Finance news. My opinion.

Appliance World stores in the Denver area have been closed in the wake of the chain’s parent company filing for bankruptcy protection three months ago.

"Effective immediately, Appliance World stores are permanently closed," a notice on the retailer’s website said Thursday.

The chain has five metro-area stores, in Denver, Arvada, Aurora, Littleton and Highlands Ranch, plus one in Colorado Springs, according to the website.

On Oct. 20, Denver-based GCF Holdings LLC, which owns Appliance World, filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court in Tampa, Fla. The company listed between $1 million and $10 million in both assets and liabilities, and said it had between 100 and 199 creditors.

In addition to Appliance World, the company had subsidiaries in Florida and New Mexico, according to the filing and news reports.

Riverview Ventures Inc. of Bradenton, Fla., did business as DeSears Appliance & Home Entertainment. Four DeSears stores in Florida were closed Dec. 2, the Bradenton Herald newspaper reported.

Another GCF subsidiary, DCE New Mexico LLC, operated a pair of electronics and appliance stores under the Baillio’s name in Albuquerque and Santa Fe. The Baillio family, which had sold the stores to the Denver company, resumed ownership after the Chapter 11 filing, the Santa Fe New Mexican newspaper reported.

The Appliance World website notice said that customers who already have been notified their appliance order is in "may pick up on Tuesday February 2 at our Denver warehouse located at 320 S. Lipan."

It said others with existing orders should "please continue to visit our website for ongoing information on receiving your product or a refund."

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About 900 General Motors and Chrysler dealerships that got the ax as the Detroit giants went through bankruptcy have filed notice that they will appeal their shutdown, according to the American Arbitration Association.

The nearly 3,000 dealerships the auto manufacturers scrapped have until Monday to file with the AAA for an independent arbitration of their case. But applications from dealers are still rolling in, so it’s hard to tell what the final count will be, said India Johnson, senior vice president of AAA.

"We are still putting cases in every day. They come in the mail, they come by e-mail, they come by fax," Johnson said. "I think that some may be filing because they want to preserve their right to file, and then next week or the week after that they may not go forward."

Electing arbitration costs dealers and manufactuers each a $1,625 filing fee. But that is just the start: If the arbitration proceeds to a hearing, the costs mount. Dealer and manufactuers are required to split common fees, such as the filing fee, and pay their own attorney expenses.

An estimated 2,000 dealers from General Motors and 789 from Chrysler are eligible to appeal. The General Motors count includes 1,300 dealerships that were put on notice in May for closure as of October 2010. Another 700 dealers were slated for "partial wind-down," meaning that one of a dealer’s multiple franchises is scheduled to be shuttered guaranteed payday loans.

The dealers Chrysler targeted in May have already stopped operating as Chrysler franchises. The company gave them less than 30 days to close.

Dealerships that have already closed or will close due to the death of GM’s Saturn and Pontiac brands are being handled separately. The fate of Hummer franchises will remain in limbo until the brand’s sale to a Chinese company is complete. Saab dealers are also hanging by a thread.

Arbitrators have a list of seven factors to consider in evaluating dealers’ appeals. They will assess the dealer’s profitability over the past four years, the dealership’s current economic viability, the geographic and demographic characteristics of the dealership’s territory, and the length of time the dealership has been in business, among other factors.

The arbitrator must also consider each manufacturer’s overall business plan, and how well the contested dealership fits into it.

The proceedings will be held in the state where the dealership is located and must, by law, be completed by June 14. However, arbitrators will have the option of extending that deadline if they can show cause for the extension. 

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Starbucks Corp.’s fiscal first-quarter profit soared and topped Wall Street’s forecast Wednesday as the upscale coffee retailer boosted its outlook for 2010.

The world’s largest coffee chain reported a profit of $241.5 million, or 32 cents per share, during the three months ended Dec. 27, which was a nearly four-fold rise from a year ago.

Stripping out restructuring charges, Starbucks posted an adjusted profit of 33 cents per share. Analysts polled by Thomson Reuters, who typically exclude one-time items from their forecasts, expected 28 cents per share.

The Seattle-based company’s quarterly sales rose to $2.7 billion, a 4% climb compared with the same period in the prior year. The revenue beat analysts’ forecast of $2.6 billion.

"Continued innovation, the successful enhancement of the customer experience and a transformed, more efficient cost structure have brought Starbucks to a significant milestone — a return to positive growth," said Howard Schultz, chairman, president and chief executive of the company, in a statement.

