Financial News

WASHINGTON — The post office will run out of money this year unless it gets help, Postmaster General John Potter told Congress on Wednesday as he sought permission to cut delivery to five days a week.

"We are facing losses of historic proportion. Our situation is critical," Potter told a House panel.

The agency lost $2.8 billion last year and is looking at more losses this year. Reducing mail delivery from six days to five days a week could save $3.5 billion annually, Potter said.

Potter also urged changes in how the post office prepays for retiree health care to cut its annual costs by $2 billion.

If the Postal Service does run out of money, the lingering question, Potter told the House Oversight post office subcommittee, is which bills will be paid and which will not. Ensuring the payment of workers’ salaries comes first, he said, but other bills may have to wait.

Potter first raised the possibility of delivery cutbacks in January, but the idea has not been warmly received.

"With the Postal Service facing budget shortfalls, the subcommittee will consider a number of options to restore financial stability and examine ways for the Postal Service to continue to operate without cutting services," subcommittee Chairman Stephen F. Lynch, D-Mass., said.

Lynch said the financial stability of the Postal Service is "critical to the American expectation of affordable six-day mail delivery payday loan."

Even if the agency succeeds in reaching its planned cuts of $5.9 billion, there could still be a $6 billion deficit in 2010, Potter said.

"Without a change we will exhaust our cash resources," he said. "We can no longer afford business as usual."

Asked whether layoffs would occur, Potter said it is possible but he hopes avoidable.

Last week, the post office said it planned to offer early retirement to 150,000 workers and is eliminating 1,400 management positions and closing six of its 80 district offices.

Dan Blair, head of the independent Postal Regulatory Commission, noted that Congress could consider appropriating money to help the post office.

The agency does not receive a taxpayer subsidy for its operations, although Congress subsidizes overseas voting and free mail for the blind.

William Young, president of the National Association of Letter Carriers, stressed in his testimony that the agency is not seeking a bailout, "but we are here to ask the Congress for help."

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U.K. retail sales dropped this month as consumers tightened spending while the recession deepened, the Confederation of British Industry said.

The survey of retailers showed a net 44 percent reporting lower sales this month, compared with a net 25 percent in February, the biggest U.K. business lobby said today in London. The group canvassed 78 companies from Feb. 24 to March 11.

The central bank took the unprecedented step this month of creating money to buy assets in a bid to boost spending and stem the worst recession in a generation. Governor Mervyn King told lawmakers in Parliament yesterday that the “very weak” U.K. economy will continue to contract this quarter.

“The recession continues to force consumers to reexamine every item of spending,” Andy Clarke, chairman of the CBI Distributive Trades Panel and chief operating officer of Wal- Mart Stores Inc.’s Asda business, said in a statement paydayloans.com. “With unemployment rising and household incomes struggling, the high street faces some testing times ahead.”

Debenhams Plc, the second-largest U.K. clothing department chain, said March 17 first-half same-store sales dropped as the economic slump and winter storms dissuaded shoppers.

The U.K. economy shrank 1.5 percent in the fourth quarter, the most since 1980. King told lawmakers yesterday he expects a similar rate of contraction in the first quarter this year.

The bank has embarked on a program to spend as much as 150 billion pounds ($219 billion) to buy U.K. government debt, corporate bonds and other assets with newly created money in order to ease credit strains and encourage spending.

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The Dutch Finance Ministry will seek to curtail bonuses among senior management at financial companies receiving government support, while ING is asking some staff to give back their 2008 bonuses.

In a letter to parliament, Bos outlined stricter measures to regulate bonus policies at firms receiving government support, noting persistent social discontent regarding the bonus culture of the financial sector.

“A cultural change needs to take place with regards to remuneration policy, particularly in financial institutions receiving support from the government or who were taken over by the government,” Bos wrote in the letter.

He said measures to regulate the bonuses of executive board members in firms receiving financial support should also apply to senior management, and he would aim to prevent bonuses being paid to managers in 2009.

He said he would keep the option of going to court open, if necessary, and said he would urge the Dutch Central Bank and market regulator AFM to urgently pay attention to payments at financial institutions, in their role as supervisors.

From Europe to the United States, bonus payments at firms that were bailed out by taxpayers have become a focus of anger during the economic slump.

Millions of people took to the streets in France last week to protest excessive rewards in times of financial meltdown, and a scandal also erupted around American International Group (AIG) over bonuses to executives of a financial products unit no faxing payday loan.

