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Snohomish Busts Synthetic Rate Gone Awry in AIG Swap Undermining Customers

April 21, 2010

By Peter Robison April 21 (Bloomberg) — Water and electric customers in the Seattle area, most of whom pay U.S. taxes, will pay an additional $14 million to get out of an agreement with American International Group Inc. , the insurance company rescued from insolvency in 2008 by American taxpayers. The fee from the Snohomish County Public Utility District , serving Boeing Co. and 320,000 other electricity buyers, will settle a nine-month-old dispute with AIG, according to a copy of the accord obtained under state public records law. The municipal power company and AIG sued each other over a contract created in 1994 to help Snohomish reduce its borrowing costs by $2.9 million — an early version of a financial derivative known as an interest-rate swap. Snohomish is among at least 1,900 public institutions from Puget Sound to the Aegean Sea that sought to lessen interest expenses using similar agreements with potentially hazardous results. Harvard University in Cambridge, Massachusetts, paid more than $900 million to get out of swaps that backfired when interest rates unexpectedly plummeted, increasing its costs. Borrowers have paid as much as $5 billion to Wall Street to exit swaps since 2008, according to Peter Shapiro , the managing director of Swap Financial Group LLC, an adviser in South Orange, New Jersey. “There’s a lot of so-called sophisticated stuff ginned up by the finance industry,” said William Kittredge , a former utility director in Oregon who is now director of the nonprofit Center for the Study of Capital Markets and Democracy in Arlington, Virginia. “When you’re talking about public money, it’s not the way to go.” Exchanging Payments In an interest-rate swap, parties exchange interest payments on a set amount of debt, often with the goal of locking in a fixed rate on a related set of variable-rate bonds. During the 2008 credit crisis, interest owed by local governments on floating-rate bonds exceeded payments they received under swap agreements. Such “synthetic fixed-rate” deals pushed Jefferson County, Alabama, close to bankruptcy two years ago. It had refinanced $3 billion of debt with variable-rate bonds and purchased swaps to guard against borrowing costs rising. Its expenses soared when insurers guaranteeing the bonds lost their top credit grades, and the rate the county received fell. ‘Reckless Traders’ The Snohomish utility , which faced increased swap-related payments of about $5 million a year, resisted paying to exit its contract for almost two years. In its suit against AIG, Snohomish alleged that a “now-infamous unit of reckless traders” had “drawn a bead” on the utility. In the end, Snohomish opted to pay the termination fee and sell 15-year bonds to replace all its floating-rate debt, said Jim Herrling, senior manager of risk management and supply for the utility. Those bonds sold yesterday at 3.18 percent. Snohomish projects it will save $14,179,907.63 in budgeted interest costs over the life of the new debt, Herrling said. All but $133,782 of that will go to AIG in the termination payment. That fee is enough to buy a new energy-efficient refrigerator for 11,864 homes, based on estimates from the U.S. government’s Energy Star program. It amounts to about $43.75 for each Snohomish electric customer. “The ratepayers I don’t think are going to be paying any more in the long run,” Herrling said. “They’re just making this payment up front and we’re reducing our future debt service payments between now and 2025.” “We’re pleased that we have settled this matter,” said Mark Herr , a spokesman for New York-based AIG , which is 80 percent owned by the U.S. government after a 2008 bailout. Neither party made any admission of liability in the settlement. Battled Enron The Snohomish utility, located in Everett, Washington, 30 miles north of Seattle, unearthed audiotapes of Enron Corp. traders discussing manipulating California power prices in 2004. Enron, the bankrupt energy-trading company, had sued Snohomish over canceled power contracts. The utility paid $18 million, 10 cents on the dollar, to settle the suit in 2007. In 1994, Snohomish needed money to build transmission lines, replace electrical poles and add street lighting. Jerry Bobo, a banker at the time for New York-based Smith Barney Inc., recommended borrowing $58.3 million for 30 years at floating rates, using a swap agreement to lock in a fixed rate lower than Snohomish could obtain by issuing conventional bonds. The savings might total $2.9 million, according to a Smith Barney presentation obtained by Bloomberg through state public records law. In 1998, Smith Barney became a unit of Citigroup Inc. , the bank rescued by taxpayers in 2008. Reset Weekly Rates on the debt, known as variable-rate demand bonds, would reset weekly. AIG agreed to accept a fixed 6.2 percent payment from Snohomish and pay the floating rate. A traditional fixed-rate bond at the time might cost the utility 6.95 percent, according to the bank’s presentation. Through today, that spread saved the utility more than $4 million, according to Anne Spangler, the general counsel for Snohomish. The power company gave up something more valuable: the right to refinance the bonds without penalty if interest rates changed, said Andrew Kalotay , a former Salomon Brothers bond analyst who is now a consultant in New York. That created significant risk for the borrower over the contract’s 30-year term, he said. Kalotay compared it to a homeowner accepting a mortgage that would require extra charges in advance for refinancing. Private borrowers typically use swaps only to cover short-term rate movements of six months or less, he said. Smith Barney’s presentation to the Snohomish utility portrayed the longer term of the accord as a way to save money. ‘No Significant Risks’ “The economics of a swap are such that the financial benefits of the transaction increase as the swap term increases,” one slide said. Another mentioned that credit raters would view the structure as fixed-rate debt. “The result: True Synthetic Fixed Rate Debt,” the slide said. “No significant risks.” “They could have done the same thing much more cheaply by using plain-vanilla, fixed-coupon bonds,” Kalotay said. “The swaps are a way for the banks to make a lot of money. Every 10 swaps municipalities enter into, nine of them turn out to be completely inappropriate.” The floating-rate debt stood to make Smith Barney more in fees. Bobo acted as salesman and adviser as the utility debated the transaction. Then, his bank served as both underwriter and “remarketing agent,” responsible for setting weekly interest rates once the floating-rate debt was sold. Additional Fee That last duty earned a fee: 0.1 percent a year, or $1.7 million over the life of the bonds, according to documents presented to Snohomish officials. Those terms helped the bank earn more than double what it would have underwriting a traditional fixed-rate bond, the documents show. Bobo, who has an office in Seattle, didn’t return telephone calls seeking comment. Citigroup spokesman Alex Samuelson declined to comment. Floating rates on the utility’s bonds fell to as little as 1 percent to 2 percent from 2002 to 2004, while the utility was paying AIG 6.2 percent. Until mid-2008, Snohomish paid AIG a net $25.7 million, court filings show. Demand for the bonds dried up during the 2008 credit crisis . The lack of liquidity was so severe it was likely to trigger a provision of the contract that, AIG said, would limit its own payments to the utility to an amount based on international bank rates. The power company would have to pay the higher floating rates, resulting in $5 million of additional annual costs. Buying Back Utility bond counsel William Doyle told Snohomish commissioners at a board meeting in September 2008 that they should buy back the bonds and put them into a trust. That would force AIG, then in the midst of a government bailout that totaled $182.3 billion, to pay the floating rate. AIG’s lawyers questioned whether the arrangement was permissible under the bond agreements during a conference call. Doyle, of the firm of Orrick, Herrington & Sutcliffe LLP in San Francisco, “cut off the question,” according to AIG’s court filings. He declined to comment. The trust purchased the bonds in October 2008. In July, AIG sued the utility in New York state court, saying the refinancing breached the swap agreement because the 58-page document required “written consent” from AIG for any purchase of the bonds. Snohomish then filed its suit against AIG in federal court, and the cases were consolidated in Seattle. The settlement disposes of it. Citigroup was the senior underwriter of this week’s debt sale. The utility also added a co-manager, Barclays Plc, said Herrling, Snohomish’s financing manager. “When you have two desks working your deal, you’re making sure you’ve got some checks and balances there,” he said. The case is Public Utility District No. 1 of Snohomish County, Washington, v. AIG Financial Products Corp., U.S. District Court for the Western District of Washington (Seattle). To contact the reporter on this story: Peter Robison in Seattle at robison@bloomberg.net .

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Federal Reserve Gets Political, Sends Congress Veiled Message

April 6, 2010

Facing perhaps the biggest loss of power in the institution’s nearly 100-year history, the Federal Reserve fought back today with a little-noticed move that seemed to send a message to Congress: we use our oversight authority over banks to help us shape the direction of the economy. So, Senate Banking Committee Chairman Christopher Dodd, don’t take it away. In the wake of the biggest financial crisis and most severe economic downturn since the Great Depression, many in Washington have blamed the Fed. Partly to punish it for past failures and partly to help it concentrate on the biggest financial and economic issues, Dodd took away the Fed’s regulatory authority over banks in the November draft of his bill to reform the financial industry. Last month, he offered a new draft of his bill, this time giving the Fed authority over the nation’s biggest financial firms. But the Fed is still facing a loss of its oversight powers over nearly 5,000 bank holding companies and nearly 900 banks. To fight back, the Fed has embarked on a campaign to convince Congress that the loss wouldn’t so much punish the Fed as it would the economy. The argument, in essence, has been this: we need to be able to keep tabs on banks because it helps us understand the economy, and that helps us steer the economy — like setting interest rates — in the right direction. Fed Chairman Ben Bernanke has repeatedly presented this argument; so have the chiefs of the 12 regional Feds scattered across the country. The argument, though, wasn’t gaining much traction. Shortly after Bernanke made the case March 17 before a House panel, Dodd’s spokeswoman reportedly sent various reporters an e-mail that contained excerpts from statements made by former Fed and Treasury Department officials arguing that bank supervision does not play a role in shaping monetary policy. In minutes released Tuesday of the Federal Open Market Committee’s March 16 meeting, the Fed made clear that supervision does affect monetary policy by including the following language: Members noted the importance of continued close monitoring of financial markets and institutions — including asset prices, levels of leverage, and underwriting standards — to help identify significant financial imbalances at an early stage. At the time of the meeting the information collected in this process, including that by supervisory staff, had not revealed emerging misalignments in financial markets or widespread instances of excessive risktaking. All members agreed that the Committee would continue to monitor the economic outlook and financial developments and would employ its policy tools as necessary to promote economic recovery and price stability. The key passage is “…including that by supervisory staff…” The Fed here is making the case that it uses information from its supervisors, and that that information helps it shape monetary policy. A Huffington Post review of previous minutes from FOMC meetings — the Fed’s policy-making body that sets the main interest rate — shows that the last time the Fed mentioned that it gleaned information from its bank supervisors was during its Nov. 6, 2002, meeting. Since then, while the Fed has discussed bank issues like lending and capital levels, it’s never explicitly said that it got that information from its regulators. In fact, bank capital and lending levels are public. “This is a paragraph that in one way, shape, or form has been in the minutes probably since November,” said former Fed governor Laurence H. Meyer, vice chairman and director at Macroeconomic Advisers, an economic consultancy. “However, it hasn’t before included this notion of information gleaned from supervisors.” Meyer continued: “Now, why is it there? Well, it’s there for two very clear reasons. One, the committee has uniformly argued that the appropriate response to an emerging asset bubble likely would not be monetary policy, but rather supervisory and regulatory policy. So, the key there is a focus on the synergies between monetary policy and supervisory policy, with supervisory policy doing things that prevent monetary policymakers from being diverted from full employment and price stability [the Fed's dual mandates]. “But more importantly, I think this is political, too. The Fed argues that it needs supervisory authority over banks in order to provide information that will help them in the setting of monetary policy. “So this is what they’re saying: ‘I told you that, didn’t I?’ This is the message to Congress.” The HuffPost review of FOMC minutes found several instances in the 1990s of Fed policymakers discussing information gleaned from their examiners, but nothing in the past seven-plus years. Last month, in a speech to the Independent Community Bankers of America, Bernanke tried to make clear that his mission as the nation’s central banker relies on the Fed’s supervision over community banks. “[M]any of our regular interactions with community banks arise from our oversight of bank holding companies and state-chartered banks that choose to join the Federal Reserve System,” Bernanke said in a speech that highlighted the central bank’s structure of 12 regional banks with a headquarters in Washington. “One particularly valuable aspect of our federal structure is that, over the years, it has provided policymakers in Washington with a way to keep in close touch with the continent-spanning, highly varied economy of the United States.” Also, in contrast with the official data that the Fed analyzes, which Bernanke notes has its flaws, “the grass-roots information that we obtain from community bankers and the other community and business leaders who serve as Reserve Bank directors provides a forward-looking perspective on economic developments and concerns, as well as a level of detail and qualitative insight that is often lost in the aggregate numbers.” “Our contacts with community bankers also provide critical insights into the state of our nation’s banks. Because of the remarkable diversity of the U.S. financial system, a supervisory agency that focused only on the largest banking institutions, without knowledge of community banks, would get a limited and potentially distorted picture of what was happening in our banking system as a whole. … “As a group, community banks are also important to the nation’s financial stability, a particular focus and responsibility of the Federal Reserve. … “For all these reasons, our supervisory relationships with the state-chartered banks that have joined the Federal Reserve System are immensely valuable, as is the range of contacts we have with community banks.” The Fed’s move to make an explicit reference to this relationship in its policy-making body’s meeting minutes is an outgrowth of this recent campaign to preserve the Fed’s powers. “I would look at this as, maybe, politically clever, and a subtle way of making their point,” Meyer said. “This is critically important to [regional] Federal Reserve banks because that’s what they do: If they don’t have consumer protection authority and they don’t have bank supervision, I mean, what the hell are they doing? They’ve got big buildings with 20 economists. “So I think what this is also saying, reading between the lines, is this: ‘Look, we don’t just need supervisory authority over the large banks. That’s about Wall Street; that’s about the big guys. What we really need to know about is Main Street, and we can only get that by having access to supervision of smaller and regional banks.” Meyer doesn’t agree with this line of thinking — he doesn’t think the Fed gains much from keeping oversight over smaller banks, plus he’d prefer that banks and their holding companies have one supervisor, as opposed to the current structure of a bank regulator and then a bank holding company regulator — but he’s willing to keep the bank supervision system as is in order to keep what he views as politicization of the Fed at bay. A longtime Fed observer cautions, though, against reading too much into the FOMC minutes. “I don’t think they’re sending any kind of signal,” said Tim Duy, a former Treasury economist now at the University of Oregon who runs a popular blog chronicling the Fed. “They’re supposed to be using information from their examiners. I don’t think there’s a huge message there.” Duy points out that the minutes don’t usually convey anything that hasn’t already been expressed. “It’s always a challenge to distinguish between the innocuous and the important,” he said. READ the meeting minutes below: FOMC Minutes-March 16, 2010

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Unpaid Internships Investigated: ‘Mostly Drudgery’ Means Employers Must Usually Pay, Say Regulators

April 2, 2010

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers. Last year, M. Patricia Smith, then New York’s labor commissioner, ordered investigations into several firms’ internships. Now, as the federal Labor Department’s top law enforcement official, she and the wage and hour division are stepping up enforcement nationwide.

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Ian Fletcher: Thinking the Unthinkable: Could America Repeal NAFTA?

April 1, 2010

Four congressmen have now moved a bill to repeal NAFTA. Superficially, this means little, as passage of this bill is unlikely in the near future. But more fundamentally, it means a lot, because, unbeknownst to most Americans inside and outside the Washington Beltway, free trade is inexorably losing its base of support on Capitol Hill. This means, for a start, that President Obama’s recent brave-faced pledge to move forward with his proposed Trans-Pacific Partnership (interestingly, the dread phrase “free trade agreement” has been carefully left out of the name) is, quite likely, dead on arrival. Obama himself may know this, and may have staged this gesture simply to placate foreign nations and domestic corporate interests. The lack of any change on trade issues in the Oval Office has distracted most Americans from the fact that in recent years, there has been an inexorable movement away from free trade in the House and Senate, driven by the public’s relentlessly rising skepticism of free trade. For example, according to one analysis by Global Trade Watch, no fewer than seven Senate and 30 House seats flipped from pro- to anti-free trade in the 2006 election. Seventy-three percent of winning Democratic candidates in that election emphasized trade as an issue in their campaigns, while 72 percent of losing Democratic candidates did not. Not a single candidate of either party ran on free trade as a positive agenda, and not a single opponent of free trade was ousted by a free trader, in either the House or the Senate. Six anti-free-trade Democrats — Sherrod Brown of Ohio, Claire McCaskill of Missouri, Jon Tester of Montana, Bob Casey of Pennsylvania, Sheldon Whitehouse of Rhode Island, and Jim Webb of Virginia, plus Independent Bernie Sanders of Vermont — captured seats formerly held by free traders. This trend continued in 2008. Thirty-six new free-trade opponents were elected to the House: 13 in contests against incumbents, 20 in battles for open seats, and three in special elections. (Eight free-trade opponents lost, so the net gain was 28.) And seven new free-trade opponents were elected to the Senate: Mark Begich of Alaska, Mark Udall of Colorado, Jeanne Shaheen of New Hampshire, Tom Udall of New Mexico, Kay Hagan of North Carolina, Jeff Merkley of Oregon, and Al Franken of Minnesota. This is mainly, but not exclusively, a Democratic trend: the 2008 winners also included 10 Republican opponents of free trade who either held or won seats while campaigning against free trade. Oddly enough, given the condemnations of “protectionism” issuing from the Democratic leadership, this trend seems to be a big winner for the Democrats. For example, after the 2006 election, it was estimated that another 10 to 20 Democratic challengers might have won, if they had attacked free trade. But the Democratic Congressional Campaign Committee was headed by Rahm Emanuel (now President Obama’s chief of staff), a free trader. Emanuel played a leading role in securing Democratic votes to pass NAFTA in 1993 while serving as a staffer under Bill Clinton and decided not to use the issue. But for this decision, Lois Murphy, to take only one example, might well have beaten Jim Gerlach, rated by nonpartisan observers as one of the most vulnerable Republican incumbents in the nation, in Pennsylvania’s 6th district. Instead, Gerlach squeaked back in with 1.2 percent of the vote after the DCCC effectively vetoed a trade-oriented get-out-the-vote program. But people noticed. So after declining to run ads attacking free trade in 2006, the DCCC, startled by the issue’s potency even when neglected, relented and aired spots on the issue in 2008. The main thing currently impeding an even stronger response in the voting booth is simply how deeply conflicted the public’s dislike of free trade is. According to one 2006 poll The public…seems frustrated about where to place responsibility. Close to eight in 10 (78 percent) say the government could do something about protecting American jobs. But a majority (52 percent) do not think it’s realistic for the government to control cor-porate outsourcing. So the voters register their protests when given the chance, but otherwise remain stymied in their attempts to crystallize an opinion of what solution they ultimately want. The most puzzling thing about recent public opinion polls is that while the economy consistently ranks high on voters’ priority lists, trade per se does not, suggesting that voters have yet to become fully convinced that free trade, as opposed to other currently-hot issues like our broken financial system, is the root cause of America’s economic ills. But if trade is at least a big part of the cause, then presumably this will eventually tell upon public opinion and trade will move up voters’ priority lists. This will, if recent trends are any indication, find expression at the polls and drive Congress even further away from free trade. And if nothing stops this trend, not only will it remain impossible to pass new free trade agreements, but existing ones will become vulnerable, with NAFTA the biggest and most obvious target. NAFTA repeal by 2018 is easily a 50-50 possibility at this point. Ian Fletcher is the author of Free Trade Doesn’t Work: What Should Replace It and Why. He is an Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council, a Washington think tank founded in 1933. He was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at atian.fletcher@usbic.net.

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AT&T May Find IPad Downloads Exert Bigger-Than-Anticipated Network Strain

April 1, 2010

By Olga Kharif and Amy Thomson April 1 (Bloomberg) — AT&T Inc. , facing criticism for jams in its network in cities like New York, may find the Apple Inc. iPad adds more strain than officials anticipated. The biggest U.S. phone carrier has played down the expected impact of Apple’s iPad tablet computer, which goes on sale this weekend in the U.S., saying many consumers will choose to run it on Wi-Fi hot spots rather than on AT&T’s wireless network. That logic may be setting up customers for disappointment, Bloomberg’s BusinessWeek.com reported, citing analysts and data based on capacity strains caused by handsets like the iPhone. “AT&T seems to be convinced that most of the time users will be connected to Wi-Fi,” said Craig Moffett , a Sanford C. Bernstein & Co. analyst who rates the shares “market perform.” “That’s a pretty big stretch, given it’s a new device nobody’s used before.” An iPad on AT&T’s third-generation network will consume about two-thirds as much network capacity as an iPhone, according to independent wireless industry analyst Chetan Sharma. That could be the equivalent of 1.7 million additional iPhones hitting AT&T’s network this year, assuming Apple sells the 2.7 million of the devices that Piper Jaffray & Co.’s Chris Larsen forecasts. The iPad “certainly could put a strain” on the network if consumers use its Internet capabilities extensively and sales meet expectations, Larsen said. “If they were to get into a situation where they again got behind the capacity, it would damage their reputation.” Commuter Tasks The analysts are basing their assumptions on people like Peter Costanzo. The 45-year-old online marketing director for Perseus Books Publishing in New York has ordered a 3G-capable version of the iPad. He plans to use it during his 75-minute commute from Long Island to read the paper, buy digital books, make notes and retrieve e-mail. “As publishers, it’s really important to see how the device performs,” he said. The more consumers learn of the iPad’s potential, the more likely they are to stretch network capacity. The iPad “is extremely bandwidth-intensive,” Moffett said. “It could set users up for disappointment.” To be sure, the iPad isn’t likely to bring a large telecom network to its knees. And until consumers start snapping them up — analysts expect Apple to sell 2 million to 6 million iPads in 2010 — the industry won’t know how extensively iPad owners will stream video and perform bandwidth-intensive tasks. Six Versions Three initial versions of the iPad will communicate using Wi-Fi wireless Internet technology. Three additional models due later in April will communicate over 3G. Many users may opt for less expensive, Wi-Fi-only versions and use them in hot-spot-laden areas such as their homes, airports and coffee shops. AT&T Chief Executive Officer Randall Stephenson said at a March 2 investor conference in San Francisco that he expects the iPad to be mainly “a Wi-Fi-driven product.” Even the 3G iPad will have the ability to switch over to Wi-Fi when it comes in contact with a hot spot, helping ease network strain, Glenn Lurie , AT&T’s head of emerging devices, said in an interview. “We’re giving you the ability to have a very nice experience,” he said. Buyers of 3G-enabled iPads will be able to use AT&T’s cellular network for $15 or $30 per month depending on how much data they plan to consume. Those plans will also include access to AT&T’s more than 20,000 Wi-Fi hot spots in the U.S. “We feel very good about where our network is,” AT&T spokesman Mark Siegel said. ‘Landmark Deal’ Apple spokeswoman Natalie Kerris said users aren’t apt to experience network congestion. “AT&T is a great partner and they are offering a landmark deal for iPad customers with no-contract data plans at great prices,” she said. AT&T’s ability to stand up to iPad demands will hinge partly on how much it’s used to watch video. A two-hour movie would probably send three to five times more data to the iPad than watching a similar video file on an iPhone or iPod, according to James Brehm, a senior consultant at Frost & Sullivan. The files would be much larger than those containing electronic books, which have been the predominant use of tablet- style devices like Amazon.com’s Kindle. “Longer term, you could see it causing network congestion,” said Jonathan Schildkraut , an analyst with Jefferies & Co. who has a “hold” rating on AT&T. To contact the reporter on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net ; Amy Thomson in New York at athomson6@bloomberg.net .

