Actual finance blog

Gas prices in Hawaii are up 3 cents from a week ago.

The statewide average price of gas was $2.45 on Friday, up from $2.42 a week ago.

It is up 10 cents from a month ago and down $1.08 from a year ago, according to the AAA daily fuel gauge report.

In Honolulu, the average price was $2.37, up 2 cents from last week and up 10 cents from a month ago.

A year ago it was $3.40.

Gas prices for other Hawaii metro areas were as follows:

• In Hilo on the Big Island, regular unleaded sold for an average $2 no faxing 1 hour payday loans.56 a gallon, up 6 cents from last week, and up 11 cents from a month ago.

• In Wailuku, Maui, a gallon of regular averaged $2.61, up 5 cents from a week ago and up 12 cents from a month ago.

Gas is most expensive in Alaska at $2.51 and cheapest in Missouri at $1.67.

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Wall Street abandoned a late-session rally attempt Wednesday, ending lower, as investors took a mixed response to new details on Treasury’s plan to help stabilize the banking system.

On Thursday, investors will focus on Obama’s fiscal 2010 budget plan, the weekly jobless claims and reports on new home sales and durable goods orders.

The Dow Jones industrial average (INDU) lost 80 points, or 1.1%. The S&P 500 (SPX) index fell 8 points, or 1.1%. The Nasdaq composite (COMP) lost 16 points, or 1.1%.

Stocks tumbled in the morning after a report showed existing home sales plunged to an 11-year low in January. But equities managed to cut losses and even turn higher in the afternoon after the bank plan announcement, with a number of financial stocks rallying.

"I think people are just glad to know what they are planning," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.

Yet after a brief rally, stocks erased the gains and turned lower again, as investors continued to worry about the depth and duration of the recession.

"There’s a lot of nervousness," said Terry L. Morris, senior equity manager at National Penn Investors Trust. "It’s a tug-of-war between the news that’s out there and the fact that the market has already gotten pounded."

Confusion about the bank bailout plan has dragged on stocks lately. And recent worries have surrounded the threat of nationalization, which would wipe out shareholder value.

On Tuesday, Federal Reserve Chairman Ben Bernanke downplayed bank takeover talk, helping the stock market bounce off 12-year lows. The Treasury announcement Wednesday added to bets that the government doesn’t plan to nationalize, Rovelli said.

"They’re probably going to handle things like they are with Citigroup, where they take a stake in the bank, but don’t take it over," he said.

Banks to face tests: Treasury plans to test the 19 banks with more than $100 billion in assets to see if they have enough capital to hold up if unemployment rises to 10% and the housing market contracts another 20%. The testing will be over by the end of April. (Full story)

The collapse of the housing market has left banks riddled with bad debt that they can’t unload, and that makes them wary of lending to businesses and individuals. Although the credit markets have shown a slight improvement lately, the lending market is still sluggish at best, exacerbating the impact of the recession.

Treasury’s bailout plan is ideally meant to keep banks afloat, but also get them to lend again.

The plan may achieve that, but it doesn’t resolve the problem of how to value the bad assets at a price that is both good for the holders and good for the buyers, said Gregory Miller, chief economist at SunTrust Banks.

"They’re trying to repair bank balance sheets when the assets that define the balance sheets keep declining," he said. "This plan may come a step closer to doing that, but it’s taking an indirect route, instead of attacking more directly."

Shares of bank stocks were volatile after the Treasury news. Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500) ended lower payday loan in advance. Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) ended higher.

Washington: Speaking Tuesday night before both chambers of Congress, President Obama told the nation: "We will rebuild, we will recover and the United States of America will emerge stronger than before."

The president outlined plans for creating jobs, stabilizing the credit markets, reforming health care and improving schools, among other issues. He presents his fiscal 2010 budget plan to Congress Thursday.

Separately, President Obama told Congress Wednesday that stronger financial sector regulation is needed.

Ben Bernanke told the House Financial Services Committee Wednesday that fixing the mortgage market is necessary for fixing the financial market, even if it means bailout out irresponsible buyers.

Company news: Ford Motor (F, Fortune 500)’s CEO and chairman agreed to cut their pay by 30% for the next two years and to suspend bonuses for salaried workers. Ford will also offer another round of buyouts and early retirement packages to all of its hourly workers. The changes were announced as union members are nearing a vote on contract concessions.

