November 2009

Flat Panels at $299.99 Mark Best Buy, Retailer Courtship of Wary Shoppers

November 25, 2009

By Chris Burritt and Cotten Timberlake Nov. 25 (Bloomberg) — Wal-Mart Stores Inc. , Target Corp. and Kohl’s Corp. are competing for customers with discounts and extended Black Friday hours as cost-conscious shoppers say they plan to spend less on gifts than they did last year. Kohl’s , the fourth-largest U.S. department-store chain, plans to open at 4 a.m. on Nov. 27 and offer more than 300 early-bird specials, including $34.99 cashmere sweaters. Larger chain Macy’s Inc. cut the prices of some wool coats as much as 70 percent. Walmart is staying open all night so shoppers can grab $3 pajamas and $15 Miley Cyrus jeans when they go on sale at 5 a.m. The chains are also contending for home-electronics shoppers. Walmart’s Web site is offering home delivery of flat- panel televisions and other electronics for 97 cents. Best Buy Co. , the world’s largest electronics chain, is discounting flat- panel TVs, cameras and laptops. “Retailers are taking every opportunity now to fight for the customers that are coming to the malls and shopping centers,” said Joe LaRocca , asset-protection adviser for the National Retail Federation. The day after U.S. Thanksgiving is known as Black Friday, the traditional beginning of holiday buying. Explanations of the phrase’s origins differ, one holding that it’s the weekend when retailers go to being in the black, profitable for the year. As many as 134 million people plan to shop over the weekend, 4.7 percent more than last year, according to the NRF, a Washington-based trade group. Yet, spending may fall during the holidays. Shoppers may spend an average of $682.74 on Christmas gifts this year, compared with $705.01 last year, according to a survey by the federation. Price Matters With unemployment at 10.2 percent, price is more important to shoppers this year than selection, quality or convenience, according to the NRF. Walmart cut some toy prices to $5, and Richfield, Minnesota-based Best Buy is promoting $299.99 32-inch Dynex flat-screen TVs. J.C. Penney Co. is offering 15 percent more specials, including half-carat diamond stud earrings for $79.99. Kohl’s is selling some toys at half price. “We approached this holiday knowing it was going to be a tough season,” said Julie Gardner , chief marketing officer of Menomonee Falls, Wisconsin-based Kohl’s . “Consumers are continuing to be very smart in their shopping and look for ways to make their dollar go further.” More than a quarter of U.S. households plan to shop Friday, according to an ICSC survey. Almost eighteen percent of those surveyed said they would shop between midnight and 4 a.m.; 36 percent said they would go between 4 a.m. and 8 a.m. ‘Whenever, However’ “Retailers want people shopping whenever, however and why- ever — just come on in now,” Wendy Liebmann , chief executive officer of the New York consulting firm WSL Strategic Retail, said in a telephone interview this week. “They need to get people excited at a moment when they don’t want to overspend.” Walmart, the world’s biggest retailer, will leave the doors open at many of its 833 U.S. discount stores to keep crowds from congregating outside. Among the stores staying open is the one in Valley Stream, New York, where Jdimytai Damour, a temporary worker, was fatally trampled on Black Friday last year. The Bentonville, Arkansas-based chain announced holiday discounts on toys, turkeys and TVs as early as September. Those promotions won’t diminish the importance of Black Friday because it “signals the beginning of the Christmas season,” Charles Holley , Walmart’s executive vice president of finance, said this month. The company declined to comment further. ‘Tailgaters’ Walmart rose 21 cents to $55.06 at 11:45 a.m. in New York Stock Exchange composite trading. Target climbed 54 cents to $48. Kohl’s gained $1.24 to $55.05. Best Buy increased 9 cents to $42.94, and J.C. Penney added $1.13 to $30.36. Minneapolis-based Target , the second-largest U.S. discount chain, will open Friday at 5 a.m., an hour earlier than last year. J.C. Penney, based in Plano, Texas, will open at 4 a.m. It’s airing a TV commercial featuring tailgaters eating leftovers on Black Friday while waiting to shop, and will offer wake-up calls to shoppers. After this weekend, traffic in stores will slow through mid-December, according to Robert Drbul , a Barclays Capital analyst in New York. Another jolt of discounts will grab shoppers waiting for deals in the 10 days before Christmas, he predicted. “We expect a late Christmas,” Drbul said. To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at 1348 or cburritt@bloomberg.net ; Cotten Timberlake in Washington at ctimberlake@bloomberg.net

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Lilly, Bristol’s Erbitux Reduced Symptoms of Stomach Disorder in Study

November 25, 2009

By Shannon Pettypiece Nov. 25 (Bloomberg) — Bristol-Myers Squibb Co. and Eli Lilly & Co .’s cancer treatment Erbitux helped reduce pain and nausea in patients with a rare, precancerous stomach disorder, in a small trial. Erbitux reduced symptoms in all seven patients with Menetrier’s disease who took the treatment for four weeks, according to a study released today in the journal Science Translational Medicine. In four of the patients, signs of the disease were almost undetectable in stomach tissue. There have only been 500 documented cases of Menetrier’s disease since it was first identified in 1888, as some cases may go undiagnosed or unreported because there is no treatment, said Robert Coffey, the study’s lead researcher and a professor of medicine at Vanderbilt University. The study results may be enough to get U.S. Food and Drug Administration clearance to market the drug for the condition, which has no approved treatment, Coffey said. “We are hopeful that on the basis of this evidence in a rare disease that the FDA might consider giving approval,” said Coffey in a telephone interview. “There is really nothing else out there for these patients.” Menetrier’s disease is a pre-malignant disorder characterized by large folds in the body of the stomach. Patients with the disease have a higher risk of eventually developing stomach cancer and have little to no stomach acid needed to digest food. Rare Disorder The only current treatment for adults with the disease is removing most of their stomach. Because of the rarity of the disorder, it took eight years to recruit nine patients for the study, making it unfeasible to have a placebo patient group, the researchers wrote. Two of the patients dropped out after the first dose because of concerns that they would develop side effects. All seven of the patients continuing treatment had severe enough disease they would have needed stomach removal, the research article said. All seven decided to continue treatment after the study ended. Four of them eventually had stomach removal, including two who did not want to remain on drug treatment indefinitely. Since word got out about the research, Coffey said he has been getting an increase in calls from patients who believe they have Menetrier’s, a sign the need might be greater than expected. Root of Disease Researchers believe the symptoms of the disease are caused by over production of the protein transforming growth factor- alpha or TGF. Erbitux may help Menetrier patients because it is designed to block the binding of epidermal growth factor and TGF alpha, which is also involved in the growth of tumor cells. Erbitux is sold in the U.S. to treat colorectal and head and neck cancer. It is marketed in Europe by Merck KGaA and in the U.S. by Bristol and Lilly . The drug was developed by Imclone Systems Inc., which Indianapolis-based Lilly acquired a year ago. There are no other drugs in human testing for Menetrier’s disease, according to the U.S. database of clinical trials. The research was funded by the National Cancer Institute and Vanderbilt’s Clinical Translational Science Award. To contact the reporter responsible for this story: Shannon Pettypiece at spettypiece@bloomberg.net .

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Consumer Spending, New-Home Sales in U.S. Top Forecasts as Economy Revives

November 25, 2009

By Timothy R. Homan and Bob Willis Nov. 25 (Bloomberg) — Consumer spending and sales of new homes climbed more than forecast while claims for jobless benefits dropped to the lowest level in a year, putting the U.S. economy on stronger footing heading into 2010. Household purchases increased 0.7 percent in October and new homes sold at the fastest pace since September 2008, data from the Commerce Department showed today in Washington. The number of Americans applying for unemployment insurance dropped by 35,000 last week, the Labor Department said. Government housing incentives, which have been extended and expanded into next year, and Federal Reserve efforts to keep borrowing costs low are making it possible for Americans to keep spending even as unemployment climbs. The decrease in firings points to an improvement in labor-market conditions that will help sustain the recovery next year. “The things we watch closely to determine trends in consumer behavior were impressively strong,” said David Resler , chief economist at Nomura Securities International Inc. in New York. “The layoff picture, at least, has improved and is continuing to improve. What we still have to see is hiring, and we haven’t seen much evidence of that yet.” Stocks in the U.S. gained, with the Standard & Poor’s 500 Index adding 0.3 percent to 1,108.73 at 12:33 p.m. in New York. The Dow Jones Industrial Average rose 0.2 percent to 10,456.61, while the yield on the benchmark 10-year Treasury note rose to 3.34 percent from 3.31 percent late yesterday. A separate report from the Commerce Department showed the economic recovery will be uneven and slow to gain speed. Orders for durable goods unexpectedly declined 0.6 percent in October. Slowing demand for machinery, computers and communications equipment indicates companies are still wary about being stuck with unsold goods. Personal Income The increase in consumer spending last month exceeded the median estimate of economists surveyed that projected a 0.5 percent gain. Incomes climbed 0.2 percent, also more than forecast. Disposable income, or the money left over after taxes, rose 0.4 percent, the most since May. The figures underscore why some retailers such as J.Crew Group Inc. are seeing improving demand heading into the holiday shopping season. The U.S. clothing retailer yesterday reported that third-quarter profit more than doubled. Sales of new homes rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired. President Barack Obama this month extended the $8,000 tax credit for first-time homebuyers until April 30, from Nov. 30, and expanded it to include some current homeowners. Mortgage Rates Borrowing costs may stay low as Fed policy makers have signaled they will hold their benchmark interest rate near zero for an extended period. The average rate on a 30-year fixed mortgage dropped for a fourth straight week, according to Freddie Mac of McLean, Virginia. The rate fell to 4.78 percent, matching the record low set in April. A rise in new-home sales in the South accounted for the entire U.S. increase, the Commerce Department’s report showed. “The South is the largest region by size, accounting for over 50 percent of new home sales, so that the gain is still significant, even though a broader improvement would have been more favorable,” Ryan Wang , an economist at HSBC Securities USA Inc. in New York, said in a note to clients. The median price of a new home in the U.S. decreased to $212,200, from $213,200 a year earlier. Sales of new homes were up 5.1 percent from October 2008, the first year-over-year gain since November 2005. Unsold Homes Inventories dropped. The number of homes for sale fell to a seasonally adjusted 239,000, the fewest since May 1971. The supply of homes at the current sales rate decreased to 6.7 months’ worth, the lowest level since December 2006. Initial jobless claims declined to 466,000 in the week ended Nov. 21 from 501,000 a week earlier, signaling the labor market was deteriorating at a slower pace. The number of people collecting unemployment insurance dropped in the prior week, while those getting extended payments also declined. After eliminating more than 7 million jobs in the past two years, companies may have been limited in their efforts to cut further as the economy recovers. The government may report next week that employers in November shed the fewest jobs since January 2008. Employment Forecast The economy probably lost 116,000 jobs in November, economists surveyed by Bloomberg forecast the Labor Department will report on Dec. 4. The jobless rate probably held at a 26- year high of 10.2 percent for a second month, economists forecast. A Labor Department spokesman said there were no special factors to explain the drop in claims last week. Economists say the number of applications is often volatile in the last couple months of the year, in part because of holidays. A separate report showed confidence among U.S. consumers fell in November. The Reuters/University of Michigan’s final index of consumer sentiment decreased to 67.4 from 70.6 in October. The University of Michigan’s measure of current conditions, which reflects Americans’ perceptions of their own finances and whether it’s a good time to buy big-ticket items such as cars and homes, fell to 68.8 from 73.7 in October. The index of expectations six months from now, which more closely projects the direction of consumer spending, decreased to 66.5 from 68.6 in October. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net ; Bob Willis in Washington at bwillis@bloomberg.net