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California Now Freeing Violent Inmates To Save Money

March 31, 2010

SACRAMENTO, Calif. — Inmates convicted of violent crimes are among those being freed early from California jails to save money, despite lawmakers’ promises that they would exclude most dangerous prisoners and sex offenders. An Associated Press review of inmate data shows that some of the freed criminals were convicted of assault with a deadly weapon, battery, domestic violence, and attacks on children and the elderly. The early release program specifically forbids authorities from freeing prisoners convicted of about 150 crimes such as rape and murder. But any offense that is not specifically listed qualifies for release, and individual counties can then decide who gets out. “This bill not only theoretically will result in a public safety catastrophe, it already has,” said Democratic Assemblyman Ted Lieu, an outspoken opponent of the system who is running for attorney general. He wants to expand the list of excluded crimes. The release of violent offenders does not technically violate the law, but it runs counter to lawmakers’ promises about the plan when it was adopted. Legislators approved the early release program last year as a way to cut costs and reduce crowding in state prisons and county jails. At the time, both the Democratic Assembly Speaker, Karen Bass, and Republican Gov. Arnold Schwarzenegger described the measure as a reform that would protect public safety while saving as much as $1 billion. Both denied that it even contained early release provisions. But when the law took effect in January, the release of hundreds of inmates from local jails drew a swift backlash, especially after an inmate freed under the law was arrested within a day on suspicion of attempting to rape a female counselor. The Sacramento County inmate had been jailed for a probation violation, but his underlying offense was assault with a deadly weapon. During the first few weeks of the early release program, more than 1,800 jail inmates were released statewide before they had served their full sentences, according to the California State Sheriffs’ Association. Hundreds more have been freed since then, although the association has stopped keeping track. California is not the only state to seek savings in early releases. New or expanded release programs began last year in a dozen other states: Colorado, Georgia, Illinois, Louisiana, Mississippi, Nevada, New York, Oregon, Texas, Washington, West Virginia and Wisconsin. Gov. Pat Quinn suspended Illinois’ program in December after the AP found hundreds of inmates were being released too early. About 200 of the paroled inmates were returned to prison within the first four months of the program because of violations. In California, the AP used public-records requests to obtain lists of inmates who had been freed from several of the state’s most populous counties. The lists were then cross-referenced with inmates’ offenses. Three of those counties – Alameda, Orange and San Bernardino – account for roughly 15 percent of the state prison population. The lists covered the first 2 1/2 weeks of the early release program, which started Jan. 25. In Orange County, about 8 percent of the 278 inmates released early had been serving time for crimes that included assault, battery, corporal injury to a spouse, inflicting injury on a child, cruelty to a child, domestic violence, resisting arrest and possession of a switchblade. In Alameda County, 15 percent of the 87 inmates released early had been sentenced for those crimes and others, including carrying concealed or loaded guns, attempting to take a gun from a police officer and displaying a gun in a threatening manner. San Bernardino County provided jail records for 642 inmates released under the new law. The AP used booking numbers to link a 10 percent sample to court records. Of that sample, 29 percent had been convicted of crimes considered violent or threatening, from domestic violence and weapons charges to stalking and injury to an elder. Los Angeles County, which has the largest population of jail inmates, has not granted any early releases under the law, although it has recently begun freeing inmates because it is running out of space. At state prisons, corrections officials expect to save $500 million by granting early release to about 6,500 inmates this year. Most of those releases will not begin until later this year. The law did not provide direction to county jails about how to evaluate inmates who qualify for early release. “Some are no-brainers,” said Alameda County Sheriff’s Sgt. J.D. Nelson. With others, “It’s a slippery slope. Sometimes you have an attempted rape, but it’s pleaded down to a misdemeanor. So now you’re going to let that guy out early?” Lieu wants to amend the law to exclude many of the crimes identified in the AP’s research, as well as offenses such as solicitation to commit murder, various hate crimes and child abduction. After the attempted rape arrest in Sacramento County, the Legislature also began considering amendments to the law, including a proposal to exclude county jails entirely from the early releases. Assemblyman Alberto Torrico, a Democrat from Fremont who helped write the law and also is running for attorney general, said it was never supposed to apply to counties. When it passed in September, he praised the legislation as “a smart reform package.”

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Senators Plan To Flood Financial Reform Bill With Nearly 400 Amendments

March 19, 2010

Senators plan to offer nearly 400 amendments to the financial reform bill the Senate Banking Committee will take up on Monday — ranging from Democratic provisions to strengthen the proposed consumer protection agency to Republican amendments calling for new rules potentially compromising the independence of the board that sets financial accounting standards. Sen. Richard Shelby, the top Republican on the committee whose bipartisan negotiations with committee Chairman Christopher Dodd broke down last month, is responsible for 109 amendments alone. Earlier this week, Shelby, of Alabama, told the Huffington Post that “probably not a lot” will happen in the committee, indicating that the real battle will come on the Senate floor. The document outlining the amendments, obtained by HuffPost, doesn’t include the actual language of the provisions, but it does give a sense of what the senators plan to push for. Sen. Jack Reed, a Rhode Island Democrat, may offer an amendment that “would establish a fully independent [consumer-focused] agency that has full authority to write rules, supervise, and bring enforcement actions against all banks and nonbanks engaged in consumer financial products or services with no veto by any prudential regulator,” according to the document. That’s a far cry from how Dodd’s current bill treats the proposed agency, which has largely been de-fanged since it was first proposed by President Obama last summer. Sen. Jeff Merkley, an Oregon Democrat, may offer an amendment preventing banks from betting against the securities they underwrite and sell to investors, an activity likened to ” selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars. ” Shelby, who wowed a crowd of bankers this week in Washington , plans to introduce an amendment to “remove the requirement for certain executives to swear under oath what risks their firm poses to financial stability,” the document shows. Dodd’s bill allows the Federal Reserve to require certain systemically-important firms to “submit reports under oath” detailing the firm’s financial condition and “the extent to which the activities and operations of the company… pose a threat to the financial stability of the United States.” READ a summary of the amendments below: Amendments to Dodd bill

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Obama’s Reported Picks For Federal Reserve Praised By Economists

March 16, 2010

Economists are cheering the Obama administration’s rumored picks for the Federal Reserve, noting that the two economists and the bank regulator reportedly selected to serve on the central bank’s board will be more inclined to stick up for families. Janet L. Yellen, president of the Federal Reserve Bank of San Francisco, is reported to be the administration’s choice for the soon-to-be-vacated vice chairman role on the Fed’s Board of Governors; Peter A. Diamond, an MIT economist who’s written extensively about Social Security and pensions is said to fill one existing vacancy; and Sarah Bloom Raskin, the state of Maryland’s top bank regulator, is said to fill the other. “I think these are all great choices, and ones that will move Fed policy in the needed direction — responsive to the needs of middle-class and working families,” said Lawrence Mishel, president of the Economic Policy Institute. Commentators have designated Yellen a “dove,” meaning she favors keeping interest rates low in order to ensure access to cheap loans, thus enabling firms to get the credit they need to grow and hire workers. She’s a heavily-praised economist who’s chaired the White House Council of Economic Advisers and served on the Fed’s central board during the Clinton administration. Former Fed governor Laurence H. Meyer, vice chairman and director at Macroeconomic Advisers, an economic consultancy, wrote on his firm’s blog that he “jumped up and down when I heard the news!” “Janet is…one of the best economists I have ever worked with, and someone whose judgment I so much respect,” Meyer wrote. He went on to praise the reported Yellen pick as “outstanding” and called her the “best possible choice.” Mark A. Thoma, an economist at the University of Oregon who runs the popular economics blog Economist’s View, praised all three picks — particularly Yellen. “She’s very, very, very good,” Thoma said in an interview. “I’ve heard nothing but good things about her.” Last week, Thoma wrote that Obama needs to pick a monetary policy expert to fill at least one of the three vacancies. “She’s exactly what I thought they should have,” Thoma told HuffPost. “No complaints there at all.” Thoma noted two speeches that Yellen gave — one in 2005, another in 2009 — in which she took different positions regarding the housing bubble and whether the Fed could or should have taken any steps to deflate it before it popped. Her position in 2005 — a bursting of a bubble wouldn’t have a large effect, and the Fed shouldn’t act anyway — changed over time; last year she said that, based on “recent painful experience,” policymakers should “lean against asset price bubbles…especially when a credit boom is the driving factor.” Thoma said her evolved views are a positive development. “Some people may view that as wishy-washy, but I see that as someone who can really learn from the past, identify mistakes, is willing to listen to people and change their views,” Thoma said. He also noted that Yellen may not be as dovish as commentators paint her to be; policymakers don’t need to be as worried about inflation during the short run, he said, particularly during a period in which the economy is performing significantly below its capabilities. Dean Baker, co-director of the Center for Economic and Policy Research, was a bit more muted in his praise. In an e-mail, Baker wrote that Yellen, Diamond and Raskin “are probably about as good as you could hope for given the political constraints.” “[A]ll three should be given a thorough grilling by the Senate Banking Committee. They should first be asked about their understanding of what went wrong. Yellen in particular argued in the past that the Fed could not and should not do anything about asset bubbles. She should be given the opportunity to explain how she now realizes that her view was wrong and what she thinks the Fed should do in response to future asset bubbles. All three should be questioned on how they view the risks of inflation as opposed to the need to reduce the unemployment rate to more normal levels. They also should be asked about how low they think the unemployment rate can ultimately fall.” Diamond, while universally praised as an economist, isn’t known for his research on monetary policy or financial institutions, other economists note. His published research focuses almost exclusively on entitlement programs and taxation. Mishel, while praising Diamond, said in an e-mail that the rumored pick was a “bit of a surprise.” Thoma, puzzled by the pick, said he’d like to see a financial expert instead. Raskin may be the most interesting choice of them all. A lawyer by trade, she’s one of just a handful of bank regulators that hasn’t experienced a bank failure over the last two years. Of Maryland’s three bank failures since the start of 2008, none were state banks under her supervision. So already she’s got a better track record than nearly every other bank regulator in the country. She’s also a vigorous proponent of strong consumer protection measures, state regulation of banks, and she’s been particularly critical of Washington’s failure to rein in megabanks and Wall Street — two areas over which the Fed has a near exclusive domain. “The federal government has so far proved itself incapable of managing systemic risk,” Raskin told the Congressional Oversight Panel, a bailout watchdog, last year. “At the state level, we battled predatory lenders for almost a decade, only to be told that our local concerns were less important than the demands of the modern global marketplace…[W]e have sometimes perceived an environment at the federal level that is skewed toward facilitating the business models and viability of our largest financial institutions rather than promoting the strength of the consumer or our diverse economy. … “It is an old saying among bank regulators that our job is to take away the punch bowl once the party really gets going. That is not an easy call to make, and it was particularly difficult in the run-up to this financial crisis, as both Wall Street and monetary policy were spiking the punch bowl. “Yes, the current crisis has both revealed and created weaknesses and gaps in our regulatory system; but even more, I submit that it reveals the gap in regulatory and political will in Washington. Perhaps the resilience of our financial system during previous crises gave policy makers and regulators not only a false sense of security, but also a greater willingness to defer to powerful interests in the financial industry who assured them that all was well. To Thoma, having someone on the Fed’s board who understands bank regulation and has a different opinion on the role of state supervision and the importance of consumer protection is critical; after all, as many analysts, legislators and policymakers have noted, bank supervision and consumer protection haven’t been the Fed’s strong suits in quite some time.

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FDIC May Invite Pension Funds to Buy Stakes in U.S. Banks Facing Seizure

March 8, 2010

By Dakin Campbell March 8 (Bloomberg) — U.S. regulators are encouraging public pension funds that control more than $2 trillion to inject capital directly into the banking system by buying failed lenders, said people briefed on the matter. The Federal Deposit Insurance Corp. is trying to attract pension funds that want to buy stakes or assets of distressed bank-holding companies , according to two of the people. Direct investments may allow public retirement funds to reduce fees for private-equity managers, and the agency to get better prices for distressed assets , the people said. They declined to be identified because talks with regulators are confidential. Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures,” Jay Fewel , a senior investment officer at the Oregon State Treasury, said in a presentation made at the fund’s Feb. 24 meeting. New Jersey’s pension fund may also participate, said Orin Kramer , chairman of New Jersey’s State Investment Council. The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010. Regulators have avoided signing up private-equity firms as rescuers on concern that they might take too much risk. Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks, according to the people. Welcome Mat “The FDIC is constantly looking at structures where we can get the greatest opportunity to tap into capital that we have not had the success reaching through previous disposition methods,” FDIC spokeswoman Michele Heller said in an e-mailed statement. “We welcome and work with all investors.” Current rules don’t prohibit pension funds from buying failed banks. Until now, they have typically chosen to invest through private-equity firms using limited partnerships, which gives pension funds little to no control over the day-to-day management of the investments. They also pay management fees levied on the amount of money committed as well as a percentage of any profit. “We’ve been examining a broad range of alternatives to take advantage of what I believe are attractive transactions coming out of the FDIC,” said Kramer at New Jersey’s State Investment Council. New Jersey’s pension system faces a shortfall of about $46 billion as of last year because of investment declines and a failure to make full contributions, according to annual financial reports. Oregon State Fund Oregon would invest in Community Bancorp LLC, a bank being formed by Sageview Capital LLC , according to the Oregon presentation. Sageview was founded by former Kohlberg Kravis Roberts & Co. executives Scott Stuart and Ned Gilhuly . Sageview is looking to raise about $1 billion from pension funds and similar investors, the presentation said. Sageview, based in Greenwich, Connecticut, and Palo Alto, California, would get yearly fees as an adviser and would also invest about $100 million of its own. Ruth Pachman , a spokeswoman for Community Bancorp, declined to comment. Community Bancorp will look to buy three or four banks in the next three years and will be run by Paul Murphy , the presentation said. Murphy built Houston-based Amegy Bank into a $12.3 billion-asset lender over more than a decade, and it’s now owned by Salt Lake City-based Zions Bancorporation . “We’re pleased with the Oregon decision,” Murphy said in an interview. He declined to comment further as the group is still raising capital and in a “quiet period.” Spokesman James Sinks at Oregon’s Treasury said the state is still negotiating its commitment, and declined elaborate. Calpers Presentation After the credit crisis ate into private-equity returns, pension managers started looking for ways to trim fees and boost returns . The California Public Employees’ Retirement System, the largest U.S. public pension fund, said in a Feb. 16 presentation that one of its goals is to increase its “co-investments” in transactions alongside money managers. That kind of structure could give the pension fund an actual stake in firms purchased, rather than the private-equity firm’s buyout fund, according to the people. Known as Calpers, the pension fund plans to “explore unique structures with select general partners,” according to the presentation. The fund’s investment portfolio was valued at $203.3 billion as of Dec. 31, according to the Calpers Web site . Spokesman Brad Pacheco didn’t respond to a request for comment. Regulators have been debating how much leeway to give private buyers of failed banks on concern that they’re more likely to put federally insured deposits at risk, or will look to flip the bank for a quick profit. Longer Horizon Private-equity managed funds typically promise they’ll return funds to their investors in about 10 years. Pension funds are aiming to fund retirements that are decades away and thus can hold on to investments longer, which would help ease the FDIC’s concern, said one of the people. Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program. At least 60 lenders skipped some of their promised dividends to the TARP fund, according to SNL Financial, and a $2.33 billion stake in CIT Group Inc. was wiped out last year when the lender went bankrupt. FDIC guarantees may soften the risk of investing public pension money in distressed banks, according to one of the people. When the FDIC sells a failed bank, it typically shares a portion of the loan losses. “Financially sophisticated people do not assume that banks have recognized all of their real estate losses,” Kramer said, adding that it can still be a bad deal if a buyer overpays for a deposit franchise or if loans perform worse than expected. “We are in the early innings for commercial real estate.” To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net .

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Vineyard Defaults Surge as Lost California Land Values Undermine Napa Wine

March 8, 2010

By Dan Levy March 8 (Bloomberg) — In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands. As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.” “We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens , manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.” Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson , principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages , especially if the property is worth less than the loan. Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick . In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get. The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman , managing partner at Pleasanton, California- based Bacchus Capital Management LLC , a private-equity fund that provides mezzanine financing to wineries. Sales Fall The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report. Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV , the Utrecht, Netherlands-based bank that finances agriculture businesses. Napa and neighboring Sonoma are the top U.S. producers of premium wine, the bank said. “No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.” Cheaper Imports Super-premium wineries are likely to bear the brunt of changing consumer habits, and lenders will pressure clients who can’t cover costs to “seek solutions before the loan goes into default,” Rabobank said in a January report. Cheaper imports from countries such as Chile, Argentina and Australia are cutting U.S. winery margins, according to Stephen Rannekleiv , lead analyst on the Rabobank report. “Consumers are looking at price point and saying that Napa is not the price they want to be buying at,” New York-based Rannekleiv said in an interview. “Wine prices drive grape prices drive land prices.” Bill Harlan, maker of Napa’s Harlan Estate Proprietary Red that counts four perfect ratings from widely followed critic Robert Parker , said he expects to see foreclosures mount. “No area is going to be unaffected by this financial meltdown,” he said in a telephone interview. Distress Sale Harlan, whose Oakville, California, winery is 60 miles (97 kilometers) north of San Francisco, has seen the distress up close. In December, he acquired 21 acres next door known as Diamond Oaks Winery from businessman Dinesh Maniar , owner of two separate Napa parcels that are facing foreclosure, according to county land records and documents in U.S. Bankruptcy Court in Santa Rosa, California. David Chandler, an attorney for Maniar, didn’t return calls seeking comment. Diamond Oaks lists a $35 bottle of pinot noir and a $30 cabernet sauvignon as “new products for March” on its Web site . There have been few recent property deals because sellers are reluctant to accept the low bids they are seeing, said Tony Correia, an appraiser in Sonoma for Correia-Xavier Inc. More than 30 wineries are for sale in California, Oregon and Washington, the most ever, according to Rob McMillan , executive vice president and founder of the wine division of Silicon Valley Bank, a unit of SVB Financial Group in Santa Clara, California. The properties have too much debt, were new arrivals to the wine market or have owners who are looking to retire as competition rises and profit margins fall, he said. Endangered Deals Some Napa land deals that were never publicly disclosed or confidentially recorded at the county assessor will unravel this year and in 2011, according to Vic Motto , chief executive officer of Global Wine Partners LLC , an investment bank and advisory firm in St. Helena that brokers property sales. He declined to identify which of the buyers may not be able to hold onto their properties. “There were heavily leveraged transactions that occurred that were private, not transparent, and there is no data to show that,” said Motto. Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser. On-premises wineries are also valued by production facility and capacity and proximity to main tourist thoroughfares, he said. Napa Valley runs about 30 miles from the city of Napa in the south to Calistoga in the north. Napa Premium Average prices are $150,000 to $200,000 an acre for a vineyard planted with red varietals such as cabernet sauvignon and $115,000 an acre for white grapes such as chardonnay, said Sean Maher, president of Maher Advisors Inc. , a brokerage in St. Helena. The most desirable sites in Rutherford and Oakville can fetch $250,000 an acre, he said. Napa wine grapes have been the most expensive in California since the 1970s, said Terry Hall, a spokesman for the Napa Valley Vintners Association in St. Helena. Last year they cost an average $3,401 a ton, 56 percent more than second-place Sonoma grapes and more than double those from third-place Mendocino, a preliminary 2009 report from the state Department of Food and Agriculture shows. California produces 90 percent of all U.S. wine, according to the U.S. Tax and Trade Bureau in Washington. ‘Blind Fools’ Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal , principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.” That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009. “We went in like blind fools,” Sutherland said. “We didn’t really expect to get the loan, but felt committed when we did.” Owners who have invested for years and managed land prudently should survive the tumult, said Harlan, who has produced 18 vintages since buying the property in 1984. The 2007 vintage of his flagship wine, the most recent, sells for $500 a bottle. “In the long run, those that don’t compromise the quality, manage their wines better and manage their land better will be fine,” he said. “We just need to make sure we get through the short run.” To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net .

