ATLANTA, (Reuters) — The state of Mississippi settled an anti-trust suit with Microsoft for 100 million Thursday and said businesses, individuals, schools and local government were eligible for a share of the money. “They (Microsoft) were over-charging customers and creating a monopoly …. Anyone who made a purchase from Jan 1, 1996, to today is eligible for a share of the money,” said Jan Schaefer, public information officer for the Mississippi attorney general.
Source:CNN
NEW YORK: Ah, summer: Time to enjoy a quiet vacation. Kick back with a good book. Walk on the beach.Not Douglas Elmendorf. He’ll spend the next two months suffering voodoo-eyes from powerful people on Capitol Hill.Elmendorf is director of the Congressional Budget Office, the ordinarily low-profile federal agency that will estimate how much money health reform will cost or save.The CBO’s estimates, the first set of which are due next week, carry a lot of weight because Congress uses them in making legislative decisions. In an age of trillion-dollar budget deficits, the numbers will carry even more weight than usual.”Strictly speaking, the CBO advises the budget committees, and the committees can override what CBO recommends. But they rarely do,” said Robert Reischauer, who headed the CBO during the infamous health care debate during the Clinton administration.That’s because CBO is known for providing objective analysis in a partisan town.That doesn’t mean there won’t be serious griping and spinning on the part of lawmakers, lobbyists or the White House budget office, which makes its own estimates.During the debate over the Clinton plan in the early 1990s, the Washington Post called Reischauer “the most powerful umpire in Washington.”Reischauer, who is now president of the Urban Institute, believed the Clinton plan would have cost more than the White House estimated. And he also would have accounted for it in such a way that it would have expanded government spending as a percentage of GDP. That was exactly what the White House didn’t want since government expansion was catnip for Republican opponents of the plan.Spiral in health costsElmendorf in some ways is under even greater pressure than Reischauer, under whom he worked during the Clinton era.0:00
/2:18Boosting health reformThe CBO today is scoring proposals in the face of a federal balance sheet with eye-popping deficits that health care reform aims to curb. The agency estimates that the amount of money the government, businesses and individuals spend on health care this year will be about 18% of GDP. It’s on track to top 20% by 2018. And federal spending on Medicare and Medicaid will have doubled by 2019 from where it is today.By 2035, the Government Accountability Office estimates that all federal revenue will be consumed by Medicare, Medicaid and interest on the public debt.When Reischauer headed the CBO, “the health care challenge was ‘Don’t make the [budget] situation worse.’ Now, it’s ‘Do health care reform so we can make the budget situation better,’ ” he said.Indeed, he added, “some of the biggest pressures [Elmendorf] will face are being asserted by advocates of health reform, not opponents. They desperately want reform to succeed and their proposals to pay for it to be sufficient to cover its costs.”More art than scienceFiguring out whether they can is a job the CBO will perform with more health analysts on board and more data than was at its disposal in 1994. Despite that, the task at hand is difficult because the agency will be forecasting the effects on individuals and businesses of unprecedented changes in the health care system.”There are a lot of proposals that we think should reduce health care costs over time. The evidence is uncertain. The impact will depend very much on details yet to be specified, and on our ability to implement them in a smooth, efficient way,” Reischauer said.Elmendorf told the National Journal his goal is to find the middle ground — neither too pessimistic nor too optimistic about how much a proposal will cost or raise.”Our job is to be in the middle of the distribution of possible outcomes,” he said.In addition, the agency’s preliminary estimates may well have some holes in them if lawmakers don’t supply sufficient information about a measure for the CBO to score. The biggest case in point: the proposal to add a government-funded insurance plan to compete alongside private insurers. So far, its supporters haven’t specified a definitive framework for one in a bill.Nevertheless, Democrats are still aiming to have a bipartisan health reform bill voted through both chambers by August and President Obama has said he wants a bill on his desk by October.Whether that’s realistic or not is anyone’s guess. But one thing is certain: CBO will be running fast between now and then to keep up with every twist and turn in the legislation along the way.
