Finance news. My opinion.

September 30, 2008

Appeals court ruling favors City Manager Cauthen

Filed under: management — Tags: , , — Professor @ 6:38 pm

Kansas City Mayor Mark Funkhouser and Mayor Pro Tem Bill Skaggs lost another round in an attempt to hire a new city manager in place of Wayne Cauthen.

The Missouri Court of Appeals, Western District, ruled Tuesday that a city manager can be removed only with the mayor’s approval and the ratifying vote of six other council members, or, absent the mayor’s approval, with nine council members in favor of removing the city manager.

The city can’t remove a city manager merely by allowing the specific time period of the contract to expire, as Funkhouser tried to do in 2007.

“The expiration of the employment agreements did not serve to remove the city manager from office but merely signaled the end of the time period during which the compensation, management goals and performance guidelines set forth in the agreement were applicable,” the opinion stated.

Skaggs couldn’t immediately be reached for comment.

On Oct faxless payday loans. 18, the Kansas City Council passed an ordinance to begin negotiating a new contract for Cauthen. On Dec. 10, Funkhouser said in a memo that he wouldn’t sponsor a resolution for a new contract for Cauthen and wanted instead to find another city manager.

Three days later, the council passed an ordinance that authorized a new contract with Cauthen anyway.

Skaggs then sued the city on the claim that the council didn’t have the authority to enact ordinances for new contracts for city managers.

A trial court judge dismissed that case on summary judgement in favor of the city, leading to the appellate court ruling.


September 29, 2008

Paulson Must Make $700 Billion Rescue for Banks Work

Filed under: economics — Tags: , , — Professor @ 3:48 pm

Treasury Secretary Henry Paulson and congressional Democrats hammered out a consensus on spending up to $700 billion to rescue the financial industry. There isn't consensus on whether it would work.

Lawmakers reached agreement yesterday as House Republican leaders backed away from opposition to the proposal after it included plans to create insurance for mortgage-backed securities. The House and Senate are scheduled to vote on the bill early this week, although it wasn't clear last night that it has sufficient votes to pass the House.

Giving Treasury authority to buy so many distressed securities from lenders is without precedent, and it's unclear how the government will pay prices that strike a balance between protecting taxpayers and preventing more bank failures.

“This has a reasonable chance of pulling back from the brink and having some success, but it's far from certain that will be the case,'' said former Fed Governor Laurence Meyer, now vice chairman of consultant Macroeconomic Advisers LLC in Washington.

“The markets are going to love it because it's a massive subsidy of shareholders and unsecured creditors,'' said Nouriel Roubini, chairman of Roubini Global Economics and economics professor at New York University. “But you're not resolving the two fundamental issues: You still have to recapitalize the banking system, and household debt is going to stay high.''

U.S. stock futures fell on concern that plan won't avert more failures, with the S&P 500 future for December delivery down 2.1 percent to 1189.30 at 10:35 a.m. in Paris. The dollar gained 1.9 percent against the euro to $1.4342 and treasuries also gained.

Immediate Cash

The bill gives Paulson $250 billion at the start to buy assets, increasing the amount to $350 billion upon “written certification'' from the president that the secretary is “exercising the authority'' to buy assets. The Treasury chief, or whoever succeeds him, may use the remaining $350 billion if Congress fails to reject a request for it within 15 days.

The proposed law lets Paulson buy assets “at the lowest price that the Secretary determines to be consistent with the purposes of this Act.'' The bill doesn't require any specific method for the purchases beyond saying mechanisms such as auctions or reverse auctions should be used “when appropriate.'' Treasury officials declined to discuss how the plan will be implemented.

Democratic and Republican leaders trust that Paulson can avert a collapse after Lehman Brothers Holdings Inc. filed for bankruptcy and the government was forced to take over American International Group Inc. Success hinges on whether he can help banks raise capital after $556 billion in writedowns and losses, and get credit flowing through the economy.

`Far Worse Pain'

“We have clearly seen a run of failures of financial institutions not like anything we've seen since the Great Depression,'' House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, told reporters yesterday. “If we didn't do this, there would be far worse pain in the sense of the lending freezing up.''

“It's a fragile situation,'' Paulson said in an interview on CBS television's “60 Minutes'' program broadcast yesterday. “It's gotta do it, and we're going to make this work.''

