Financial life in a big town

Federal Reserve Chairman Ben Bernanke told a congressional panel Thursday that the economy still needs some help, but acknowledged the need to begin to tighten credit to prevent inflation at some point.

"The economy continues to require the support of accommodative monetary policies," Bernanke said Thursday. "However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus."

In prepared testimony, Bernanke explained to the House Financial Services Committee how the Fed intends to roll back emergency liquidity programs. He repeated some points made last month in remarks the Fed released after his scheduled appearance was postponed due to a snowstorm.

Bernanke re-affirmed Thursday that the Federal Open Markets Committee expects conditions are "likely to warrant exceptionally low levels of the federal funds rate for an extended period."

He added that the Fed has tools to counter inflation "at the appropriate time," he said, although he didn’t suggest when the appropriate time might be.

For the last 18 months, the Fed has bought mortgages, long-term Treasurys and the debt of mortgage finance firms Fannie Mae (FNM, Fortune 500) and Freddie Mac. (FRE, Fortune 500)

Bernanke laid out a plan to sell some of those mortgages, Treasurys and debt, by offering what’s called reverse repurchasing agreements bad credit pay day loans. Under those agreements, the Fed sells its securities to a third party while agreeing to rebuy them at some point in the future.

The second way the Fed plans to soak up money is to sell banks and financial firms the equivalent of certificates of deposit. In this case, the Fed gets a chunk of the bank’s reserves in exchange for paying interest at a steady rate.

Concern about mortgage markets

These deposits would be auctioned off and banks couldn’t count their investment in the Fed as cash or reserves.

One such exit that the Fed has begun is unwinding certain credit programs, including the Fed’s purchase of mortgage-backed securities, one of several credit markets that froze up at the start of the crisis.

Expressing concerns that the market for mortgage-backed securities won’t return, several lawmakers asked Bernanke if ending such a program will lead to problems in the housing industry, including hikes in mortgage interest rates.

Bernanke acknowledged that "mortgage rates might pop back up," but that, so far, "there seems to be very little negative reaction."

"While that market has not completely returned to normal, we’ve seen considerable improvement," he said. 

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Firehouse Subs was the ninth-fastest growing restaurant chain in the nation last year, according to restaurant consulting firm Technomic Inc.

The Jacksonville sub chain known for its steamed sandwiches raked in $206 million in sales in 2009, 10 percent increase over sales in 2008, and increased its unit number to 5 percent.

Lorton, Va-based Five Guys Burgers ranked No. 1 on the list that ranked chains with sales over $200 million with $453 million in 2009 sales, a 50 percent increase over 2008 revenue. Oakville, Ontario-based Tim Hortons Inc. (NYSE: THI) ranked No. 2, with $446 million in 2009 revenue, a 23 percent increase. Minneapolis, MN.-based Buffalo Wild Wings Grill & Bar (Nasdaq: BWLD) ranked No. 3, with $1.5 billion in sales, up 22 percent from 2008.

The rest of the ten fastest growing restaurant chains in 2009 were Jimmy John’s Gourmet Sandwich Shop, Wingstop, Noodles & Company, BJ’s Restaurant and Brewhouse, Chipotle Mexican Grill and Potbelly Sandwich Works fast payday loan no faxing.

Founded in Jacksonville by Robin and Chris Sorensen, both former firefighters, Firehouse operates 380 locations in 19 states and has plans to open at least 50 new restaurants in 2010, including its first location in Chicago, and adding St. Louis, Mo., Oklahoma City, Okla. and Pittsburgh, Pa, among others, to its list of markets.

The company’s goal is to operate at least 3,500 restaurants nationwide.

In total, the top 10 fastest-growing chains’ sales accounted for $5.9 billion, a 19 percent increase over 2008. Unit counts grew 16 percent.

Overall, however, the 500 largest U.S. restaurant chains registered a .8 percent annual sales decline in 2009, according to Technomic’s annual report on the top U.S. restaurant chains. Systemwide sales for the top 500 declined to an estimated $230 billion in 2009, down almost $2 billion over 2008.

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After more than a year of rancorous debate, health-care reform has won passage in Congress.

The U.S. House of Representatives passed the Senate’s version of health-care reform Sunday night by a 219-212 margin, sending it to President Barack Obama for his signature. All Republicans voted against the bill, joined by 34 Democrats.

“This isn’t radical reform, but it is major reform,” Obama said shortly before midnight. “This is what change looks like.”

The president said the bill would create a health-care system “that works better for the American people.”

The legislation would enable an estimated 32 million Americans to obtain health insurance by expanding eligibility for Medicaid, as well as provide subsidies for low- and moderate-income individuals to buy private insurance.

Individuals and small businesses could purchase insurance through new state-based exchanges, which would offer plans that meet minimum federal standards. Some small businesses with low-wage workers would be eligible for temporary tax credits to help them pay for insurance.