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South Korean Manufacturers’ Confidence Declines on Uncertainty Over Demand

November 25, 2009

By Seyoon Kim Nov. 26 (Bloomberg) — South Korean manufacturers’ confidence slipped to the lowest level in four months due to uncertainty about the outlook for domestic demand. An index measuring expectations for December fell to 85 from 93 a month earlier, according to a survey of 1,475 manufacturers released by the Bank of Korea today in Seoul. A measure of non-manufacturing companies’ expectations was unchanged at 84. Consumer confidence fell in November for the first time in eight months on concern about the sustainability of the economic recovery. The benchmark Kospi stock index has declined 3.7 percent since October and the won gained 2.3 percent in the same period against the dollar. Finance Minister Yoon Jeung Hyun said yesterday the currency’s gain may hurt corporate profitability. Asia’s fourth-largest economy expanded 2.9 percent in the third quarter, the fastest pace in seven years, as South Korea led a regional rebound with China and Singapore. Samsung Electronics Co. and Hyundai Motor Co. , among the nation’s largest exporters, reported higher earnings in the quarter. Today’s report showed an index measuring the outlook for exports dropped to 98 from 102 a month ago, and a gauge for domestic sales in December fell to 98 from 101. The Bank of Korea surveyed the manufacturers and 801 non- manufacturers between Nov. 13 and Nov. 20. To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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European Companies Turn to Bonds as Bank Loans Dry Up: Chart of the Day

November 25, 2009

By Jana Randow and Simone Meier Nov. 25 (Bloomberg) — European companies are turning to credit markets after losses stemming from the financial crisis left banks reluctant to lend, cutting off corporations from their primary source of financing, according to UBS AG. The CHART OF THE DAY shows the level of corporate bonds in the credit market, in blue, has risen 12 percent over the past year, and bank loans, in yellow, have fallen to the lowest in 13 months. While the euro-region economy returned to growth in the third quarter, banks may remain reluctant to lend for some time, boosting bond issuance further, said Stephane Deo , UBS chief European economist in London. “One of the key reasons why banks remain cautious about lending are future economic prospects,” Deo said. “New debt now comes disproportionately from markets. This is a very unusual pattern.” In the euro area, bank lending accounts for about 70 percent of corporate financing compared with 20 percent in the U.S., according to the European Central Bank. Banks started tightening credit standards in the third quarter of 2007 as a result of the financial crisis, according to ECB statistics. “Companies that have access to the credit market are better off compared to those that have no access,” Deo said. Celesio AG, Europe’s largest publicly traded drug wholesaler, sold 350 million euros ($523 million) in convertible bonds last month, the Stuttgart-based company’s first such transaction. Safran SA, a Paris-based maker of commercial aircraft engines with General Electric Co., said on Nov. 20 it raised 750 million euros in an inaugural five-year bond auction. To contact the reporters on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net ; Simone Meier in Dublin at smeier@bloombert.net

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Israeli Government Approves 10-Month Settlement Building Halt in West Bank

November 25, 2009

By Gwen Ackerman and Calev Ben-David Nov. 25 (Bloomberg) — Israeli Prime Minister Benjamin Netanyahu said his government approved a 10-month halt to new housing construction in West Bank settlements and called on Palestinians to resume peace talks. “This is not an easy step, it is a painful step, but we are taking it out of broad national security considerations with the goal of renewing negotiations to achieve peace with our neighbors, the Palestinians,” Netanyahu said at a press conference in Jerusalem. U.S. Secretary of State Hillary Clinton said in an e-mailed statement that the Israeli decision “helps move forward toward resolving the Israeli-Palestinian conflict.” Her comment came within minutes of Netanyahu’s announcement. George Mitchell, the U.S. Middle East peace envoy, said the move “falls short of a full settlement freeze but it is more than any Israeli government has done before.” Palestinians have refused to resume peace talks unless Israel ends all construction in the West Bank and east Jerusalem, which they seek as the capital of a state. Netanyahu said today that Israel wouldn’t halt construction in east Jerusalem or of public buildings in the West Bank, such as synagogues and kindergartens. “The Palestinian Authority rejects the partial stopping of settlement and calls for the complete cessation of settlement activities in the West Bank and in Jerusalem,” Saeb Erakat , the top Palestinian negotiator, said today before Netanyahu’s official announcement. The Palestinian Authority “is calling on President Barack Obama to exert more pressure on Israel to completely stop settlements.” Military Operation Israeli-Palestinian negotiations broke down last December when Israel launched a military operation in the Gaza Strip. The Obama administration’s high-profile efforts to bring the two sides together have failed to break the stalemate. “There is a sense that the Israeli government is aware that a vacuum in the Israel-Palestinian political process does not play to Israel’s favor,” said Jonathan Spyer , a political scientist at the Herzliya Interdisciplinary Center outside Tel Aviv. “It invites the possibility of imposed solutions from outside.” Ministers today approved a 10-month suspension of new residential construction permits and of new homes in the West Bank. The freeze will not apply to public building in the West Bank or to construction in east Jerusalem, which Israel captured in the 1967 Middle East war and annexed in a move that was not internationally recognized. Population Growth Israel approved the construction of 455 housing units on the West Bank on Sept. 7, while work is already under way on another 2,500. Netanyahu has said settlers should be allowed to build new homes and schools in existing settlements to accommodate population growth. A Jerusalem planning committee on Nov. 17 approved the building of 900 new homes in the area of Gilo, built beyond the 1967 borders. Some members of Netanyahu’s Likud party, which has traditionally advocated settlement construction, said they opposed the plan. “Prime Minister Netanyahu must bring this decision to the Likud Knesset faction for their approval,” lawmaker Danny Danon said in an e-mailed statement. “If Netanyahu does not do so, I will personally convene an urgent meeting of the Likud Central Committee to correct this betrayal of commitments we made to our voters.” To contact the reporters on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net ; Gwen Ackerman in Jerusalem at gackerman@bloomberg.net .

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Obama Plans to Unveil Afghan War Strategy in Dec. 1 Speech at West Point

November 25, 2009

By Kate Andersen Brower and Roger Runningen Nov. 25 (Bloomberg) — President Barack Obama will lay out his strategy for the war in Afghanistan on Dec. 1 in a nationwide address from the U.S. Military Academy at West Point, New York. “The American people are going to want to know why we’re here, they’re going to want to know what our interests are, and the president is going to walk through the decision-making process,” White House Press Secretary Robert Gibbs told reporters. “We’re in the ninth year of our efforts in Afghanistan,” Gibbs said. “The president does not see this as an open-ended engagement.” After months of review, Obama held his final session with his top foreign policy advisers and military commanders this week, including General Stanley McChrystal , the U.S. commander in Afghanistan. The talks now focus on adding 30,000 to 35,000 U.S. troops, according to a U.S. official. McChrystal cautioned in August that the situation in Afghanistan, where a Taliban insurgency has gained strength, was “serious” and required a revised strategy. “I feel very confident that when the American people hear a clear rationale for what we’re doing there and how we intend to achieve our goals, that they will be supportive,” Obama said yesterday. Obama is set to speak at 8 p.m. New York time on Dec. 1. To build support, Defense Secretary Robert Gates , Secretary of State Hillary Clinton and Admiral Michael Mullen , chairman of the Joint Chiefs of Staff, likely will be dispatched to outline the strategy to Congress next week. McChrystal may testify the following week. Congressional Pressure Obama is under pressure from both political parties: Some Democrats are resisting deeper U.S. involvement in the war, while Republicans are pushing for quick action to add more troops to the fight. The president also faces a skeptical public. In a recent Washington Post-ABC News poll , 52 percent of Americans said the conflict hasn’t been worth the cost. “It’s a million dollars a troop for a year,” Gibbs said today. “10,000 troops is $10 billion. That’s in addition to what we already spend in Afghanistan and Pakistan.” Obama has given no indication of how many U.S. military personnel he will need to achieve his goals, which include dismantling al-Qaeda’s networks in the region and preparing the Afghan government to take over responsibility for security. The U.S. now contributes about 70,000 of the 110,000 international troops waging the Afghan war. McChrystal has recommended boosting the U.S. force by as many as 40,000 troops. ‘Comprehensive’ Obama said his administration’s review of Afghanistan strategy has been “comprehensive and useful.” “After eight years, some of those years in which we did not have, I think, either the resources or the strategy to get the job done, it is my intention to finish the job,” Obama said at the White House. Obama said he also plans to remind allies from the North Atlantic Treaty Organization of their “obligations” to the war effort, including money and troops. NATO foreign ministers are scheduled to meet in Brussels next week. “Nobody should expect that the day after President Obama makes his announcement that there will be a total troop figure added up and put on the table from the other allies,” NATO spokesman James Appathurai told reporters in Brussels today. “There should be patience on everyone’s part.” U.K. Prime Minister Gordon Brown is “optimistic” that 10 NATO allies, excluding the U.K. and the U.S., will send 5,000 more troops to Afghanistan, his spokesman, Simon Lewis , told reporters today in London. Benchmarks Obama has said he wants to set benchmarks to measure improvements in Afghanistan’s military and government, including the ability to deliver services to the civilian population and efforts to reduce corruption. The president also has said he wants to lay out a path for an exit strategy for a war that began a few weeks after the Sept. 11, 2001, terrorist attacks on the U.S. “The Afghan people ultimately are going to have to provide for their own security,” he said. The intensified pace of the war there has increased U.S. casualties. October was the deadliest month for U.S. forces since the fighting began, with 59 military personnel dead from combat and accidents, according to Department of Defense figures . An issue getting increasing attention among congressional Democrats is the cost of the war effort. Raise Taxes Michigan Democrat Carl Levin , chairman of the Senate Armed Services Committee , said last week that higher-income Americans should be taxed to pay for sending more troops to Afghanistan. An “additional income tax to the upper brackets, folks earning more than $200,000 or $250,000” a year, could fund more troops, Levin, a Michigan Democrat, said in an interview for Bloomberg Television’s “Political Capital With Al Hunt .” Gibbs said Nov. 23, before the president’s last strategy session, that the idea of a so-called war tax hadn’t come up in Obama’s discussions. The president has told the Joint Chiefs of Staff that “we have to take into account how much all of this is going to cost over a five-year, 10-year period,” Gibbs said. Levin said today he expects to conduct hearings of his panel “within a day or two” after the announcement to hear from McChrystal, Gates, Mullen and Karl Eikenberry , the U.S. ambassador to Afghanistan. To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net ; Kate Andersen Brower in Washington at kandersen7@bloomberg.net .

