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Carolina Diaz-Silva says she believes that learning a foreign language at an early age can give children a cognitive advantage in the future. Diaz-Silva is founder and director of International Schoolhouse, a Spanish-immersion preschool in Olivette. She started the school in August with 10 children and will be adding eight more in January.

Diaz-Silva, who speaks in English, Spanish, Italian and German, hails from Peru and moved to St. Louis 16 years ago. She spent her time teaching Spanish at MICDS in Ladue and also at Washington University.

In 2006, she received a master’s degree in Spanish Literature from Washington University and received an MBA from the university in May. She serves as an adjunct lecturer in the romance languages department of Washington University, teaching Spanish.

Diaz-Silva says she is trying to weather the economic challenges that come with her new venture and the competition from other preschools in the area.

Are the children enrolled in the program from different backgrounds?

We have a lot of diversity in our student body as well as our teachers. Out of 18 students, we have four Hispanic children, one Indian and one African-American.

What kind of economic challenges are you facing with the school?

I would say that I had a lot of interest in the school, because it is not a day care, it is only a preschool that has part-time hours.

But in today’s economy, preschool has become an option for a mother who stays home with her child. A lot of families are choosing not to make that expense. And that has an impact on the enrollment.

But I am happy that we are small and are able to gradually grow.

Has the performance of the school, so far, met your expectations?

I was naive no fax payday loan. I thought the school would fill up from the first day, because it is such a great idea.

It is also important to realize that I have to build trust with the parents. And that is exactly what we are doing right now.

We had an open house for children coming in January and we had the current parents be at the open house and talk to the prospective families. That made all the difference in the world. Because it wasn’t the director or the teacher selling what a great program we have, but the parents telling them how delighted they were with the program and how fantastic the teachers are.

Who are your competitors?

Preschool is very local. We did a lot of market research before starting the school and found out that families drive less than three miles for a preschool and a lot of families just walk.

There aren’t any Spanish-immersion preschools in our area, but there are a couple in St. Charles and Ballwin. My direct competition are other preschools in the area.

How do you publicize the school?

Most of our publicity comes from word-of-mouth. But we also do some advertising, like in St. Louis Kids Magazine, Ladue News, direct mailing, postcards.

We need to do more effective marketing. But I don’t believe marketing is going to get me more students. It is going to be my current families talking to their friends. Basically, I have 10 advocates, and I will have 18 in January.

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Indonesia can’t replicate the “high single digit” economic growth of China and India because of impediments to investment and high credit costs, according to Credit Suisse Group AG.

“We don’t expect investment to take off,” Cem Karacadag, an economist at Credit Suisse in Singapore, said in a report received yesterday. “It will take the government many years to fix the structural obstacles to investment, including corruption, regulatory risks, and a weak legal framework.”

President Susilo Bambang Yudhoyono’s re-elected government has “neither the mandate nor the capacity” to implement quickly the reforms needed to overcome these obstacles to investment, according to Credit Suisse. Borrowing costs are also too high as the central bank isn’t committed to keeping monetary policy “stable and tight,” Karacadag said in the report.

Indonesia wants to be included among the so-called BRIC nations of Brazil, Russia, India and China, according to Emil Salim, an adviser to President Yudhoyono and a former Cabinet member. The nation’s accelerating growth provides a case for its inclusion among BRIC economies, Morgan Stanley said in June.

Credit Suisse said it was likely that gross domestic product growth in Southeast Asia’s largest economy would remain below that of China and India.

“The key question for Indonesia is will investment accelerate quickly and be efficient enough to lift GDP growth to high single digits?” Karacadag said. “Our answer is no.”

‘Bright’ Outlook

Still, Indonesia’s long-term economic outlook is “bright” and annual GDP growth may average 5.6 percent from 2010 to 2014 and 6.5 percent from 2015 to 2019, according to Credit Suisse. That will see per capita income almost triple to $6,800 by 2019 from $2,300 in 2009, it said.

