Analysis: MF Global proves Enron-era accounting lives on

Latest News - The off-balance-sheet accounting methods that Enron and Lehman Brothers made famous in their epic failures years ago have a modern-day poster child: MF Global.

Like its predecessors, the bankrupt brokerage formerly run by Jon Corzine took advantage of an accounting maneuver to keep certain financial obligations off its books, making the firm look less indebted and thus less a risk than it really was.

On Thursday, Mary Schapiro, chairman of the Securities and Exchange Commission, told a committee of Congress the SEC was investigating the accounting treatment that helped mask MF Global's exposure to risky foreign sovereign debt.

The fact that MF Global was able to use the technique highlights how off-balance-sheet moves are evolving as quickly as new accounting rules intended to stop them. Earlier this year, the Financial Accounting Standards Board changed its rules to bar an off-balance-sheet loophole that had helped Lehman Brothers get into trouble in 2008.

The fixes of FASB often are too specific to keep firms from trying new tacks, said several analysts, academics and former regulators. "They keep trying to put a Band-Aid on this thing, but you've got this problem that is huge and requires major surgery," said Penn State University accounting professor Ed Ketz.

WITHIN THE RULES

MF Global's version complies with current accounting rules. Other Wall Street firms use it too, though generally for ultra-safe U.S. Treasuries, which the government promises to repurchase at face value.
In MF Global's case, the off-balance-sheet accounting itself didn't cause the firm's downfall, but it allowed MF Global to use borrowed money to make billions of dollars in ultimately catastrophic bets on European sovereign debt - and obscured the risk those bets posed to the company.

Nothing was done to force MF Global to respond until the U.S. Financial Industry Regulatory Authority demanded that MF Global's broker dealer business put aside more cash and liquid assets to absorb any losses in its European bets. Moody's downgraded the firm, setting off a rapid drop in confidence that ended with the firm's October 31 bankruptcy.

Moody's senior analyst Al Bush told the Wall Street Journal last month his firm was surprised to learn that MF Global's large off-balance-sheet position was not being held for clients, but was the firm's own bet.

Law-enforcement officials, regulators and the bankruptcy trustee are still searching for as much as $1.2 billion in missing investor money believed to have been unlawfully mingled with the firm's own funds. The firm has said it is cooperating fully with the investigation. Corzine has been quiet on the matter since his November 4 resignation, though at that time he pledged to help the firm respond to inquiries.

REPO


MF Global's off-balance-sheet maneuver involved what's called a repo, or repurchase agreement. In repo deals, a firm borrows money, but puts up assets as collateral, assets it agrees to repurchase later. Repo deals are common, and typically don't move assets off the balance sheet.

Lehman got in trouble for doing deals in late 2007 and in 2008 using a slightly different move, what it called the "Repo 105,", which used to get assets off its balance sheet, often just days prior to its reporting deadlines.
Lehman's repo created "a materially misleading picture of the firm's financial condition," according to a 2010 report by Anton R. Valukas, the now-defunct firm's Bankruptcy Court examiner and chairman of Jenner & Block law firm.. It has been closed by a new FASB rule being implemented this quarter.

MF Global used a version of the off-balance-sheet move called "repo-to-maturity." The firm offered billions of dollars in sovereign debt as collateral on a series of loans designed to expire at the same time as the collateral itself. With the collateral and the loans coming due simultaneously, MF Global might never take possession of that debt again. That entitled the firm to count those as sales, and moved $16.5 billion off its balance sheet, most of it debt from Italy, Spain, Belgium, Portugal and Ireland.

It did disclose a $6.3 billion exposure to European debt, a figure that eventually became a concern for regulators and others doing business with the firm.

To top it all off, the accounting for these deals added $124 million in financing payments to the firm's revenue over the last four quarters, according to SEC filings, firm documents and people close to the firm.

HARD TO TRACK

It's hard to track the intricacies of repo-to-maturity deals. A few other financial firms including Oppenheimer, Nomura Holdings and Merrill Lynch have disclosed that they use the structure. Much like MF Global, Nomura used the deals to help build a bet on European debt that was as high as $3.6 billion at the end of September, but which has now been cut by the Japanese firm to $884 million. A New York spokesman for Nomura could not immediately be reached for comment.

Accounting and financial experts are starting to call for a re-examination of the repo structure that MF Global used. "We are talking to FASB about whether that is a policy that ought to be changed," Schapiro said on Thursday, referring to the Financial Accounting Standards Board. In response, a FASB spokesman declined immediate comment.

Last month, Leslie Seidman, FASB chairman, told Reuters in an interview that the U.S. accounting rule maker relies on regular contact with regulators, investors, accounting experts, companies and accounting firms to know what accounting concerns are out there and no one had raised questions about repo-to-maturity transactions.

Accounting rules since Enron have forced many deals onto the balance sheet and disclosure of important details on other deals. Hundreds of billions of dollars of investments in credit card debt, for example, moved onto balance sheets after accounting changes in 2010, though similar bets on real estate loans remain largely off bank balance sheets. Hundreds of billions of dollars in obligations of all types sit off balance sheets.

