WASHINGTON, Feb 9 (Reuters) - A U.S. House subcommittee will hold a hearing early in March to investigate whether the Treasury is getting enough information from banks to oversee the bank rescue program, Rep. Dennis Kucinich, the panel's chairman, announced on Monday.
Kucinich, an Ohio Democrat who heads the Domestic Policy subcommittee of the Oversight and Government Reform Committee, recently sent requests for documents to the largest recipients of money from the Troubled Asset Relief Program (TARP), as the bank bailout program is called.
The subcommittee will examine these records as well as look at how the Treasury is analyzing the documents received from TARP recipients, Kucinich said in a statement.
"After handing out billions to banks, we have an obligation to the taxpayers to look at all the ways that banks are using TARP funds, whether it's marketing, lavish parties, executive salaries or legitimate purposes," Kucinich said.
The lawmaker's interest had been piqued by the recent news that Citigroup Inc, recipient of billions of bailout funds, had a $400 million baseball stadium sponsorship deal with the Major League team, the New York Mets. Kucinich has urged the government to press Citigroup to end that contract.
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Monday, February 9, 2009
U.S. SEC says top enforcer Thomsen to leave agency
WASHINGTON, Feb 9 (Reuters) - The U.S. Securities and Exchange Commission's top enforcement official, Linda Thomsen, plans to leave the agency and return to the private sector, the SEC said on Monday.
The SEC did not say exactly when Thomsen would leave or who would replace her. An SEC spokesman said she would stay for some time to ensure a smooth transition. The SEC's enforcement division has been harshly criticized by lawmakers for how the Bernard Madoff case was handled.
The SEC did not say exactly when Thomsen would leave or who would replace her. An SEC spokesman said she would stay for some time to ensure a smooth transition. The SEC's enforcement division has been harshly criticized by lawmakers for how the Bernard Madoff case was handled.
New Zealand Treasury Secy Says Worst Not Over For Econ-Report
ew Zealand Treasury Secy Says Worst Not Over For Econ-Report WELLINGTON (Dow Jones)--Treasury Secretary John Whitehead said Tuesday that New Zealand's economy is faring worse than predicted, according to a newspaper report. Treasury had previously said the economy was tracking in line with the "downside scenario" of its December update, and Whitehead now sees an even bleaker future and a likely fifth consecutive quarter of negative growth in the three months to March, The Dominion Post reported. Whitehead said there was a strong sense that troubled times would continue for a while yet, and that "the worst is not over." In its latest update, the Treasury said it had downgraded its forecasts because of a sharp fall in trading partner growth. Whitehead made the comments while he and Reserve Bank of New Zealand Governor Alan Bollard were traveling abroad to drum up support for New Zealand as an investment destination.
BRIEF-TorreyPines Therapeutics board approves freezing of base salaries
Feb 9 (Reuters) - TorreyPines Therapeutics Inc:
* Says board approved freezing of base salaries for all of co's named executive
officers for 2009
* Says board approved freezing of base salaries for all of co's named executive
officers for 2009
French unions call for new protest over economy
PARIS, Feb 9 (Reuters) - France's eight union federations have called for a new day of action on March 19 to protest against President Nicolas Sarkozy's handling of the slowing economy, a union source said on Monday.
Up to 2.5 million protesters took to the streets of France last month in a first day of strikes and rallies to denounce the economic crisis and the government's refusal to do more to help workers cope with the slowdown.
Sarkozy has called for talks with the unions on Feb. 19 and moderate labour leaders have said further strikes and protests might be averted if they get concessions.
Up to 2.5 million protesters took to the streets of France last month in a first day of strikes and rallies to denounce the economic crisis and the government's refusal to do more to help workers cope with the slowdown.
Sarkozy has called for talks with the unions on Feb. 19 and moderate labour leaders have said further strikes and protests might be averted if they get concessions.
FACTBOX-Aid packages for automobile industry
Feb 9 (Reuters) - France pledged support for its ailing car makers on Monday by promising loans of 3 billion euros ($3.89 billion) each for PSA Peugeot Citroen and Renault .
Here are some details about recent aid packages for the shattered auto industry:
* BRAZIL -- Said in November it had instructed state-run bank Banco do Brasil to make available a total of 4 billion reals ($1.72 billion) so that automakers' financing units could increase lending and spur sales.
* BRITAIN -- Announced last month it would guarantee up to 2.3 billion pounds ($3.29 billion) of loans to the car industry. The government said it would guarantee up to 1.3 billion pounds of auto industry loans from the European Investment Bank and guarantee a further 1 billion pounds of loans to back investments that are not eligible for support from the European lender.
* CANADA -- Unveiled an aid package on Dec. 20 that provided C$4 billion ($3.28 billion) in emergency loans to the Canadian arms of General Motors and Chrysler to keep them operating while they restructure. The automakers have a deadline of Feb. 20 to come up with a comprehensive plan that would allow them to get government aid.
* CHINA -- Unveiled measures on Jan. 14, which included cutting in half, to 5 percent, the sales tax on purchases of cars with engine sizes below 1.6 litres and one-off cash subsidies totalling 5 billion yuan ($731.1 million) to owners of high-emission vehicles who trade them in for cleaner ones.
* FRANCE -- Pledged loans of 3 billion euros each to struggling car makers PSA Peugeot Citroen and Renault, in return for them promising to "do everything" to avoid further job losses. The five-year, 6 percent interest rate loans are designed to fund investment into clean vehicle technologies.
* GERMANY -- Unveiled a 1.5 billion euro aid package on Jan. 13. The package forms part of a 50 billion euro stimulus package of investments, tax relief and support for companies. The measures include incentives worth 2,500 euros for new car purchases.
* ITALY -- Announced a stimulus package for cars on Friday which includes a payment of as much as 1,500 euros for trading in an old car to buy a new one. Italian car sales are expected to fall 17 percent in 2009, after a 13 percent drop in 2008,
* PORTUGAL: -- Announced on Dec. 3 a 200 million euro credit line for auto and car parts exporters.
* SWEDEN -- Said on Jan. 22 it had given the National Debt Office the authority to grant emergency loans to the industry.
* UNITED STATES -- Announced on Dec. 19 a $17.4 billion lifeline to Detroit carmakers. The bailout funds will come from the $700 billion Troubled Asset Relief (TARP) program. GM will receive $13.4 billion and Chrysler $4 billion. Ford Motor Co said it did not need a loan. Loans will be called in if the automakers cannot prove they are viable by March 31.
Here are some details about recent aid packages for the shattered auto industry:
* BRAZIL -- Said in November it had instructed state-run bank Banco do Brasil to make available a total of 4 billion reals ($1.72 billion) so that automakers' financing units could increase lending and spur sales.
* BRITAIN -- Announced last month it would guarantee up to 2.3 billion pounds ($3.29 billion) of loans to the car industry. The government said it would guarantee up to 1.3 billion pounds of auto industry loans from the European Investment Bank and guarantee a further 1 billion pounds of loans to back investments that are not eligible for support from the European lender.
* CANADA -- Unveiled an aid package on Dec. 20 that provided C$4 billion ($3.28 billion) in emergency loans to the Canadian arms of General Motors and Chrysler to keep them operating while they restructure. The automakers have a deadline of Feb. 20 to come up with a comprehensive plan that would allow them to get government aid.
* CHINA -- Unveiled measures on Jan. 14, which included cutting in half, to 5 percent, the sales tax on purchases of cars with engine sizes below 1.6 litres and one-off cash subsidies totalling 5 billion yuan ($731.1 million) to owners of high-emission vehicles who trade them in for cleaner ones.
* FRANCE -- Pledged loans of 3 billion euros each to struggling car makers PSA Peugeot Citroen and Renault, in return for them promising to "do everything" to avoid further job losses. The five-year, 6 percent interest rate loans are designed to fund investment into clean vehicle technologies.
* GERMANY -- Unveiled a 1.5 billion euro aid package on Jan. 13. The package forms part of a 50 billion euro stimulus package of investments, tax relief and support for companies. The measures include incentives worth 2,500 euros for new car purchases.
* ITALY -- Announced a stimulus package for cars on Friday which includes a payment of as much as 1,500 euros for trading in an old car to buy a new one. Italian car sales are expected to fall 17 percent in 2009, after a 13 percent drop in 2008,
* PORTUGAL: -- Announced on Dec. 3 a 200 million euro credit line for auto and car parts exporters.
* SWEDEN -- Said on Jan. 22 it had given the National Debt Office the authority to grant emergency loans to the industry.
* UNITED STATES -- Announced on Dec. 19 a $17.4 billion lifeline to Detroit carmakers. The bailout funds will come from the $700 billion Troubled Asset Relief (TARP) program. GM will receive $13.4 billion and Chrysler $4 billion. Ford Motor Co said it did not need a loan. Loans will be called in if the automakers cannot prove they are viable by March 31.
BRIEF-Lakeland Bancorp gets $59 mln from US treasury's CPP
Feb 9 (Reuters) - Lakeland Bancorp Inc:
* Reports receipt of $59,000,000 from U.S. treasury in capital purchase program
* Says issued treasury warrants to purchase 949,571 shares of its common stock
at $9.32 per share
* Reports receipt of $59,000,000 from U.S. treasury in capital purchase program
* Says issued treasury warrants to purchase 949,571 shares of its common stock
at $9.32 per share
US Economic Indicators: Latest 6 Months Data-Feb 9
US Economic Indicators: Latest 6 Months Data-Feb 9
Forecasts based on the projections from 10 economists as of Monday,
Feb 9. NA = not available. E = estimate. R = revised. **** = tentative.
