkshire.
Powder Dry
GE declined 11 cents to $24.39 in German trading today and Goldman was indicated up 50 cents at $135.
``Even high-quality companies like Goldman and GE are having to pay what appear to be pretty substantial amounts for new sources of funding,'' Kersting said. ``Buffett's philosophy is always to keep some powder dry. That allows him to take advantage of the current turmoil.''
In addition to GE and Goldman, which gave him warrants to buy common stock at prices below where they currently trade, Berkshire agreed on Sept. 18 to buy Constellation Energy Group Inc. for $4.7 billion, or $26.50 a share.
Until the week Berkshire's MidAmerican Energy Holdings Co. made the deal, Constellation hadn't traded at a price that low since March 2003. The shares plunged 58 percent in the three days before the announcement of the acquisition on concern that turmoil in financial markets would wreck Baltimore-based Constellation's energy-trading business.
Iscar Metalworking
MidAmerican announced plans this week to spend $232 million for 9.9 percent of BYD Co., China's biggest maker of rechargeable batteries, making a wager that the company will capitalize on growing demand for electric vehicles.
Berkshire's Iscar Metalworking Cos. agreed Sept. 21 to buy a 71.5 percent stake in Japan's Tungaloy Corp., a manufacturer of tools for cars and planes. The deal was for $1 billion, reported Globes, a newspaper in Israel, where Iscar is based.
Buffett said in the interview yesterday that regulators had ``basically'' taken the proper steps during the deepening economic crisis. With congressional action, the ``best case'' is that the economy begins to improve in six months, Buffett told Rose.
He said he supports a $700 billion financial-rescue package before the U.S. Congress that is designed to help the economy, and expects the legislation to pass. The rescue plan was approved by the Senate late yesterday and is scheduled to go to the House for a vote tomorrow.
Buffett compared the economy to a heart-attack patient who needs attention now -- not later.
``Paramedics have arrived,'' Buffett said. ``And they shouldn't argue about whether to put the resuscitation equipment a quarter of an inch this way or a quarter of an inch that way, or they shouldn't start criticizing the patient because he didn't have blood-pressure tests.
``They should do what's needed right now, and I think they will,'' he said. ``I think Congress will do the right thing.''
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Read more...
Oct. 2 (Bloomberg) -- Warren Buffett, the billionaire who says the U.S. economy suffered a heart attack, is betting General Electric Co. and Goldman Sachs Group Inc. are among companies that will thrive when the credit crunch eases.
Buffett, heralded as the world's preeminent stock picker, is striking while the biggest banks find themselves strapped with a shortage of capital. Buffett's Berkshire Hathaway Inc. spent $8 billion in the past week to buy stakes in Fairfield, Connecticut- based GE and New York-based Goldman.
The worst housing slump since the Great Depression has resulted in record mortgage defaults in the U.S. and a yearlong contraction in global credit markets, driving down stock prices and sending firms like GE and Goldman in search of funds. For Buffett, who had $44.3 billion in cash at the start of the year, it's also been a call to action.
``The prices make a lot more sense now,'' Buffett said in an interview from San Diego with PBS's Charlie Rose yesterday in which he described the economy as being ``flat on the floor'' with cardiac arrest. ``You want to be greedy when others are fearful and you want to be fearful when others are greedy.''
As home foreclosures climbed across the U.S., Buffett spent at least $28 billion this year to acquire companies, finance buyouts and purchase securities for Omaha, Nebraska-based Berkshire. Buffett is Berkshire's chairman.
``In my adult lifetime, I don't think I've ever seen people as fearful, economically, as they are right now,'' Buffett, 78, told Rose. ``They are not wrong to be worried.''
Frozen Markets
A lack of short-term credit is ``sucking the blood out of the economic body of the United States,'' Buffett said.
Buffett is pursuing deals at a time when others can't. Frozen credit markets have choked funding for leveraged buyouts and reduced corporations' ability to acquire rivals. The value of announced mergers shrank 28 percent to $2.37 trillion this year from the same period in 2007, data compiled by Bloomberg show.
``We want to use cash,'' Buffett told Rose. ``There are times when cash buys more than other times, and this is one of those times where it buys more.''
Buffett is seizing the opportunity by demanding outsized payments in the form of 10 percent dividends for Berkshire's cash, and the implicit endorsement of the so-called Oracle of Omaha.
The deals suggest that GE, a AAA-rated company that has remained profitable throughout the crisis, and Goldman, the biggest independent U.S. investment bank, meet Buffett's standards as market-leading franchises with capable leadership, said Tom Kersting, an analyst at Edward Jones & Co in St. Louis, who tracks Berkshire.
Powder Dry
GE declined 11 cents to $24.39 in German trading today and Goldman was indicated up 50 cents at $135.
``Even high-quality companies like Goldman and GE are having to pay what appear to be pretty substantial amounts for new sources of funding,'' Kersting said. ``Buffett's philosophy is always to keep some powder dry. That allows him to take advantage of the current turmoil.''
In addition to GE and Goldman, which gave him warrants to buy common stock at prices below where they currently trade, Berkshire agreed on Sept. 18 to buy Constellation Energy Group Inc. for $4.7 billion, or $26.50 a share.
Until the week Berkshire's MidAmerican Energy Holdings Co. made the deal, Constellation hadn't traded at a price that low since March 2003. The shares plunged 58 percent in the three days before the announcement of the acquisition on concern that turmoil in financial markets would wreck Baltimore-based Constellation's energy-trading business.
Iscar Metalworking
MidAmerican announced plans this week to spend $232 million for 9.9 percent of BYD Co., China's biggest maker of rechargeable batteries, making a wager that the company will capitalize on growing demand for electric vehicles.
Berkshire's Iscar Metalworking Cos. agreed Sept. 21 to buy a 71.5 percent stake in Japan's Tungaloy Corp., a manufacturer of tools for cars and planes. The deal was for $1 billion, reported Globes, a newspaper in Israel, where Iscar is based.