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Treasuries Supplanting Munis as Brown Brothers Says Two-Year Notes Ascend

March 7, 2010

By Cordell Eddings March 8 (Bloomberg) — Municipal bond investors are piling into Treasuries as state and local government finances worsen and the yield advantage for tax-exempt securities evaporates. Local government bonds due in three years with AAA ratings yielded 66 percent of similar maturity Treasuries last month, about the lowest level since Bloomberg began compiling the data in 2001. If the ratio moves closer to 60 percent, investors in the 38.3 percent federal tax bracket would lose all the benefits of sheltering income that comes from municipal debt. Muni bonds are losing favor as state and local governments raise taxes to fund the record $18.5 billion in budget gaps estimated in a National Governor’s Association survey . Increased buying by tax-exempt investors would sustain a rally in short-term Treasuries, already benefiting from demand for a refuge from sovereign credit concerns and rising purchases by banks. “Treasuries are safer and more liquid investments, especially given the quality issues with many municipalities of late,” said Jeffrey Schoenfeld , partner and chief investment officer in New York at Brown Brothers Harriman & Co., which manages $33 billion in assets. “In this low-rate environment Treasuries can be huge pickup and very good value on an after- tax basis in the shorter-end.” The Build America Bond program, an Obama Administration plan that subsidizes 35 percent of interest expense for state and local issuers when they sell taxable debt, is also making municipal securities less attractive relative to Treasuries. Build America Bonds Almost $80 billion in Build America Bonds have been sold since the program began in April 2009, and taxable bond sales totaled $97 billion, or about 28 percent of long-term, fixed- rate municipal issuance during the last 11 months, data compiled by Bloomberg show. During the six years through 2008, taxable sales made up an average 5 percent of issuance. More tax-exempt bonds may be replaced with Build America debt, because the federal budget for the fiscal year starting in October calls for an expansion of the program to allow refunding. It also calls for making the stimulus initiative permanent with a lower interest subsidy of 28 percent for new issues beginning Jan. 1, 2011. Treasuries due in one to three years have returned 0.78 percent since December, after gaining 0.79 percent in 2009, according to Bank of America Merrill Lynch index data. Similar maturity state and local securities returned 0.57 percent this year, extending 2009’s 4.2 percent gain. Relative Returns Government securities fell last week after a Labor Department report showed payrolls dropped by a less-than- forecast 36,000 in February. Two-year note yields increased eight basis points to 0.90 percent, according to BGCantor Market Data. The yield climbed to 0.91 percent today as of 12:17 p.m. in Tokyo. Municipal debt became more expensive as investors bought longer-maturity debt with money stored in short-term tax free money market accounts that yielded as little as 0.02 percent. Assets in the funds dropped by $148.76 billion from the record $528.36 billion in August 2008, according to iMoneyNet of Westborough, Massachusetts. “Demand for munis is mostly coming from retail investors who have been sitting on a mountain of cash and wondering what to do with it,” said Christine Todd , a managing director and head of the group that oversees $26 billion in tax-sensitive fixed-income portfolios at Standish Mellon Asset Management Co. in Boston. “AAA munis are rich versus Treasuries.” ‘Great Opportunity’ Baltimore County, Maryland’s AAA rated general obligation bond due in three years yielded as little as 58 percent of comparable Treasuries last week, according to Bloomberg data. The ratio of AAA rated Arlington County, Virginia, debt due in three years dipped as low as 50.7 percent last week, according to Bloomberg data. That means that buyers would be better off buying Treasuries even if they’re in the highest tax bracket. “Most people with wealthy clients think about taxes first, and that usually means munis, even when munis are overvalued,” said Jonathan Lewis , founding principal of New York-based Samson Capital Advisors LLC, which manages more than $4 billion. “Right now there is a great opportunity to go up in quality and increase liquidity by building allocation in Treasuries.” Municipal bonds may get even more expensive with a proposal in Congress by Oregon Democrat Ron Wyden and New Hampshire Republican Judd Gregg seeking to replace the tax exemption for state and local bonds with a more limited tax credit. Economic Outlook “Supply concerns will continue to be the major issue, even as quality concerns are not emerging to be real issues,” said George Friedlander , municipal strategist for Morgan Stanley Smith Barney in New York. “Add to that the prospect of the possibility for Congress ending tax exemption and it points to more demand for munis going forward. There is still room for munis to get richer.” Even if municipal yields fall, investors can still benefit by switching into U.S. government debt given the relative low level of interest rates and slow economic recovery, said Gary Pollack , who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth management unit in New York. Federal Reserve Chairman Ben S. Bernanke , who slashed the central bank’s target rate for overnight loans between banks to a range of zero to 0.25 percent in December 2008, has flooded the economy with more than $1 trillion in the largest monetary expansion in U.S. history. In his semi-annual testimony to Congress last month, Bernanke reiterated that rates will remain low for “an extended period” because the economy’s “nascent” recovery isn’t strong enough to bear higher borrowing costs. Market Performance Shorter-maturity Treasures are outperforming longer-dated debt with the Fed in no hurry to raise rates and investors’ concern increasing that inflation will accelerate because of the record borrowing and stimulus measures. Yields on 10-year notes rose to a record 2.94 percentage points more than two- year notes on Feb. 18, and were 2.79 percentage points higher on March 5. For all the concern about a record federal budget deficit and the rising supply of Treasury debt, U.S. bonds are the place to be so far in 2010, with returns topping equities and commodities. Bank of America Merrill Lynch’s U.S. Treasury Master Index has increased 1.56 percent, compared with a gain of 0.17 percent for the MSCI World Index of stocks and a 0.33 percent increase in the Standard & Poor’s GSCI Index of 24 raw materials. “Smart investors are doing the math by buying short-term Treasuries, which are giving more after tax returns and adding quality and liquidity to their portfolio,” said Deutsche Bank’s Pollack. “A combination of extremely low rates, lack of muni supply and the prospect of higher income taxes are making munis look extremely rich. If ratios go lower the after tax return will still be there.” To contact the reporter on this story: Cordell Eddings in New York at ceddings@bloomberg.net

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Garlic, Pest-Eating Geese Protect Chile’s Eco-Friendly Pinots: Elin McCoy

January 19, 2010

Review by Elin McCoy Jan. 19 (Bloomberg) — “See those white bands around the vines? They’re soaked in garlic and oil,” says Chilean winemaker Matias Rios as I kneel down for a sniff. The pungent smell keeps fat insects called burritos from destroying pinot noir vines at Cono Sur Vineyards & Winery , the oldest in Chile. “We tried onions, then chilies. Garlic worked best,” Rios says. The vines’ grapes make the spicy, juicy $15 Vision, one of five pinots Cono Sur produces. I never thought finicky, cool-climate pinot noir had a future in Chile, a country best known as a Bordeaux wannabe for its good-value but unexciting $10 cabs and dozen-or-more showcase reds with $50-plus price tags. But on a December trip to this 2,700-mile-long coastal country, I found several wineries taking on the “heartbreak grape” and starting to succeed. Cono Sur is banking on the grape’s potential here. Founded in 1993 as a subsidiary of giant Vina Concha y Toro SA , the winery added an ambitious pinot noir project a decade ago and created the country’s first super-high-end, or icon, pinot, Ocio. With 300,000 cases a year, it has become one of the globe’s largest pinot producers. It’s eco-friendly, too. The winery’s other burrito busters are 1,000 white geese that waddle through the vineyards gobbling up insects. The downside is that they also like nibbling on grapes, so they’re allowed out on patrol only before the fruit forms on the vines. Chile’s isolation and dry climate make organic farming easier by keeping most pests and diseases at a distance. Wines made from thin-skinned pinot generally show more complexity and individuality when grapes are grown without chemicals. Rios mixes compost pellets that look like dog food with water to create a natural fertilizer he refers to as “organic Red Bull.” Slow Start Chile has been slow to embrace the prized grape partly because few Chileans have any experience with it. Cono Sur’s chief winemaker Adolfo Hurtado had worked in Burgundy and enlisted a French consultant to help design a special cellar to mimic Burgundian methods. As Rios and I taste in a room overlooking the barrels, he explains that for the two top pinots they now use feet to crush grapes. “Human energy is softer than machines and produces juicier wines,” explains Rios. The darkly fruity 2007 20 Barrels ($24) and silky-textured 2008 Ocio ($50) are good demonstrations, though they don’t yet compete with the best of Oregon or New Zealand. I hope the winery tones down the oak in future vintages. Burgundian winemaking tricks are only part of the recipe for good pinot. At first, wineries planted the grape in all the wrong places; now the most ambitious seek out cooler regions. I found the best and most elegant Chilean pinots at Casa Marin in San Antonio valley, about an hour’s drive west from Santiago. Only 3 miles from the ocean, this boutique producer has the coldest vineyards in the country and makes truly exceptional wines. Steep, Foggy “Everyone told me this land was too close to the Pacific, too steep and too foggy to make great wine,” says owner- winemaker Maria Luz Marin, a short, blond woman who greets me in the winery courtyard. With its tile roof, the stone-and-wood building surrounded by steep hills green with vines looks like a small, rambling hacienda. Marin admits even her friends in neighboring village Lo Abarca (population, 400) worried she would lose all her money when she bought 88 acres here 10 years ago and struggled to transform it from eucalyptus forest to vines. Standing outside the small cellar with her son and co- winemaker, Filipe, in bill cap and wrap-around sunglasses, I feel a chill wind on this sunny day. That’s just what pinot loves. As we taste through her stunning line of whites and reds, she explains she picks later than anyone else in Chile. The long cool growing season, she says, allows complex grape flavors and aromas to develop without losing delicacy. Smoky Pinot Marin’s haunting 2006 Lo Abarca Hills ($49) has wonderful, layered, spicy, cranberry flavors. The smoky 2007 Cartagena pinot, her second label, offers real pinot character at $20. A less-expensive ($15), no-oak 2009 pinot, coming to the U.S. later this year under her Cartagena label, was deliciously gulpable, fresh, juicy and savory. Now even hard-to-please Burgundians are taking the country’s pinot potential seriously. Vosne-Romanee’s Comte Liger-Belair has joined with French/Chilean oenologist Francois Massoc and terroir consultant Pedro Parra to launch one. Nicolas Potel , one of the region’s most brilliant winemakers, has been hired to make pinot in new region Bio Bio, 400 miles south of Santiago, where vintners battle strong winds, hard rain and frequent frost. Pest-gobbling geese will have plenty to keep them busy. ( Elin McCoy writes on wine and spirits for Bloomberg News. The opinions expressed are her own.) To contact the writer of the story: Elin McCoy at emcwine@gmail.com .

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Artisanal Spirits: Booze Goes Boutique As Small Scale Distilleries Take Off

January 15, 2010

Boutique booze – formally called artisanal spirits – is a big trend in the bar business. Just as the market for craft beers and wines boomed during the past two decades, the audience has similarly grown for small-scale booze that is high quality and often higher priced. “Why is this better? Because it’s not produced for 10 million people; it’s produced for 5,000 people,” says Bill Owens of the American Distilling Institute. He estimates the number of small distilleries at just over 200, and growing by about 20 to 30 a year. They have sprouted up in more than three dozen states in recent years, with Oregon, California, Colorado, Michigan and New York the main players. The gourmeting of hard liquor taps into the current trend of eating and drinking small, local and artisanal foods and beverages. It’s also being driven by “mixologists,” a growing class of high-profile bartenders who craft trendy drinks with specialty alcohol. And it hasn’t hurt that Americans have grown enamored with the hard-drinking characters on the trendsetting AMC television series “Mad Men,” Owens says. But demand alone doesn’t explain the growth. The repeal of Prohibition-era laws in many states helped spur the rush. In an effort to promote local distilleries, many states recently have legalized liquor tastings at manufacturing facilities and retail outlets, says Frank Coleman, spokesman for the Distilled Spirits Council, which represents big booze makers. Many states also have relaxed blue laws, or prohibition on Sunday liquor sales. Still, the $63 billion distilled spirits market remains almost entirely in the hands of major producers. Small distilleries generate well below 1 percent of sales, says Coleman. But he predicts that just as small-scale beers and wines did, micro-distilleries will cut into the market. Among the big players in this little field are Anchor Distilling in San Francisco, a branch of the Anchor Brewing Company, as well as Hanger One in Alameda, Calif., and Iowa’s Templeton Rye. Prices for these beverages trend toward the top shelf. Dry Fly Distilling of Spokane, for instance, sells 750-milliliter bottles of its vodka for $29.95 and its whiskey for $42 per bottle. Washington, where wineries have boomed during the past two decades, is a relatively new player. The micro-distilling business took off here after a 2008 change in state laws that allowed booze makers to serve samples to customers and directly sell 2 liters of take-home spirits per customer per day. Before, all sales had to occur in state liquor stores. As a result, Washington has five small distilleries and 13 more awaiting licenses. Dry Fly Distilling, whose high-quality gin, vodka and whiskey are garnering national awards, is based in a modest facility just east of downtown Spokane. The production room is dominated by stainless steel tanks, copper distilling equipment – including a tower that rises three stories in the air – and a wall of oak barrels marked “whiskey.” Cases of finished booze are stacked everywhere. “We sell out everything we make,” says Kent Fleischmann, who with partner Don Poffenroth started the state’s first distillery in 2007. In this case, selling out translated to $2 million in sales last year. Fleischmann says the key to a successful small distillery is an emphasis on quality. Big distillers tend to keep every drop of alcohol produced, figuring it can be processed into something drinkable, he says. At Dry Fly and other small distilleries, they discard the foul stuff (which is a main cause of hangovers). “We use it for cleaning,” Fleischmann says. Dry Fly is a “grain to glass” operation, meaning they make their own alcohol from raw grain. Many small companies buy neutral spirits in bulk, process them into finished liquor and slap their label on them, he says. Production is a scene you wouldn’t see at a big company. Ten volunteers come in to bottle the spirits on weekends, and the waiting list to do this stretches for a year, Fleischmann says. There is no pay. “We serve them lunch and let them sign the bottles,” he said. ___ http://www.distilling.com http://www.dryflydistilling.com

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Bank Watch: West Coast Banks Sells REO Assets at 58 Cents on the Dollar

January 13, 2010

West Coast Banks Sells REO Assets at 58 Cents on the Dollar West Coast Bank in Lake Oswego, OR, sold 69 residential properties in Oregon and Washington held in the bank’s portfolio of foreclosed real estate to an entity affiliated with Sierra Capital…

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Bond Auctions Survive Credit Freeze, Bankers’ Hex: Joe Mysak

January 5, 2010

Commentary by Joe Mysak Jan. 6 (Bloomberg) — Selling municipal bonds the old- fashioned way, at auction , still hasn’t gone out of style. This is welcome news for all those who believe in good government, and who also know that inviting banks to bid on bonds can save borrowers money. States and localities sold $60.6 billion in bonds at auction in 2009, or 15.6 percent of the $389 billion in fixed- rate issues marketed during the year, according to Bloomberg data. That’s down from 18.6 percent in 2008. Of the 11,583 bonds sold, 3,775, or about one-third, were sold at auctions. It looked like bankers’ four-decade push to eradicate auctions, or competitive sales, would succeed in 2009. For one thing, issuers began selling a new kind of security, Build America Bonds. New varieties of bonds are best sold through negotiation, with issuers awarding the business to a bank before setting the price. The thinking here is that new securities require additional sales efforts to educate investors about how the new products work. That’s the thinking. Also portending doom for auction sales was the state of the market as 2009 began: departures in the ranks of underwriters, flagging institutional demand and the collapse of the bond insurance industry. After the credit markets froze in September 2008, dozens of issuers canceled or postponed sales, afraid they wouldn’t get bids. Even AAA issuers selling tax-backed bonds, such as Utah and Georgia, found they could save money through negotiation. Reducing Risk Bankers prefer negotiation because it is less risky. In this process, issuers choose who is going to sell their bonds, sometimes soliciting requests for proposal, sometimes not. The bank then decides how to price the bonds. In a competitive sale, the issuer sets a date for an auction and collects bids. The bid that produces the lowest cost of funds wins the bonds. There’s a risk that the bank won’t be able to re-sell them to investors. Auction was the preferred way of sale since the beginnings of the municipal market in the 1800s. In the 1960s, bankers began persuading issuers to negotiate all deals, not just those for new or weak credits, or for large amounts. Negotiated sales outnumbered competitive ones in 1976, and have dominated since. For their part, issuers liked negotiation because it meant less work and gave politicians a new batch of goodies — bond underwriting assignments — to distribute. Pre-Sale Work I would like to think that issuers saw things that didn’t put negotiation in a very good light and acted accordingly. Take those Build America Bonds. In return for selling taxable debt, the issuer gets a 35 percent subsidy from the U.S. Treasury that lowers the cost of the debt even below the tax- exempt level. In 2009, issuers sold $64 billion in BABs. Experts say they will sell double that amount this year. What did we see almost from the beginning? BAB deals were priced, and within days the institutions that bought the bonds resold them at higher prices — flipping them exactly as those favored with shares of initial public offerings used to do. In other words, issuers paid too much in yield. What happened to all the pre-sale work that was the promise of negotiation? Then there is the Securities and Exchange Commission’s case filed in November against two former JPMorgan Chase & Co. bankers in connection with their work in Jefferson County, Alabama. In order to get the county’s business, the SEC alleges, the bankers paid local firms whose principals or employees were close friends of certain county commissioners, who appeared to be concerned solely with giving out patronage. The bankers say they will fight the charges. It was unseemly. Required Skill Or take the Chicago official who told his water authority’s board members this summer that he didn’t bother to set up a process to choose a financial adviser because of the “high degree of professional skill required.” State law allows agencies to dispense with the formalities in just such circumstances. I find that unseemly, too. I’d like to say that public officials saw these episodes and chose competition because it’s clean. Maybe some did. What saved competitive sale was a market rally that extended from June through September. While it ran, the Bond Buyer index fell 92 basis points, to its lowest level since the 1960s. Fueling the rally was a relative scarcity of tax-exempt bonds — so many issuers had decided to go the BAB route. I asked Eric Johansen , debt manager for Portland, Oregon, and a proponent of competitive sale, how auction sales have survived. Pushing Negotiation “I guess I should be happy that the competitive share hasn’t fallen even lower than it has, given the market turmoil of 2008,” he said in an e-mail. “However, it tells me that there are still far too many issuers relying on financial advice from investment bankers that are pushing negotiation.” “It would be interesting to determine the percentage of fixed-rate sales that meet the Government Finance Officers Association’s criteria for factors favoring a competitive sale, namely good ratings, strong security and straightforward debt structure,” he continued. “My sense is that the percentage of bonds meeting these criteria is probably well over 50 percent.” The SEC’s inquiry into anticompetitive practices in the municipal market is going to produce a series of sordid revelations. Maybe that will boost auction sales in 2010. ( Joe Mysak is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: Joe Mysak in New York at jmysakjr@bloomberg.net

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Florida Beats Cincinnati in Sugar Bowl; Ohio State Wins Rose Bowl

January 2, 2010

By Nancy Kercheval Jan. 2 (Bloomberg) — Tim Tebow passed for 482 yards and three touchdowns and ran for a fourth as No. 5 University of Florida handed third-ranked University of Cincinnati its first loss of the season with a 51-24 win in college football’s Sugar Bowl. Tebow set a Bowl Championship Series record with total yardage of 533, which surpassed the previous mark of 467 held by University of Texas quarterback Vince Young since the Rose Bowl against the University of Southern California following the 2005 season. “These have been the best four years of my life,” said Tebow, winner of the 2007 Heisman Trophy, in a televised post- game interview. “We wanted to end on a good note and it was very special to go out with these seniors and coaches.” The Gators played amid concerns about whether coach Urban Meyer would return next year. He announced his resignation Dec. 27 and then changed his mind the next day, saying he was taking an indefinite leave for health reasons. When asked about his future after the game, he said, “I plan on being the coach of the Gators.” Florida (13-1) scored 23 points before Cincinnati’s Jake Rogers kicked a 47-yard field goal in the second quarter. The Gators held a 30-3 lead at halftime at the Superdome in New Orleans. Tony Pike passéd for 170 yards and three touchdowns for the Bearcats (12-1). OSU Wins Rose Bowl In the Rose Bowl, Terrelle Pryor passed for two touchdowns and Devin Barclay kicked three field goals as eighth-ranked Ohio State University beat No. 7 University of Oregon 26-17 in Pasadena, California. Ohio State (11-2) made its first trip to the Rose Bowl since the 1996 season when it beat Arizona State University. “To win the Rose Bowl is unbelievable,” said coach Jim Tressel in a televised post-game interview. “This is huge. We haven’t won the Rose Bowl in a while.” Pryor, who passed for 266 yards, connected with Brandon Saine on a 13-yard pass in the first quarter to give the Columbus, Ohio, university a 7-0 lead. Barclay kicked three field goals of 19, 30 and 38 yards before Pryor fired a 17-yard scoring pass to DeVier Posey in the fourth. “I just wanted to lead the team as best I can,” Pryor said. “The defense helped out a lot.” ‘Up Tempo Defense’ Tressel said the Buckeyes showed an “up tempo defense.” “They run and they hit and they prepared,” Tressel said. “But don’t take anything away from Oregon.” Jeremiah Masoli completed nine of 20 passing attempts for 81 yards and one interception for the Ducks (10-3). He scored a touchdown on a one-yard run in the third quarter to give the Eugene, Oregon, school a 17-16 lead. Morgan Flint put Oregon on the scoreboard with a 24-yard field goal in the second quarter. LeGarrette Blount ran three yards for a touchdown six minutes later to tie the score 10-10 before Barclay and Aaron Pettrey kicked field goals to give Ohio State a 16-10 halftime lead. In the Gator Bowl, Florida State University rallied from a halftime deficit to beat West Virginia University 33-21 and give retiring coach Bobby Bowden his 389th career victory. Dustin Hopkins kicked his second of four field goals to give the Seminoles a two-point advantage in the third quarter and Jermaine Thomas ran for his second touchdown as Florida State (7- 6) took the lead for good at 23-14. Win for Bowden Bowden, 80, announced his retirement Dec. 1 after 34 seasons at FSU, two national titles and the second-most wins at the major-college level. Florida State hasn’t had a losing season since Bowden’s first year at the Tallahassee, Florida, school in 1976. “Like so many games when you are behind like we were in the first quarter, there’s always an opportunity to quit and give up, but these kids kept fighting and kept coming back to win the game,” Bowden said in a post-game television interview at Municipal Stadium in Jacksonville, Florida. Jarrett Brown, Noel Devine and Ryan Clarke each scored a touchdown for the Morgantown, West Virginia, school (9-4). In the Capital One Bowl, Collin Wagner kicked a 21-yard field goal with 57 seconds left to play to give No. 13 Penn State University a 19-17 victory over 12th-ranked Louisiana State University. Paterno’s 394th Win Wagner kicked four field goals and Derek Moye scored a touchdown on a 37-yard pass from Daryll Clark for Penn State (11- 2) to give Coach Joe Paterno his 394th victory and record 24th bowl win. Paterno, 82, is the winningest coach in major- college football. The Nittany Lions gave up a 16-3 lead in the third quarter when Brandon LaFell scored on a 24-yard pass from Jordan Jefferson and Steven Ridley ran for one yard to put LSU (9-4) ahead by 17-16 at the Florida Citrus Bowl in Orlando, Florida. Penn State is located in State College, Pennsylvania, while LSU is in Baton Rouge, Louisiana. In the Outback Bowl, Wes Byrum kicked a 21-yard field goal in overtime to give Auburn University a 38-35 victory over Northwestern University. Northwestern (8-5), which fought back from a 14-point halftime deficit to take the game into overtime, was stopped when it faked a field goal on fourth down from the Auburn five- yard line and Zeke Markshausen was tackled two yards from the goal line. Auburn’s Ben Tate, who rushed for 108 yards, scored two touchdowns in the fourth quarter to break a 21-21 tie before Northwestern’s quarterback Mike Kafka ran for a two-yard score and then completed an 18-yard pass to Sidney Stewart to end regulation time at 35-35 at Raymond James Stadium in Tampa, Florida. Kafka passed for a career-high 532 yards, four touchdowns and five interceptions. Chris Todd completed 20 of 31 passing attempts for 235 yards and one touchdown for Auburn (8-5). Northwestern is located in Evanston, Illinois, while Auburn is in Auburn, Alabama. To contact the reporter on this story: Nancy Kercheval in Washington at nkercheval@bloomberg.net .