--Forecast--
Date Indicators :Median : Jan Dec Nov Oct Sep Aug
02/10 Wholesale Inv: : 435.0 437.7R 442.9 444.5
02/10 % change : -0.8: -0.6 -1.2R -0.4 0.6
02/10 Invty-Sales: : 1.25 1.16 1.12 1.10
02/11 Trade Balnce : -35.0: -40.4 -56.7R -56.6 -58.9
02/11 Goods Balnce: NA : -52.4 -69.0R -69.5 -71.1
02/11 Imports : : 183.2 208.2R 211.7 224.5
02/11 Exports : : 142.8 151.5R 155.1 165.6
02/11 Trsy Budget : -85.0: -83.6 -164.4 -237.2 45.7R -111.9
02/12 Unemply Clms : 618:[1/31 626 [1/24 591R ] [1/17 585]
02/12 Retail Sales : : 343.2 352.6 360.3R 373.0 362.0
02/12 % change : -0.8: -2.7 -2.1 -3.7R -7.4 -0.7
02/12 Ex-Auto : : 284.2 293.2 300.7R 309.7 302.1
02/12 % change : -0.4: -3.1 -2.5 -3.0R -0.5 -1.1
02/12 Busin Invty : : 1,485 1,496R 1,505 1,511
02/12 % change : -1.0: -0.7 -0.8R 0.4 0.2
02/12 % mfg chg : : -0.3 -0.6R -1.4 0.7
02/18 Hsg Starts : NA : 0.550 0.651 0.767R 0.824 0.854
02/18 % change : : -15.5 -15.1 -6.9R -3.5 -10.0
02/18 Permits : NA : 0.549 0.615 0.730 0.805 0.857
02/18 % change : : -10.7 -15.8 -9.3 -6.1 -8.5
02/18 Industl Prod : : 103.6 105.7 107.1R 105.2 109.8
02/18 % change : NA : -2.0 -1.3 1.8R -4.2 -1.3
02/18 Capacty Util: NA : 73.6 75.2 76.3R 75.0 78.3
02/19 PPI : : 168.8 172.1 177.3 182.0 182.1
02/19 % change : NA : -1.9 -2.2 -2.8 -0.4 -0.9
02/19 % 12-mo chg: : -1.1 0.4 5.2 8.7 9.6
02/19 PPI Core : : 170.5 170.4 170.4 167.9 167.3
02/19 % change : NA : 0.2 0.1 0.4 0.4 0.2
02/19 LEI : : 99.5 99.0 99.4 100.3 100.3
02/19 % change : NA : 0.3 -0.4 -0.9 0.0 -0.9
02/20 CPI : : 210.2 212.4 216.6 218.8 219.1
02/20 % change : NA : -0.7 -1.7 -1.0 0.0 -0.1
02/20 % 12-mo chg: : 0.1 1.1 3.7 4.9 5.4
02/20 CPI Core : : 216.1 216.7 217.0 216.9 216.5
02/20 % change : NA : 0.0 0.0 -0.1 0.1 0.2
02/20 Real Earnings: : 0.6 2.6 1.2R 0.0 0.6
02/24 Pre Stl Imp : : -11.4 -24.4 1.5 24.5 -17.4
02/24 Cnsmr Confid : NA : 37.7 38.6 44.7 38.8 61.4 58.5
02/25 Exist Hm Sls : NA : 4.74 4.45 4.91R 5.14 4.91
02/25 % change : : 6.5% -9.4% -4.5R 4.7 -2.2
02/26 Durable Gds : : 176.8 181.5 188.5R 206.0 206.1
02/26 % change : NA : -2.6 -3.7 -8.5R 0.0 -5.5
02/26 NonDef Captl: : 57.0 60.5 63.5R 67.9 68.7
02/26 % change : : -5.9 -4.6 -6.5R -1.1 -7.8
02/26 S/F Home Sls : NA : 331 388 406R 434R 448
02/26 % change : : -14.7% -4.4% -6.5R -3.1R -11.3
02/27 GDP Annual % : NA :[Q4 08 -3.8 [Q3 08 -0.5][Q2 08 2.8]
02/27 Final Sales%: NA :[Q4 08 -9.4 [Q3 08 2.2][Q2 08 5.7]
02/27 PCE Defltr % NA :[Q4 08 -3.5 [Q3 08 -3.8 ][Q2 08 1.2]
02/27 Prc Defltr %: NA :[Q4 08 -0.3 [Q3 08 3.9][Q2 08 1.3]
02/27 Chnd Wt Prc%: :[Q4 08 -0.1 [Q3 08 3.9][Q2 08 1.1]
02/27 Corp Profit%: :[Q3 08 -0.5R [Q2 08 -3.8][Q1 08 1.1]
03/02 Personal Inc : : 12,093 12,118 12,162R 12,173 12,164
03/02 % change : NA : -0.2 -0.4 0.1R 0.0 0.3
03/02 PCE : : 9,836 9,938 10,016R 10,132 10,176
03/02 % change : NA : -1.0 -0.8 -1.1R -0.4 -0.1
03/02 ISM : NA : 35.6 32.9 36.2 38.9 43.5 49.9
03/02 Employment : : 29.9 29.9 34.2 34.6 41.8 49.7
03/02 Prices : : 29.0 18.0 25.5 37.0 53.5 77.0
03/02 Constrcn Spd : : 1053.7 1068.8 1082.3R 1089.4 1085.7
03/02 % change : NA : -1.4 -1.2 -0.7R 0.3 2.4
03/05 Prod & Costs%: NA :[Q4 08 3.1 [Q3 08 1.7R ][Q2 08 3.7]
03/05 Unit Labor%: NA :[Q4 08 1.5 [Q3 08 2.5R ][Q2 08 0.1]
03/05 Factory Ords : : 362.4 377.2 403.3 431.5 443.2
03/05 % change : NA : -3.9 -6.5 -6.0 -3.1 -4.3
03/05 Unfill Order: : 801.9 812.9 820.7 828.2 826.5
03/05 % change : : -1.4 -0.9 -0.9 0.2 0.3
03/06 Jobless Rate : NA : 7.6 7.2 6.8 6.6 6.2 6.1
03/06 Jobs (chg) : : -598 -577 -597 -380R -403 -127
03/06 Pvt (chg) : : -604 -567 -601 -384R -384 -139
03/06 Manuf(chg): : -207 -162 -121 -119R -69 -61
03/06 Factory hrs : : 2.9 3.0 3.2 3.5 3.5 3.7
03/06 Avg Hr % chg: NA : 0.3 0.4 0.3 0.6R 0.2 0.4
03/06 Consumr Crdt : : 2562.3 2568.9 2,580R 2581.7 2581.2
03/06 change : NA : -6.6 -11.0 -1.8R 6.8 -6.3
03/18 Current Acct : :[Q3 08 -$183.1 [Q2 08 -180.9R ][Q1 08 -175.640]
04/30 ECI : NA :[Q4 08 0.5 [Q3 08 0.7][Q2 08 0.7]
04/30 ECI Annual : NA :[Q4 08 2.6 [Q3 08 2.9][Q2 08 3.1]
-By Rodney Christian; Dow Jones Newswires; 202-646-1880;
csstat@dowjones.com
Related fixed stories:
84697 US Economic Indicators: Latest 6 months data
80055-57 US Economic Calendar
Forecasts based on the projections from 10 economists as of Monday,
Feb 9. NA = not available. E = estimate. R = revised. **** = tentative.
--Forecast--
Date Indicators :Median : Jan Dec Nov Oct Sep Aug
02/10 Wholesale Inv: : 435.0 437.7R 442.9 444.5
02/10 % change : -0.8: -0.6 -1.2R -0.4 0.6
02/10 Invty-Sales: : 1.25 1.16 1.12 1.10
02/11 Trade Balnce : -35.0: -40.4 -56.7R -56.6 -58.9
02/11 Goods Balnce: NA : -52.4 -69.0R -69.5 -71.1
02/11 Imports : : 183.2 208.2R 211.7 224.5
02/11 Exports : : 142.8 151.5R 155.1 165.6
02/11 Trsy Budget : -85.0: -83.6 -164.4 -237.2 45.7R -111.9
02/12 Unemply Clms : 618:[1/31 626 [1/24 591R ] [1/17 585]
02/12 Retail Sales : : 343.2 352.6 360.3R 373.0 362.0
02/12 % change : -0.8: -2.7 -2.1 -3.7R -7.4 -0.7
02/12 Ex-Auto : : 284.2 293.2 300.7R 309.7 302.1
02/12 % change : -0.4: -3.1 -2.5 -3.0R -0.5 -1.1
02/12 Busin Invty : : 1,485 1,496R 1,505 1,511
02/12 % change : -1.0: -0.7 -0.8R 0.4 0.2
02/12 % mfg chg : : -0.3 -0.6R -1.4 0.7
02/18 Hsg Starts : NA : 0.550 0.651 0.767R 0.824 0.854
02/18 % change : : -15.5 -15.1 -6.9R -3.5 -10.0
02/18 Permits : NA : 0.549 0.615 0.730 0.805 0.857
02/18 % change : : -10.7 -15.8 -9.3 -6.1 -8.5
02/18 Industl Prod : : 103.6 105.7 107.1R 105.2 109.8
02/18 % change : NA : -2.0 -1.3 1.8R -4.2 -1.3
02/18 Capacty Util: NA : 73.6 75.2 76.3R 75.0 78.3
02/19 PPI : : 168.8 172.1 177.3 182.0 182.1
02/19 % change : NA : -1.9 -2.2 -2.8 -0.4 -0.9
02/19 % 12-mo chg: : -1.1 0.4 5.2 8.7 9.6
02/19 PPI Core : : 170.5 170.4 170.4 167.9 167.3
02/19 % change : NA : 0.2 0.1 0.4 0.4 0.2
02/19 LEI : : 99.5 99.0 99.4 100.3 100.3
02/19 % change : NA : 0.3 -0.4 -0.9 0.0 -0.9
02/20 CPI : : 210.2 212.4 216.6 218.8 219.1
02/20 % change : NA : -0.7 -1.7 -1.0 0.0 -0.1
02/20 % 12-mo chg: : 0.1 1.1 3.7 4.9 5.4
02/20 CPI Core : : 216.1 216.7 217.0 216.9 216.5
02/20 % change : NA : 0.0 0.0 -0.1 0.1 0.2
02/20 Real Earnings: : 0.6 2.6 1.2R 0.0 0.6
02/24 Pre Stl Imp : : -11.4 -24.4 1.5 24.5 -17.4
02/24 Cnsmr Confid : NA : 37.7 38.6 44.7 38.8 61.4 58.5
02/25 Exist Hm Sls : NA : 4.74 4.45 4.91R 5.14 4.91
02/25 % change : : 6.5% -9.4% -4.5R 4.7 -2.2
02/26 Durable Gds : : 176.8 181.5 188.5R 206.0 206.1
02/26 % change : NA : -2.6 -3.7 -8.5R 0.0 -5.5
02/26 NonDef Captl: : 57.0 60.5 63.5R 67.9 68.7
02/26 % change : : -5.9 -4.6 -6.5R -1.1 -7.8
02/26 S/F Home Sls : NA : 331 388 406R 434R 448
02/26 % change : : -14.7% -4.4% -6.5R -3.1R -11.3
02/27 GDP Annual % : NA :[Q4 08 -3.8 [Q3 08 -0.5][Q2 08 2.8]
02/27 Final Sales%: NA :[Q4 08 -9.4 [Q3 08 2.2][Q2 08 5.7]
02/27 PCE Defltr % NA :[Q4 08 -3.5 [Q3 08 -3.8 ][Q2 08 1.2]
02/27 Prc Defltr %: NA :[Q4 08 -0.3 [Q3 08 3.9][Q2 08 1.3]
02/27 Chnd Wt Prc%: :[Q4 08 -0.1 [Q3 08 3.9][Q2 08 1.1]
02/27 Corp Profit%: :[Q3 08 -0.5R [Q2 08 -3.8][Q1 08 1.1]
03/02 Personal Inc : : 12,093 12,118 12,162R 12,173 12,164
03/02 % change : NA : -0.2 -0.4 0.1R 0.0 0.3
03/02 PCE : : 9,836 9,938 10,016R 10,132 10,176
03/02 % change : NA : -1.0 -0.8 -1.1R -0.4 -0.1
03/02 ISM : NA : 35.6 32.9 36.2 38.9 43.5 49.9
03/02 Employment : : 29.9 29.9 34.2 34.6 41.8 49.7
03/02 Prices : : 29.0 18.0 25.5 37.0 53.5 77.0
03/02 Constrcn Spd : : 1053.7 1068.8 1082.3R 1089.4 1085.7
03/02 % change : NA : -1.4 -1.2 -0.7R 0.3 2.4
03/05 Prod & Costs%: NA :[Q4 08 3.1 [Q3 08 1.7R ][Q2 08 3.7]
03/05 Unit Labor%: NA :[Q4 08 1.5 [Q3 08 2.5R ][Q2 08 0.1]
03/05 Factory Ords : : 362.4 377.2 403.3 431.5 443.2
03/05 % change : NA : -3.9 -6.5 -6.0 -3.1 -4.3
03/05 Unfill Order: : 801.9 812.9 820.7 828.2 826.5
03/05 % change : : -1.4 -0.9 -0.9 0.2 0.3
03/06 Jobless Rate : NA : 7.6 7.2 6.8 6.6 6.2 6.1
03/06 Jobs (chg) : : -598 -577 -597 -380R -403 -127
03/06 Pvt (chg) : : -604 -567 -601 -384R -384 -139
03/06 Manuf(chg): : -207 -162 -121 -119R -69 -61
03/06 Factory hrs : : 2.9 3.0 3.2 3.5 3.5 3.7
03/06 Avg Hr % chg: NA : 0.3 0.4 0.3 0.6R 0.2 0.4
03/06 Consumr Crdt : : 2562.3 2568.9 2,580R 2581.7 2581.2
03/06 change : NA : -6.6 -11.0 -1.8R 6.8 -6.3
03/18 Current Acct : :[Q3 08 -$183.1 [Q2 08 -180.9R ][Q1 08 -175.640]
04/30 ECI : NA :[Q4 08 0.5 [Q3 08 0.7][Q2 08 0.7]
04/30 ECI Annual : NA :[Q4 08 2.6 [Q3 08 2.9][Q2 08 3.1]
-By Rodney Christian; Dow Jones Newswires; 202-646-1880;
csstat@dowjones.com
Related fixed stories:
84697 US Economic Indicators: Latest 6 months data
80055-57 US Economic Calendar
Bayer settles Yaz advertising case with states
BOSTON, Feb 9 (Reuters) - German drugmaker Bayer AG has agreed to submit any television advertisements for its oral contraceptive Yaz to U.S. regulators for approval and conduct a $20 million corrective advertising program, according to Massachusetts Attorney General Martha Coakley.