During a conference call, Shultz added that Starbucks’ performance during the holiday season was the best in the company’s history, with the Caramel Brulee Lattee, which was launched during the season, lifting beverage sales by 30%.

He also said that Starbucks’ new line of instant coffee called Via outperformed expectations and was a highlight for the quarter.

Same-store sales, which measure sales at stores open at least a year and are a key gauge of customer traffic, grew for the first time since 2007, with a 4% uptick worldwide and a 4% boost in the United States fast cash online. In its last forecast, Starbucks said it expected a rise in same-store sales in 2010.

While analysts expected the pick-up in sales, the increase was a surprise said Buckingham Research’s Mitchell Speiser, who expected a 2% hike.

From mid-2008 to 2009, Starbucks closed 800 stores in the U.S. and 100 international locations, laid off workers, revamped its food menu and tinkered with drink prices. The company’s cost-cutting initiatives saved $580 million in 2009.

"Starbucks’ combination of value initiatives, improved food quality and focus on wellness, and new loyalty programs that are encouraging frequency helped it deliver a high quality earnings report," Speiser said. "They’ve brought it all together this quarter and that will give them momentum going forward."

Starbucks raised its outlook and said it expects to earn between $1.05 and $1.08 per share for the full year. In its last forecast, the company said it expected to earn between 92 and 96 cents per share in 2010.

As announced last fall, Starbucks maintains its target to open 100 stores in the United States and 200 in international markets during 2010.

Shares of Starbucks (SBUX, Fortune 500) surged more than 3% in after-hours trading, after falling 1.2% during regular hours.  

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The Toronto stock market started the trading week off positive Monday, led by higher commodity and financial stocks.

The S&P/TSX composite index closed up 65.17 points to 11,750.54 after a lukewarm start to the U.S. quarterly earnings season and moves by China to cool its economy had pushed the main index down more than two per cent last week to below where it started the new year.

“When China raised the reserve requirements (for banks), it was unexpected,” said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier.

“All of a sudden, you say: is some of the global stimulus going to be removed quicker than I thought?”

The TSX Venture Exchange climbed 12.25 points to 1,605.72.

Volumes were lower than normal as New York markets closed for the Martin Luther King holiday.

A day before the Bank of Canada makes its scheduled announcement on interest rates, the Canadian dollar moved 0.28 of a cent higher to 97.42 cents US. The central bank is widely expected to leave rates — which hover near zero — alone until at least the end of the second quarter.

The base metals sector was up 1.39 per cent. Late Monday afternoon, the March copper contract on the New York Mercantile Exchange rose five cents to US$3.41 a pound in electronic trading. Regular trading on the New York Mercantile Exchange was also closed Monday for the King holiday.

Teck Resources (TSX:TCK.B) added 43 cents to $41.23 while Labrador Iron Mines Holdings (TSX:LIM) ran up 69 cents to $5.57.

The February crude contract rose 25 cents to US$78.25 a barrel shortly before the TSX closed, taking the energy sector ahead 0.63 per cent. EnCana Corp. (TSX:ECA) improved 46 cents to $35.67 while Imperial Oil (TSX:IMO) gained 46 cents to $41.10.

Crude prices fell every day last week, losing just over five per cent, as the first batch of fourth-quarter earnings and economic data pointed to signs of continued weakness in the U.S. economy.

Oil and gas explorer Enterra Energy Trust (TSX:ENT.UN) said Monday it will convert to a corporation by the end of May, changing its name in the process to Equal Energy Ltd. Calgary-based Enterra said Monday it wants to make the move before a change in the rules governing the taxation scheme for trusts takes effect in 2011. Enterra units jumped 56 cents or 25.93 per cent to $2.72.

Shares in Cirrus Energy Corp. (TSXV:CYR) dropped 68 cents or 24.46 per cent to $2.10 after delivering a disappointing update on its drilling activities at its subsidiary in Holland. A platform refurbishment was meant to allow “continuous uninterrupted production” from its well. Instead, production performance has steadily declined.

The financial sector moved up 0.65 per cent after losing ground at the end of last week in the wake of disappointing earnings results from American banking giant JPMorgan Chase. TD Bank (TSX:TD) was ahead 75 cents to $64.10 and Manulife Financial was up 22 cents at $20.54 .

The February gold contract was ahead $2.90 to US$1,133.40 an ounce and the gold sector edged up 0.19 per cent.