General Motors (GM, Fortune 500) rallied nearly 15%. Currently, an Obama administration task force is reviewing turnaround plans from GM and Chrysler, which have asked for a combined $22 billion more in bailout money on top of the $17.4 billion they have already received. GM issues fourth-quarter results before the start of trading Thursday.

In deal news, Canadian fertilizer Agrium made a hostile bid for U.S. rival CF Industries (CF) worth $3.6 billion in cash and stock - a 30% premium over CF’s closing price Tuesday. Any deal is conditional on CF giving up its hostile offer for Terra Industries (TRA), which the company has already rejected.

First Solar (FSLR) plunged 22% in unusually active Nasdaq trade after the solar panel maker warned late Tuesday that first quarter and full-year 2009 revenue will fall from a year ago amid a bleak outlook for the industry and economy.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers three to two on volume of 1.82 billion shares. On the Nasdaq, losers beat winners by more than two to one on volume of 2.45 billion shares.

Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.92% from 2.79% Tuesday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian markets rose and European markets were mixed.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for April delivery rose $2.54 to settle at $42.50 a barrel on the New York Mercantile Exchange. The price of oil was volatile after the government said the supply of crude increased less than expected last week.

COMEX gold for April delivery fell $3.30 to settle at $966.20 an ounce. 

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Japan’s exports plunged 45.7 percent in January from a year earlier, resulting in a record trade deficit, as recessions in the U.S. and Europe smothered demand for the country’s cars and electronics.

The shortfall widened to 952.6 billion yen ($9.9 billion), the biggest since 1980, the earliest year for which there is comparable data, the Finance Ministry said today in Tokyo. The drop in shipments abroad eclipsed a record 35 percent decline set the previous month.

Exports to the U.S. tumbled an unprecedented 52.9 percent from a year earlier, and shipments to Asia and Europe also posted the largest-ever declines as the global recession deepened. The collapse is likely to force Japanese companies to keep firing workers and closing factories, worsening an economy that shrank the most in 34 years last quarter.

“The pressure on companies to cut jobs and investment is rising and that will make the recession deep and protracted,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo.

Shipments to Europe slid 47.4 percent in January from a year earlier, the Finance Ministry said. Exports to China fell 45.1 percent and those to Asia dropped 46.7 percent.

Imports fell 31.7 percent from a year earlier. The drop in exports was in line with economists’ estimates. Analysts predicted a 1.2 trillion yen trade deficit.

Yen Relief

The yen fell to 96.91 per dollar as of 12:28 p.m. in Tokyo from 96.72 before the report. The currency is at the lowest level against the dollar in three months as the weakening economy reduces its allure as a haven.

The yen’s 23 percent gain against the dollar in 2008 eroded the value of exporters’ overseas sales, exacerbating losses at companies including Nissan Motor Corp. and Toyota Motor Corp. The exchange rate has also made Japanese exporters less competitive than their rivals in South Korea, where the won’s 16 percent drop this year has helped to shield earnings of companies including Hyundai Motor Co.

Still, the Japanese currency has weakened 7.2 percent this month, offering some relief to exporters while indicating investors’ growing pessimism about the economic outlook.

“People are coming to realize that Japan is in deep trouble,” said Hiroshi Shiraishi, an economist at BNP Paribas Securities Japan Ltd. in Tokyo. “Considering what’s happening on the export side, and the implications that has for the domestic economy, the yen is clearly not a buy short term personal loans.”

Falling Stocks

Japanese stocks touched a 26-year low yesterday and the government is considering buying shares to support equity prices, the Nikkei newspaper reported today, without saying where it got the information. The Nikkei 225 Stock Average has lost 17 percent of its value this year. It rose 1.6 percent in morning trading.

The world’s second-largest economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, and analysts predict the slump will drag into next fiscal year. Japan may shrink a record 4 percent in the year starting April 1, according to economists surveyed. The worst contraction to date was fiscal 1998’s 1.5 percent drop.

Japan became more reliant on exports for growth in the past decade, making the economy more vulnerable to the global recession. Manufacturers shipped 21 percent of their goods abroad in 2008, up from 16 percent in 1998, according to the Bank of Japan.

