Actual finance blog

Bank of America Corp agreed to give regulators more information about why it refrained from disclosing details about Merrill Lynch’s performance before it bought the investment bank, federal regulators said on Tuesday.

The agreement, still subject to court approval, would allow the U.S. Securities and Exchange Commission to look at details on the bank’s failure to disclose information to shareholders about Merrill’s $15.8 billion fourth-quarter losses and bonuses paid to Merrill employees.

The bank faces an array of lawsuits and investigations by lawmakers and regulators. New York Attorney General Andrew Cuomo has threatened to sue bank officers and is seeking more information on who knew what prior to the December 5 shareholder vote to approve the merger.

Under the SEC pact, Bank of America would waive its attorney-client privilege that protects the names of those who made decisions on the Merrill merger.

“Attorney-client privilege is a very important business principle but given the pressure in several inquiries for further insight we decided to waive it in this matter,” said Bank of America spokesman Larry Di Rita.

“We have nothing to hide and believe our actions throughout the Merrill Lynch acquisition were appropriate and in the best interest of our shareholders,” he said.

Last month, a federal judge rejected Bank of America’s $33 million settlement with the SEC, which alleged it misled investors about $3.6 billion of bonuses paid to Merrill employees.

U.S. District Court Judge Jed Rakoff faulted the SEC for accepting the bank’s effort to invoke attorney-client privilege and avoid disclosing what executives and lawyers knew about its authorization to pay the bonuses no fax pay day loan.

If the pact is approved, the SEC would have access to information on the bank’s decisions about whether to disclose impairment of goodwill of Merrill and other financial results of Merrill Lynch during the fourth quarter of fiscal year 2008.

The agreement would give the SEC access to the bank’s communications with the Federal Reserve and the Treasury Department, which helped broker the deal and buttress the bank with taxpayer funds.

That would likely include communications between departing Bank of America CEO Ken Lewis who was at the center of negotiations with federal regulators.

The order would allow the SEC to share the information from Bank of America with other government authorities including federal and state regulators, the SEC said.

The bank announced at the end of last month that 62-year-old Lewis will retire by the end of the year. His reputation has been badly bruised by government investigations into the Merrill acquisition, as well as massive credit losses that led the bank to take two rounds of U.S. bank bailout funds.

Bank of America is searching for a successor with a view to appointing a replacement before Lewis leaves. Possible candidates include Brian Moynihan, head of consumer banking, and Joe Price, the bank’s chief financial officer.

Lewis had previously said he wanted to stay at the bank until it had returned the $45 billion in government funds it received.

(Reporting by Rachelle Younglai, Elinor Comlay, Dan Wilchins, editing by Dave Zimmerman)

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U.S. government-controlled mortgage finance companies Freddie Mac and Fannie Mae are working on a program to help independent mortgage banks get access to short-term credit needed to make home loans, the Wall Street Journal said, citing people familiar with the matter.

Fannie and Freddie will provide advance commitments for the purchase of home mortgages that meet certain standards, according to the paper.

The program aims to reduce risks that independent mortgage banks face so they can obtain short-term credit, the paper said.

The Journal’s sources added that the companies are planning to build on an undisclosed pilot program that Freddie has with Provident Funding Associates LP and warehouse-lender NattyMac, where short-term funding would be provided to mortgage companies. Spokesmen for Fannie and Freddie declined to discuss details of the plan with the paper.

Fannie and Freddie could not be immediately reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Kim Coghill)

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In the 1980s, when stocks mostly surged, a few mutual fund managers became the equivalent of rock stars.

Tops among them: Peter Lynch, who racked up average annual returns of a remarkable 29 percent over a 13-year run.

Lynch did it at Fidelity Magellan, which continued to grow after he left in 1990. What once was the world’s largest fund swelled from $13 billion to nearly $110 billion a decade later. Assets peaked three years after the fund shut its doors to new investors because it became so big it was hard to manage effectively.

So where is Magellan now? It’s at $24 billion, and struggling to draw investors who fled in droves after years of mediocre performance. Magellan is still big by any standard, but it’s merely Fidelity’s fourth-largest stock fund.
"I don’t worry about too many assets now," says current manager Harry Lange, who took over in late 2005.

Magellan reopened to new investors early last year, but those who gave it a try were disappointed. The fund’s 2008 plunge? Forty-nine percent — steeper than the market’s nearly 39 percent decline. Blame bad bets on dogs like AIG and Wachovia — financial companies that Lange held on to for too long.