A spokesman for ING said on Monday it had launched a “moral appeal to management to hand in bonuses for 2008,” confirming an earlier report in Dutch daily De Volkskrant that ING was asking 1,200 employees to return their bonus payments.

The company has also deferred bonuses for 2009 until a new remuneration policy is set, which is due in 2010.

“We will then look back to 2009 and if we made a profit the bonuses will be paid in line with the new policy,” the ING spokesman said.

ING received a 10 billion euro ($13.69 billion) capital injection from the Dutch state in October last year and executive board bonuses for 2008 were scrapped.

However, it has faced criticism for bonus payments to staff in 2008, which amount to about 300 million euros.

The Dutch government has also provided a capital injection to insurer Aegon, and offers a loan guarantee scheme for banks. Fortis’ Dutch activities, including ABN AMRO, were nationalized in October.

($1=.7302 Euro)

(Additional reporting by Harro Ten Wolde; Editing by Jon Loades-Carter and Simon Jessop)

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India’s central bank has “more room” to cut interest rates further to combat economic slowdown and a global recession, according to Montek Singh Ahluwalia, deputy chairman of the nation’s Planning Commission.

“Fortunately, we have more room for further relaxation unlike some of the industrialized countries where the scope for monetary easing has been pretty much exhausted,” Ahluwalia said yesterday via videolink from New Delhi to a conference in Philadelphia sponsored by the University of Pennsylvania’s Wharton business school.

India’s central bank earlier this month cut interest rates for the fifth time since October after growth slowed to a five- year low. Governor Duvvuri Subbarao is driving policy rates to unprecedented lows to revive investment and spur consumption in Asia’s third-largest economy.

Parliamentary elections scheduled for April and May complicate efforts to boost the economy because the government is banned from announcing new fiscal policies or stimulus steps until the voting is finished. Prime Minister Manmohan Singh’s government has backed the monetary stimulus by lowering taxes and increasing spending on infrastructure.

“The new government when it comes into place probably in early June will almost certainly continue the fiscal stimulus policies we have followed,” said Ahluwalia. “We will use the opportunity, the scope that is available for monetary policies, to support these fiscal policies.”

Slower Growth

India’s economy probably will grow less than 7 percent in the financial year ending March 31, Ahluwalia said.

The International Monetary Fund said this past week that India’s economy will weaken more than government forecasts as the global recession reduces corporate investment. Indian banks are reluctant to extend loans in a slowing economy for fear of piling up bad debts, even after the central bank has cut its key repurchase rate to an all-time low of 5 percent.

Growth this year may be “less than 7 percent,” while the government had expected it would be about 7 payday loan.1 percent, Ahluwalia said. That’s “certainly not a bad growth rate,” given the global recession, he said. The financial crisis has “had an impact on the real economy” through India’s trade and investment links with the rest of the world, he said.

Ahluwalia said growth over the current fiscal year and the next may average 6.5 percent. He didn’t make a specific forecast for the coming fiscal year.

IMF Forecast

The IMF said March 17 that India’s growth will be at 6.3 percent this fiscal year and will slow to 5.3 percent in the year starting April 1.

The country is experiencing “some withdrawal” of foreign private capital, though that will return once the global economy recovers and if the new government keeps policies in place, Ahluwalia said.

“There will be some loss of growth,” he said. Still, India is “well positioned” and the government’s stimulus efforts is aimed at investing in areas such as infrastructure to correct the “neglect of the past.”

India’s financial sector is in “pretty strong shape,” Ahluwalia also said.

India and China offer “spectacular opportunities” for investors, said investor Jim Rogers, chairman of Singapore-based Rogers Holdings and the author of books including “Hot Commodities,” “Investment Biker” and “Adventure Capitalist.”

India’s politicians are one of the “major problems,” Rogers told the Wharton India Economic Forum via videolink from Singapore. The country has the “single worst bureaucracy in the world.” If a person can deal with that, “there are fortunes” to be made by investing in India, Rogers said.

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UAL Corp, parent of United Airlines, said on Friday it expects an $80 million cash loss related to fuel hedge contracts that settled in the first quarter.

The airline recently has taken large one-time quarterly accounting losses related to its fuel hedge program, which became less valuable as energy prices fell from peaks in July.