Buffett said in the interview yesterday that regulators had ``basically'' taken the proper steps during the deepening economic crisis. With congressional action, the ``best case'' is that the economy begins to improve in six months, Buffett told Rose.
He said he supports a $700 billion financial-rescue package before the U.S. Congress that is designed to help the economy, and expects the legislation to pass. The rescue plan was approved by the Senate late yesterday and is scheduled to go to the House for a vote tomorrow.
Buffett compared the economy to a heart-attack patient who needs attention now -- not later.
``Paramedics have arrived,'' Buffett said. ``And they shouldn't argue about whether to put the resuscitation equipment a quarter of an inch this way or a quarter of an inch that way, or they shouldn't start criticizing the patient because he didn't have blood-pressure tests.
``They should do what's needed right now, and I think they will,'' he said. ``I think Congress will do the right thing.''
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Read more...
Trichet May Be Pushed Toward Rate Cut as Banks Fail
By Gabi Thesing and Simon Kennedy
Oct. 2 (Bloomberg) -- European Central Bank President Jean- Claude Trichet's balancing act may be drawing to a close.
With the euro-region sliding toward its first recession, Trichet's ECB is finding it increasingly difficult to fight inflation and at the same time protect its 15-nation economy from the global credit crunch.
The result may be a move toward lower interest rates as financial turmoil damps growth and reduces inflation pressures. The crisis reached new heights in Europe this week, with governments forced to help bail out five banks and credit costs soaring to records.
``The ECB's Governing Council will have had a serious wake- up call in recent days,'' said Juergen Michels, a London-based economist at Citigroup Inc., who expects the bank to cut rates in December. ``The credit crunch has arrived on its doorstep.''
While all 58 economists surveyed by Bloomberg News predict the ECB will leave its benchmark rate at a seven-year high of 4.25 percent today, those at Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. this week followed Citigroup in predicting a rate cut before the end of the year.
The Frankfurt-based ECB announces today's decision at 1:45 p.m. and Trichet holds a press conference 45 minutes later.
Separation Principle
Since the market turbulence began more than a year ago, Trichet has insisted on a ``clear separation'' between monetary policy and liquidity management. He's flooded frozen markets with cash in a bid to lubricate lending while keeping interest rates focused on curbing the strongest inflation in 16 years.
In doing so, the ECB became the only central bank in the Group of Seven to raise borrowing costs this year. It lifted its benchmark by a quarter point in July after inflation accelerated to 4 percent, twice its 2 percent limit.
That stance is becoming harder to maintain as banks' refusal to lend to each other starts to hurt the economy, threatening to turn the ``trough'' Trichet predicted into a recession.
The economy contracted in the second quarter, unemployment increased to the highest in more than a year in August and the manufacturing, services and retail sectors all shrank for a fourth month in September. Confidence in the economic outlook is the lowest since the slump following the Sept. 11 terrorist attacks in 2001, according to the European Commission.
Sliding Into Recession
Such indicators suggest to David Mackie, chief European economist at JPMorgan, that the economy will shrink an annualized 1 percent in the second half of this year, compared with the ECB's forecast of 0.8 percent expansion. ``The region is sliding into a meaningful recession,'' said Mackie, who now expects the ECB to lower its key rate to 2.75 percent next year.
European governments have helped rescue banks including Fortis and Dexia SA, and the ECB has boosted its lending of euros and dollars following the collapse of Lehman Brothers Holdings Inc. on Sept. 15.
On Sept. 30 alone, it lent banks 15.9 billion euros at the emergency marginal rate, allowed them to deposit a record 102.8 billion in its vaults overnight and auctioned 190 billion euros and $60.7 billion as financial companies refused to interact with each other.
The longer credit remains tight, the greater the risk that elevated borrowing costs will hurt companies and consumers, damping lending further.
Job Losses
Amsterdam-based Akzo Nobel NV, the world's largest maker of paints, this week postponed plans to repurchase 1.6 billion euros ($2.3 billion) of its stock as debt repayments loom. The company plans to cut 3,500 jobs as demand for its products wanes.
If growth weakens, so should inflation, which slowed for a second month in September as oil extended its decline from a July record of $147.27 a barrel. ``Euroland will no longer have an inflation problem come 2009,'' said Erik Nielsen, chief European economist at Goldman Sachs.
Investors have fully priced in a cut in the ECB's key rate to 4 percent by December, Eonia forward contracts show.
Those bets may be premature, said Klaus Baader, chief European economist at Merrill Lynch & Co. He argues lower rates would do little to assist markets, noting that credit costs kept rising in the U.S. even after the Federal Reserve slashed its benchmark rate to 2 percent.
Inflation of 3.6 percent last month is also still outside the ECB's comfort zone, fanning concern at the bank of a wage- price spiral. Germany's IG Metall labor union, representing 3.2 million workers, is seeking the biggest pay increase in 16 years.
Inflation Expectations
The ECB's preferred gauge of five-year inflation expectations today stayed near its August record of 2.7 percent.
``The bank has to be able to point to substantial improvement in price stability before cutting, and that's still extraordinarily hard to do,'' said Baader, who predicts the ECB's key rate will stay at 4.25 percent through 2009.
One way for the ECB to ease market tensions today without sacrificing its inflation focus would be to shift its other lending rates, said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt.
Under that scenario, the ECB would cut the marginal rate it charges banks for emergency overnight funds from 5.25 percent and raise the rate it pays banks on deposits from 3.25 percent.
``That would cement the ECB's position as a European money market clearing house,'' Bielmeier said. ``It could also pave the way for a rate cut next month.''
To contact the reporters on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- European Central Bank President Jean- Claude Trichet's balancing act may be drawing to a close.
With the euro-region sliding toward its first recession, Trichet's ECB is finding it increasingly difficult to fight inflation and at the same time protect its 15-nation economy from the global credit crunch.