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Black Market Signals Vietnam’s Dong Devaluation Is Just Start of Weakening

November 25, 2009

By Beth Thomas Nov. 26 (Bloomberg) — Vietnam, struggling to control accelerating inflation and a widening trade deficit, will keep weakening the dong after devaluing the currency for the first time since December, black-market rates and forwards show. The central bank said yesterday it will permit the currency to decline a further 3 percent today, after it fell 5.4 percent in the past year. The unofficial rate offered at gold shops in Ho Chi Minh City is 9.7 percent weaker than yesterday’s spot- market price of 17,886 per dollar. Contracts based on the exchange rate in 12 months imply a 15.6 percent depreciation. Inflation accelerated to a six-month high of 4.35 percent in November from a year earlier and the nation’s balance of payments worsened as exports dropped and rising commodity prices swelled the cost of imports. The dong has slumped 22 percent in the past decade and the government risks “damaged credibility” by allowing further losses, according to Standard Chartered Plc. “Whenever you devalue a currency, there is general expectation for more,” said Thomas Harr , a foreign-exchange strategist in Singapore at Standard Chartered, which predicts a decline to 19,000 by the end of next year. “The key challenge is the widening trade deficit and slowing inflows from foreign direct investment, remittances and equity inflows.” The State Bank of Vietnam decided to lower the reference rate 5 percent to 17,961 against the dollar, close to yesterday’s spot rate. That was the first such move since Dec. 25. The dong’s decline will be limited as policy makers also narrowed its trading range to 3 percent from the daily rate, from a 5 percent band adopted March 23. Support for Exports The currency, which is not fully convertible, traded as weak as 19,800 yesterday at gold shops in the nation’s financial center, according to a state-run telephone information service. Twelve-month non-deliverable forwards, in which assets are bought and sold at current prices for future delivery, have lost 6.8 percent this month to 21,200. The contracts are settled in dollars. A weaker dong may help to increase overseas shipments, said Dominic Scriven , a director of Ho Chi Minh City-based fund managers Dragon Capital, which has $1.6 billion under investment. “Government attempts to address market concerns ought to be seen positively,” he said. “The move on the currency can only strengthen Vietnam’s export competitiveness.” Gold Hoarding The trade deficit widened to $1.9 billion in October, the most since May 2008, from $1.8 billion in September. Exports fell 14 percent in the first 10 months of 2009 from the year- earlier period. The government may release figures for November’s shortfall as early as today. Vietnam’s currency is caught in a “vicious circle” between the government’s desire to boost exports and its concern that a devaluation could push more locals into holding dollars, Morgan Stanley said this month. The dong is the third worst-performer among currencies of Asia’s 17 biggest economies in the past year, after the Pakistan rupee and Kazakhstan tenge, as Vietnamese hoarded gold to protect their savings from further devaluation. The metal’s price climbed to 28.85 million dong ($1,613) per tael yesterday, from 18.4 million dong at the start of the year. One tael is about 1.2 ounces of gold. “I just bought a load of gold to save my money since it looks like prices will go higher,” said 46-year-old Nguyen Thi Hoa, who runs a coffee shop in Hanoi’s Old Quarter. “The dong has lost its value.” Investment Outflows Outflows of investment are overwhelming inflows. The deficit in Vietnam’s financial account rose to $5 billion in the first half, compared with $1.6 billion for all of 2008, according to the International Monetary Fund. The benchmark VN Index of stocks dropped 4.5 percent yesterday, the most in more than seven months, to close at a three-month low of 503.41. Direct foreign investment commitments fell 73 percent in the first 10 months and the central bank is forecasting a drop of as much as 20 percent in remittances from overseas Vietnamese. “We used to have exposure to the currency but we’ve gotten out already,” said Michael Hasenstab , who oversees $45 billion in assets for San Mateo, California-based Franklin Templeton Investments. “There are questions about the economy.” Imports and inflation have gathered pace as the government provided subsidized loans to meet its 5.2 percent economic growth target for 2009, compared with 6.2 percent expansion last year. Credit growth in the first 10 months reached 33 percent, exceeding policy makers’ 30 percent full-year target. ‘Unlikely’ to be Last To help restore confidence, central bank Governor Nguyen Van Giau increased the benchmark interest rate yesterday by one percentage point to 8 percent. The central bank response to the triple threat of inflation, the trade deficit and the slumping dong “is most unlikely to be the last,” Robert Prior-Wandesforde , a senior economist at HSBC Holdings Plc. in Singapore, wrote in a research note yesterday. He predicted an 11 percent benchmark rate by the end of 2010. “Funding costs for corporates are on their way up so this may lead to some downward revisions in earnings outlooks,” said Mark Canizares , the head of equities at Ho Chi Minh City-based Manulife Vietnam Fund Management, which has about $280 million in assets under management. To contact the reporter on this story: Beth Thomas in Hanoi at bthomas1@bloomberg.net .

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AIG Derivatives Employees May Depart If Bonuses Aren’t Paid, Lawyer Says

November 25, 2009

By Hugh Son Nov. 25 (Bloomberg) — American International Group Inc. employees unwinding the insurer’s derivatives may leave in March if they don’t get their promised retention bonuses, said a lawyer representing some of the workers. Staff in the Financial Products unit may depart if the company, under pressure from regulators, doesn’t pay the $198 million it previously committed, Andrew Goodstadt , a partner at Thompson Wigdor & Gilly LLP, said today in an interview. There will also be “instant litigation ” against New York-based AIG if the awards aren’t sent, he said. “Some or all of my group would be willing to go, these are very smart, talented people who’ve made a lot of money for the company,” Goodstadt said. “If they don’t get their payments, under Connecticut law that’s a constructive discharge,” he said, using a term for a situation in which an employer makes conditions intolerable. He said he represents about 20 workers at Wilton, Connecticut-based Financial Products. AIG enraged lawmakers this year after handing out $165 million in retention awards to staff at Financial Products, the unit blamed for pushing the company to the brink of collapse with bets on subprime home loans. Remaining employees are now working to reduce the number of derivative trades as AIG sells assets to repay loans included in its $182.3 billion bailout. Kenneth Feinberg , the Obama administration’s special master on executive pay, has told AIG to reduce the $198 million in March 2010 retention bonuses, according to an October report from Neil Barofsky , the special inspector charged with policing the Troubled Asset Relief Program. Feinberg didn’t specify how much the payments should be cut, according to the report. Workers ‘Frustrated’ Financial Products workers are “frustrated” with the dearth of information about the retention pay and their 2010 salary, Goodstadt said. Feinberg rejected AIG’s proposal to give the workers raises and said they will get only their base salaries this year, according to an October letter. He is in “ongoing discussions” with AIG regarding these workers, according to the document. “If there’s an unrealistically low cap on compensation, certainly they’d have motivation to leave,” Goodstadt said. “If they’re getting paid less than what the market would bear in a free economy, why work for that company?” Feinberg wanted to cut the March 2010 payments to less than $100 million, according to New York Magazine, which reported the workers’ threat to leave in an article in the issue dated Nov. 30. Gerry Pasciucco , the former Morgan Stanley executive appointed to wind down the AIG unit, offered to trim the payments to about $115 million, the magazine reported. Mark Herr , an AIG spokesman, declined to comment. Executive Departures AIG has lost more than 50 managers to competitors since its September 2008 bailout. Chief Executive Officer Robert Benmosche sought to reassure workers last month by saying that the “vast majority” of them will be unaffected by Feinberg’s rulings. In March, former CEO Ed Liddy had to defend the bonuses before Congress and said that some AIG employees received death threats. Protesters visited the Connecticut homes of two Financial Products executives. The negative publicity hurt sales of life insurance and retirement products around the world, AIG said in regulatory filings. The insurer’s bailout includes a $60 billion Federal Reserve credit line, a Treasury investment of as much as $69.8 billion and $52.5 billion to buy mortgage-linked assets owned or backed by the company. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

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Fed Adopts Stricter Rules on Regional Directors’ Ties to Financial Firms

November 25, 2009

By Michael McKee and Scott Lanman Nov. 25 (Bloomberg) — The Federal Reserve tightened eligibility rules for the directors who choose regional Fed presidents after the central bank came under fire for letting a former Goldman Sachs Group Inc. chairman serve. Board members of Fed banks who represent the public must end any association with a firm that becomes the owner or part of a bank, thrift or credit union, or they must resign from the regional Fed bank’s board. The rules, announced today by the Fed in Washington, apply to the two-thirds of regional directors who don’t represent banks. The new Fed rules follow a proposal by Senate Banking Committee Chairman Christopher Dodd that aims to put more distance between the financial industry and the Fed by removing commercial banks’ role in appointing directors and subjecting each board chairman to Senate confirmation. “It’s a very good idea to tighten it up to reduce any ambiguity,” said former St. Louis Fed President William Poole, now a senior fellow at the Cato Institute in Washington. “It’s obviously an effort to respond to the political pressure for changing the Federal Reserve structure.” Chairman Ben S. Bernanke goes before the Senate panel Dec. 3 in a confirmation hearing for his second term as central bank chief. He is likely to face questions about the central bank’s record of supervision during the financial crisis and its role in taxpayer-funded rescues of firms including insurer American International Group Inc. Senate Confirmation The Fed came under fire after it granted a waiver allowing a Goldman Sachs board member to stay on as a member of the New York Fed board representing the public after Goldman Sachs became a bank holding company in September 2008. The change to a bank holding company put Goldman Sachs under the New York Fed’s supervision. The director, Stephen Friedman , bought additional stock in Goldman Sachs after receiving the waiver and while serving as chairman of the New York Fed’s board. Senator Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee, said Friedman’s stock purchases were “deeply disturbing,” according to an article in May in the Wall Street Journal. Friedman, in his resignation letter in May, said he had been in compliance with Fed rules and that his service on the board was “mischaracterized as improper.” Exigent Circumstances The new policy says Fed governors may approve a waiver in “rare and exigent circumstances” upon written request from the regional bank. The Fed’s 12 regional Fed banks, along with the Washington- based Board of Governors, make up the Federal Reserve system. The regional banks are private entities with nine-member boards of directors. Regional directors together nominate a president who is approved by the governors in Washington. The New York Fed’s president has a permanent seat on the policy-setting Federal Open Market Committee, while the others serve on the FOMC on a rotating basis. All are responsible for supervising banks in their regions. “The whole idea of being chosen by the very institutions you’re going to be having responsibility over seems somehow inherently contradictory,” Dodd, a Connecticut Democrat, told reporters on Nov. 10. Board Chairmen Dodd wants directors who are currently chosen by banks to be picked instead by the Board of Governors in Washington. His proposal would also make the chairmen of the Fed banks appointees of the U.S. president subject to Senate confirmation. The main role of the regional Fed bank chairmen is to lead the search for bank president. St. Louis Fed President James Bullard said last week that the Dodd proposal is a “blatant politicization” of the central bank. A report Nov. 17 by the U.S. financial rescue’s special inspector general faulted the New York Fed for making “limited efforts” to protect taxpayer funds during last year’s bailout of AIG. The New York Fed president at the time was Timothy Geithner , now the Treasury secretary. Banks including Goldman Sachs received the full value on credit-default swaps purchased from AIG to protect against declines in mortgage-linked investments. After the AIG report, Representative Elijah Cummings , a Maryland Democrat, and other lawmakers called for a “comprehensive congressional review” of the Fed system and consideration of “possible changes in its governance model.” Types of Directors Regional Fed banks have three types of directors. Three Class A directors are elected by and represent member banks. Three Class B directors are elected by member banks to represent the public. The chairman, vice chairman and one other seat on the board are Class C directors, chosen by the Fed’s board of governors to represent the public. Under the new Fed policy, if Class B or Class C directors have a role in any company that becomes a bank, a bank holding company, or in some other way is affiliated with a financial institution, they have 60 days to resign from the board or end the connection. During that period, the director would not be allowed to participate in board activities. In addition, Class C directors who hold stock in a company that becomes a “financial stock issuer” during their term must sell their stock or resign from the Fed’s board, also within 60 days. Until the stock is sold, the director cannot participate in board activities. “It removes all ambiguity,” said George Scalise , who served as chairman of the San Francisco Fed, one of 12 regional Fed banks, from 2003 to 2006. “What it translates into is a tightening up and broadening of the rules that were in place.” Scalise said he was speaking for himself and not as president of the Semiconductor Industry Association in San Jose, California. To contact the reporters on this story: Michael McKee in New York at mmckee@bloomberg.net ; Scott Lanman in Washington at slanman@bloomberg.net .