The draft legislation was posted on the House Financial Services Committee's Web site yesterday. It includes a provision to give taxpayers equity stakes in the companies that benefit from the plan.

The bill has a section aimed at limiting the pay of executives at companies that take advantage of assistance by prohibiting tax deductions for officials that exceed $500,000, which is half the normal deductible limit payday loans. It also allows “clawbacks'' of money already paid to executives at troubled companies and forbids so-called golden parachutes.

Community Banks

The legislation takes steps to let some 800 community banks that held preferred stock in Fannie Mae and Freddie Mac before the mortgage giants were taken over by the federal government on Sept. 7, make better use of losses for tax purposes than they would otherwise be allowed.

House Republicans offered early resistance to the Paulson plan. They complained that it put the country on the road to socialism and instead argued that elimination of the capital gains tax would spur a wave of investment that would render the bailout plan unnecessary.

House Minority Leader John Boehner of Ohio commissioned Virginia Representative Eric Cantor to draft a rival plan without telling Democrats or Paulson. The plan, which depended on self- funded insurance premiums, was abandoned after Democrats lashed out at Republicans at a White House meeting Sept. 25.

Limited Insurance

Ultimately, Republicans got none of the tax breaks they sought, though the bill includes a limited self-funded insurance program for companies that benefit from the bailout. Last night Boehner, the top House Republican, urged his colleagues to support the bailout plan.

Some House Republicans, such as Representative Mike Pence of Indiana, are still holding out. “We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?'' Pence said in a letter to colleagues.

Pence called the plan “the largest corporate bailout in American history'' and that it would “nationalize almost every bad mortgage in America.''

Paulson, the 62-year-old former Goldman Sachs Group Inc. chairman, said such a strategy is necessary to stabilize financial markets. “We will have turbulence and turmoil in our financial system for some time, but I believe that this is going to work,'' he said on “60 Minutes.''

`Some Doubts'

Yet as members of Congress and their staffs worked late nights over the past week negotiating and writing compromise legislation, money markets failed to improve. “It just raised some doubts in my mind whether this was going to be sufficient,'' said Meyer, who was on the Fed board when the Asian financial crisis struck in 1997.

Should the plan fail, “there may have to be a more substantial participation by the federal government to buy mortgages,'' Frank said last night. Any alternative proposal would involve “significant purchases directly of the foreclosed mortgages.''

Paulson and Federal Reserve Chairman Ben S. Bernanke, who will be on a five-member oversight board for the program, have signaled that their priority is shoring up the nation's banks even if it means they don't get taxpayers the cheapest prices for the devalued assets the government buys.

The proposal also sets the stage for an overhaul of financial regulation next year, something Frank is already planning. The draft bill requires the Treasury secretary to report to Congress and make recommendations by April 30 on whether to regulate additional participants in the financial markets.

“It'll give us some temporary respite from the earlier pressures,'' said Joseph Mason, a Louisiana State University finance professor who formerly worked in the bank-research division of the Office of the Comptroller of the Currency. “If we don't use that respite to design more permanent policy, we will find ourselves back in the same place.''


September 24, 2008

Florida high-tech exports grow by nearly $1 billion

Filed under: legal — Tags: , , — Professor @ 9:08 am

Florida’s technology exports grew by almost $1 billion last year, according to the Trade in the Cyberstates 2008 report, released Tuesday by AeA, a national technology trade association.

Florida was the third-largest tech exporter in the nation, with a $13.4 billion share of the U.S.’s $214 billion total.

Florida trailed only California, which led the country with $48.2 billion, and Texas, the nation’s second leading high-tech exporter, with $35.9 million. New York ($8.9 billion) and Massachusetts ($8.7 billion) rounded out the top five.

"When many people think of Florida exports, they probably think only of citrus fruits,” said Maryann Fiala, executive director of AeA’s Florida Council. “But, nearly a third of all exports from the Sunshine State are high-tech products. State public policy officials need to see trade as a great job creator for Florida. High-tech exports support nearly 70,000 jobs in the state.”

While Florida’s tech exports rose, they declined by 3 percent domestically.

The largest single tech sector was computers and peripherals, which accounted for $5.1 billion of exports.

The overviews also provided the top five leading high-tech export destinations for individual states.

For example, Massachusetts’ leading export destination was Japan, followed by Germany and Canada fast cash advance. In contrast, Florida’s leading high-tech export destinations were Brazil, Venezuela and Mexico.