Source:CNN
NEW YORK: Yahoo on Thursday announced it has appointed longtime General Electric veteran Tim Morse as its new chief financial officer.Morse currently serves as the CFO of semiconductor company Altera Corp. (ALTR), a position he’s held since January 2007. Prior to Altera, Morse was at GE (GE, Fortune 500) for 15 years, including a stint as the CFO for the conglomerate’s plastics division.”Yahoo is an amazing brand with a unique combination of assets, and I am extremely excited to be joining a finance team with a deep commitment to financial excellence and fiscal discipline,” Morse said in a statement. Morse’s appointment is Carol Bartz’s first major executive hire after taking over as Yahoo’s chief executive in January. Bartz has said that she aims to make the company’s management structure more efficient as she tries to move the once-dominant tech company back to the industry’s vanguard. Yahoo has lost significant online ad market share to Google (GOOG, Fortune 500) and Microsoft (MSFT, Fortune 500).Bartz said the beginning of her tenure that she would be bringing in her own CFO.”Tim has a proven ability to translate strategy into structure, process, and execution, and I am delighted that he will be joining my leadership team to help drive Yahoo’s growth,” Bartz said in a statement. “With his passion for operational finance, global experience, and expertise simplifying complex organizations and managing growth, Tim is a natural fit for Yahoo.” Morse will start at Yahoo (YHOO, Fortune 500) on June 17 will become the company’s CFO on July 1. He replaces Blake Jorgensen, who has been at Yahoo since June 2007, when founder Jerry Yang took over again as CEO.
Source:CNN
NEW YORK (Fortune) — Ally Bank, the lending arm of struggling auto financier GMAC, has cut the rates it offers depositors after a friendly chat with regulators. The Utah-based bank trimmed the rate it offers on a one-year certificate of deposit to 2.49% from 2.8% in the past week. The move came after the Federal Deposit Insurance Corp. sent Ally a letter reminding it of a commitment it made last month to reduce the cost of gathering deposits. The bank’s practice of offering above-market rates with the aid of federal funding — GMAC has taken in some 21 billion in government capital and loan guarantees, and will soon list the government as its biggest shareholder — recently drew the ire of the chief bank trade group, the American Bankers Association. Ally Bank’s total deposits rose 46% from a year ago in the first quarter, to 22.5 billion, as the bank offered certificate of deposit rates well above the national average. The ABA urged the FDIC to crack down on what it deemed these “risky” deposit-gathering practices. The bankers questioned Ally’s financial health, noting that it lost 133 million in the first quarter, while arguing that Ally’s efforts to draw deposits endanger the health of the industry-funded FDIC deposit insurance fund. Ally rejected those claims, claiming in a letter to the ABA that it was “better capitalized than many of your members.” A spokeswoman for GMAC says the firm — until 2006 a unit of General Motors (GMGMQ), and still the biggest provider of financing to GM and Chrysler customers — has in its dealer network “an asset generation platform that enables us to put deposits to work profitably.”Ally’s deposit-gathering and the surge of federal funding over the past six months are helping to keep GMAC afloat as it struggles with a souring mortgage portfolio and plunging car sales. 0:00
/1:58FDIC wants cushionStill, the FDIC’s letter to Ally suggests the agency shares the bankers’ concerns about the deposit fund, which has fallen below its statutory minimum balance under the weight of five dozen bank failures since the start of 2008. Last month, the FDIC issued rules capping the rates troubled banks can pay on deposits — an edict that didn’t apply to Ally Bank because it is well capitalized.The letter requires Ally to report to the agency on its deposit rates and how they compare with other banks whenever it seeks to tap funds under a federal debt guarantee program. “The FDIC is saying, show us what you’re doing,” ABA spokesman Wayne Abernathy said of the FDIC letter. “There’s taxpayer money at risk here.” The FDIC’s Temporary Liquidity Guarantee Program allows financial institutions to borrow, with FDIC backing, at near-Treasury rates in exchange for a fee. The FDIC approved GMAC last month to borrow 7.4 billion under the program. The company sold 4.5 billion of FDIC-backed bonds last week. But before GMAC sells another round of bonds under TLGP, it will have to get the FDIC’s prior written approval, the letter said. While that requirement isn’t unheard of, it isn’t a duty that all TLGP borrowers share. Even with the recent reductions, Ally’s rates are still well above the norm. The daily overnight average for a one-year CD Thursday was 2.07%, according to Bankrate.com. “We monitor the market and adjust rates, as appropriate,” the GMAC spokeswoman said. “Ally Bank intends to continue to offer customers rates that are among the most competitive.” But the FDIC’s letter has the bankers breathing easier about the risks being taken on at Ally. “The FDIC is putting them on a pretty short tether,” said Abernathy.