The result may be a move toward lower interest rates as financial turmoil damps growth and reduces inflation pressures. The crisis reached new heights in Europe this week, with governments forced to help bail out five banks and credit costs soaring to records.
``The ECB's Governing Council will have had a serious wake- up call in recent days,'' said Juergen Michels, a London-based economist at Citigroup Inc., who expects the bank to cut rates in December. ``The credit crunch has arrived on its doorstep.''
While all 58 economists surveyed by Bloomberg News predict the ECB will leave its benchmark rate at a seven-year high of 4.25 percent today, those at Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. this week followed Citigroup in predicting a rate cut before the end of the year.
The Frankfurt-based ECB announces today's decision at 1:45 p.m. and Trichet holds a press conference 45 minutes later.
Separation Principle
Since the market turbulence began more than a year ago, Trichet has insisted on a ``clear separation'' between monetary policy and liquidity management. He's flooded frozen markets with cash in a bid to lubricate lending while keeping interest rates focused on curbing the strongest inflation in 16 years.
In doing so, the ECB became the only central bank in the Group of Seven to raise borrowing costs this year. It lifted its benchmark by a quarter point in July after inflation accelerated to 4 percent, twice its 2 percent limit.
That stance is becoming harder to maintain as banks' refusal to lend to each other starts to hurt the economy, threatening to turn the ``trough'' Trichet predicted into a recession.
The economy contracted in the second quarter, unemployment increased to the highest in more than a year in August and the manufacturing, services and retail sectors all shrank for a fourth month in September. Confidence in the economic outlook is the lowest since the slump following the Sept. 11 terrorist attacks in 2001, according to the European Commission.
Sliding Into Recession
Such indicators suggest to David Mackie, chief European economist at JPMorgan, that the economy will shrink an annualized 1 percent in the second half of this year, compared with the ECB's forecast of 0.8 percent expansion. ``The region is sliding into a meaningful recession,'' said Mackie, who now expects the ECB to lower its key rate to 2.75 percent next year.
European governments have helped rescue banks including Fortis and Dexia SA, and the ECB has boosted its lending of euros and dollars following the collapse of Lehman Brothers Holdings Inc. on Sept. 15.
On Sept. 30 alone, it lent banks 15.9 billion euros at the emergency marginal rate, allowed them to deposit a record 102.8 billion in its vaults overnight and auctioned 190 billion euros and $60.7 billion as financial companies refused to interact with each other.
The longer credit remains tight, the greater the risk that elevated borrowing costs will hurt companies and consumers, damping lending further.
Job Losses
Amsterdam-based Akzo Nobel NV, the world's largest maker of paints, this week postponed plans to repurchase 1.6 billion euros ($2.3 billion) of its stock as debt repayments loom. The company plans to cut 3,500 jobs as demand for its products wanes.
If growth weakens, so should inflation, which slowed for a second month in September as oil extended its decline from a July record of $147.27 a barrel. ``Euroland will no longer have an inflation problem come 2009,'' said Erik Nielsen, chief European economist at Goldman Sachs.
Investors have fully priced in a cut in the ECB's key rate to 4 percent by December, Eonia forward contracts show.
Those bets may be premature, said Klaus Baader, chief European economist at Merrill Lynch & Co. He argues lower rates would do little to assist markets, noting that credit costs kept rising in the U.S. even after the Federal Reserve slashed its benchmark rate to 2 percent.
Inflation of 3.6 percent last month is also still outside the ECB's comfort zone, fanning concern at the bank of a wage- price spiral. Germany's IG Metall labor union, representing 3.2 million workers, is seeking the biggest pay increase in 16 years.
Inflation Expectations
The ECB's preferred gauge of five-year inflation expectations today stayed near its August record of 2.7 percent.
``The bank has to be able to point to substantial improvement in price stability before cutting, and that's still extraordinarily hard to do,'' said Baader, who predicts the ECB's key rate will stay at 4.25 percent through 2009.
One way for the ECB to ease market tensions today without sacrificing its inflation focus would be to shift its other lending rates, said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt.
Under that scenario, the ECB would cut the marginal rate it charges banks for emergency overnight funds from 5.25 percent and raise the rate it pays banks on deposits from 3.25 percent.
``That would cement the ECB's position as a European money market clearing house,'' Bielmeier said. ``It could also pave the way for a rate cut next month.''
To contact the reporters on this story: Gabi Thesing in Frankfurt at gthesing@bloomberg.net; Simon Kennedy in Paris at skennedy4@bloomberg.net
Read more...
Brazil, Chile, Peru: Latin American Currency, Bond Preview
By Drew Benson
Oct. 2 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
Brazil: Industrial production rose 2.5 percent in August from the year-earlier period after increasing 8.5 percent in July, according to the median forecast of 26 economists in a Bloomberg News survey. The National Statistics Agency is scheduled to release the report at 8 a.m. New York time.
The real dropped 0.7 percent to 1.9176 per dollar.
The yield on the zero-coupon, real-denominated bond due in January 2010 fell 5 basis points to 14.49 percent.
Chile: The central bank is scheduled to release minutes from last month's monetary policy meeting at 8:30 a.m. New York time.
The peso dropped 1.3 percent to 559.45 per dollar from 552.11 yesterday.
The yield for a basket of Chile's five-year peso bonds in inflation-linked currency units, known as unidades de fomento, fell 9 basis points, or 0.09 percentage point, to 3.09 percent, according to Bloomberg composite prices.
Peru: Inflation slowed less than expected in September as transportation costs surged. Consumer prices rose 0.57 percent after increasing 0.59 percent in August, the National Statistics Agency said after market close yesterday. Prices rose more than the 0.47 percent median forecast in a Bloomberg survey of 14 economists. The 12-month inflation rate fell to 6.22 percent from 6.27 percent.