Production Cuts

Companies cut production an unprecedented 9.8 percent in December from a month earlier and the jobless rate climbed the most in 41 years to 4.4 percent. Economists predict a report on Feb. 27 will show factory output dropped 10 percent in January.

Nissan said this month it will fire 20,000 workers and post its first loss in nine years as the global car demand plunges. Toyota, which is forecasting its first operating loss in seven decades, will halve production in the current quarter versus the same period last year.

Central bank Governor Masaaki Shirakawa said last week that the economy will remain in a “severe” state next quarter and companies will struggle to obtain financing as investors shun risk. The bank, which lowered the key overnight lending rate to 0.1 percent in December, last week said it will buy corporate bonds for the first time to stem the credit squeeze.

The government has been unable to pass a stimulus package that could help encourage domestic spending in the absence of export demand. Prime Minister Taro Aso is struggling to get approval from the opposition-controlled upper house to spend 10 trillion yen to aid companies and households, whose sentiment is near a record low.

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Ford Motor Co. has reached a tentative deal with the United Auto Workers union on changes to a retiree health care trust, becoming the first Detroit automaker to secure union concessions on the key issue.

Ford’s shares (F, Fortune 500) were up 12% in mid-morning trading on the New York Stock Exchange following the news while shares of larger rival General Motors Corp. (GM, Fortune 500) were up almost 4%.

Ford, the No. 2 U.S.-based automaker, said the deal gives it the option to settle up to 50% of payments to the Voluntary Employees Beneficiary Association, or VEBA, in stock. Previously, all payments were due in cash.

"We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," Ford said in a statement.

All three Detroit automakers have been in negotiations with the UAW on changing the terms of their VEBA health care trusts, which is mandated under the $17.4 billion U.S. government bailout of GM and Chrysler LLC.

The terms of the bailout require both companies to make half of planned contributions to VEBA in company stock in lieu of cash.

GM said negotiations between the automaker and the UAW are continuing but it has nothing to announce relative to the VEBA. A Chrysler representative was not immediately available for comment.

Ford, which has not accepted any government loans, has said it expected the union to offer parity with any concessions granted to its U.S.-based rivals, including the key requirement on VEBA funding.

The Dearborn-based automaker, which posted a record $14.6 billion loss in 2008, has sought to distance itself from its U guaranteed unsecured personal loan.S. rivals, which have requested an additional $22 billion to support turnarounds.

Changes subject to ratification

GM, Ford and Chrysler collectively have pledged about $48 billion to the VEBA fund through transfers of current trusts and future payments to cover a share of their estimated $80 billion health care liability.

But with GM and Chrysler running short of cash and Ford also battling to survive a brutal downturn in car sales, the UAW has come under intense pressure to accept concessions that would rewrite provisions for funding the VEBA even before it takes effect in 2010.

UAW President Ron Gettelfinger said in 2007 the creation of the VEBA trust would safeguard retiree health care for 80 years.

Ford said the VEBA agreement - together with the deal reached on Feb. 15 to modify the labor contract - is subject to ratification by active UAW-Ford members and other conditions, including concessions from other stakeholders.

The proposed modifications were expected to be presented to the union’s local Ford leadership at a council meeting early this week, according to the unions.

"The modifications will protect jobs for UAW members by ensuring the long-term viability of the company," UAW President Ron Gettelfinger said in a statement.

The union also said the changes to the VEBA will require court approval.

The union’s tentative agreement with the automaker on the labor contract includes changes to labor costs, benefits and operating practices.

Neither Ford nor the UAW provided further details on the contract changes. 

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Japan, China, South Korea and 10 Southeast Asian nations agreed to form a $120 billion pool of foreign-exchange reserves that can be used by countries to defend their currencies amid the deepening global recession.

The amount is 50 percent more than the $80 billion proposed last May, and an expansion of the current arrangement called the Chiang Mai Initiative that allows only bilateral currency swaps. The nations’ finance ministers and government officials jointly announced the decision at a meeting in Phuket, Thailand, today.

“The pool will shore up confidence and provide support for these nations in any kind of emergency,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore. “We cannot rule out that some countries will need to tap the fund in this crisis.”