Individuals would be required to obtain insurance, and businesses that employ more than 50 workers would have to provide coverage or pay a penalty of $2,000 per worker if any of their employees receives government-subsidized coverage on their own.

The legislation also would impose a tax on high-cost insurance plans beginning in 2018. New taxes also would be imposed on insurance plans, medical-device manufacturers and pharmaceutical companies. Individuals who make more than $200,000 would face additional Medicare payroll taxes.

Insurance companies would no longer be able to deny coverage for pre-existing conditions or rescind coverage when someone gets ill. They also would be prohibited from capping the amount of benefits individuals can receive.

Democrats say the law will make insurance coverage affordable to all Americans and rein in abusive insurance practices.

Republicans, however, contend insurance will become more expensive. They also argue that businesses will be afraid to hire workers because of the financial penalties they would face if they don’t provide affordable coverage.

In the end, however, it was the issue of abortion — not what the nation’s health-insurance system should look like — that determined the bill’s fate payday loans online.

The House passed health-care reform Sunday night at 10:49, but the outcome was determined nearly seven hours earlier. That’s when Democrat Bert Stupak of Michigan announced he and a handful of other anti-abortion Democrats would vote for the bill.

At issue was whether the bill would allow public funds be used to subsidize abortions. Stupak said an executive order from President Barack Obama would ensure that wouldn’t happen.

“I’m pleased to announce that we have an agreement,” Stupak said. “I’ve always supported health-care reform.”

The abortion issue was the most serious threat to House passage of the bill, and Republicans wouldn’t let the issue go away even after Stupak’s announcement.

“If you vote for this bill, you can never call yourself pro-life again,” said Rep. Paul Broun (R-Ga.).

Republicans also said Obama’s executive order couldn’t be relied on because it could be rescinded at any time.

They also called into question the Senate’s ability to pass a separate bill fixing the House’s problems with the Senate’s health-care legislation. To avoid the need to get 60 votes in the Senate, Democrats decided to have the House vote on the Senate-passed bill, and then approve a package of fixes through a budget-related process known as reconciliation, which only requires 51 votes to clear the Senate.

The problem, according to Republicans, is the reconciliation bill would generate additional contributions to the Social Security Trust Fund, and changes to Social Security aren’t eligible for consideration in a reconciliation bill. That means the Senate bill, might not be fixed, Republicans warned Democrats.

That argument didn’t sway any members. The House passed the reconciliation bill by a 220-211 margin.

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Shares of Blockbuster Inc. sank 30 percent Wednesday after the video rental chain warned that it may have to file for Chapter 11 bankruptcy protection.

Competition from DVD-by-mail company Netflix Inc. and DVD vending machines operated by Coinstar Inc. have eroded the Dallas company’s revenue even as it staggers under a heavy debt load.

Blockbuster said in a regulatory filing late Tuesday that it was suffering "significant liquidity constraints" and could have to file for bankruptcy protection if it was unable to convince creditors to restructure a big chunk of its debt or business continued to deteriorate.

The company has had to close about 1,300 stores and wants to shut down hundreds more. It had about 5,200 stores worldwide in January, excluding franchised shops. About 3,500 of those were in the U.S.

The company is trying to update its business, setting up video-rental kiosks like those run by Coinstar and offering a DVD-mailing service. It added 2,000 kiosks in 2009 and expects to have more than 10,000 by the middle of this year — but NCR Corp., which operates the kiosks, is "under no obligation" to install or run them, Blockbuster said bad credit personal loan lenders.

Blockbuster is also pursuing several measures to help shore up cash. It wants to sell some of its international business, and it is pursuing a debt-for-equity swap to help alleviate its debt burden. It wants to swap all or part of its senior subordinated notes for common stock. It said it owed $975 million under senior secured notes and senior subordinated notes as of Jan. 3. Even if the swap goes through, it could significantly dilute current shareholders.

Meanwhile, the company predicts further declines in its sales. The chain said it expects a key sales measure to drop in the mid-single digits to high single digits in 2010 — and a "further deterioration" could leave it unable to service its debt, leading to default.

The company’s key sales measure sank 16 percent in the fourth quarter — a dismal holiday season performance despite higher advertising. It lost $435 million compared to a loss of $360 million in the last three months of 2008.

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If you haven’t started your 2009 tax return, get going — and be ready to pay for help even if you haven’t before.

"Most people will need all the help they can get" this year, said Mildred Carter, senior federal tax analyst with tax publisher CCH, a Wolters Kluwer business. One big reason: The American Recovery and Reinvestment Act enacted by Congress in February 2009 contained more than 50 provisions affecting 2009 and 2010 tax returns, and some were changed again in November by the Worker, Homeownership and Business Assistance Act.