The sol rose 0.4 percent to 2.9701 per dollar, from 2.9825 yesterday.
The yield on Peru's benchmark 8.6 percent sol-denominated bond due in August 2017 rose 12 basis points to 8.62 percent, according to the local unit of Citigroup Inc.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net.
Read more...
Oct. 2 (Bloomberg) -- The following events and economic reports may influence trading in Latin American local bonds and currencies today. Bond yields and exchange rates are from the previous day's session.
Brazil: Industrial production rose 2.5 percent in August from the year-earlier period after increasing 8.5 percent in July, according to the median forecast of 26 economists in a Bloomberg News survey. The National Statistics Agency is scheduled to release the report at 8 a.m. New York time.
The real dropped 0.7 percent to 1.9176 per dollar.
The yield on the zero-coupon, real-denominated bond due in January 2010 fell 5 basis points to 14.49 percent.
Chile: The central bank is scheduled to release minutes from last month's monetary policy meeting at 8:30 a.m. New York time.
The peso dropped 1.3 percent to 559.45 per dollar from 552.11 yesterday.
The yield for a basket of Chile's five-year peso bonds in inflation-linked currency units, known as unidades de fomento, fell 9 basis points, or 0.09 percentage point, to 3.09 percent, according to Bloomberg composite prices.
Peru: Inflation slowed less than expected in September as transportation costs surged. Consumer prices rose 0.57 percent after increasing 0.59 percent in August, the National Statistics Agency said after market close yesterday. Prices rose more than the 0.47 percent median forecast in a Bloomberg survey of 14 economists. The 12-month inflation rate fell to 6.22 percent from 6.27 percent.
The sol rose 0.4 percent to 2.9701 per dollar, from 2.9825 yesterday.
The yield on Peru's benchmark 8.6 percent sol-denominated bond due in August 2017 rose 12 basis points to 8.62 percent, according to the local unit of Citigroup Inc.
To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net.
Read more...
U.S. Factory Orders in August Probably Fell Amid Tight Credit
By Timothy R. Homan
Oct. 2 (Bloomberg) -- Orders to U.S. factories probably decreased in August by the most in a year as tight credit conditions and slowing sales forced companies to cut back, economists said before a government report today.
Bookings dropped 3 percent, the most since August 2007, after advancing 1.3 percent in July, according to the median forecast in a Bloomberg News survey. A separate report may show the number of Americans seeking unemployment benefits is at a level that signals the job market has deteriorated.
Banks have become reluctant to lend as losses mount, making it harder for companies to obtain the financing needed to investment in new equipment. Exports, which had made up for a slowdown in U.S. sales, are likely to weaken in coming months as growth in Europe and Japan also falters.
``The credit crunch is hitting home as the manufacturing sector has taken a major turn for the worse,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. ``The economy may be starting to unravel.''
The Commerce Department's factory orders report is due at 10 a.m. in Washington. Estimates in the survey of 59 economists ranged from a drop of 6 percent to a 0.5 percent increase.
A Labor Department report at 8:30 a.m. may show the number of first-time claims for unemployment benefits last week fell to 475,000 from 493,000 the previous week as job losses related to the Gulf Coast hurricanes subsided, according to a Bloomberg survey median.
Still, 452,000 workers a week on average have filed applications for benefits in the last two months, up from 367,000 in the first seven months of the year.
Durables Demand
Orders for durable goods, which comprise about half of factory orders, fell 4.5 percent in August after a gain of 0.8 percent the previous month, the Commerce Department said last week. Excluding transportation equipment, bookings dropped 3 percent after a 0.1 percent increase in July.
A private report yesterday showed the slump may have worsened last month. Manufacturing contracted in September at the fastest pace since the 2001 recession, according to the Institute for Supply Management. Orders, production and employment all dropped and exports rose at the slowest pace in two years.
The slowdown in overseas demand threatens to undermine one of the last remaining bright spots for the economy. A narrowing of the trade gap last quarter added 2.9 percentage points to growth, the biggest contribution since 1980, the Commerce Department said last month.
Lift from Trade
Excluding trade, the economy would have contracted at a 0.1 percent pace from April through June, instead of the 2.8 percent pace of expansion.
Business spending on new equipment and software dropped at a 5 percent annual pace during the second quarter, the most in six years, Commerce also said.
A slowdown in factory orders is forcing some companies to trim payrolls. Rockwell Automation Inc., the world's largest maker of factory automation products, said this week it will cut about 3 percent of its 20,000-member workforce immediately to reduce costs.
Keith Nosbusch, chief executive officer of the Milwaukee- based company, said in July that slower demand hurt profit for the quarter ended June 30.
Bloomberg Survey
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- Orders to U.S. factories probably decreased in August by the most in a year as tight credit conditions and slowing sales forced companies to cut back, economists said before a government report today.
Bookings dropped 3 percent, the most since August 2007, after advancing 1.3 percent in July, according to the median forecast in a Bloomberg News survey. A separate report may show the number of Americans seeking unemployment benefits is at a level that signals the job market has deteriorated.
Banks have become reluctant to lend as losses mount, making it harder for companies to obtain the financing needed to investment in new equipment. Exports, which had made up for a slowdown in U.S. sales, are likely to weaken in coming months as growth in Europe and Japan also falters.
``The credit crunch is hitting home as the manufacturing sector has taken a major turn for the worse,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. ``The economy may be starting to unravel.''
The Commerce Department's factory orders report is due at 10 a.m. in Washington. Estimates in the survey of 59 economists ranged from a drop of 6 percent to a 0.5 percent increase.
A Labor Department report at 8:30 a.m. may show the number of first-time claims for unemployment benefits last week fell to 475,000 from 493,000 the previous week as job losses related to the Gulf Coast hurricanes subsided, according to a Bloomberg survey median.
Still, 452,000 workers a week on average have filed applications for benefits in the last two months, up from 367,000 in the first seven months of the year.