Many Asian currencies have weakened in the past year, threatening to undermine regional stability, as fallout from the global credit crunch ripples through their export-dependent economies. The fund is aimed at ensuring central banks have enough to shield their currencies from speculative attacks such as those that depleted the reserves of Indonesia, Thailand and South Korea during the 1997-1998 financial crisis.

“Capital flows into the region have decreased due to global de-leveraging,” the ministers from the 10-member Association of Southeast Asian Nations and their three northern neighbors said in a joint statement.

Threat to Growth

Large reversals “of capital flows, which have affected the financial markets, could undermine growth prospects,” they said. “This can be a significant downside risk to regional growth, which has already been dragged down by the global economic downturn.”

Eight of 10 of Asia’s most-traded currencies outside of Japan have declined against the dollar in the past year, led by a 37 percent slump in the Korean won and a 23 percent drop in Indonesia’s rupiah, according to Bloomberg data.

The currencies are at risk of further losses as wealthier nations curb overseas investment and private investors sell existing stock and bond holdings in emerging markets.

Japan, China and South Korea will provide about 80 percent of the currency pool with the 10 Asean members contributing the remainder, the statement said, in line with last year’s proposal. How much each country will contribute is still under discussion and no date was set for completion of the new arrangement 500 payday loans.

Asian Crisis

A decade ago, Indonesia, Thailand and South Korea spent much of their foreign reserves attempting to prop up their exchange rates. The three nations were forced to turn to the International Monetary Fund for more than $100 billion of loans. In return, the governments had to cut spending, raise interest rates and sell state-owned companies.

In the years since, Japan, China and South Korea together with the Asean economies have amassed more than $3.6 trillion of foreign-exchange reserves, about half of the global total.

Fallout from the current global slump has led to some Asian nations using their reserves to support their currencies.

South Korea’s foreign-currency holdings declined to $202 billion in January from a record $264 billion last March. The nation may use reserves after the won weakened beyond 1,500 per dollar last week, Yonhap News reported today, citing unidentified government and central bank officials.

Malaysia’s gold and foreign-exchange reserves fell to $91.3 billion on Jan. 30 from $123.7 billion on Aug. 15. Indonesia’s reserves have slumped by $10 billion since last July to $50.9 billion at the end of January.

‘First Step’

“There remains the need for more foreign exchange cooperation and coordination” to bolster regional stability, Asian Development Bank President Haruhiko Kuroda told the ministers in Phuket, according to the text of his speech obtained by Bloomberg News. “A multi-lateralized and expanded Chiang Mai Initiative is a critical first step only if it is operationalized quickly.”

Asian nations are expanding or forging new bilateral currency swap agreements even as they set up the combined reserve pool. Japan and Indonesia yesterday agreed to boost the size of an existing bilateral swap agreement to $12 billion from $6 billion. China and Malaysia this month agreed on a three-year 80 billion-yuan ($11.7 billion) currency swap.

“As an interim measure, the existing bilateral swap agreement network should play its full role and be strengthened in terms of size and participants if necessary,” the Asian ministers said in the joint statement.

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Billionaire investor George Soros said the 16-member euro region economy must confront the problem created by the absence of a central Treasury.

“I don’t think a breakup is possible,” Soros said in an interview in Dubai today. “But the lack of a Europe-wide Treasury — you have a central bank but you don’t have a central Treasury and don’t have supervision of the currency that’s unified — those are issues that need to be confronted.”

Europe’s faltering economy is pushing up bond yields in countries including Italy, Spain and Greece, making European Central Bank rate cuts less effective and sparking concerns of a region breakup. While the U.S. Federal Reserve and the Bank of England have purchased government securities to counter the crisis, economists say that the lack of a European Treasury makes it difficult for the ECB to adopt unconventional tools payday loans with low fees.

ECB council member George Provopoulos said yesterday that buying government bonds in the secondary market “might constitute a direct monetary finance of fiscal deficits, which isn’t allowed by the ECB’s rules.” The ECB’s “position is that every country is responsible for resolving its own fiscal difficulties,” he said.

Soros, who made $1 billion selling the pound in 1992, said he’s “not currently taking any positions in the currencies.”

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Indonesia’s economy, Southeast Asia’s biggest, probably expanded at the slowest pace in more than two years in the fourth quarter as exports slumped.