Indonesia’s economic growth accelerated in the three months to Sept. 30 for the first time in five quarters, with GDP expanding 4.2 percent from a year earlier. The $514 billion economy may expand 4.3 percent this year and between 5 percent and 5.5 percent in 2010, the central bank said yesterday.

“The country has a sound fiscal policy, good balance of payments, declining government and external debt ratios, and an improving political situation,” Karacadag said. “However, we don’t expect investment and real GDP growth in Indonesia to take off in a hurry.”

China and India will continue to achieve faster rates of GDP growth until Indonesia fixes structural impediments to investment and shows a “credible commitment to low inflation,” according to Credit Suisse.

Inflation Target

Bank Indonesia kept its benchmark interest rate unchanged at 6 payday loan.5 percent for a fourth straight month yesterday, after nine consecutive cuts that ended in August.

The central bank said monetary policy would be directed toward “keeping inflation low while taking into account the recovery of the economy.” Inflation this year may be “lower than” the target of 3.5 percent to 5.5 percent, the bank said.

“Unfortunately, we don’t perceive the government and Bank Indonesia to be committed to keep monetary policy stable and tight enough to rein in inflation and persistently high inflation expectations,” Karacadag said. “Even if the central bank was committed to bringing inflation under control once and for all, it first would probably have to keep real interest rates high for many years.”

Indonesia’s inflation rate has hovered around 4 percent to 17 percent over the past decade, according to Credit Suisse.

Weak Credibility

“Being able to deliver on their inflation targets in the coming two years would be a significant breakthrough for Indonesia,” said Enoch Fung, an economist at Goldman Sachs Group Inc. in Hong Kong. “Weak inflation credibility is the biggest issue overhanging the Indonesian risk premium.”

Indonesia’s inflation unexpectedly slowed in November, suggesting that the central bank may take more time before it follows other Asia Pacific nations including Australia, India and Vietnam in withdrawing monetary stimulus.

Consumer prices rose 2.41 percent last month from a year earlier after gaining 2.57 percent in October.

“There is less pressure for Bank Indonesia to increase rates earlier in 2010 following Vietnam and Australia,” said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. “The central bank may maintain the benchmark rate at the current rate of 6.5 percent at least until the second quarter of 2010 before gradually increasing it to 7.25 percent.”

Bank Indonesia needs to show a stronger commitment in its fight against inflation in order to bring down borrowing costs to companies and consumers, according to Credit Suisse.

“The higher the rate of inflation, the higher are real lending rates because of the inflation risk premium that is built into nominal interest rates,” Karacadag said. “It would only be much later, once tight and consistent policy has raised the credibility of the central bank, that the payoff would come in the form of lower real interest rates.”

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Business managers interviewed by Federal Reserve researchers conducting their eight-times-a-year review of the New England economy “cite mixed results amid signs of improvement, although activity generally remains below year-earlier levels,” the analysts wrote in the report, which was released Wednesday.

“Some respondents are beginning to hire and/or reverse pay cuts or freezes, or planning to in 2010,” the researchers wrote in the summary often referred to as the “beige book.”

“Prices are generally said to be stable,” they wrote. “Contacts in a number of sectors express uncertainty about whether recent improvements will last, but most — outside of commercial real estate — expect recovery to take hold in 2010.”

By sector:

• A number of retailers told the researchers “consumers are much more cautious than in previous years.” And executives in the category worried about the impact of unemployment on consumer spending.

Several retail concacts told the researchers they are maintaining lower inventory levels than a year ago.

Capital spending in the sector is “guarded,” the Fed team wrote, though there is some spending planned on renovations and IT.

“Seasonal hiring is mixed,” the report states. “Wages remain mostly steady, although one respondent reports wage cuts were successfully taken in order to prevent a cut in headcount. Selling prices are reportedly stable.”