Durables Demand
Orders for durable goods, which comprise about half of factory orders, fell 4.5 percent in August after a gain of 0.8 percent the previous month, the Commerce Department said last week. Excluding transportation equipment, bookings dropped 3 percent after a 0.1 percent increase in July.
A private report yesterday showed the slump may have worsened last month. Manufacturing contracted in September at the fastest pace since the 2001 recession, according to the Institute for Supply Management. Orders, production and employment all dropped and exports rose at the slowest pace in two years.
The slowdown in overseas demand threatens to undermine one of the last remaining bright spots for the economy. A narrowing of the trade gap last quarter added 2.9 percentage points to growth, the biggest contribution since 1980, the Commerce Department said last month.
Lift from Trade
Excluding trade, the economy would have contracted at a 0.1 percent pace from April through June, instead of the 2.8 percent pace of expansion.
Business spending on new equipment and software dropped at a 5 percent annual pace during the second quarter, the most in six years, Commerce also said.
A slowdown in factory orders is forcing some companies to trim payrolls. Rockwell Automation Inc., the world's largest maker of factory automation products, said this week it will cut about 3 percent of its 20,000-member workforce immediately to reduce costs.
Keith Nosbusch, chief executive officer of the Milwaukee- based company, said in July that slower demand hurt profit for the quarter ended June 30.
Bloomberg Survey
=============================================
Initial Factory
Claims Orders
,000's MOM%
=============================================
Date of Release 10/02 10/02
Observation Period Sept. 27 Jan.
---------------------------------------------
Median 475 -3.0%
Average 471 -2.7%
High Forecast 525 0.5%
Low Forecast 432 -6.0%
Number of Participants 39 59
Previous 493 1.3%
---------------------------------------------
4CAST Ltd. 460 ---
Action Economics 490 -3.0%
Aletti Gestielle SGR --- -1.6%
Argus Research Corp. --- 0.3%
Banc of America Securitie --- -2.6%
Bank of Tokyo- Mitsubishi 490 -2.0%
Barclays Capital 490 -3.0%
BBVA 463 ---
BMO Capital Markets 470 -2.8%
BNP Paribas 460 -1.5%
Briefing.com 440 -2.0%
Calyon --- -3.2%
CIBC World Markets --- -4.5%
Commerzbank AG 460 -1.5%
Credit Suisse 475 ---
Daiwa Securities America --- -3.0%
DekaBank --- -3.0%
Desjardins Group 483 -2.2%
Deutsche Bank Securities 475 -3.0%
Dresdner Kleinwort --- -3.0%
DZ Bank --- -3.2%
First Trust Advisors 479 -3.1%
Fortis --- -2.0%
Goldman, Sachs & Co. --- -3.0%
H&R Block Financial Advis 460 -2.4%
High Frequency Economics 475 -3.0%
HSBC Markets 450 -2.6%
IDEAglobal 485 -2.0%
ING Financial Markets 480 -3.0%
Insight Economics 475 -2.8%
J.P. Morgan Chase 485 -2.8%
Janney Montgomery Scott L --- -3.4%
JPMorgan Private Client 475 -2.3%
Landesbank Berlin 475 -3.2%
Landesbank BW --- -2.0%
Lehman Brothers --- -2.0%
Lloyds TSB 432 -1.6%
Maria Fiorini Ramirez Inc 480 -3.5%
Merk Investments --- -1.7%
Merrill Lynch 470 -3.0%
MFC Global Investment Man 480 -3.0%
Moody's Economy.com 480 -4.5%
Morgan Keegan & Co. --- -2.3%
Morgan Stanley & Co. --- -3.5%
National City Corporation --- -2.2%
Newedge --- -4.0%
Nomura Securities Intl. --- -3.0%
PNC Bank --- -3.0%
RBS Greenwich Capital --- -3.1%
Ried, Thunberg & Co. 525 -3.0%
Schneider Trading Associa 436 -2.5%
Scotia Capital 455 -2.3%
Societe Generale --- -3.0%
Stone & McCarthy Research 440 -2.7%
TD Securities 450 ---
Thomson Financial/IFR 465 -3.3%
Tullett Prebon 465 -3.0%
UBS Securities LLC 470 -3.0%
Unicredit MIB 445 ---
University of Maryland --- 0.5%
Wachovia Corp. --- -1.9%
Wells Fargo & Co. 490 -3.0%
WestLB AG --- -2.0%
Westpac Banking Co. 460 -6.0%
Wrightson Associates 525 ---
=============================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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Bailout Bill Sent to House for Second Vote After Senate Passage
By James Rowley and Nicholas Johnston
Oct. 2 (Bloomberg) -- The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure, following the House's rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
``The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation ``has a much better chance'' of passage this time, he said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote ``will send a very strong signal even to the Asian markets and others.''
Asian stocks and U.S futures fell on concern the package won't be enough to avert a recession. The MSCI Asia Pacific Index dropped 1 percent to 107.95 as of 12:54 p.m. in Tokyo. The dollar rose against the euro, approaching a one-year high, as it advanced to $1.3963 from $1.4009 yesterday.
Only 12 Votes
The extra measures may help sway some Republicans.
``They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. ``If they put these few fundamental reforms in there,'' congressional leaders ``would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
No Done Deal
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. ``We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
``The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. ``Why would I turn around and vote for it tomorrow evening or Friday?''
President George W. Bush said in a written statement after the vote that ``the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
Sweeteners
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
``There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was ``personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
``I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
``At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. ``We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net and Nicholas Johnston at njohnston3@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- The U.S. Senate passed a $700 billion financial-market rescue package loaded with inducements for the House of Representatives to approve the measure, following the House's rejection of an earlier version.