The agreement comes as part of a supplement to a 2007 court-entered judgment, Coakley said in a statement.
The latest judgment, filed in Massachusetts' Suffolk Superior Court, resolves allegations that Bayer's 2008 marketing of Yaz violated the terms of the 2007 agreement by not disclosing the uses for which Yaz has been approved by the U.S. Food and Drug Administration.
The 2007 agreement involved allegations of deceptive advertising, including a failure to disclose the safety risks in Bayer's marketing of its cholesterol drug Baycol, which was withdrawn in 2001.
The latest judgment requires Bayer to submit all Yaz television advertisements to the FDA for approval and to comply with all changes suggested by the agency. It requires Bayer to conduct a $20 million corrective advertising program.
In an earlier warning letter to Bayer, the FDA had addressed two direct-to-consumer advertisements where it said Bayer improperly broadened promotion of Yaz to include symptoms of premenstrual syndrome, or PMS, when Yaz was not approved to treat this condition.
Yaz is approved to treat a more serious condition known as premenstrual dysphoric disorder, or PMDD, which causes anxiety, tension, persistent anger and other symptoms.
The FDA's letter also warned Bayer about overstating the effects Yaz had on acne, according to the statement from Coakley.
Twenty-six states aside from Massachusetts took part in the action against Bayer, Coakley's office said.
The agreement comes as part of a supplement to a 2007 court-entered judgment, Coakley said in a statement.
The latest judgment, filed in Massachusetts' Suffolk Superior Court, resolves allegations that Bayer's 2008 marketing of Yaz violated the terms of the 2007 agreement by not disclosing the uses for which Yaz has been approved by the U.S. Food and Drug Administration.
The 2007 agreement involved allegations of deceptive advertising, including a failure to disclose the safety risks in Bayer's marketing of its cholesterol drug Baycol, which was withdrawn in 2001.
The latest judgment requires Bayer to submit all Yaz television advertisements to the FDA for approval and to comply with all changes suggested by the agency. It requires Bayer to conduct a $20 million corrective advertising program.
In an earlier warning letter to Bayer, the FDA had addressed two direct-to-consumer advertisements where it said Bayer improperly broadened promotion of Yaz to include symptoms of premenstrual syndrome, or PMS, when Yaz was not approved to treat this condition.
Yaz is approved to treat a more serious condition known as premenstrual dysphoric disorder, or PMDD, which causes anxiety, tension, persistent anger and other symptoms.
The FDA's letter also warned Bayer about overstating the effects Yaz had on acne, according to the statement from Coakley.
Twenty-six states aside from Massachusetts took part in the action against Bayer, Coakley's office said.
UPDATE:Obama:Without Action May Be 'Unable To Reverse' Crisis
WASHINGTON -(Dow Jones)- Taking his pitch for economic stimulus to heartland America, U.S. President Barack Obama warned Monday that delay in Washington will bring "deepening disaster" for the U.S. economy "We can no longer afford to wait," Obama said at a town hall meeting in Elkhart, Ind., the first event in a two-day campaign-style push for the $800 billion economic recovery package. "If we don't act immediately, millions more jobs will be lost, and national unemployment rates will approach double digits not just here in Elkhart, all across the country," Obama said. "More people will lose their homes and their health care. And our nation will sink into a crisis that, at some point, we may be unable to reverse." Obama will continue to push his message in a prime-time press conference later Monday, and another town hall event in Fort Myers, Fla., Tuesday. The White House says the trips are a chance for the president to take a conversation that has focused in recent weeks on political differences to areas hard hit by the recession. In Elkhart, the unemployment rate has more than tripled in the past year to 15.3%. Obama painted the stimulus package, a version of which will face a Senate vote Tuesday, not as a cure all, but as an essential step in a long road to economic revival. The plan, another version of which has already passed the House, would provide hundreds of billions of dollars in infrastructure spending, tax cuts, and expanded unemployment benefits. "Even with this plan, the road ahead won't be easy. This crisis has been a long time in the making. We're not going to turn it around overnight," Obama said. "Recovery will likely be measured in years, not weeks or months." The White House has downplayed differences between the House and Senate bills, leaving it to lawmakers to craft a final version in a conference committee. Obama said Tuesday that the legislation isn't perfect, "but it is the right size, it is the right scope, broadly speaking it has the right priorities to create jobs that will jump-start our economy and transform this economy for the 21st Century." "I can't tell you with a hundred-percent certainty that every single item in this plan will work exactly as we hoped," Obama said. "But what I can tell you is, I can say with complete confidence that endless delay or paralysis in Washington in the face of this crisis will only bring deepening disaster." Still, the measure is unlikely to garner much support from Republicans, who say it is a bloated vehicle for pork, doesn't rely heavily enough on tax cuts and wouldn't provide short-term stimulus. House GOP leaders Monday called the package "a blatant act of generational theft." White House spokesman Robert Gibbs said Obama, who has courted Republican lawmakers to little effect, said Monday that Obama is focused on passing a bill that creates enough jobs to get the economy back on track. "The number the President is focused on is not a vote number, but instead how many jobs is this legislation going to create, how many people are we going to put back to work," Gibbs said. Nonetheless, Obama will be joined by at least one prominent Republican in Florida Tuesday: Governor Charlie Crist. "I am eager to welcome President Obama to the Sunshine State as he continues to work hard to re-ignite the U.S. economy," Crist said in a statement released by the White House. In Elkhart Monday, Obama said tax cuts to working families, rather than the wealthy, are the most effective way to stimulate the economy. "When you give a tax break to working families who are struggling, they will spend it on buying a new coat for the kids or making sure that, you know, that they get that car repaired ... to get to work," Obama said. He provided little new insight into the financial rescue package to be outlined Tuesday by Treasury Secretary Tim Geithner, but again criticized Wall Street for awarding large bonuses at a time when many banks are asking for government help, promising to impose accountability and responsibility on the financial sector. "You can't go take a trip to Las Vegas, or go down to the Super Bowl on the taxpayers' dime," the president said. He said the administration's proposal for the financial sector will include a "series of plans" to boost the housing market and ease foreclosures. He renewed his support for a "cramdown" provision allowing for bankruptcy judges to alter mortgage terms, suggesting it would be included in Geithner's proposal.