High-tech exports supported hundreds of thousands of U.S. jobs. In Florida, nearly 70,000 jobs were supported by tech exports. Other leading states included Texas (183,900 jobs), California (183,000 jobs), Arizona (36,400 jobs) and Oregon (33,900 jobs).

What does high-tech trade mean for Florida?

· $13.4 billion in high-tech exports (ranked third in U.S.)

· Up $989 million in tech exports between 2006 and 2007

· 30 percent of exports from Florida are tech exports (ranked 12th)

· 69,900 jobs in Florida are supported by tech exports

Florida’s leading tech export destinations:

· Brazil ($2 billion)

· Venezuela ($1.3 billion)

· Mexico ($1 billion)

Florida’s leading tech export sectors:

· Computers and peripheral equipment ($5.1 billion, ranked third in U.S.)

· Communications equipment ($3.3 billion, ranked third)

· Photonics ($529 million, ranked second)

Source: Trade in the Cyberstates 2008


September 22, 2008

Manufacturers’ association opposes payday law repeal

Filed under: term — Tags: , — Professor @ 9:32 pm

The trade group representing the state’s manufacturing industry is joining the fight to keep new restrictions on the payday lending industry intact.

The Ohio Manufacturers’ Association on Monday endorsed a yes vote on Issue 5 to maintain restrictions on the state’s payday lending industry created through House Bill 545. A no vote would strip away a 28 percent annual interest rate cap and reinstate the maximum 391 percent allowed before H.B. 545 went into effect at the beginning of September.

Detailing its opposition to the referendum, the association used similar reasoning that sparked state lawmakers’ push to impose the lower interest rate cap.

“Congress already has capped the interest rates that payday lenders can charge military families,’’ association President Eric Burkland said in a statement. “Ohio manufacturers want those same benefits extended to all Ohio families.’’

Lined up with Gov. Ted Strickland and leaders of both chambers of the Ohio General Assembly to support the new restrictions are the Ohio Farm Bureau Federation, Ohio Roundtable, Habitat for Humanity and the Coalition on Homelessness and Housing in Ohio, among others.

The payday industry group working to bring the measure to the ballot, Ohioans for Financial Freedom, has the backing of the Ohio Chamber of Commerce, Ohio Grocers Association and other small businesses in the state.

Ohioans for Financial Freedom turned in about 422,000 signatures backing the referendum at the end of August, but it hit a snag last week when it agreed to toss out about 13,000 signatures collected by a California company that failed to file required paperwork prior to gathering voter signatures paydayloans. Opponents of the payday group, however, have said they’re confident the measure will come before voters in November even if the Financial Freedom must make a last-minute move to collect more signatures.


September 21, 2008

Frank Seeks More Oversight of Paulson

Filed under: legal — Tags: , , — Professor @ 11:35 pm

House Financial Services Committee Chairman Barney Frank sought authority to oversee and audit Treasury Secretary Henry Paulson's $700 billion program to buy bad mortgage investments.

Frank, a Democrat from Massachusetts, proposed that the U.S. Comptroller General “commence ongoing oversight of the activities and performance'' of the plan, according to legislative language presented to Treasury officials today and obtained by Bloomberg News.

The Comptroller General, who serves as director of the Government Accountability Office, and other GAO officials would have access to financial records, have audit powers and would report findings to Congress, under Frank's measures. The GAO is Congress' financial watchdog.

Frank also recommended limits on executive compensation of companies participating in the debt purchase plan, called the Troubled Asset Relief Program, or “TARP.'' Frank's additions to Paulson's request yesterday urged the Treasury to broaden efforts to help homeowners in danger of foreclosure.

The Comptroller General's oversight will include assessing how well the program is meeting other goals Frank set out, including foreclosure prevention, consumer protection and stabilization of the financial system, according to the document.

Unchecked Power

Paulson asked Congress for unfettered authority to buy devalued mortgage-related securities from investment firms in an effort to keep the financial system from coming to a standstill. The proposal would prevent courts from reviewing the Treasury's actions while raising the nation's debt ceiling.

“We cannot just turn over $700 billion in taxpayer money and not insist that that taxpayer is going to be protected in this,'' Senate Banking Committee Chairman Christopher Dodd told reporters today after a conference call with Senate Democratic leaders creditscore.