Gross domestic product grew 5.7 percent in the three months ended Dec. 31 from a year earlier, after gaining 6.1 percent in the preceding quarter, according to the median forecast of 15 economists surveyed by Bloomberg News. The Central Statistics Bureau will release the data after 1:30 p.m. today.

The nation’s overseas sales plunged 20 percent in December as the deepening global recession cut demand for Indonesia’s rubber, electronics and oil. Slowing economic expansion adds pressure on the central bank to cut borrowing costs further to boost consumer spending as the government forecasts growth in exports will slow to a nine-year low of 1 percent in 2009.

“The actual magnitude of the slowdown may help decide how fast and how far further policy makers are prepared to cut,” said Helmi Arman, an economist with PT Bank Danamon Indonesia. “Investment growth is also likely to have slowed as the quarter saw cement-consumption growth easing, and commercial-vehicle sales dropping substantially.”

The rupiah has dropped more than 6 percent this year to 11,863 against the dollar, making it the worst-performing currency after the South Korean won among Asia’s 10 most-traded currencies outside Japan.

The central bank may cut its policy rate to 7.25 percent from 8.25 percent by year-end to help boost consumption, said Lim Su Sian, an economist with DBS Group Holdings Ltd. in Singapore.

Mobile Phones

“In this environment, you need to use whatever you have in your arsenal,” Lim said. “Still, there are concerns about employment outlook and income, things rate cuts can’t offset.”

PT Excelcomindo Pratama, Indonesia’s third-largest mobile- phone company, said its revenue from the country’s palm-oil producing regions may decline by as much as 10 percent because of a fall in exports of the commodity. Indonesia is the world’s largest producer of the edible oil.

“Our revenue will be hit quite significantly in those areas,” Excelcomindo’s President Director Hasnul Suhaimi said in an interview last week no teletrack payday loan. “We expect there will be an impact in textile- and shoe-producing areas as well.”

Indonesia’s new-car sales fell for the first time in almost two years in January as slowing economic growth and higher loan rates last year damped demand.

Local consumption, which accounts for about 70 percent of the economy, expanded 4.7 percent in the final quarter of 2008, according to the economists’ forecasts. That would be the slowest pace of growth since March 2007.

Exports Plunge

Exports grew 4 percent last quarter, according to the median forecast of seven economists, the slowest pace since the three months ended June 2004. Overseas sales posted the biggest drop in more than seven years in December.

“Headwinds are growing given the deteriorating growth outlook for Indonesia’s main trading partners,” said Prakriti Sofat, an economist at HSBC Holdings Plc in Singapore. Indonesia’s $433 billion economy may expand as little as 3.8 percent this year, she said.

Japan’s economy, Indonesia’s biggest export market, shrank at an annual 12.7 percent pace in the fourth quarter, the most since the 1974 oil crisis, the Cabinet Office said today.

The economy in Indonesia, Asia’s third-most populated nation, expanded 6.1 percent last year, slowing from 6.3 percent growth in 2007, according to the median forecast of 13 economists in the Bloomberg survey.

Government Stimulus

To boost employment and consumer demand, the government plans a 71.3 trillion-rupiah ($6 billion) stimulus package. That includes a plan to give tax breaks that will save individuals and companies 43 trillion rupiah in payments this year.

The government said it will also spend 15 trillion rupiah on discounts for electricity tariffs and public works, adding to a previous plan to outlay 12.5 trillion rupiah on a stimulus package meant to subsidize taxes and duties.

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The stimulus legislation would revamp the 74-year-old U.S. unemployment compensation program by encouraging states to give benefits to those who quit their jobs to care for ailing relatives.

The provision, sponsored by Representative Jim McDermott, is in the $789 billion compromise reached by House and Senate negotiators. Critics say the change would undermine the original intent of the Depression-era program as a cushion only for people whose jobs disappear.

“It’s fundamentally at odds with the basic tenets of unemployment insurance: temporary cash payments for people who lose their job though no fault of their own,” said Douglas Holmes, president of UWC-Strategic Services on Unemployment and Workers Compensation, a Washington-based group that represents employers. “Unemployment insurance is not public assistance, it’s not a family support program, it’s not food stamps.”

House and Senate votes approving the bill and sending it to President Barack Obama for signature could come as early as today.