EU mergers and takeovers (Feb 9)
BRUSSELS, Feb 9 (Reuters) - The following are mergers under review by the European Commission, and a brief guide to the EU merger process:
APPROVALS AND WITHDRAWALS:
-- Slovakian construction firm Doprastav a.s., belonging to the DDM Group, and Czech construction services provider Ceskomoravsky beton a.s. take joint control of a Slovakian maker and distributor of ready-mixed concrete, TBG Doprastav a.s. (approved Feb. 9)
-- Italian cruise ship operator Costa Crociere SpA, controlled by the U.S. Carnival Corp; and Swiss cruise ship operator MSC Crociere SA, controlled by Mediterranean Shipping Company Holding SA, take joint control of Marseille Provence Cruise Terminal SAS, a newly created French venture that manages a cruise terminal in Marseille (approved Feb. 9)
NEW LISTINGS:
-- Austrian construction and building materials firm Strabag SE and German counterpart Kemna Bau Andreae GmbH & Co KG to take joint control of German peer Hermann Wellmann Tiefbau GmbH & Co KG (notified Feb. 2/deadline March 9/simplified)
EXTENSIONS AND OTHER CHANGES:
None
FIRST-STAGE REVIEWS BY DEADLINE:
FEB 12
-- Dutch financial services group Rabobank International Holding BV acquires sole control of Poland's Bank Gospodarki Zywnosciowej SA, which specialises in providing banking services to rural areas. The bank was jointly controlled by Rabobank and the state treasury of Poland (notified Jan. 8/deadline Feb. 12/simplified)
FEB 17
-- Mubadala Development Corporation PJSC, a United Arab Emirates direct principal investments firm, and Rolls-Royce plc , a British turbine maker, acquire joint control of JVCO, a United Arab Emirates supplier of aftermarket services for large commercial aircraft engines (notified Jan. 13/deadline Feb. 17)
FEB 18
-- Japanese electronics maker Hitachi Ltd to acquire control of part of Japanese power-driven tools manufacturer Hitachi Koki Co Ltd (notified Jan. 14/deadline Feb. 18/simplified)
-- French cosmetic and hygiene products firm Johnson & Johnson Consumer France, controlled by U.S. Johnson & Johnson group, acquires French feminine protection products companies Vania and Polive as well as activities in Belgium and Luxembourg of French feminine protection products company Georgia Pacific France (notified Jan. 14/deadline Feb. 18)
-- Venture capital firm Citi Infrastructure Partners, controlled by U.S. Citigroup, to acquire part of the Spanish infrastructure undertaking Itinere Infraestructuras (notified Jan. 14/deadline Feb. 18/simplified)
FEB 20
-- French capital investment firm Serendipity Investment SAS, controlled by Bouygues Group and Financiere Pinault Group, and French TV sports broadcaster Eurosport SA, controlled by Bouygues Group, take joint control of French undertaking SPS (notified Jan. 16/deadline Feb. 20/simplified)
FEB 23
-- U.S. health care products firm Abbott seeks to acquire U.S. eye health care products firm Advanced Medical Optics (notified Jan. 19/deadline Feb. 23/simplified)
FEB 25
-- French banking and insurance products and services provider Credit Mutuel to acquire French consumer credit products and services provider Cofidis (notified Jan. 21/deadline Feb. 25)
FEB 26
-- German chemical products company BASF SE to acquire Swiss specialty chemicals firm Ciba Holding (notified Jan. 22/deadline Feb. 26)
-- Czech electricity company CEZ and Turkish energy and chemicals firm Akkok acquire joint control of Turkish electricity company Akenerji Elektrik Uretim. Subsequently, CEZ and Akkok acquire joint control of Turkish electricity company Sedas (notified Jan. 22/deadline Feb. 26/simplified)
-- German automaker Daimler AG takes joint control of Li-Tec, a German lithium-ion battery cell research and development firm currently controlled by German industrial conglomerate Evonik Industries AG (notified Jan. 22/deadline Feb. 26/simplified)
FEB 27
-- J. Aron & Co, controlled by the U.S. Goldman Sachs Group , to acquire control of substantially all the assets of the international commodities business of U.S. Constellation Energy Commodities Group (notified Jan. 23/deadline Feb. 27/simplified)
-- United Arab Emirates investment firm International Petroleum Investment Co to acquire German industrial services provider MAN Ferrostaal AG (notified Jan. 23/deadline Feb. 27)
MARCH 2
-- U.S. private equity fund One Equity Partners II LP, controlled by JPMorgan Chase & Co, to acquire U.S. carbon black producer Columbian Chemicals Holding LLC (notified Jan. 26/deadline March 2/simplified)
-- Italian helicopter maker Agusta SpA and CAE Aviation Training BV, a Dutch provider of aerospace simulator technology, acquire joint control over Italian flight simulator operator Rotorsim Srl (notified Jan. 26/deadline March 2/simplified)
MARCH 3
-- Czech private equity firm Penta Holding Ltd to acquire Polish windows and glass doors maker Okna Rabien (notified Jan. 27/deadline March 3/simplified)
-- U.S. entertainment company NBC Universal, controlled by General Electric; Luxembourg film distributor De Agostini Communications, controlled by De Agostini SpA of Italy; and Italian equity investments company IMI Investimenti SpA, controlled by Intesa Sanpaolo SpA of Italy, acquire joint control of Italian film and TV production firm Cattleya SpA (notified Jan. 27/deadline March 3/simplified)
MARCH 5
-- German pharmaceuticals firm Sanacorp to acquire German peer v.d. Linde (notified Jan. 29/deadline March 5)
-- U.S. aluminium producer Alcoa to acquire Norwegian peer Elkem Aluminium ANS (notified Jan. 29/deadline March 5/simplified)
MARCH 6
-- Norwegian conglomerate Orkla acquires control of the whole of Sapa AB, a Swedish maker of soft alloy extrusions (notified Jan. 30/deadline March 6/simplified)
-- Italian toll road operator Atlantia SpA and Spanish infrastructure firm Acciona acquire joint control of the Chilean toll motorway assets of Spain's Itinere (notified Jan. 30/deadline March 6/simplified)
-- Danish shipping company Vesterhavet A/S and Danish freight forwarder DSV A/S to acquire joint control of Danish sea shipping company DFDS A/S (notified Jan. 30/deadline March 6/simplified)
MARCH 10
-- France's Dassault Aviation and French holding company TSA, controlled by the French state, acquire joint control of French defence electronics firm Thales (notified Feb. 3/deadline March 10)
SECOND-STAGE REVIEWS BY DEADLINE
-- German airline Lufthansa AG to acquire Belgian air transport company SN Airholding SA/NV, which controls Brussels Airlines (notified Nov. 26/deadline Jan. 12/extended on Jan. 6/new deadline Jan. 26/in-depth probe opened Jan. 27/deadline June 10)
-- Sweden's Bonnier AB and Norway's Schibsted ASA, both international media groups, acquire joint control of Retriever Sverige AB, a supplier of digital media monitoring, archives and business intelligence services in Sweden (notified Dec. 15/deadline Jan. 29/in-depth probe opened Jan. 29/deadline June 15)
GUIDE TO EU MERGER PROCESS
DEADLINES:
The European Commission has 25 working days after a deal is filed for a first-stage review. It may extend that to 35 working days, to consider either a company's proposed remedies or an EU member state's request to handle the case.
Most mergers win approval but occasionally the Commission opens a detailed second-stage investigation for up to 90 additional working days, which it may extend to 105 working days.
SIMPLIFIED:
Under the simplified procedure, the Commission announces the clearance of uncontroversial first-stage mergers without giving any reason for its decision. Cases may be reclassified as non-simplified -- that is, ordinary first-stage reviews -- until they are approved.
APPROVALS AND WITHDRAWALS:
-- Slovakian construction firm Doprastav a.s., belonging to the DDM Group, and Czech construction services provider Ceskomoravsky beton a.s. take joint control of a Slovakian maker and distributor of ready-mixed concrete, TBG Doprastav a.s. (approved Feb. 9)
-- Italian cruise ship operator Costa Crociere SpA, controlled by the U.S. Carnival Corp; and Swiss cruise ship operator MSC Crociere SA, controlled by Mediterranean Shipping Company Holding SA, take joint control of Marseille Provence Cruise Terminal SAS, a newly created French venture that manages a cruise terminal in Marseille (approved Feb. 9)
NEW LISTINGS:
-- Austrian construction and building materials firm Strabag SE and German counterpart Kemna Bau Andreae GmbH & Co KG to take joint control of German peer Hermann Wellmann Tiefbau GmbH & Co KG (notified Feb. 2/deadline March 9/simplified)
EXTENSIONS AND OTHER CHANGES:
None
FIRST-STAGE REVIEWS BY DEADLINE:
FEB 12
-- Dutch financial services group Rabobank International Holding BV acquires sole control of Poland's Bank Gospodarki Zywnosciowej SA, which specialises in providing banking services to rural areas. The bank was jointly controlled by Rabobank and the state treasury of Poland (notified Jan. 8/deadline Feb. 12/simplified)
FEB 17
-- Mubadala Development Corporation PJSC, a United Arab Emirates direct principal investments firm, and Rolls-Royce plc , a British turbine maker, acquire joint control of JVCO, a United Arab Emirates supplier of aftermarket services for large commercial aircraft engines (notified Jan. 13/deadline Feb. 17)
FEB 18
-- Japanese electronics maker Hitachi Ltd to acquire control of part of Japanese power-driven tools manufacturer Hitachi Koki Co Ltd (notified Jan. 14/deadline Feb. 18/simplified)
-- French cosmetic and hygiene products firm Johnson & Johnson Consumer France, controlled by U.S. Johnson & Johnson group, acquires French feminine protection products companies Vania and Polive as well as activities in Belgium and Luxembourg of French feminine protection products company Georgia Pacific France (notified Jan. 14/deadline Feb. 18)
-- Venture capital firm Citi Infrastructure Partners, controlled by U.S. Citigroup, to acquire part of the Spanish infrastructure undertaking Itinere Infraestructuras (notified Jan. 14/deadline Feb. 18/simplified)
FEB 20
-- French capital investment firm Serendipity Investment SAS, controlled by Bouygues Group and Financiere Pinault Group, and French TV sports broadcaster Eurosport SA, controlled by Bouygues Group, take joint control of French undertaking SPS (notified Jan. 16/deadline Feb. 20/simplified)
FEB 23
-- U.S. health care products firm Abbott seeks to acquire U.S. eye health care products firm Advanced Medical Optics (notified Jan. 19/deadline Feb. 23/simplified)
FEB 25
-- French banking and insurance products and services provider Credit Mutuel to acquire French consumer credit products and services provider Cofidis (notified Jan. 21/deadline Feb. 25)
FEB 26
-- German chemical products company BASF SE to acquire Swiss specialty chemicals firm Ciba Holding (notified Jan. 22/deadline Feb. 26)
-- Czech electricity company CEZ and Turkish energy and chemicals firm Akkok acquire joint control of Turkish electricity company Akenerji Elektrik Uretim. Subsequently, CEZ and Akkok acquire joint control of Turkish electricity company Sedas (notified Jan. 22/deadline Feb. 26/simplified)
-- German automaker Daimler AG takes joint control of Li-Tec, a German lithium-ion battery cell research and development firm currently controlled by German industrial conglomerate Evonik Industries AG (notified Jan. 22/deadline Feb. 26/simplified)
FEB 27
-- J. Aron & Co, controlled by the U.S. Goldman Sachs Group , to acquire control of substantially all the assets of the international commodities business of U.S. Constellation Energy Commodities Group (notified Jan. 23/deadline Feb. 27/simplified)
-- United Arab Emirates investment firm International Petroleum Investment Co to acquire German industrial services provider MAN Ferrostaal AG (notified Jan. 23/deadline Feb. 27)
MARCH 2
-- U.S. private equity fund One Equity Partners II LP, controlled by JPMorgan Chase & Co, to acquire U.S. carbon black producer Columbian Chemicals Holding LLC (notified Jan. 26/deadline March 2/simplified)
-- Italian helicopter maker Agusta SpA and CAE Aviation Training BV, a Dutch provider of aerospace simulator technology, acquire joint control over Italian flight simulator operator Rotorsim Srl (notified Jan. 26/deadline March 2/simplified)
MARCH 3
-- Czech private equity firm Penta Holding Ltd to acquire Polish windows and glass doors maker Okna Rabien (notified Jan. 27/deadline March 3/simplified)
-- U.S. entertainment company NBC Universal, controlled by General Electric; Luxembourg film distributor De Agostini Communications, controlled by De Agostini SpA of Italy; and Italian equity investments company IMI Investimenti SpA, controlled by Intesa Sanpaolo SpA of Italy, acquire joint control of Italian film and TV production firm Cattleya SpA (notified Jan. 27/deadline March 3/simplified)
MARCH 5
-- German pharmaceuticals firm Sanacorp to acquire German peer v.d. Linde (notified Jan. 29/deadline March 5)
-- U.S. aluminium producer Alcoa to acquire Norwegian peer Elkem Aluminium ANS (notified Jan. 29/deadline March 5/simplified)
MARCH 6
-- Norwegian conglomerate Orkla acquires control of the whole of Sapa AB, a Swedish maker of soft alloy extrusions (notified Jan. 30/deadline March 6/simplified)
-- Italian toll road operator Atlantia SpA and Spanish infrastructure firm Acciona acquire joint control of the Chilean toll motorway assets of Spain's Itinere (notified Jan. 30/deadline March 6/simplified)
-- Danish shipping company Vesterhavet A/S and Danish freight forwarder DSV A/S to acquire joint control of Danish sea shipping company DFDS A/S (notified Jan. 30/deadline March 6/simplified)
MARCH 10
-- France's Dassault Aviation and French holding company TSA, controlled by the French state, acquire joint control of French defence electronics firm Thales (notified Feb. 3/deadline March 10)
SECOND-STAGE REVIEWS BY DEADLINE
-- German airline Lufthansa AG to acquire Belgian air transport company SN Airholding SA/NV, which controls Brussels Airlines (notified Nov. 26/deadline Jan. 12/extended on Jan. 6/new deadline Jan. 26/in-depth probe opened Jan. 27/deadline June 10)
-- Sweden's Bonnier AB and Norway's Schibsted ASA, both international media groups, acquire joint control of Retriever Sverige AB, a supplier of digital media monitoring, archives and business intelligence services in Sweden (notified Dec. 15/deadline Jan. 29/in-depth probe opened Jan. 29/deadline June 15)
GUIDE TO EU MERGER PROCESS
DEADLINES:
The European Commission has 25 working days after a deal is filed for a first-stage review. It may extend that to 35 working days, to consider either a company's proposed remedies or an EU member state's request to handle the case.
