Actual finance blog

The Senate on Wednesday approved a $15 billion job-creation bill that would give businesses tax breaks for hiring the unemployed and states more money for infrastructure projects.

The four-prong bill would:

• Exempt employers from Social Security payroll taxes on new hires who were unemployed;
• Fund highway and transit programs through 2010;
• Extend a tax break for business that spend money on capital investments, such as equipment purchases;
• Expand the use of the Build America Bonds program, which helps states and municipalities fund capital construction projects.

The legislation, approved by a 70-28 vote, is a scaled-down version of an $85 billion bipartisan draft bill that was crafted by Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa.

Some 13 Republicans, including newly elected Sen. Scott Brown, R-Mass., voted for the measure Wednesday.

"Today’s progress is a small step forward but an important one," said Senate Majority Leader Harry Reid, D-Nev., who surprised many lawmakers last week when he announced the slimmed-down measure. "This morning’s vote is a victory for hard-working Americans, especially those trying to find work. This will help our economy grow."

It now moves to the House, which may take it up as soon as Friday, said a Democratic aide at the House, which passed a more comprehensive $154 billion bill in December.

However, the bill does not extend the deadline to apply for unemployment benefits or the Cobra health insurance subsidy. Some 1.2 million people will run out of benefits after Feb. 28 if the deadline is not extended cash advance. Lawmakers are looking to pass a separate, shorter extension by the end of the week in order to give them time to enact a longer fix.

Also, unlike the House’s bill, the Senate’s jobs measure does not provide additional assistance for states. Many governors want the Obama administration to send more federal dollars so they can cope with yawning budget gaps.

The administration said on Monday that it strongly supports the $15 billion jobs measure but indicated it is only one step in the job-creation effort. The president wants lawmakers to take up a bill that would increase small businesses’ access to credit.

Reid said the Senate will vote on extending tax provisions and small business job measures in the near future. The majority leader also said lawmakers will consider providing additional Medicaid money for states, which governors have been requesting.

"We have other things in mind," Reid said. "Remember, we don’t have a jobs bill, we have a jobs agenda."

Still, labor leaders and left-leaning think tanks say the Senate must do more to spur job creation.

"We need to create 11 million jobs to get back to the level of unemployment we had before the recession began," said Lawrence Mishel, president of the Economic Policy Institute. "Yet the Senate jobs bill would create no more than a couple hundred thousand jobs."

CNN Radio Correspondent Lisa Desjardins contributed to this report. 

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No faxing fast cash advance gets you cash fast and easily.

MONTREAL–Bombardier Inc. has received an order from Spain's national rail operator to maintain a fleet of high-speed trains for 14 years, the transportation equipment maker announced Thursday.

RENFE will pay US$917 million to Bombardier and Spanish railway vehicle maker Talgo to maintain the new trains. Bombardier's share of the contract comes to US$405 million.

The maintenance activities will take place at RENFE's depots in Spain with work expected to begin in 2010.

Bombardier will be responsible for the preventive and corrective maintenance of the train power-heads, power supply, signalling and propulsion system and auxiliaries.

The trains that will be maintained are currently being manufactured by Bombardier in association with Talgo.

Bombardier is no stranger to Spain's railway industry, and employs more than 600 people at various sites in the country. The AVE 102 and AVE 103 high speed trains and the Madrid Barajas airport people mover are among its key projects in the region.

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Brazil’s average interest rate for consumers and companies fell to the lowest since December 2007 last month as banks stepped up lending amid declining defaults.

The average interest rate on bank loans dropped to 34.9 percent from 35.6 percent in October, the central bank said today in a report issued in Brasilia. It’s the lowest since an average 33.8 percent in December 2007. Rates on consumer loans touched the lowest on record, Altamir Lopes, the head of the central bank’s economic department, told reporters in Brasilia.

“The perception of lower risk is the main reason for that result, but the reduction of reserve requirements and increasing competition among banks are also influencing it,” said Roberto Padovani, senior strategist at WestLB do Brasil in Sao Paulo. “Average interest rates should continue to fall for the next six months before stabilizing.”

Brazil emerged from its first recession since 2003 in the second quarter after central bank policy makers made five straight cuts in the benchmark interest rate to a record low of 8.75 percent. President Luiz Inacio Lula da Silva has publicly pressed state and private banks to expand credit to consumers and companies to sustain demand, keep investment in public works and help meet the government’s target of building 1 million homes.

Personal Defaults

The personal default rate in Brazil fell to 8.1 percent in November, from 8.2 percent in the previous month, the bank said, the lowest level since last year.