But Lange is turning things around, thanks to a sharp departure from his predecessor’s style. Where Robert Stansky was criticized for too closely mirroring broader markets, Lange has tilted the fund heavily in favor of growth stocks — companies whose comparatively steep share prices are backed by expectations that earnings will keep growing rapidly. He’s eased out of cheaper value stocks with steadier earnings, and takes a go-anywhere approach in keeping with the fund’s namesake 16th century explorer. Nearly one-quarter of Magellan’s holdings are international stocks.

Many of the same bets on riskier stocks that weighed Magellan down last year are lifting it in 2009. It’s up 35.6 percent, easily topping the nearly 17 percent gain for its benchmark, the Standard & Poor’s 500, and beating nearly nine of 10 of its peer funds.

So is it time to climb back aboard Magellan? Only if you’re willing to commit to a fund whose penchant for racy stocks makes it unusually volatile.

This year, the fund expanded its already substantial stake in recently hot technology stocks — its second- and third-largest holdings are specialty glass maker Corning Inc. (up 62 percent this year) and semiconductor maker Applied Material (up 34 percent). It’s also favored hard-hit fare like home builder Toll Brothers (down 8 online cash advance.8 percent) and big banks — Magellan’s most recent list of top 10 holdings included Bank of America, J.P. Morgan Chase, Wells Fargo and Goldman Sachs.

Lange has turned Magellan into "a fund for optimists," according to Morningstar’s lead Fidelity analyst, Christopher Davis.

"If you look at its portfolio, it’s positioned for an economy that’s improving," Davis says, noting an absence of such defensive favorites as Wal-Mart and Procter & Gamble.

Lange says this year he’s slightly eased off his leaning toward growth stocks but still heavily favors the category. Though value stocks outperformed growth for an eight-year run after the dot-com bubble deflated early this decade, the pendulum swung back to growth last year — financial stocks that were hit so hard last year are mostly in the value category. Growth’s ranks include plenty of tech names that have recently fared well.

Lange still likes tech because of its big stake in emerging markets, where consumers in countries like China and India continue to drive growing demand for gadgets including mobile phones from makers like Nokia, Magellan’s top holding. He figures that trend will continue giving growth an edge over value. "I’m pretty confident that growth will be as strong in the next six to 12 months," Lange says. "There are a lot of people out there who think after that, it will be a sluggish recovery. I’m more bullish than that."

As for his fund’s choppiness, Lange acknowledges that with his growth-oriented style, "it’s pretty tough not to have volatility in these unusual times."

Even with this year’s strong results, winning back investors who fled Magellan has proved tough. Lange is still trying to shake the cumulative record of the last 10 years, a period when Magellan posted an average annual loss of 1.2 percent, slightly worse than most of its peers.

"This is not your grandfather’s Magellan fund," says Jim Lowell, a former Fidelity employee who runs an independent newsletter, FidelityInvestor.com, that evaluates the company’s funds.

Lowell currently recommends Magellan but says it’s no longer appropriate as a core retirement holding for investors who are looking for the broad exposure it once offered. Instead, Magellan is geared toward those seeking more growth exposure in an otherwise diversified portfolio.

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Recession-pounded consumers who find Target, Kohl’s and even Wal-Mart a bit pricey are moving down to the dollar stores.

As many retailers suffer — quarterly profits dipped this summer at mighty Wal-Mart, for example — dollar stores are opening by the hundreds. And some locate in well-to-do suburbs that once seemed out of reach for chains near the bottom of the retail barrel.

Growth by Dollar Tree, Family Dollar and Dollar General — the Big Three of discount retailing — has become a lifeline to commercial property owners struggling against rising vacancy rates.

"It’s a fascinating trend consistent with neoclassic economic theory," said Bob Lewis, president of Development Strategies, an economic development consultant in St. Louis. "It relates to marginal utility and inferior goods concepts. And the need for commercial real estate owners to fill up space."

Dollar Tree, with nearly two dozen stores in the St. Louis area, is about to open another store at the Heritage Place shopping center on Olive Boulevard in Creve Coeur. The latest Dollar Tree, scheduled to open Thursday, is taking space formerly occupied by Famous Footwear, which moved in July to a smaller spot.

Marginal utility? Inferior goods? Lewis doesn’t equate inferior with poor quality. He means inexpensive items.

"You can survive on ramen noodles if you’re poor," Lewis said. "You don’t buy more of them after you get a good job. But if you’re poor, inferior goods go up in demand."