When Wall Street returns on Tuesday, the focus will turn towards the next batch of fourth-quarter corporate earnings figures, including those from Citigroup Inc. and IBM Corp.

So far, earnings have been fairly mixed, with upside surprises from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc. and JPMorgan Chase.

“Are they going to meet their guidance? And how are they going to meet it? asked Nakamoto.

“Expectations have ratcheted up.”

In other corporate news, a group of bidders, including former Canadian senator Jerry Grafstein, says it’s preparing to make an offer for some of Canwest’s (CGS.V) newspapers, including its flagship National Post. The consortium of investors also includes former Global TV executive and Montreal Star editor Raymond Heard and writer and broadcaster Beryl Wajsman.

But Nakamoto said he expected there are funds and companies that would be interested in the whole newspaper chain.

“I would think there’s a bunch of private equity investors _ like even Onex Corp. (TSX:OCX). Why wouldn’t they look at it? It seems right up their alley. Or why wouldn’t the Ontario Teachers Pension Fund look at it? There’s a lot of money out there.”

Canwest shares were off one cent at 7.5 cents.

Mosaid Technologies Inc. (TSX:MSD) shares rose $1.45 to $21.51 after it said its revenue will be $3 million higher in the 2010 financial year than previously thought, rising to an estimated range of $68 million to $70 million. It said the improved performance is the result of a landmark licensing agreement between the Ottawa patent firm and Samsung Electronics Co., Ltd.

Heritage Oil Corp. (TSX:HOC) says that Tullow Uganda Ltd. has exercised its right to pre-empt Heritage’s sale of a 50 per cent interest of two blocks in Uganda to Italy’s Eni International B.V., and will pay more than US$1.35 billion for the assets. Heritage shares ran ahead $1.90 or 24.24 per cent to $10.20.

Financially troubled Coalcorp Mining Inc. (TSX:CCJ) says the proposed US$150-million sale of its La Francia coal mine in Colombia has been threatened by a company allegedly controlled by former Coalcorp directors. Coalcorp said Monday it received a letter from Blue Pacific Assets Corp. advising that it will ask a court to block the sale unless it receives about $2 million of royalties that are purportedly overdue and assurance that Coalcorp will terminate the proposed sale of La Francia to Goldman Sachs. Coalcorp shares were 1.5 cents higher at 19.5 cents.

New Flyer Industries Inc. (TSX:NFI.UN) said Friday it received orders for 711 buses in the fourth quarter for a total of $308 million. The company said the orders included 506 new firm and option orders and 205 exercised options for buses. Its units added 10 cents to $10.50.

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Today, Norty Cohen opens Buzz-hound Learning Lab in Maplewood, sharing space with Hatch, a focus group and research facility. Among its initial offerings, Buzzhound will offer classes on search engine optimization, the process of improving a website so it ranks higher in search engine results.

Cohen says he sees a strong market for the 10-member classes (prices range from $600 to $700 per person) at a time when there is so much emphasis on reaching customers through the Internet — particularly when research suggests it is critical to rank high in search results. By some estimates, 65 percent of all searchers will go to the first 10 sites they see.

It seems like we hear a lot these days about search engine optimization. Why is that?

There are 100 billion searches a month online. More and more people are using their cell phones to search and that’s where people are finding customers and businesses.

Even though Yellow Pages is still a $16 billion-a-year business, where everything is going is search. If you are in business or if you are in marketing, you need to understand search.

What is the most important thing one needs to know about SEO? And are there any big no-nos?

You need to understand how and why people are coming to your site. And how and what you need to do to improve your content. And to make more opportunities for people to find you online.

… There are people who will say that you can’t fool the search engine, that you can’t do this thing called black hat, where you put in some things that may not be true. I think the biggest no-no is not doing anything and assuming people are going to find you.

You have this lab set to open today low interest rate personal loans. What sort of response are you expecting?

We’ve had several major corporations commit to sending people to the classes. We tried to price it so that it’s incredibly reasonable, while at the same time, there is a ton of information that happens in one day.

There are two instructors, so it is a five-to-one student-teacher ratio. These people are experts much more than myself. Several major corporations have committed to sending several people, and that’s just in our first couple of announcements. We’re really going to start much more heavily marketing next week.

What prompted you to open Buzz-hound?