Most mergers win approval but occasionally the Commission opens a detailed second-stage investigation for up to 90 additional working days, which it may extend to 105 working days.
SIMPLIFIED:
Under the simplified procedure, the Commission announces the clearance of uncontroversial first-stage mergers without giving any reason for its decision. Cases may be reclassified as non-simplified -- that is, ordinary first-stage reviews -- until they are approved.
FACTBOX-Spreads of U.S. mergers and acquisitions
EW YORK, Feb 9 (Reuters) - The following list shows the arbitrage spread for
proposed mergers and acquisitions of U.S. companies.
Historically, the wider the spread, the more investors doubt a deal will close.
Arbitrage spreads measure the difference between the offered takeover price and the
target company's current trading price.
For real-time spreads, go to
ACQUIRER TARGET RIC DEAL VALUE* PRICE/SHARE SPREAD %
Pfizer Inc Wyeth WYE.N 66,825.00 47.62 9.67
Roche Holding Genentech DNA.N 36,451.76 86.50 4.22
Dow Chemical Rohm and Haas ROH.N 15,225.62 78.00 38.05
NRG Energy Calpine Corp CPN.N 10,916.43 13.40 63.26
Exelon Corp NRG Energy NRG.N 6,237.66 28.04 11.70
CenturyTel IncEmbarq Corp EQ.N 5,744.34 38.02 3.20
Consortium Post Properties PPS.N 2,054.24 47.00 291.01
CF Industries Terra Industries TRA.N 1,913.93 23.14 -2.22
Abbott Labs Advanced Medical EYE.N 1,356.81 22.00 .55
NOTE: * Deal values in millions of U.S. dollars
proposed mergers and acquisitions of U.S. companies.
Historically, the wider the spread, the more investors doubt a deal will close.
Arbitrage spreads measure the difference between the offered takeover price and the
target company's current trading price.
For real-time spreads, go to
ACQUIRER TARGET RIC DEAL VALUE* PRICE/SHARE SPREAD %
Pfizer Inc Wyeth WYE.N 66,825.00 47.62 9.67
Roche Holding Genentech DNA.N 36,451.76 86.50 4.22
Dow Chemical Rohm and Haas ROH.N 15,225.62 78.00 38.05
NRG Energy Calpine Corp CPN.N 10,916.43 13.40 63.26
Exelon Corp NRG Energy NRG.N 6,237.66 28.04 11.70
CenturyTel IncEmbarq Corp EQ.N 5,744.34 38.02 3.20
Consortium Post Properties PPS.N 2,054.24 47.00 291.01
CF Industries Terra Industries TRA.N 1,913.93 23.14 -2.22
Abbott Labs Advanced Medical EYE.N 1,356.81 22.00 .55
NOTE: * Deal values in millions of U.S. dollars
ECOFIN: French Fin Min: Aid To Auto Makers Not Protectionist
ECOFIN: French Fin Min: Aid To Auto Makers Not Protectionist BRUSSELS -(Dow Jones)- French government aid to the country's automobile industry isn't protectionist, Finance Minister Christine Lagarde said Monday. Earlier, President Nicolas Sarkozy announced that car makers PSA Peugeot-Citroen (12150.FR) and Renault SA (13190.FR) are to receive EUR3 billion loans each from the state as part of a broader plan to underpin the sickly French automobile industry. Sarkozy also said the amount of credits that are being made available to automotive suppliers is being doubled to EUR600 million. As part of their loan agreements, Peugeot-Citroen and Renault have agreed not to close any French plants for the duration of the five-year loans. Arriving at a meeting of finance ministers from the 16 countries that use the euro, Dutch Finance Minister Wouter Bos said the European Commission should review the French plan. "There is no protectionist trend" in the loan package, Lagarde said as she arrived for the meeting. The French move prompted concerns that Germany, Spain and Sweden would be obliged to offer similar support to their automakers in order to preserve fair competition in the industry. "I am a bit concerned that day after day, member state after member state are arranging...their own plans and programs," Luxembourg's Prime Minister and Finance Minister Jean-Claude Juncker told reporters on his way into the meeting. Juncker chairs the gathering. "Of course, we need more coordination," Lagarde said.
ITC proposes project to move wind power to Chicago
NEW YORK, Feb 9 (Reuters) - ITC Holdings Corp on Monday proposed to build a $10 billion to $12 billion power transmission network to move up to 12,000 megawatts of electricity from wind-abundant areas in the Dakotas, Minnesota and Iowa to the heavily populated Chicago area.
In a release, ITC said the proposed "Green Power Express" network would facilitate the development of wind power projects by moving that clean generation to areas in need of additional renewable energy.
"The Green Power Express will create the much-needed link between the renewable energy-rich regions of the Midwest and high-demand population centers," Joseph Welch, chairman, president and CEO of ITC, said in the release.
The power grid operators in the eastern part of the United States said in a report Wednesday the region would need to spend about $80 billion for new transmission infrastructure to increase the amount of energy from wind power to about 20 percent over the next 15 years.
The Green Power Express will cross parts of North Dakota, South Dakota, Minnesota, Iowa, Wisconsin, Illinois and Indiana and will ultimately include about 3,000 miles of extra high-voltage (765-kilovolt) transmission.
ITC filed with the Federal Energy Regulatory Commission (FERC) seeking approval of a revenue requirement formula and incentives including recovery of development expenses.
ITC said it was partnering with several local utilities and wind developers on the project, including NorthWestern Corp, FPL Group Inc's NextEra Energy (formerly FPL Energy) and Iberdrola Renovables SA.
ITC, of Novi, Michigan, operates the high-voltage power system in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and Missouri, and is developing projects in the Great Plains, the Texas Panhandle and elsewhere.
In a release, ITC said the proposed "Green Power Express" network would facilitate the development of wind power projects by moving that clean generation to areas in need of additional renewable energy.
"The Green Power Express will create the much-needed link between the renewable energy-rich regions of the Midwest and high-demand population centers," Joseph Welch, chairman, president and CEO of ITC, said in the release.
The power grid operators in the eastern part of the United States said in a report Wednesday the region would need to spend about $80 billion for new transmission infrastructure to increase the amount of energy from wind power to about 20 percent over the next 15 years.
The Green Power Express will cross parts of North Dakota, South Dakota, Minnesota, Iowa, Wisconsin, Illinois and Indiana and will ultimately include about 3,000 miles of extra high-voltage (765-kilovolt) transmission.
ITC filed with the Federal Energy Regulatory Commission (FERC) seeking approval of a revenue requirement formula and incentives including recovery of development expenses.
ITC said it was partnering with several local utilities and wind developers on the project, including NorthWestern Corp, FPL Group Inc's NextEra Energy (formerly FPL Energy) and Iberdrola Renovables SA.
ITC, of Novi, Michigan, operates the high-voltage power system in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and Missouri, and is developing projects in the Great Plains, the Texas Panhandle and elsewhere.
ITC proposes project to move wind power to Chicago
NEW YORK, Feb 9 (Reuters) - ITC Holdings Corp on Monday proposed to build a $10 billion to $12 billion power transmission network to move up to 12,000 megawatts of electricity from wind-abundant areas in the Dakotas, Minnesota and Iowa to the heavily populated Chicago area.
In a release, ITC said the proposed "Green Power Express" network would facilitate the development of wind power projects by moving that clean generation to areas in need of additional renewable energy.
"The Green Power Express will create the much-needed link between the renewable energy-rich regions of the Midwest and high-demand population centers," Joseph Welch, chairman, president and CEO of ITC, said in the release.
The power grid operators in the eastern part of the United States said in a report Wednesday the region would need to spend about $80 billion for new transmission infrastructure to increase the amount of energy from wind power to about 20 percent over the next 15 years.
The Green Power Express will cross parts of North Dakota, South Dakota, Minnesota, Iowa, Wisconsin, Illinois and Indiana and will ultimately include about 3,000 miles of extra high-voltage (765-kilovolt) transmission.
ITC filed with the Federal Energy Regulatory Commission (FERC) seeking approval of a revenue requirement formula and incentives including recovery of development expenses.
ITC said it was partnering with several local utilities and wind developers on the project, including NorthWestern Corp, FPL Group Inc's NextEra Energy (formerly FPL Energy) and Iberdrola Renovables SA.
ITC, of Novi, Michigan, operates the high-voltage power system in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and Missouri, and is developing projects in the Great Plains, the Texas Panhandle and elsewhere.
In a release, ITC said the proposed "Green Power Express" network would facilitate the development of wind power projects by moving that clean generation to areas in need of additional renewable energy.
"The Green Power Express will create the much-needed link between the renewable energy-rich regions of the Midwest and high-demand population centers," Joseph Welch, chairman, president and CEO of ITC, said in the release.
The power grid operators in the eastern part of the United States said in a report Wednesday the region would need to spend about $80 billion for new transmission infrastructure to increase the amount of energy from wind power to about 20 percent over the next 15 years.
The Green Power Express will cross parts of North Dakota, South Dakota, Minnesota, Iowa, Wisconsin, Illinois and Indiana and will ultimately include about 3,000 miles of extra high-voltage (765-kilovolt) transmission.
ITC filed with the Federal Energy Regulatory Commission (FERC) seeking approval of a revenue requirement formula and incentives including recovery of development expenses.
ITC said it was partnering with several local utilities and wind developers on the project, including NorthWestern Corp, FPL Group Inc's NextEra Energy (formerly FPL Energy) and Iberdrola Renovables SA.
ITC, of Novi, Michigan, operates the high-voltage power system in Michigan's Lower Peninsula and portions of Iowa, Minnesota, Illinois and Missouri, and is developing projects in the Great Plains, the Texas Panhandle and elsewhere.
Irish Life & Permanent freezes managers' pay
DUBLIN, Feb 9 (Reuters) - Bank and insurance group Irish Life & Permanent will cancel the bonuses for 160 senior managers and keep all managers' pay at 2008 levels this year due to a deepening recession, it said on Monday.
Senior managers, including the three executive directors who received 1.4 million euros ($1.82 million) of bonuses between the three of them in 2007, will not get any for 2008 due to "challenges facing the business and the broader economy".
"For all other staff, any bonuses due for 2008 will be cut by 75 percent," Irish Life & Permanent said in a statement.
The group's chairman received 288,000 euros last year, having waived her entitlement to some of her full compensation of 420,000 euros, it said.
Prime Minister Brian Cowen said last week directors at Ireland's two main banks -- Bank of Ireland and Allied Irish Banks -- should face a sharp drop in pay in return for a multi-billion euro government bailout.