Marginal utility relates to shopping "ambience," he said. While many shoppers prefer the surroundings of upscale stores, some find that dollar-store shopping for staple items bestows smart-shopper status, Lewis said.

"It’s a fascinating little situation we have going on here," he added. "If you’re buying the things you might normally pick up at Target or Wal-Mart for a few pennies more, why not use the dollar place?"

Shopping center owners benefit by getting occupants for millions of square feet of retail space payday loans.

"Otherwise, it would probably stay vacant or be rented out to a dance studio, or something, just so that the owners can generate a bit of income and keep the lights on," Lewis said.

Mike Swearngin, vice president of Pace Properties, said Dollar Tree’s presence at Heritage Place helps boost the center’s occupancy to 90 percent, up from 80 percent a year ago. He said Dollar Tree will add stability to Heritage Place and draw the same women who already shop at the center’s Marshalls and TJ Maxx stores.

"It’s the type of retailer that seems to be relatively recession-proof," Swearngin said.

In August, Dollar Tree, based in Chesapeake, Va., reported a 50 percent jump in per-share quarterly earnings. Sales rose 12 percent, to $1.22 billion. Dollar Tree had 3,717 stores, 200 more than a year earlier. Spokeswoman Shelley Davis said the company knows the recession is sending shoppers its way from more upscale places.

"We have a sense we are benefiting from trade downs," she said. "But we also feel our regular loyal customers are shopping us more. We do feel that Dollar Tree can operate in a booming or recovering economy."

She said the 9,600-square-foot Creve Coeur outlet is within the company’s ideal size.

Dollar Tree isn’t alone in enjoying growth. Dollar General Co.’s latest quarterly profit tripled, to $93.6 million, from $27.7 million a year earlier. Sales rose 11 percent, to $2.91 billion. The Goodlettsville, Tenn., company has said it will open 500 stores in addition to the 8,577 it had at the end of July.

Dollar General already has more than 600 stores in Missouri and Illinois, including about 20 in the St. Louis area. Family Dollar has about 30 area stores. The region’s next Family Dollar will open in January at 9070 West Florissant Avenue in Ferguson.

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NATIONAL HARBOR, Md. — Defense Secretary Robert Gates said Wednesday that he would put the Air Force in charge of awarding a $35 billion contract for refueling tankers even though it botched two earlier efforts.

Boeing Co. and a joint venture that includes Northrop Grumman Corp. and the European aircraft maker of Airbus SAS are competing for the contract. Air Force officials plan to release a draft proposal within the next two weeks that details the type of plane they are seeking.

While Gates said he would let the Air Force run the competition instead of having his office do it, he cautioned that the Pentagon "cannot afford the kind of letdowns and parochial squabbles and corporate food fights that have bedeviled this effort over the last number of years."

He also said, in a speech at an Air Force Association convention, that his office would continue to have "a robust oversight role."

The Air Force’s first effort to obtain new tankers collapsed in 2004 amid corruption charges involving a proposed leasing deal with Boeing guaranteed fast personal loans. Northrop Grumman and the European Aeronautic Defense and Space Co., known as EADS, then teamed up and won a competition last year against Boeing, which has its defense operations based in Hazelwood.

Boeing protested that award, saying the Air Force unfairly gave extra points to the Northrop and EADS team for offering a larger plane than the service had sought and made other mistakes in evaluating the proposals. The Government Accountability Office, a congressional auditing agency, said some Boeing complaints were valid and blocked the award.

Boeing and Northrop Grumman both released statements Wednesday saying they were ready to renew the battle. If anything, the political and economic stakes seem even higher now, with spending on big military programs expected to tighten and high-paying jobs in the balance.

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Jorge Ramos runs a camp at Seneca College, teaching kids about money.

About 200 children went to Camp Millionaire this summer at a cost of $240 each. Most are 9 to 11 years old, but there’s an advanced course for graduates aged 12 to 14.

Pushed by parents to go, some were not happy campers.

One boy sat on the sidelines, refusing to pick any stocks for an interactive trading contest.

"He came in fifth by being out of the market. After that, he was excited and really got into it," says Ramos, who bought the Canadian rights to the camp from a California entrepreneur.

He’s learned to make financial literacy fun for youngsters. So, what’s his advice for parents trying to do the same thing?

First, he says, involve kids in your household’s finances. You don’t have to disclose your income or your net worth, but you can talk to them about how much things cost – even the family home.

Second, use an allowance as a budgeting tool. Make kids responsible for their spending on clothes, entertainment and other discretionary purchases.