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PG&E Customer Revolt Over Meters May Slow Deployment of Obama’s Smart Grid

December 30, 2009

By Mark Chediak Dec. 30 (Bloomberg) — Consumer backlash and cost concerns may cause delays in the nationwide rollout of “smart” utility meters at the center of the Obama administration’s $8 billion push to update the U.S. electricity grid. PG&E Corp. , owner of California’s largest utility, halted meter installations in Bakersfield, north of Los Angeles, after hundreds of customers complained that readings weren’t accurate. The meters, part of a so-called smart-grid initiative billed as clearing the way for more renewable-energy use, are designed to help consumers conserve power during periods of peak demand. Martha Johnson, pastor of a church in Bakersfield, said her utility bill almost doubled from a year earlier to $874 in July after her new meter was installed. “That caught my eye because I’ve never had a bill that high,” said Johnson, 64. San Francisco-based PG&E , which faces a lawsuit from a Bakersfield customer who’s seeking class-action status, says its meters are accurate and hot weather and increased rates led to higher bills than consumers expected. The state Utilities Commission ordered an independent study of billing accuracy. Whether PG&E’s complaints stem from perception or defects, they may slow U.S. installations of the meters, a cornerstone of President Barack Obama ’s plan to spur grid upgrades with $8 billion in public-private funding. Consumer groups question whether benefits of the meters justify costs passed on when regulators allow utilities to increase rates to pay for them. Regulator Reluctance “If customers lose confidence in smart meters, I would expect regulators would be more reluctant to grant rate increases to install new meters across the system,” said Travis Miller , a utility analyst at Morningstar Inc. in Chicago. “Any kind of adverse impact from these projects could impact long- term growth of the meters.” The devices allow utilities to check energy use remotely, eliminating the need for employing meter readers. They can be connected to equipment that shows customers when rates are highest, allowing households and other consumers to shift power use to less costly periods. Smart meters also give utilities more control of demand, helping them match usage with renewable electricity flows, such as from wind and solar power. There are about 8 million smart electric meters in the U.S., and that count will jump sevenfold by 2019, according to the Institute for Electric Efficiency in Washington. “Other states are looking very closely at what is happening in California,” said Mindy Spatt , a spokeswoman for the Utility Reform Network , a consumer group in San Francisco. “What we know for sure about the meters is they are job killers and they are very expensive. The rest is just pie in the sky.” Cost Objections Utility-consumer groups across the country have raised cost concerns about meter projects, said Charles Acquard , executive director of the National Association of State Utility Consumer Advocates. Ben Schuman , an analyst who covers such meter makers as Itron Inc. at Pacific Crest Securities in Portland, Oregon, said the devices installed so far have proved accurate. The unknown is whether consumers will use the technology to cut power costs, he said. Liberty Lake, Washington-based Itron has risen 7.3 percent this year on the Nasdaq Stock Market, trailing a 45 percent jump by the Nasdaq Composite Index. Schuman has “sector perform” ratings on Itron and other makers of meter-related products, including Comverge Inc. , EnerNOC Inc. and Esco Technologies Inc. Comverge and EnerNoc have more than doubled in value this year. Esco has dropped 11 percent. Duke Plan Rejected Regulators in states such as Connecticut and Texas are pressing utilities to show how smart meters will benefit consumers. In November, Indiana regulators rejected a proposal by Duke Energy Corp. to install about 800,000 smart meters after concluding the company didn’t show the plan’s long-term rewards. Charlotte, North Carolina-based Duke, which got $200 million in federal funding to deploy smart meters and other equipment in three states, will reapply in January for approval in Indiana, company spokesman Dave Scanzoni said. Fairfield, Connecticut-based General Electric Co. and Switzerland’s Landis+Gyr are supplying the 10 million meters that PG&E plans to deploy at a cost of $2.2 billion. Bakersfield resident Pete Flores filed suit in October, alleging that his bills almost tripled after a smart meter was put in. Lawyer Michael Kelly , who represents Flores, said he plans to file an updated suit with more plaintiffs in January. California Case “The allegations in the lawsuit are untrue,” PG&E spokesman Paul Moreno said. PG&E tested meters in Bakersfield and found they were working properly, Moreno said. The company is installing 12,000 to 15,000 meters a day in central California and the San Francisco area. PG&E has investigated more than 400 customer complaints, mostly from Bakersfield and other areas where hot weather and rate increases as high as 22 percent caused power bills to surge, Moreno said. Bakersfield had 17 days above 100 degrees Fahrenheit (38 Celsius) in July, up from six days a year earlier, according to the National Weather Service. Mark Hura , smart-grid leader for GE, and Landis+Gyr spokesman Stan March said their meters read power usage within an accuracy range of 0.2 percent. To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net .

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PG&E Customer Revolt Over Meters May Slow Deployment of Obama’s Smart Grid

December 30, 2009

By Mark Chediak Dec. 30 (Bloomberg) — Consumer backlash and cost concerns may cause delays in the nationwide rollout of “smart” utility meters at the center of the Obama administration’s $8 billion push to update the U.S. electricity grid. PG&E Corp. , owner of California’s largest utility, halted meter installations in Bakersfield, north of Los Angeles, after hundreds of customers complained that readings weren’t accurate. The meters, part of a so-called smart-grid initiative billed as clearing the way for more renewable-energy use, are designed to help consumers conserve power during periods of peak demand. Martha Johnson, pastor of a church in Bakersfield, said her utility bill almost doubled from a year earlier to $874 in July after her new meter was installed. “That caught my eye because I’ve never had a bill that high,” said Johnson, 64. San Francisco-based PG&E , which faces a lawsuit from a Bakersfield customer who’s seeking class-action status, says its meters are accurate and hot weather and increased rates led to higher bills than consumers expected. The state Utilities Commission ordered an independent study of billing accuracy. Whether PG&E’s complaints stem from perception or defects, they may slow U.S. installations of the meters, a cornerstone of President Barack Obama ’s plan to spur grid upgrades with $8 billion in public-private funding. Consumer groups question whether benefits of the meters justify costs passed on when regulators allow utilities to increase rates to pay for them. Regulator Reluctance “If customers lose confidence in smart meters, I would expect regulators would be more reluctant to grant rate increases to install new meters across the system,” said Travis Miller , a utility analyst at Morningstar Inc. in Chicago. “Any kind of adverse impact from these projects could impact long- term growth of the meters.” The devices allow utilities to check energy use remotely, eliminating the need for employing meter readers. They can be connected to equipment that shows customers when rates are highest, allowing households and other consumers to shift power use to less costly periods. Smart meters also give utilities more control of demand, helping them match usage with renewable electricity flows, such as from wind and solar power. There are about 8 million smart electric meters in the U.S., and that count will jump sevenfold by 2019, according to the Institute for Electric Efficiency in Washington. “Other states are looking very closely at what is happening in California,” said Mindy Spatt , a spokeswoman for the Utility Reform Network , a consumer group in San Francisco. “What we know for sure about the meters is they are job killers and they are very expensive. The rest is just pie in the sky.” Cost Objections Utility-consumer groups across the country have raised cost concerns about meter projects, said Charles Acquard , executive director of the National Association of State Utility Consumer Advocates. Ben Schuman , an analyst who covers such meter makers as Itron Inc. at Pacific Crest Securities in Portland, Oregon, said the devices installed so far have proved accurate. The unknown is whether consumers will use the technology to cut power costs, he said. Liberty Lake, Washington-based Itron has risen 7.3 percent this year on the Nasdaq Stock Market, trailing a 45 percent jump by the Nasdaq Composite Index. Schuman has “sector perform” ratings on Itron and other makers of meter-related products, including Comverge Inc. , EnerNOC Inc. and Esco Technologies Inc. Comverge and EnerNoc have more than doubled in value this year. Esco has dropped 11 percent. Duke Plan Rejected Regulators in states such as Connecticut and Texas are pressing utilities to show how smart meters will benefit consumers. In November, Indiana regulators rejected a proposal by Duke Energy Corp. to install about 800,000 smart meters after concluding the company didn’t show the plan’s long-term rewards. Charlotte, North Carolina-based Duke, which got $200 million in federal funding to deploy smart meters and other equipment in three states, will reapply in January for approval in Indiana, company spokesman Dave Scanzoni said. Fairfield, Connecticut-based General Electric Co. and Switzerland’s Landis+Gyr are supplying the 10 million meters that PG&E plans to deploy at a cost of $2.2 billion. Bakersfield resident Pete Flores filed suit in October, alleging that his bills almost tripled after a smart meter was put in. Lawyer Michael Kelly , who represents Flores, said he plans to file an updated suit with more plaintiffs in January. California Case “The allegations in the lawsuit are untrue,” PG&E spokesman Paul Moreno said. PG&E tested meters in Bakersfield and found they were working properly, Moreno said. The company is installing 12,000 to 15,000 meters a day in central California and the San Francisco area. PG&E has investigated more than 400 customer complaints, mostly from Bakersfield and other areas where hot weather and rate increases as high as 22 percent caused power bills to surge, Moreno said. Bakersfield had 17 days above 100 degrees Fahrenheit (38 Celsius) in July, up from six days a year earlier, according to the National Weather Service. Mark Hura , smart-grid leader for GE, and Landis+Gyr spokesman Stan March said their meters read power usage within an accuracy range of 0.2 percent. To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net .

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Bernanke’s Support for Second Term at Fed Runs 3-1 in Favor in U.S. Senate

December 22, 2009

By Scott Lanman Dec. 22 (Bloomberg) — U.S. senators are backing Federal Reserve Chairman Ben S. Bernanke for a second term by a 3-to-1 margin, based on a count of 77 lawmakers by Bloomberg News. Bloomberg today interviewed 53 senators who aren’t on the Banking Committee, which voted 16-7 on Dec. 17 to recommend Bernanke’s nomination to the full Senate. Twenty-one lawmakers said they are inclined to vote for Bernanke, while four said they would oppose the central bank chief, giving Bernanke 37-12 support so far for a four-year term starting Feb. 1. Another 28 said they’re undecided or declined to comment. California Democrat Dianne Feinstein and South Carolina Republican Lindsey Graham were among senators saying they’ll support Bernanke, citing his response to the financial crisis. Senators from both major parties said they expect him to be confirmed, even with at least four lawmakers trying to block or delay the nomination. “We were on the verge of a Great Depression, and I think he and others came up with some monetary policies that prevented us from going into a depression,” said Graham, who also backs a broad audit of the central bank. “He is worthy of renomination.” Of the 77 senators who have voted, spoken with Bloomberg or publicly commented on their views, 43 are Democrats, 33 are Republicans and one is an independent. Democrats support Bernanke by a 26-1 margin, while Republicans are split 11-10 in the Fed chief’s favor. The chamber has 58 Democrats, 40 Republicans and two independents. Bernard Sanders , a Vermont independent who isn’t on the banking panel, previously announced his opposition to Bernanke, saying he would try to block the nomination. After Jan. 19 A vote will occur sometime after Jan. 19, Christopher Dodd , a Democrat from Connecticut and chairman of the Senate Banking Committee, said last week. During a Dec. 3 hearing by Dodd’s panel, Bernanke, 56, faced criticism of the Fed’s bank oversight while gaining support for a second term. Dodd credited Bernanke with preventing a financial meltdown, while saying the Fed’s oversight of banks before the crisis was an “abysmal failure.” Four Republicans — John McCain and Jon Kyl of Arizona, Jeff Sessions of Alabama and Roger Wicker of Mississippi — said they were inclined to oppose Bernanke. “He hasn’t been effective enough in pointing out the reckless spending and financial policies of our Congress and our government,” Sessions said. “I don’t have anything against him personally, but there needs to be some accountability around here.” Jeff Merkley of Oregon remains the only Democrat to announce his opposition to the Fed chief. Majority Vote While the nomination requires a majority vote for approval, the Senate would need 60 votes to break the procedural holds. The Senate has 100 members, two from each U.S. state. Orrin Hatch , a Republican from Utah, said Bernanke has “done as good a job as he could. And I would be a little bit concerned by who would replace him.” “He’s done an impressive job under extremely difficult circumstances,” said Jeff Bingaman , a Democrat from New Mexico. Extrapolating the current vote count for the entire Senate would yield about 25 “no” votes, a total that probably wouldn’t trigger declines in stock or bond markets or cause investors to question the Fed’s political support, said Michael Feroli , an economist at JPMorgan Chase & Co. in New York. “The market could deal with that,” said Feroli, a former Fed researcher. “If you got closer to 35 or 40, I think that’s worrisome.” Decide to Oppose Once a majority materializes for Bernanke, senators, especially those who are up for re-election next year, may decide to oppose the Fed chief, said Tom Gallagher , head of policy research at International Strategy and Investment Group Inc. in Washington. “It’s fair to say that the safe vote on Bernanke is to vote ‘no’ on the losing side,” said Gallagher, a former congressional aide. Bernanke was named “Person of the Year” last week by Time magazine after leading the biggest expansion of the central bank’s powers in its 96-year history to respond to the crisis. The Fed is phasing out many of its emergency programs by Feb. 1. Feinstein said Bernanke shouldn’t be blamed for the troubles in the economy. “This thing was a long time coming, and to put it all on Bernanke is a mistake,” she said. “It’s a combination of a lack of regulation over a substantial period of time.” To contact the reporter on this story: Scott Lanman in Washington at slanman@bloomberg.net .

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GE-Mitsubishi Wind-Turbine Battle Threatens Arkansas `Silicon Valley’ Plan

December 20, 2009

By Susan Decker Dec. 18 (Bloomberg) — General Electric Co. ’s effort to keep wind turbines made by Mitsubishi Heavy Industries Ltd. out of the U.S. may hinder Arkansas’s plan to become the “Silicon Valley of wind manufacturing.” The state has spent two years luring wind-related manufacturers, including Denmark’s LM Glasfiber AS and Germany’s Nordex AG . In October, Mitsubishi announced plans to build a $100 million wind-turbine assembly plant that would bring about 400 jobs to Fort Smith, the state’s second-biggest city, with a population of 85,000. “I’m confident they’re coming to Arkansas,” said Joe Holmes, marketing head of the state Economic Development Commission, who used the Silicon Valley comparison. “When you take not just the jobs but also the indirect jobs that this will create with suppliers — everybody’s got to eat — it’s tremendous.” The plan may be delayed if the U.S. International Trade Commission, an agency set up to protect U.S. markets from unfair trade practices, sides with GE in a patent battle and bans Mitsubishi turbines from the U.S. market. The agency, which was scheduled to announce a decision today, will now decide by Jan. 8, it said in a notice posted on its Web site. It gave no reason for the delay. GE, the biggest U.S. wind-turbine maker, claims Mitsubishi infringes its patents. If it wins, the Fairfield, Connecticut- based company might prevent Tokyo-based Mitsubishi from increasing its share of the U.S. wind-turbine market, now dominated by GE and Denmark’s Vestas Wind Systems A/S . GE fell 20 cents to $15.59 in New York Stock Exchange composite trading. Wind turbines accounted for 42 percent of new electricity- generating capacity in the U.S. last year, almost matching the additions of natural gas-fueled plants, according to the American Wind Energy Association , an industry trade group. 20% in 20 Years The U.S. Energy Department is counting on wind to generate 20 percent of the country’s electricity by 2030. The amount was 1.3 percent at the end of last year, the trade group said. The GE-Mitsubishi dispute has prompted politicians to take sides based on businesses in their states. Arkansas Governor Mike Beebe , a Democrat, and Republican congressmen John Boozman and Marion Berry urged the trade commission to let Mitsubishi proceed with plans for the Fort Smith facility, which would assemble the turbines made in Japan. GE targeted Mitsubishi’s 2.4-megawatt turbines, which are higher producers and more efficient than earlier models. The Japanese company has been taking orders since at least 2006 for wind turbines in the U.S. It has installed turbines in Texas and has a contract to supply turbines to farms in Oregon and Texas, according to the wind trade group. GE Backer Bob Inglis , a Republican congressman from South Carolina, backs GE, employer of more than 3,900 people in a Greenville, South Carolina, plant. In a letter to the ITC, he described the plant as “a facility with the most to lose if this process is swayed by politics.” GE, whose equipment generates one-third of the world’s electricity, earlier this month won a $1.4 billion contract to supply turbines and services for an Oregon wind farm that will be bigger than any completed so far, the company says. An ITC judge in August found Mitsubishi violated GE’s patent rights and recommended exclusion from the U.S. The six- member trade commission will decide whether the patents were infringed and, if so, whether to bar imports of the turbines. Infringing goods can be imported if the commission decides overriding the patents rights would be in the public interest. The agency’s staff, which acts as a third party on behalf of the public, sided with Mitsubishi on the underlying patent case. At the same time, the staff lawyers said the Arkansas investment doesn’t meet the public-interest test and those turbines should be barred if Mitsubishi loses. ITC Staff View They said otherwise on one project, arguing that Mitsubishi even if it loses should be allowed to send turbines to an Iberdrola SA -run wind farm in Texas that received $114 million in federal stimulus dollars. An ITC ban on the turbines would face an automatic White House review on public-policy grounds. President Barack Obama’s $787 billion stimulus plan to end the deepest recession since the Great Depression dedicates $6 billion in the next two years to expand the country’s renewable-energy transmission system, including wind. The underlying patent case can be appealed to a federal court. The Fort Smith project was announced after the administrative law judge issued his findings. Construction isn’t expected until 2011, the ITC staff said. The turbines, resembling high-tech windmills, convert wind into electricity for a region’s electrical grid. Wind speeds change all the time, so the turbines must be built to provide a constant source of power. Turbine Patents The three GE patents, issued in 1992, 2005 and 2008, are related to variable-speed turbines. The inventions adjust to ensure a constant amount of power is supplied to the grid without damaging the machines and deal with periods when voltage on the grid is low, such as during an outage. GE entered the market in 2002 after buying assets from the bankrupt Enron Corp. GE reported about $6 billion in global sales of wind turbines last year and said its turbines represent about half the new wind capacity in the U.S. It operates plants making turbines and components in Greenville; Tehachapi, California; and Pensacola, Florida. GE in September sued Mitsubishi Heavy Industries, seeking cash compensation for the patent infringement. That case was put on hold pending the ITC review. The ITC case is In the Matter of Certain Variable Speed Wind Turbines and Components Thereof, 337-641, U.S. International Trade Commission (Washington). The civil suit is General Electric Co. v. Mitsubishi Heavy Industries Ltd., 09-cv- 229, U.S. District Court, Southern District of Texas (Corpus Christi). To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net .