• In manufacturing, the report states, “biopharmaceuticals companies indicate that their revenues continue to increase. Some equipment makers report that sales have picked up from their depressed levels in the first half of the year, while others say their business remains in a slump.”

The researchers wrote: “Respondents across a variety of industries note that sales to retailers, restaurants, and personal services establishments remain depressed.”

Materials costs and selling prices remained largely unchanged.

“Some firms that cut wages and salaries earlier in 2009 have recently restored pay to pre-cut levels or plan to do so in 2010,” the researchers wrote. “Most contacts say that they have held their domestic headcounts relatively steady in recent months, but biopharmaceutical firms continue to expand employment.”

They add: “Some seeking to fill specialized technical positions indicate they are disappointed with the quality of the applicant pool.”

“For the most part, capital spending remains subdued,” the report states. “Many note that they have adequate cash to fund both needed and discretionary investments.”

For the sector, it concludes: “Most manufacturers and related services providers are anticipating modest to moderate revenue increases over the coming six to 12 months.”

• Software and Information Technology Services could see some new hiring in 2010.

“Those firms that implemented wage freezes this year anticipate lifting them in 2010, with raises expected to be in the 3-percent to 5-percent range,” the report states.

It states: “Expectations range from gradual upticks over the course of 2010 to high levels of growth from the start of the year.

• “New England staffing contacts report upticks in activity through the end of the third quarter and

into the fourth,” the report states. “While year-over-year revenues are still down — from 10 percent to 60 percent — revenues are improving on a sequential basis, with increases reported in billing hours and number of assignments.”

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European consumer prices increased for the first time in seven months in November led by energy costs as the economy recovered from the worst slump since World War II.

Prices in the 16-nation euro region rose 0.6 percent from a year earlier after falling 0.1 percent in October, the European Union statistics office in Luxembourg said today. Economists had projected a gain of 0.4 percent, the median of 30 forecasts in a Bloomberg News survey showed.

Oil prices have risen 9 percent in the past three months as the economy has gathered strength. While the euro-area economy returned to growth in the third quarter, companies continue to cut costs and eliminate jobs to bolster earnings. The European Central Bank has signaled it sees “moderate” inflation and is in no rush to withdraw stimulus measures.

“The medium-term outlook for euro-zone inflation remains very subdued,” said Martin van Vliet, a senior economist at ING Bank in Amsterdam. ING anticipates the ECB will “adopt a very gradual approach to withdrawing its emergency liquidity measures, and to keep interest rates on hold for an extended period,” he said.

The euro was higher against the dollar after the inflation report, trading at $1.5050 at 10:52 a.m. in London, up 0.4 percent on the day. The yield on the German 10-year benchmark bond dropped 0.1 basis point to 3.15 percent.

Latest Forecasts

The ECB said on Nov. 12 that professional forecasters project European inflation will average 0.3 percent this year and 1.2 percent in 2010. The Frankfurt-based central bank, which aims to keep annual gains in consumer prices just below 2 percent, will release its latest forecasts for economic developments and inflation on Dec. 3.

For now, a recovery may remain too fragile for companies to start adding workers. European unemployment probably rose to 9.8 percent in October from 9.7 percent in the previous month, according to the median estimate in a Bloomberg survey of economists. The statistics office will release the unemployment report tomorrow at 11 a.m.

Remy Cointreau SA, France’s second-largest liquor company, on Nov. 25 forecast “modest” third-quarter sales after profit dropped 18 percent in the year’s first six months. Hugo Boss AG, Germany’s largest clothing maker, said earlier this month that it projects sales will remain “challenging” in the first half of 2010.

Coming Months

European households anticipate prices will decline further in coming months. A gauge of consumers’ price expectations over the next 12 months rose to minus 11 in November from minus 14 in the previous month, the European Commission said on Nov. 27.

“Economic activity is unlikely to be strong enough to generate significant inflationary pressures for some considerable time to come,” said Howard Archer, chief European economist at IHS Global Insight in London. “There remains a compelling case for the ECB to only very gradually withdraw its emergency liquidity measures.”