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Dubai World Seeks to Delay Repayment of Debt; Default Risk Rises by Record

November 25, 2009

By Arif Sharif and Laura Cochrane Nov. 25 (Bloomberg) — Dubai World, with $59 billion of liabilities, is seeking to delay debt payments, sending contracts to protect the emirate against default surging by the most since they began trading in January. The state-controlled company will ask all creditors for a “standstill” agreement as it negotiates to extend maturities, including $3.52 billion of Islamic bonds due on Dec. 14 from its property unit Nakheel PJSC, the builder of palm tree-shaped islands, Dubai’s Department of Finance said in an e-mailed statement. Moody’s Investors Service said it would consider the plan a default should bondholders be forced to accept the terms. “Extending the maturity of Nakheel debt is feeding the market’s uncertainty on which debt Dubai will honor in full,” said Rachel Ziemba , a senior analyst covering sovereign wealth funds at New York-based Roubini Global Economics. “They look desperate and the market is concerned that in the long term Dubai’s indebtedness is rising not falling.” Dubai accumulated $80 billion of debt by expanding in banking, real estate and transportation before credit markets seized up last year. Contracts protecting against default rose 116 basis points to 434 basis points today, the most since they began trading in January, ranking it the sixth highest-risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January. ‘No Clarity’ Investor concern is growing because the emirate hasn’t disclosed how it will pay more than $9 billion of debt coming due in the next four months. Dubai said today it borrowed $5 billion from Abu Dhabi government-controlled banks, half the $10 billion Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said he planned to raise by yearend. “There is no clarity about what exactly is happening,” said Emad Mostaque , a London-based Middle East equity-fund manager for Pictet Asset Management Ltd., which oversees more than $100 billion globally. “They have to clarify if there is going to be a voluntary rollover or if there is going to be a forced rollover. If there is a forced rollover it will mean technical default. If they don’t clear this up then the whole market will want to sell.” Bond Program Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, and home to the world’s tallest tower and the biggest man-made islands, suffered the world’s steepest property slump in the global credit crisis as home prices fell 50 percent from their 2008 peak, according to Deutsche Bank. UBS AG predicted a further 30 percent drop in a report last week. Sheikh Mohammed turned to Abu Dhabi, the capital of the U.A.E. and holder of the world’s sixth-largest crude oil reserves, in February for a $10 billion bailout. The central bank, headquartered in Abu Dhabi, bought all of the 4 percent, five-year securities that Dubai sold on Feb. 23 and the emirate’s credit default swaps dropped 178 basis points that day, after trading for a record 976 basis points. Dubai’s ruler said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil. Repayment Schedule Sheikh Mohammed last week removed the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of U.A.E.’s biggest developer Emaar Properties PJSC from the board of the Investment Corp. of Dubai , the emirate’s main holding company. He also ejected the governor of the Dubai International Financial Centre, Omar Bin Sulaiman , who had led efforts to transform Dubai into the Middle East finance hub. Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from Dubai’s government, Dubai’s Department of Finance said in an e-mailed statement today. Dubai will draw down $1 billion from the bonds sold to the Abu Dhabi banks to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal. Dubai owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. The government raised $1.93 billion last month in its first sale of Islamic bonds, attracting more than $6.3 billion of orders. DP World Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. It didn’t provide a breakdown. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion, according to the statement. Some $18 billion of Dubai World’s debt is with units such as DP World that have enough cashflow to service their obligations, two bankers familiar with the group’s finances, who declined to be identified, said last month. The remaining debt amounts to $22 billion, they said. Credit-default swaps on DP World jumped by a record 163 basis points to 522 basis points, according to CMA data. The price of Nakheel’s bonds fell to 86 cents on the dollar from 110.5 yesterday, according to Citigroup Inc. prices on Bloomberg. Iceland Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett , managing partner for corporate finance, was assigned. “The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.” Credit-default swaps linked to Abu Dhabi rose 34.5 basis points to 134.5, according to CMA prices at 4 p.m. in London. The cost of the contracts increased throughout the Middle East, with Saudi Arabia climbing 11.5 to 86.5 basis points and Qatar rising 5.5 basis points to 99, according to CMA. The swap contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point is 0.01 percentage point and is equivalent to $1,000 a year on a contract protecting $10 million of debt. The cost of Dubai’s contracts is 51 basis points more than for Iceland, where the failure of the banking system triggered the collapse of the currency and economy last year. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net

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Video: Schutz Says Bank of America Should Find CEO From Within: Video

November 25, 2009

Nov. 25 (Bloomberg) — Anton Schutz, president of Mendon Capital Advisors Corp., talks with Bloomberg’s Matt Miller about Bank of America Corp.’s search for a chief executive officer to replace Kenneth D. Lewis and the outlook for the bank’s stock. Bank of America’s next CEO will inherit a bank ranked No. 1 in the U.S. by assets, deposits and mortgages as of the third quarter. The Charlotte, North Carolina-based bank has raised almost $40 billion and posted a cumulative profit of about $6.5 billion during the first three quarters of this year. (Source: Bloomberg)

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Video: Randy Bateman Discusses Stocks, Strategy: Video

November 25, 2009

Nov. 25 (Bloomberg) — Randy Bateman, chief investment officer for Huntington Bancshares Inc., talks with Bloomberg’s Matt Miller about the performance of U.S. stocks and Federal Reserve monetary policy. (This is an excerpt of the full interview. Source: Bloomberg)

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Media Downplays News About ‘Troubled’ Banks, According To Columbia Journalism Review

November 25, 2009

The major business press underplays news from the FDIC that its troubled-banks list soared to more than 550 in the third quarter. The FDIC now considers seven percent of all banks in the U.S. “troubled.”

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Video: Davis Says `Avatar’ Likely to be a Profitable Franchise: Video

November 25, 2009

Nov. 25 (Bloomberg) — David Davis, managing partner of Arpeggio Partners, talks with Bloomberg’s Julie Hyman about the outlook for holiday box office sales. Davis also discusses the outlook for James Cameron’s new movie “Avatar” and the success of “The Twilight Saga: New Moon.” (Source: Bloomberg)

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Video: Gheit Says Oil Prices Shouldn’t Be Higher Than $50: Video

November 25, 2009

Nov. 25 (Bloomberg) — Fadel Gheit, managing director of oil & gas research at Oppenheimner & Co., talks with Bloomberg’s Julie Hyman about factors affecting energy markets and the outlook for oil and natural-gas prices. (Source: Bloomberg)

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Schumer Calls On Adidas To Keep Making NBA Jerseys In US, Save American Jobs (VIDEO)

November 25, 2009

WASHINGTON (Associated Press) – The official uniforms for NBA players could soon be made in Asia, a move drawing sharp criticism from a New York Democratic senator. Sports apparel maker Adidas plans to end its contract with American suppliers and move production of NBA jerseys to a factory in Thailand. The move could cost about 100 jobs at a factory in upstate New York that makes more than half the uniforms worn by Kobe Bryant, LeBron James and other NBA players. Sen. Chuck Schumer said the switch would blemish more than a century of history for the marquee American sport. He called on Adidas to reverse its decision and keep making the uniforms in the U.S. “To do anything else is an insult to the American worker and sports fans everywhere in America,” said the New York Democrat, who is a longtime New York Knicks fan. American Classic Outfitters of Perry, N.Y., has been making NBA jerseys for 40 years. Adidas is in the middle of an 11-year merchandising deal to be the official uniform and apparel provider for the NBA, WNBA and the NBA Development League. In a statement, Adidas said it was consolidating its supply chain and moving production closer to the source of uniform materials. “The Adidas Group continues to produce uniforms for professional, college and other amateur teams at more than 30 facilities in North America and will continue to do so moving forward,” Adidas said. A spokeswoman for the NBA did not immediately respond to requests for comments. NBA players’ jerseys have always been manufactured in the United States. Rob Knoll, senior vice president at American Classic Outfitters, said his company had a multiyear contract to make professional basketball uniforms for Adidas. But last month, he said, Adidas officials told him they were moving operations overseas. The New York plant had invested more than $1 million in facility improvements and equipment to produce the jerseys. “It’s a blow because the work that was in house and scheduled for production is gone now,” Knoll said. “If they want to change their mind, we’d love it.” Adidas also had contracts with two other U.S. companies to make the official NBA jerseys. German-owned Adidas is the second largest athletic shoe and apparel company in the world. Its U.S. subsidiary, Adidas America, has its U.S. headquarters in Portland, Ore. WATCH:

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Video: Venture Capitalist O’Hurley Discusses Copper Prices: Video

November 25, 2009

Nov. 25 (Bloomberg) — John O’Hurley, host of the National Dog Show and a venture capitalist, talks about the China’s influence on copper prices. (This is an excerpt of the full interview Source: Bloomberg)

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Video: Winmill Likes Agnico-Eagle, Newmont, Jaguar Stocks: Video

November 25, 2009

Nov. 25 (Bloomberg) — Thomas Winmill, chief executive officer of Bexil Corp., talks with Bloomberg’s Julie Hyman about his investment strategy in gold-mining stocks. Winmill also discusses the outlook for gold prices, the impact of Federal Reserve policy on metal prices and his stock picks. (Source: Bloomberg)

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Federal Reserve to run public service announcement with credit card tips for holiday shoppers

November 25, 2009

Federal Reserve to run public service announcement with credit card tips for holiday shoppers

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White House Visitor Logs Show Obama Turned To Business Leaders

November 25, 2009

Through its first nine months in office, the Obama administration frequently consulted with leaders of the business and financial communities they were saving from the brink of collapse, according to a review of White House visitor log records released on Wednesday . Chamber of Commerce CEO Tom Donohue visited the White House on ten different occasions, an administration aide confirms. He met twice with the president, twice with his chief economic consultant, Larry Summers and three times with Obama’s business liaison, Valerie Jarrett. In the past few months, the Chamber has found itself embroiled in a bitter fight with the administration on health care policy and regulatory reform, which may explain why none of the visits have occurred since June. Donohue wasn’t the only frequent invitee from the business world. John J. Castellani, president of The Business Roundtable, was also a visitor at the White House on seven different occasions. Twice he came as an audience member for a business council speech. Once he was there for a meeting with the White House’s chief health care adviser, Nancy-Ann DeParle. Once he met in the East Room with the president. Edward Yingling, the president of the American Bankers Association, visited the White House on six occasions –five of which have been previously reported. Often the visits were to discuss issues of bank and credit card policy as well as the housing market. Some of these meetings were formal discussions with other business tycoons. On one occasion Yingling did meet with the president himself, according to a review of White House visitor log records released on Wednesday. Former Federal Reserve Chairman Alan Greenspan visited the administration on six different occasions, twice to talk with OMB Director Peter Orszag and once to meet with Summers (as has been previously reported). As noted during the last release of White House visitor logs, CEOs of banks that received billions in taxpayer-funded bailouts also were granted an audience with the administration. Goldman Sachs CEO Lloyd Blankfein made three visits, and JP Morgan Chase CEO Jamie Dimon stopped by six times. Business wasn’t the only topic that brought visitors to the White House. Health care reform was another big draw. Billy Tauzin, the CEO of the pharmaceutical lobby PhRMA, stopped by the White House eleven times — for both formal bill signings, a town hall meeting, and gathering with high-ranking staff. Once Tauzin met with the president himself. Karen Ignagni, the president and CEO of America’s Health Insurance Plans, came to the White House on eight occasions, usually for meetings with high-ranking officials. As the Associated Press reports , the heads of Kaiser Health Plans, the Blue Cross and Blue Shield Association, the American Hospital Association as well as several major health care industry lobbyists, were also White House visitors. All told, between January 20 and the end of August, the AP reports, lobbyists, strategists and others with a stake in health care reform made 575 visits to the White House. Labor leaders also were frequent guests. The Service Employees International Union president Andy Stern was a visitor on 22 different occasions, as previously reported. George Soros, a major donor to progressive causes, stopped by the White House on four occasions. On Wednesday afternoon, the administration released a second wave of visitor logs documenting who visited the White House between January 20 and the end of August. The information, which includes over 1,600 records, came in response to over 300 requests from the public during the month of October. There are, as in the previous visitor log release, false positive identifications — people who happen to share a name with someone more famous. In addition to those listed above, the following individuals were noticed on the logs. *Mayor Michael Bloomberg of New York City visited four times. *Mayor Cory Booker of Newark visited three times. * CNN’s Wolf Blitzer visited three times. * Sen. Kirsten Gillibrand (D-NY) made five visits, two for formal receptions, one with the president, one with Jarrett and one with Political Director Patrick Gaspard. * Prominent progressive blogger Markos Moulitsas also visited the White House, an administration official confirms. Get HuffPost Politics On Facebook and Twitter!