In the banking industry, the bigger off-balance-sheet categories are unused credit, investments backed by pools of loans and derivatives. Excluding derivatives, which are largely offset by other investments aimed at limiting their risk, U.S. bank holding companies' off-balance-sheet obligations totaled over $9 trillion in September, according to an analysis of Federal Reserve Board data by Montanus Group.

More than half of that came from unused lending commitments, 70 percent of which were promised by the 10 largest banks.

That's down almost $700 billion in the last two years, in part because of changes in accounting rules that required banks to bring some of their off-balance-sheet deals onto the books.

For MF Global, repo-to-maturity deals pushed assets and liabilities off their balance sheet while providing a source of income for a company that had a drop in other sources, especially interest income.

MF Global earned $286.8 million in its last full fiscal year from interest income after expenses. Three years earlier, that figure was $502.1 million.

"In this type of environment, when it's tough to generate high returns on anything, institutions may try to get a little cute in the way they take positions," said Montanus Group managing partner Nathan Powell. "That's the lesson I take from MF Global."

Posted on 5:55 AM / 0 comments / Read More

Zynga IPO values company as high as $9.04 billion

Latest News - Zynga Inc plans to sell an 11.1 percent stake in a scaled-back initial public offering that would value the Facebook game maker at as much as $9 billion on a fully diluted basis.

The leading social games maker plans to sell 100 million new shares at between $8.50 and $10 each, according to a U.S. regulatory filing on Friday.

At the midpoint price, the IPO could raise $925 million, which would make it the largest from a U.S. Internet company since Google Inc raised $1.7 billion in 2004.

Five-year-old Zynga made its name on viral games such as "FarmVille," among the most popular on the Facebook social network. While Zynga's games are free to play, the company makes money from selling virtual items -- such as tractors and weapons -- that players then use.

Based on a fully diluted share count of 904 million, which includes existing shares and stock options, the IPO price values Zynga at $7.7 billion to $9.04 billion.

In a filing two weeks ago, the company said a third-party analysis had valued it at $14.05 billion. While the valuation has been cut, Zynga would still be among the largest publicly traded U.S. game developers after it debuts on Nasdaq under the "ZNGA" symbol.

Video game developer Activision Blizzard Inc currently has the industry's highest market value of $14.2 billion, followed by Electronic Arts Inc at $7.7 billion.

Zynga's debut will follow IPOs this year from Groupon Inc and LinkedIn Corp, which helped revive a market that had sputtered in recent years. Facebook is gearing up to go public next year.

Mark Pincus, a serial entrepreneur before he founded Zynga, will hold a class of shares with 70 times more voting power than the regular stock that will be sold in the offering.

Google, one of the early investors in Zynga, will be offering about 1.7 million shares, according to a regulatory filing. Other companies selling shares include Institutional Venture Partners and Union Square Ventures
Deep-pocketed rivals from Walt Disney Co to Electronic Arts are starting to muscle in on Zynga's turf.

The company said its IPO represented 14.3 percent of 699 million common shares, excluding restricted stock.

Posted on 5:54 AM / 0 comments / Read More

Coal projects under fresh scrutiny in Australia

Latest News - Australia Monday said all new coal seam gas (CSG) and large coal projects would face increased scientific scrutiny after a key lawmaker made it a condition of his approval for a contested mining tax.

Prime Minister Julia Gillard said there would be a "new focus on scientific evidence to build community confidence" in the fast-growing but controversial CSG industry, which is facing a public backlash in parts of Australia.

All future projects would be scrutinised by a new Aus$150 million (US$149.6 million) independent scientific committee to ensure they did not pose a risk to underground water sources before they could be approved, Gillard said.

"Coal seam gas and coal can bring huge opportunities, but to do so must maintain community confidence, especially in regard to the impact on water," the premier said in a statement.

"This can only be achieved by ensuring all environmental approvals and licensing decisions are made on the basis of transparent, objective scientific evidence."

Farmers, winegrowers and other landholders have spoken out against the emerging CSG industry due to concerns about its "fracking" extraction method -- under which high-pressure water and chemicals are used to split rockbeds.

Protesters have called for greater certainty about the environmental impacts of fracking, particularly on groundwater sources, before projects are approved.

The industry has said that the practice is safe and that CSG will be a vital part of the energy mix as the world looks for cleaner fuel sources.

Independent lawmaker Tony Windsor, a key member of Gillard's minority coalition government, has been vocal about CSG and large-scale mining projects in his rural, mostly agricultural electorate.

Windsor made scientific action on mining a condition of his support for Gillard's contentious tax on coal and iron ore profits, and secured Monday's promises from the government as the tax was debated in parliament.

The tax, to go to a vote this week, will apply to the extraordinary profits of major coal and iron ore miners at a rate of 30 percent.

It was watered down from 40 percent and a range of other concessions were made after an intense campaign from the powerful and wealthy mining industry.

Gillard said a new expert committee would advise the government on the scientific impacts of CSG and large coal mining projects "where they have significant impacts on water".

"This is an important development with Australia set to benefit from a strong coal mining and coal seam gas industry for years to come", she said.