The ECB has cut borrowing costs to a record low, purchased covered bonds and injected billions of euros into markets to encourage lending. Policy makers meeting in Frankfurt on Dec. 3 may keep the key rate at 1 percent, a Bloomberg survey shows.

“We still don’t know to what extent the incipient global recovery has enough support on its own to allow for exceptional stimulus to be withdrawn without the danger of a relapse in activity,” ECB council member Miguel Angel Fernandez Ordonez said on Nov. 23. Inflation “although positive, will remain at moderate levels in the near future.”

The statistics office will release a breakdown of November inflation data on Dec. 16.

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Federal Reserve Chairman Ben Bernanke has a tough road ahead.

Very tough.

Bernanke, whose four-year term expires in January, is certain to face a contentious Senate banking panel at his confirmation hearing, set for Dec. 3. He is also defending against the sharpest attack on Federal Reserve powers ever.

The latest blow came last week, when a House panel overwhelmingly agreed to tack on to must-pass regulatory reform a proposal to dig into the Fed’s books, despite attempts by Rep. Barney Frank, D-Mass., to make it less intrusive.

Fed watchers say they expect that Bernanke will be confirmed for a second term as chairman. But he may get the fewest favorable votes on record - and end up at the helm of a vastly changed Federal Reserve.

"It’s going to wind up to be a very different institution," said American Enterprise Institute scholar Vincent Reinhart, a former director of the Fed’s division of monetary affairs. "At least on the Federal Reserve part, Congress is going to converge on something that’s tougher on the Fed. It’s a way to vent anger. And fundamentally people are angry."

While many credit Bernanke for saving the economy from falling into the next Great Depression, some in Congress blame the Fed - and Bernanke - for having failed to restrain the housing bubble. Others say he has gone too far in the financial system bailouts.

"We’re in a very populist era and that populism is manifesting itself in a dislike and distrust in large institutions," said Washington policy analyst Brian Gardner of investment firm Keefe Bruyette & Woods. "That means the Fed is one of those targets."

But the proposal to allow for congressional audits of the Fed is taking that anger one step further.

Since the 1980s, Fed antagonist Rep. Ron Paul, R-Texas, whose recently published book is entitled "End the Fed," has been trying to pass bills to curb Fed powers.

Paul won approval for his audit proposal from a key House committee last week.

"I agreed with him that some increase in openness about the Fed was important," Rep. Barney Frank, D-Mass., chairman of the Financial Services Committee, told CNNMoney.

The audit measure scares the Fed and many of its defenders.

Bernanke has said on several occasions that Paul’s proposal, which would allow members of Congress to have the Government Accountability Office audit Fed activities, is more than a simple "look at the book." He warns it would interfere with the central bank’s ability to carry out independent monetary policy.

Last week, Rep. Mel Watt, D-N.C., who offered an alternative version of the audit proposal that did not go as far, pleaded with his colleagues to moderate their anger.

"I recognize the Fed currently has no political capital. Everyone would like to beat up on the Fed and call them the bad guys," Watt said cash advance loan no fax. "If we make this decision on a political basis, I know what the result will be."

Politics won out. With 15 Democrats and all Republicans, the panel passed Paul’s more controversial audit.

Still, the measure may meet resistance in the Senate. Sen. Judd Gregg, R-N.H., released a statement Friday calling the audit amendment "a dangerous move … to pander to the populist anger" at the Fed.

"Make no mistake; this move to bring the Fed’s conduct of monetary policy under the control of Congress is a grave threat to our economy," Gregg said.

Tension on the Hill

Bernanke, 55, was first appointed to the top job in 2006 by former President George W. Bush, after serving as head of the Council of Economic Advisers.

Considered an expert on the Great Depression, Bernanke previously chaired the economics department at Princeton University. He also did a three-year stint on the Fed’s board of governors ending in 2005.