The legislation, approved last night on a 74-25 vote, authorizes the government to buy troubled assets from financial institutions rocked by record home foreclosures. It contains two provisions favored by House Republicans: One raises the limit on federal bank-deposit insurance; the other reiterates the authority of securities regulators to suspend asset-valuing rules that corporate executives blame for fueling the crisis.
The bill's proponents cited the record 778-point drop in the Dow Jones Industrial Average after the House's 228-205 defeat of the legislation Sept. 29 as evidence of the urgency to stabilize the banking system. They suggested that the market reaction may spur some House Republicans to change their minds when the bill comes to a vote, likely tomorrow afternoon.
``The big drop'' in the Dow Index ``really had a chilling effect on a lot of our members and a lot of their constituents,'' House Republican Leader John Boehner said on Fox News. With changes made by the Senate, the legislation ``has a much better chance'' of passage this time, he said.
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he hoped the vote ``will send a very strong signal even to the Asian markets and others.''
Asian stocks and U.S futures fell on concern the package won't be enough to avert a recession. The MSCI Asia Pacific Index dropped 1 percent to 107.95 as of 12:54 p.m. in Tokyo. The dollar rose against the euro, approaching a one-year high, as it advanced to $1.3963 from $1.4009 yesterday.
Only 12 Votes
The extra measures may help sway some Republicans.
``They only need 12 votes,'' Kansas Representative Todd Tiahrt, who voted against the bailout, said in an interview with Bloomberg Television. ``If they put these few fundamental reforms in there,'' congressional leaders ``would easily get enough votes to pass the legislation'' he said before the Senate included those provisions in the package.
Democratic supporters of the bill are targeting lawmakers such as Illinois Representative Bobby Rush, who twice changed his vote in the House roll call. Rush ended up being among the 21 members of the Congressional Black Caucus to oppose the legislation. The caucus scheduled a meeting today to discuss the changes made by the Senate. Rush wasn't available to comment on his vote.
No Done Deal
Still, House passage is far from certain.
House Majority Leader Steny Hoyer told MSNBC News yesterday that no Democrats who opposed the measure earlier this week have pledged to back it. ``We don't have any more Democrats at this hour,'' he said.
Some Republicans said they also weren't budging.
``The bill that they are going to send back is the same bill that I voted against two days ago,'' Representative Joe Barton of Texas told Bloomberg Television. ``Why would I turn around and vote for it tomorrow evening or Friday?''
President George W. Bush said in a written statement after the vote that ``the bill the Senate passed is essential to the financial security of every American.'' He said the House should follow suit in approving the proposal.
The bill was a bipartisan effort, with 40 Democrats, 33 Republicans and independent Joe Lieberman of Connecticut voting for it. The two presidential nominees, Democrat Barack Obama and Republican John McCain, returned from the campaign trail to vote for the plan.
Sweeteners
The Senate also sweetened the measure for Republicans by authorizing the government's purchase of troubled assets with a $149 billion package of tax breaks. They would spare 24 million households from a $62 billion alternative minimum tax and extend $17 billion in benefits to companies that produce alternative energy.
Yet Hoyer warned there was a possibility that some additional Democrats may oppose the legislation because of the tax breaks, which aren't offset with spending cuts.
``There are people who are upset that we are making the deficit worse as we try to stabilize the economy,'' he told reporters. Hoyer said he was ``personally disappointed' by the Senate's decision to include the tax legislation in the package.
Blue Dogs
Twenty-four of the 44-member Blue Dog Coalition of fiscally conservative Democrats voted for the rescue package on Sept. 29. Four of them said yesterday they'll continue to back the bill, even though their caucus derided the Senate's tax measures as irresponsible as recently as Monday.
``I will vote for the package coming from the Senate,'' said Oklahoma Representative Dan Boren. Other members of the coalition who voiced support included Representative Jane Harman of California, Representative Jim Marshall of Georgia and Representative Jim Cooper of Tennessee.
Added to the rescue plan this week is a temporary increase in the limit on federal deposit insurance to $250,000 from $100,000 aimed at discouraging people from pulling their money out of banks.
The Senate bill also reiterates the U.S. Securities and Exchange Commission's authority to suspend an accounting rule that bankers and other corporate executives say exacerbates their troubles.
Ease the Rule
The so-called fair-value standard requires companies to review assets and report losses if their values decline. Lawmakers, the American Bankers Association and companies including American International Group Inc. have urged the SEC to suspend or ease the rule, saying it forces firms to report deeper losses than needed on assets such as subprime mortgages.
Representative Rahm Emanuel of Illinois, the No. 4 House Democrat, said it was likely the Democratic vote total in the House will change.
``At the end of the day, I doubt we lose Democratic votes in total,'' Emanuel said. ``We lose some and will pick up others. The question now will be how many Republicans come to the table to help solve this crisis.''
To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net and Nicholas Johnston at njohnston3@bloomberg.net
Read more...
Asian Currencies: Korean Won, Thai Baht Fall on Credit Concern
By Lilian Karunungan and Bob Chen
Oct. 2 (Bloomberg) -- South Korea's won and the Thai baht declined on speculation a seizure in global credit markets will prompt investors to cut holdings of emerging-market assets.
The Singapore dollar and the Taiwan dollar also weakened as Asian stocks declined on concern the U.S. Senate's approval of a $700 billion rescue package won't prevent further finance industry collapses. Kookmin Bank, South Korea's largest, and its three closest rivals had the outlook for their bank financial strength ratings cut yesterday to ``negative'' from ``stable'' by Moody's Investors Service.
``The downgrade of the credit outlook for Korean banks overnight, that's probably going to cause some short-term concerns for dollar funding for Korea in the near term.'' said Han Sia Yeo, a Singapore-based foreign-exchange strategist at Bank of America Corp. ``That'll keep some pressure on the won.''