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Bernanke Backed for Second Term as Fed Chairman in 16-7 Senate Panel Vote

December 17, 2009

By Scott Lanman and Craig Torres Dec. 17 (Bloomberg) — Ben S. Bernanke won backing for a second term as chairman of the Federal Reserve today in a 16-to- 7 vote by the Senate Banking Committee. Members including panel Chairman Christopher Dodd , Democrat of Connecticut, voted in favor of Bernanke. Richard Shelby of Alabama, the ranking Republican, was among those opposed. The nomination next goes to the full Senate. The 56-year-old Fed chief, a Republican first appointed by President George W. Bush in 2006, was criticized before the vote for ignoring the housing bubble and failing to supervise banks. Democrats including Dodd and Mark Warner of Virginia came down in favor of Bernanke’s emergency actions, which they said saved the economy from a more severe recession. Dodd praised Bernanke for “stepping up during a critical time in our nation’s history with wise leadership” and preventing an economic “catastrophe.” Twelve Democrats and four Republicans voted for Bernanke. Six Republicans and one Democrat, Jeff Merkley of Oregon, were opposed. Shelby began with Bernanke’s role as a Fed governor earlier this decade and said the former Princeton University professor “missed clear signals” of a financial crisis that started with a bubble in the housing market. “I strongly disapprove of some of the past deeds of the Federal Reserve while Ben Bernanke was a member and its chairman, and I lack confidence in what little planning for the future he has articulated,” Shelby said. Regulatory Overhaul Congress is considering an overhaul in financial regulation to prevent a repeat of the worst credit crisis in seven decades. The U.S. House passed legislation last week that would allow the Fed to keep supervisory powers. At least four senators have said they want to obstruct or delay the floor vote, which hasn’t been scheduled. Bernanke can remain chairman without Senate approval as long as a replacement isn’t installed. His term expires on Jan. 31. Dodd predicted yesterday that Bernanke’s nomination would clear the panel today, with a Senate confirmation vote in January. Bernanke yesterday was named “Person of the Year” by Time magazine after leading the biggest expansion of the central bank’s powers in its 95-year history to battle the worst economic slump since the Great Depression. When the committee approved Bernanke’s first nomination in November 2005, Kentucky Republican Jim Bunning was the lone member to object, and Shelby called Bernanke a “superb choice.” Bernanke went on to win Senate confirmation with only Bunning in opposition. The Fed chief has a separate, nonrenewable 14-year term on the Board of Governors ending in 2020. Bunning today reaffirmed his opposition to Bernanke’s nomination. Yesterday, Bernanke and his colleagues on the policy- setting Federal Open Market Committee repeated their pledge to keep interest rates “exceptionally low” for an “extended period” and said the economy is strengthening. To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net ; Craig Torres in Washington at ctorres3@bloomberg.net

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Democrats, Lieberman List Conditions for Supporting Health Bill in Senate

December 13, 2009

By Greg Stohr Dec. 13 (Bloomberg) — Democratic and independent U.S. senators laid out a list of conditions to win their votes on health care legislation, underscoring the challenges facing Senate leaders as they work to pass a bill by the year’s end. Connecticut independent Joseph Lieberman said today he is against a proposal to let people as young as 55 participate in the federal Medicare program. Appearing on CBS’s “Face the Nation” show, he also said lawmakers should drop a proposed long-term care insurance program and a government-run insurance plan, or “public option.” “We don’t need to keeping adding on to the back of this horse because we’re going to break the horse’s back and get nothing done,” said Lieberman, who usually votes with the Democrats. Faced with the prospect of no Republican support for the measure, Senate Democrats may need all 58 of their party’s votes, plus those of the chamber’s two independents. The 10- year, $848 billion Senate bill is designed to cover 31 million uninsured Americans and curb medical expenses. Ten Democratic senators yesterday attacked a compromise plan that includes expanding Medicare, which covers the elderly and disabled. Other senators pressed their own demands today on the Sunday talk shows. Senator Ben Nelson , a Nebraska Democrat, said he “can’t support the bill” without stricter limits on abortion funding. The Senate on Dec. 8 rejected a Nelson- sponsored amendment to tighten those restrictions. Reducing Costs Democratic Senator Claire McCaskill of Missouri said on “Fox News Sunday” that she won’t support health care legislation unless it reduces both costs and the federal budget deficit. “I have to be assured that this is going to bring down the deficit, and it’s going to bring down health care costs for most Missouri families,” said McCaskill. McCaskill said the Congressional Budget Office’s anticipated cost estimate for the compromise plan will prove pivotal. Democratic leaders refused to share details of the plan until the estimate is released. An analysis issued last week by the chief actuary at the federal Centers for Medicare and Medicaid Services said that national health expenditures would grow about $234 billion from 2010-2019 under the legislation now before the Senate. Summers Question Appearing on ABC’s “This Week” program, White House economic adviser Larry Summers didn’t answer directly when asked whether that analysis would preclude President Barack Obama from signing the bill. “We’re very confident that this bill will reduce health care costs in whatever form ultimately emerges from the Congress,” Summers said. Obama has made controlling costs a centerpiece of his drive for a health care overhaul, telling Congress on Sept. 9 that his plan “will slow the growth of health-care costs for our families.” Republicans said the disagreements among Democrats were evidence that the entire effort should be scrapped. Republicans fault the legislation for cutting more than $400 billion from Medicare and say the measure would crowd out private insurers, raise taxes and cause the deficit to explode. “I think they’re in serious trouble on this, and the core problem is the American people do not want us to pass it,” Senate Republican Leader Mitch McConnell of Kentucky said today on “Face the Nation.” Lieberman said that “there’s a good basic bill here” and that “parts of it can be supported by 60 senators, including some Republicans.” Democratic Letter The 10 lawmakers yesterday demanded changes in Medicare reimbursement rates, complaining that Medicare currently underpays states with more efficient medical care and leaves fewer physicians willing to treat patients in the program. The letter to Senate Majority Leader Harry Reid was signed by Senators Maria Cantwell of Washington, Russ Feingold of Wisconsin, Tim Johnson of South Dakota, Patrick Leahy of Vermont, Jeanne Shaheen of New Hampshire, Tom Udall of New Mexico, Jeff Merkley and Ron Wyden of Oregon, and Amy Klobuchar and Al Franken of Minnesota. The current system pays providers for the number of services they provide, creating a situation in which Medicare pays more efficient states less for the same result, and “spends over one-third more for each beneficiary in some states compared to ours,” the Democratic senators wrote. “An expansion of the program would simply see the same issue expanded to Americans between the ages of 55-64,” they said. They urged Reid to make changes in the bill to reward providers for the quality, not quantity, of their care. The Medicare expansion, or buy-in, was meant to draw moderate support. It is part of a compromise to replace the government-run insurance plan that drew so much opposition it threatened to derail the legislation. Both Republicans and centrist Democrats said a public plan would provide unfair competition to insurers such as Hartford, Connecticut-based Aetna Inc . To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net .

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Democratic Senators Rebel Over Health Care Compromise to Expand Medicare

December 12, 2009

By Nicole Gaouette and Jim Rowley Dec. 12 (Bloomberg) — A Democratic compromise over health- care legislation came under attack today from within the party as 10 senators voiced concern the plan would make it harder for the elderly to get medical care. The senators were responding to a proposal to expand the Medicare program, which serves Americans age 65 and over, to cover people as young as 55. The 10 lawmakers demanded changes in Medicare reimbursement rates, complaining that Medicare currently underpays states with more efficient medical care, driving up the number of physicians unwilling to treat patients in the program. The letter provided more fodder for Republicans who argue that the legislation doesn’t meet a central goal President Barack Obama has set for slowing the increase in health costs and expanding access to medical care. The Democrats’ letter came a day after a report by the Centers for Medicare and Medicaid Services that found the Senate bill would increase total spending on health care and may contain “unrealistic” promises to save money on Medicare. “We appreciate the rationale underlying the proposed Medicare expansion,” the lawmakers wrote in the Dec. 11 letter, “but fear that provider shortages in states with low reimbursement rates such as ours will make such a program ineffective, or even worsen the problems these states are experiencing.” Signers of Letter The letter to Senate Majority Leader Harry Reid was signed by Senator Maria Cantwell of Washington, Senator Russ Feingold of Wisconsin, Tim Johnson of South Dakota, Senator Patrick Leahy of Vermont, Senator Jeanne Shaheen of New Hampshire, Senator Tom Udall of New Mexico, Oregon senators Jeff Merkley and Ron Wyden , and Minnesota senators Amy Klobuchar and Al Franken . The current system pays providers for the number of services they provide, creating a situation in which Medicare pays more efficient states less for the same result, and “spends over one-third more for each beneficiary in some states compared to ours,” the Democratic senators wrote. “An expansion of the program would simply see the same issue expanded to Americans between the ages of 55-64,” they said. They urged Reid to make changes in the bill to reward providers for the quality, not quantity, of their care. Republican Criticism Republicans were quick to expand on the Democrats’ criticism. “Access is a crisis,” said Senator Lisa Murkowski , an Alaska Republican. Her state has the fastest growing elderly population in the country, Murkowski told reporters today. Yet in Anchorage, the state’s largest city, there are only 13 physicians willing to see new Medicare patients because of the low reimbursement rates, she said. According to a 2008 study by the Institute of Social Economic Research at the University of Alaska Anchorage, the city has 19,210 Medicare beneficiaries 65 and older. That number does not account for disabled in the program. The Senate bill “does nothing to expand access,” Murkowski said. “This is not acceptable to us.” Reid is prodding the Senate to pass legislation before the end of the month. The 10-year, $848 billion Senate bill is designed to cover 31 million uninsured Americans and curb medical expenses. Gaining the support of moderate Democrats is essential to meet the 60-vote benchmark needed to pass the bill. “Right now you are at the crucial hour,” Wyden of Oregon said about negotiations in an interview. “You’re facing 14, 15 days to the holiday.” Seeking Centrist Support The Medicare expansion, or buy-in, was meant to draw moderate support. It is part of a compromise to replace a government-run insurance plan that drew so much opposition it threatened to derail the legislation. Both Republicans and centrist Democrats said a public plan would provide unfair competition to insurers such as Hartford, Connecticut-based Aetna Inc . Almost immediately, however, centrist Democrats raised questions about the Medicare expansion. “As long as Medicare continues to underpay providers, Medicare patients are at risk of losing” doctors who will treat them, Senator Ben Nelson , a Nebraska Democrat said in an interview. Democratic leaders refused to share details of the compromise plan until the Congressional Budget Office has offered a cost estimate. They suggest there may be a fix for Medicare reimbursement rates in the larger proposal. Senator Charles Schumer of New York told reporters that he didn’t think the budget-office “numbers will be so out of the ballpark we will have to start all over again.” Reimbursement Disparities Asked whether the proposal deals with disparities in reimbursement between regions where medical costs are higher than others, Schumer declined to discuss specifics of the proposal, saying only “those are legitimate concerns that I think ought to be addressed.” “We may have to adjust things here and there to keep the deficit number down and keep the savings up,” he said. “It’s very, very possible there will have to be some readjustments” because “CBO tells you what you’re doing.” Yesterday Richard Foster , the chief actuary of the Medicare and Medicaid programs, said that under the Senate bill national health expenditures would grow about $234 billion from 2010-2019 under the bill, 0.7 percent more than if nothing were done. He attributed the increases to greater use of services by newly insured patients, the report said. The impact of several provisions aimed at curbing spending growth would be offset through 2019 by the higher costs of expanding coverage. Senator John Cornyn , a Texas Republican, released a statement saying the study proved Republican claims that the Democrats’ legislation would “drive up this country’s unsustainable level of health-care spending.” Democratic Senator Max Baucus of Montana, one of the bill’s chief architects, said the Medicare and Medicaid Services report shows the health-care overhaul would extend the life of Medicare and reduce premiums in the government health-insurance program for the elderly. To contact the reporters on this story: Nicole Gaouette in Washington at ngaouette@bloomberg.net ;

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Congressmen To Call For Break-Up Of Biggest Banks

December 7, 2009

Five House Democrats will call this week for a return to a Depression-era law that separated Wall Street investment banking from Main Street commercial banking. If adopted, the measure would give banks one year to choose between being commercial banks or investment banks. The nation’s biggest — those now commonly referred to as “too big to fail” — would be broken up. The Obama administration opposes the measure. The amendment’s five co-sponsors — Maurice Hinchey of New York, John Conyers of Michigan, Peter DeFazio of Oregon, Jay Inslee of Washington, and John Tierney of Massachusetts – want to restore the Glass-Steagall Act of 1933, which prohibited commercial banks from underwriting stocks and bonds. The act was repealed in 1999 at the urging of, among others, Larry Summers, now President Barack Obama’s chief economic adviser. The five congressman all voted against the repeal then — and now they want it back. Former Federal Reserve Chairman Paul Volcker is one of a number of financial luminaries calling for at least a partial return to Glass-Steagall. The Wall Street Journal’s editorial page also endorsed the concept in a recent editorial as a way to “reduce moral hazard” and “limit certain kinds of risk-taking by institutions that hold taxpayer-insured deposits.” The law’s repeal ushered in an era marked by big banks getting even bigger. The country’s four largest — Bank of America, JPMorgan Chase, Citigroup and Wells Fargo – now control more than half of the nation’s mortgages, two-thirds of credit cards and two-fifths of all bank deposits. And because their deposits are taxpayer-insured, there’s a growing concern that they will feel overly confident about making risky bets through their investment arms because they know that should they suffer huge losses, taxpayers will ultimately be there to bail them out. The five Democrats face big obstacles, including their own leadership and the Obama administration. Three weeks ago on Capitol Hill, Treasury Secretary Timothy Geithner said : “I would not support reinstating Glass-Steagall. And I don’t actually believe that the end of Glass-Steagall played a significant role in the cause of this crisis.” But in an interview Monday, Hinchey said that “some of the people around our president are not giving him the appropriate advice.” He added: “And contrary to that, the wrong advice is coming forward — and being implemented.” DeFazio has called for Geithner to resign. In a Nov. 17 opinion piece in the Detroit Free Press, Conyers wrote : Without Glass-Steagall serving as a critical check on the power of banks, the floodgates of speculation were opened. The banks leveraged personal savings accounts to trade in exotic securities and assets. Banks, insurance companies, and investment firms merged at an astounding pace. No longer content to simply finance home mortgages, these new hybrids began creating and selling securities based off of the speculative value of shaky mortgages. The banks took on more risk because risk was profitable. No one paid much attention to what would happen when the speculation bubble burst. Conyers also argues that the administration is taking the wrong approach. Currently, the Obama administration is working with both houses of Congress on legislation aimed at preventing a…major calamity in the banking industry. I am concerned, however, that their preferred method seems to focus on empowering our financial regulators to manage and mitigate some level of “acceptable risk” within the present system, instead of correcting the structural flaws that make a collapse likely to recur. Conyers and Hinchey point to Volcker, among others, as being on the right side of this debate. In response to reports that the administration is marginalizing Volcker and disregarding his recommendations, Hinchey lashed out: “He’s someone we should be listening to. It’s very discouraging and annoying and angering to me that someone like him is not being listened to.” But there’s a reason for that, of course. As Hinchey said Monday, “I think there is excessive influence of some banks on the legislative process in this Congress.” Get HuffPost Business On Facebook and Twitter !

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No Escape From TARP for U.S. Banks Choking on Commercial Real Estate Loans

December 7, 2009

By Elizabeth Hester and Linda Shen Dec. 7 (Bloomberg) — As the U.S. economy pulls out of a recession and the biggest banks return to profitability, mounting defaults on commercial property may keep regional lenders from repaying bailout funds until at least 2011. Unpaid loans on malls, hotels, apartments and home developments stood at a 16-year high of 3.4 percent in the third quarter and may reach 5.3 percent in two years, according to Real Estate Econometrics LLC, a property research firm in New York. That’s a bigger threat to regional banks, which are almost four times more concentrated in commercial property loans than the nation’s biggest lenders, according to data compiled by Bloomberg on bailout recipients. The concentration makes regulators less likely to let regional lenders like Synovus Financial Corp. and Zions Bancorporation leave the Troubled Asset Relief Program, analysts said. Smaller banks would remain stuck in TARP, while bigger lenders, including Bank of America Corp. , repay the government and free themselves to set their own policies on executive pay. “Community and regional banks basically became real estate banks in the past 25 years, and now real estate is on its back,” said Jeff Davis , an analyst at FTN Equity Capital Markets Corp. in Nashville, Tennessee. “The largest banks have other areas where they can make money, be it consumer lending, capital markets and asset management.” Bank Failures The stakes for taxpayers include whether they’ll get back $36.6 billion held by 35 of the largest regional lenders that received TARP money. Souring commercial real estate loans pose the biggest threat to the U.S. banking industry, according to October testimony to Congress by Sheila Bair , chairman of the Federal Deposit Insurance Corp., and Comptroller of the Currency John Dugan . Regulators have shut 130 banks this year, all regional or community lenders, costing the FDIC more than $33 billion. Non- performing commercial property loans caused a majority of the failures, said Chip MacDonald , a partner specializing in financial services at law firm Jones Day. “Somebody that has a lot of CRE exposure is going to be held to a higher standard” to redeem TARP preferred shares, said Paul Miller , a former bank examiner and now an analyst with FBR Capital Markets in Arlington, Virginia. “You’ve got to be careful they don’t allow these guys to pay back TARP, and then a year goes by and have to give it back to them.” Commercial real estate loans “absolutely could be a factor” in whether regional banks can repay TARP funds, Bair said in an interview on Dec. 4. Regional Lenders Among 35 of the biggest regional lenders that retain TARP funds, commercial real estate and construction loans average 37 percent of total loans, compared with 9.5 percent at Citigroup Inc. and Wells Fargo & Co. , the two biggest U.S. banks that haven’t announced plans to repay the government, according to data compiled by Bloomberg. The figures were derived from holdings at regional lenders that still have bailout money whose stocks are listed in either the 24-company KBW Bank Index or the 50-company KBW Regional Bank Index. Of the 35 firms, 25 hold commercial real estate and construction loans equal to 30 percent or more of their total loans, according to FDIC data ; seven have more than half of their loans in commercial property. Nine of the banks with more than 30 percent of their loans in commercial real estate won’t show a profit for 2010, including Birmingham, Alabama-based Regions Financial Corp. , Columbus, Georgia-based Synovus and Zions in Salt Lake City, according to Bloomberg’s survey of analysts. Paying Back TARP “To pay back TARP, they need to return to profitability, and for them to return to profitability, credit problems have to start to decline,” said Gerard Cassidy , a banking analyst at RBC Capital Markets in Portland, Maine. Losses may hamper efforts of regional lenders to compete with bigger banks, such as Bank of America, ranked first by assets and deposits. The Charlotte, North Carolina-based lender, aided by profits from brokerage services and underwriting securities at its Merrill Lynch unit, announced last week that it would pay back the $45 billion it took from the government. If Bank of America and Wells Fargo join JPMorgan Chase & Co. in redeeming TARP preferred shares, they’ll be free to press their advantage in markets they already dominate and to declare dividends and stock repurchases without seeking government approval. Bank of America and Wells Fargo finance about half of all U.S. home loans, and the four biggest banks — Bank of America, JPMorgan, Citigroup and Wells Fargo — account for more than a third of all U.S. deposits. Diversified banks are also better able to capitalize on close-to-zero borrowing costs to make money by trading currencies, commodities and other assets. Bank Stocks Stocks of regional banks have taken a bigger hit than their larger peers. The KBW Regional Bank Index is down 28 percent this year. Bank of America and JPMorgan have posted gains this year, while Wells Fargo has dropped 9 percent. There are more than 8,000 banks in the U.S., most of them community and regional lenders. Regional banks typically operate in several communities or states while lacking national or international operations. Property owners and their bankers are facing losses because the recession cut into employment and consumer spending, pushing up vacancies at office buildings, shopping centers and hotels and bringing down asset values. Commercial real estate prices may drop as much as 55 percent from their October 2007 peak, Moody’s Investors Service said last month. Office vacancy rates may approach 20 percent in 2010, according to brokers at Jones Lang LaSalle Inc. and Grubb & Ellis Co. ‘Out of Whack’ Synovus, with $968 million in TARP money and two-thirds of its loans in commercial property and construction loans — the highest of any TARP-holding bank in the KBW Bank Index — posted five straight quarterly losses and is projected to lose money for all of 2010. The bank’s failures include a $220 million loan to Sea Island Co., a Georgia real estate development firm, which it renegotiated and declared non-performing in April. Last month, co-lender Wells Fargo took over the deed to Sea Island’s 3,000- acre Frederica community on St. Simons Island that features a course favored by professional golfer Davis Love III . “We got out of whack in the last four, five years, where we were pushing for growth, trying to keep up with the herd,” said Kevin Howard , Synovus’s chief credit officer. “Real estate, in the Southeast, is where you can get the growth. We let our percentages get higher than we normally have. We are fine, really, with moving it back.” Zions Losses Zions, Utah’s biggest lender and recipient of $1.4 billion from TARP, has posted four straight quarterly losses, and analysts are predicting the bank won’t return to profitability next year, according to Bloomberg data. Commercial property loans make up 57 percent of Zions’ portfolio, second-highest among banks in the KBW Index that haven’t repaid the government. Collateral values are “stabilizing,” and while losses are expected to “increase somewhat,” they will be “extremely manageable” when compared with earnings, bank spokesman James Abbott said in an e-mail. Other regional banks have seen defaults on projects ranging from a condominium-conversion project in Racine, Wisconsin, that was foreclosed on by Milwaukee-based Marshall & Ilsley Corp. , the state’s biggest bank, to a subdivision in Oregon inspired by J.R.R. Tolkien’s “The Lord of the Rings.” The Shire Umpqua Holdings Corp. , the Portland, Oregon-based bank that has 66 percent of its loans tied up in commercial property, sank $3.4 million into the Shire, a development in Bend, Oregon, with homes that have artificial thatched roofs modeled on the hobbit community in Tolkien’s trilogy. The developer defaulted in July, according to Oregon’s Bend Bulletin newspaper. Umpqua CEO Raymond Davis said that while the bank did not experience a “significant loss” on the Shire, its real estate portfolio was “showing signs of weakness.” The bank has the highest commercial-property loan ratio of any lender in the regional bank index still holding TARP funds. Davis said that Umpqua has set aside cash to repay the $214 million in TARP funds that it took from the government last year and is waiting for the economy to show further signs of stabilization before returning the money. The worst may still be ahead for regional banks, according to Moody’s, which calculated that the non-performing loan ratio for commercial mortgages is higher than for residential ones. “The commercial real estate problem is looming, and a bit like the rat going through the snake,” said William Bartmann , CEO of Bartmann Enterprises in Tulsa, Oklahoma, and former chairman of Commercial Financial Services, which was among the first companies to purchase assets from regulators during the savings and loan crisis. “We can see that it’s coming, it just hasn’t shown up yet.” To contact the reporters on this story: Elizabeth Hester in New York at ehester@bloomberg.net ; Linda Shen in New York at lshen21@bloomberg.net .