Posted on 11:46 PM / 0 comments / Read More

BNP profits hit by 2 billion euro Greek charge

Latest News - France's biggest listed bank BNP Paribas reported a 72 percent slide in quarterly earnings on Thursday after booking a bigger-than-expected 2 billion euro ($2.8 billion) charge on Greek debt and sold billions in eurozone bonds to cut risk.

The charge equated to 60 percent of BNP's sovereign exposure to the crisis-hit Greek economy and reflected last month's pledge from private-sector creditors to write off a bigger chunk of their Greek debt, the bank said in a statement, though it added the plan was still "shrouded by uncertainty."

Describing the bank's Greek provisioning as adequate for the time being, BNP Chief Executive Baudouin Prot nonetheless did not rule out a Greek sovereign debt default, telling Reuters Insider TV it would be "unpleasant" but manageable.

"A (Greek) default certainly would be manageable. Unpleasant, but manageable," he said. "I think that (BNP's provisioning) is adequate ... We will see as things go."

Separately, Dutch financial services group ING Group said it would cut 2,700 jobs at its Dutch banking operations to cope with a deteriorating market, which led to Greek and other impairments.

BNP's big balance sheet, its dependence on wholesale funding markets and its overwhelming European exposure make it among the most vulnerable to the eurozone sovereign debt crisis.

Following a sharp share-price drop in the summer, the bank has announced sweeping asset sales that will be accompanied by job cuts, mainly at its corporate and investment bank, BNP's Prot said, though he would not comment on likely numbers.

"We will have some staff reductions as we implement the deleveraging plan," he said. "We are working (on) the numbers and we will make announcements to the different platforms in mid-November."

Banks such as JPMorgan Chase and Credit Suisse are shedding jobs worldwide as stricter regulations and a tough trading environment take their toll on investment banking units in particular.

BNP's cuts will be in the hundreds not thousands, Prot told BFM Radio.

The impact of disposals and the reduction in U.S.-dollar funding needs -- down by $20 billion in the third quarter and due to go down by the same amount in the fourth -- will lead to one-off losses of 1.2 billion euros, BNP said.

On an annual recurring basis, gross operating income will fall by 750 million.

BNP's Frankfurt-listed shares were down 2.8 percent at 0702 GMT (3:02 a.m. EDT). The bank's Paris-listed shares are down 44.5 percent since the end of June, against a 27.8 percent fall for the STOXX Europe 600 bank index <.SX7P> and a 57 percent fall for smaller domestic rival Societe Generale .

EUROZONE DEBT SLASHED

Third-quarter net profit at BNP fell by 71.6 percent to 541 million euros, compared with a 991.9 million mean estimate of nine analysts polled by Reuters. Revenue fell 7.6 percent to 10.0 billion compared with a mean estimate of 10.48 billion.

The results bore the scars of a volatile quarter, with corporate and investment bank revenue down 39.8 percent to 1.75 billion euros. Capital-markets pretax profit was almost completely wiped out, while wealth and asset management pretax profit fell by nearly 50 percent in the quarter.

However, BNP's strong exposure to retail banking benefited from revenue and credit growth in western European markets and others like Turkey. Retail pretax profit rose by 22.8 percent.

In addition to taking a Greece charge of 2.26 billion euros, BNP also booked extra losses after slashing its exposure to eurozone sovereign debt by 20.7 percent to 58.6 billion euros.

The bank cut its banking-book exposure to Greek sovereign debt to 1.6 billion from 3.5 billion at end-June; Spanish holdings fell to 0.5 billion from 2.7 billion; exposure to Italy slid to 12.2 billion from 20.5 billion.

CEO Prot said the move was a response to regulators' demand that banks mark their sovereign debt to market values.

Asked whether the bank would continue to offload sovereign bonds, BNP's Prot told Reuters Insider: "No ... We are going to stand where we are."

BNP's quarterly numbers were peppered with other one-offs, including a revenue gain of 786 million euros on widening spreads on BNP's own debt and a 299 million-euro writedown on its 5.2 percent stake in Europe's No. 2 insurer AXA .

The bank's core Tier 1 ratio, a closely watched metric of lenders' loss-absorbing capital, stood at 9.6 percent at end-September, unchanged from end-June.

French banks including BNP have promised to boost their capital levels by 8.8 billion euros without government help to reach tougher targets set by European regulators for mid-2012.

Although bonuses will likely come down in line with capital-markets profits, BNP could be at 9.1 percent core Tier 1 in mid-2012 without touching its dividend, CEO Prot said.

Posted on 12:59 AM / 0 comments / Read More

GOP primary contest is getting nasty, personal

Latest News - Talk about nasty.

The bitter, face-to-face sniping at this week's Republican debate was just a prelude to the coming weeks as Mitt Romney's rivals seek to tear him down before the leadoff Iowa caucuses.

Increasingly on the defensive, Romney is being hammered on old issues — like an accusation of hiring illegal immigrants to work on his yard — and is creating new openings for everyone from Rick Perry to President Barack Obama.

"You won't hear a lot of shape-shifting nuance from me," Perry told Republicans gathered in Las Vegas on Wednesday, hitting Romney anew the day after the two sparred onstage during a debate. "I'm going to give the American people a huge, big old helping of unbridled truth."