I’ve been trying to learn this subject for some time. And I found it to be incredibly hard. It was hard to follow webinars. It was hard to follow books. It was sort of like an advanced math problem that you just needed someone to show you how to do it.

And once you got into understanding it, it became very basic. And I realized we could create a business that could truly teach people how to help their businesses.

You’ve said you don’t think this is the sort of thing that can be taught or learned online. Why is that?

Search engine optimization is a language. It’s just like learning any other language. Someone has to show you and speak it for you so you can hear them.

If you go into the lab and you try the programs and the instructor shows you how to use them, it becomes very natural to you. But it’s the whole sort of foreign language aspect to it that makes it difficult to learn.

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Weak demand for office space and an influx of new buildings has caused landlords to drop rents for commercial buildings in the GTA.

Average asking rents fell 9 per cent or from $17.83 in 2008 to $16.20 per square foot by the end of last year, according to a report by Colliers International Monday.

"The impact of the recession still lingers on Toronto’s office market," said the real estate services firm.

Office vacancies continued on an upward trend, hitting 6.1 per cent equal to 11.3 million square feet at the end of 2009 – a 20 per cent increase. Colliers says things will get worse before they get better, with vacancies hitting 6.9 per cent before the trend is reversed.

"Historically, there has been a lag between economic recovery and its impact on the GTA office market," said John Arnoldi, managing director with Colliers.

Another problem has been with sub-leases, where troubled companies looking to reduce overhead dump part of their office space back onto the market.

The sub-lease market is up 48 per cent from a year earlier, and is now above one million square feet.

That space now competes with existing vacancies and accounts for about 10 per cent of total vacancies.

Meanwhile, commercial landlords say their biggest concern during the recession is the financial stability of tenants as tough economic times are resulting in higher rent defaults.

In a survey of Canadian commercial investors by Colliers, 92 per cent of respondents said "tenant financial credit rating" was at the top of their list when it came to making a leasing decision. This compares to 33 per cent when the survey was last taken in 2007

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The Pentagon will hold public meetings in late February regarding the F-35 jet fighter possibly coming to Luke Air Force Base in Glendale.

The Phoenix suburb of El Mirage says noise tests of the new fighter should be completed at Luke before those public Feb. 22-26 forums. The U.S. Defense Department has not yet said if and when such tests might be conducted.

El Mirage officials cite concerns that F-35 will be far nosier than the F-16, which now flies out of Luke on training missions. El Mirage Mayor Michele Kern asked U.S. Sen. John McCain, R-Ariz., last year to bring F-35s to Luke for noise evaluations and the senator said he would.

“The noise needs to be studied,” said El Mirage spokeswoman Stacy Pearson.

Glendale spokesman Jerry McCoy said Glendale is open to the Luke tests, but they should be conducted in a uniform way and at the same time as at other sites being considered for F-35 training fast payday loans. Luke is the U.S. Air Force’s prime training base for F-16 pilots and Glendale is leading the effort to bring the F-35 training to Arizona.

The F-35 is succeeding the F-16 in the U.S. military arsenal.

Luke fighters now take off and land over El Mirage to the north of the base and Goodyear to the south.

McCoy also said Glendale is urging residents and base supporters to attend the DOD meetings.

Luke is competing with bases in Florida and New Mexico for F-35 training. Sites and times for the public forums on Luke have not yet been announced.

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BNP Paribas SA, the most accurate forecaster of the real’s world-beating rally last year, now says avoid Brazil’s currency in favor of the won and rupee as Asia’s central bankers prepare to raise interest rates.

South Korea and India’s currencies will climb 11 percent this year as Brazil’s rally ends, according to Sebastien Galy, the senior foreign-exchange strategist at France’s largest bank in New York. The real, Australia’s dollar and the South African rand were the best-performing of 16 major currencies in 2009, gaining more than 25 percent, on demand for their iron ore, coal and gold. The won rose 8.2 percent and the rupee 4.9 percent.

Bank Julius Baer & Co., Franklin Templeton and Investec Asset Management, which together manage $736 billion, say Asian policy makers will let their currencies strengthen as demand for exports recovers and the cost of imported food and fuel rises. The real weakened 0.1 percent since October 19, when Brazil began taxing foreign purchases of stocks and bonds to curb speculation. South African unions are pressing the government to weaken its currency.

“Much of the gains in commodity currencies already happened in 2009,” said Galy, 35, a former analyst for the International Monetary Fund. “As Asia tightens policy and finally lets its currencies appreciate, flows of capital should shift away from commodity currencies into Asia.”

