Financial life in a big town

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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Simon Property Group Inc. late Wednesday reiterated its interest in buying General Growth Properties Inc. despite General Growth’s announcement that it has reached a $2.6 billion equity deal with Brookfield Asset Management Inc.

If approved by a bankruptcy court judge, the deal announced Feb. 23 by Chicago-based General Growth (Pink Sheets: GGWPQ) would allow the operator of the Regency Square Mall to exit Chapter 11 bankruptcy protection and possibly avoid being taken over.

Officials with Simon (NYSE: SPG), based in Indianapolis, called the deal between General Growth and Brookfield “inferior and highly conditional.”

Last week, Simon offered General Growth $10 billion, including $9 billion in cash. A total of $7 billion would have gone to creditors and $3 billion to shareholders.

In a letter to Simon executives, General Growth officials rebuffed the offer, saying it was “not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders cash advance america.”

After learning of General Growth’s deal with Brookfield, Simon officials accused General Growth officers of not following the due-diligence process it referred to.

“General Growth’s proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors,” Simon officials said in the release. “While continuing to block the immediate and certain 100 percent cash recovery provided by Simon’s offer, General Growth has pre-empted its own self-proclaimed ‘process’ in favor of a highly speculative and risky plan to attempt to raise $5.8 billion of new capital in today’s uncertain markets.”

General Growth filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April last year. In December, it won court approval to restructure about $10.25 billion of its debt on 103 of its 200 properties.

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Bills that would change intrastate access charges — the fees phone companies charge each other for their customers’ in-state long-distance calls.

HB1750 > Introduced by Rep. Timothy Jones, R-Eureka — This one has already passed the House and has been sent to the Senate. It would reduce intrastate charges by 50 percent over 10 years. Exempts companies with fewer than 25,000 lines. Contains no explicit approach for companies to make up any revenue lost.

SB698 > Introduced by Sen. John Griesheimer, R-Washington — Would lower rates by 50 percent over five years. Companies serving high-cost areas would be allowed to raise their rates to make up the lost revenue.

SB 785 > Introduced by Sen. Kurt Schaefer, R-Columbia — Would reduce rates by 45 percent, but would offset those losses through a state universal service fund, supported by fees on companies that provide Internet-based phone service and mobile radio service. The act also exempts companies with fewer than 25,000 lines.

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Shares of Macy’s Inc. fell about 1 percent Monday afternoon after a Deutsche Bank analyst downgraded the stock to “hold” from “buy.”

According to a MarketWatch report, analyst Bill Dreher Jr. said the department store chain’s “My Macy’s” initiative, which consolidated merchandising and tailored it to local markets, hasn’t produced the expected results.

“Macy’s decentralization initiative is developing awkwardly and will likely need years of refinement before demonstrating significant traction," Dreher said in the MarketWatch story. He also lowered his first-quarter earnings forecast to $1.21 per share from $1.25. Analysts. on average, expect earnings per share of $1.18.

Shares of Macy’s (NYSE: M) lost about 1.5 percent, or 24 cents, to $15.69 in Monday afternoon trading.

Macy’s, with corporate offices in Cincinnati and New York, operates about 850 department stores in 49 states, the District of Columbia, Guam and Puerto Rico.

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NEW YORK – A more upbeat outlook on jobs pushed Americans' confidence in the economy higher in December for the second month in a row, a survey released Tuesday said.

Consumers' expectations for the job market over the next six months reached their highest level in two years, but Americans remain gloomy about their current prospects.

Meanwhile, a closely watched home price index released Tuesday showed that home prices rose for the fifth month in a row in October, but the recovery continues to be uneven with only 11 of the 20 metro areas tracked showing gains.

The U.S. Conference Board said its consumer confidence index rose to 52.9, up from a revised 50.6 in November, but the reading is still far short of the 90 that would signify a solid economy. In October, consumer confidence was 48.7.

Economists surveyed by Thomson Reuters predicted a reading of 52 for December.

The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May, fuelled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has taken a toll on consumers.

Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 per cent of U.S. economic activity by federal measures.

Stocks extended their increases into a seventh day following readings. In morning trading, the Dow Jones industrial average rose 23.05, or 0.2 per cent, to 10,570.13.

One key component of the Confidence index that measures consumers' outlook over the next six months rose to 75.6 from 70.3 last month, the highest level since December 2007, when the index was 75.8. But the survey's other main component, which measures shoppers' current assessment, actually fell to 18.8 from 21.2.

The survey of 5,000 households ran Dec. 1 through 21.

"Regarding income, however, consumers remain rather pessimistic about their short-term prospects and this will likely continue to play a key role in spending decisions in early 2010," Lynn Franco, director of The Conference Board Consumer Research Center said in a statement.

Still, many retailers are breathing sighs of relief after the holiday selling season turned out better than expected, according to MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.