Total outstanding loans expanded 1.5 percent in November to 1.39 trillion reais ($800 billion) from a revised 1.37 trillion reais the previous month, the central bank said. That figure expanded 1.5 percent in the December 1-15 period, Lopes said.

Total outstanding credit will reach 48 percent of gross domestic product by the end of next year, after touching 45.3 percent this month, the central bank’s director of economic policy, Mario Mesquita, said Dec. 22.

After pumping 100 billion reais into the state development bank, the Brazilian government pledged another injection of 80 billion reais into the bank, known as BNDES, to ease credit conditions for infrastructure projects and other investment.

The economy will expand as much as 5.8 percent next year, fueling inflation above the government’s target of 4.5 percent, the central bank said in a report earlier this month.

Brazil’s non-state banks will be able to issue domestic debt as a way to raise funds, Finance Minister Guido Mantega said Dec. 9. The new paper, which needs to be approved by the central bank’s monetary council, will reduce costs and allow private lenders to compete for long term loans, Mantega said.

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The author of a statewide ballot initiative that would permit full-strength beer and wine sales in Colorado grocery and convenience stores said he plans to modify the measure to increase the percentage of shelf space that must be devoted to craft beer and boutique wine.

Blake Harrison said Tuesday at a hearing for Initiative 29 that he had thought his proposal, which was largely copied from a failed 2008 legislative effort, required 25 percent of alcohol shelf space go to smaller breweries and wineries.

When a Denver Business Journal reporter pointed out its wording actually called for only a minimum of 20 percent shelf space for the products, he said that he plans to grow that area as the measure moves along in the process.

That alteration of the language appears to be the only part of Harrison's proposal that is changing after weeks of discussions with affected parties such as grocers and convenience store owners, however.

Grocers are working on a separate bill or ballot initiative to let them sell all alcohol and a convenience store association is unlikely to back Harrison's plan, but Harrison said he feels his idea can win popular support in the 2010 election.

"I recognize that this bill can be improved … We're just trying to break the stalemate," the Denver deputy district attorney and Democratic legislative candidate said after the Capitol hearing. "The real answer to this may be something that neither side likes."

The measure, submitted to the Legislative Council on Nov. 17, goes next to a title-setting board in the Secretary of State's office. While Harrison can submit his initiative quickly to that board — which must approve its wording before he can collect signatures to put it on the ballot — he said he may wait for a few months to see what the Legislature does first.

Legislative committees have killed bills the past two years that would have ended the post-Prohibition ban on grocery and convenience stores selling any wine or selling beer stronger than 3.2 percent alcohol by volume. While grocers and convenience stores have backed those bills, liquor stores and craft-beer makers lobbied for their defeat, claiming their businesses would be hurt.

Harrison hopes the Legislature will come up with a solution and even included in his proposal a clause saying that any legislative action

allowing grocery stores to sell full-strength beer or wine will supersede his measure.

Grier Bailey, government affairs manager for the Colorado Wyoming Petroleum Marketers and Convenience Store Association, said he expects several legislative proposals will seek incremental changes in the law this year.

Association officials met with Harrison in recent weeks to see if they could back his plan but generally are not supportive of it, Bailey said. They believe a provision in the initiative limiting full-strength beer and wine sales to just 5 percent of a store's shelf space is too restrictive and would help large grocers far more than smaller local proprietors, he said.

"I think the language is, from a small-business perspective, not well thought-out," Bailey said.

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U.S. regulators are looking hard at banks’ expected future tax benefits and the result for some financial institutions could be more writedowns.

Any charges are much more likely to hurt regional and community banks, than the largest U.S. lenders, who have more ways to preserve the benefits, known as “deferred tax assets,” or DTAs.

The most common reason for a bank to write down these assets is an expected lack of taxable income in the future. As income becomes less likely, regulators including the Federal Deposit Insurance Corp are pressing banks to write them down, experts told Reuters.

Regulatory pressure often means that, at the margin, accountants are inclined to be much more conservative when evaluating these assets.

“As long as the FDIC is looking at this, writedowns will be much more widespread,” said Jim Goeller, a partner at tax firm Perry-Smith in San Francisco, which audits more than 60 banks in California. An FDIC spokesman said the agency looks at all assets on the balance sheets and expects banks to follow accounting rules.

Publicly traded banks have about $134 billion of deferred tax assets on their books, according to SNL Financial. In that sense, the problem is small compared with the $1.7 trillion of commercial real estate on companies books, for example.