Cowen said new executives hired to work at banks receiving state funds should face at least a 25 percent cut on current remuneration levels and their salaries should be capped at that level.
Irish Life & Permanent is not expected to receive a bailout but it is participating in Ireland's 440 billion euro state guarantee scheme for bank liabilities, which also gives the cabinet influence over the banks.
"Since the guarantee scheme was introduced we have the ability as government ... to look at all areas of remuneration in the banking sector for those institutions that are covered by the guarantee," Cowen told public broadcaster RTE.
Irish Life & Permanent said it had taken the decisions on pay on its own initiative but added it would continue to work with the government-appointed Group on Senior Executive Pay in the banking sector.
Senior managers, including the three executive directors who received 1.4 million euros ($1.82 million) of bonuses between the three of them in 2007, will not get any for 2008 due to "challenges facing the business and the broader economy".
"For all other staff, any bonuses due for 2008 will be cut by 75 percent," Irish Life & Permanent said in a statement.
The group's chairman received 288,000 euros last year, having waived her entitlement to some of her full compensation of 420,000 euros, it said.
Prime Minister Brian Cowen said last week directors at Ireland's two main banks -- Bank of Ireland and Allied Irish Banks -- should face a sharp drop in pay in return for a multi-billion euro government bailout.
Cowen said new executives hired to work at banks receiving state funds should face at least a 25 percent cut on current remuneration levels and their salaries should be capped at that level.
Irish Life & Permanent is not expected to receive a bailout but it is participating in Ireland's 440 billion euro state guarantee scheme for bank liabilities, which also gives the cabinet influence over the banks.
"Since the guarantee scheme was introduced we have the ability as government ... to look at all areas of remuneration in the banking sector for those institutions that are covered by the guarantee," Cowen told public broadcaster RTE.
Irish Life & Permanent said it had taken the decisions on pay on its own initiative but added it would continue to work with the government-appointed Group on Senior Executive Pay in the banking sector.
Saturday, February 7, 2009
WORLD FOREX: Euro Extends Gains Vs Dlr On US Stocks
EW YORK (Dow Jones)--The euro gained to session highs against the dollar and yen Friday morning after U.S. stocks opened strong and the appetite for risk grew. The Dow Jones Industrial Average was recently up more than 80 points on the day, discounting a disappointing U.S. jobs report and focusing instead on a potential economic stimulus package ahead of a press conference scheduled for next week by new Treasury Secretary Timothy Geithner. "There is little doubt that the U.S. non-farm payrolls report was extremely weak," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank in New York. "Over the past few days the foreign exchange market has tried to lean on positive developments - better-than-expected Purchasing Managers Index numbers in Europe and the U.S., a modest rebound in equities, and hope of fiscal stimulus and a move towards government guarantees for toxic assets in the U.S." That optimism is encouraging risk appetite among currency traders Friday. They sold off both the dollar and yen, considered safe-haven assets. Alan Ruskin, head of international currency at RBS Greenwich Capital, noted that investors are also unwilling to let go of their riskier positions ahead of Geithner's address. The euro gained as high as $1.2894 and Y118.35 Friday morning. The dollar also rose against the relatively safer yen, to Y91.85. Friday morning, the euro was at $1.2877 from $1.2798 late Thursday, while the dollar was at Y91.70 from Y91.18, according to EBS. The euro was at Y118.12 from Y116.76. The U.K. pound was at $1.4662 from $1.4635 and the dollar was at CHF1.1684 from CHF1.1706 late Thursday. Nonfarm payrolls in January tumbled 598,000, the U.S. Labor Department said Friday, the most since December 1974 and above the 525,000 drop Wall Street economists in a Dow Jones Newswires survey expected. December was revised to show an even steeper decline of 577,000. The data were worse than expected, but "nothing catastrophic," said David Powell, a currency strategist at Bank of America in London. "There is already a very bad amount of news being priced into global equity markets, and this report doesn't give us a new leg down in risk."
Canada Morning
The Canadian dollar dropped rapidly in response to news that Canada lost 129,000 jobs in January, sharply weaker than the expected loss of 40,000 and the largest single monthly job loss on record. The U.S. dollar surged to the C$1.2478 area immediately after the 7 a.m. EST (1200 GMT) release from about C$1.2427 just before. It subsequently registered a session high at C$1.2541, its highest level since Jan. 23, before receding. The dollar was recently at C$1.2478 again as risk appetite returned.
London Gold Market Report
Gold Steady as US Jobless Rate Jumps, Euro Faces "Systemic" Danger; Global Output to Fall Now "Sweet Spots Mined Out"THE SPOT PRICE of wholesale gold held inside a tight $7 range Friday morning as the United States reported its worst monthly job losses since 1974 and Japanese auto-giant Toyota posted its first annual loss since 1950.For the week, Spot Gold in Dollars neared the London close 1.2% below last week's finish, while crude oil slipped back to $40 per barrel.The Euro – to which oil and gold looked tied during the "Reflation Rally" of 2003-2008 – gave back all of a 3¢ bounce to $1.2800 on the forex market.The British Pound meantime rose to a 3-week high of $1.4750, capping the Gold Price in Sterling below £626."The Euro could be in danger if strains in Eastern Europe and the Baltics create systemic risk in Western European banks," reckons Steven Barrow writing for Standard Bank today."This might seem a strange thing to say given that banks the world over are struggling. However, we think the situation could throw up Euro weakness in the same way that Mexico's devaluation in 1994 hurt the Dollar due to hefty US bank exposures."It is certainly something that keeps us focused on a slide in Euro/Dollar down to 1.20 and Euro/Yen down to 100," says Barrow.Versus gold, the Euro slipped below 0.14% of an ounce Friday morning, losing almost 15% of its value against Gold Bullion so far this year.Stock markets retreated from earlier gains, meanwhile, after the US Dept. of Labor reported a loss of 598,000 non-farm payrolls for January – almost one-fifth greater than analyst forecasts.Unemployment rose to 7.6% of the workforce, also beating expectations, while average earnings just crept ahead of inflation."We are not going to get relief by turning back to the very same policies that for the last eight years doubled the national debt and threw our economy into a tailspin," said US president Barack Obama on Thursday."We can't embrace the losing formula that says only tax cuts will work for every problem we face."An independent auditor appointed by Congress said Thursday that US tax-payers handed Wall Street a subsidy of $78 billion in their $250bn purchase of preferred stock.At around 30¢ in the dollar, that estimate beats the Congressional Budget Office's figure of a 25¢ subsidy.Over in the Gold Mining sector, meantime, "We've gone through all the sweet spots," says Graham Briggs, CEO of South Africa's Harmony Mining – the world's No.9 – in a Financial Times report on the country's failing supply."The [ore] grade year on year is downwards."Formerly world No.1 throughout the 20th century, South Africa saw its output fall 14% in 2008, taking it to third place behind the China and the United States.Breaking new records, AngloGold Ashanti – the world's No.3 gold producer – is now having to mine at a depth of 3,778 meters at its Mponeng project in South Africa."Total fabrication demand for gold (comprising jewelry and other sources) was steady in 2008," says a new research note from Barclays Wealth today, "and we expect overall demand to hold steady again throughout 2009."In the medium term," the wealth management group reckons, "global [physical] demand should grow by around 3% a year."On data compiled by BullionVault, Gold Mining output worldwide has shrunk by an average of 1% per year since peaking in 2003.
US: Claims surge higher, factory orders plunge
nitial claims unexpectedly rose by 35 000 to 626 000 in the most recent week, the highest level in the cycle and the highest since October 1982. The steep rise is probably due to massive shutdowns at carmakers plants. The continuing claims increased by a more modest 20 000 to 4 788 000, which is the highest level ever (series started in 1967). The figures clearly show that the current recession is at best as severe as the 1981/82 recession.
The monthly retail sales fell in January for the fourth consecutive month, notably by 0.7% Y/Y, a weak result but nevertheless stronger than the ICSC forecast of a decline of 2 to 3%. Only Wal-Mart posted positive sales figures; all other retailers reported steep declines.
December factory orders printed very weak, down 3.9% M/M following a downwardly revised drop of 6.5% in the previous month. Consensus was looking for a more modest 3.1% M/M decline. On a yearly basis, orders are down a stunning 18.7%, suggesting just like in Germany that industrial activity collapsed in Q4. Looking to the details, part of the decline (non-durable orders) was due to the plunge of the prices of refined petroleum goods.
Q4 productivity increase by 3.2% ann., following a 1.5 rise in Q3 and was up 2.7% Y/Y. This is an extraordinary result given the plunge in output. Indeed, while business output dropped 5.5% in Q4, the aggregate hours worked (private sector) fell a whopping 8.4% (annualized). The combination of the productivity growth (3.2%) and the rise in compensation (5%) led to a moderate rise of 1.8% of unit labour costs in Q4 in annualized terms and a very subdued 0.7% Y/Y. This means that there are absolutely no wage-related inflationary pressures.
The monthly retail sales fell in January for the fourth consecutive month, notably by 0.7% Y/Y, a weak result but nevertheless stronger than the ICSC forecast of a decline of 2 to 3%. Only Wal-Mart posted positive sales figures; all other retailers reported steep declines.
December factory orders printed very weak, down 3.9% M/M following a downwardly revised drop of 6.5% in the previous month. Consensus was looking for a more modest 3.1% M/M decline. On a yearly basis, orders are down a stunning 18.7%, suggesting just like in Germany that industrial activity collapsed in Q4. Looking to the details, part of the decline (non-durable orders) was due to the plunge of the prices of refined petroleum goods.
Q4 productivity increase by 3.2% ann., following a 1.5 rise in Q3 and was up 2.7% Y/Y. This is an extraordinary result given the plunge in output. Indeed, while business output dropped 5.5% in Q4, the aggregate hours worked (private sector) fell a whopping 8.4% (annualized). The combination of the productivity growth (3.2%) and the rise in compensation (5%) led to a moderate rise of 1.8% of unit labour costs in Q4 in annualized terms and a very subdued 0.7% Y/Y. This means that there are absolutely no wage-related inflationary pressures.
German CSU leader rejects Glos's resignation offer
MUNICH, Germany, Feb 7 (Reuters) - The chairman of Germany's Christian Social Union (CSU) said in a statement on Saturday he had rejected Economy Minister Michael Glos's resignation offer.
CSU chief Horst Seehofer said he had told Glos by telephone earlier on Saturday he would not accept the offer, adding that he would discuss the reasons behind the request with him in person.
CSU chief Horst Seehofer said he had told Glos by telephone earlier on Saturday he would not accept the offer, adding that he would discuss the reasons behind the request with him in person.
Geithner says banks must modify loans-sources
WILLIAMSBURG, Va., Feb 7 (Reuters) - U.S. Treasury Secretary Timothy Geithner on Saturday told lawmakers that financial institutions that receive government assistance will have to make loan modifications and meet other new standards, according to Democratic sources.
Geithner, during a briefing with House of Representatives' Democrats, was asked about a New York Times report that the Obama administration would not require banks to increase their lending as part of revamped government effort to restore stability to the financial industry.