Source:CNN
WASHINGTON (Reuters) — The U.S. Senate Thursday backed a plan giving the Food and Drug Administration power to regulate cigarettes and other tobacco products, allowing the agency to curb advertisements, require stronger package warnings and inspect manufacturers.Supporters said the bill, which passed in a bipartisan 79-17 vote, would help rein in the tobacco industry and curb smoking, especially among teenagers and children.Hundreds of health advocacy groups lobbied for the measure, which has divided the tobacco industry.A similar measure has already passed the House. House Speaker Nancy Pelosi said earlier on Thursday she wanted to look closely at the Senate’s bill. “But from what I have seen so far, I believe it will be possible for us to accept their bill and send it right on to the president.”President Barack Obama, who has discussed his own struggles to quit smoking, is expected to sign the bill into law.Under the Senate plan, industry user fees would fund a new FDA tobacco division to inspect manufacturers as well as set certain cigarette standards. The bill also restricts vending machine sales and curbs advertising targeting youth.
Source:CNN
NEW YORK: In the auto business, timing really is everything. Even as Chrysler embarks on its path to resurgence, its short-term survival is threatened by rising gas prices and a product line still dominated by trucks and SUVs.Fiat of Italy, stands ready to assist with its fuel-efficient small cars. But those won’t be ready for at least a year.That means Chrysler has to hope that gas prices don’t spike this summer. “If gas prices continue to go up, the challenge for Chrysler becomes greater and greater,” said Tom Libby, president of the Society of Automotive Analysts.Chrysler’s best stuff is still its biggest stuff. Its most well-regarded vehicles are the new Dodge Ram pick-up, the Dodge Challenger muscle car and the Chrysler 300C, a V8-powered sedan — not the type of vehicles consumers flock to when gas prices are high.This problem is not specific to Chrysler. All domestic manufacturers face challenges when gas prices go up. Import carmakers have been focused on selling small cars more than the SUV-loving U.S. carmakers. When consumers shift to smaller cars that command lower prices and deliver slimmer profits American automakers struggle to compete. Last summer, as gas prices rose toward 4 a gallon, sales of the Chrysler 300 dropped more than 40% from the year before. Sales of the Dodge Durango and Chrysler Aspen full-size SUVs also plummeted. Chrysler eventually took the big SUVs out of production altogether as inventories backed up.0:00
/3:24Clunker bill motors onSales of GM (GMGMQ) and Ford’s (F, Fortune 500) big trucks dropped, too, but at least they had some decent small, fuel efficient cars to offer shoppers. Sales of the Ford Focus and Chevrolet Cobalt took off.Chrysler’s smaller cars couldn’t stand up to the competition: Sales of Chrysler’s Dodge Caliber, for example, didn’t budge.”GM has more products in the pipeline and, right now, they have more competitive products in key segments,” said Libby.Since last year, GM’s Chevrolet Malibu mid-size sedan has gained market share against its foreign competitors in spite of the crisis gripping the automaker and the industry. Ford has made even more headway with its new Fusion sedan, more than doubling its share of the market since the beginning of 2008.Chrysler’s Sebring sedan, meanwhile, has gone from about 5.5% of the mid-size car market at the start of 2008 to just 1.4% today.Besides mid-size sedans and small cars, small crossover SUVs have become a key segment as consumers look to save gas while still getting SUV functionality. Ford already has the popular Ford Escape and Mercury Mariner in that segment, which also includes the Honda CR-V and Toyota Rav4.GM will introduce three new small crossover vehicles in the next few weeks: The redesigned Chevrolet Equinox, the GMC Terrain and a new Cadillac SRX.Meanwhile, Chrysler offers the Dodge Nitro. While it may look like a crossover SUV, it’s actually a truck-based SUV based on the Jeep Liberty. It rides rougher than a real crossover SUV and its fuel economy is 25% worse than that of a V6-powered Ford Escape. Also, the Nitro isn’t even available with a 4-cylinder engine, which Ford’s Escape offers.”If the Nitro were a good small SUV, or if they had a family sedan that was anywhere