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Three Baltimore Area Professionals and Their Companies Come Together to Form RER MD – a One-Stop Resolution to Real … (PR Newswire via Yahoo!…

November 25, 2009

Craftsmen Developers, LLC, Daft McCune Walker, Inc. and The Casey Group, Ltd. are excited to announce the formation of Real Estate Resolutions, LLC . RER MD was established to provide comprehensive problem solving services that result in unique opportunities for the distressed real estate industry.

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Eric C. Anderson: Beijing Quietly Signaling Intent To Flee U.S. Debt

November 25, 2009

It now appears China’s leaders are acting upon their frequently expressed concerns about the continuing viability of the U.S. dollar. On 23 November 2009, the Economic Observer News , an independent weekly newspaper distributed in major cities throughout China, published a story suggesting Beijing’s sovereign wealth fund is preparing to almost double in size. According to the Economic Observer News , the China Investment Corporation (CIC) is rumored to be preparing a request for an infusion of an additional $200 billion. The money would be shifted from China’s ever-expanding foreign exchange reserves ($2.27 trillion as of September) into the hands of investors charged with earning a maximum return on the Chinese taxpayers’ hard won gains. This is great news for the Chinese citizenry…the purported “victims” of Beijing’s strict monetary policies…and bad news for the average American. Allow me to explain this conclusion by running a few numbers by the reader. I’ll start with the official Treasury figures for China’s ownership of our growing national debt. On 17 November, Washington released its latest report on “Major Foreign Holders of Treasury Securities.” Here’s what the U.S. Treasury has to say about Beijing’s spending habits over the last seven months. In March 2009, China held $767.9 billion in U.S. Treasury securities. In April that figure was $763.5 billion. In May it was $801.5 billion. In June, $776.4 billion. In July, $800.5 billion. In August, 797.1 billion. And in September–the last month for which data is available–$798.9 billion. Quite simply, over the last seven months China’s investment in our debt has been essentially static. Now let’s turn to China’s foreign exchange reserves over the same time period. According to Chinabilty , a website that has reliably provided the most current news and statistics on China’s economy, in March 2009 Beijing’s foreign exchange reserves stood at $1,952.7 trillion. In April that figure was $2,008.9 trillion. In May, $2,089.5 trillion. In June, $2,131.6 trillion. In July, $2,174.6 trillion. In August, $2,210.8 trillion. And in September, $2,272.6 trillion. My point in reciting this data–during the same period that China’s foreign exchange reserves grew by approximately $320 billion, Beijing’s interest in funding Washington’s extravagance flat-lined. Please note, I am not arguing that the Chinese are preparing to flee U.S. Treasury securities. Such a move would be devastating for Beijing and Washington. Rather, I am increasingly convinced the evidence points to a Chinese decision to diversify their holdings. A logical move–and one we can actually track by monitoring the China Investment Corporation. Officially established in September 2007, the China Investment Corporation is responsible for managing Beijing’s official sovereign wealth fund. (The U.S. Treasury defines a sovereign wealth fund as a government investment account, typically established using foreign currency reserves, but managed separately from those reserves.) Initially provided a pool of $200 billion, CIC was tasked with supporting the rise of China’s largest banks and seeking off-shore opportunities. The approximately $100 billion CIC’s managers allocated for the first task has paid significant dividends–as of August 2009 this investment has risen in value by an estimated $98 billion. The initial offshore investments were not so lucrative. In fact, the China Investment Corporation took significant hits on forays into Morgan Stanley and Blackstone. These losses were an object lesson for Beijing. Unlike Washington–where bailing out the bankers and large insurance firms became a mantra of the moment–Beijing decided its taxpayers’ funds were best kept locked up at home. This caution is now to be lauded. As a result of keeping 87.4% of its holdings in cash and only risking 3.2% in equities and 9% in fixed-income securities, CIC lost a scant 2.1% of its value in 2008. During the same time period Harvard and Yale’s endowment funds–the reputed investment champions–declined in value by 22% and 13%, respectively. Guess what, the Chinese are now ready to invest…in apparently anything but more U.S. T-notes. In March 2009, the China Investment Corporation deputy general manager declared “the current international situation gives the CIC a good opportunity.” (OK, now go back and look at when China’s interest in U.S. Treasury securities essentially flat lined…I’m thinking this is not coincidental.) So where is the money going? To long term investments that serve Beijing’s national interests–read, economic growth–and earn a respectable return for the Chinese taxpayer. A case in point, commodities. In July 2009, CIC announced its first foray into the natural resources sector–a 17.2% stake in the Canadian mining company Teck Resources Limited. The purchase price–$1.5 billion. In September, CIC bought an 11% stake in Kazakhstan’s state-run energy company for $939 million. This move came only a week after CIC purchased $1.9 billion in debt from Indonesia’s biggest coal producer. In October, CIC spent $700 million on a Mongolia-focused mining firm. And in November the China Investment Corporation sunk $400 million in China’s largest wind-power producer and $1.58 in a Virginia-based power-plant developer. All told, over $5 billion now spent on energy and resource industries in less than 6 months. The story does not stop there. In August, CIC bailed out the heavily indebted majority owner of London’s Canary Wharf real estate development–taking a 19% share in the British firm. In September, China Investment Corporation mangers began talking with private-equity funds in the U.S. about acquiring distressed real estate assets–including mortgages and physical property–in the United States. Has CIC been successful? Beijing seems to think so. The Economic Observer News reports the China Investment Corporation has now reached an agreement with the Chinese Communist Party such that it no longer has to treat its original $200 billion allotment as a debt, but rather as an asset. This means CIC will no longer have to make scheduled interest payments to the Ministry of Finance. Instead, CIC will now pay the state–Chinese taxpayers–dividends. This is a development policy makers in Washington can only dream about. I, for one, am certainly not expecting a similar outcome with our “investment” in AIG or GM. My bottom line, Beijing has seen the light–further investment in Washington’s debt does not appear a wise expenditure of Chinese taxpayers’ money. We can speculate what this might mean in the long run…an even weaker dollar and higher interest rates…but should be more concerned about ensuring Mr. Geithner and company get the message. Rather than speculating on the potential of a brighter tomorrow, Washington needs to talk about taking fiscal responsibility seriously, today. The Chinese are not going to be impressed with a blue-ribbon panel that banally offers platitudes concerning the scope of our financial problems. Beijing is only going to be assuaged when Capitol Hill decides it too should be looking to this nation’s long-term best interests. Until that happens I suspect the best gauge of Beijing’s faith in the dollar’s prospects will be measured by where the China Investment Corporation turns next.

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Video: RBC’s Tucci Sees `Pent Up Demand’ for Five-Year Notes: Video

November 25, 2009

Nov. 25 (Bloomberg) — Tom Tucci, head of the U.S. Treasury trading desk at RBC Capital Markets, talks with Bloomberg’s Laura Lee and Brian Luke about the outlook for Treasuries. The U.S. Treasury sold $32 billion of seven-year notes at a yield of 2.835 percent, as demand rose relative to the last auction of securities with the same maturity. (Source: Bloomberg)

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Video: Bloomingdale’s Gould Says Spring Goods Sales `Positive’: Video

November 25, 2009

Nov. 25 (Bloomberg) — Michael Gould, chief executive officer of Macy’s Inc.’s Bloomingdale’s, talks with Margaret Brennan about the outlook for the retail industry. Gould also discusses jewelry sales and luxury consumers. (This is an excerpt of the full interview. Source: Bloomberg)

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Robin Soderling Upsets No. 3 Seed Novak Djokovic in ATP Tennis Group Stage

November 25, 2009

By Chris Elser Nov. 25 (Bloomberg) — Robin Soderling, the lowest-ranked player at this week’s ATP tennis finals, continued his run of upsets, defeating No. 3 seed Novak Djokovic in two sets in the event’s group stage. Soderling, who opened the tournament with a two-set victory over second-seeded Rafael Nadal, won 7-6 (7-5), 6-1 today. The Swede is the No. 8 seed in the eight-man end of season tournament.

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Leonsis Intends to Buy Rest of NBA Washington Wizards After Pollin’s Death

November 25, 2009

By Mason Levinson Nov. 25 (Bloomberg) — Former AOL Vice Chairman Ted Leonsis said he intends to exercise his exclusive right to purchase the remainder of the Washington Wizards following the death yesterday of majority owner Abe Pollin . Leonsis, 52, is majority owner and chairman of closely held Lincoln Holdings LLC, which bought 44 percent of Pollin’s Washington Sports & Entertainment LP in 1999. That company’s assets include the National Basketball Association’s Wizards, the Verizon Center and the Ticketmaster franchise in Baltimore and Washington. The 1999 purchase gave Lincoln Holdings “the exclusive right” to buy the rest of the basketball team, the arena and the ticket seller, Leonsis said in a statement last night hours after Pollin’s death at age 85. “That agreement established an orderly process for conducting that transaction and it is our intention to follow that process,” Leonsis said. Lincoln Holdings, an investment partnership among Leonsis and 10 other area business leaders, purchased the National Hockey League’s Washington Capitals from Pollin in 1999 and the Washington Mystics of the Women’s NBA six years later. Pollin became the Wizards’ owner in 1964, when the franchise was known as the Baltimore Bullets. The team moved to Washington in 1974 and won an NBA championship in 1978. “My partners and I were proud to work with him and his family during the last 10 years and we are committed to continuing his tradition of building exciting, championship- caliber teams,” Leonsis said. “Now is not the time, however, to discuss that subject; our focus now should be on mourning a great man who has done so much for our city.” AOL History Leonsis stepped down from day-to-day activity at Time Warner Inc .’s AOL in 2006 after 15 years with the company. He now holds the title of vice chairman emeritus. The Wizards are 4-9 this season after a 108-107 home win last night against the Philadelphia 76ers. The team finished last season with a 19-63 record following four straight trips to the NBA playoffs. The Wizards are worth $353 million, according to Forbes magazine, ranking 15th among the NBA’s 30 franchises. To contact the reporter on this story: Mason Levinson in New York at mlevinson@bloomberg.net .