According to the sources, who asked not to be identified, Geithner said: "We are not doing what they wrote ... Institutions that get assistance will have to participate in loan modifications and meet other standards that we set."
"Public assistance is a privilege, not a right," the sources said Geithner told lawmakers.
The sources said Geithner told the lawmakers that fixing the banking system. "It is going to take time for it to work but it will work," he said, according to the sources.
Geithner on Monday will unveil the Obama administration's plans for dealing with an ongoing credit crisis and outline how it will spend what remains in a $700 billion financial bailout fund approved by Congress in the fall.
The Democratic sources did not indicate that Geithner provided any specifics on that plan during his meeting with House Democrats attending an annual retreat. Besides answering questions on how the administration will battle the crisis, the session was a chance for lawmakers to get an opportunity to get to know the new Treasury secretary better, source said.
Geithner is not expected to ask Congress for more funds to clean up a banking system weighed down by bad mortgage-related assets, but some lawmakers believe the Obama administration could ask for more money later in the year.
"We believe liquidity needs to be restored and in order to do that we need to see lending proceed," House Majority Leader Steny Hoyer told reporters before meeting with Geithner.
Geithner, during a briefing with House of Representatives' Democrats, was asked about a New York Times report that the Obama administration would not require banks to increase their lending as part of revamped government effort to restore stability to the financial industry.
According to the sources, who asked not to be identified, Geithner said: "We are not doing what they wrote ... Institutions that get assistance will have to participate in loan modifications and meet other standards that we set."
"Public assistance is a privilege, not a right," the sources said Geithner told lawmakers.
The sources said Geithner told the lawmakers that fixing the banking system. "It is going to take time for it to work but it will work," he said, according to the sources.
Geithner on Monday will unveil the Obama administration's plans for dealing with an ongoing credit crisis and outline how it will spend what remains in a $700 billion financial bailout fund approved by Congress in the fall.
The Democratic sources did not indicate that Geithner provided any specifics on that plan during his meeting with House Democrats attending an annual retreat. Besides answering questions on how the administration will battle the crisis, the session was a chance for lawmakers to get an opportunity to get to know the new Treasury secretary better, source said.
Geithner is not expected to ask Congress for more funds to clean up a banking system weighed down by bad mortgage-related assets, but some lawmakers believe the Obama administration could ask for more money later in the year.
"We believe liquidity needs to be restored and in order to do that we need to see lending proceed," House Majority Leader Steny Hoyer told reporters before meeting with Geithner.
Monday, February 2, 2009
Is the pound really finished?
Few would argue the UK faces one of its toughest ever economic challenges this year, and the country’s currency has reflected this: hitting a 23-year low against the dollar and a record low against the yen.
But other economies are in poor condition, so why has the pound suffered more? Has its sell off been overdone, or are UK finances in such poor shape sterling’s descent is fully warranted?
Maurice Pomery, head of FX at IDEAglobal, answered readers’ questions on the plight of sterling and the fortunes of other currencies on Monday, February 2.
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It seems every bit of news this day hits the pound against other currencies. I hear the British government believes this will help the economy since it would make British goods cheaper. I am wondering as to the rationale behind this lack of support to the currency. Last time I checked, the UK was importing more than exporting and was a service-based economy not a manufacturing oriented one. Consequently do you believe the UK government to be likely to back the pound at some point in the next 3 to 6 months and to what extent such public showing could strengthen the currency?
Marc, London
Maurice Pomery: This is a very good question and I have often said that lowering the value of sterling to help exports requires a strong export infrastructure and someone to export to.
The UK is just not in this business to the extent it was and although it worked in the past after the demise of the exchange rate mechanism, the structure of our economy has shifted.
Weaker sterling makes life very tough on our retailers, as we import so much, at a time when consumers are demanding ever-bigger discounts and bargains.
However, I think there is little this administration will do with the Pound in the medium-term as Mr Brown himself has quickly moved to rebuff comments from the French finance minister that the government should intervene to stem the fall as it is uncompetitive.
But if sterling starts to collapse on a trade-weighted basis, the political pressure from Europe for action will rise and, with the UK’s lack of reserves, any action may have to be co-ordinated across the continent.
My own opinion is that the government likes a lower pound to attract back the foreign investment from banks and major institutions to prop up the Gilt market and underpin the financial sector.
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Why is the US dollar, with a crisis to at least match that of the UK in housing, in trade and in the government budget overspend, not to mention even lower interest rates, doing so much better than the UK?
Francis Toye, London
MP: The plain fact here is that we have gone through a massive shortage of US dollars as banks struggled to borrow and that, with the financial turmoil we have seen, a massive disinvestment from global markets has taken place.
This de-leveraging has seen money move home and investors clamour for the safety of what can be called ‘the world’s reserve currency’. The dominance of the US bond markets has attracted money that is now more interested in safety than in yield.
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In terms of foreign currency, where does one go for a safe haven? Is the best option the Swiss franc?
David Nichol, UK.
MP: The emphasis on the Swiss franc as a safe haven currency has been diluted recently and the correlation between risk aversion and Swiss strength has been somewhat tarnished.
As this financial and economic situation is a global event, investors have turned to the US dollar as the world’s reserve currency and as interest rate differentials have narrowed, have been more inclined to buy into the creditor nation status that is the Japanese yen.
Again this is more about safety, even on a Sovereign basis, than yield.
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I am reading that with the demise of both London as a global financial powerhouse and the tailing off of North Sea reserves, the UK is not the place for future investments. Sterling has dropped significantly and some say will go down further to parity against the dollar as well as below the one-euro level. I can understand the rationale behind this sentiment, but would like another view to see if this is on the cards.
Richard Marshall, London
MP: My personal view is these comments are from the hyper-pessimists and the financial infrastructure is still a very compelling story with a talent pool that is till the envy of the world.
It will remain important for financial services companies to do business in London. We have seen confidence tested before.
I do not see London going from being the best trading centre in the World to nowhere- at-all so quickly, and possibly new investment is already being attracted by the weaker pound.
I feel there is a lot already “priced in “ in terms of the current level of sterling, and the UK currency even seems a little undervalued against the euro.
Against the US dollar, sterling’s prospects are a little more opaque and lower levels could be seen.
But I see no run on the pound yet. Any step-down for sterling against the dollar will see most currencies follow it, including the euro.
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What is really the driver behind the currency volatility of the past few months? It seems that underlying fundamentals are less important, and also that with interest rates now being so close to zero that foreign exchange trading is one of the few ways for investors and institutions to generate tax free profits or returns . Does this mean that currency volatility is likely to continue; what is your perspective on this?
Peter Russell, Hungary
MP: Quite simply the elevated volatility in markets has been based on fear and de-leveraging with a lack of liquidity in the market.
This will last some time as there is a massive split in opinions as to what is around the corner in both political initiatives and reactions to them.
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Has the banking crisis in the UK severely damaged the UK position as a leading finance centre and if so will this and the weak manufacturing position in the UK result in the current weak pound sterling becoming a permanent state of affairs?
Ian Mayger, Watlington Oxfordshire
MP: The banking crisis has not done any favours for the UK’s position as a leading financial centre, but I would argue against it being severely damaged.
The government, the Bank of England and the Financial Services Authority (FSA) are implementing measures to stabilise the financial system and restore confidence in the banking system; via bank recapitalisation measures (amounting to £37bn in fourth quarter of 2008), nationalisation or part nationalisation of some banks, taking measures to provide liquidity insurance to banks in the event of stressed market conditions.
Also from February 2, the Bank of England will start purchasing of high quality corporate bonds, commercial paper and paper issued under its capital guarantee scheme (all high quality assets and paper that enjoys genuine private demand in normal conditions).
Even the FSA has already acknowledged that it would have to accept a lower capital adequacy requirements for banks, as the latter absorb expected losses stemming from prospective bad loans as a result of the weakening economy.
Don’t forget that New York has also been in the eye of the storm, perhaps even more so than the UK, and the key financial centre in the eurozone, Frankfurt in Germany, has also had its fair share of banking sector problems.
With time, once stability is restored, with tighter regulation in place, London will enhance its role as a key financial centre.
In fact it still is a key financial centre, even after the recent debacle.
In its favour are demographics, a universally spoken language, a flexible labour market and its favoured location between New York and Tokyo.
But it will probably take several years before it resumes trading at the capacity at which it did prior to the financial turmoil.
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What were the reasons for the sell-off of gold by the UK government at a time when the price was at a long-term low? Was it debated in the commons?Who made the decision? How much more would have been raised if the same quantity was sold now?
Tony Crampton, Brittany
PM: The government decision to sell 415tonnes from its holdings of 715 tonnes of Gold reserves in 1999 came in the aftermath of sales of gold reserves by a handful of central banks.
It was felt at the time that it wasn’t necessary for the government to hold the bulk of its currency reserves in gold. So what it did was to reduce the proportion of its holdings of gold in favour of increased holdings of other currencies. So, the intention was for gold holdings to fall to around 7 per cent of total reserves, from 16.7 per cent.
Recall that this decision was taken against the backdrop of a continuous fall in the gold price, from $413.5 per troy ounce in Feb 96, to $282.5 per troy ounce on May 7 1999, when the govt made its announcement.
The price carried on falling right through to September 1999. So the government would have felt it was prudent at the time to make such a decision. Indeed, the Treasury said “its aim was to balance the portfolio of Britain’s reserves by increasing the amount held in currency against a background of falling gold prices”. It was also felt that with nearly 50 per cent of the UK’s net foreign currency reserves invested in gold, prior to the sale, the exposure to a single asset (whose price had exhibited volatility historically) was too great.
Parliamentary approval of the gold sale was not sought, but the decision has since been debated a few times. Note that in Jan 2001 the govt spending watchdog (National Audit Office) did declare that the sale of the UK’s gold reserves had been successful. It is estimated that the government raised $3.5bn from the sale of gold, having sold around 395tonnes between 1999 and 2001.
But it’s been claimed that the sale cost the UK £2bn because the UK did not capitalise on the subsequent soaring of gold prices from March 2001.
Could Hyperinflation Happen Again?
Global
Could Hyperinflation Happen Again?
According to Philip Cagan’s (1956) classical definition, hyperinflation is an episode where the inflation rate exceeds 50% per month. The historical examples of hyperinflation mostly occurred in the 1920s, when Austria, Germany, Hungary, Poland and Russia experienced galloping price increases. For example, Germany in 1923 recorded an astronomical inflation rate of 3.25 million percent in a single month. Since the 1950s, hyperinflations have been confined to developing and transition economies. Some recent examples include Argentina (1989-90), Bolivia (1984-85), Brazil (1989-90), Peru (1990), Ukraine (1991-94) and Zimbabwe in the past several years.
The root cause of hyperinflation is excessive money supply growth, usually caused by governments instructing their central banks to help finance expenditures through rapid money creation. Hyperinflations have mostly occurred in a context of political instability, adverse economic shocks and chronically high fiscal deficits. Hyperinflationary episodes are characterised by a general loss of confidence in the value of money, a flight into real assets and hard currencies, a surge in barter trade, and a shrinkage of financial intermediation and thus of the banking system.