Real Retreat

Even BNP’s forecast for the real to strengthen 16 percent to 2 per dollar, the most bullish among projections in a Bloomberg survey at the end of 2008, underestimated its rally. The currency closed 2009 at 1.7445, up 33 percent. BNP sees Brazil finishing this year at 1.75 to the dollar, in line with the median estimate in a Bloomberg survey of 17 analysts, as the exchange rate erodes the competitiveness of manufacturers.

The real gained 0.1 percent to 1.7178 per dollar at 8:19 a.m. in New York, from 1.7200 yesterday.

The won will be the 2010 winner, appreciating 7.8 percent to 1,080 and the rupee will climb 5.7 percent to 44, while the rand drops 6.4 percent to 7.90, separate surveys showed. BNP forecasts the won will rise to 1,050 and the rupee to 42. The Korean currency today gained 1.2 percent to 1,140.5, the biggest increase since July 14, and India’s touched a one-month high of 46.09.

Asian central banks “will be leaders in the hiking cycle,” said Werner Gey van Pittius, a London-based money manager who helps oversee about $60 billion in assets at Investec, which is speculating the real will decline. Its emerging-market bond fund returned 28 percent in 2009, beating the 22 percent gain in the JPMorgan Chase & Co. GBI-EM Global Diversified Unhedged index.

China Stimulus

Currencies of commodity producers rallied in 2009 as China led the global economic recovery by focusing its $586 billion two-year stimulus package on building roads and power plants.

Near-zero interest rates in the U.S. encouraged investors to borrow dollars and invest the money in markets with higher returns through so-called carry trades. Benchmark interest rates are 8.75 percent in Brazil and 7 percent in South Africa.

Swap contracts to exchange fixed-interest payments for floating rates indicate the market anticipates faster increases in Asian borrowing costs. A one-year agreement in India has risen to 1.76 percentage points more than the central bank’s benchmark, up from 0.95 point on June 30. The spread in Korea is 1 free business cards.65 percentage points, compared with 1.69 points in Brazil and 0.13 point in South Africa.

Rate Increases

The Bank of Korea will raise its benchmark rate one percentage point to 3 percent by end-2010, according to a Bloomberg survey of economists. India’s central bank will increase its reverse repurchase rate to 4 percent from 3.25 percent, a separate poll showed.

Korean companies boosted capital spending 10 percent in the third quarter, helping win business as demand strengthened in China, just as the financial crisis forced Japanese factories to pare investment. The world’s most-populous nation is the biggest buyer of Korea’s exports, accounting for 18 percent of shipments last month.

Royal Bank of Scotland Group Plc has the most bearish 2009 forecast for the won, predicting a retreat to 1,300, and sees the rupee little changed at 46 as the dollar rallies and developed nations raise rates. New York University Professor Nouriel Roubini said in October that a rebound in the dollar may force carry-trade investors to “rush to the exit.”

“As the U.S. economy recovers, rates there will rise and this will reduce the portfolio inflows into India,” said Sanjay Mathur, a Singapore-based economist at RBS, which is controlled by the U.K. government. “As India’s economy rebounds, imports will rise, softening the external position.”

Rand Overvalued

The rand is overvalued by 8 percent to 9 percent, which will “penalize the economy” in 2010, said Murat Toprak, a strategist in London at Societe Generale SA, France’s second- largest bank. South Africa’s central bank will cut its benchmark rate by half a percentage point to 6.5 percent in the first quarter, he said.

SocGen’s 2009 forecast for the rand to gain 12 percent was the most accurate after Standard Bank Group Plc, Africa’s largest lender, in a Bloomberg survey of 22 analysts.

Investors will buy currencies “where they think rates will go up,” said Toprak. SocGen predicts the won will rise 11 percent in 2010 and the rupee 5.7 percent.

Asian nations will allow currency appreciation to reduce import costs and curb inflation, said Michael Hasenstab, who oversees the $2 billion Templeton Emerging Markets Bond Fund.

India’s wholesale food prices surged 20 percent in the week ended Dec. 19 from a year earlier, almost an 11-year high. Global costs jumped 7 percent in November from October, the most in about two years, according to the United Nations Food and Agriculture Organization.

Food Costs

“Emerging markets will be among the first to face inflation due to rising commodities prices,” Hasenstab said. His fund returned 49 percent last year, beating the 28 percent advance in the benchmark JPMorgan EMBI Global Index.