The target was Romney, who over the years has reversed his positions on a series of issues that conservatives champion. And the sharper, more personal tone seems sure to shape the campaign in the next month as Perry looks to undercut the former Massachusetts governor's standing at the head of the pack.

Obama's team, too, wasted little time in going after Romney in personal terms.

"The core principle driving Mitt Romney? Getting elected," Obama campaign manager Jim Messina told reporters in a conference call.

Appearing unruffled at the attacks, Romney kept his focus on Obama and the economy on Wednesday, saying: "He should be less concerned about keeping his own job and spend more time helping the millions who are unemployed."

But more criticism against Romney is certain to come from fellow Republicans as the race for theGOP nomination enters a new phase and the 2012 general election inches closer.

For now, Romney tops state surveys and national polls, including the latest Associated Press-GfK survey, in the GOP campaign. Perry's and Romney's other rivals have mere weeks to change that dynamic before the Iowa caucuses on Jan. 3.

After five debates since Labor Day, the candidates won't meet again in that setting until mid-November. So they'll be mixing it up mostly from afar — on the campaign trail, on the Internet and, soon, in television advertising by the candidates themselves as well as by Super PACs that are working on their behalf and can spend as much money as they raise.

The candidates will cross paths at a dinner in Iowa this weekend where they will try to court cultural conservatives who haven't yet rallied behind a single contender. It's a prime setting for candidates like Perry, Minnesota Rep. Michele Bachmann, businessman Herman Cain and others looking to emerge as the alternative to Romney. Iowa conservatives have long viewed Romney skeptically for his reversals on abortion rights and gay rights, and they have viewed his Mormon faith warily.

Perry also will give an economic speech on Tuesday in South Carolina. Romney contends his business background makes him the strongest Republican in the field able to take on Obama on the economy, and Perry needs to counter that. The Texan will point to his state's job growth during his tenure as governor, and, in a bid to win over fiscal conservatives, he plans to call for tax changes that would apply the same rate to all citizens, regardless of income level.

Previewing the proposal, Perry said Wednesday that jumpstarting the economy "starts with scrapping the 3 million words of the current tax code and starting over with something much simpler: a flat tax. I want to make the tax code so simple that even Timothy Geithner can file his taxes on time." It was a reference to Obama's Treasury secretary.

Behind the scenes, the candidates with the most money — Perry and Romney — and their allied groups are gearing up for the inevitable TV ad war. Each campaign is sitting on roughly $15 million and counting, and there are less than 75 days before the Iowa caucuses.

There's no doubt that the personal attacks that played out on stage Tuesday — and that had been simmering behind the scenes for weeks between the Romney and Perry camps — will now continue out in the open.

Romney, for one, wasted no time. He told a South Dakota business group that the nation's economic challenges require a tested leader, while he released an Internet campaign video questioned Perry's readiness to be president. The video knots together clips from recent debates where Perry jumbled his words and had trouble making his point.

And Herman Cain got in on it Wednesday, too, offering a full-throated defense of his 9-9-9 tax plan a day after his opponents repeatedly attacked the proposal during the debate. Their attacks and insistence that his plan couldn't pass Congress, he said, show the "difference between a politician and a problem solver."

As GOP strategist Alex Castellanos said in a Twitter message after the most acrimonious debate of the year: "All the GOP candidates have lost their virginity now. Everybody attacks everybody from now on."

After the debate and again on Wednesday, the candidates' respective aides made that clear.

Romney adviser Ron Kaufman called Perry "a petulant little boy" and said that Romney "put him in his place."

"The governor of Texas came across as mean, petulant and nasty," Kaufman said.

Perry communications director Ray Sullivan suggested the sharper tone from Perry would continue, saying: "I suspect this tack will be part of future debates, will be part of the campaign, and that's probably good for the voters."

He explained Perry's sharper tone this way: "I think he was Rick Perry in his approach, and that was a good thing for us."

A more aggressive Perry showed up during the debate and quickly assailed Romney's character.

"Mitt, you lose all of your standing from my perspective because you hired illegals in your home, and you knew for about it for a year," Perry said, raising a topic that was an issue during Romney's 2008 presidential run. "And the idea that you stand here before us and talk about that you're strong on immigration is, on its face, the height of hypocrisy."

Romney defended himself, but in doing so gave critics an opening.

He said that he had told the company that worked on his lawn in 2006 and 2007 that all of its workers had to be in the country legally.

"I'm running for office, for Pete's sake, I can't have illegals," Romney said he told the company when he discovered that it employed illegal immigrants.

Obama's advisers jumped on that comment quickly, with Messina saying: "He didn't object to having undocumented immigrants working for him because it's illegal."

Democrats also cast him as out of touch with middle class Americans after he went to Nevada — the state with the highest foreclosure rate in the nation — and said he wants to allow home foreclosures to "hit the bottom" to help the housing industry recover.

There's no mystery as to why Obama's team is assailing Romney. Many Democrats see him as likeliest to win the GOP nomination, given his wide name recognition, his proven fundraising ability and his expansive campaign organization.