An important empirical feature of hyperinflations is the high correlation of money supply growth and inflation rates. Money growth and inflation rates are also highly correlated in milder versions of high inflation episodes. Past bouts of high inflation in the UK, Italy, New Zealand and Mexico were preceded and accompanied by high growth rates of the money supply.
It is important to note that in low-inflation and low-monetary growth environments, the relationship between money growth and prices is much weaker or altogether non-existent. Average money growth rates have varied substantially between countries that have experienced relatively low (single-digit) inflation rates. However, countries with sustained high money growth rates have also experienced sustained high inflation.
Against this backdrop, could hyperinflation or high inflation happen again? Possibly yes, under certain circumstances.
First, the rapid expansion of the monetary base that the Fed, the ECB, the Bank of England and others have engineered in the last several months would have to continue and, importantly, would have to feed into a more rapid and sustained expansion of money in the hands of the general public.
Money supply M1 (consisting of currency in circulation and sight/checking deposits by non-banks) has gained momentum recently, especially in the US. We will be watching closely how this measure of money will evolve in the coming months.
Second, governments would have to face difficulties in financing rapidly rising expenditures on the various stimulus and bailout packages through taxes and selling bonds to the general public. In such circumstances, political pressures on central banks to monetise government spending would probably rise. This could be done through central bank loans to the government, central bank buying of government bonds at auction, outright unsterilised purchases of government bonds in the open market or additional lending to banks against government collateral.
Last, but not least, a combination of sustained monetary growth and high fiscal deficits would have to undermine the general public’s confidence in both the government’s ability to service the debt without taking resort to the printing press, and in the central bank’s ability or willingness to resist such pressures. A sudden surge in inflation expectations on the back of such a loss in confidence would induce people to reduce their deposits and cash holdings and pile into real assets. The velocity of money and inflation would rise, and the government/central bank would have to keep printing ever more money to finance government spending.
Clearly, this is an extreme scenario. Governments and central banks would have to jettison their commitment to long-term fiscal sustainability and keeping inflation low, and the public would have to lose confidence in their credibility. Given the reputation that central banks have built up, and given the commitment of central bankers to maintaining low inflation, a return to high inflation or even hyperinflation would seem to us to be no more than a distant possibility.
However, given the size of the current and prospective economic and financial problems, and given the size of the monetary and fiscal stimulus that central banks and governments are throwing at these problems, investors would be well advised not to ignore this tail risk, especially as markets are priced for the opposite outcome of lasting deflation in the next several years. Put differently, we believe that buying some insurance against the black swan event of high inflation or even hyperinflation makes sense and is relatively cheap currently.
Head Fake?
United States
Head Fake?
Head Fake?
January 29, 2009
The global economy fell off a cliff in the fourth quarter of 2008. Official data from countries as diverse as Great Britain and Korea indicate that output collapsed in the final three months of last year at the fastest pace on record. In those two economies, output plunged by 6% and 20.8% annualized.
A fierce debate is now unfolding over the economic prognosis: Many hope that these shocking declines in global output represent a massive destocking of the global supply chain that has gone so far, it has to snap back. Coupled with scattered signs of stability in business surveys and the fact that policy stimulus is coming, this belief has spurred hopes that the worst is over or even that a rebound is coming. Such an inflection point – famously identified by its mathematical label of a positive second derivative – would be critical not just for the economic prognosis, but also for markets. Negative market sentiment is intensely pervasive, so any less-bad news could promote a rally in risky assets.
Would that it were true. In our view, recovery is coming eventually, thanks to efforts to repair the financial system, massive stimulus, and the ebbing of recessionary forces. But a sustainable economic rebound is unlikely soon. The fundamentals behind demand are still negative, inventories are excessive, and the lags between coming policy changes and their economic impact may be longer than hoped. Indeed, barring significant changes in the pending US fiscal stimulus plan, its timing and thrust seem likely to disappoint.
We think the upside and downside risks now seem more evenly balanced than a month ago, and the freefall in economic activity will turn less intense in the next couple of months. But in our view the improvements in recent data are for now more noise than signal, and likely represent a transitory deviation from the fundamental weakness of the overall economy. Investors beware: The road through this recession to recovery will turn more bumpy and treacherous, marked by dead ends, false dawns, head fakes and other dangerous critters. A clear implication is that it is likely too soon to embrace risky assets.
There’s no mistaking recent weakness, even in economies for which official 4Q output figures haven’t been published. We estimate that, courtesy of sharp declines in consumer spending, business investment, housing and exports, US output tumbled at a 6.5% annual rate in 4Q. In the Eurozone, we think real GDP contracted by about 4%, and in Germany by more than 6%. In other economies and regions where the data on output are published with a longer lag, indicators ranging from industrial production to exports are declining at a double-digit pace. While the experience is diverse, that’s largely true for Japan, Asia excluding Japan, some countries in Latin America, and many in Central and Eastern Europe. For example, our team reports that in Brazil, one of the last economies to see the downturn, many indicators for 4Q08 show the sharpest decline on record – from car production and paperboard sales to heavy vehicles traffic and business confidence.
These sharp declines in production seemingly make the logic for a rebound straightforward: Production cuts have gone well beyond the declines in demand, so inventories are thought to be razor-thin. Interest rates and energy prices are down, frozen markets are thawing, and fiscal stimulus is coming. Other scraps of evidence support this thesis: Mortgage applications have spiked, funding and credit markets are active, and the University of Michigan index of consumer sentiment has bounced off its November trough. Early-January production indicators have turned less negative. In the US, for example, the January Empire and Philadelphia Business Outlook Surveys rose by 6 and 11 points, respectively. Our own Business Conditions Index jumped by 11 points in early January. US leading indicators rose by 0.3% in December, reflecting a steeper yield curve and growth in the M2 monetary aggregate, and existing home sales jumped as foreclosure sales rose. In Europe, production seems aligned with plans, and improvements in the Eurozone flash manufacturing PMI and the Belgian BNB survey and a stabilization in the French INSEE survey hint at an eventual recovery. Big increases in Ukrainian and Russian steel exports in December and January probably reflect the impact of devaluation and a correction after large-scale shutdowns in October-November. Industry analysts cite anecdotes of improvement as well. For example, Equistar, one of the largest producers of ethylene, propylene and polyethylene in North America, says demand for petrochemical derivatives is showing signs of improvement in 1Q. This is the first chemical company to make a positive noise for several quarters.
We see three problems with this thesis. First, the crisis hit when inventories were excessive. Despite five straight quarters of inventory liquidation, equaling the records for duration from 1981-82 and 2001-02, stocks are not especially lean. On the contrary, judging by inventory-sales ratios and purchasing managers’ surveys, inventories are more out of line with sales than at any time in nearly a decade. We estimate that the real inventory-sales ratio in manufacturing and trade jumped to 1.42 in November – up 10 points off its 2007 lows – as real sales plunged nearly 6% from a year earlier but real inventories fell by only one-third as much. While purchasing managers have slashed their stocks, the ISM customer inventories index jumped to 57 in December, the second-highest reading ever. So even if demand stabilizes quickly, which is in doubt, more production cuts lie ahead. In Japan, automakers are cutting production in order to trim bloated inventories.
The second problem is that head fakes and false dawns are common in recessions. The intensity of contractions is never uniform, and changes in business behavior can cluster or move in waves. Quirks in the weather or other factors can create deviations in business surveys and economic data that are inherently volatile. Classic examples of US head fakes are the double-dip recessions in 2001 and 2007-9 (yes, the current recession began in December 2007). In fact, history shows that such ups and downs within recessions are common. In the 1957-58 recession, the economy rebounded sharply after contracting in the spring of 1957, but relapsed into two quarters of steep declines. In 1960, a 3Q increase in activity separated contractions in 2Q and 4Q. Two quarters of contraction kicked off the 1969-70 recession, followed by two quarters of growth and a final setback in 4Q70. In the long 1973-75 recession, two separate quarters of growth (4Q73 and 2Q74) interrupted a long downturn. And the six-quarter downturn in 1981-82 encompassed two separate quarters of economic growth.
Most important, the fundamentals are still negative, although the positive factors cited above mean that the risks to US and global growth are now more balanced around a weaker baseline than a month ago (see Global Forecast Snapshots, January 2009). The full impact of the tightening in credit is still playing out, so it’s too soon to expect a reversal. Indeed, the adverse feedback loop from the credit crunch to a deteriorating economy and balance sheets prompted our colleague Betsy Graseck to increase her estimates of cumulative losses in the US financial system to US$1.5 trillion, and this will feed back to a further tightening of lending standards. Global economic activity has just begun to fall, and this will feed back to weaker US exports (see Global Recession Aggravates the US Downturn, January 12, 2009). Moreover, a deep US and global capital-spending recession is now underway, one that may rival the bust of 2001-2. The economic ‘accelerator’ is working in reverse, and slumping operating rates, sinking profitability and tighter financial conditions are all dragging down investment outlays. They will suffer early in 2009 as the expiration of investment tax incentives on December 31, 2008 will accentuate the downturn (see The Capex Recession Goes Global, December 1, 2008).
Policy implications: For the Fed, with interest rates now effectively at zero, these developments mean that it is important to continue to expand its menu of financing facilities and purchases of long-term securities in order to ease the credit crunch. The Term Asset-Backed Securities Lending Facility (TALF) will go into operation next month and could be a template for helping other markets, like those for commercial MBS and municipal bonds. The Fed will also continue its aggressive purchases of residential MBS and agency debt through the spring, which should support those markets until the Obama Administration can begin to use the housing GSEs’ balance sheets to support housing finance. While the Fed is unlikely to take the option of purchasing longer-term Treasuries off the table, such outright purchases seem less likely than buying other assets, unless rates back up significantly under the weight of heavy Treasury supply. And Fed officials likely will collaborate with the incoming Treasury team to explore options for cleaning up bank balance sheets and mitigating mortgage foreclosures.
US GDP Contracts by most since 1982
The greenback edged up higher against the majors amid heightened risk aversion, pushing the euro beneath the 1.28-level. Data from the US pointed toward further deterioration in fundamentals, suggesting the recession continues to worsen.
US economic reports released earlier revealed a sharp contraction in GDP growth, down by an annualized 3.8% in Q4 versus a 0.5% decline previously. Although the drop in GDP was less than the anticipated drop of 5.4%, it was still the steepest contraction in the US economy since 1982. The Q4 sales component of GDP declined by 5.1% versus a 1.3% decline previously, while PCE price index posted a 5.5% drop versus a 5% decline. The Q4 employment costs eased to 0.5% from 0.7%. The January Chicago PMI declined to 33.3 from 35.1 in December, while the University of Michigan consumer sentiment survey improved to 61.2 in January, up from 60.1.
US economic reports released earlier revealed a sharp contraction in GDP growth, down by an annualized 3.8% in Q4 versus a 0.5% decline previously. Although the drop in GDP was less than the anticipated drop of 5.4%, it was still the steepest contraction in the US economy since 1982. The Q4 sales component of GDP declined by 5.1% versus a 1.3% decline previously, while PCE price index posted a 5.5% drop versus a 5% decline. The Q4 employment costs eased to 0.5% from 0.7%. The January Chicago PMI declined to 33.3 from 35.1 in December, while the University of Michigan consumer sentiment survey improved to 61.2 in January, up from 60.1.
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