The won dropped 1.9 percent to 1,210.85 against the dollar as of 12:03 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It reached 1,235 per dollar on Sept. 30, the weakest level since April 2003. The Singapore dollar dropped 0.5 percent to S$1.4395, according to data compiled by Bloomberg. The baht fell as much as 0.3 percent to 34.07 against the dollar before trading at 34.05 in Bangkok. Taiwan's dollar dropped 0.3 percent to NT$32.125.
The MSCI Asia Pacific Index dropped 1.4 percent, even after the U.S. Senate voted 74-25 in favor of a bill that authorizes the government to buy troubled assets from financial institutions reeling from a record number of home foreclosures.
Reserves Decline
South Korea's foreign-exchange reserves fell for a sixth month in September after authorities provided dollars in the swap market to stem the won's drop. Reserves decreased to $239.7 billion from $243.2 billion in August, the Bank of Korea said in a statement released in Seoul today. Central banks intervene in the currency markets by either selling or buying foreign exchange.
South Korea's government is determined to stabilize the currency, said Vice Finance Minister Kim Dong Soo, describing the won's recent decline as excessive.
Thailand's baht fell for a second day. The baht is the third biggest loser this year of the 10 most-active currencies in Asia after the South Korean won and India's rupee.
There are ``uncertainties on whether the package will be passed,'' said Thio Chin Loo, a currency strategist at BNP Paribas SA in Singapore. ``If the dollar remains bid against Asian currencies, the dollar-baht will find its way up.''
Deputy Bank of Thailand Governor Atchana Waiquamdee said Sept. 30 that the risk to economic growth from external factors was ``quite high'' as the nation cannot decouple itself from the world's biggest economy.
Singapore Dollar
The Singapore currency traded near the lowest since January on concern the city-state is heading for a recession as the global financial crisis deepens. The local dollar fell for a second day before the Monetary Authority of Singapore meets this month to decide on the next course of its policy.
``The focus is on the global economy right now and our numbers haven't been inspiring either,'' said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings, Southeast Asia's largest lender. ``The market is looking at a monetary policy shift.''
The local currency will fall to S$1.47 by the end of this year, Wee Forecast.
Industrial production in the city-state contracted for a second month in August on declining electronics and pharmaceutical output, the Economic Development Board in Singapore said on Sept. 26.
Philippine Peso
The Philippine peso climbed for the first time in five days on speculation the House of Representatives will support the U.S. legislation in a vote tomorrow.
``An approval will restore confidence among investors and will lessen risk aversion,'' said Antonio Espedido, treasurer at China Banking Corp. in Manila. ``The pressure on the peso is also easing as money flows from remittances start to come in.''
The local currency rose 0.3 percent to 46.90 per dollar in Manila, according to Tullett Prebon Plc.
The Philippine central bank meets on Monday to decide on its benchmark interest rate. Policymakers increased borrowing costs in the last three meetings to 6 percent.
Elsewhere, Vietnam's dong was little changed at 16,605. Financial markets were closed in Malaysia, Indonesia, China and India for public holidays.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Oct. 2 (Bloomberg) -- South Korea's won and the Thai baht declined on speculation a seizure in global credit markets will prompt investors to cut holdings of emerging-market assets.
The Singapore dollar and the Taiwan dollar also weakened as Asian stocks declined on concern the U.S. Senate's approval of a $700 billion rescue package won't prevent further finance industry collapses. Kookmin Bank, South Korea's largest, and its three closest rivals had the outlook for their bank financial strength ratings cut yesterday to ``negative'' from ``stable'' by Moody's Investors Service.
``The downgrade of the credit outlook for Korean banks overnight, that's probably going to cause some short-term concerns for dollar funding for Korea in the near term.'' said Han Sia Yeo, a Singapore-based foreign-exchange strategist at Bank of America Corp. ``That'll keep some pressure on the won.''
The won dropped 1.9 percent to 1,210.85 against the dollar as of 12:03 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It reached 1,235 per dollar on Sept. 30, the weakest level since April 2003. The Singapore dollar dropped 0.5 percent to S$1.4395, according to data compiled by Bloomberg. The baht fell as much as 0.3 percent to 34.07 against the dollar before trading at 34.05 in Bangkok. Taiwan's dollar dropped 0.3 percent to NT$32.125.
The MSCI Asia Pacific Index dropped 1.4 percent, even after the U.S. Senate voted 74-25 in favor of a bill that authorizes the government to buy troubled assets from financial institutions reeling from a record number of home foreclosures.
Reserves Decline
South Korea's foreign-exchange reserves fell for a sixth month in September after authorities provided dollars in the swap market to stem the won's drop. Reserves decreased to $239.7 billion from $243.2 billion in August, the Bank of Korea said in a statement released in Seoul today. Central banks intervene in the currency markets by either selling or buying foreign exchange.
South Korea's government is determined to stabilize the currency, said Vice Finance Minister Kim Dong Soo, describing the won's recent decline as excessive.
Thailand's baht fell for a second day. The baht is the third biggest loser this year of the 10 most-active currencies in Asia after the South Korean won and India's rupee.
There are ``uncertainties on whether the package will be passed,'' said Thio Chin Loo, a currency strategist at BNP Paribas SA in Singapore. ``If the dollar remains bid against Asian currencies, the dollar-baht will find its way up.''
Deputy Bank of Thailand Governor Atchana Waiquamdee said Sept. 30 that the risk to economic growth from external factors was ``quite high'' as the nation cannot decouple itself from the world's biggest economy.
Singapore Dollar
The Singapore currency traded near the lowest since January on concern the city-state is heading for a recession as the global financial crisis deepens. The local dollar fell for a second day before the Monetary Authority of Singapore meets this month to decide on the next course of its policy.
``The focus is on the global economy right now and our numbers haven't been inspiring either,'' said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings, Southeast Asia's largest lender. ``The market is looking at a monetary policy shift.''
The local currency will fall to S$1.47 by the end of this year, Wee Forecast.
Industrial production in the city-state contracted for a second month in August on declining electronics and pharmaceutical output, the Economic Development Board in Singapore said on Sept. 26.