UAL said its mainline nonfuel unit costs, excluding some items, were expected to be up 1 percent to 1.5 percent in the first quarter, a smaller rise that previously forecast.

On a consolidated basis, which includes all UAL units, unit costs were seen up 1.5 percent to 2 percent for the quarter.

This compares with an earlier estimate for an increase of 4 percent to 5 percent for both mainline and consolidated operations fast cash.

“The reduction in estimate reflects both the results of continued efforts to drive cost savings across the company and the impact of softening demand on revenue-driven and traffic-driven expenses,” UAL said in a regulatory filing.

UAL expected consolidated passenger unit revenue to be down 11 percent to 12 percent in the first quarter, while consolidated capacity is expected to be down 11.7 percent.

(Reporting by Kyle Peterson; editing by Jeffrey Benkoe)

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HALIFAX–A new report indicates rural parts of Atlantic Canada are being hard hit as the recession takes a toll on the region's economy.

The Atlantic Provinces Economic Council says the decline in production and exports in mining and manufacturing is leading to layoffs in many smaller communities.

The council says that as of last month, overall employment in the Atlantic region was down by about 9,400 jobs from the peak in October 2008.

But the rate of decline was not as bad as the national average faxless payday loans.

The most recent figures show a drop of 0.8 per cent in the number of jobs in the Atlantic region since last October, compared with a decline of 1.7 per cent nationally.

Meanwhile, the regional unemployment rate rose to 10.3 per cent in February from 9.6 per cent last October.

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HTC Corp. plans three more smartphones this year that use Google Inc.'s Android operating system, the Taiwan company's CEO said Tuesday.

CEO Peter Chou said the first version of the Google G1 has sold more than 1 million units.

A second-generation version of the smartphone HTC developed with Google (NASDAQ:GOOG) is expected in the second quarter. The three new Google phones are among no more than 20 new models of smartphone HTC plans for the year.

The company is the world's largest maker of phones using Microsoft Corp freecreditscore.'s operating system in terms of shipments. Its share of the 38.1 million smartphone market market grew to 4.3 percent in the three months ended Dec. 31 from 3.7 percent a year earlier, a report from research firm Gartner said this month.

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U.S. Treasury Secretary Timothy Geithner will soon propose an overhaul of the financial regulatory system that is expected to give the Federal Reserve powers to monitor broad economic risks, a Treasury spokesman confirmed on Monday.

As officials grapple with the worst financial meltdown since the Great Depression, government officials plan to outline a revamp of controls over banks and financial institutions aimed at preventing a repeat of the crisis.

Geithner is due to soon outline proposed changes that are also expected to include tougher capital standards for banks, according to a report in the Wall Street Journal that a Treasury spokesman said is accurate.

The administration’s goal is to unveil its proposals before the meeting of the heads of state of the Group of 20 rich and developing economies in early April, the report said no fax payday loans.

The rules are further expected to aim to ensure that banks cannot shop among different regulatory agencies to obtain the most lenient supervision and require more transparency and stricter rules for the way money flows between banks.

Consolidated consumer protection enforcement is also among contemplated changes.

(with additional reporting by Ajay Kamalakaran and S. John Tilak in Bangalore)

(Reporting by Mark Felsenthal; Editing by Mike Nesbit)

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Regulators should expand the toolbox banks can use to place a value on hard-to-sell assets, market participants and accounting watchdogs told a congressional panel Thursday. But some legislators said they want more sweeping action now.

The capital markets subcommittee of the House Financial Services committee held a hearing to discuss the problems with so-called fair value accounting. The rules, which oblige financial firms to carry certain securities at the price they could fetch in a sale now, are widely known as mark-to-market.

Regulators put the practice in place to give investors a fuller picture of companies’ financial position. Critics, including two prominent former regulators who testified Thursday, say the fair value rules have worsened the financial crisis by forcing companies to recognize steep paper losses on bonds that in many cases are still paying interest and principal.

Questions about the role of accounting in the financial crisis have intensified as the taxpayer tab for the bank bailout has risen. The government has spent hundreds of billions of dollars supporting banks from Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) on down, so the notion that some of the financial sector’s problems stem in part from regulatory missteps is naturally attracting attention.

"This issue has become a real hot potato," said Rep. Judy Biggert, R-Ill., as she questioned Robert Herz, the head of the nation’s private-sector accounting rule maker, the Financial Standards Accounting Board.