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Orders for Durable Goods in U.S. Unexpectedly Decline on Defense Equipment

November 25, 2009

By Courtney Schlisserman Nov. 25 (Bloomberg) — Orders for goods meant to last several years unexpectedly fell in October, restrained by a drop in demand for defense equipment and a reminder the economic recovery will be slow to gain speed. The 0.6 percent decrease in bookings for durable goods followed a revised 2 percent gain in September that was larger than previously estimated, figures from the Commerce Department showed today. Excluding defense bookings, orders rose 0.4 percent. Concern that consumer spending may retrench as unemployment mounts will probably cause companies to limit spending on new equipment and keep inventories lean. While another Commerce Department report showed consumer spending rose more than forecast last month, the world’s largest economy needs a rebound in manufacturing and housing for the recovery to gain momentum. “Many firms are still hesitant to make capital investments,” said Guy Lebas , chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “What we saw in the month of October was a big, big drop in machinery orders after a large increase in September.” Commerce Department figures also showed spending by consumers rebounded in October more than anticipated. The 0.7 percent increase in purchases was larger than the median estimate of economists surveyed by Bloomberg News and followed a 0.6 percent September drop. Incomes climbed 0.2 percent, also exceeding expectations. Jobless Claims A separate report from the Labor Department today showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since September 2008. Claims declined to 466,000 in the week ended Nov. 21 from 501,000 a week earlier, the report showed. Futures on the Standard & Poor’s 500 Index were up 0.4 percent to 1,107.2 at 9:08 a.m. in New York. Economists forecast durable-goods orders would increase 0.5 percent, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from a decline of 1 percent to a 2.1 percent gain. Excluding transportation equipment, orders fell 1.3 percent, the biggest decrease since March. These bookings were forecast to increase 0.7 percent. Less demand for machinery, computers, communications equipment in addition to defense gear contributed to last month’s decrease. Shipments for non-defense capital goods excluding aircraft, which is used in calculating gross domestic product, fell 0.2 percent in October. Bookings for such goods, a proxy for future business spending, decreased 2.9 percent in October. Emerging Rebound The figures raise questions on the sustainability of the emerging rebound in business investment. A report from the Commerce Department yesterday showed the economy grew at a 2.8 percent annual pace last quarter, less than previously estimated. Spending on equipment and software climbed at a 2.3 percent annual pace, the first gain in more than a year. Demand for transportation equipment increased 1.5 percent, led by a 51 percent surge in orders for commercial aircraft. Auto bookings fell 0.1 percent. Auto production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to buy cars expired in late August. Motor vehicle and parts production fell 1.7 percent in October, after an 8.1 percent increase a month earlier, according to industrial production figures released from the Federal Reserve on Nov. 17. Auto Sales Even so, auto sales rose at a 10.45 million annual rate in October, according to Bloomberg data. Ford Motor Co. Chief Executive Officer Alan Mulally said Nov. 3 he is taking a “cautiously optimistic point of view” on 2010 and the automaker will be “solidly profitable” in 2011. Inventories were little changed last month, today’s report showed. Smaller reductions in inventories following the biggest plunge in stockpiles on record will probably support economic growth in comings months. The economy will grow at a 3 percent annual rate this quarter, according to the median projection of economists in a Bloomberg News survey earlier this month. “We exited the year pretty low on inventory — we saw higher demand for printers as we went through the end of the year,” Hewlett-Packard Co. Chief Executive Officer Mark Hurd said in an interview Nov. 23. Hewlett-Packard reported personal- computer sales for its fiscal fourth quarter that topped some analysts’ estimates. Also helping support manufacturing, exports rose in the five months through September, according to Commerce Department data. To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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Consumer Spending, Incomes in U.S. Increase More Than Economists Forecast

November 25, 2009

By Timothy R. Homan Nov. 25 (Bloomberg) — Spending by U.S. consumers rebounded in October more than anticipated, an indication that mounting unemployment has yet to stifle American’s willingness to buy. The 0.7 percent increase in purchases was larger than the median estimate of economists surveyed by Bloomberg News and followed a 0.6 percent September drop, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent, also exceeding expectations. A jobless rate that is projected to exceed 10 percent through the first half of next year means households will probably contribute less to growth as the economy recovers. Nonetheless, retailers such as J.Crew Group Inc. are among companies seeing improving demand heading into the holiday shopping season. “People have been too negative for too long on the consumer,” said John Herrmann , chief economist at Herrmann Forecasting in Summit, New Jersey, who accurately forecast the gain in spending. “We’re seeing very positive spending signals for November.” A separate report from the Labor Department today showed the number of Americans filing claims for unemployment benefits fell last week to the lowest level since September 2008. Claims declined to 466,000 in the week ended Nov. 21 from 501,000 a week earlier, the report showed. U.S. stock-index futures extended gains after the reports. Futures on the Standard & Poor’s 500 Index rose 0.7 percent to 1,110.60 at 8:37 a.m. in New York. Durable Goods Another Commerce Department report showed orders for long- lasting goods unexpectedly dropped last month, depressed by a slump in bookings for defense gear. The median estimate of 75 economists surveyed called for a 0.5 percent increase in spending after an originally reported decrease of 0.5 percent the prior month. Projections ranged from no change to a gain of 0.8 percent. The gain in incomes followed a similar 0.2 percent increase in September and exceeded the 0.1 percent median estimate in the Bloomberg survey. Wages and salaries were unchanged last month after decreasing 0.1 percent in September. Today’s report showed prices were stabilizing. The inflation gauge tied to spending patterns rose 0.2 percent from October 2008, the first year-over-year gain since April. The Fed’s preferred price measure, which excludes food and fuel, climbed 0.2 percent in October from the previous month and was up 1.4 percent from a year earlier. Adjusted for inflation, spending climbed 0.4 percent following a 0.7 percent drop the prior month. Savings Rate Because the increase in spending was larger than the gain in incomes, the savings rate fell to 4.4 percent from 4.6 percent the prior month. Disposable income, or the money left over after taxes, increased 0.4 percent, the most since May. Adjusted for inflation, disposable income increased 0.2 percent. J.Crew, the U.S. clothing retailer, yesterday reported that third-quarter profit more than doubled. Its shares have more than tripled so far this year. Still, uneven gains in spending are even hurting companies that appeal to bargain shoppers, such as Target Corp. , the second-largest U.S. discount chain. The Minneapolis-based company last week said it’s planning for a modest increase in fourth-quarter comparable sales. “We haven’t seen that rebound or that lift yet,” Chairman and Chief Executive Officer Gregg Steinhafel said in a Nov. 17 interview. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, climbed 2 percent last month after falling 8.7 percent the prior month. Purchases of non-durable goods increased 0.2 percent, and Spending on services, which account for almost 60 percent of all outlays, climbed 0.3 percent. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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BP Said to Complete Work on Rotterdam Refinery, Second-Largest in Europe

November 25, 2009

By Nidaa Bakhsh Nov. 25 (Bloomberg) — BP Plc completed two months of maintenance at its Rotterdam refinery, Europe’s second-largest, two people familiar with the work said. The resumption of output may boost gasoline stockpiles at a time of below-normal demand. Maintenance at the plant ended on schedule and units are starting this week, the people said, declining to be identified because the information is confidential. Jacoline Poldervaart, a BP spokeswoman based in Rotterdam, couldn’t immediately comment. A 62,000-barrel-a-day fluid catalytic cracker for gasoline production and an associated alkylation unit were due to be halted at the end of September for as many as eight weeks, two people with knowledge of the plans said on Feb. 6. BP’s plant is able to process 400,000 barrels of oil a day. Royal Dutch Shell Plc’s Pernis facility, also in the Rotterdam area, is Europe’s largest refinery with a daily processing capacity of 416,000 barrels. The global recession has eroded demand for fuels such as gasoline and diesel, cutting profits for refiners and forcing some to lower operating rates, idle plants and put others up for sale. Gasoline inventories in independent storage in the Amsterdam-Rotterdam-Antwerp area, Europe’s oil-trading hub, rose to 784,000 metric tons in the week to Nov. 19, according to PJK International BV. That’s the highest level since Sept. 10. BP’s Global Indicator Margin , a broad measure of refining profitability, sank to an average of $1.13 a barrel in October through Nov. 19, according to data on its Web site . That compares with an average of $5.19 in the fourth quarter of 2008. To contact the reporter on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net

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Toyota Will Repair Floor Pedals on 4 Million Recalled Automobiles in U.S.

November 25, 2009

By Angela Greiling Keane and Makiko Kitamura Nov. 25 (Bloomberg) — Toyota Motor Corp. , the world’s largest automaker, plans to repair accelerator pedals on 3.8 million vehicles in the U.S. that are involved in its biggest recall. The Toyota City, Japan-based company will also install a brake override system on some of the vehicles after drivers reported cases of sudden acceleration, the U.S. Transportation Department said today in an e-mailed statement. The recall affects models of Toyota’s top-selling Camry as well as its Lexus and Prius cars and Tacoma and Tundra trucks. Toyota will reshape the accelerator pedal and, in some vehicles, the floor surface under the pedal, the department’s National Highway Traffic Safety Administration said. The company will develop replacement pedals that will be available for certain models by April, the agency said. Vehicles that are repaired sooner will still get the new pedals when they are ready. The repairs will have “extremely little impact” on Toyota’s earnings, said Kurt Sanger , a Tokyo-based auto analyst at Deutsche Securities Inc. “The cost concerns are not terribly material,” he said. “What you’re worried more about is obviously liabilities,” such as class-action consumer lawsuits. Toyota said in a statement that it was taking the actions “to address the root cause of the potential risk for floor mat entrapment of accelerator pedals.” John Hanson and Brian Lyons, spokesmen for Toyota’s U.S. sales unit based in Torrance, California, didn’t immediately respond to an e-mail seeking comment before regular business hours. The highway safety agency had advised owners of the affected Toyota and Lexus vehicles in October to remove floor mats to reduce the risk of accelerator pedals jamming in the down position. Models Involved The models involved in the recall are the 2007 to 2010 model-year Camry sedans; 2005 to 2010 Avalon sedans; 2004 to 2009 Prius hybrids; 2005 to 2010 Tacoma pickups; 2007 to 2010 Tundra pickups; and Lexus’s 2007 to 2010 ES 350, 2006 to 2010 IS 250 and 2006 to 2010 IS 350 sedans. In 2007, Toyota recalled 55,000 Camrys and Lexus ES 350s in the U.S. for a similar defect. Toyota’s largest U.S. recall to date involved 978,000 vehicles to fix a steering-related flaw that could cause drivers to lose control. Toyota’s biggest previous recall worldwide involved 1.53 million Hilux pickup trucks with faulty steering relay rods. The recall began in Japan in 2004 and was extended to overseas markets in 2005. The 1.53 million is the total number of vehicles recalled globally, Toyota spokeswoman Ririko Takeuchi said. The U.S.-built Camry is the market’s best-selling passenger car, and the Prius is the world’s most popular hybrid-electric model based on sales volume. To contact the reporters on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net ; Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

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Obama Will Attend UN Climate-Change Meeting in Copenhagen, Official Says

November 25, 2009

By Hans Nichols and Kim Chipman Nov. 25 (Bloomberg) — President Barack Obama will attend United Nations climate-change talks in Copenhagen next month amid international pressure for the U.S. to do more to reduce its record production of greenhouse gases. Danish Prime Minister Lars Loekke Rasmussen has invited the heads of almost 200 countries to the Danish capital for the Dec. 7-18 meeting. Leaders planning to make an appearance also include German Chancellor Angela Merkel , U.K. Prime Minister Gordon Brown and Japanese Prime Minister Yukio Hatoyama . The president will go to Copenhagen Dec. 9, White House Press Secretary Robert Gibbs told reporters today. Obama will then travel to accept the Nobel Peace prize in Oslo, Norway, on Dec. 10. Obama, who campaigned on a pledge to tackle climate change aggressively, has been under pressure to attend the meeting amid criticism that the U.S., the biggest greenhouse-gas producer on a per-capita basis, is thwarting progress because of a lack of new national laws to limit heat-trapping pollution and create an emissions-trading market The U.S. Senate is unlikely to pass climate legislation before the Copenhagen meeting of at least 65 world leaders, and Senate Majority Leader Harry Reid , a Nevada Democrat, has said lawmakers will try to focus on the issue “sometime in the spring.” Without a bill from the Senate, which must ratify treaties by a two-thirds majority, Obama’s negotiators are left without firm guidelines to center their discussions. Measure Passed House The House of Representatives passed a bill in June by a 219-212 vote. The Senate is working to complete a bipartisan blueprint of a measure before the Copenhagen meeting, Senator Joe Lieberman , a Connecticut independent, has said. Negotiators have worked for almost two years to devise new emissions-reduction targets for the 37 developed nations bound by the 1997 Kyoto Protocol treaty goals that expire in 2012. Leaders are also trying to agree on standards for the U.S., which never ratified Kyoto, and for developing nations such as China and India, which had no Kyoto commitments. Obama and other leaders have said that a binding accord for reducing greenhouse gases is unlikely to happen in Denmark. The UN had previously said the meeting would mark the deadline for completing a treaty. Instead, leaders are now calling for a “meaningful” political agreement as a framework for a final accord to replace Kyoto. Negotiations are expected to continue next year. To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net ; To contact the reporter on this story: Hans Nichols in Washington at hnichols2@bloomberg.net .