But for some banks, valuation adjustments can be serious. Consider The South Financial Group Inc, which recently wrote down its deferred tax asset by $200 million.

The writedown, known as a valuation allowance, had little impact on its regulatory capital levels. But it did influence its tangible common equity, a measure of capital increasingly important to stock investors and debt rating agencies.

The Greenville, South Carolina-based bank said in a filing this week that it is looking to boost its common equity, potentially through issuing shares.

Issuing shares now is difficult for banks. Starkeville, Mississippi-based Cadence Financial Corp has a large deferred tax asset, but has posted quarterly losses since the third quarter of 2008.

As of September 30 this year, it had not been forced to write down any of the asset. Chief Financial Officer Richard Haston says the bank looks at its DTA every quarter. It is unclear whether an adjustment will be necessary in the fourth quarter.

“It would probably be very difficult for a bank our size to raise capital now,” Haston said.

As of September 30, the bank’s deferred tax asset was $30.6 million, or about 25 percent of Cadence Financial’s net worth as measured by its book equity.

Lawmakers gave some relief to banks last week — a new law signed last Friday will allow businesses to count accumulated losses against five years of income, compared with prior limits of two years. But those “carrybacks” apply only to banks that did not sell equity or warrants to the government under the Troubled Asset Relief Program. 

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Costco Wholesale Corp is hoping that consumers are becoming more comfortable making purchases as the No. 1 U.S. warehouse club operator heads into the year-end holiday shopping season.

“We still are cautious but are keeping our fingers crossed that people are buying a little bit,” said Chief Financial Officer Richard Galanti on Wednesday.

He made the comments at the retailer’s investor day, which was held in its new store in Manhattan.

Costco’s monthly same-store sales fell through much of this year as shoppers shunned purchases of its discretionary merchandise, like jewelry and clothes. Unlike a year ago, when gasoline prices rose to record levels, Costco received no recent sales boost from the price of gas.

But same-store sales returned to positive territory in September and October, marking an improvement from August, when same-store sales fell 2 percent. The retailer has also said it is seeing demand return for products besides food, like sporting goods, clothes and cameras.

Costco also said at the meeting that it plans to ramp up store openings in the next five years. While the majority of those new stores will be opened in the United States, it said it sees potential to expand its store base in Japan, Taiwan, Korea and Australia.

R.J. Hottovy, an analyst with Morningstar, said he was pleased with what he heard at the meeting, and it reinforced his view that Costco has a strong business model.

“In the downward economic cycle that we’re in, I think the value proposition that Costco provides, it really sells itself,” Hottovy said payday cash advance loans.

OPENING PLANS ACROSS THE GLOBE

Costco operated 559 warehouses as of August 30, the end of its fiscal year. That including 406 clubs in the United States and Puerto Rico; 77 in Canada, 21 in the United Kingdom, seven in Korea, six in Taiwan, nine in Japan, 32 in Mexico and one in Australia.

It expects to open 15 to 20 stores this current 2010 fiscal year, up to 20 stores in each of its fiscal years 2011 and 2012, and more than 25 in fiscal years 2013 and 2014.

In Japan, Taiwan and Korea, where business is performing well, Costco said it has the capacity to operate 100 stores. In Australia, where it recently opened its first location, it has the capacity to operate roughly 20 stores, it said.

CEO Jim Sinegal said Costco does not plan to raise prices to boost margins. Instead, he said Costco will be smarter about the products it stocks on shelves to reduce costs — like making round jars square so that more can fit on a shelf or reducing the size of packaging.

“We prefer to make our additional margin by being smarter, by buying better and being more efficient in our business,” Sinegal said.

He also said a reasonable goal for Costco’s operating profit margin would be about 3.5 percent. While that is slimmer than the 4 percent margin he discussed during the boom years, it is still fatter than some analysts have expected. 

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Wal-Mart and Amazon continued a price war on Friday as the retail heavyweights vie for online book sales ahead of the critical holiday shopping season.

One day after Wal-Mart announced it was pre-selling 10 highly-anticipated books for $10 each on its Web site, Amazon (AMZN, Fortune 500) said it would match that price.

In response, Wal-Mart.com (WMT, Fortune 500) dropped the price to $9, a move Amazon also met.

The books, which all have release dates in November, are by big-name authors such as Sarah Palin, John Grisham and Stephen King.

The price war comes as retailers look for ways to entice bargain shoppers ahead of the holiday sales period, when retailers bring in the bulk of their profit for the year. Last year, consumers spent nearly $450 billion.