The result is a bunch of new deductions and credits (and tax forms and worksheets) that can lower your tax bill but make things more complicated. "The one certainty," Carter said, "is that whatever route you take, it’s best to start early."

If you hire a professional, go with know-how and experience. For referrals, ask your friends, business associates and your local or state certified public accountant and/or enrolled agent organizations.

If you opt for do-it-yourself software, go with a reputable name. TurboTax (www.turbotax.com), H&R Block at Home (www.hrblockathome.com) and TaxAct (www.TaxAct.com) offer quality products for returns of different levels of complexity. Many are free, particularly for simpler returns.

I’ve used TurboTax’s Home & Business for years and like it for its thorough yet plain-English interview questions. I also appreciate the "help" features — such as a free "Live Community" where other users and tax experts can answer questions — and the navigation options, including being able to see interview questions and related tax forms at the same time. Your choice of software may come down to individual preferences and the program that best fits your needs.

Even if you get help, it pays to be aware of significant tax law changes for 2009 returns. "Tax-return preparation is a chore, and the desire to take shortcuts is common," said Bob Scharin, senior tax analyst for the Tax & Accounting business of Thomson Reuters. "But make sure you take the time to check for tax breaks, and if you are using the services of a professional, ask questions and gather the information they will need to calculate the tax deductions and credits to which you are entitled."

Potential tax breaks are plentiful — for buying a car, a house, going to college, making your home energy-efficient or even holding a job (the latter is the new "Making Work Pay" credit).

But the devil is in the details, with many complex eligibility requirements and "phase-outs" that reduce or eliminate tax savings based on income.

One example: First-time home buyers may be entitled to a refundable tax credit of 10 percent of the purchase price, with a maximum credit of $8,000. In addition, for home purchases after Nov. 6, 2009, those who owned and lived in a home for at least five consecutive years out of the eight-year period preceding the purchase may be entitled to a credit of up to $6,500. The home buyer credit phases out for modified adjusted gross income of $75,000 to $95,000 for singles ($150,000 to $170,000 for joint filers) for purchases before Nov. 7, 2009, and $125,000 to $145,000 ($225,000 to $245,000 for joint filers) for purchases made after Nov. 6.

Get it?

But don’t despair. With a qualified professional or tax-preparation software — you can bet the pro will be using software — you don’t have to memorize all these details.

"Just know there are credits available," said Bob Meighan, vice president of TurboTax. "Don’t worry about the details; just put your numbers in."

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Medicine Shoppe and Medicap pharmacists in seven states sued Cardinal Health in federal court Tuesday, alleging the health care products distributor failed to make good on promises it made when it asked them to switch to a new franchise agreement.

The lawsuit filed in U.S. District Court in Columbus, Ohio, says franchise holders who agreed to the change offered in March 2009 are paying lower fees than others, while all are getting fewer supports and services from the Cardinal-owned Medicine Shoppe International Inc. and Medicap Pharmacies Inc. It says many who have the lower fees were charged "grossly unfair" penalties to switch from their old agreements.

Pharmacists want a return of penalties paid and for all franchisees to be charged the lower fees or be allowed to cancel their franchise agreements, said St free 3-in-1 credit report. Louis attorney David Harris, who represents the pharmacists. Plaintiffs include Medicine Shoppe franchisees in California, South Dakota and Kansas and Medicap franchisees in Pennsylvania, Idaho, Iowa and North Carolina.

Harris said the suit seeks class-action status and could include more than 600 franchises that account for $1 billion in drug sales for Cardinal. Most signed 20-year agreements.

Medicine Shoppe, which Cardinal acquired in 1995, had been based in Earth City but the pharmacy chain moved its headquarters to Dublin, Ohio, last year.

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Maine’s lobstermen are working harder for less, as demand drops for their expanding harvest.

Lobstermen pulled in a robust 76.3 million pounds in 2009, according to the Maine Department of Marine Resources. That’s the largest harvest in years, according to state records and estimates, but only in terms of volume.

The 2009 take was worth $223.7 million, which is about $22 million less than the prior year, according to the department. State statistics show that the harvest has dropped in value, year-to-year, since 2005, when it totaled nearly $318 million.

As with most things, the recession is to blame. Cash-strapped consumers are avoiding delicacies such as lobsters, driving down the overall price, according to George Lapointe, commissioner of the Maine Department of Marine Resources.

"I think it’s largely a function of supply and demand, and the world economic condition," he said. "Lobster is a luxury product."

Lapointe said the price of lobster managed to "claw its way" back to a range of $2.75 to $3 per pound in 2009, after slumping to $2 to $2.50 in the fall of 2008. That pales in comparison to five years ago, he said, when lobstermen were getting $4 to $4.50 per pound.

