Finance news. My opinion.

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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Exxon Mobil may be getting more than it bargained for with its recent plan to purchase natural gas giant XTO Energy.

The $41 billion deal would make Exxon the country’s largest shale gas producer, drawing more attention to a controversial area of drilling that analysts say could invite tightened federal regulations for the entire industry.

When the acquisition was announced last week, it was generally seen as a smart business move. XTO (XTO, Fortune 500) is a big player in the so-called "unconventional" gas business — specifically, gas that lies in shale rock formations.

That business is booming. It’s one of the fastest growing energy sectors in the country. But some of the shale is near major population centers, and residents near the drilling are worried about air and, especially, water pollution from the chemicals used to extract shale gas.

"A $41 billion investment is going to make anyone with an environmental eye look sooner and deeper," said Kevin Book, a managing director at ClearView Energy Partners, a Washington, D.C.-based firm that tracks political developments in the energy sector. Exxon’s (XOM, Fortune 500) entry into the field, along with interest from other international oil companies, means that shale gas has hit the big time, Book said.

The shale gas industry has been operating in relative obscurity and with minimal federal oversight: A 2005 law exempted it from the federal Safe Drinking Water Act. State regulators do the policing.

Although there are air pollution and land issues associated with shale gas drilling, what most concerns people is the water. Extracting shale gas relies on a method known as hydraulic fracturing, where a huge amount of chemical-laced water is injected down the well hole to fracture the rock and allow the gas to flow out.

State regulators and the industry say the process is safe, as the gas lies thousands of feet below the water table.

But residents near the drilling, which includes much of the New York metro area, Dallas-Fort Worth, and other large population centers, fear the chemicals may contaminate the drinking water.

The federal Environmental Protection Agency has only just begun looking into the issue payday loans for bad credit.

Book said several bills in Congress include provisions that direct the EPA to study the issue more broadly, and could ultimately lead to further regulation. "These are the placeholders," said Book. "Is a change in the law coming? Probably."

Pushing up the price of clean energy

A change in regulation could result in gas companies having to pump out the injected water and removing the chemicals before disposing of it back in the ground. That could add anywhere from 8% to 30% to the cost of operating a well, said Neil Dingmann, a Houston-based analyst at Wunderlich Securities.

Yet pushing up the price of natural gas is not something environmentalists are keen to do. Natural gas is much cleaner source of electricity than coal and emits about half the carbon dioxide. Making it more expensive would only deter industries from using it, and push them toward cheaper and dirtier power sources like coal.

Exxon is so concerned about a change in the law it has a clause with XTO that allows it to walk away from the deal if Congress bans hydraulic fracturing or makes it prohibitively expensive, according to filings with the Securities and Exchange Commission. Exxon declined to comment for this story.

Dingmann also said there’s another reason Exxon may bring new attention to this type of drilling: They are a high profile company.

"It’s not the energy committee going after some company nobody’s heard of," said Neil Dingmann, a Houston-based analyst at Wunderlich Securities. "It’s big, bad Exxon."

Soon after the XTO deal was announced Chairman of the House Energy and Environment Subcommittee Rep. Ed Markey, D-Mass., issued a statement.

While acknowledging natural gas’ environmental benefits, Markey questioned the environmental safety of the drilling and raised anti-trust issues.

"I intend to convene hearings in the Subcommittee early next year so that our members can take a closer look at this proposed transaction," he said. 

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As the first decade of the 21st century comes to a close, the Denver Business Journal is revisiting some of the biggest business-news stories of the last 10 years.

Here, we look at Joseph Nacchio, the one-time hard-charging CEO of Qwest Communications International Inc. who is now serving a prison term following his 2007 conviction on 19 felony counts related to insider trading.

The story: Nacchio was an AT&T executive when Qwest — a telecom founded by Denver billionaire Philip Anschutz — named him CEO in 1996. He was granted millions of shares of Qwest stock in 1997.

In 2000, under Nacchio’s leadership, Qwest acquire the baby Bell U S West and became of the nation’s largest phone companies.

In 2001, Nacchio began selling off his shares before a write-down pushed the stock price downward. In August 2001, a class-action lawsuit was filed in federal court, accusing Nacchio and others of issuing "false and misleading" statements about the company’s financial state that had kept the stock price artificially high. Later, the Securities and Exchange Commission and the Justice Department launched probes.

In June 2002, after Qwest stock cratered, Nacchio resigned, and the company later was forced to restate three years’ worth of earnings.