While the move could have serious implications for the publishing industry, some observers say Wal-Mart may be more interested in kick-starting online sales than taking over the book business.

"It’s hard to know if this is an effort to transform the book business, as they’ve done with many other businesses before, or an effort to draw attention to the fact that you can buy a lot of [Wal-Mart’s]products online," said Charles Fishman, author of "The Wal-Mart Effect."

Raul Vazquez, chief executive of Walmart.com, would only say that the company is "committed to providing our online customers with the lowest prices available."

"That commitment extends to the nation’s best-selling books, especially during an increasingly challenging year for many of our customers," he added in a prepared statement released on Thursday.

While book sales are not a big part of Wal-Mart’s overall business and the company may actually lose money on the $9 offer, the low-cost juggernaut’s presence in the book business is disturbing, Fishman said.

"As an author, this is a little scary," he said. "If consumers expect to get hardcover books for $10, that will have a dramatic impact on the quality of books they get." 

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Sweeping rule changes meant to shed light on so-called dark pools, where stock-trading is done anonymously, could ultimately hurt the traditional investors that regulators are trying to empower, trading executives warned over the past few days.

The U.S. Securities and Exchange Commission meets in the coming week to consider changes that the industry widely expects will bring some order to the way dark pools communicate, force them to display more quotes, and publicly reveal more data about the amount of trading taking place outside the formal exchanges.

Executives at a conference said political pressure had a hand in pushing new regulations. They argued that although some changes may be needed, a lack of understanding the way orders circulate among the more than 40 U.S. trading venues could lead to poorer prices and executions for mutual funds, pension funds, and individual retail investors.

“Does the public understand that (new rules are) actually going to have real negative consequences to larger orders that are generally made up of a lot of small retail interest?” Shane Swanson, head of transactions at Citigroup Inc’s Lava unit, told the Security Traders Association conference.

Dark pools, private venues primarily used to match large trades, have proliferated this decade as institutions sought safe places to buy and sell “blocks” of stock. They now account for an estimated 10 to 15 percent of U.S. equity volumes.

The SEC, having last month proposed a ban on so-called flash orders, has now turned to dark pools as it cracks down on an increasingly opaque and complex marketplace that some say favors the most sophisticated players at the expense of others.

Commissioners, who meet in Washington on Wednesday, are expected to require from dark pools real-time post-trade transparency so that the public has a better idea where trading actually takes place.

Brett Redfearn, global head of liquidity at JPMorgan Securities, said new data would matter little to the public but would be a boon for high-frequency trading shops — the market’s fastest players that use lightning-fast algorithms to seek out market imbalances, and who could take advantage of the dark pool information.

Swanson added: “That will result in worse impact for those orders. And quite honestly, the small retail orders that are going into the market today already interact with these dark pools. That’s the point that seems to be missed.”

Similar objections were raised over a likely SEC proposal to lower the threshold at which dark pools must publicly display quotes and allow fair access to 1 or 2 percent of market share in a particular stock from 5 percent.

WHAT’S A QUOTE

The SEC is also expected to decide that most so-called actionable indications of interest, or IOIs, should be treated as regular quotes and added to the public quote stream.

Dark pools, exchanges, and other market players send or receive IOIs to sniff out trading interest elsewhere. They vary, but can include the stock symbol, order size, and the price, much like a public quote, raising concerns over a two-tiered market favoring those in the know.

“Depending on how you define IOIs, you may find that many dark pools are not so dark. And that is a little bit scary for institutional orders,” Jeromee Johnson, vice president at BATS Exchange, said in an interview. “If they can’t execute in a dark pool, where do they go?”

Len Amoruso, senior managing director at Knight Capital Markets Group, told the conference: “There could be a host of very legitimate, very bona fide reasons people are using those IOIs to help execute their underlying orders.” 

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It has been 31 years since the last trains left Union Station. And 24 years since its $140 million renovation as a hotel, shopping and entertainment spot on Market Street. But today the station is a shell of what it once was.

Banana Republic? Gone. Talbot’s? Gone. Body Shop, Brookstone, Nature Co.? Gone, gone, gone.

The space formerly occupied by Nature Co. is a gift shop called Fat Sassy’s. Nearby, a shop that calls itself a newsstand has one magazine rack near the front door and several shelves of liquor behind the counter.

But don’t write of this downtown landmark just yet.

A large expansion by Marriott, which in December took over the station’s hotel from Hyatt, is about to get under way. Marriott will move the front desk to the atrium near the station’s western end, allowing greater use of the barrel-vaulted Great Hall for

private events. Marriott also will extend its meeting and restaurant space into much of the retail area along the midway.