The comptroller will submit reports of findings at least every 60 days to the House Financial Services Committee, the Senate Banking Committee and the Treasury Department Inspector General on the activities and performance of the program, according to the draft language.

The program will issue audited financial statements annually to the public and Congress, and the GAO will audit the statements.

CEO Compensation

Companies seeking to sell assets through the program must meet “appropriate standards'' for executive pay and shareholder disclosure, Frank proposed. These include limits on pay to exclude incentives for executives to take risks that are “inappropriate or excessive.''

The Treasury facility would be required to help homeowners avert foreclosures on mortgages, mortgage-backed securities and other assets it acquires that are secured by residential real estate. This includes using its authority as an investor to urge the companies that service the underlying loans to take advantage of a new Federal Housing Administration program.

The FHA program, created under a foreclosure-prevention law Congress enacted in July, is aimed at insuring up to $300 billion in refinanced 30-year fixed-rate loans for about 400,000 borrowers after loan holders agree to forgive some of the balance to help struggling homeowners.


Central Banks May Accept Foreign-Currency Assets, Nikkei Says

Filed under: money — Tags: , , — Professor @ 12:56 pm

Central banks including the U.S. Federal Reserve may begin accepting assets denominated in foreign currencies as collateral to increase liquidity in the world's financial markets, the Nikkei newspaper said.

Six central banks including the Fed, European Central Bank, Bank of Japan and Bank of England are discussing the plan, Nikkei reported today without saying where it got the information or naming the other two banks get a free credit report.

Central bankers struggled to restore confidence in markets last week as banks hoarded money on concern more financial companies will follow Lehman Brothers Holdings Inc. into bankruptcy.


September 20, 2008

Tri-Valley CEO Terry take CEO job at Vineyard

Filed under: management — Tags: , , — Professor @ 9:20 pm

Glen Terry, president and CEO of Tri-Valley Bank, resigned abruptly to take the president and CEO role at struggling Vineyard National Bancorp in Corona, the parent of Vineyard Bank N.A.

Terry left Tri-Valley Bank after just four months on the job.

John Rockwell, chief operating officer, and Eugene Jeanne, chief financial officer, will oversee Tri-Valley Bank during a transitional period as it undertakes a search for a new CEO. Rockwell served as interim chief financial officer after founding CEO Bill Nethercott left the bank earlier this year to help start another bank in San Francisco.

Having just gone through a CEO search several months ago, Tri-Valley already has a search firm and a list of potential candidates for the CEO position, said Jim Snell, chairman of Tri-Valley Bank, who added that Terry’s resignation, which he received via e-mail on Sept, 15, came as a surprise.

“I’m upset by it, but it’s not a devastating blow,” Snell said.

Three-year old Tri-Valley in August said its total assets topped $100 million. Near the end of the third quarter, the bank had $82 million in deposits and $78 million in loans, with a substantial amount of new loans in the pipeline, Snell said. The bank’s ratio of noncurrent loans to total loans stood at 0.63 percent at the end of the second quarter. While the bank has reported a net loss of $680,000 this year through June 30, Snell said that a noncash stock option expense that has hurt earnings goes away effective this month.

Vineyard announced Terry’s appointment, and the appointment of Lucilio Couto as executive vice president and chief credit officer, on Sept payday loan. 18. Terry's appointment was effective Sept. 12, according to Vineyard.

Terry, a Vineyard shareholder, was elected to Vineyard’s board of director at the bank’s annual meeting on Aug. 5. He was part of a alternate slate of directors proposed by the bank’s previous CEO, who was mounting a proxy fight.

Vineyard, with $2.2 billion in assets, has struggled amid huge losses from soured real estate loans. It is operating under a consent decree with the office of the Comptroller of the Currency, its regulator, that required the bank to establish a compliance committee, and name a new president and CEO and chief credit officer by Oct. 31. It must also maintain appropriate regulatory capital levels; just Friday it proposed raising as much as $250 million through a private placement of convertible debt and common stock in an effort to raise capital. Vineyard has offices in Los Angeles, Marin, Orange, Riverside, San Bernardino, San Diego, Santa Clara and Ventura counties.


Paulson Takes Page From Rubin, Tapping Treasury Rainy-Day Fund

Filed under: finance — Tags: , , — Professor @ 8:26 am

An obscure U.S. Treasury Department fund that Robert Rubin once used to save the Mexican economy may provide cash to preserve the savings of investors in U.S. money-market mutual funds.