The provision is part of a broader effort to update the jobless program. Unemployment in the U.S. climbed to 7.6 percent in January, the highest level since 1992. Obama has said the economic stimulus bill will help create as many as 4 million jobs.

A $7 Billion Fund

The stimulus measure includes a $7 billion fund to reward states that adopt changes in unemployment benefits. Among actions required to qualify, states would have to provide benefits to people who quit a job for a “compelling family reason” such as caring for a sick or disabled member of their immediate family, or because of domestic violence. Workers could collect benefits only when they started looking for a new job.

“We’re telling single mothers who have to quit their job to care for their child, or women in an abusive relationship who have to quit to get away, you can draw unemployment insurance checks when you are ready to go back to work,” McDermott, a Washington Democrat, said in an interview direct lender payday loans. “Most states say you can only draw a check if you are fired. We’re giving states incentives to move beyond that.”

McDermott, who has long pressed for an expansion of the unemployment insurance program, said expanding unemployment payments meets the goals of the economic stimulus package, he said.

“The money from these checks are in the economy within 20 minutes of the checks being cashed,” he said. “People who get it aren’t putting the money in their IRAs, they aren’t putting it in savings accounts, they are spending the money to keep their head above water.”

A 1935 Law

Unemployment insurance is paid by states from taxes collected from employers, and was enacted as part of the Social Security Act of 1935. To qualify for a share of the $7 billion in incentives, states would also have to meet other requirements, such as extending unemployment insurance to certain part-time workers.

McDermott said he supported the change in part because the Family and Medical Leave Act, which lets workers take unpaid leave, doesn’t cover small companies, part-timers and certain lower-wage workers. It limits time off to 12 weeks.

Critics say one of their complaints is that the provision is too vague in defining an illness.

“If someone leaves their job to care for someone in their family with a cold, they shouldn’t be getting insurance,” Holmes said. “In any event, this has nothing to do with economic stimulus.”

The economic stimulus package also would allocate funds to continue extended unemployment benefits, providing as much as 33 weeks of extended benefits through 2009. The proposal would also provide an extra $25 each week to recipients.

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The European Central Bank said governments should consider combining a so-called bad bank with guarantees of securities to achieve the most cost-effective way of ridding lenders of toxic assets.

In draft guidelines being discussed at a meeting of European finance ministers in Brussels yesterday and today, the ECB said the credit crisis shows no sign of ending and that the number of illiquid assets on banks’ books will probably rise.

Lawmakers from Washington to Berlin are studying how to clear the toxic assets clogging bank balance sheets and preventing them from lending. Economist Nouriel Roubini says global bank write-offs could triple to $3.6 trillion, and the ECB is seeking to provide a framework to deal with further woes.

“The credit crisis has not yet reached the bottom of the cycle,” the ECB said in a report obtained by Bloomberg News and dated Feb. 9. “The amount of impaired assets is likely to continue growing in the future.”

Luxembourg’s Jean-Claude Juncker, who led yesterday’s discussion among euro-area finance chiefs, said there is a “vital” need to tackle toxic assets in Europe. He said ministers discussed the issue “at length” and hope to reach agreement among all 27 European Union finance chiefs today.

“The various instruments that might be deployed could be used in some countries for some banks in certain situations,” Juncker said at a press conference in Brussels last night. “We continue to coordinate the European approach to toxic assets, and in the next few weeks, we will be upping the tempo there.”

‘Level Playing Field’

The guidelines aren’t “a one-size-fits-all proposal,” EU Monetary Affairs Commissioner Joaquin Almunia said after yesterday’s meeting, which he attended along with European Commission President Jose Barroso. “We need to guarantee a level playing field,” Almunia said. “This does not mean that all the formulas should be the same.”

While acknowledging that the best strategy varied depending on the bank and country, the ECB noted that Switzerland recently extended aid to UBS AG through a “hybrid scheme” involving elements of a bad bank and insurance. The Swiss National Bank and UBS set up a special fund to buy as much as $60 billion in toxic investments from UBS.

Zurich-based UBS provided $6 billion in capital, which will be used as first protection against losses. The SNB finances the purchase of the assets with secured loans to the fund of up to $54 billion. Such an approach “limits the upfront cost to the government,” the ECB said in the report.