Democrats believe he could be a formidable contender, with his business background and economic pitch, against a Democratic incumbent trying to win re-election at a time of 9 percent unemployment.

Posted on 10:53 PM / 0 comments / Read More

Congress passes 3 free trade agreements

Latest News - Congress approved free trade agreementsWednesday with South Korea, Colombia and Panama, ending a four-year drought in the forming of new trade partnerships and giving the White House and Capitol Hill the opportunity to show they can work together to stimulate the economy and put people back to work.

In rapid succession, the House and Senate voted on the three trade pacts, which the administration says could boost exports by $13 billion and support tens of thousands of American jobs. None of the votes were close, despite opposition from labor groups and other critics of free trade agreements who say they result in job losses and ignore labor rights problems in the partner countries.

"We don't do much around here that's bipartisan these days," said Sen. Rob Portman, R-Ohio, who was U.S. Trade Representative during the George W. Bush administration. "This is an example of where we can come together as Republicans and Democrats realizing that with 14 million Americans out of work, we need to do things to move our economy forward."

President Barack Obama said passage of the agreements was "a major win for American workers and businesses."

"Tonight's vote, with bipartisan support, will significantly boost exports that bear the proud label 'Made in America,' support tens of thousands of good-paying American jobs and protect labor rights, the environment and intellectual property. ... I look forward to signing these agreements."

The agreements would lower or eliminate tariffs that American exporters face in the three countries. They also take steps to better protect intellectual property and improve access for American investors in those countries. The last free trade agreementcompleted was with Peru in 2007.

The House also passed and sent to Obama for his signature a bill to extend aid to workers displaced by foreign competition. Obama had demanded that the worker aid bill be part of the trade package.

Years in the making, the votes come just a day after Senate Republicans were unified in rejecting Obama's $447 billion jobs creation initiative

The agreement with South Korea, the world's 13th largest economy, was the biggest such deal since the North American Free Trade Agreement with Mexico and Canada in 1994.

The votes were 278-151 for South Korea, 300-129 for Panama and 262-167 for Colombia. The Senate votes were 83-15 for Korea, 77-22 for Panama and 66-33 for Colombia.

Despite the strong majorities, the debate was not without rancor.

Republicans criticized Obama for taking several years to send the agreements, all signed in the President George W. Bush administration, to Congress for final approval. Many among Obama's core supporters, including organized labor and Democrats from areas hit hard by foreign competition, were unhappy that the White House was espousing the benefits of free trade.

Lori Wallach, director of Public Citizen's Global Trade Watch, said the "job-killing" agreements were a "complete flip-flop for President Obama, who won crucial swing states by pledging to overhaul our flawed trade policies."

In Cartagena, Colombian President Juan Manuel Santos said, "Today is a historic day for relations between Colombia and the United States." He added that the agreement with his country "is going to generate much well-being for our peoples."

But Tarsicio Mora, president of Colombia's CUT labor federation, said Colombia's economy was not ready to compete with the U.S.

"Our country isn't developed, it does not have the expertise much less the requirements for trade at this level," Mora said. "The country should be clear as to who is responsible for the coming massacre, because industry, large and small businesses are going to be hit because we are not in a condition to compete."

Panamanian President Ricardo Martinelli said the trade agreement will help to attract foreign investment and increase commerce with the U.S., contributing to the creation of new jobs in the Central American country.

"We, Panamanians, have to prepare to take advantage of this agreement," Martinelli said in a statement.

Panama's Chamber of Commerce, Industries and Agriculture called it "a historic moment for Panama."

"This is a historic moment for Panama. A treaty with the largest trading partner in the world has been ratified and this will open the doors to a very important market," said chamber president Federico Humbert in a statement.

"We hope this agreement will bring great opportunities for Panama, while encouraging competitiveness and attract more foreign investment to our country," Humbert said.

House Democratic leader Nancy Pelosi said that before taking up free trade agreements the House should be considering legislation passed by the Senate on Tuesday that would punish China for keeping its currency undervalued, a practice that makes its exports cheaper and contributes to China's huge trade surplus with the United States. House GOP leaders oppose the currency bill and a Democratic attempt to attach it to the Colombia agreement was rejected.

Democratic opposition was particularly strong against the agreement with Colombia, where labor leaders long have faced the threat of violence.

"I find it deeply disturbing that the United States Congress is even considering a free trade agreement with a country that holds the world record for assassinations of trade unionists," said Rep. Maxine Waters, D-Calif.

To address Democratic objections to the deals, the White House demanded linking the trade bills to extension of a Kennedy-era program that helps workers displaced by foreign competition with retraining and financial aid. The Senate went along; the House passed it Wednesday, 307-122.

But with the focus in both the White House and Congress on jobs, the trade agreements enjoyed wide bipartisan support.

The administration says the three deals will boost U.S. exports by $13 billion a year and that just the agreement with South Korea, America's seventh largest trading partner, will support 70,000 American jobs.

Supporters say the three trading partners already enjoy almost duty-free access to U.S. markets and the agreements will lower tariffs on U.S. goods, making them significantly more competitive.