Congress and the Fed have always had a complicated relationship. The Fed is designed to be independent and non-political, although it regularly reports to Congress.

The financial crisis and its aftermath have made things awkward for Bernanke on Capitol Hill. Congress didn’t like that the Fed initially refused lawmakers’ requests to reveal which major financial firms received billions in bailout dollars through the rescue of AIG (AIG, Fortune 500). The Fed later released the information.

Earlier this spring, when public rage boiled over about bonuses paid to the same unit of AIG responsible for the company’s demise, lawmakers were irked to discover that the Fed had known for months about the bonuses.

For the past several months, a House oversight panel has been investigating whether the Fed, among other regulatory agencies, overstepped its authority in negotiating the Bank of America (BAC, Fortune 500) take over of Merrill Lynch.

Lawmakers have also accused the Fed of moving slowly on consumer protection. The Fed has lately stepped up in this area, crafting rules that crack down on credit card issuers and on banks’ practice of automatically enrolling customers in overdraft protection programs with hefty fees.

Meanwhile, behind the scenes, Bernanke continues to make efforts to be more accessible than past Fed chairmen, according to lawmakers and congressional aides. He regularly answers questions, by phone or in person, aides say.

While Fed watchers expect Bernanke to be confirmed, they also expect that the hearing could turn into one of the more politically explosive confirmations the Obama administration has faced.

"Voting against him is a way of showing your discomfort with the current system and a lot of them are uncomfortable with the current system," Reinhart said. 

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An Indian Ocean airline is planning the first regular flights for more than 800 passengers after buying a budget version of the Airbus A380, the world’s largest airliner, with economy seating throughout.

Reunion-based Air Austral confirmed an order for two superjumbos at the Dubai Air Show and said it would operate them between Paris and the French overseas department from 2014.

The deal will put the A380 into service as the industry’s largest people carrier and comes 80 years after the first wood and canvas plane touched down on the Indian Ocean island after making the 9,300 kilometer (5,800 mile) trip from Paris in 10 days.

The A380 entered service in 2007 and is designed to seat 525 people in ordinary three-class seating or 853 people when its two floors of cabins are filled with economy seats — giving it 8 times more capacity than Airbus’s smallest model, the A318.

So far, buyers of the plane have focused on luring premium passengers with facilities from beds and showers in first class to a stand-up bar, with total seating of around 500 people.

Air Austral said its low-cost version would seat 840 people.

“We are convinced that airplanes with good priced tickets will help explode traffic figures,” founder and president Gerard Etheve told Reuters after announcing the deal on Tuesday.

The economy end of the airline market has performed relatively better during the financial crisis, but revenues everywhere have been battered by recession this year no credit check payday loans.

The budget version of the A380 aims at tapping growth in China, India and demand from airlines flying aging Boeing 747s on high-density routes in markets like Japan, where rival Boeing dominates air travel.

Boeing’s 747-400D, a version of the jumbo jet built for the Japanese domestic market, carries up to 660 people in one class.

Etheve said the airline he founded in 1975 had paid less than the $660 million list price for two Airbus A380s.

The aircraft was tested for the ability to evacuate over 800 people in cabin emergency tests before entering service.

Air Austral’s planes will be powered by engines from the Engine Alliance, a joint venture between General Electric and Pratt & Whitney.

The A380 deal, reported by Reuters earlier this week, includes options for a further two A380s to either serve future Caribbean routes or more flights to La Reunion.

(Editing by Jon Loades-Carter)

(Reporting by John Irish, Writing by Tim Hepher, editing by Will Waterman and Jon Loades-Carter)

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The Federal Open Market Committee in its statement November 4 left unchanged the language that its ultra-low rates would be kept for "an extended period". By not even signaling an end to the current era of easy money, the central bank runs the risk of further inflating asset and commodity prices and sinking the dollar.

The Fed’s mandate is to keep inflation and employment stable. It’s hard to see how avoiding bubbles — and the crashes that accompany them — shouldn’t be central to its mission.