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Geithner Dismisses Pelosi-Backed Financial Transactions Tax as Unworkable

December 5, 2009

By Robert Schmidt Dec. 5 (Bloomberg) — Treasury Secretary Timothy Geithner , throwing cold water on a plan by congressional Democrats to tax financial transactions, said banks and other market participants would find ways to circumvent the expense. “I have not seen the version of that that I think works,” Geithner said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” that airs throughout the weekend. Firms are “going to move in a heartbeat to get around any tax like that.” The Treasury chief also predicted a “quite high” chance that the U.S. unemployment rate will be lower than 10 percent in a year, and he called yesterday’s Labor Department report showing the smallest monthly job loss in two years “progress but not good enough.” Geithner also continued to push Congress to pass legislation that would rewrite financial rules and said that the Obama administration was close to announcing a new tack for the $700 billion bailout. Geithner said he expects the Troubled Asset Relief Program to get as much as $175 billion in repayments from banks by the end of next year. The prospect of a so-called Tobin tax, floated last month by U.K. Prime Minister Gordon Brown , is already provoking nervous U.S. financial companies to lobby for its defeat. Democrats, including Oregon Representative Pete DeFazio and Iowa Senator Tom Harkin , this week proposed taxing large transactions in stocks and derivatives. House Speaker Nancy Pelosi said the idea has a “great deal of merit.” Tobin Tax In yesterday’s interview, Geithner, echoing some of the banking industry’s reasons for opposing a Tobin tax, said he was concerned it wouldn’t be able to be adopted globally, making it harder to impose. He also noted that the tax may hit less sophisticated investors, instead of the big firms. “There’s a real risk that retail investors, who’ve got fewer choices, they end up bearing the cost of the tax,” he said. On another tax issue, Geithner questioned the effectiveness of providing businesses with a $5,000 credit for each new net job they create. Some have predicted the measure could help the economy add as many as 1.5 million new jobs. “Just to be frank about it, there’s a lot of people in the business community and the academic community who are not confident that that particular proposal would be that powerful,” Geithner said. “But we’re going to keep looking at it.” TARP Changes On the TARP, Geithner said the administration was in the process of putting the final touches on a major refinement of the effort. “We’re going to have very substantial resources we can make available to support not just the immediate priorities the country faces in spurring investment in job creation , but also to meet our long term fiscal challenges,” he said. He didn’t say whether he will seek to extend the program for another nine months, as the law allows, when it expires on Dec. 31. Geithner also said he was confident that loopholes concerning derivatives, inserted into legislation Congress is crafting to overhaul financial regulation, would be tightened before a law is passed. Airlines, energy companies and other firms that rely on derivatives to protect their businesses against swings in oil and commodities prices would be exempt from most new requirements in House of Representatives bills designed to rein in more speculative trading. The House legislation is slated for votes next week. A Senate version has fewer exceptions. ‘Evade’ Protections “There is support for trying to make sure that we tighten up those exceptions and, again, they don’t provide a way for firms to evade those basic protections,” Geithner said. “We have a very good chance of getting a very strong bill.” Overall on the economy, Geithner said a “key test” will be when companies begin to add to their payrolls. “The economy is now growing and growth seems to be gradually strengthening,” he said. “You see pockets of real strength now in technology and exports and I think they are hopeful signs of progress.” Geithner and other Obama administration officials this week held a forum at the White House to brainstorm about ways to bolster job creation in an economy that lost 7.2 million jobs since the recession began in December 2007. To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net .

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Wall Street Transaction Tax Proposed by U.S. Democrats to Fund Jobs Bill

December 3, 2009

By Ryan J. Donmoyer Dec. 3 (Bloomberg) — A group of congressional Democrats proposed taxing large transactions in stocks and derivatives, an idea that has received a cool reception from the Obama administration. Iowa Senator Tom Harkin , Oregon Representative Peter DeFazio and five other House Democrats proposed the measure, designed to raise $150 billion a year to fund a new jobs bill and help close the federal budget deficit . “Let me be blunt: We need new revenue,” Harkin said at a news conference today in Washington. He called a tax the “most painless way” to raise revenue and stop risky market speculation. “Ask not what America can do for Wall Street, but what Wall Street can do for America,” Harkin said. House Speaker Nancy Pelosi said there’s a “great deal of merit” in imposing a tax on large stock transactions as long as other major nations do it as well. Treasury Secretary Timothy Geithner said during a Nov. 7 meeting of Group of 20 finance ministers in St. Andrews, Scotland, that a “day-by-day” tax on speculation is “not something we’re prepared to support.” Harkin said he will introduce the bill in the Senate next week with Senator Bernard Sanders , a Vermont independent who caucuses with Democrats. 0.25 Percent for Stocks The measure would be based on legislation DeFazio proposed in the House that would apply a tax of 0.25 percent or 25 basis points to stock transactions in excess of $100,000, and a levy of 0.02 percent or 2 basis points on derivatives including futures, options, swaps and credit default swaps. Harkin and DeFazio said the proposed new levy is backed by more than 200 economists, the AFL-CIO labor union federation and business leaders including Warren Buffett and Vanguard Group Inc. founder John C. Bogle , now president of Bogle Financial Markets Research. “I endorse the Harkin-DeFazio bill in principle,” Bogle said in an e-mail released by the lawmakers. He urged “careful study” to find appropriate tax rates. His office confirmed the authenticity of the e-mail. Business groups including the Business Roundtable and the Securities Industry and Financial Markets Association oppose the bill. “Nearly every American would be impacted by a new transaction tax, no matter how small it is,” said Steve Bartlett , president and chief executive officer of the Business Roundtable. ‘Wrong Policy’ Kenneth Bentsen , executive vice president for the securities industry group, called the bill “the wrong policy at the wrong time.” He said it would make capital more expensive, hurt U.S. companies’ ability to compete globally and increase compliance burdens. Christopher Bergin , president and publisher of Tax Analysts, a Falls Church, Virginia publisher of tax information, predicted the lobby groups will successfully fend off the proposal. “Willie Sutton robbed banks because that’s were the money is,” Bergin said. “There’s certainly money” in taxing stock and derivative trades, “but this bank is just too well guarded” by lobbyists who oppose the idea, he said. Clint Stretch , a tax policy specialist at the Deloitte Tax LLC consulting firm, also said lawmakers will be reluctant to do anything that would be perceived as affecting liquidity. “The current state of the economy and market does not suggest that Congress will want to risk having an adverse impact on markets,” he said. Theodore Seto , a tax law professor at the Loyola Law School of Los Angeles, said supporters of the tax believe it will make markets more efficient by reducing risks created by the rise of computer-oriented trading. ‘More Information’ The tax “reduces the pressure to operate with less information,” Seto said. “Markets that operate on the basis of more information are much less likely to produce the kinds of self-reinforcing bubbles that led to this past crash.” The tax would be refunded for tax-favored retirement accounts, mutual funds, education savings accounts and health savings accounts. DeFazio told reporters he thinks the idea will gain traction even though the Obama administration is resisting it because it will appeal to ordinary Americans in an era of government bailouts of investment banks. “Mr. Geithner is just protecting the interest of Wall Street,” DeFazio said. He also said he thought the proposal would catch on around the globe. “There’s pretty much consensus around the world that derivatives are not a good thing” when used to speculate, he said. To contact the reporter on this story: Ryan Donmoyer at rdonmoyer@bloomberg.net

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Bob Maynard Joins OutBack Power System’s Board of Directors

December 3, 2009

ARLINGTON, WA–(Marketwire – December 3, 2009) – OutBack Power Systems, Inc., a manufacturer of reliable and durable power electronics products for renewable energy applications worldwide, today announced that Bob Maynard was appointed to OutBack Power System’s Board of Directors. Maynard has previously served as board member and President for the Oregon Solar Energy Industries Association and the Josephine County Renewable Energy Task Force. With over twenty years experience in the solar electric industry, Bob Maynard is recognized as a charismatic leader who continues to produce positive change and growth throughout the industry. As founder and President of Energy Outfitters, Maynard focused his efforts on building a profitable and sustainable organization, which quickly grew to become one of the top five national solar distribution companies by 2004. More recently, Maynard served as Vice President of Northwest Sales for groSolar providing top quality consulting and system de

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New Jobless Claims Fall For The Fifth Straight Week, Claims Hit 457K

December 3, 2009

WASHINGTON — The tally of newly laid-off workers seeking unemployment benefits fell unexpectedly for the fifth straight week, a hopeful sign that the job market is slowly improving. Still, claims remain above the levels that most analysts say would be consistent with an economy that is adding jobs. The unemployment rate is at 10.2 percent and expected to keep climbing into next year. First-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of Sept. 6, 2008, the Labor Department said Thursday. Wall Street economists expected an increase, according to a survey by Thomson Reuters. The ongoing decline in claims signals that employers could start adding jobs by as early as January or February, economists said. The nation’s economy has shed jobs for 22 straight months, the longest stretch since World War II. “The surprise further drop in jobless claims … is a very encouraging sign that the U.S. economy may be closer to the point of net job creation than we had thought,” John Ryding, an economist at RDQ Economics, wrote in a research note. Many economists say that claims need to fall to about 425,000 for at least a month to indicate that employers are hiring more people than they are firing. The department’s employment report for November, to be released Friday, is expected to show that employers shed another 130,000 jobs after cutting 190,000 in October. Economists forecast the unemployment rate will remain at 10.2 percent. A Labor Department analyst said the closing of state unemployment offices for last week’s Thanksgiving holiday was responsible for some of the decline. Economists closely watch initial claims, which are considered a gauge of layoffs and a sign of whether companies are willing to hire. The four-week average of claims, which smooths out fluctuations, dropped for the 13th straight week to 481,250, about 180,000 below the peak for this recession, reached this spring. But the Federal Reserve said in a report Wednesday that employers in most regions are reluctant to hire new workers, even as the economy stages a modest recovery. Meanwhile, the number of people claiming unemployment benefits for more than a week rose by 28,000 to 5.5 million, the department said. Analysts had expected a decline. That total doesn’t include millions of unemployed Americans that are receiving benefits under extended programs paid for by the federal government. About 4.5 million people were receiving extended benefits in the week ended Nov. 14, the latest data available. That’s an increase of about 300,000 from the previous week. The jump is a result of Congress adding another 14 to 20 weeks of extra benefits last month, the fourth extension since the recession began and the longest total extension on record. That boosted the total number of weeks a person could collect unemployment to as much as 99 in the hardest-hit states. Layoffs continued this week. Gannett Co. said it was cutting 26 newsroom jobs at its flagship USA Today newspaper and eliminating 11 positions at USA Weekend magazine. Another media company, the Greenspun Media Group, which publishes the Las Vegas Sun, announced it was reorganizing its operations in a cost-cutting move and would lay off an unspecified number of workers. Among the states, California had the largest increase in claims, with nearly 15,000, which it attributed to layoffs in the service industry. Illinois, North Carolina, Pennsylvania and Texas had the next largest increases. The state data lag initial claims by one week. The largest decrease in claims was in Michigan, with a drop of 1,242, which it attributed to fewer layoffs in the auto industry. Indiana, Hawaii, Oregon and the Virgin Islands also reported declines.

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New Jobless Claims Fall For The Fifth Straight Week, Claims Hit 457K

December 3, 2009

WASHINGTON — The tally of newly laid-off workers seeking unemployment benefits fell unexpectedly for the fifth straight week, a hopeful sign that the job market is slowly improving. Still, claims remain above the levels that most analysts say would be consistent with an economy that is adding jobs. The unemployment rate is at 10.2 percent and expected to keep climbing into next year. First-time claims for unemployment insurance dropped by 5,000 to a seasonally adjusted 457,000, the lowest total since the week of Sept. 6, 2008, the Labor Department said Thursday. Wall Street economists expected an increase, according to a survey by Thomson Reuters. The ongoing decline in claims signals that employers could start adding jobs by as early as January or February, economists said. The nation’s economy has shed jobs for 22 straight months, the longest stretch since World War II. “The surprise further drop in jobless claims … is a very encouraging sign that the U.S. economy may be closer to the point of net job creation than we had thought,” John Ryding, an economist at RDQ Economics, wrote in a research note. Many economists say that claims need to fall to about 425,000 for at least a month to indicate that employers are hiring more people than they are firing. The department’s employment report for November, to be released Friday, is expected to show that employers shed another 130,000 jobs after cutting 190,000 in October. Economists forecast the unemployment rate will remain at 10.2 percent. A Labor Department analyst said the closing of state unemployment offices for last week’s Thanksgiving holiday was responsible for some of the decline. Economists closely watch initial claims, which are considered a gauge of layoffs and a sign of whether companies are willing to hire. The four-week average of claims, which smooths out fluctuations, dropped for the 13th straight week to 481,250, about 180,000 below the peak for this recession, reached this spring. But the Federal Reserve said in a report Wednesday that employers in most regions are reluctant to hire new workers, even as the economy stages a modest recovery. Meanwhile, the number of people claiming unemployment benefits for more than a week rose by 28,000 to 5.5 million, the department said. Analysts had expected a decline. That total doesn’t include millions of unemployed Americans that are receiving benefits under extended programs paid for by the federal government. About 4.5 million people were receiving extended benefits in the week ended Nov. 14, the latest data available. That’s an increase of about 300,000 from the previous week. The jump is a result of Congress adding another 14 to 20 weeks of extra benefits last month, the fourth extension since the recession began and the longest total extension on record. That boosted the total number of weeks a person could collect unemployment to as much as 99 in the hardest-hit states. Layoffs continued this week. Gannett Co. said it was cutting 26 newsroom jobs at its flagship USA Today newspaper and eliminating 11 positions at USA Weekend magazine. Another media company, the Greenspun Media Group, which publishes the Las Vegas Sun, announced it was reorganizing its operations in a cost-cutting move and would lay off an unspecified number of workers. Among the states, California had the largest increase in claims, with nearly 15,000, which it attributed to layoffs in the service industry. Illinois, North Carolina, Pennsylvania and Texas had the next largest increases. The state data lag initial claims by one week. The largest decrease in claims was in Michigan, with a drop of 1,242, which it attributed to fewer layoffs in the auto industry. Indiana, Hawaii, Oregon and the Virgin Islands also reported declines.

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The Next Credit Crisis Will Involve Private Equity, Says Author Josh Kosman

November 30, 2009

As the nation struggles to endure the financial crisis — with rising foreclosures and increased unemployment threatening to prolong the devastation — another meltdown looms around the corner. The next credit crisis may be caused by private equity companies, which bought over 3,000 companies this decade by forcing them to take on enormous amounts of debt, argues financial reporter Josh Kosman, the author of ” The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis .” Almost one in 10 nongovernment employees works for a company owned by a private equity firm, and many of them could find their jobs in jeopardy if their employers can’t pay back the loans. “Private equity firms bought thousands of companies this decade using the same cheap credit that fueled the subprime mortgage crisis and that debt is coming due in the next few years,” Kosman tells HuffPost in an extended interview, citing Chrysler and Simmons Mattress as two recent examples. Though private equity leaders like Stephen Schwarzman of Blackstone insist that “the worst is behind the industry,” six of the ten companies acquired by PE firms in the biggest buyouts of the last decade are already considered distressed by Moody’s . Looking ahead, between 2011 and 2014, almost half a trillion dollars in leverage buyout debt will mature. Those numbers are fiercely disputed by the industry trade group, the Private Equity Council, which says that half of the defaults described by Moody’s are not traditional defaults, but rather opportunistic transactions to deleverage companies. The potential dangers of private equity acquisitions are due to the risky methods they use, says Kosman: “They’re playing with other people’s money — putting 20% down, and company they buy is borrowing 80% — in that sense, there’s already little risk [for the private equity firm]. Apollo doubled its money in two years while driving Linens N’ Things into bankruptcy. Most of the risk comes from other investors like state pension funds, some of which are really exposed to private equity investments – Oregon has 22% exposed, California is 14%.” The biggest leveraged buyout in history — when PE firms Kohlberg Kravis Roberts and TPG took control of power generator TXU (now called Energy Future Holdings Corp) in 2007 — is close to the brink due partly to a collapse in natural gas prices. “Their cash flow is negative, they owe $30+ billion,” says Kosman. “They won’t go bankrupt in next year or two but there is no prayer of that company being able to pay that debt.” Kosman explains that PE firm execs often do well when their companies collapse because most of them earn enough from management fees they charge their investors and the companies to more than cover their losses. Typically, private equity managers rake in ‘ two and twenty ‘ fees — two percent of the total amount assets under their management, regardless of performance, and twenty percent of any profits their fund earns. He also warns that PE firms are trying to profit from the current crisis by buying up distressed assets like banks, mortgage and corporate loans at deep discounts and the US government is seeking them out to help rescue failing banks. And Kosman takes a tough looks at Bain Capital, the PE firm owned for 11 years by potential 2012 presidential candidate Mitt Romney. He claims that three companies — Ampad, Dade Behring and GS Industries — failed after being bought by Bain Capital. In the case of Dade, a lab testing equipment maker, Romney pushed for big cutbacks in the employee pension plan, which saved the company $40 million. The next month, he used that as a basis to borrow $420 million. A company executive told Krosman that he confronted the CEO about the move, telling him “Well, that’d be like me going out and borrowing the amount of money I make in a year and then trying to pay it off and pay for my house and feed myself and everything else. That doesn’t make sense.” The CEO responded: “Companies do that all the time.” Within two years, the company collapsed. Kosman is skeptical about Romney’s claims that he wasn’t aware of some of these events: “That either indicates he doesn’t know what’s going on at a company which he [owned] 100% of, which is incompetent, or he’s lying, which is worse.” In a call to arms at the end of his introduction, Kosman urges lawmakers to close tax loopholes exploited by PE firms: “I believe the record shows that PE firms hurt their businesses competitively, limit their growth, cut jobs without reinvesting the savings, do not even generate good returns for their investors, and are about to case the Next Great Credit Crisis.” Get HuffPost Business On Facebook and Twitter !