Nacchio was indicted on 42 insider-trading counts in December 2005. His federal-court trial in March 2007 garnered worldwide attention.

Following his conviction and a string of unsuccessful appeals all the way to the U.S. Supreme Court, Nacchio reported to prison in Pennsylvania in April of this year.

Today: Nacchio remains behind bars while he awaits a resentencing on his original conviction, a date for which has not been set.

Click here for a roundup of DBJ coverage of this key story of the decade.

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The developer of Tempe apartments designed and marketed for Arizona State University students says it has resolved a payment dispute and lawsuit with a construction contractor.

Chicago-based Campus Acquisitions says it has settled a $3 million lawsuit filed by contractor Nelson Phoenix LLC. Nelson claimed that Campus had not paid it for work done on the Vue on Apache.

The private development sits just east of ASU’s Tempe campus.

Campus Acquisitions Project Manager J.J. Smith said in a prepared statement the two companies resolved the $3 million dispute with mediators and “a new mutually agreeable payment amount" was established on a payment plan, Smith said payday loan.

The Vue on Apache, which opened August 2009, is one of the first privately developed and owned housing projects intended for ASU students, according to Smith’s statement.

Nelson filed a tax lien and lawsuit against Campus in late October saying Campus failed to make final payments on the private student housing next to ASU.

Calls to Nelson Phoenix LLC were not immediately returned.

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Porsche SE is headed for a second consecutive annual loss in the billions of euros, as the hangover lingers from ex-Chief Executive Wendelin Wiedeking’s failed takeover of Volkswagen AG.

The indebted automotive holding company created as a vehicle for the acquisition will stay deeply in the red as it is forced to deconsolidate its Volkswagen stake and much of its Porsche AG sports car business, officials said on Wednesday.

The complex untangling at Porsche — now set to merge in 2011 with its 51-percent owned Volkswagen unit — cemented its reputation as a financial black box that scarcely resembles its roots as a maker of sports cars such as the 911 Turbo.

As its debt mounted just as car markets collapsed, Porsche was forced to drop its takeover and agree a merger with Volkswagen. The first step is selling to VW a 49.9 percent stake in the Porsche AG sports car business by the end of this year.

“To take into account the rather unlikely possibility that the merger does not take place after all, the parties concerned have incorporated a put/call structure into the transaction concept,” said Hans Dieter Poetsch, finance chief of both Porsche SE and Volkswagen.

This includes transferring the remaining 50.1 percent of Porsche AG to Volkswagen by no later than 2014, he added fast cash advance loan.

Poetsch warned on Wednesday that the deconsolidation loss in the fiscal year to July would be triggered if VW’s home state of Lower Saxony once again gets the right to appoint two members to VW’s supervisory board at the next annual meeting.

According to International Financial Reporting Standards, this would mean Porsche would have to book its VW stake at market value, he told Porsche’s annual news conference.

“This would give rise to a considerable loss based on the current market price,” Poetsch said.

Including the sale of the minority stake in the sports car business, the structural changes in its consolidated statements would lead to a loss “in the low single-digit billion euro range.”

Porsche SE posted a group net loss of about 3.6 billion euros ($5.37 billion) for the fiscal 2008/09 year. Net debt at the end of its fiscal year on July 31 was 11.4 billion euros.

Porsche shares were barely changed by 1306 GMT while the DJ Stoxx European car sector index dipped 0.2 percent.

(Editing by David Holmes)

($1=.6708 Euro)

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Current valuations of waste managers such as Waste Connections Inc, Waste Management Inc and Republic Services Inc give the company’s shares a lot of room to rise, according to a Barron’s story.

In its November 23 edition, Barron’s said Waste Connections shares could rise to $37.50 in a year, citing Raymond James analyst William Fisher’s price target for the stock, which closed at $31.79 on the New York Stock Exchange Friday.

According to Barron’s, investor Todd Lowenstein of Highmark Value Momentum Fund sees Waste Management shares rising as high as $40 from their Friday NYSE close at $32.30.

Republic Service’s Chairman Jim O’Connor has said that analysts’ discounted cash-flow analysis pegs his company’s value in the mid $30s range, according to the story low fee payday loans. This compares to Republic Services NYSE close of $27.40 on Friday.

The story also noted that Warren Buffett has bought 1 percent of Republic Services, based on Berkshire Hathaway Inc filings.

It said that Bill Gates investment vehicle had doubled its shares in Waste Management, giving it a 15 percent stake.

