Financial life in a big town

The euro fell to a four-month low as Spain

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Post-Dispatch Editor Arnie Robbins announced Friday that he will step down this month. Editorial Page Editor Gilbert Bailon will take over, becoming the paper’s eighth editor in its 134-year history.

Robbins, 59, has led the Post-Dispatch since 2005, after seven years as managing editor.

The last seven years have been a tumultuous time for the newspaper industry, including the Post-Dispatch. The paper has endured falling print circulation and several rounds of newsroom layoffs and buyouts. But it also has seen website visitors nearly double since 2007 and has been named a finalist for the industry’s top honor, the Pulitzer Prize, three times in the last four years.

Despite the economic challenges, Robbins made his mark on the paper and the St. Louis region, said publisher Kevin Mowbray.

“Arnie has done a fabulous job managing this newsroom through change, with honor and grace,” Mowbray said. “I’m really sad to see him go.”

In a speech to the newsroom Friday afternoon, Robbins stressed that he alone decided to step down, wanting “balance in my life.” He started considering it seriously on a hiking trip earlier this year.

That decision, Robbins said, comes with mixed emotions.

“I’ll miss walking around the newsroom. I won’t miss waking up at 3 a.m. and worrying about the newsroom,” he said. “We’ve been through a lot together. I’m happy, but I’m sad.”

Robbins said he has no immediate plans, that he might explore university or foundation work, and that he and his wife hope to stay in St. Louis.

Stepping into his shoes will be Bailon, 53, who has been the newspaper’s editorial page editor since late 2007. He previously spent 21 years at the Dallas Morning News, where he rose through the ranks from nightside general assignment reporter to the post of executive editor and then editor and publisher of Al Día, the paper’s Spanish-language subsidiary.

Bailon said he understands the challenges facing big metro newspapers but called their mission as vital as ever.

“We’re not going anywhere,” he said. “People want information. They want to pick up something and know they can trust it. We can provide that.”

If anything, Bailon said, the proliferation of news platforms — from print to smartphones to tablets — provides more opportunity for an organization such as the Post-Dispatch.

“I see a good future for us,” he said.

Having a top editor who thinks creatively about technology and the economics of journalism has never been more important, said Jill Geisler, who teaches newsroom leadership at the Poynter Institute, a journalism think tank in Florida.

“Being a superb journalist, that’s the starting point now,” she said. “There has to be a much deeper understanding of audience, a deeper understanding of the business side.”

Bailon brings that understanding, Mowbray said.

“I’m confident that Gilbert will continue the outstanding and exceptional work that is produced by our newsroom each and every day,” he said.

In an unrelated move, Sports Editor Reid Laymance left the Post-Dispatch on Friday. Steve Parker, deputy managing editor for news, will replace him on an interim basis while retaining oversight of Page 1. No replacement has been named for Bailon on the editorial page.

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A Senate committee has approved President Barack Obama’s two nominations to fill vacancies on the Federal Reserve’s board. But prospects for a quick confirmation in the full Senate are uncertain.

The Senate Banking Committee approved by voice vote the nominations of Jeremy Stein, a Harvard economics professor, and Jerome Powell, an investment banker who served in the George H.W. Bush administration.

Obama nominated Stein, a Democrat, and Powell, a Republican, in hopes that pairing nominees from both parties could overcome Republican objections paperless payday loans. The Fed board hasn’t operated with a full seven members since 2006.

But one Republican senator, David Vitter, a critic of the Fed’s policies, has expressed opposition. That won’t necessarily block the nominees’ confirmation. But it means the Senate won’t vote before its two-week break starts this weekend.

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A growing number of U.S. cities are choosing to fund essential services like public safety and garbage collection over making payments on their outstanding debt, as rising costs and falling revenue deplete their budgets.

So far, the bond defaults are not roiling the $3.7 trillion municipal market because insurance companies are stepping in to make payments to bond holders in some cases. But defaults on insured bonds are putting pressure on these insurers, which never fully recovered from the last decade’s financial crisis.

The California cities of Stockton and Hercules, as well as Pennsylvania’s capital, Harrisburg, have opted to default on some of their insured debt in recent months.

“Municipalities are saying this is what bond insurance is for - bond holders get paid,” said Richard Lehmann, publisher of Distressed Debt Securities Newsletter.

So far in 2012, there have been 21 muni defaults totaling $978 million, versus 28 defaults totaling $522 million for the same period in 2011, said Lehmann, who sees the number rising. A breakdown of defaults on insured munis was not available.