By the Full Employment and Balanced Growth Act of 1978, the Fed must maintain long-run growth, minimize inflation and maintain price stability. As the events of 2007-09 demonstrated, in order to achieve these goals it helps to avoid bubbles, the bursting of which makes prices unstable and causes unemployment.

Fed Chairman Alan Greenspan used to claim that it was impossible to recognize a bubble in progress, but that does not preclude the Fed’s responsibility to prevent them from developing.

Currently, stock prices are up 50% from their lows, oil prices are above $80 a barrel and the gold price has surged to close to $1,100 an ounce. Global monetary conditions have been exceptionally accommodative for over a year, with Chinese M2 money supply up 29.3% in the year to September, for example.

All of which suggests the substantial probability of a bubble developing, whether or not it can be detected in progress. The bursting of such a bubble, at a time of large global budget deficits, could prove highly destructive to economic growth and employment.

So the Fed’s lack of action — either in word or deed — seems incautious. It may believe that raising interest rates would abort the incipient U.S. economic recovery and that removing quantitative easing could cause a liquidity crisis given the huge U.S. budget deficit.

However, removing the language promising to keep interest rates low for an "extended period" could have no real economic effect, but would warn the markets that the Fed is aware of the potential bubble. Sometimes two words can make all the difference. 

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Gold investors are partying like it’s 1849.

The price of the yellow precious metal hit yet another all-time high Wednesday. At nearly $1,100 an ounce, you have to wonder just how much higher gold can go in the next few months. Is it $1200? $1300? Heck, is $1500 out of the question?

The Gold Rush of 2009 has been stunning to watch. Unlike some prior gold price spikes, the "good" news about gold’s recent rise is that it does not appear to be due to worries about an imminent meltdown of the financial system. Gold rallied in early 2008, for example, just as Bear Stearns was about to collapse.

Instead, gold has rallied recently as the dollar has weakened. Gold, along with other metals, such as silver and copper, and commodities, like oil, are benefiting from inflation fears.

Investors around the world have fled the dollar due to worries that the massive amounts of money pumped into the U.S. economy by Congress, the Treasury Department and the Federal Reserve will eventually lead to inflation.

Prior to this week though, many experts thought that the bump in gold had more to do with momentum traders taking advantage of these fears and simply riding a hot hand. But there is now growing evidence that real demand for gold is playing a role in the run as well.

Gold, unlike silver, copper and many other metals, does not have that much of an industrial use. But gold has often been considered the safest of safe havens when the dollar declines. As a hard, tangible asset of value, some investors buy gold as an alternative to the dollar.

The International Monetary Fund announced on Monday that it sold a huge chunk (200 metric tons) of gold to the central bank of India. Now there is chatter that other nations may also want to bulk up on gold.

"More central banks may look to move into gold and out of the dollar. There are some rumblings that it could be like a series of dominos now that India has taken the first step," said Darin Newsom, senior analyst with Televent DTN, a financial markets research firm based in Omaha.

Partly for this reason, Newsom said that it’s not out of the question for gold to go as high as about $1,400 an ounce in the next year or so.

Central banks don’t appear to be the only big gold buyers. Mining companies are doing so as well.

With gold prices continuing to rise, some producers have announced plans to stop hedging as much (if it all) against the possibility of falling prices. To do that, producers are buying back gold from what is known as their hedge books.

Barrick Gold (ABX) said Monday that it bought back 1 million ounces in October, while AngloGold Ashanti (AU) also announced that day that it intends to reduce the size of its hedge book by 800,000 ounces a year over the next five years quick payday loan. More gold producers may follow suit.

"Gold producers are going to need to close their hedge books because for every dollar that the price of gold goes up, they lose a lot of money," said David Beahm, vice president of economic research with Blanchard & Company Inc., a New Orleans-based investing firm that specializes in gold and other precious metals.