"Instead of saying, `Here’s $10 a week, do what you want,’ structure a budget allocated to items they want to buy in the next few months.

"When you say to kids, ‘Here’s $40 a week, don’t blow it,’ they look for sales. They’re more cautious when it’s their money. You’re empowering them."

Third, encourage kids to start a business. Selling lemonade, raking leaves or shovelling snow can teach them about how markets work.

They have to ask questions such as: What do I charge for my product or service? Who are my clients?

Testimonials at his website, FinancialIQ.ca, are endearing.

Michael, 9, is making money picking up sticks, apples and nuts in his mom’s garden. He also grows pumpkins and sells some of them.

Michelle, 11, is earning "passive income" from interest on her bank account instant credit report. (That’s a popular term for money received on a regular basis with little effort required to maintain it.)

Matthew, 13, learned so much after the first day that "financial intelligence was coming out of both ears."

Kids are assigned homework to do with their parents.

"They have to ask, ‘What was the best investment decision you ever made and the worst? What does it cost to raise me?’ "

At Camp Millionaire, children learn to use money jars for spending, saving, giving and education.

The use of jars, popularized by host Gail Vaz-Oxlade in a TV show, Til Debt Do Us Part, allows them to budget in a tangible way and dedicate money to different goals.

Ramos says he’s starting to cover his costs. He made a pitch to The Dragons Den, a CBC-TV show that helps entrepreneurs get funding but came away empty-handed.

Doug Meharg, on the other hand, became a millionaire at 28 through owning real estate. He bought his partner’s share of an apartment building in Markham with 50 suites, all rented.

In a self-published book, Become a Richer You, he gives tips for raising savvy kids – such as banishing bad attitudes and recognizing that mistakes are part of success.

Failures help you learn what not to do next time, he says, and might even point you in the direction of what you need to do.

Junior Achievement of Canada does such work with kids during the school year free (jacan.org).

There’s obviously a demand for exciting, interactive ways to improve personal money management.

Let’s hope the new financial literacy task force plants seeds for such programs to sprout in communities across the country.

eroseman@thestar.ca

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When General Motors executives stopped in St. Louis last fall to meet with auto dealers, the economy was entering a free fall.

"We were right in the middle of the meltdown when we were out doing this. We just didn’t know it," said Mark LaNeve, GM vice president for sales. "I mean we thought it was a bad couple of weeks. And as it turned out, the vehicle market was collapsing, the stock market was collapsing, the banking sector (too)."

Last week, LaNeve, CEO Fritz Henderson and other GM executives met with Midwestern auto dealers in downtown St. Louis for the first time since emerging from bankruptcy last month. The automaker is going forward with fewer brands, fewer vehicle "nameplates" and, ultimately, fewer dealerships.

The launch of the nine-city dealer tour comes at a pivotal time for the American automaker. The deep recession has hurt auto sales, and consumers have been lukewarm to some of its vehicle brands.

Henderson called last week’s meeting a good opportunity to reconnect with GM dealers and get people "charged up about winning in the marketplace." To do so, the new, smaller GM has to win back the hearts and minds of U.S. consumers, he added.

"For those people who own our vehicles today, and are happy with them, we want to make sure we make them even happier," Henderson said after the meeting. "And for those that don’t want to consider us, we want to compete and get back on their consideration list."

Several area dealers were upbeat about what they heard and the prospects for the future. The fact that Henderson attended this year’s meeting was further evidence that "they mean business; that they’re serious," said attendee Greg Flotte, general manager of Don Brown Chevrolet in St. Louis.

Flotte said there already had been some signs that it wasn’t business as usual at the new GM. When the federal government was slow to reimburse dealers on Cash for Clunkers rebates, GM came up within 48 hours with a loan program to help dealers who had not been paid car loan interest rates.

"That would not have happened under the old General Motors," Flotte said. "To have that happen that quickly and take action that was effective was something that I was very, very impressed with."

General Motors plans to put more marketing muscle behind fewer vehicle models within its core brands — Chevrolet, Buick, Cadillac and GMC, LaNeve said. "We’re going to very aggressively get our story told. That’ll kind of start in September."

Dealers said they welcomed that focused approach to advertising.

LaNeve said reducing the number of dealerships proved "an enormously emotional, painful process." The company plans to shed about 1,200 dealers nationwide under its reorganization, but GM officials would not disclose how many are in the St. Louis region or elsewhere.