Although issuers contend they are not singling out insured munis for defaults, some believe that municipalities are strategically protecting bond buyers by relying on insurers to pay the debt service.

“Such a default may signal changing attitudes by distressed municipalities to contemplate a strategic default or bankruptcy on insured debt, knowing that bond holders will not suffer losses,” Moody’s Investors Service said in a report this week.

The credit rating agency added that municipal issuers “may be willing to damage their relationship” with insurers, which in turn could potentially be exposed to large losses.

CITY SERVICES TRUMP BOND-HOLDERS

Harrisburg’s state-appointed receiver said earlier this month that $5.3 million of payments due on general obligation bonds insured by Ambac Assurance Corp will be skipped.

“I was aware they were insured bonds when we made the decision,” David Unkovic, the receiver, told Reuters, adding that the city’s financial condition was more important than bond-holders.

“My first concern as receiver is to maintain vital and necessary service in the city,” he said. “In order to do that I need sufficient cash flows.”

The city of Stockton, nestled among the farms of California’s Central Valley, is defaulting on about $2 million in bond payments for debt sold in 2004, 2007 and 2009. Wells Fargo & Co is the trustee on each of the debt issues and has filed a lawsuit against Stockton for missing its February 28 payment on its $32.8 million of 2004 parking facilities debt, said bank spokeswoman Elise Wilkinson.

Hercules, which had considered bankruptcy, reached a settlement this month with Ambac after defaulting on a $2.4 million bond payment due in February.

Some of the companies are starting to feel the pressure. Syncora Guarantee Inc last month told a federal judge in Alabama that the prospect of it having to make good on millions of dollars a month in debt payments owed by bankrupt Jefferson County might sink the company.

In addition, the once-widespread use of insurance on new issuance has shrunk to a sliver of the muni market. After the financial crisis, so-called monoline insurers left the business, and the largest remaining insurer, Assured Guaranty, is scaling back, depending on states’ bankruptcy laws.

Insured bonds, which accounted for 57.3 percent of muni issuance in 2005, sank to only 5.5 percent of issuance in 2011, according to Thomson Reuters data cash advance today.

Insurers do not appear to perceive an immediate risk. “We don’t feel picked on,” said a senior executive at a bond insurer. “I’m not sure it’s correct to say issuers are deciding to default on insured bonds over uninsured ones. The market does not care whether a bond’s insured or not. The fact they defaulted is what the market remembers.” The executive, who spoke on condition of anonymity, said struggling issuers get no tangible benefit from skipping payments on an insured obligation over an uninsured one since any money must eventually be repaid to the insurer.

“It’s not a get-out-of-jail card,” the executive said.

THE FINANCIAL CRISIS LEGACY

There was a time when bond insurers confined themselves to the dull but steady business of underwriting municipal debt, effectively lending their superior credit ratings to cities and towns for a fee. The insurers branched out into structured financial products, which resulted in huge payouts when the credit crisis hit. One-time market leader MBIA chose to restructure, and its municipal National Public Finance business is no longer writing new policies, pending the outcome of a lawsuit filed by a number of banks challenging the restructuring. Ambac, once the second-largest U.S. bond insurer, went bankrupt in 2010, as did the parent of bond insurer FGIC. Syncora went through a major restructuring in 2009 and stopped writing new business as well. The carnage left one bond insurer standing, Assured Guaranty. On Tuesday Moody’s placed its ratings, including the A3 senior unsecured rating of Assured Guaranty US Holding and Assured Guaranty Municipal Holdings, on review for possible downgrade.

“Assured Guaranty’s business and financial profiles may have meaningfully deteriorated due to the firm’s narrower business opportunities and substantial exposure to sectors adversely affected by the financial crisis and current economic stress,” commented Moody’s Associate Managing Director Stanislas Rouyer in a statement.

The company has argued it can still effectively underwrite smaller municipalities with lower-tier ratings. Even so, it is threatening to pull out of some states without tight bankruptcy controls.

“This is weighing more heavily in our underwriting as we examine the legal framework for bankruptcy in every state that we insure municipal securities,” Assured said in a written reply to Reuters. “While some defaults have occurred on insured transactions, most have been on uninsured transactions.”