However, even though shoppers saw their confidence improve slightly and bought a bit more, they've been cautious in their spending. During the Christmas season, they focused on practical items for loved ones and even for themselves, while shying away from buying gift cards and opting for deeply discounted items instead.

Experts say such patterns might remain for several years amid unemployment that could be stubbornly high.

The unemployment rate dipped in November to 10 per cent, down from a 26-year high of 10.2 per cent in October. Some analysts worry it will again start to rise in coming months and won't peak until hitting 10.5 per cent next summer.

Still, businesses cut their payrolls by a net of just 11,000 jobs in November, the smallest decrease since the recession started two years ago, according to the November job report.

For December, economists surveyed by Thomson Reuters expect that the unemployment rate will tick up to 10.1 per cent, but they also expect no job losses on net when the government reports figures Jan. 8.

According to The Standard&Poor's/Case-Shiller index, home prices edged up 0.4 per cent to a seasonally adjusted reading of 145.36 in October from September. The index was off 7.3 per cent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters.

The index is now up 3.4 per cent from its bottom in May, but still almost 30 per cent below its peak in April 2006.

The Conference Board survey showed that consumers' assessment of current conditions worsened in December. Those saying conditions are “bad" increased to 46.6 per cent from 44.5 per cent, while those saying business conditions are "good" decreased to seven per cent from 8.1 per cent.

Consumers' six-month outlook improved in December. Those anticipating business conditions will be better over the next six months increased to 21.3 per cent from 19.7 per cent, while those expecting conditions will deteriorate declined to 11.9 per cent from 14.6 per cent.

The outlook for the job market was also more positive. The percentage of consumers expecting more jobs to become available in the months ahead increased to 16.2 per cent from 15.8 per cent, while those expecting fewer jobs declined to 20.7 per cent from 23.1 per cent. However, the proportion of consumers anticipating an increase in their incomes declined to 10.3 per cent from 10.9 per cent.

13:01ET 29-12-09

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AMSTERDAM–Sweden said a last-ditch bid by Spyker Cars for Saab offered a thread of hope the iconic brand would survive, as talks between the Dutch luxury automaker and General Motors extended into the evening.

Russia-backed Spyker said on Sunday it had lodged a renewed fast-track offer to buy Saab from General Motors just two days after talks with GM over a rescue of the loss-making Swedish manufacturer collapsed.

The surprise new offer from Spyker – which made 43 luxury cars last year against Saab’s sales of 93,295 – was set to expire at 5 p.m. EST, but Spyker said it has extended that deadline until further notice.

"We hope, naturally, that even if it is a very, very slim thread of hope, there is a chance of finding some kind of solution to the question of Saab," Swedish Enterprise Minister Maud Olofsson told a news conference.

"It is very late, there is a very tight timetable and that means the situation is very difficult," she said after meeting with representatives of Saab and local authorities.

Spyker Cars said on Sunday it had submitted a new offer to GM, including an 11-point plan addressing issues that arose during the due diligence process for its old bid.

"We’ve had various discussions with them (Monday)," Spyker Cars chief executive Victor Muller told Reuters, adding that talks were "definitely" ongoing, but there was nothing new to report.

The Swedish government said it would allot 542 million Swedish crowns ($79 million Canadian) to measures, mainly for education and job schemes, to help deal with the thousands of jobs set to disappear if Saab was shut down.

Abandoning the 60-year-old Swedish auto brand would eliminate 3,400 jobs in Sweden and hit 1,100 Saab dealers, but General Motors raised hopes on Sunday when it said it would evaluate several new expressions of interest for Saab.

"We should be careful about fuelling new hopes in a situation where the people in Trollhattan, and at Saab and their subcontractors are thrown between hope and despair," Swedish Prime Minister Fredrik Reinfeldt told journalists.

Shares in Spyker Cars closed up 19.9 per cent in Amsterdam as its renewed approach to Saab sparked talk the Dutch firm – which had a market capitalization of just 26.6 million euros ($40.37 million) at Friday’s close – may exponentially expand operations and perhaps become profitable.

"The stock’s value is close to nothing but if they succeed to buy Saab, invest, and turn the company around then the shares can become valuable," said a Dutch analyst who declined to be named.

Swedish daily Svenska Dagbladet, citing unidentified sources, said the ownership structure backing the Spyker bid had been altered and that Russian parties were no longer involved. "That which was considered a problem has been solved," it quoted a source as saying.

Russian banking tycoon Vladimir Antonov holds an almost 30 per cent stake in Spyker Cars.

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American Water Works Co., the largest investor-owned U.S. water utility, purchased O’Fallon, Mo.-based Environmental Management Corp. Terms weren’t disclosed.

Environmental Management, which manages water and sewer projects in the United States and Canada. The company has about 300 employees, including 84 in the St payday loans. Louis area, and recorded 2008 revenue of $50 million.