close to the Malibu, they wouldn’t be where they are today,” said Jake Fisher, a senior automotive engineer for Consumer Reports magazine.Chrysler’s recently redesigned Dodge Ram truck is very good, he said, but that just continues Chrysler’s traditional reliance on big trucks.Chrysler does have the Journey, a mid-size crossover SUV with an available third row of seats. While it doesn’t match up to what many competitors offer, Fisher said, the Journey is decent. It gives the carmaker something with which to compete in that segment.He contrasts that to the small Caliber which is essentially a small SUV playing the role of a compact car. In fact, Chrysler markets the nearly identical Jeep Compass as a small crossover SUV.”Since Chrysler lost the Neon and went with the Caliber, they essentially don’t have a small car at all,” he said.Fortunately for Chrysler, the current rise in gas prices doesn’t signal a run-up like last summer’s unprecedented rise, said Jeff Schuster, executive director of forecasting for J.D. Power and Associates.”If you look historically at the summer rise, the levels we’re at right now are very similar to that,” he said.Gas prices will start creating a real problem for Chrysler Group if they begin approaching the 4.00 a gallon mark, Schuster said. That’s what started a panic shift in the market last year as consumers began a sudden rush to small cars.Chrysler admits that it’s hoping gas prices don’t spike too high.”None of us wants to see 4.50 a gallon gas,” Chrysler spokesman Scott Brown said. Any carmaker would say the same thing, though, he noted.In the meantime, Brown said, having the company’s best product be a large pick-up isn’t such a bad thing. Americans still like big trucks and they remain profitable vehicles. “If we had to have one thing to hang our hats on, I think we’d want it to be the Ram,” he said.
Source:CNN
STOCKHOLM (Reuters) — Swedish luxury carmaker Koenigsegg and Norwegian investors have struck a preliminary deal to buy General Motors’ Swedish unit Saab, a source familiar with the matter said on Thursday.The source told Reuters a letter of intent had been signed between the parties and said the financing of the deal had been agreed, leaving only minor issues to be resolved.”The deal is there now and a few minor details remain,” said the source, who declined to be identified.Saab spokesman Eric Geers declined to comment on the report, saying the carmarker was “in the final stages of negotiations” and was still targeting a sale by early July.Swedish television channel SVT, citing unnamed sources, reported the deal had been struck after intensive negotiations in Zurich, Switzerland. “Final negotiations about details on the deal will go on in the next months,” SVT said on its Web site.Saab Automobile, which was put up for sale by its now bankrupt U.S. parent earlier this year, had been in talks with two or three bidders in the past weeks with Deutsche Bank (AG, Fortune 500) advising in the sales process.The brand, whose sales comprised just over 1% of GM’s total sales volume last year, has been hit hard by the economic downturn that has savaged sales on both sides of the Atlantic.Saab, one of Sweden’s best-known brands, has said it needs 1 billion of financing to help it overhaul production and launch new models while absorbing expected losses of about 3 billion crowns (370 million) this year.Luxury carsKoenigsegg, founded by Christian von Koenigsegg in 2004, makes luxury sportscars. The company’s headquarters is located in Angelholm, in southern Sweden, which currently houses 45 full-time employees, according to its Web site.The tiny vehicle maker, part-owned by Norwegian entrepreneur Bard Eker through his holding company Eker Group AS, had sales of 106 million crowns (US13.95 million) last year.The Swedish government said on Thursday it had authorized the debt office to begin talks with Saab on state loan guarantees. “The decision means that the Debt Office can initiate negotiations with Saab, the EIB and the coming owner, once one is revealed, about terms for state guarantees,” the government said in a statement.The guarantees are needed for Saab to receive loans from the European Investment Bank to finance environmentally friendly vehicles.Sweden has until now said it was not prepared to consider loan guarantees for Saab unless the carmaker finds a private investor to underwrite its business plan.