Assured Guaranty said it believes defaults will remain infrequent, saying its municipal portfolio has experienced “only modest loss development on a few isolated transactions.” As of the end of 2011, Assured Guaranty enhanced $15.2 billion of munis - a drop of 45.1 percent from 2010, when it was also the market’s sole active guarantor. Assured listed exposure to $3.9 billion of debt sold by non-investment grade issuers on its 2011 financial statements. It includes notorious names like Alabama’s Jefferson County sewer system, Harrisburg, Detroit, and Detroit Public Schools. Radian Group, which wrote bond insurance until 2008, said last September it was considering starting a new unit with dormant bond insurance assets it purchased from Macquarie Group. The Financial Times reported this week that Goldman, Sachs & Co has also been hiring for a bond insurance specialist.

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Markets were in a jittery mood on Monday as talks dragged on between Greek political leaders over a fresh austerity package that is required if the debt-ridden country is to get a crucial bailout package.

The leaders of the parties backing Greece’s coalition government are set to hold a second day of emergency talks over austerity measures that rescue creditors are demanding in return for more money. Prime Minister Lucas Papademos will meet with negotiators from the eurozone and the International Monetary Fund in the afternoon and then with the leaders of the three parties backing his coalition.

The parties all publicly oppose steep cuts in private sector pay demanded by the eurozone and IMF, but their backing is needed for the government to reach a deal for the bailout, which must be approved by the Greek Parliament. The new euro130 billion ($171 billion) bailout deal is vital for Greece to avoid bankruptcy next month as it cannot cover a euro14.5 billion ($19.1 billion) bond repayment due March 20 without the rescue funds.

The bailout’s implementation also depends on Greece’s progress in separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt, in exchange for a cash payment and new bonds with more lenient repayment terms.

“Time is running out,” said Lee Hardman, an analyst at The Bank of Tokyo-Mitsubishi UFJ.

Fears that a deal won’t emerge have reinforced concerns of a disorderly Greek debt default that could send shockwaves round the global economy. That’s kept investors on edge on Monday, even though market sentiment has been fairly buoyant of late following a run of strong U.S. economic data, notably last Friday’s forecast-busting jobs figures for January.

In Europe, the FTSE 100 index of leading British shares was down 0.5 percent at 5,871 while Germany’s DAX fell 0 personal business card.7 percent to 6,720. The CAC-40 in France was 1.3 percent lower at 3,384.

Wall Street was also poised for a lower opening following its rally on Friday, when government figures showed the U.S. economy generated a bigger than expected 243,000 jobs in January, pushing the unemployment rate down to 8.3 percent. Dow futures were down 0.4 percent at 12,744 while the broader Standard & Poor’s 500 futures fell 0.6 percent at 1,332.

The euro was also under pressure as investors awaited developments in Athens _ the currency was trading 0.8 percent lower at $1.3041.

Oil prices tracked the broader market trends, with benchmark oil for March delivery down $1.17 at $96.67 a barrel in electronic trading on the New York Mercantile Exchange.

Greece will likely remain the focal point over the week, though a raft of corporate earnings, particularly in Europe, and a host of central bank meetings could garner some interest. The European Central Bank’s monthly policy meeting on Thursday could be crucial in determining market expectations of whether there will be further interest rate reductions. Meanwhile, many traders think the Bank of England will clear the way to inject more money into the U.K. economy in the hope of boosting lending.

Earlier Asian shares mostly traded higher as investors there had their first chance to respond to join in the advance generated by Friday’s upbeat jobs data.

Japan’s Nikkei 225 index rose 1.1 percent to close at 8,929.20, its highest closing in more than three months but Hong Kong’s Hang Seng lost 0.2 percent to 20,709.94. Benchmarks in Singapore and mainland China also rose.

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Pamela Sampson in Bangkok contributed to this report.

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Orders to U.S. factories rose in December, supported by a rebound in business investment in capital goods such as heavy machinery.

The results cap off another strong year for U.S. manufacturing. Combined with strong figures released Thursday on job growth in January, they signal the economic recovery is gathering strength.

Factory orders rose 1.1 percent following a 2.2 percent gain in November, the Commerce Department reported Friday. For the year, total orders were up 12.1 percent following a gain of 12.9 percent in 2010. Orders had plunged 22.1 percent in the 2009, the year the deep recession ended.

For December, orders for so-called core capital goods, which are viewed as a good measure of business investment plans, rose 3.1 percent to an all-time high. That gain was driven in part by a rush by businesses to take advantage of expiring tax breaks.