Standard Chartered Plc, whose 2009 won forecast was the most accurate, predicts gains of 11 percent for both the Korean and Indian currencies this year.

“You’re going to see Asian governments probably tolerating some currency appreciation to prevent inflation from becoming a bigger problem,” said Neo Teng Hwee, head of portfolio management for Asia at Bank Julius Baer, which oversaw assets equivalent to about $140 billion at the end of June. His preferred picks include the rupee and China’s yuan.

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Delta Air Lines Inc. has received government permission to operate its namesake service and its Northwest Airlines subsidiary as a single carrier, a Delta executive said Thursday.

The single operating certificate from the Federal Aviation Administration allows Delta to put its code on Northwest flights and phase out the Northwest name. That process will be complete in the first quarter of this year. For now, travelers won’t notice anything different.

Delta, based in Atlanta, acquired Northwest for $2.8 billion in stock in October 2008 to become the world’s biggest airline.

Delta and Northwest are now one airline, meaning that for the first time pre-merger Northwest operations will be combined into Delta’s operations, Chief Operating Officer Stephen E. Gorman said in an internal memo.

Labor issues remain, however. While pilots and some smaller work groups from both carriers are operating under joint contracts and seniority lists, flight attendants and gate and reservation agents and ramp workers have not resolved representation issues. Pre-merger Northwest was heavily unionized, while pre-merger Delta was not — its pilots were its only major work group to be in a union.

Meanwhile, more than 80 percent of pre-merger Northwest aircraft have already been painted over with the Delta livery. Employees of both carriers are wearing the same uniforms, and the two carriers frequent-flier programs have already been combined under the Delta SkyMiles brand.

But operationally, the two carriers have been kept separate while Delta sought the FAA certificate.

Delta plans to operate Northwest-coded flights until all seats and fares are consolidated in Delta’s reservations system. Once that occurs, it will remove the distinction for passengers of purchasing on Delta or Northwest, and the Northwest website will be folded into Delta’s.

Still unresolved for Delta is its effort to lure Japan Airlines Corp. away from its alliance with American Airlines and into Delta’s SkyTeam alliance. There’s been no word on a decision by JAL, which is said to be teetering on the verge of bankruptcy.

Delta also is dealing with the aftermath of a failed terrorist attack on a Northwest flight from Amsterdam to Detroit on Christmas.

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The Federal Reserve on Monday proposed allowing banks to set up the equivalent of certificates of deposit at the central bank, a move that would help the Fed mop up money pumped into the economy and prevent inflation from taking off later.

Under the proposal, the Fed would offer so-called "term deposits" that would pay interest. Doing so would provide banks with another incentive to park their money at the Fed, rather than having it flow back into the economy.

The proposal comes as no surprise. Federal Reserve Chairman Ben Bernanke and other Fed officials have repeatedly said the creation of so-called "term deposits" — essentially the equivalent of CDs for banks — would be one of several tools the Fed could use to drain money from the economy when the time is right.

Against that backdrop, the Fed said the proposal "has no implications for monetary policy decisions in the near term."

With both the economy and the financial system on the mend, the Fed this year started to wind down and scale back some emergency lending programs. Many of those programs were set up at the height of the financial crisis in the fall of 2008 when some credit markets virtually shut down.

Lending conditions have improved but still aren’t back to normal. They continue to restrain the recovery.

The Fed’s balance sheet has ballooned to $2.2 trillion, reflecting the creation of lending programs intended to ease the financial crisis. That’s more than double the pre-crisis level. The Fed will need to mop up that money or it could trigger inflation down the road.

The Fed proposed that the interest rate paid on the term deposit be set through an auction mechanism.

Banks wanting to hold a term deposit would bid in regularly scheduled competitive auctions. The banks would indicate both the interest rate at which they are willing to be paid and the amount of money they want to deposit into the account at that interest rate.

Given that process, it’s unclear now what the rates on the accounts would be.

The Fed said it anticipated term deposits with "relatively short maturities" likely ranging between one and six months. It said deposit maturities wouldn’t exceed one year, and no early withdrawals of money in the accounts would be allowed.

Most economists don’t believe the Fed will start raising its key bank lending rate, which influences a range of consumer lending rates, until the middle of next year.

Separately, in a weekly report issued Monday, the Fed said banks cut back on emergency loans from the central bank, a fresh sign credit problems have eased.

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