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Cincinnati’s Kelly Is Favored to Replace Weis as Head Coach of Notre Dame

November 25, 2009

By Erik Matuszewski Nov. 25 (Bloomberg) — University of Cincinnati coach Brian Kelly is the favorite on online gambling sites to take over as football coach at the University of Notre Dame if Charlie Weis is fired. Weis, who has a 35-26 record at the South Bend, Indiana, school over five seasons, has guided the Fighting Irish to a 6-5 record this year heading into the final regular-season game against Stanford University this weekend. Weis said on Nov. 22 it would be hard to argue with a decision to fire him. In addition to Kelly, who is listed as an even-money favorite at Bodog.com , Florida’s Urban Meyer and Stanford’s Jim Harbaugh were asked by media whether they would be interested in following coaches such as Knute Rockne , Frank Leahy , Ara Parseghian and Lou Holtz . “This is the silly season, you know?” Kelly said. “The truth is, this happens every year.” Openings at a program such as Notre Dame’s don’t come along every year, though. The Irish rank third in college football history with 837 wins, have 11 consensus national championships and have produced seven Heisman Trophy winners. Kelly, who has led Cincinnati to a 10-0 record in his third season, is listed at BetUS.com, as the 5-6 favorite. Season Finale Harbaugh, whose Stanford team hosts Notre Dame in this week’s regular-season finale, is given 7-2 odds, according to Antigua-based Bodog . Meyer has 4-1 odds of replacing Weis even though he’s won two of the past three national titles at Florida and said earlier this week that he plans to remain with the Gators as long as they’ll have him. Other coaches listed by Bodog are the University of Oregon’s Chip Kelly at 9-2, Oklahoma’s Bob Stoops at 10-1 and Iowa’s Kirk Ferentz at 14-1. Cincinnati’s Kelly, 48, said he’s being mentioned as a possible candidate at Notre Dame because many people don’t think his current post is a “destination job.” While the Bearcats lead the Big East Conference, they’re fifth in the Bowl Championship Series rankings, the second-lowest among the six undefeated teams at college football’s top level. Harbaugh, 45, has led Stanford to a 7-4 record in his third season and plans to return to the Cardinal next year. I’m “only interested in the one I have,” Harbaugh said during a news conference. “And (I’m) not going to talk about any other job but my own.” Ex-NFL Coaches Costa Rica-based BetUS.com lists Meyer as the second choice at 3-1, followed by Harbaugh at 4-1, and Oregon’s Kelly and Boise State’s Chris Peterson at 5-1. Stoops has odds of 8-1, Ferentz is 12-1, and former NFL coach Mike Shanahan of the Denver Broncos is 20-1. Jon Gruden , the former coach of the NFL’s Tampa Bay Buccaneers and Oakland Raiders, has 30-1 odds at BetUS.com. Gruden attended high school in South Bend and his father was an assistant under former Notre Dame coach Dan Devine. Notre Dame last won a national championship in 1988. Since then, the program has been in a decline. The Irish have won only one of their past 10 bowl games and are 16-20 the past three seasons under Weis. “If they decide to make a change, I’d have a tough time arguing that,” Weis said after last week’s overtime loss to Connecticut that dropped Notre Dame to 6-5. Athletic Director Jack Swarbrick has said a decision on Weis’s job will come after the season. A loss to Stanford this week would give the Irish their third straight regular season without a winning record. To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Michelle Wie’s Win Comes at Key Time for LPGA Tour as Schedule Announced

November 18, 2009

By Michael Buteau Nov. 18 (Bloomberg) — As Michelle Wie hugged her first professional golf trophy, she was clad in red clothes adorned with Nike Inc. logos — just like a typical victory by Tiger Woods . For the LPGA Tour, Wie’s win at the Lorena Ochoa Invitational in Guadalajara, Mexico, last weekend might be that Tiger moment that the top circuit in women’s golf long has been waiting for. The tour lost six sponsors during the past year, recently replaced its commissioner and struggled with its marketability in the U.S. amid a rise of Asian-born champions. It announced its 2010 schedule today at the inaugural Tour Championship in Houston, with signs that turning things around will take more than one Wie win. “Michelle in and of herself is not enough to save women’s golf,” said Paul Swangard , managing director of the University of Oregon’s Sports Marketing Center. “But the LPGA needs Michelle to be successful probably more than men’s golf needs Tiger to be successful.” The LPGA’s list of sponsor-committed tournaments dwindled this year to 17 from 34 in 2008 as companies pulled out during the global recession. Even Wie’s home state of Hawaii is without an event for 2010 after hosting a record three tournaments in 2008. The new schedule features 24 tournaments in 10 countries. Wie, 20, birdied the last hole at the Guadalajara Country Club for a 13-under-par total, beating Paula Creamer by two shots. The win was Wie’s first since the 2003 U.S. Women’s Amateur Public Links championship. She had six runner-up and six third-place finishes since making her LPGA debut at the age of 12. Holds On It was the second time this year she held a share of the lead going into a tournament’s last day. In her 2009 debut, Wie was tied for the lead at the SBS Open in Hawaii before finishing three strokes behind winner Angela Stanford . After her victory on Nov. 15, Wie was doused with beer by Solheim Cup teammate Morgan Pressel and said she felt a weight had been lifted off her back. “It sounds cliché, but it feels awesome,” Wie said at a press conference. “Hopefully, life will be a lot better.” The LPGA shares the same thought. “We’ve been waiting all year,” tour spokesman David Higdon said. “She had a good season, and then in one fell swoop, at one event with an amazing leaderboard, she beat all the best. It will help us in a big way.” Interest in Wie’s victory brought plenty of attention. Page views for the tour’s Web site, LPGA.com, rose 84 percent to 3.9 million from 267,000 during the same tournament in 2008, Higdon said in an e-mail titled “Wie Love Michelle.” The final round produced 1.5 million page views, almost doubling traffic from each of the previous two rounds, he said. Big Hitter The 6-foot-tall Wie is one of golf’s longest hitters, averaging 281 yards on tee shots in Mexico, and has an impact that extends far beyond fairways and greens. She ranked fifth on Forbes magazine’s 2008 list of highest- paid female athletes with $12 million worth of agreements. While Sony Corp. ended a sponsorship with her this year, Wie remains attractive to endorsers. She also has a contract with Omega watches. “This validates what everybody expected Michelle to do,” Swangard said in a telephone interview from Eugene, Oregon. “It just took longer than everybody expected.” Tiger-Like Appeal Wie, like Woods, the world’s top-ranked men’s player, also has an appeal beyond golf fanatics. “She draws casual fans,” Swangard said. “The LPGA needs people to care more.” The LPGA needs caring more than ever before. This year’s Kapalua LPGA Classic was canceled in July after its sponsor, the Kapalua Land Co., ended an agreement with four years remaining on its contract. Florida’s Ginn Open folded and the Corning Classic in Corning, New York, lost its sponsor for 2010. Tournaments in New Jersey and Phoenix also lost backers. Sponsorships recently have begun to turn around. State Farm Insurance extended its agreement for a June tournament through 2011 and HSBC renewed its contract for an event in China through 2012. Wie’s victory also came a day before the LPGA announced that the ShopRite Classic was returning after a three-year absence. The tournament, first played in 1986, will be held at the Seaview Resort, just outside of Atlantic City, New Jersey. “Her winning is not a single event that will resurrect the LPGA but it’s a piece of the puzzle that they’re trying to put back together,” Swangard said. In past years, the LPGA schedule didn’t seem to matter to Wie, who mostly tried to compete against men. She missed the 36- hole cut in eight U.S. PGA Tour events before joining the LPGA as a full-time member this year. Soon after her victory in Mexico, Wie told ESPN.com that she was now motivated to practice harder, play better and win more. While that might be bad news for her competitors, it’s welcome news for the LPGA. To contact the reporter on this story: Michael Buteau in Atlanta at at mbuteau@bloomberg.net

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Reid Pushes Democratic Senate Holdouts to Vote for Health-Care Bill Debate

November 18, 2009

By Laura Litvan and Kristin Jensen Nov. 18 (Bloomberg) — Senate Majority Leader Harry Reid said he’s close to unveiling legislation to overhaul the U.S. health-care system even as fellow Democrats raise concerns over issues from abortion to a government-run insurance plan. Reid, who is scheduled to meet with the Senate Democratic caucus at 5 p.m. today, said he expects cost estimates from the Congressional Budget Office “very soon” and is hopeful he can get enough votes to start debate on the bill. “I feel cautiously optimistic that we can do that,” Reid said in Washington yesterday, referring to opening floor discussion on the health-care measure. Sixty votes are needed in the Senate to overcome efforts to block debate. The legislation, President Barack Obama’s top domestic priority, is intended to cover millions of uninsured Americans while curbing medical costs. The proposals for purchasing exchanges, subsidies and a requirement that all Americans have coverage would cost more than $800 billion over 10 years and mark the biggest changes to U.S. health care in four decades. The House passed its version on a 220-215 vote on Nov. 7. Reid, a Nevada Democrat, has been waiting for the CBO analyses on various proposals drawn up by the Senate health and finance committees before unveiling his plan. Getting to 60 A Senate aide familiar with Reid’s final bill said one proposal the legislation is likely to include would be the creation of a federally run long-term care insurance plan dubbed the “Class Act” by its original sponsors, the late Senator Edward Kennedy , a Massachusetts Democrat, and former Senator Michael DeWine , an Ohio Republican. Under the plan, participating employers would let workers pay premiums into the program, which would offer a cash benefit of between $50 and $75 per day that could be used to pay for adult day care or assisted living expenses. Workers would pay into the plan for five years before receiving benefits. The idea has drawn critics, who say its success would depend on a growing roster of new premium contributors. Budget Committee Chairman Kent Conrad , a North Dakota Democrat, called the Class Act “a Ponzi scheme of the first order,” in an Oct. 27 Washington Post article . The White House weighed in on the legislation last night, releasing a letter sent by 23 economists that outlined four priorities the Senate bill should include. Letter From Economists The economists said the bill should impose an excise tax on high-cost insurance plans; not increase the deficit; set up an independent commission to make binding recommendations on Medicare cuts, and carry out “delivery-system reforms,” which would reward health-care providers for “providing better care, not just more care.” Including those elements “will reduce long-term deficits, improve the quality of care, and put the nation on a firm fiscal footing,” wrote the economists, who included Princeton University Professors Alan Blinder and Uwe Reinhardt and former Federal Reserve Vice Chairman Alice Rivlin. While Democrats control 60 Senate votes, Reid can’t yet count on them to clear the way for debate. At least three Democrats — Senators Ben Nelson of Nebraska, Mary Landrieu of Louisiana and Blanche Lincoln of Arkansas — have refused to pledge their votes until they have seen the bill’s text. Another Democrat, Oregon Senator Ron Wyden , said his support for proceeding is in doubt unless the government-run insurance program, or public option, is included in the plan. “I’m not going to support a bill that’s a competition-free zone,” Wyden told reporters yesterday. Splitting Democrats The public option has split Senate Democrats. Wyden and Senator Jay Rockefeller of West Virginia insist the best way to reduce health costs is to set up the government program to compete with insurers like Hartford, Connecticut-based Aetna Inc. Other Democrats are critical of the undertaking. Connecticut Senator Joe Lieberman , an independent who caucuses with the Democrats, said he won’t vote for a bill that includes the program, though he has said he will support a motion to start debate. Delaware Senator Tom Carper is crafting a compromise for fellow Democrats that might be offered as a replacement for the public option during floor debate. The “hammer approach” would require states where insurance plans don’t meet affordability standards to offer an alternative, national plan run by a nonprofit, Carper told reporters yesterday. Reid is also grappling with the issue of abortion, which threatened to derail the House bill before lawmakers included language aimed at preventing the use of federal funds for the procedure. Abortion rights supporters have protested that provision. Nelson, an abortion opponent who had said he wanted to see a similar provision in the Senate bill, on Nov. 16 said he’s willing to support legislation with less restrictive language. That issue may still pose an obstacle when the House and Senate eventually get around to crafting a compromise. To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net ; Laura Litvan in Washington at llitvan@bloomberg.net

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Steve Parker: Nissan Leaf EV – Be first to see it in person!

October 29, 2009

Nissan has announced a US national tour of their new pure EV, Leaf, beginning with a first American public showing on November 13th in Los Angeles. Though not yet officially announced, the first public sighting of Leaf at a major auto show will be at the 2010 Los Angeles Auto Show which runs from December 4th through 13th. Leaf is ready for its close-up at the Tokyo Motor Show Much of the talk at this week’s Tokyo Motor Show, the 41st iteration of that extravaganza, held in Makuhari, about ½-hour north of Tokyo, was understandably about EVs, hybrids and various other green technologies. Nissan, however, topped the competition by displaying a production version of Leaf, the only Japanese car maker at the show claiming they’re not just working on a real-world, production EV, but showing one they’ll be making and selling worldwide beginning in 2011. There’s still room for overwrought fun, though. Toyota introduced a production version of their Lexus LF-A supercar, a $375,000, 552-horsepower monster with a 4.8 liter V10 engine. Only 500 will be built in total for the world and production commences in December, 2010. Much more at: www.Lexus-LFA.com. On the other hand, at Tokyo, Lexus displayed a production verison of their new LF-A supercar … not very green, but a helluva lotta fun … what do you think of the car’s looks? Me? I’m not so sure … Here’s the Leaf tour information from a Nissan press release: Nissan North America announced that the Nissan LEAF zero-emission, all-electric car will make its North American debut in Los Angeles on Nov. 13. The Los Angeles showing will be the first time people in the United States will be able to see the five-passenger, five-door, gasoline-free car, which is embarking on a nationwide tour. The Nissan LEAF Zero Emission Tour will make stops in 22 cities, in 11 states, the District of Columbia, and Vancouver, Canada, offering the opportunity for interested drivers, media, civic partners, businesses and university students to learn more about the Nissan LEAF and the benefits of zero-emission driving. Interior of production Leaf Follow the tour, get updates on the final schedule and specific showings, and sign up for more information, at www.nissanusa.com/Leaf-electric-car. Look for the Nissan LEAF to make public appearances in the following areas during these times: Southern California Los Angeles: Nov. 13-17 Orange County: Nov. 18 San Diego: Nov. 19-21 Northern California Berkeley/Walnut Creek: Nov. 23-24 San Francisco: Nov. 25-29 Santa Rosa: Dec. 1 Sacramento: Dec. 1 San Jose: Dec. 3-6 Pacific Northwest Seattle: Dec. 8-12 Vancouver, Canada: Dec. 14-15 Portland, Ore.: Dec. 17-23 Rear 3/4 view of Leaf Southwest Phoenix/Tucson: Dec. 30-Jan. 5 Las Vegas: Jan. 6 Midwest/East Coast Detroit: Jan. 11-13 Knoxville/Chattanooga, Tenn.: Jan. 16 Middle Tennessee: Jan. 19-21 Washington, D.C.: Jan. 26-28 Raleigh, N.C.: Jan. 29 Orlando: Feb. 1-2 Texas Houston: Feb. 5-6 New York New York City: Feb. 9-14 Leaf’s drivetrain Nissan is the only automaker committed to making all-electric vehicles available to the mass market on a global scale. Through the Nissan LEAF Zero Emission Tour, Nissan will be showcasing the electric vehicle and battery technology as well as the company’s zero-emission mobility objectives. Nissan already has partnered on the development of an electric-vehicle infrastructure through partnerships in the State of Tennessee, the State of Oregon, Sonoma County, San Diego, Phoenix, Tucson, Washington D.C., Seattle, Raleigh, and Vancouver. Additional partnerships will be announced in the near future. In North America, Nissan’s operations include automotive design, engineering, consumer and corporate financing, sales and marketing, distribution and manufacturing. Nissan is dedicated to improving the environment under the Nissan Green Program 2010, whose key priorities are reducing CO2 emissions, cutting other emissions and increasing recycling. Prototype Leaf instrument panel from an earlier version of the car More information on the Nissan LEAF and zero emissions can be found at www.nissan-usa.com/Leaf-electric-car and www.nissan-zeroemission.com (end Nissan release) By the way, those two websites are really fun. Also, while we’re talking about the LA Auto Show and green technology, Green Car Journal (www.GreenCar.com) has announced its five finalists for their 2010 Green Car of the Year award. For the fifth consecutive year, the award will be announced during a press conference at the Los Angeles Auto Show on Dec. 3. The finalists are the Audi A3 TDI, Honda Insight, Mercury Milan Hybrid, Toyota Prius and Volkswagen Golf TDI (Prius was named Japan Car of the Year at the Tokyo Motor Show this past weekend). Will you be lining up to see Leaf in your area? And what do you think of the Green Car of the Year nominees?

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Reid’s Democrats Fill Health Bill With Favors for Nevada, Florida, Miners

October 20, 2009

By Brian Faler Oct. 20 (Bloomberg) — Nevada would get help with its Medicaid bills. The elderly in Florida and New York would receive additional Medicare benefits. And workers in so-called high-risk professions such as firefighting and construction would get a break on a new insurance tax. Those are provisions that Senate Democrats, including Majority Leader Harry Reid , put in an $829 billion health-care bill to shield constituents from measures intended to pay for the biggest overhaul of the medical system in four decades. The result is the new policies may be unevenly administered, with some U.S. states getting preferential treatment, a possibility that has given Republican lawmakers ammunition to attack the legislation. “It’s going to hurt the bill and raise the level of cynicism about Washington politics,” said Senator Lamar Alexander , a Tennessee Republican. “The provisions ought to be applied to all of the states.” The number of special provisions is likely to grow as the full Senate begins debating the measure in coming weeks. Because Democrats are unlikely to win many Republican votes, individual lawmakers will have leverage to demand changes to satisfy parochial interests. At the same time, those provisions may make it easier for Congress to approve a sweeping bill by giving lawmakers more of a stake in legislation they may not otherwise fully support. Doing Their Jobs “Members being able to convince colleagues of the special circumstances in their states?” said Senator Kent Conrad , a North Dakota Democrat. “That’s what members are here to do — represent their state.” Senate Democratic leaders are meeting behind closed doors with Obama administration officials to combine measures approved by the finance and health committees. Debate may begin next week on the legislation, which would expand health coverage to millions of uninsured Americans and place new restrictions on insurance companies. Health-insurer stocks have lost ground in the last month on concern the overhaul will hurt profits. The Standard & Poor’s index of 13 managed-care companies dropped 13 percent, led by Hartford, Connecticut-based Aetna Inc. Lawmakers have already made exceptions to some of the biggest policy changes under consideration. $100 Billion Cut Democrats such as Senators Bill Nelson of Florida and Ron Wyden of Oregon secured provisions setting aside $5 billion to shore up benefits for constituents who participate in Medicare Advantage. That program allows private insurers to contract with the government to provide Medicare benefits. The bill that came out of Senator Max Baucus’s finance committee cuts more than $100 billion from Medicare Advantage to help fund the overhaul. Some lawmakers say they are concerned the elderly will see a reduction in benefits. The measure doesn’t identify which states could get the $5 billion. The language is so confusing — those eligible include retirees in “counties where the MA benchmark amount in 2011 is equal to the legacy urban floor amount” — that even congressional aides said they aren’t sure. Nelson said the aid isn’t directed solely at Florida. “It affects several states, including New York,” he said. “We’re trying to grandfather in seniors so that they don’t lose the benefits they have.” Wyden said it would go to states like Oregon that “would face hardships” under Medicare Advantage cuts. Help for Unions Lawmakers such as Senator Robert Menendez of New Jersey pushed for exceptions to a tax on expensive insurance plans. The tax would be phased in more slowly in states the government determines have the highest costs. Democrat John Kerry , whose state of Massachusetts is likely to end up on the list, said the tax may disrupt his state’s own efforts to expand health coverage. “If you change the way it’s working, you automatically upset people’s expectations,” Kerry said. Those in professions deemed high risk like mining would also get a break. For them, the tax would kick in for family insurance plans worth $26,000 not $21,000. Menendez said that was designed to protect those “who gave up money at the table in order to get better health-care packages,” referring to Democratic-supporting unions. Senator Dick Durbin of Illinois last week said lawmakers are considering additional changes to reduce the tax hit on union members. Full Funding Reid secured provisions to ensure his state of Nevada won’t face higher Medicaid costs. Democrats want to expand coverage by loosening eligibility rules for the joint federal-state health-care program for the poor. Some governors say that could saddle them with higher bills. State spending would increase by $33 billon under Baucus’s plan, the Congressional Budget Office says. The plan calls for “full federal funding” of Medicaid for new beneficiaries in only those states that had unemployment rates of at least 12 percent in August and whose Medicaid enrollment is below the national average. Only Nevada, Rhode Island, Michigan and Oregon meet that criteria. That prompted complaints from other lawmakers that their states would have to pay more. “We cut special favors for special states, not based on need or requirements but on the influence of the individual senator,” said Arizona Republican John McCain . Reid responded: “I make absolutely no apologies — none – - for helping people in my state.” To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net .

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Columbia Sportswear Company Names Adrienne Lefebre Moser General Manager, Apparel Merchandising

October 12, 2009

PORTLAND, OR–(Marketwire – October 12, 2009) – Columbia Sportswear Company ( NASDAQ : COLM ), a global leader in active outdoor apparel, footwear and accessories, today announced the appointment of Adrienne Lefebre Moser to the newly created position of general manager, apparel merchandising for the Columbia brand. Moser brings over 20 years of senior experience in apparel merchandising with several global brands. Most recently, she served as senior vice president of product, sales, and marketing at LaCrosse, Inc., in Portland, Oregon, where she led successful efforts to integrate sales, marketing, design, development, forecasting and customer service operations in support of the company’s brand portfolio.