Lobstering is an essential part of Maine’s economy, he said, providing about $500 million in annual revenue to coastal communities. He said the tourism industry has managed to hold up, despite the recession, but visitors to Maine only account for one-sixth of lobster purchases.

Lapointe said cruise ships, which are traditionally among the largest consumers of lobsters, are cutting back on their purchases and this has been painful for lobstermen.

"They are certainly in a financial squeeze right now," he said. "When they fish harder, they use more bait and more fuel, and those are huge costs for them."

Lapointe said fuel cost is consuming as much as 40% of a lobsterman’s take, up from 10% to 15% in recent years.

More lobsters, less money

David Cousins, president of the Maine Lobstermen’s Association and a lobsterman for 42 years, said the 2009 harvest was the biggest since the early 1990s, when the annual take peaked at an estimated 100 million pounds. But that is little comfort, considering the dropping prices and increasing costs.

"Our business is based on a $4 dollar-plus lobster [per pound]," said Cousins. "When you’re getting $2.90 a pound, you’re going the wrong way and it just doesn’t work anymore.

The cost of Atlantic herring, an abundant fish used as bait in lobster traps, jumped to a range of 25 to 30 cents per pound from 3 cents in the mid-1990s, said Cousins. The cost of bait now consumes 20% of gross revenue for lobstermen, compared to 2% in mid-1990s, he said.

"Our [net] income has dropped by 35% to 40%, and sometimes 50%, because of increased cost of fuel and increased cost of bait," Cousins said.

This spells trouble for the industry and some lobstermen have lost their boats to bank foreclosures, he said.

"There are a lot of people who are in serious trouble up here, because they have a lot of money out on their business - they owe for boats and traps and houses and trucks and all that," Cousins said.

But getting out of this hardscrabble business isn’t much of an option for most lobstermen, despite its difficulties, he added.

"People are hanging on as long as they can, because there aren’t any jobs any more," Cousins said. 

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Facing firm demands from the European Union and financial markets to cut its deficit, Greece announced cost-cutting measures Wednesday that will save the debt-challenged country €4.8 billion, $6.53 billion, this year.

The Greek government plans to cut civil service workers’ entitlements by 12%. This includes a 30% decrease in holiday bonus payments, according to The Wall Street Journal’s online edition. Officials also said civil service pensions will be frozen for the year.

To increase revenue, the Greek government said it will raise the value-added tax to 21% from 19% on items including clothing and footwear. Sales tax on food and medicine will rise to 10% from 9% and the tax rate on printed products will increase to 5% from 4.5%.

The country will boost the tax on alcohol by 20% and raise the tax on tobacco to 65% from 63%. Taxes on gasoline prices will be hiked by €0.08 per liter.

Officials expect the measures will reduce Greece’s budget deficit to 8 free credit report.7% of the country’s gross domestic product this year from a level of 12.7% last year, according to the report. The European Union had given Greece until March 16 to show it is making progress in cutting its deficit from more than four times the allowed level.

Umbrella union for civil servants ADEDY is already speaking out against the measures and has called for a 24-hour general strike on March 16, said the Journal.

In a speech to parliament Tuesday, Greek prime minister George Papandreou said the country risks bankruptcy if it neglects to find lenders to cover its €300 billion, $409 billion, in debt, the Journal said.

Greece is preparing to raise between €3 billion and €5 billion, $4.1 billion and $6.8 billion, in a 10-year bond sale.  

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Banks have pared their reliance on central banks and governments for liquidity support as the worst financial crisis since the Great Depression ebbs, according to a study by the Bank for International Settlements.

“The take up of many measures has declined,” economist Petra Gerlach wrote in the study, published in the Basel, Switzerland-based BIS’s latest quarterly review.

The report comes as central banks such as the U.S. Federal Reserve trim some of the emergency programs they introduced to combat the crisis. The Fed has completed its purchase of U.S. Treasuries, while the European Central Bank conducted a final auction of 12-month funds in December. The Bank of Japan stopped its purchases of commercial paper and corporate bonds.

The shift “seems to reflect” the increased ability of banks to raise funds in markets, although it may also be the result of some lending programs becoming more restrictive, Gerlach said. She also said support may need to be removed to avoid distorting competition and so banks don’t have an excuse not to postpone repairing balance sheets quick cash.

While the decline in demand for liquidity is “clearly good news,” some institutions are relying more on governments and central banks than others, Gerlach said.

“This suggests that a differentiated exit strategy is desirable,” she said. “Such an approach would aim for a timely discontinuation of public support while taking into account that some financial institutions remain weak.”

The BIS also noted that banks within the European Union had a combined exposure of more than $200 billion to sovereign debt in Greece, Spain and Portugal at the end of the third quarter of last year. That dwarfs the exposures of the U.S. and Japan, where combined exposure is less than $20 billion.

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