The Treasury will use the $50 billion Exchange Stabilization Fund to insure publicly offered retail and institutional funds, the department said in a statement. The move comes after the Reserve Primary Fund this week became the first in 14 years to break the buck, or drop below $1 a share, exposing investors to losses.

The ESF — a mix of U.S. dollars, euros and yen — was created in 1934. It enables the department to buy and sell currencies to stabilize the dollar. Because it is outside congressional control, Treasury secretaries have been able to tap it for a number of other purposes, including the 1995 bailout of the Mexican economy orchestrated by then-Treasury Secretary Rubin.

The use of the fund in the past “has been very controversial,'' said Peterson Institute fellow Edwin Truman, former head of the Federal Reserve's international-finance division. “It is, on the basis of its prior use, a stretch to use the Exchange Stabilization Fund for domestic financial- stability purposes.''

Record Redemptions

Nevertheless, Truman said it's “appropriate'' for the Treasury to consider all options. Interest rates on the shortest-maturity Treasury securities fell to almost zero this week as money-market funds, fearing redemptions, rushed to raise cash. Investors pulled a record $89.2 billion from the funds on Sept. 17, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts.

The Treasury's use of the ESF doesn't always attract headlines payday advance low fees. Late last year and early this year, Secretary Henry Paulson authorized a bridge loan to Liberia to address some technical issues with the African nation's debt-relief transactions at the International Monetary Fund and World Bank.

In 1995, however, Rubin's move drew heavy criticism on Capitol Hill, including calls for his impeachment.

The peso was plunging as Mexico appeared close to defaulting on billions of dollars in short-term borrowings. After Congress refused a direct loan, Rubin persuaded former President Bill Clinton to send Mexico $20 billion from the fund, then talked the IMF into lending another $17.8 billion. Mexico later paid back all the money, with interest.

End Run

This time, an end run around Congress isn't likely to create a huge outcry, said Paul McCulley, a portfolio manager at Pacific Investment Management Co.

“You never can legislate the nature of crisis or how it may unfold,'' he said.

The ESF held $49.97 billion as of the end of August. Treasury officials told reporters they don't expect to use the entire amount, since strict rules that require money-market funds to invest in safe assets will likely prevent widespread failures.

Given that some of the fund is in foreign currencies, using it all domestically would require selling euros and yen, which might be tricky, said Wrightson ICAP chief economist Louis Crandall. However, “it could probably be arranged'' with other central banks, he said.


September 19, 2008

Fitch withdraws ‘A’ rating on Expressway Authority bonds

Filed under: finance — Tags: , , — Professor @ 10:20 am

Fitch Ratings is withdrawing its underlying A rating on the Orlando-Orange County Expressway Authority’s $203 million refunding revenue bonds, series 2008A.

Due to market conditions, the Expressway Authority did not issue the refunding bonds.

The Orlando-Orange County Expressway Authority is responsible for the construction, maintenance and operation of toll roads in Central Florida bad credit payday loans.


September 18, 2008

Almunia Has No `Clear Idea

Filed under: legal — Tags: , , — Professor @ 10:08 pm

European Union Commissioner for Economic and Monetary Affairs Joaquin Almunia said he has no “clear idea'' how long the financial-market turmoil will last.

This year “may be one of the hardest years we can remember,'' Almunia said today at a conference in Madrid. “We still don't have a clear idea of how long we'll be living in such a difficult situation.''

The euro-area economy contracted in the second quarter for the first time since monetary union began almost a decade ago, buffeted by record-setting gains in the euro and oil prices, while the yearlong credit squeeze has led in the past two weeks to the collapse of Lehman Brothers Holdings Inc. and the government takeover of Fannie Mae, Freddie Mac and American International Group Inc.

“The degree of optimism has reduced in past six months,'' Almunia said faxless payday loans. “Many thought we were at the beginning of the end of the financial tension.''

Almunia said the European Central Bank has a “clear awareness'' of the dangers inflation poses for the economy, though price growth probably peaked at 4 percent in June and July.

“Inflation in August has started to slow in the euro region,'' he said. “We can expect that this deceleration won't just continue, but will become more evident.''

And this “will help avoid errors of the past with second- round effects,'' Almunia said.


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