As a result, Union Station’s shops will be concentrated along the eastern concourse, where the food court is situated beneath the arched train shed, which dates to 1894. Whether this transformation — the station’s most extensive since the 1980s — will revive the place is yet to be seen.

Barbara Geisman, deputy mayor for development, said city officials hope better times are ahead.

"We would certainly like to see as much retail as possible in Union Station," she said. "As the downtown residential and business population grow, we think there’s a market for more mainstream retail there."

Resuscitating shopping at Union Station will require "some big-time marketing," Geisman said.

"A lot of this is that you get a name draw and then that kind of sets the tone for the rest of it," she said. "We think the station presents opportunities for larger retail."

Bass Pro Shops, based in Springfield, Mo., took a look a few years ago but passed on Union Station, Geisman said. She added that shopping habits have changed since the 1980s, when "festival markets" such as Quincy Market in Boston, South Street Seaport in New York and Union Station drew big crowds. All have faded.

"Things have changed a lot since then," Geisman said. "Instead of people going there on a whim because they want to see a neat old building, you now have a lot of people with disposable income who like to shop."

Frances Percich, Union Station’s marketing manager, said "serious" discussions are under way with two retailers, including one that would be new to St. Louis. She declined to name them. Percich said the station will continue to market itself as a tourist attraction with numerous spring and summer events.

"When people walk in here expecting a mall, they will be disappointed," she said. "We’re not a mall. We have no anchor store."

Among the few Union Station visitors one afternoon last week were Russ and Donna Clark of Yuba City, Calif. They were staying at the Marriott for a meeting. The Clarks said they had been unsure whether Union Station’s emptiness resulted from a renovation still under way or from a lack of business.

Told that the renovation was completed in 1985 and that the station had been in decline for years, Donna Clark said: "Wow, that’s a shame. This looks like a great idea. It’s disappointing not to see a lot of people."

Union Station’s current retail occupancy is 79 percent, Percich said. Ownership has changed in recent years. In 2003, the inability of St. Louis Station Associates, the investment group behind the 1980s renovation, to pay the mortgage led to foreclosure by Regency Savings Bank of Oak Park, Ill. Park National Bank of Chicago bought the property from Regency and owns it through Union Station Holdings LLC.

Doug Dean, the Marriott’s general manager, said the hotel renovation will restore some of the inn’s original 1890s configuration. He noted that the original front desk was off the atrium, remarkable for its glass-block floor. All 539 rooms, including the 67 in the station’s original "headhouse," will be redone. Dean declined to specify the overall cost, saying it remained "a moving target."

Four meeting rooms and a restaurant will be built near the new lobby. One floor above, the existing restaurant will be used mainly for private events. Beginning with a ballroom freshening done by November, the renovation project will be completed in late 2011, he said.

Hotel and shopping areas will remain open during the renovation.

Across Market from Union Station is the western end of the Gateway Mall, the milelong park that extends east to the Old Courthouse. Tricia Roland-Hamilton, head of the project to redo the mall, said that to thrive, the Union Station area must have more offices, residents and stores.

"The key to livening up that space, not just Union Station but that part of the mall, is density," she said. "And we don’t have that right now."

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U.S. lawmaker Barney Frank is making key changes to the White House plan for an agency to protect consumers from risky financial products, according to a congressional document obtained by Reuters on Tuesday.

Financial firms will not be required to offer plain vanilla products and services, such as mortgages with simple terms and contracts, the document said.

Representative Frank, who chairs the House Financial Services Committee, is expected to soon release a revised discussion draft about the proposed consumer agency, which has drawn criticism from businesses and banking regulators.

Businesses fear the Consumer Financial Protection Agency (CFPA) will stifle innovation and erode profits as consumers seek out government-approved products. Regulators fear the consumer agency will take away some of their authority.

According to the document, the consumer agency will not have the authority to approve or change business plans. Banking regulators will coordinate and consult with the consumer agency on timing, scope and results of the exams to “ensure minimum regulatory burden.”

Depository institutions will have simultaneous federal safety and soundness and consumer compliance exams unless they want separate exams, the document said.

Other service providers, such as accountants, lawyers, telecom, and cable companies, will not be required to comply with the consumer agency rules if they are acting in their “traditional capacities,” said the document.

The Federal Reserve will partially fund the agency so that financial institutions are not unduly burdened with more fees.

All non-bank financial institutions that provide financial products and services for consumers will be required to register with the CFPA.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)

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