It also plans to sell off Hummer, Saturn and Saab, and discontinue the Pontiac brand.

"So we’ll have a 24, 25 percent reduction in the overall number of dealers, which we did to strengthen the dealers," he said. "We’ve got to have dealers that can compete."

The weakened economy has hurt demand for GM’s full-size GMC Savana and Chevrolet Express vans built at the company’s Wentzville plant, where GM eliminated one of two production shifts. But Henderson said that the van remained an important product and that Wentzville was "the only place where we build that van."

One analyst said GM’s campaign for the hearts and minds of consumers, dealers and auto enthusiasts was not unlike a political campaign.

"A lot of it, at the end of the day, is to get votes," said Erich Merkle, president of Autoconomy in Grand Rapids, Mich. "GM wants to be elected. They want to be perceived as a cutting-edge, high-quality company."

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Even though financial stocks have rallied nearly 70 percent since the end of March, the Federal Deposit Insurance Corp. issued another grim quarterly report Thursday on the health of the nation’s banks.

The agency reported that the banking industry lost $3.7 billion in the second quarter amid a surge in bad loans made to home builders, commercial real estate developers and small and midsize businesses. Its deposit insurance fund dropped 20 percent, to $10.4 billion, its lowest level in nearly 16 years. And the number of "problem banks" increased to 416, from 305 in the first quarter, and is expected to remain high.

Indeed, federal officials warned that while the economy and financial markets were showing signs of improvement, the banking sector was unlikely to rebound soon.

"These credit problems will at least outlast the recession by a couple of quarters," said Sheila Bair, the FDIC chairwoman. "Cleaning up balance sheets is a painful process that does take time, but it is absolutely necessary to the industry’s sustained profitability."

The dismal report shows how the industry’s problems have spread. A handful of the biggest banks were among the first to suffer big losses nearly two years ago from complex mortgage assets and other securities, but have posted strong profits from trading over the last two quarters.

Still most of the nation’s 8,195 banks primarily make their money from lending to consumers and businesses. They are now facing increased pressure from soaring loan losses and higher deposit insurance costs as the FDIC seeks to shore up the industry fund. Analysts say a recovery will not be in sight until the job market and broader economy stabilize.

So far, 81 banks have failed this year, including 45 in the second quarter. That, in turn, has put enormous stress on the government’s deposit insurance fund, which is supported by fees charged to the banks regulated by the FDIC. Its second-quarter reserve of $10.4 billion compares with $45.2 billion a year earlier.

The bulk of the decline comes from additional money that the agency has set aside to cover the cost of bank failures, and Bair said the fund had ample resources to make sure insured depositors would not lose money. But the levels are so low that FDIC officials said Thursday that they would consider imposing a special assessment on the banks, on top of elevated insurance fees, toward the end of the third quarter.

Through similar actions, it added about $9.1 billion to the fund in the second quarter.

Bair said she did not anticipate having to immediately tap an emergency credit line run by the Treasury Department, although she did not rule it out. "I never say never," she said. The FDIC quarterly report came after a similar release by the Office of Thrift Supervision on Wednesday that showed savings and loan associations eked out a $4 million profit, the first time the sector posted positive results since the fall of 2007. Still, the number of "problem thrifts" rose to 40, up from 17 a year earlier.

The savings and loan industry "is not out of the woods yet," said John Bowman, the acting director of the Office of Thrift Supervision. "Despite some encouraging signs, the industry’s performance remained uneven."

Federal banking regulators are bracing for hundreds of small and medium-size banks to collapse in the coming months even though the economy has shown early signs of a recovery. Banks are burdened with billions of dollars of bad loans made over the last few years and are continuing to set aside more money to cover losses. In fact, credit loss rates reached a record high in the second quarter.

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CLAYTON — U.S. Equities Realty of Chicago, a commercial real estate firm with projects worldwide, has sold its ownership interest in the $212 million Centene Plaza project to the principals of Clayco Realty and The Koman Group.

Robert A. Wislow, chairman and CEO of U.S. Equities, said the firm will remain actively involved as a development consultant in the project. Located at the corner of Hanley Road and Forsyth Boulevard, the development will become the new expanded headquarters of Centene Corp. and it also will include shops, restaurants and commercial businesses on the first floors of a 17-story office tower and parking garage.

"We sold our interests to two very strong local development entities, and it makes perfect sense for local people who have had huge success in that market to be the developers," he said.

Wislow said the local developers — Centene, Koman and Clayco — also would be well-positioned to handle leasing and management of the project now under construction personal loans rates.