Bad-Bank Approach

The strategy also found support in a separate draft report by the European Commission, which was prepared with ECB input banks issue payday loans. To control costs “one could consider combining a bad-bank approach and asset insurance whereby bad assets are transferred to a single entity which benefits in some way from a government guarantee,” the commission, the EU regulator in Brussels, said in the report.

“This approach combines many of the benefits of the bad- bank approach from the perspective of restoring confidence in the banking system while limiting the budgetary impact,” according to the commission report, which is dated Feb. 6.

The ECB said a bad bank would work best in an environment in which there was uncertainty regarding the future quality of bank assets or the impaired securities are concentrated in a few institutions. Insuring the assets may be the best approach if they are hard to value or governments have bloated public finances, it said.

Cross-Border Activities

The commission also said governments should agree on the criteria for pooling impaired investments to ensure “the consistent treatment of assets” for banks with cross-border activities. An agreement is needed on the range and criteria for eligible assets and how they should be valued “to prevent that differences in approach result in opportunities for cross-border arbitrate and competition distortions,” it said in the draft report.

The commission, which ensures that state aid doesn’t distort competition in the 27-member EU, said governments must avoid a subsidy war, which could hurt public finances. Jonathan Todd, spokesman for EU Competition Commissioner Neelie Kroes, had no comment on the guidelines.

In setting out broad parameters for how governments should craft bank asset-support programs, the ECB said participation should be voluntary and priority given to those with large amounts of impaired assets. The definition of assets eligible for support should be kept broad and valuation of the assets is key to any plan’s success, it said.

Risk should be shared between the state and the banking system, while the program should be allowed to run possibly as long as it takes the assets to mature, according to the ECB report. The banks should be allowed to be run according to business principles and there should be yardsticks established to judge the success of the plan, it said.

There is “a middle course between a bad bank and a guarantee scheme,” Dutch Finance Minister Wouter Bos told reporters after yesterday’s meeting. “But there are a lot of unanswered questions; that discussion is to be continued.”

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The Honolulu Star-Bulletin said Friday it is laying off 17 newsroom workers, cutting jobs in other departments and converting from a broadsheet to a tabloid, similar to the format of MidWeek.

Oahu Publications Inc., which publishes the daily Star-Bulletin and the free MidWeek, also said it was ending its weekend edition of MidWeek, which it began in 2005. The last weekend MidWeek was published Friday.

Switching the daily newspaper to a tabloid format will save money in production costs by enabling the Star-Bulletin and MidWeek to run the same advertisements in both papers without having to change their size.

In a story posted on the Star-Bulletin Web site, the newspaper also said it will close its bureaus on Maui, Kauai and the Big Island. The story said the company is freezing wages and, in addition to cutting the news staff will lay off “an undetermined number of employees elsewhere in the company.”

The job cuts represent about a 23 percent reduction in the news staff of approximately 70.

The announcements were made by Dennis Francis, president of Oahu Publications. Francis declined to comment beyond the announcement.

The Star-Bulletin joins the growing roster of newspapers that have been forced by the worsening recession and the abandonment by readers and advertisers to make drastic cuts to stay viable.

On Sunday, unionized employees of The Honolulu Advertiser will vote on a contract extension to 2010 that will impose a 10 percent pay cut, eliminate holidays and water down a number of benefits enjoyed by workers in more prosperous times fast cash without a hassle.

The Advertiser has already eliminated more than 170 jobs since 2007 and won the union concessions by opening its books and showing that it was losing money. The Advertiser, Hawaii’s largest daily newspaper with a daily circulation of about 135,000, is owned by Gannett Co., Inc. (NYSE: GCI).

The Star-Bulletin has been owned by Black Press Ltd. of Victoria, B.C. since 2001. It last reported a daily circulation of 64,000 in 2007 and publishes both morning and afternoon editions, though it's possible one of those editions would disappear as part of the latest cost-cutting.

While privately held Black Press doesn’t release financial results, a glimpse into the health of its operations was provided on Jan. 23 when Standard & Poor’s Ratings Services lowered its long-term corporate credit rating on the company to B from B+.

Standard & Poor’s also released a “negative” outlook on the debt of Black Press and its U.S. subsidiaries, dropping the rate from B to BB-.

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