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Bank of America Is Sued by BNP, Deutsche Bank Over Custody of $1.6 Billion

November 25, 2009

By David Glovin Nov. 25 (Bloomberg) — Bank of America Corp. , the largest U.S. bank by assets, was sued by BNP Paribas Mortgage Corp. and Deutsche Bank AG over hundreds of millions of dollars in losses they sustained by investing in asset-backed commercial paper. BNP Paribas and Deutsche Bank today filed separate lawsuits in Manhattan federal court. They say they bought a total of $1.6 billion in asset-backed notes issued by a special purpose entity known as Ocala Funding LLC, which provided funding for mortgage loans originated by Taylor, Bean & Whitaker Mortgage Corp. To reduce risk, they say they insisted that Ocala hold $1.6 billion in cash or mortgage loans as collateral to be deposited with Bank of America, the deal’s trustee. Deutsche Bank “trusted that BofA, one of the nation’s largest and most well-known financial institutions, would perform the gatekeeper function reasonably and responsibly,” the Frankfurt-based bank says in its complaint. “In myriad ways, BofA failed to carry out its various duties designed to protect DB’s investment.” Deutsche Bank, Germany’s biggest bank, said in its third- quarter earnings statement on Oct. 29 that it lost about 350 million euros ($527 million) in the deal. Paris-based BNP Paribas, France’s largest bank, didn’t say in its complaint how much it lost. William Halldin , a spokesman for Charlotte, North Carolina- based Bank of America, didn’t have an immediate comment. Misled Banks Ocala was a commercial-paper vehicle sponsored by now- bankrupt Taylor Bean, which was the 12th-largest U.S. home lender. Taylor Bean received funding from Colonial Bank, an Alabama lender under U.S. investigation. The commercial paper, or short-term IOUs, was backed by residential mortgages. BNP Paribas and Deutsche Bank claim that Bank of America improperly transferred billions of dollars out of Ocala accounts; didn’t track mortgages it was holding as security, as it promised to do; issued false statements about the amount of collateral it held; and took other steps that misled the two banks. The lawsuits are Deutsche Bank v. Bank of America, 09-cv- 9784, and BNP Paribas v. Bank of America, 09-cv-9783, U.S. District Court, Southern District of New York (Manhattan). To contact the reporter on this story: David Glovin in New York at dglovin@bloomberg.net .

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Brazil’s Real Is `Most Overvalued’ Currency as Cash Pours In, Goldman Says

November 25, 2009

By Paulo Winterstein and Camila Fontana Nov. 25 (Bloomberg) — Brazil’s real is the “most overvalued” currency as a “wall of money” coming into Latin America’s biggest economy may overwhelm government efforts to curb its rally, said Goldman Sachs Group Inc. While the real has underperformed other currencies after the government imposed a 2 percent tax on foreign purchases of equity and fixed-income assets on Oct. 19, the effectiveness of the levy “remains to be seen” and further appreciation may prompt controls, Goldman Sachs economist Thomas Stolper wrote. “After some initial success with capital controls, real appreciation appears to be on the rise again,” Stolper wrote in a note to clients. The real has gained 34 percent this year, making it the second-best performer in the world after the Seychelles rupee. The currency slipped 0.3 percent to 1.7359 per U.S. dollar at 10:37 a.m. in New York. A quickening economic recovery and the nation’s link to growing demand for commodities from emerging markets such as China have led to “unprecedented amounts” of overseas capital flowing into the country, Stolper wrote. Inflows reached $17.6 billion in October, compared with $6 billion to $8 billion in previous months, he wrote. Those inflows, together with increased government spending and expanding access to credit, will likely create problems for policy makers as they try to combat inflation to ease pressure on exporters, Stolper wrote. Credit Expansion Brazil’s economy is undergoing a “gradual” expansion of credit, Tulio Maciel , deputy head of the central bank’s economic department, said today in Brasilia. The credit-to-gross domestic product ratio reached 45.9 percent in October, from 45.7 percent in September, Maciel said. The ratio may climb to 47 percent by yearend, he said. Total outstanding bank loans rose 1.4 percent in October from the previous month, the central bank said. State and non-state bank lending climbed 15.3 percent from the same month last year. “Growing inconsistencies in the Brazilian policy mix likely amplify the appreciation pressures, in particular the combination of expansionary fiscal (particularly through current spending), credit, and incomes policies,” Stolper wrote. These factors may force the central bank to raise interest rates from a record low as inflation climbs to the upper limit of its target next year, Stolper said. “This in turn would lead to further appreciation pressures in the current global environment and hence potentially trigger the need for ever blunter measures to curb capital inflows.” Brazil Controls Brazil last week began taxing the issuance of depositary receipts in international markets in a bid to prevent companies from selling shares abroad rather than locally. Economic Policy Secretary Nelson Barbosa said the move would “balance” out distortions caused by the so-called IOF tax that was imposed Oct. 19 in a bid to stem a currency rally. Policy makers will increase the benchmark interest rate to 10.5 percent next year from the current 8.75 percent, a central bank survey of about 100 economists released this week showed. Brazil’s economy resumed growth in the second quarter after its first recession since 2003. The real is the most overvalued based on the bank’s Goldman Sachs Dynamic Equilibrium Exchange Rate. The median forecast for the currency by the end of this year and next is 1.70 per dollar, according to a Bloomberg survey with 18 financial institutions. The real will remain near 1.7 per U.S. dollar for a “long time,” said Jose Francisco de Lima Goncalves, the chief economist of Banco Fator SA. To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net ; Camila Fontana Correa in Sao Paulo at cfontana@bloomberg.net

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Stocks, Commodities Gain, Dollar Falls on Optimism Recovery Strengthening

November 25, 2009

By Michael P. Regan and Mark Gilbert Nov. 25 (Bloomberg) — Stocks and commodities advanced, while the dollar approached a 14-year low against the yen, as reports on home sales, jobless claims and consumers spurred optimism that the economic recovery is strengthening. The Standard & Poor’s 500 Index added 0.3 percent to 1,109.02 at 11:14 a.m. in New York. Gold climbed to a record on demand for a store of value as the dollar weakened against 15 of 16 major currencies and broke 88 versus the yen for the first time since January, when it slid to the weakest since 1995. Treasuries were little changed before the government’s $32 billion auction of seven-year notes. U.S. reports today showed weekly jobless claims slid to the lowest level since September 2008, while home sales, consumer confidence and personal spending topped estimates. The Federal Reserve yesterday raised its forecast for 2010 U.S. growth to a range of 2.5 percent to 3.5 percent, from 2.1 percent to 3.3 percent, and signaled it will tolerate a weaker U.S. dollar. “The U.S. is our planet’s greatest consuming nation, so a healthy U.S. economy, a healthy U.S. consumer is a strong symptom of improving global demand,” said Lawrence Creatura , a Rochester, New York-based fund manager at Federated Investors Inc., which oversees $390 billion. “You’re seeing equity markets respond to that globally, as well as commodity markets.” Europe, Asia The Dow Jones Stoxx 600 Index of European shares added 0.3 percent as raw-material producers climbed with metals. BHP Billiton Ltd., the world’s largest mining company, advanced 3.2 percent in London. France Telecom SA gained 1.8 percent in Paris. Europe’s third-biggest phone company will merge its Orange Switzerland unit with TDC A/S’s Sunrise Communications SA division to expand in Switzerland and pay 1.5 billion euros ($2.25 billion) for a majority stake. Equities pared some of their gains after Dubai World, the government-owned holding company struggling with $59 billion of liabilities, said it is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund. The Dow Jones Industrial Average climbed 24.19 points, or 0.2 percent, to a 13-month high of 10,457.9. Commerce Department reports showed consumer spending increased 0.7 percent last month, beating the median estimate of 0.5 percent from economists surveyed by Bloomberg News, and new home sales increased 6.2 percent. Jobless Claims, Consumers Separate data from the Labor Department showed that the number of Americans filing claims for unemployment benefits fell to 466,000 last week. The Reuters/University of Michigan final index of consumer sentiment was 67.4, higher than the 67 forecast by economists. The U.S. currency extended its drop versus the yen after breaking 88 for the first time in 10 months. The Swiss franc appreciated to parity versus the dollar for the first time since April 2008. Russia’s central bank plans to add Canadian dollars to its reserves to reduce a reliance on the greenback. The dollar dropped 0.9 percent to 87.68 yen after falling to 87.39, the lowest level since Jan. 21. On that day, it touched 87.13, the weakest since July 1995. The dollar depreciated 0.6 percent to $1.5064 per euro, from $1.4968 yesterday, after reaching $1.5096, the weakest level since August 2008. Currencies, Dollar South Africa’s rand gained 1.5 percent to 7.3507 versus the dollar and the Swedish krona appreciated 0.3 percent to 6.8887 on speculation investors will increase carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmark lending rate of zero to 0.25 percent in the U.S. makes its currency popular for funding such transactions. Gold climbed to the highest price ever as the dollar’s slump deepened and following a report that India may buy more bullion for its central-bank reserves. Gold reached a record $1,184.70 an ounce and has rallied 12 percent since Nov. 2. “There is a lot of central-bank buying, hedge-fund buying and gold is obviously getting to $1,200 an ounce before the end of the year,” David Lee , a trader at Heraeus Precious Metals Management in New York, said in a telephone interview. The most-active gold contract rose for a ninth straight day, headed for the longest rally since August 1982. Gold is up 34 percent this year. The last time bullion gained more than that was in 1979. Vietnam Devalues Vietnam’s central bank devalued its currency and raised interest rates to rein in inflation and a widening trade deficit that’s eroding confidence in the dong. The State Bank of Vietnam lowered the reference rate 5.2 percent to 17,961 against the dollar, after the gap between spot and black-market rates widened to the most in a decade. Policy makers narrowed the dong’s daily trading band to 3 percent, from 5 percent, effective tomorrow. Emerging-market bond yields fell 6 basis points relative to U.S. Treasury notes, pushing JPMorgan Chase & Co.’s benchmark Emerging Markets Bond EMBI+ Index of total returns to a record high of 496.75. The index measures the average return on emerging-market international bonds since December 1993. Soybeans for January delivery climbed for a second day in Chicago, rising 0.8 percent to $10.54 a bushel, on speculation demand will increase in China, the world’s biggest oilseed importer. Wheat for March delivery climbed 11.75 cents, or 2.1 percent, to $5.65 a bushel, rebounding from a five-day, 7.2 percent retreat. To contact the reporter on this story: Michael Regan in New York at Mregan12@bloomberg.net .