This demand, coupled with more worries about inflation, is likely to lead gold significantly higher, Beahm said. He thinks gold could hit $1,150 by the end of this year and $1,500 by the end of 2010.

"There is no doubt that there will be inflation. It’s not a matter of if but a matter of when. And when that happens gold will spike again," he said.

Now of course, it’s probably a good idea to still have a healthy dose of skepticism about how much higher gold can go. After all, it was only a year ago that oil spiked above $140 a barrel and many commodity bulls were predicting that crude would hit $200 before long. That didn’t happen.

If the economy is really in recovery mode, the Fed will eventually start raising interest rates from their current level of near zero. Once it does that, some of the inflation pressures should subside. That could take some of the air out of the gold run.

But there is also a good chance that gold could gain even more ground over the long haul even if the global economy gets back on track and the dollar strengthens again. It’s simple Economics 101.

Marshall Berol, co-manager of the Encompass fund, a mutual fund that is currently investing heavily in commodity-producing companies, said many investors don’t realize how much time and effort it takes to produce gold.

And instead of just watching gold trends from afar, Berol said he and his fellow co-manager like to visit projects of companies the fund owns to get a better sense of how supply is shaping up. They have a trip planned to Chile and Argentina next week, for example, to look at mining projects run by Exeter Resources (XRA), one of the fund’s holdings.

So even if demand doesn’t remain as robust as it is now, Berol thinks a low supply of gold should mean that prices will continue to move up.

"On a day-to-day basis, people talk about gold going up because of the dollar or oil," he said. "But the difficulties in finding significant new deposits is overlooked. Not only do you have to find it but determine how much there is and how you are going to get it out. Bringing new mines to production takes years."

Talkback: Are you buying gold? Selling gold? How much higher do you think gold prices could go? Share your comments below. 

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The U.S. government’s “pay czar” played a critical role in Citigroup’s decision to sell off its lucrative commodities trading business, Phibro, a source familiar with the matter said Friday.

The sale of the unit to Occidental Petroleum Corp relieves beleaguered Citigroup of a massive political headache– what to do with Phibro trader Andrew Hall and his paycheck of up to $100 million.

Hall has become the poster child of Wall Street’s top earners; and while pay czar Kenneth Feinberg would have limited power over his pay this year, he would undoubtedly have dramatically restructured Hall’s pay in future years.

Feinberg made it clear to Citigroup that Hall would not be able to keep earning his eye-popping paychecks, leaving Citigroup with the decision of selling off Phibro and parting with Hall or keeping Phibro but losing the unit’s moneymaker, according to the source.

The source spoke anonymously because the negotiations between Citigroup and the pay czar have not been made public.

Citigroup’s decision to offload both Phibro, and so Hall, demonstrates the extent of Feinberg’s power over the seven firms that have received “exceptional assistance” from the government.

The other firms are Bank of America Corp, American International Group Inc, Chrysler Group LLC, General Motors Co, Chrysler Financial and GMAC.

Alan Johnson, a Wall Street compensation consultant, said the deal helped Citigroup unload what was becoming “an embarrassment on line pay day loans.”

Occidental did not disclose the terms of the deal but said that its net investment would be about $250 million and that it was paying roughly the net asset value of the business.

Citigroup has received multiple bailouts from the government, including $45 billion from the U.S. Treasury’s Troubled Asset Relief Program.

POWER PLAY

Feinberg is in the thick of a 60-day intensive review of the pay contracts for the top 25 earners at the seven firms, in which he has the power to approve or renegotiate their compensation packages.

Citigroup’s announcement that it is shedding Phibro comes just three weeks before Feinberg’s rulings are due.

Feinberg did not have explicit authority to approve or reject Hall’s pay for this year because the contract was signed before a cut-off date of February 11, 2009.

But in a demonstration of the reach of Feinberg’s powers, he would still have a say over Hall’s future pay. He would have likely forced much more of it to be in equity that vested over a longer time horizon, crimping Hall’s ability to take home cash. 

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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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