(Reporting by Sinead Carew; Editing Bernard Orr)

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It is "inadequate" for global regulators to merely create new rules for the financial sector, because preventing another crisis also requires an equivalent focus on the day-to-day supervision of the industry, says Canada’s top banking regulator.

Julie Dickson, superintendent of the Office of the Superintendent of Financial Institutions, made the remarks Wednesday during an address at the Women in Capital Markets luncheon in Toronto. While the OSFI is updating its supervisory framework and increasing its oversight of risk management, Dickson does not want to cross the line by intruding into the management of banks.

While regulations tend to focus on issues such as banks’ capital requirements, supervision centres on when and how regulators intervene in the industry, Dickson said. When it comes to supervision, there are significant differences in supervisory regimes around the world.

"To the extent that some financial systems were more resilient than others, we need to focus on what worked well," Dickson said. "Day-to-day supervision is one such area that deserves focus and that has not been discussed as yet in any great depth internationally; it should be."

Supervision can involve more on-site visits and proactive intervention when a company’s risk management process appears weak. Dickson made it clear that the regulator will not hesitate to step up its on-site verification if it feels that a financial institution is being deliberately opaque about its business. "We have considerable powers to use if required," she said cash advance now.

While some U.S. supervisors have established permanent offices in the banks, the OSFI prefers to take a "balanced" approach. That’s because its mandate stipulates "regulation and supervision must be carried out having regard to the fact that boards of directors are responsible for the management of financial institutions."

Still, whenever a company appoints a new chief risk officer, the OSFI does consider how that appointment affects its own risk assessment.

"We discuss how much depth the new CRO (chief risk officer) has, the person’s clout and general disposition toward risk. At times, I have to say we have expressed, within OSFI, positive and negative views about such appointments," Dickson said.

Nonetheless, she is wary about the regulator being involved in the actual selection of those individuals. "I think you are crossing the line when you do that," she said.

The OSFI, meanwhile, is "developing guidance on minimum expectations for firms in setting risk appetite," while bolstering its scrutiny of risk management around the use of models.

With respect to board composition, Canadian financial institutions should be filling more of those seats with bankers in an effort to "deepen" expertise on financial issues, she said. "It’s something all institutions should be paying attention to."

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General Motors expects to announce a market share gain for the third month in a row in October, GM executive director of corporate planning Mike DiGiovanni told reporters on Wednesday.

October will also mark the first year-over-year sales gain GM has managed in 21 months, DiGiovanni said. In September, GM’s sales were down 47% compared to a year earlier.

"When you look at GM’s performance, we’re having a really good October," he said.

The automaker expects its vehicle sales will amount to 20% to 21% of all vehicles sold that month, he said. He expects those numbers to be about 3% higher than Toyota’s and 4% higher than Ford’s, he said.

DiGiovanni credited strong product introductions for the market share rise. Over the past few months, GM has started production on six new or redesigned models: the Chevrolet Camaro performance coupe, Chevrolet Equinox, GMC Terrain and Cadillac SRX small crossover SUVs, Buick LaCrosse luxury sedan and the Cadillac CTS Sportwagon.

Sales of the new 2010 Chevrolet Equinox crossover SUV are strong enough that the automaker is adding a third shift to the Ontario, Canada factory that builds the Equinox and its sister-vehicle the Terrain easy online payday loans.

"We’ve got enough data now that we feel very confident that adding this third shift is the right ting to do, said Susan Docherty, who was recently appointed to head GM’s sales efforts.

An overall improvement in auto sales will also help GM’s bottom line, DiGiovanni predicted.

The market share rise comes despite the fact that GM has shed four of its former eight brands, DiGiovanni said. Only 5% of GM’s October sales came from the four brands that are being shut down, he said, compared to 10% a year ago.

Besides new model introductions, the automaker’s "Truck Month" promotion program has also helped boost sales, Docherty said.

GM still has a much larger percentage of 2009 models on its dealer lots, Docherty said, but part of that is a deliberate strategic decision. The automaker wanted to have more 2009 truck to sell as part of its "Truck Month sales drive. 

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German business confidence probably rose to a 13-month high in October, improving the outlook for growth in Europe’s largest economy.

The Ifo institute in Munich will say its business climate index, based on a survey of 7,000 executives, increased to 92 from 91.3 in September, according to the median of 40 forecasts in a Bloomberg survey of economists. That would be the highest reading since September last year. The index reached a 26-year low of 82.2 in March. Ifo releases the report at 10 a.m. today.