She told Herz she expects to see the board, which operates under the aegis of the Securities and Exchange Commission, act to limit the damage to bank balance sheets sooner rather than later. Other legislators chimed in as well.

"The key is to act expeditiously - cautiously, but expeditiously," said Rep. John Campbell, R-Calif., who told Herz and two government representatives that FASB should clarify its guidelines or Congress could grow impatient and take rash legislative action.

Herz said his board stands ready to act if the SEC asks it to and added that the accounting standards as written aren’t the straitjacket critics make them out to be.

Along the same lines, the view offered up by most participants in testimony before the panel supported the stated position of SEC chief Mary Schapiro. She indicated last month that she expects changes in the rules to be made only at the margins.

"Recent market events do not demonstrate that mark to market should be abandoned but rather that other measures should be used to a greater degree alongside," said Tanya Beder, a risk manager who runs the SBCC Group financial consultancy in New York, in prepared testimony for the committee.

Beder was among seven private industry panelists to speak at the hearing, which was chaired by Rep. Paul Kanjorski, D-Pa. Kanjorski said earlier this week he wanted to solve the problem of excessive writedowns while maintaining the transparency of fair value rules.

His panel doesn’t have the power to set accounting rules, though he said the hearing would help policymakers to "pursue consensus solutions together to this thorny, contentious issue."

The claim that galvanizes fair value skeptics is that the rules have steepened the economic downturn by pressuring banks’ balance sheets and making them less apt to lend — constraining businesses and further feeding the downturn bad credit payday loans.

Tom Bailey, president of the Brentwood Bank in suburban Pittsburgh and chairman of the Pennsylvania Association of Community Bankers, said in testimony that his bank has lent out less money because of questionable fair value writedowns. Bailey adds that these writedowns, which total $2 million, "represent lost opportunity cost to finance $20 million in loans" — or nearly a third of the bank’s lending volume over the past nine months.

"The issues before this subcommittee today strike at the heart of how community bankers will serve their marketplaces in the months to come," Bailey said in prepared testimony.

Bailey said the accounting watchdogs at the standard-setting Financial Standards Accounting Board should allow banks to add credit analysis to their assessment of securities valuations, which currently depend on what some observers call highly conservative dealer quotes.

While Bailey and Beder are among those who believe the rules must be made more robust, the panel also heard from two prominent opponents of fair value accounting: Bob McTeer, the former president of the Federal Reserve Bank of Dallas, and Bill Isaac, the onetime head of the Federal Deposit Insurance Corp.

Isaac argues that the fair value rules have unnecessarily wiped out $500 billion of banking industry capital — which he contends has reduced U.S. lending capacity by $5 trillion. He says immediate suspension of mark-to-market rules should be policymakers’ top priority.

"I believe firmly that if the SEC and FASB had suspended this MTM rule nine months ago — in favor of marking these assets to their true economic valued based on actual and projected cash flows — our financial system and economy would not be in anywhere near the crisis that they are in today," he said in prepared testimony.

McTeer agreed, saying in his written testimony that "much of our recent wealth destruction has resulted from slavish adherence to an accounting dogma that never should have applied to banks and other regulated financial intermediaries in the first place."

Nonetheless, it appears unlikely regulators will seek such drastic action. The House subcommittee was scheduled to hear from a three-man panel of accounting overseers — James Kroeker of the SEC, Herz of FASB and Kevin Bailey of the Office of the Comptroller of the Currency.

And in their prepared testimony, all three spoke of the need for further improvements to the fair value rules, while emphasizing that fair value accounting provides critical information to investors that wouldn’t be available under competing accounting regimes.

That view was bolstered by comments made by private sector fair value advocates such as Jeff Mahoney of the Council of Institutional Investors and Cindy Fornelli of the Center for Audit Quality.

"Investor confidence in the reliability and transparency of financial reporting is critical to our financial system’s long-term well being," said Fornelli in her testimony. "We must pursue only those proposals that do not put that confidence at risk."  

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The Capital Metropolitan Transportation Authority will receive $475,000 through a federal appropriations bill that passed in Congress earlier this week.

U.S. Senator Kay Bailey Hutchison, R-Texas, who sponsored the allocation of funds but voted against the final bill, said the funds would go towards Capital Metro’s bus and “Park and Ride” services guaranteed online payday loans.

“As Austin’s population continues to grow, this funding will help provide a more efficient mass transit system and improve air quality,” Hutchison said.

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