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Sexual Desire May Be Revealed as Emory Investigates Prairie Vole Genetics

October 12, 2009

By Mary Jane Credeur Oct. 12 (Bloomberg) — Prairie voles , the furry rodents found in tall-grass fields in the U.S. Midwest, may help scientists unlock age-old mysteries underlying human desire for companionship, sex and even the accumulation of wealth. Research on the animal’s genetic makeup is uncovering more about human behavior than does the study of “just about any other species,” said Larry J. Young , a social-neurobiology researcher at Emory University in Atlanta. Voles have become the focus of scientists because they mate monogamously, unlike rats and monkeys. Voles also produce oxytocin , a hormone that spurs mothers to bond with babies, and dopamine , which fuels human cravings and euphoria. Within months, Young and his colleagues will begin mapping the prairie vole’s genome after getting the animal approved for sequencing by the National Human Genome Research Institute in Bethesda, Maryland. The findings will advance understanding of the relationships between genes, the brain and behavior, and may lead to new therapies for autism and other social disorders, said Young, who has studied voles for 15 years. “Dopamine is involved in all kinds of rewards, things that make us feel good: eating, drinking, winning a football game, making money, buying a new car,” Young said. “Oxytocin is that reward of being around friends, a mate. There are times when you have the combination of the two — like when you are making love.” Oxytocin in the form of pitocin is frequently given to mothers during or after childbirth to speed delivery and reduce hemorrhaging, and is being used experimentally to treat autism, said Sue Carter , a biologist and co-director of the Brain Body Center at the University of Illinois at Chicago, who has studied voles for three decades. Vero Labs, Genesis Companies are trying to capitalize on oxytocin’s role in bonding and trust. Vero Labs LLC in Boca Raton, Florida, sells an oxytocin spray it calls Liquid Trust, and Genesis Biolabs Inc. in Tucson, Arizona, markets a “ruthlessness/bonding” test kit for humans that looks for the AVPR1a receptor gene that is also involved in prairie vole social behavior. Like voles, some people have a genetic tendency to be more social and introduce their friends to each other, while others tend to keep to themselves, said Nicholas Christakis , co-author of “ Connected ” (Little Brown, 2009), which explains why behaviors are contagious and why the rich keep getting richer. “It’s a similar group of genes that influence pro-social behavior in prairie voles and us,” said Christakis, who also teaches health-care policy, sociology and medicine at Harvard Medical School in Boston. “There are advantages to these social networks. If you want to hunt a mastodon, it’s better to have your friends along.” Sex Chemistry The first time prairie voles mate, the chemistry of their brains is altered and they form a lasting bond with each other, even after they stop producing offspring, Young said. Some related species, such as meadow voles, aren’t monogamous, he said. “There’s this flip-flopping of the neurochemistry in the brain that prevents them from forming that kind of bond again,” said Young, who organized a gathering of vole researchers in February that drew 90 attendees to Emory. Although some prairie voles may later have sex with another partner to reproduce, the oxytocin-driven social bond won’t form again, said Young, who earned his Ph.D. in neuroendocrinology from the University of Texas at Austin. Intimate Contact “If someone wants to know the best way to keep a relationship going, it’s to engage in activities that stimulate oxytocin, that is, intimate contact,” Young said. “Your body is wired to be sensitive to the kind of intimate contact when you’re making love to release both oxytocin and dopamine to active those systems.” There are now 25 labs in the U.S. that are doing vole research, and two in Japan, Young said. Prairie voles have been a “particularly thrilling” research subject because their monogamy and bonding behavior is both uncommon among mammals and strikingly similar to that of humans, said Joseph Lonstein , a neuroscientist who helps run a lab with about 100 voles at Michigan State University in East Lansing. “The same mechanism that causes us to desire sex or to gamble or to parent, those are the same structures involved in social bonding,” Lonstein said. Alcohol-Drinking Voles A 2007 study at the University of Illinois at Chicago found that social isolation leads to depression in prairie voles. In an ongoing study at the Oregon Health and Science University, in Portland, voles consumed more alcohol when housed together than when isolated from their mates or relatives — which researchers said may be a useful model for studying drinking behavior of humans. Gene mapping will most likely lead to research on voles that may help scientists learn why the initial carnal attraction between humans evolves to a lasting social bond and how to improve social behavior, said Young, 42, who has five children and lives in Atlanta with his wife, Anne. It may also yield clues on what drives our desires to make money. “Dopamine and oxytocin, these are the ones we know of,” Young said. “In mapping the whole genome, we can see what these other things are” that also influence behavior. To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net .

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Health-Care Plan Future Rests on Snowe, Battling Democrats, Budget Office

October 12, 2009

By Kristin Jensen and Laura Litvan Oct. 12 (Bloomberg) — The future of U.S. health-care legislation now depends on warring Democrats, number-crunching analysts and, possibly, one senator from Maine. The Senate Finance Committee tomorrow is scheduled to vote on a plan to curb rising medical costs and cover tens of millions of uninsured Americans at a cost of $829 billion over 10 years. The next step for Senate leaders is to try to bring together divided Democrats to craft a compromise for the full chamber, a process also taking place in the House. Senate leaders are also wooing Republican Olympia Snowe of Maine, whose support may help shore up backing from Democrats in Republican-leaning states. In the House, lawmakers are waiting for the Congressional Budget Office to analyze the costs of various proposals to make sure they don’t add to the deficit, meeting a requirement of President Barack Obama . “Snowe’s a pivotal vote, and the CBO’s the pivotal actor,” said Rogan Kersh , a public policy professor and associate dean at New York University. “Everybody’s held hostage to what figure they come up with.” The nonpartisan agency last week blessed the Senate finance panel’s plan, which requires that all individuals obtain insurance, imposes restrictions on insurers’ ability to deny people coverage, and establishes nonprofit cooperatives to compete with private insurers. The plan, built on a framework by Senator Max Baucus , a Montana Democrat who runs the committee, contains enough new taxes and savings that it would cut the budget deficit by $81 billion over 10 years, the CBO estimated. Last to Act The finance committee will be the last of five congressional panels to act on Obama’s top domestic priority. Baucus delayed a vote for months while trying to win Republican support, an effort he continues with Snowe and others. None of the other four measures has won any Republican backing. Snowe has been noncommittal. While saying the CBO analysis of her committee’s bill was “important,” she told reporters on Oct. 7 she still has “a lot to review.” She is one of 10 Republicans on the panel, which has 13 Democrats. Michigan Senator Debbie Stabenow , a Democrat on the committee, said she spoke with Snowe last week and is eager to see what she decides about the vote. “The big question is whether it will be bipartisan,” Stabenow told reporters on Oct. 9. While Democrats say they are unified in their desire to get legislation passed, they are split on the specifics. Among other issues, the party is grappling with whether to create a government-run insurance option, whether to require that employers cover workers and how to pay for the legislation. Democratic Questions Two of the Democrats on the finance panel, Senators Ron Wyden of Oregon and Jay Rockefeller of West Virginia, won’t yet say how they will vote. Both are proponents of the government- run program, or public option, and said they are focused on making health care more affordable. “The primary focus should be on bringing premiums down,” Wyden said. “You don’t have, when you go home, people saying, what I really want is an exemption or a hardship waiver.” Baucus opted against an employer mandate and the public option. He also included $6 billion in federal seed money for the cooperatives to offer an alternative to insurers such as Hartford, Connecticut-based Aetna Inc. The Senate finance panel plan calls for new taxes on high- end insurance plans and fees on industries such as drugmakers and medical device manufacturers. The House versions would institute surtaxes on the wealthiest Americans, and leaders are now considering new ideas such as a tax on insurer profits. Common Ground There is common ground in all the measures. They require that Americans get insurance, with varying penalties for failing to do so. They also encourage greater use of preventive care, electronic records and research on the effectiveness of treatments. Under all the plans, insurers would have to accept new clients, regardless of preexisting conditions. Lawmakers will face some pushback from health-care industries in the weeks ahead. Insurers are upset that the finance panel scaled back penalties for not buying insurance. The hospitals, which agreed to contribute $155 billion in savings toward the effort, said not enough new people will be covered by the finance committee’s version. The measure “does not meet the standard of coverage that our agreement is based on,” said Chip Kahn , president of the Federation of American Hospitals. End of October House Speaker Nancy Pelosi said last week she would decide on the final legislation she’ll bring to the floor after hearing from the CBO. The No. 2 House Democrat, Maryland Representative Steny Hoyer , said the last week in October would be the earliest timeframe for a vote. Senate Majority Leader Harry Reid hasn’t given a timetable for floor action, though he’s said he wants to get legislation to Obama by the Nov. 26 Thanksgiving holiday. Both the House and Senate have to vote on their versions, agree on a compromise and then approve final legislation before that happens. “We are much closer than we’ve ever been to accomplishing the elusive goal of reforming health care,” Representative Henry Waxman , a California Democrat who runs the House Energy and Commerce Committee, told reporters last week. “I think we are going to make it.” To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net Kristin Jensen in Washington at kjensen@bloomberg.net

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Mortgage Delinquencies: SEE Which Counties Have Been Hit the Hardest (MAP)

October 9, 2009

Where is the mortgage crisis wracking the most damage? These handy maps, courtesy of the New York Fed , track changes in mortgage delinquency rates by county. You may not be surprised to see that mortgage delinquencies are getting worse over vast swaths of the country. But the year-over-year delinquency numbers — the first chart below — point to heavy concentration of late in the West, followed by a streak of improvements in the Midwest that trickle away as you head East. In almost all parts of California, Washington and Oregon, delinquencies are far worse than they were a year ago. Disturbingly, there are only a handful of counties across the nation where mortgage delinquencies are actually improving over last year. (Kudos to Beaverhead, Montana and Red River, Texas!) The New York Fed’s website, which also tracks other measures of consumer credit, including auto loans, student loans, and bank loans, is intended to help “government agencies, community groups, commercial institutions and other practitioners better understand, monitor and respond to local conditions associated with foreclosures and credit and mortgage delinquencies.” To see how your area is faring, check out the map below. (NOTE: The New York Fed’s map has full data on each county. Check it out here .) In the below map, red indicates counties where delinquencies have worsened, green indicates areas where conditions have improved, and the gray shading indicates areas where there has been no change. The second-quarter numbers in the chart below are even more devastating news for California. In fact, the map shows that almost all of the most severe delinquency rates are concentrated in California and Florida. (Check out the more detailed version of this map here ) Get HuffPost Business On Facebook and Twitter !

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Home Sellers in U.S. Cut Asking Prices by $28 Billion as Recovery Stalled

October 8, 2009

By Daniel Taub Oct. 8 (Bloomberg) — U.S. home sellers cut their asking prices by a total of $28.4 billion to attract buyers as the real estate recovery stalled, Trulia Inc. said. The average discount was 10 percent as of Oct. 1, the San Francisco-based real estate data provider said today. Homes listed for more than $2 million were cut the most, with owners taking an average of 14 percent off the original price. Luxury homes accounted for 25 percent of all of the reductions. Sales of existing U.S. homes unexpectedly fell in August for the first time since March, according to the National Association of Realtors, signaling the recovery will be slow to gain speed. The median price dropped 12.5 percent from August 2008. “Consumers have to be slashing the prices of the homes they list,” Pete Flint , chief executive officer of Trulia, said in an interview. There’s a “significant inventory” of homes for sale. “You’re still going to see further price declines before the market stabilizes in 2010.” Half of the 10 states with the highest percentage of discounted homes are in the Northeast: Massachusetts, Rhode Island, Connecticut, New Hampshire and New Jersey. A third of residences for sale in those states were reduced at least once, Trulia said. New York, California and Florida accounted for 35 percent of the total value of price cuts nationally. In Nevada, Idaho, Arizona, Wyoming, Hawaii, Utah and California, sellers have dropped an average of 13 percent off the original price, according to Trulia. Three Million Homes Closely held Trulia collects data from brokers and agents, third-party providers and multiple-listing services . For the survey, it looked at homes for sale as of Oct. 1 — about 3 million properties, excluding foreclosed homes and undeveloped land — and calculated how many had previously been listed for a higher price. Some were lowered more than once. Among the 50 largest U.S. cities, those with the biggest percentage of discounts were Memphis, Tennessee; Minneapolis; Portland, Oregon; Indianapolis; and Baltimore, according to Trulia . Prices were cut on 36 percent of homes for sale in those cities. Baltimore had the biggest discounts of that group — an average of 11 percent. According to a separate survey released today by real estate data service Zillow.com , U.S. buyers paid a median $6,525, or 3 percent, less than the final listing amounts on properties bought in August. Buyers in the Vero Beach, Florida, area had the most negotiating power, paying a median $20,974, or 8.9 percent, less than the last asking price, Seattle-based Zillow.com said. To contact the reporter on this story: Daniel Taub in Los Angeles at dtaub@bloomberg.net .

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Oregon tops up distressed debt real estate holdings

October 5, 2009

From IPE: Oregon Public Employees Retirement Fund has demonstrated its ongoing commitment to Lone Star Funds by committing a further $400m (€273.6m) of capital to the distressed real estate debt specialist. (more…)

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Oregon invests heavily in Grayken's 'distressed debt' fund

October 2, 2009

The Oregon Investment Council doubled its bet Wednesday on the profit potential of John Grayken, king of the bare-knuckled corner of the investment industry referred to as ” distressed debt .” Lacking many of its conventional investment …

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Favre Profit Center Lifts NFL’s Vikings Fans Wearing His Jersey, Earrings

October 2, 2009

By Erik Matuszewski Oct. 2 (Bloomberg) — Brett Favre’s arrival in Minnesota has yielded wins for the Vikings while spurring ticket sales and increasing revenue off the field. His most significant impact on the team may be yet to come. The 39-year-old quarterback, a three-time winner of the National Football League’s Most Valuable Player award, is helping to redefine the culture of the organization even though he’s been with the Vikings for just six weeks, said Paul Swangard , managing director of the University of Oregon’s Sports Marketing Center in Eugene, Oregon. The signing of Favre to a two-year, $25 million contract has changed how some Vikings’ fans perceive ownership’s commitment to winning, Swangard said. It may also ultimately help the team get the $700 million retractable-roof stadium it’s seeking in Minneapolis and raise the value of a franchise that’s next-to-last in Forbes magazine’s NFL ranking at $835 million. “We already knew this team was going to be good, but his arrival has raised attention,” Swangard said in a telephone interview. “He’s been a catalyst for some very positive momentum in the market that the franchise desperately needed.” The Dallas Cowboys, whose value rose 2 percent from a year ago to $1.7 billion after building a new $1.2 billion stadium, top the Forbes list. Annual revenue for owner Jerry Jones will be about $350 million, before debt payments, Forbes said. Favre’s on-field contributions are easy to gauge. He’s helped lead the Vikings to a 3-0 start heading into their Oct. 5 showdown with the Green Bay Packers, the team Favre played with for 16 seasons. With a victory, the Vikings would be 4-0 for the first time since 2003 and Favre would become the first NFL player to beat all 32 of the league’s current teams. Adding Experience Favre has added experience and stability for the Vikings, who had a different quarterback lead the team in passing yardage each of the past three seasons. The Vikings made the playoffs with a 10-6 record last year behind running back Adrian Peterson , who led the NFL in rushing yards, and a defense that allowed the fewest rushing yards in the league. The 24-year-old Peterson tops the NFL in rushing again this season and Favre, who’s started a league-record 272 straight games, has passed for 566 yards, with five touchdowns and one interception. Favre last week threw a 32-yard touchdown pass with two seconds remaining to help Minnesota beat San Francisco 27-24. It was the 40th time in his career that Favre has led a comeback win in the fourth quarter or overtime. His 172 victories are the most by an NFL quarterback. “This guy is a special football player and he’s going to bring attention,” said former NFL quarterback Ron Jaworski , 58, who’s now a television analyst for ESPN. “The expectations are high, the bar is raised.” Vikings-Packers The Vikings are 3 1/2-point favorites in the nationally televised Monday night game against the Packers, who lead the series 49-46-1. It’s Favre’s first game against Green Bay, where he played from 1992-2007, making 11 playoff appearances while winning a Super Bowl title. The one-time rival has been warmly received in Minnesota. In the three days after Favre’s signing, the Vikings sold more than 4,000 season tickets, 15,000 individual game tickets and 5,000 replicas of his jerseys for $80 apiece at their stores and on the team Web site. Favre’s No. 4 jersey is still the top-seller among all players, according to the NFL, and Reebok International Ltd. is predicting sales this season will surpass those of his New York Jets’ jersey from last year. Chicago Bears linebacker Brian Urlacher was the last player to lead the NFL in jersey sales two straight years, in 2001 and 2002. $850 Autographed Footballs The Vikings also are selling other Favre products, from an $850 autographed football to $10 earrings in the shape of Favre’s jersey or $7 shot glasses with his number and replica signature. “Our team stores and Vikings.com continue to see unprecedented numbers,” spokesman Jeff Anderson said. The Vikings have added sponsors and yesterday announced that Mall of America in Minneapolis, the nation’s largest retail and entertainment complex, signed a three-year naming-rights partnership at the Metrodome. While Favre and the team’s success have boosted ticket sales, the Vikings still have available seats for their remaining six home games. The team’s lease at the 27-year-old Metrodome expires in 2011 and Zygi Wilf’s attempts to get public financing for a retractable-roof stadium in Minneapolis have been unsuccessful. The 59-year-old Wilf, a real estate developer, heads an ownership group that purchased the team in 2005 and includes his brother Mark and other family members. Sway Sentiment Favre might be able to help sway sentiment for a new stadium, Swangard said, especially if the Vikings keep winning. A new facility with more luxury seating and better amenities would mean increased revenue for the Vikings, whose estimated value is ahead of only the Oakland Raiders, according to Forbes . The Vikings’ revenue of $209 million last season also was the second-lowest in the NFL ahead of the Detroit Lions, who in 2008 became the first team to go 0-16. “This is in some ways about asset valuation,” Swangard said. “The initial investment of (Favre’s) salary, if leveraged properly, is going to potentially raise the value of what Zygi might be able to get for the team if he decides to sell.” Wilf didn’t respond to an interview request through the Vikings, who have one playoff win in the past eight years. Steve LaCroix , the team’s vice president of sales and marketing, said that while the short-term boost with Favre is positive, the Vikings are also looking to the future. “He’s created additional fan engagement, which has led to a variety of expanded revenue streams,” LaCroix said. “We’re looking to sustain that interest toward long-term growth of our Vikings brand both locally and nationally.” To contact the reporter on this story: Erik Matuszewski in New York at matuszewski@bloomberg.net

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Tsunami in Pacific Ocean May Have Killed Over 120 People in Samoa, Tonga

September 30, 2009

By Gavin Evans and Tracy Withers Sept. 30 (Bloomberg) — A tsunami in the Pacific Ocean caused by a magnitude-8 earthquake may have killed more than 120 people in Samoa, American Samoa and Tonga, as well as prompting alerts for waves hitting Japan and the U.S. west coast. The toll in Samoa, where 62 people are confirmed dead, may rise to 100 as rescue teams reach isolated villages, Radio New Zealand reported, citing an estimate by the nation’s Disaster Management Office. At least 24 people were killed in American Samoa and five in Tonga, it said. Villages on the southern coast of the Samoan island of Upolu were destroyed and many people are missing, the radio cited Disaster Management Office Assistant Chief Executive Officer Ausegalia Mulipola as saying. A tsunami alert sounded in Samoa’s capital, Apia, several hours after the waves struck, Agence France-Presse reported, citing people in the city. The quake was the biggest since a magnitude-8.1 tremor hit east of the Kuril Islands in Russia in January 2007. The Pacific warning center extended a tsunami advisory to the west coast of the U.S. from the Californian-Mexican border to the Oregon- Washington border. A 5-foot (1.5-meter) tsunami was reported at Pago Pago, the capital of American Samoa, the U.S. Pacific Tsunami Warning Center said. Waves may have been as high 15 feet in other parts of the island, Eni Faleomavaega , the territory’s delegate to the U.S. Congress told AFP. Japan Tsunami A change in the sea level of 10 centimeters (4 inches) was recorded by a sensor south of Tokyo a little before 2 p.m. Japanese time, after Japan’s weather agency warned an 0.5 meter tsunami may hit the country’s eastern seaboard by 3 p.m. Officials in Ofunato, a city in northern Japan, ordered the evacuation of about 10,000 residents, according to a notice on the municipality’s Web site. The tsunami alert in Japan and a warning issued for the South Pacific region were later canceled. President Barack Obama declared a “major disaster” in American Samoa, the White House said in an e-mailed statement. The declaration makes government funding immediately available for aid operations and rebuilding in the territory that has a population of about 65,600 people. The U.S. Federal Emergency Management Agency is sending a team to American Samoa to assist, administrator Craig Fugate said in an e-mailed statement. Emergency provisions in Hawaii will be sent south as needed, he said. Hit by Quake The tsunami was triggered by a magnitude-8.0 earthquake shortly before 7 a.m. local time on Sept. 29 about 122 miles (196 kilometers) southwest of Apia. Samoa is close to the International Date Line and 7 a.m. on Sept. 29 is 7 a.m. on Sept. 30 in Wellington, New Zealand. The quake struck at a depth of about 22 miles, according to the U.S. Geological Survey. Tsunami warnings were issued for Fiji, New Zealand, Tonga, the Cook Islands and 16 other nations. The final death toll may not be known until tomorrow, New Zealand’s Deputy Prime Minister Bill English said. Bodies are being brought into Apia, while the sea along Samoa’s southern coast is being scoured. “The majority of the deaths so far are elderly or children because they were less able to escape the tsunami as it came in,’ he told Radio New Zealand. At least five people are reported dead on Tonga’s northern island of Niuatoputapu , New Zealand Foreign Minister Murray McCully told journalists in Wellington. The airstrip on the island is out of action and may have been damaged in the earthquake, he said. Coastal Villages In Samoa, residents in coastal villages were evacuated to higher ground after the quake. Tsunami drills earlier in the year may have helped reduce the death toll, Radio Polynesia journalist Jonah Tui Le Tufuga told Radio New Zealand. Cars and parts of houses were left floating in the sea, he said. The nation of about 180,000 people, consists of 10 islands and lies about 2,800 kilometers north-northeast of New Zealand. It’s about 80 kilometers northwest of Pago Pago on Tutuila, American Samoa’s principal island. Australia will deploy a taskforce to Samoa within 24 hours, Foreign Minister Stephen Smith told ABC Radio today. One Australian was killed in Samoa, the ministry said. Residents of Samoa , shocked by the strength of the jolt, heeded warnings of local police and moved inland, Radio New Zealand’s Samoa correspondent, Tipi Autagavaia, said on a broadcast. “My kids were preparing to go to school and were all crying and screaming,” he said in the broadcast. “It was a big, big shock to most people, because it is the first time they have experienced such a very strong earthquake.” The magnitude of the quake was revised higher from an initial reading of 7.9, the USGS said. The quake was followed by 20 aftershocks of magnitude-5 or higher, the USGS said . To contact the reporters on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net : Tracy Withers in Wellington at twithers@bloomberg.net

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Glimcher Realty Trust Selling Lloyd Center Mall for $192M

September 17, 2009

Glimcher Realty Trust (NYSE: GRT) landed a deal to sell its Lloyd Center Mall in Portland, Oregon for $192 million. The buyer, Merlone Geier Partners IX, is assuming the existing $127.5 million mortgage loan on the property. Glimcher expects to generate…

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Bank Watch: Bank of Cascades Hit with a Cease & Desist

September 2, 2009

Bank of the Cascades in Bend, OR, entered into a cease and desist order with the Federal Deposit Insurance Corp. (FDIC) and the Oregon Division of Finance and Corporate Securities that requires the bank to take measures to strengthen the bank’s financial…

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