The German government last week increased its forecasts for the economy and now expects growth of 1.2 percent in 2010 after a contraction of 5 percent in 2009. With the recovery likely to be tempered by rising unemployment, the euro’s increase against the dollar and the expiry of stimulus measures, the European Central Bank is reluctant to tighten policy too soon.

“We expect relatively robust growth in the second half of this year as the economy bounces back from recession,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “However, the recovery next year will be dull and bumpy.”

Ifo’s gauge of the current situation will increase to 88 while an index of executives’ expectations will advance to 96.2, according to the survey of economists.

Volkswagen AG, Europe’s biggest carmaker, predicts the worldwide automotive market won’t match pre-recession levels until 2013 at the earliest. “There are growing signs that the worst of the crisis may now be behind us, but it will take time for the markets to recover,” Chief Executive Officer Martin Winterkorn said on Oct. 8.

Fiscal Stimulus

Chancellor Angela Merkel’s government is trying to haul Germany out of its worst recession since World War II with about 85 billion euros ($127 billion) in stimulus measures. Her Christian Democrats are also prepared to cut taxes by 20 billion euros after they form a coalition with the country’s Liberal Democrats, negotiator Steffen Kampeter said on Oct. 16.

“The economy still is on a drip but will return to sustainable growth next year,” said Carsten Brzeski, an economist at ING Groep NV in Brussels, who expects overall output to expand by 2 percent in 2010. “We haven’t seen the election effect so far and the support measures taken are also designed to spur private investment.”

Economic data are mixed. While German factory orders rose for a sixth month in August and industrial output gained, exports unexpectedly fell. Investor confidence declined for the first time in three months in October amid concerns the recovery could falter.

The euro has appreciated 20 percent since mid-February and reached a 14-month high of $1.50 this week, eroding export returns. Rising joblessness may also discourage household spending.

The ECB has cut its benchmark rate to a record low of 1 percent and is lending banks as much money as they want for up to a year in an effort to get credit flowing through the economy of the 16 nations sharing the euro. President Jean-Claude Trichet has repeatedly said that it’s too early to withdraw monetary policy stimulus.

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Bank of England policy makers maintained consensus on the size of their bond-purchase plan this month, postponing a debate on the need for more spending until officials produce economic forecasts in November.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, unanimously voted to keep the program at 175 billion pounds ($286 billion) and to leave the benchmark interest rate at a record low of 0.5 percent.

“There were differences of view among members of the committee on the balance of risks to the medium-term outlook for inflation and how it had shifted in recent months,” the minutes of the Oct. 8 meeting showed today in London. “All committee members, however, agreed that recent developments were not sufficiently compelling to justify revising the target level of asset purchases.”

King and David Miles had pushed for more spending in August, when forecasts showed that the inflation rate may not return to the 2 percent target in two years. King said yesterday that the outlook for consumer prices is volatile and that policy makers would look beyond the short term to determine how much spending the economy needs.

The pound extended gains against the euro and the dollar after the minutes were published. Britain’s currency rose 1.2 percent to 90.16 pence per euro as of 10:10 a.m. in London, and 1.3 percent to $1.6577.

November Forecasts

“The forecast round ahead of the November inflation report would provide an opportunity to assess more fully how the medium-term outlook for activity and inflation had evolved since August,” the minutes said payday loans with no fax.

The central bank should pause its bond-purchase program next month after Britain probably emerged from recession, the National Institute for Economic and Social Research said today. Gross domestic product will probably increase 0.7 percent in the last three months of the year, Niesr said.

While the U.K. economy may have returned to growth in the third quarter, policy makers have signaled that the recovery may be uneven. The statistics office will probably say Oct. 23 that the economy grew 0.2 percent in the July-September period, according to the median of 33 economists forecasts in a Bloomberg News survey.

Policy makers said that higher asset prices, lower short- term interest rates and the weakness of the pound would help economic growth in the future. London home sellers raised asking prices to a record high this month and led gains across the U.K., Rightmove Plc said Oct. 19.

The bond purchases had probably helped contribute to improvements including a narrowing of spreads, the minutes said.

“The evidence suggested that the effect on asset prices had been of the type that the committee had anticipated when it launched the program and had been substantial,” the minutes said. “The impact of the recent rises in asset prices would be to support spending, but only if sustained.”

The next policy decision is due on Nov. 5.

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