The company, founded in 1980, was owned by the Linde Group, a German conglomerate.

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SEATTLE — The date for the 787 Dreamliner’s first flight has inched closer, and Boeing hopes to fly not one but two 787s by year’s end.

According to a person close to the jet program, Boeing has set a new target date of Friday, Dec. 18, for the initial flight — four days earlier than its previous plan.

And a second Dreamliner is set to take to the air just 10 days after the first one, the person said.

After more than two years of delays, excitement is growing among those working on the new airplane, who now anticipate a pre-Christmas flight and look forward to a New Year test-flight program that could erase the memory of 2009’s embarrassing glitches payday loans for self employed.

The schedule’s acceleration follows the successful retesting of the wing last week, which validated the fix for a structural flaw that caused a test failure last May and the consequent suspension of the planned June first flight.

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Retailers are thinking beyond Cyber Monday — a holiday marketing promotion many push for the Monday after Thanksgiving — and trying to spin their discounts into Cyber Weekends or even Cyber Weeks.

Target, Walmart, Toys R Us and others will be running online sales throughout the holiday weekend, with additional sales on Nov. 30, or Cyber Monday. J.C. Penney will offer online sales for items such as clothes and electronics on Monday and Tuesday, and Walmart.com will offer deals starting Monday through Dec. 4.

Retailers are planning more promotions this year, as opposed to last year, when the sudden consumer spending downturn sent online sales down 3 percent, the first decline on record.

The National Retail Federation said Monday that nearly 9 out of 10 retailers plan specific Cyber Monday deals, up slightly from about 84 percent last year. Deals on specific products, one-day sales and free shipping are expected to be the most common promotions.

While the day after Thanksgiving is known as Black Friday, historically the point when retailers start to turn a profit, the following Monday has become known as Cyber Monday, when sellers look to lure holiday shoppers online, either from work or home.

ComScore analyst Andrew Lipsman expects free shipping deals to be key, as companies this year are planning their promotions more carefully so there will be less discounting.

"Psychologically, consumers need to get some sort of a deal on almost every transaction, and free shipping tends to be pretty compelling," Lipsman said.

Lipsman is expecting "marginally positive" online sales growth compared with a year ago.

The Monday after Thanksgiving is typically one of the top 10 busiest online shopping days, but it’s not the busiest day. Last year it was the third-busiest day since a late Thanksgiving holiday led to pent-up demand.

This year Thanksgiving also falls late in November, and Lipsman expects the date to rate similarly high.

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A deal between U.S. regulators and J.P. Morgan Securities to settle charges over secret payments to Alabama’s Jefferson County may prove a false dawn for the debt-ridden county.

County officials welcomed the settlement, but analysts said on Thursday it will not unravel its multibillion-dollar sewer-system bond debt, which still threatens to force the county into the biggest municipal bankruptcy in U.S. history.

While the deal may give the county leverage in talks over the debt that have lasted 20 months, it still faces a fundamental problem — Jefferson County’s sewer system generates insufficient revenue to pay creditors.

The settlement “is not a fundamental game changer,” said Melissa Woodley, assistant professor of finance at Alabama’s Samford University. “The biggest problem has always been the sewer bonds, and that is still there.”

On the face of it, the settlement announced on Wednesday is good news for Jefferson County, which accumulated its debt earlier this decade by using complex bond and swap transactions to refinance improvements to its sewer system.

But that debt mushroomed in February 2008, when ratings agencies downgraded the county’s bond insurers. Earlier this week, the debt stood at close to $4 billion and counting as interest costs of roughly $75,000 accumulate each day.

Under the settlement, J.P. Morgan Securities will pay a penalty of $25 million to the U.S. Securities and Exchange Commission (SEC) and will pay the county $50 million payday loans online.

The bank will also forfeit more than $647 million it claimed in termination fees, making a significant dent in the total owed by the county.

At the same time, the SEC has filed a civil complaint against two former J.P. Morgan employees in connection with their conduct during the swap transactions.

“VICTIM STATUS”

County commission president Bettye Fine Collins described the deal as “significant” and said it “greatly” enhanced the county’s financial position.

Yet she sought to couch the deal not so much in terms of the overall reduction of the debt, and more in terms of the assignment of responsibility for its accumulation.

She cited a letter she wrote to SEC chairman Mary Schapiro in June asking the commission to consider the county’s “status as a victim of these violations in negotiations with J.P. Morgan.”

“It is appropriate for the SEC to include, in its settlement, relief that will help Jefferson County in its efforts to resolve the sewer debt and avoid bankruptcy,” she wrote.

Jefferson’s debt matters to bondholders and banks as well as to Alabama’s economy because Birmingham, the state’s largest city is situated at the heart of the county. Bankruptcy for the county could limit the state of Alabama’s ability to raise money through bonds. 

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