U.S. Equities was brought into the project in 2006 as a co-developer and majority partner. Wislow had been the lead person in securing approvals from Clayton and appeared personally and regularly in St. Louis to handle the project.

On Thursday, Centene announced that along with its joint venture partners, The Koman Group and Clayco, it had secured and closed on the financing arrangements for the development. The lenders include a consortium of banks led by U.S. Bank and Private Bank, said Sandy McBride, a Centene spokesperson.

Construction is on target to be completed next summer. This first phase will include a parking garage along Forsyth, a public terrace and the 17-story tower.

A possible second phase would include a second office building at Hanley and Carondelet Avenue.

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Boeing Co. leaders say that the U.S. military’s airlift needs are growing and that a Pentagon proposal to halt future orders for the C-17 Globemaster III cargo plane is premature.

Boeing, whose defense unit is headquartered in St. Louis, is trying to rally support for the C-17 on multiple fronts — arguing that ceasing production would erode the U.S. industrial base, costing thousands of jobs at Boeing plants and those of its main suppliers. But Boeing officials also emphasize the plane’s strategic value.

"Right now, since 9/11, the airplane has been flying at about a 15 percent higher rate than was anticipated," said Donald A. Anderson, Boeing’s C-17 program manager in St. Louis. "In addition, they’re talking about rebasing troops in the United States. They’re talking about an increase in the size of the Marines Corps and the Army.

"So it seems like the airlift requirements are growing. And you need airlifters to meet those needs."

Starting with Secretary of Defense Robert Gates’ announcement in early April and continuing through last week, the Pentagon has said it can get by with the 205 C-17s that are either in service or on order. The Air Force also uses the Lockheed Martin C-5 Galaxy to transport weapon systems, cargo and personnel to overseas locations.

Republican Sen. Christopher "Kit" Bond and Democratic Sen. Claire McCaskill, both of Missouri, have written letters supporting more orders of the C-17, and Machinists Union officials have traveled to Washington to show their support for a program that supports 900 jobs in St. Louis.

"This is high political theater," said analyst Richard Aboulafia of The Teal Group in Fairfax, Va. "The bottom line is I don’t think the line is threatened. But it is up to everybody from Department of Defense to Congress to Boeing to the unions to make it look as though it were."

The Defense Department has not sought funding for the C-17 in the last three years. But Congress has stepped in to add funding for more of the $202 million planes through supplemental defense appropriations bills.

Bond and Boeing officials have asked why Gates would halt C-17 orders while there is a study under way into the military’s future air-mobility needs. The results are expected this fall.

"But yet we’re making that decision now to stop the airplane," Anderson said. "So it seems somewhat premature fast payday loans."

Bond said shutting down production of the C-17 is a "dangerous gamble" and warned that the U.S. can’t afford to "lose the capability to transport safely our troops and equipment to anywhere in the world."

In a letter to President Barack Obama, McCaskill said the U.S. is "literally flying the wings off these planes," and added "this is not the time to end its production, especially in light of projected global mission sets for the U.S. military."

Both legislators also have gone to bat for Boeing’s St. Louis-built F/A-18 Super Hornet, whose future was placed in limbo under the latest Pentagon spending plan.

The C-17 is assembled at a plant in Long Beach, Calif. But the cargo door, cargo ramp, landing-gear pods, nose and engine pylons are built in St. Louis.

A November 2008 report by the Government Accountability Office recommended "careful planning to avoid shutting down the C-17 line prematurely." Both Boeing and the Air Force believe shutting down and restarting production "would not be feasible or cost effective," the report found.

The GAO cited the high costs of hiring and training a new work force, reinstalling equipment to proper working condition and re-establishing a supplier base.

Boeing has delivered the C-17 to other countries, including Australia, Canada and the United Kingdom. The United Arab Emirates has announced its intent to buy four of the planes, and Qatar has ordered two and exercised an option on two additional C-17s.

But Anderson said international sales alone are not enough to sustain the C-17 line. Boeing officials say maintaining C-17 sales to the U.S. Air Force is necessary to keep the price of the planes competitive in the international market.

Defense analyst Loren Thompson of the Lexington Institute in Arlington, Va., said the C-17 is the best strategic airlifter ever built and "a very cogent case" can be made that terminating production at 205 planes would be too early. At the moment, he said, its future will be dictated by Congress.

"Here’s the bottom line to C-17," Thompson said. "If Congress doesn’t add money, there won’t be any more."

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