The U.S. Chamber of Commerce notes that U.S. farm products sold to South Korea face 54 percent tariffs, compared with 9 percent for Korean agricultural goods in the United States, and that U.S. automakers are hit with a 35 percent tariff in Colombia, compared with 2 percent for any vehicles coming from Colombia.

The administration says the trade deal with South Korea could increase exports by $10 billion, enough to eliminate the current $10 billion surplus Seoul has with the United States. It would make 95 percent of American consumer and industrial goods duty free within five years.

The vote came a day before Korean President Lee Myung-bak is to address a joint meeting of Congress. On Wednesday he said in a speech at the Chamber of Congress that the agreement would "send a powerful message to the world that the United States and South Korea stand together in rejecting protectionism and that we are open to free and fair trade."

Republicans welcomed the prospect of increased exports but said those benefits could have come sooner if Obama had acted more quickly. They said American businesses have paid $3.8 billion in tariffs to Colombia since the trade agreement was signed, and that Americans are losing markets in South Korea because of a Korea-European Union free trade agreement that went into effect in July.

In the past year the administration has succeeded in winning concessions from South Korea to open up its markets further to U.S. vehicles and concluded an agreement to bring transparency to banking practices in Panama, known as a tax haven.

It has prodded Colombia into putting together a plan designed to protect labor rights and crack down on violence against labor leaders.

The United States has free trade relations with 17 nations. It could still take several months to work out the final formalities before the current agreements go into force. The South Korean parliament is expected to sign off on its agreement this month.

Posted on 2:44 AM / 0 comments / Read More

US foreclosure activity edged higher in 3Q

Latest News - More U.S. homes are entering theforeclosure process, but they're taking ever longer to get sold or repossessed by lenders.

The number of U.S. homes that received a first-time default noticeduring the July to September quarter increased 14 percent compared to the second quarter, RealtyTrac Inc. said Thursday.

That increase signals banks are moving more aggressively now against borrowers who have fallen behind on their mortgage payments than they have since industrywide foreclosure processing problems emerged last fall. Those problems resulted in a sharp drop in foreclosure activity this year.

The surge in default notices means homeowners who haven't kept up their mortgage payments could now end up on the foreclosure path sooner. Initial default notices are first step in the process that can eventually lead to a home being taken back by a lender.

A pickup in foreclosure activity also means a potentially faster turnaround for the U.S. housing market. Experts say a revival isn't likely to occur as long as there remains a glut of potential foreclosures hovering over the market.

The third-quarter increase in initial defaults was largely a product of a spike in August. In September, default notices were off 10 percent from August, RealtyTrac said.

Still, the jump in initial defaults during the July to September period is significant because it is the first increase after five consecutive quarterly declines, suggesting banks are gradually addressing their backlog of homes in foreclosure and are now beginning to move on more recent home loan defaults, said RealtyTrac CEO James Saccacio.

"While foreclosure activity in September and the third quarter continued to register well below levels from a year ago, there is evidence that this temporary downward trend is about to change direction, with foreclosure activity slowly beginning to ramp back up," Saccacio said.

Foreclosure activity began to slow last fall after problems surfaced with the way many lenders were handling foreclosure paperwork, namely shoddy mortgage paperwork comprising several shortcuts known collectively as robo-signing.

Many of the nation's largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases and revisiting pending cases to prevent errors.

Other factors have also worked to stall the pace of new foreclosures this year. The process has been held up by court delays in states where judges play a role in the foreclosure process, lenders' reluctance to take back properties amid slowing home sales and a possible settlement of government probes into the industry's mortgage-lending practices.

Those settlement talks, led by a group of state attorneys general, have been undermined in recent weeks after state officials in some states, including California and Massachusetts, have broken with the rest of the states.

While banks appear more willing to start the foreclosure countdown on borrowers, they haven't put a dent in the overall length of the foreclosure process.

In the third quarter, it took an average of 336 days, or 11.2 months, for a U.S. home to go from receiving an initial notice of default to being foreclosed by a lender, RealtyTrac said.

That's up from 318 days, or 10.6 months, in the second quarter and represents the largest average span of time for the foreclosure process since the first quarter of 2007, the firm said.

In some states, it's even longer.

It took an average of 986 days, almost three years, for the foreclosure process to play out in New York in the third quarter — the longest stretch of time of any state, RealtyTrac said.

New Jersey was a close second at 974 days, while Florida was third at 749 days, or just over two years.

Not all states are seeing an increase in the time it takes for homes to move through the foreclosure process, however.

In Texas, homes made it through the foreclosure process in an average of 86 days during the third quarter, down from 92 days in the second quarter, RealtyTrac said.

In all, 195,878 properties received a default notice in the third quarter. Despite the sharp increase from the second quarter, the total was still down 27 percent versus the third quarter last year, RealtyTrac said.

Lenders took back 196,530 homes during the quarter, down 4 percent from the second quarter and down 32 percent from the same quarter last year.

Banks remain on track to repossess some 800,000 homes this year, down from more than 1 million last year, Saccacio said.

RealtyTrac had originally anticipated some 1.2 million homes would be repossessed by lenders this year.

Posted on 2:43 AM / 0 comments / Read More

In China, Russia's Putin calls US a parasite

Latest News - Russian Prime Minister Vladimir Putin is likening the U.S. to a parasite following his meetings with Chinese leaders to push ahead energy deals and draw the once wary neighbors closer.