Source:CNN
NEW YORK: Gas prices have been on a tear, with the national average climbing more than 28% since late April, motorist group AAA said Thursday. The national average price for a gallon of gasoline now stands at 2.632, up from the previous day’s price of 2.627, according to a daily survey by AAA. Gas prices have risen daily since April 29, and are nearly 1 higher since the beginning of 2009. However, prices are about 1.50 cheaper than they were at this time last year. California had the highest gas prices in the nation. Drivers in the golden state pay an average of 2.945 a gallon. The state with the lowest price was South Carolina, where a gallon of gas averages 2.416.The run up comes on the back of a surge in the price of crude oil, which is the main ingredient in gasoline. Oil prices have more than doubled since the end of last year.At the same time, gas prices typically rise in the summer months, which is traditionally the peak driving season. While demand for gas remains relatively weak because of the nation’s economic woes, there are some signs that Americans are still willing to fill up their tanks. Government figures showed Wednesday that demand for gas over the most recent 4-week period returned to positive territory. This is the first time this year that demand rose versus the same period in ‘08.Another government report showed Thursday that retail sales rose in May, due in large part to higher gas prices and purchases of automobiles.
Source:CNN
NEW YORK: Home mortgage rates jumped in the most recent week, pulled higher by skyrocketing Treasury yields.The average 30-year fixed rate soared to 5.95% from 5.45% last week, according to a weekly national survey from Bankrate.com.The 30-year rate moves in tandem with the benchmark 10-year bond, which has increased steadily to hover around 4% recently compared to 2% just six months ago. Investors worry that this has re-ignited inflation fears and threaten the potential for economic recovery. In an effort to cap mortgage rates, the Federal Reserve in March revealed a campaign to buy back 300 billion in Treasurys in hopes that it will spark demand and keep yields — and therefore, mortgage rates — in check. Mortgage rates fell as refinancings abounded. But those benefits seem to have worn off, as rates have been on a tear in recent weeks.Although mortgage rates continue to rise, they remain much lower than last year, when the average 30-year fixed mortgage rate was 6.48%.Adjustable-rate mortgages: Those rising rates have made it difficult for many homeowners to refinance, but ARMs are an option, the Bankrate report noted. Adjustable-rate mortgages were higher last week, with the average 1-year ARM rising to 5.16% and the 5-year ARM jumping to 5.49%.”Bankers say ARMs got a bad rap in the mortgage debacle,” the report continued, adding that the riskiest loans in the housing bubble –”subprime, low down payment, interest-only, negative amortizing and stated income” — tended to be adjustable-rate mortgages.But the meltdown happened “because those loan features were layered on top of ARMs,” the report said, meaning that it was not the adjustable rates that caused people to default. Rather, home buyers put no money down and “exaggerated their earnings when they applied for stated-income loans.”A few months ago, only about 1% of mortgage applications were for ARMs. Last week, it was 3.4%, the report added.Other rates: The average 15-year fixed rate mortgage jumped to 5.37% from 5.06% the week prior.The average jumbo 30-year fixed rate ticked up to 6.96% from 6.68%. Loans are considered “jumbo” when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). They carry higher rates than smaller “conforming” loans, which do have guarantees.