The advances in 2011 pushed orders for the year up to $5.36 trillion, still slightly below the peak of $5.44 trillion set in 2008.

For December, orders for durable goods, items expected to last at least three years, rose 3 percent, a figure that was unchanged from a preliminary report last week. Orders for nondurable goods slipped 0.4 percent, reflecting declines in petroleum products.

The orders category that signals business investment plans, non-defense capital goods excluding aircraft, climbed to an all-time high of $68.9 billion in December.

While some of that surge likely reflected a rush to make orders before investment tax breaks expired at the end of last year, many economists believe the boom in spending on new equipment will continue even with the tax breaks gone because there is a large amount of pent-up demand on the part of businesses to modernize their operations.

Companies are hiring more, factories are making more goods and more people are buying cars. Those positive signs for the economy have to be balanced against the threat that Europe’s prolonged debt crisis is acting as a drag on global growth. That would hurt sales of U.S. exports.

In December, orders for commercial aircraft were up 18.9 percent, orders for autos increased 1.7 percent and demand for heavy machinery rose 6.7 percent, reflecting strong demand for oil field equipment and construction machinery.

Manufacturing has been a bright spot in the recovery, although there was a slowdown in the middle of last year as factories dealt with supply shortages caused by the Japanese natural disasters that occurred in March.

The Institute of Supply Management reported this week that its gauge of manufacturing activity expanded in January at the fastest pace in seven months. The index rose to 54.1, up from 53.1 in December. Readings above 50 indicate expansion and the index has been in expansion territory for 30 straight months.

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Spain’s Banco Santander saw its fourth-quarter profits plunged 98 percent after it took a euro1.8 billion ($2.4 billion) charge to protect its Spanish real estate portfolio, and as it set aside cash to cover bad loans.

Europe’s largest bank by market capitalization said Tuesday it earned euro47 million for the quarter that ended in December, down from euro2.1 billion in the same period a year earlier.

Without the provision, the bank said it would have had profit of euro1.7 billion in the fourth quarter.

Spain’s banks are under heavy pressure from the government to disclose additional losses on overvalued real estate including land and apartment buildings in their holdings.

Spain is mired in an economic morass and has the highest unemployment rate in the whole 17-nation eurozone, largely because of a big construction sector crash.

A more detailed look at the quarterly earnings figures showed that the bank’s revenue rose modestly to euro11 billion from euro10.6 billion a year earlier.

For the whole of 2011, Santander’s profit totaled euro5.4 billion, down from euro8.2 billion in 2010. The bank said profits from Latin America made up the bulk of its profits during the year. It said 51 percent of the total came from its operations there.

The growing importance of Latin America was evident in the bank’s loan book during the year. Total loans during the year were up 4 percent as Banco Santander SA boosted business in Latin America that helped buffer decreasing European operations.

Santander shares rose 1.1 percent to euro6.05 each in Tuesday morning trading after the results were released.

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U.K. Prime Minister David Cameron pledged more action to deal with

Twelve former employees of the St. Louis Post-Dispatch sued the newspaper today for fraudulent inducement and negligent misrepresentation, alleging the newspaper reneged on a promise to pay for health insurance for life.

The former employees sued the newspaper, publisher and president Kevin Mowbray and Astrid Garcia, vice president of human resources and labor operations, in St. Louis Circuit Court.

The Post-Dispatch denied the allegations.

“The St. Louis Post-Dispatch believes there is no basis for these allegations and that we will be vindicated in court,” spokeswoman Tracy Rouch said in a statement.

The former employees who filed suit are: Rayburn Jordan, Melinda Krummrich, Mary Delach Leonard, Samuel Leone, John Linstead, Linda Lockhart, Odell Mitchell Jr., John Naunheim Jr., Carolyn Olson, Kathleen Richardson, Suzanne Tarrant and Larry Williams.

The former employees allege in the lawsuit that they agreed in 2007 to voluntarily early retirements from the newspaper with benefits including payment for health insurance for life payday loans for bad credit.

However, all of the employees were notified in late 2010 by the newspaper’s parent company, Davenport, Iowa-based Lee Enterprises, that the St. Louis Post-Dispatch would stop paying for their health insurance effective Jan. 1, 2011.

“Had they known that the Post would renege on their promise for lifetime health insurance benefits, my clients would not have accepted the early retirement offer and buyout,” the former employees’ attorney, Staci Yandle, said in a statement.

The former employees are seeking an unspecified amount of compensatory and punitive damages.

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