In an interview with Chinese state media released Tuesday, Putin said that the U.S. itself is not a parasite for the world economy but that its dollar monopoly is. Putin said his criticism was meant to help find a solution to problems in the world economy.

Putin's reproach came after a half-day of talks in Beijing in which he and Chinese Premier Wen Jiabao reportedly agreed on pricing of oil shipped to China and vowed to push ahead on gas prices.

Posted on 7:45 PM / 0 comments / Read More

Education companies

Latest News - Shares of some top education companies are down at 10 a.m.:

• Apollo Group fell $.68 or 1.6 percent, to $41.54.
• Career Education fell $.06 or .4 percent, to $14.07.
• DeVry fell $.89 or 2.3 percent, to $38.49.
• Strayer Education fell $.10 or .1 percent, to $79.25.

Posted on 7:40 AM / 0 comments / Read More

Finance companies

Latest News - Shares of some top finance companies are mixed at 10 a.m.:

• Bank of America fell $.06 or 1.0 percent, to $5.70.
• Citigrp rs fell $.20 or .8 percent, to $24.19.
• JPMorgan Chase rose $.09 or .3 percent, to $30.35.

Posted on 7:39 AM / 0 comments / Read More

The federal budget deficit

Latest News - The federal budget deficit reached $1.23 trillion in August. The third straight $1 trillion-plus deficit adds pressure on Congress and the White House to reach agreement on a long-term plan to trim government spending.
The Treasury Department says the deficit grew by $134.2 billion last month. At that rate, the nonpartisan Congressional Budget Office projects the deficit will total $1.28 trillion when the budget year ends in September. That would nearly match last year's $1.29 trillion imbalance and come in below the record $1.41 trillion hit in fiscal 2009.
A congressional panel is seeking $1.2 trillion in savings later this year.
The CBO director warned that spiraling interest payments could swamp the government's ability to pay for its operations and could spark a financial crisis if nothing is done.

Posted on 11:13 AM / 0 comments / Read More

Recovery will be driven not by Washington

Latest News - The economy needs to be fixed. On this, Democrats and Republicans agree. They part ways over how to do it and, specifically, what role the federal government should play.

"Ultimately," President Barack Obama tells Congress, "our recovery will be driven not by Washington, but by our businesses and our workers. But we can help." His argument that government has a responsibility to do so probably doesn't sit well with an America that's down on Washington.

Texas Gov. Rick Perry, former Massachusetts Gov. Mitt Romney and other Republicans competing for his job take a different tack as they court a tea party-infused GOP electorate: The economy will thrive, they say, if Washington simply gets out of the way. As Perry puts it: "Smaller government, less spending, fewer regulations."

At the heart of the 2012 presidential race is an issue as old as the country itself. Is it the federal government's responsibility to address what ails the nation, in this case the economy? And if so, to what degree? What is the right balance?

History tells us that, try as we might, we may never answer those questions; we've been debating them ever since the Jeffersonians and the Federalists squabbled over states' rights vs. a strong central government. In the end, the Constitution assigned certain powers to the federal government while reserving others to states.

But the tension in America between the purely local and a far-off central government has never gone away. Nor, perhaps, should it in an ever-evolving democracy.

These days, Republicans argue for a limited government, claiming that lower taxes and less regulation will encourage job creation. Democrats advocate a more robust government, one that provides more services, pours more money into the economy and, in Obama's case, raises taxes on the nation's highest earners.

"We've been in this pattern for decades. These are the terms of our politics probably for the next generation, too," said Charles Kesler, who teaches government at Claremont McKenna College and edited "Saving the Revolution: The Federalist Papers and the American Founding."

Given the scripts, the question that ultimately determines who wins the presidency might be this: What do Americans want from their government?

For many, the answer is difficult to articulate.

Larry Parkin, a conservative who hosts a discussion group on the Federalist Papers with the South Pinellas 9.12 Patriots in St. Petersburg, Fla., just started collecting Social Security, which he calls a contract with the government. The 65-year-old Coast Guard retiree expects the country to secure the borders and protect the nation. Beyond that, he says: "I expect them to be less intrusive than they are. I expect them to have a limited role."

But he struggles to identify exactly where the line between too much and too little government lies.

Ask Ashley Stilos, a liberal in Fayetteville, Ark., the same question and she says one of the government's roles is to take care of its people, adding: "Every individual should have the right to pursue happiness from an equal fighting ground, and that's not the way it is in society."

Is it the government's job to make that playing field level? The 27-year-old university loan specialist says: "They have the power to make it more equal, and it's their responsibility to do that."

Americans' views of government have shifted in recent years, according to an analysis of Associated Press exit polls.

In 1992, more than half of voters thought government was doing too many things better left to businesses and individuals. But by 2008, a majority, for the first time, wanted government to do more to solve the nation's problems.

That didn't last long after Obama took office. In quick fashion, he signed into law an economic stimulus plan, oversaw an auto-industry bailout and presided over the second installment of money to keep Wall Street afloat. A health care system overhaul came a year later.