Source:CNN
NEW YORK: Detroit’s housing market is heating up. The city’s median home price has fallen 32% to 77,700, and these cheap houses have got sales jumping, with volume up 23% in April compared with April 2008.”The good news is that sales are up all across the board,” said John North, Coldwell Banker Schweitzer in Birmingham, Mich. “And [inventories] are down, another good sign.”But with all of the layoffs, plant closures and other auto woes, who is buying? Investors – some of whom are snapping up five and 10 houses at a time.”I have investors from all over the country and the world,” said Jeremy Burgess, co-founder of Urban Detroit Wholesalers, which buys undervalued homes to rehab and rent or to sell to other investors. “One Lithuanian woman just bought a second house.”"Most of the local investors are out of money,” added Mike Shannon, who specializes in Detroit foreclosures and has clients from New Zealand, Australia, England and other places.Recently a Californian purchased 179 properties, one at a time, most for under 10,000. Another has purchased six Detroit properties since September and hopes to begin buying five a month. “The capital needed to get in the Detroit market is so low,” said Jason Imbruglio, a 29-year-old from Tacoma, Wash., who has bought three homes so far. 0:00
/2:47Mortgage rates tick back upTwo years ago, he paid 12,000 for a two-family house with two bedrooms and a bath in each unit. He spent 18,000 repairing it for a total cost of about 30,000. Imbruglio has keep tenants in both apartments most of the time and charges 1,100 a month. After taking into account the 10% he pays a management company, plus utilities, property taxes and maintenance costs, he says he is making double-digit profits.Plentiful opportunitiesThere is no secret to finding these properties. Burgess said he buys through regular sellers and other investors and off the local multiple listing service. Many are buying in buying in bulk, snapping up properties bundled together and sold by lenders. However, that is becoming less lucrative, according to Burgess. “The quality of the bulk stuff is significantly lower than it was a year ago,” he said. “Back them 70% of the houses bought in bulk were nice. Now, 80% or 90% are not.”What he focuses on when selecting properties is the neighborhood. He looks to own in some of the city’s stable, blue-collar communities with high homeownership rates, such as Warrendale, University District and Grandmont.”In the good areas, rents are actually going up,” said Burgess. “I just had a house rent for 950 that I was thinking I would get 850 for.”The bad areas, ones with vacant homes and foreclosed properties, such as the Brightmoor district, are no-go zones for Burgess. Rents and values are low in those communities — and falling.”I wouldn’t touch anything, not even for a dollar, in those areas,” he said.Making it workIn general, Shannon said investors are “looking for long-term investment of five to 10 years. They sock away some profits [on rentals] and wait for prices to appreciate.”To make sure they have a steady rent roll, some investors are getting their properties qualified to be Section 8 housing, which is the housing voucher program run by the federal government to help low-income families. Under this program, some tenants can rent units in private housing with the government picking up part or all of the cost, which must be “fair-market rent.” “You put in a Section 8 tenant and collect 850 to 1,200 a month on a three-bedroom home,” said Shannon, who specializes in foreclosure properties. Another option is to work with local nonprofits to sell rehabbed units to credit-damaged – but worthy – buyers. These organizations identify families and offer them credit-repair counseling and assistance finding an affordable financing so that they can buy the investors’ rehabbed properties. “We shifted away from speculative investing into restoring affordable housing,” said investor David Butler, who buys through Burgess. The deals are often structured like a lease-option contract, with the tenant/buyers paying rent on the property plus a premium charge that is applied to the future sale price. They buyers complete the purchases when they get affordable mortgage loans. To keep costs down, Butler looks to pay no more than 45,000 for a property, including repairs and any back taxes. When finished these homes typically appraise for about 80,000. Because his company partners with a nonprofit, it accepts narrower margins, about 12%. Normally, buy-rehab-flip investors prefer margins of 35% or more.
Source:CNN