Philippine Peso
The Philippine peso climbed for the first time in five days on speculation the House of Representatives will support the U.S. legislation in a vote tomorrow.
``An approval will restore confidence among investors and will lessen risk aversion,'' said Antonio Espedido, treasurer at China Banking Corp. in Manila. ``The pressure on the peso is also easing as money flows from remittances start to come in.''
The local currency rose 0.3 percent to 46.90 per dollar in Manila, according to Tullett Prebon Plc.
The Philippine central bank meets on Monday to decide on its benchmark interest rate. Policymakers increased borrowing costs in the last three meetings to 6 percent.
Elsewhere, Vietnam's dong was little changed at 16,605. Financial markets were closed in Malaysia, Indonesia, China and India for public holidays.
To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@blooomberg.net; Bob Chen in Hong Kong at bchen45@bloomberg.net.
Read more...
Investec Commodity Arm May Start Private Equity Fund, WSJ Says
By Jim McDonald
Oct. 2 (Bloomberg) -- Investec Ltd.'s commodity unit may start a private equity fund to invest in mining, the Wall Street Journal reported, citing George W. Rogers, head of commodities and resource finance at the company. Rogers said he believes withdrawals from mining investment during the recent turmoil in finance markets have been excessive, according to the report.
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Oct. 2 (Bloomberg) -- Investec Ltd.'s commodity unit may start a private equity fund to invest in mining, the Wall Street Journal reported, citing George W. Rogers, head of commodities and resource finance at the company. Rogers said he believes withdrawals from mining investment during the recent turmoil in finance markets have been excessive, according to the report.
Read more...
Rio Starts to Restore Idled N.Z. Aluminum Smelter
By Gavin Evans
Oct. 2 (Bloomberg) -- Rio Tinto Group, the world's second- biggest aluminum producer, started restoring idled capacity at its New Zealand smelter, a process that may take 10 weeks.
The 350,000 metric ton-a-year Tiwai Point operation, 79 percent owned by Rio Tinto Alcan, is restarting 93 smelting cells after rain on New Zealand's South Island restored hydroelectric output and cut power prices, General Manager Paul Hemburrow said.
``We return each cell one at a time and it's quite labor intensive,'' Hemburrow said in a telephone interview from the plant near Invercargill. ``It could be eight to ten weeks'' before full production is reached, he said.
The smelter, which uses almost 15 percent of New Zealand's power, cut production by 11 percent in May as the nation's hydroelectric reserves fell to half their seasonal average and prices soared. Storage, which refers to the amount of usable water in the system, was 4 percent below average yesterday.
Tiwai Point, 21 percent owned by Sumitomo Chemical Co., makes the world's purest aluminum and supplies metal for almost half the hard-drives and capacitors in the world's computers and LCD screens. It gets about 10 percent of its power at spot prices and has lost about 2,900 tons of output a month since May as energy costs surged.
Electricity cost an average NZ$27.64 ($19) a megawatt-hour nationwide yesterday, having reached a record NZ$392.72 June 1.
August Plan
Rio Tinto's plans to resume output in August were thwarted by a continued dry spell on South Island and transmission constraints that restricted power supplies from the North Island. The high- voltage cables liking the two islands will remain at half capacity until an upgrade is completed in 2012.
Government-owned generator Meridian Energy Ltd. supplies the smelter from its nearby 850-megawatt power station on the shores of Lake Manapouri.
The company plans to seek changes to its operating rules early next year that could boost the plant's output by 89 gigawatt-hours a year, enough to supply 11,000 homes, and 1.7 percent more than the plant produced in 2007.
Aluminum for delivery in three months on the London Metal Exchange gained $6 to $2,415 a ton in Asian trading today. The metal fell 0.5 percent yesterday its fourth straight decline.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
Read more...
Oct. 2 (Bloomberg) -- Rio Tinto Group, the world's second- biggest aluminum producer, started restoring idled capacity at its New Zealand smelter, a process that may take 10 weeks.
The 350,000 metric ton-a-year Tiwai Point operation, 79 percent owned by Rio Tinto Alcan, is restarting 93 smelting cells after rain on New Zealand's South Island restored hydroelectric output and cut power prices, General Manager Paul Hemburrow said.
``We return each cell one at a time and it's quite labor intensive,'' Hemburrow said in a telephone interview from the plant near Invercargill. ``It could be eight to ten weeks'' before full production is reached, he said.
The smelter, which uses almost 15 percent of New Zealand's power, cut production by 11 percent in May as the nation's hydroelectric reserves fell to half their seasonal average and prices soared. Storage, which refers to the amount of usable water in the system, was 4 percent below average yesterday.
Tiwai Point, 21 percent owned by Sumitomo Chemical Co., makes the world's purest aluminum and supplies metal for almost half the hard-drives and capacitors in the world's computers and LCD screens. It gets about 10 percent of its power at spot prices and has lost about 2,900 tons of output a month since May as energy costs surged.
Electricity cost an average NZ$27.64 ($19) a megawatt-hour nationwide yesterday, having reached a record NZ$392.72 June 1.
August Plan
Rio Tinto's plans to resume output in August were thwarted by a continued dry spell on South Island and transmission constraints that restricted power supplies from the North Island. The high- voltage cables liking the two islands will remain at half capacity until an upgrade is completed in 2012.
Government-owned generator Meridian Energy Ltd. supplies the smelter from its nearby 850-megawatt power station on the shores of Lake Manapouri.
The company plans to seek changes to its operating rules early next year that could boost the plant's output by 89 gigawatt-hours a year, enough to supply 11,000 homes, and 1.7 percent more than the plant produced in 2007.
Aluminum for delivery in three months on the London Metal Exchange gained $6 to $2,415 a ton in Asian trading today. The metal fell 0.5 percent yesterday its fourth straight decline.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
Read more...
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