By 2010, 56 percent of voters were back to saying that government was overreaching, while just 38 percent said government should be more active. It was the most government wary view among independents that the exit poll has recorded, with 65 percent saying government should do less, while 28 percent said it should do more.

Nowadays, people across the political spectrum seem to want very little from Washington.

A CNN/Opinion Research Corporation poll in June found that 63 percent of people think the government is doing too much, while 33 percent want it to do more. And the sentiments of independents, who typically decide close elections, generally mirrored Americans at large.

But all that could change quickly, especially if these tough times persist, with 9.1 percent unemployment, rampant foreclosures and fear of back-to-back recessions.

Against this backdrop, Obama is seeking re-election. And a 24-hour span last week showed the vastly different type of leader — and view of government — the nation will get if they choose a Republican over him.

No sooner did eight Republicans take the debate stage at the Ronald Reagan Presidential Library in Simi Valley, Calif., than did they rail against the federal government requiring states to act a certain way, lambast Washington overreach, and argue that fewer regulations and lower taxes would compel businesses to hire again.

"They're looking for a president that will say we're going to lower the tax burden on you and we're going to lower the regulation impact on you, and free them to do what they do best: create jobs," said Perry, who has staked his candidacy on a promise to make the federal government as inconsequential as possible to people's lives.

He and the others were posturing before a GOP electorate shaped by the tea party, whose existence can be attributed in part to a disgust by citizens over the growth of government — and federal spending — under George W. Bush, a Republican, and Obama, a Democrat.

"I believe in a lot of what the tea party believes in," Romney said. "The tea party believes that government's too big, taxing too much, and that we ought to get to the work of getting Americans to work."

Minnesota Rep. Michele Bachmann said Washington needs to stay out of education and health issues, claiming: "We have the best results when we have the private sector and when we have the family involved. We have the worst results when the federal government gets involved." And Texas Rep. Ron Paul opposes the federal government from having any role that isn't explicitly laid out in the Constitution.

One night later, Obama pressed Congress to immediately pass a $450 billion plan to create jobs and jolt the economy, arguing that government was at least partly responsible for fixing it, helping Americans who are hurting and upgrading the nation's crumbling roads, bridges and schools.

"This task of making America more competitive for the long haul, that's a job for all of us," he said, adding: "For government and for private companies. For states and for local communities — and for every American citizen."

He countered the pitch from conservatives and the tea party that heavily cutting government spending and eliminating a chunk of government regulations is the best solution to the economic woes, saying: "This larger notion that the only thing we can do to restore prosperity is just dismantle government, refund everybody's money, and let everyone write their own rules, and tell everyone they're on their own — that's not who we are. That's not the story of America."

And he reached back to history to try to prove his point.

Obama argued that its workers and entrepreneurs made America's economy great, the envy of the world. But he also noted that government was responsible for the Transcontinental Railroad, the National Academy of Sciences, the first land grant colleges, the G.I. Bill, the nation's highway and air systems, the public school system, research that led to the Internet and the computer chip.

Americans will hear these competing visions of government for the next 14 months before casting a vote that will offer a glimpse into Americans views of the scope of government — a temporary clarity at best as the debate as old as our founding rages on.

Posted on 7:25 AM / 0 comments / Read More

Consumer Confidence at Its Worst Since 2009

Latest News - Consumer Confidence at Its Worst Since 2009, American shoppers spent more in July than they did in June, but in August, they still didn't feel very confident about the economy and their role as one of its main drivers. In fact, consumer confidence is at its lowest level since April 2009, according to a report out Tuesday from the Conference Board. More participants in the board's survey said business conditions were "bad" than did in July, while those saying jobs were "hard to get" also increased to 49.1 percent from 44.8 percent, the board reported.

"A contributing factor may have been the debt ceiling discussions since the decline in confidence was well underway before the S&P downgrade," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement. "Consumers' assessment of current conditions, on the other hand, posted only a modest decline as employment conditions continue to suppress confidence." Predictably, the gloomy report dragged down U.S. stock markets, which opened down across the board on Tuesday, with the Dow losing more than 100 points before rebounding after two hours of trading.

Posted on 8:41 AM / 0 comments / Read More

NYSE stocks posting largest percentage decreases

Latest News - NYSE stocks posting largest percentage decreases, A look at the 10 biggest percentage decliners on New York Stock Exchange at 1 p.m.:

• AuRico Gold Inc. fell 15.9 percent to $11.70.
• Vanguard Health Systems Inc. fell 3.0 percent to $14.06.
• Jaguar Mining Inc. fell 2.3 percent to $6.30.
• Sprott Physical Gold Trust fell 2.0 percent to $15.54.
• Yamana Gold Inc. fell 1.7 percent to $15.72.
• Pike Electric Corp. fell 1.6 percent to $8.72.
• Saratoga Investment Corp. fell 1.6 percent to $17.05.
• Lone Pine Resources Inc. fell 1.6 percent to $8.87.
• Barrick Gold Corp. fell 1.5 percent to $50.15.
• Sprott Physical Silver Trust fell 1.5 percent to $19.00.

Posted on 11:34 AM / 0 comments / Read More