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Sales of New Houses in U.S. Rise to Highest Level Since 2008 on Tax Credit

November 25, 2009

By Shobhana Chandra Nov. 25 (Bloomberg) — Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired. Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low. Rising demand shows the administration’s incentive for first-time buyers, which earlier this month was extended into next year and expanded to include current owners, may help housing recover from the worst slump since the Great Depression. Home values may remain under pressure as builders are forced to compete with mounting foreclosures as unemployment climbs. “We are getting some help from the Federal Reserve in terms of low rates, lower prices and of course the tax credit,” said Ken Mayland , president of ClearView Economics LLC in Pepper Pike, Ohio. “People are coming off the fence and getting into the market. We have seen a bottom. I’m pretty confident that the turn in the housing industry is behind us.” Sales were projected to climb to a 404,000 annual pace from an originally reported 402,000 rate in September, according to the median estimate in a Bloomberg survey of 75 economists. Forecasts ranged from 350,000 to 425,000. The government revised September’s reading up to 405,000. Commerce Department also said. U.S. stocks rose after the report. The Standard & Poor’s 500 Index increased 0.2 percent to 1107.66 at 10:36 a.m. in New York. Sales in the South The entire increase in sales was in the South, while the other three U.S. regions registered a decline. “The South is the largest region by size, accounting for over 50 percent of new home sales, so that the gain is still significant, even though a broader improvement would have been more favorable,” Ryan Wang , an economist at HSBC Securities USA Inc. in New York, said in a note to clients. The median price of a new home in the U.S. decreased to $212,200, from $213,200 a year earlier. Sales of new homes were up 5.1 percent from October 2008, the first year-over-year gain since November 2005. Inventories dropped. The number of homes for sale fell to a seasonally adjusted 239,000, the fewest since May 1971. The supply of homes at the current sales rate decreased to 6.7 months’ worth, the lowest level since December 2006. Timely Indicator While accounting for less than 10 percent of the housing market, new-home purchases are considered a timelier indicator because they are based on contract signings. Sales of previously owned homes, which make up the remainder, are compiled from closings and reflect contracts signed weeks or months earlier. President Barack Obama this month extended the $8,000 tax credit for first-time homebuyers until April 30 from Nov. 30, and expanded it to include some current homeowners. Borrowing costs may stay low as Fed policy makers have signaled they will hold the benchmark interest rate near zero for an extended period. “The housing sector continued to recover, on balance,” central bankers said in minutes of the Nov. 3-4 meeting released yesterday. Lower rates and stimulus efforts are reviving demand. Existing home sales jumped in October to the highest level since February 2007, the National Association of Realtors reported this week. Tax Credit The timing of the tax incentive’s extension indicates existing home purchases may jump again this month, decline in December and early 2010, before picking up again, the Realtors group said this week. The erosion in prices is also abating, the S&P/Case-Shiller home-price index showed yesterday. Home prices in 20 cities rose in September from the prior month, the fourth straight gain. Compared with September 2008, the gauge had the smallest year- over-year decline since the end of 2007. The labor market needs to turn around to ensure a sustained rebound in housing, according to economists. The unemployment rate, which rose to a 26-year high of 10.2 percent last month, will exceed 10 percent through the first half of 2010, a Bloomberg survey showed. Foreclosure filings surpassed 300,000 for an eighth straight month in October as rising joblessness made it tougher for homeowners to pay bills, according to RealtyTrac Inc. data. Home Improvement Companies seeing signs of stability include Home Depot Inc., the largest U.S. home-improvement retailer. The Atlanta- based company’s third-quarter profit beat the average estimate of analysts as it slashed costs, and the chain gained market share. Home Depot “continued to see signs of stabilization in the markets that were hardest hit by the housing crisis,” Chief Executive Officer Frank Blake said on a conference call with analysts on Nov. 17. “Despite this positive momentum, caution is appropriate.” To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Dubai World Seeks to Delay Repayment of Debt; Default Risk Rises to Record

November 25, 2009

By Arif Sharif and Camilla Hall Nov. 25 (Bloomberg) — Dubai World, the government-owned holding company struggling with $59 billion of liabilities, is seeking to delay repayment on all of its debt, even after Abu Dhabi banks provided $5 billion for Dubai’s support fund. Dubai World will ask all creditors for a “standstill agreement” as it negotiates to extend the maturities of its debt, including $3.52 billion of Islamic bonds due for repayment on Dec. 14 by its property unit Nakheel PJSC, the builder of Dubai’s palm tree-shaped islands, the company said in an e- mailed statement today. The cost to protect against a default by Dubai surged 111 basis points to 429 basis points, ranking it the sixth highest- risk government borrower, according to credit-default swap prices from CMA Datavision in London. The contracts, which increase as perceptions of credit quality deteriorate, are now higher than Iceland’s after climbing 131 basis points in November, the biggest monthly increase since January. The emirate, home to the world’s tallest tower and the biggest man-made islands, owes $4.3 billion next month and another $4.9 billion in the first quarter of 2010 through government and corporate debt, Deutsche Bank AG data show. Abu Dhabi government-controlled banks, National Bank of Abu Dhabi PJSC and Islamic lender Al Hilal Bank bought all $5 billion of bonds from the government, Dubai’s Department of Finance said in an e-mailed statement today. “The Dubai Financial Support Fund, working with the chief restructuring officer, will start to assess and evaluate the extent of the restructuring required,” the Dubai Department of Finance said in a statement. “As a first step, Dubai World intends to ask all providers of financing to Dubai World and Nakheel to ‘standstill’ and extend maturities until at least May 30.” The price of Nakheel bonds dropped to 80 percent of face value. Debt Restructuring Dubai will draw down $1 billion from the bonds sold to Abu Dhabi to provide funding through a sale of securities to National Bank of Abu Dhabi PJSC and Islamic debt, or sukuk, to Al Hilal. Dubai’s Supreme Fiscal Committee hired Deloitte LLP to lead the restructuring of Dubai World debt, the Department of Finance said. Deloitte’s Aidan Birkett , managing partner for corporate finance, was assigned. Dubai, the second biggest of seven sheikhdoms that make up the United Arab Emirates, set up a $20 billion Dubai Financial Support Fund after the credit crisis triggered the world’s worst property crash and hurt its finance and tourism industries. The emirate raised $10 billion by selling bonds to the U.A.E. central bank in February, with some of the money going to property developers. ‘Shut Up’ Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum said Nov. 9 the emirate’s bond program to raise a further $10 billion will be “well received,” and those who doubt the unity of Dubai and Abu Dhabi should “shut up.” Abu Dhabi, the U.A.E.’s capital, is owner of the world’s biggest sovereign wealth fund and holds almost all of its oil. Eleven days later, he removed the governor of the Dubai International Financial Centre, Omar Bin Sulaiman , who had led efforts to transform Dubai into a Middle East finance hub. The change came 24 hours after Sheikh Mohammed dropped the chairmen of Dubai Holding LLC and Dubai World, two large state-owned business groups, as well as the head of U.A.E.’s biggest developer Emaar Properties PJSC from the board of the Investment Corp. of Dubai , the emirate’s main holding company. Home prices in Dubai plummeted 47 percent in the second quarter from a year ago, the steepest drop of any market, according to Knight Frank LLC. Property prices may drop further, a survey by Colliers International showed Oct. 14. Dubai World had $59.3 billion in liabilities at the end of last year, its subsidiary Nakheel Development Ltd., said in a statement posted on the Nasdaq Dubai Web site Aug. 20. The company had total assets of $99.6 billion at the end of 2008 and total revenue of $14.2 billion. To contact the reporter on this story: Arif Sharif in Dubai at asharif2@bloomberg.net To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net

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Video: Morehouse Seeking U.S. Clothing Sponsor for Fencing: Video

November 25, 2009

Nov. 25 (Bloomberg) — Tim Morehouse, Olympic silver medalist in fencing for the U.S., talks with Bloomberg’s Margaret Brennan about efforts to obtain clothing sponsors for his sport. (Source: Bloomberg)

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Deep Blue Marine, Inc. Announces Hiring of Archaeologist

November 25, 2009

SALT LAKE CITY, UT–(Marketwire – November 25, 2009) – Deep Blue Marine, Inc. ( PINKSHEETS : DPBE ) is pleased to announce the hiring of Alejandro Selmi as their official company archaeologist. Mr. Selmi comes with high accolades, an impressive resume and years of experience. The importance of having a qualified underwater archaeologist cannot be underscored. The necessity of ensuring that artifact recovery is being done in compliance with government requests and United Nations guidelines is a responsibility that Deep Blue Marine takes very seriously. The sites that Deep Blue Marine are currently diving on, as well as those that will be undertaken in the near future, are an essential part of the host country’s history and all recovery must be done with the respect and dignity each site has earned.

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Video: Dollar Nears 14-Year Low Against Yen on Fed Rate Outlook: Video

November 25, 2009

Nov. 25 (Bloomberg) — Bloomberg’s Sara Eisen reports on the outlook for the U.S. dollar. (Source: Bloomberg)

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Video: Obama to Give Afghanistan Decision in West Point Speech: Video

November 25, 2009

Nov. 25 (Bloomberg) — President Barack Obama will lay out his strategy for the war in Afghanistan in an address to the nation from West Point, New York, on Dec. 1, White House Press Secretary Robert Gibbs told reporters today. Bloomberg’s Hans Nichols reports. (Source: Bloomberg)

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Video: Obama to Give Afghanistan Decision in West Point Speech: Video

November 25, 2009

Nov. 25 (Bloomberg) — President Barack Obama will lay out his strategy for the war in Afghanistan in an address to the nation from West Point, New York, on Dec. 1, White House Press Secretary Robert Gibbs told reporters today. Bloomberg’s Hans Nichols reports. (Source: Bloomberg)

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Video: BlackRock’s Stattman `Overweight’ Emerging Markets, Asia: Video

November 25, 2009

Nov. 25 (Bloomberg) — Dennis Stattman, a fund manager for BlackRock Inc., talks with Bloomberg’s Margaret Brennan about his investing strategy for emerging markets, particularly Asia. Stattman, among the finalists for Morningstar Inc.’s Manager of the Decade, also discusses the implications of health-care legislation on BlackRock’s picks. (Source: Bloomberg)

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Video: BlackRock’s Stattman `Overweight’ Emerging Markets, Asia: Video

November 25, 2009

Nov. 25 (Bloomberg) — Dennis Stattman, a fund manager for BlackRock Inc., talks with Bloomberg’s Margaret Brennan about his investing strategy for emerging markets, particularly Asia. Stattman, among the finalists for Morningstar Inc.’s Manager of the Decade, also discusses the implications of health-care legislation on BlackRock’s picks. (Source: Bloomberg)

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Video: DO NOT USE THIS IS A TEST

November 25, 2009

DO NOT USE THIS IS A TEST

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Video: DO NOT USE THIS IS A TEST

November 25, 2009

DO NOT USE THIS IS A TEST

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Written agreement with Home Valley Bancorp and Home Valley Bank

November 25, 2009

Written agreement with Home Valley Bancorp and Home Valley Bank

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