Archive for July 15th, 2009

WASHINGTON: A new government investigative panel charged with getting to the bottom of what caused the financial crisis was assembled on Wednesday, and its chairman vowed to begin work soon.Congressional leaders named 10 members of the Financial Crisis Inquiry Commission, which has the power to hold hearings and collect records examining everything from fraud to executive pay during the collapse of the financial system. It will start meeting next month.Leading the commission will be former California State Treasurer Phil Angelides, a Democrat who warned about financial sector abuses back in 2002 but lost a 2006 gubernatorial bid. The second-in-command is Bill Thomas, a retired California Republican congressman described as strong-willed during his tenure running the powerful Ways and Means Committee.”Millions of Americans have lost their homes and hard-earned pensions, and it’s our responsibility to make sure the facts are known so this is less likely in the future,” Angelides said.The panel joins a growing list of financial crisis watchdogs, each responsible for keeping an eye out for the taxpayer in different ways that often overlap. The Special Inspector General for the bailout and the Congressional Oversight Panel for the bailout and even the New York Attorney General have all pledged to stamp out fraud as they look at different parts of the financial crisis.The new commission is the only group charged, by law, with looking at financial firms that failed and those that survived due to taxpayer infusions, Angelides said.Will it have influence?”We’re unique in that we’re a national commission comprised of Americans with a broad range of experiences, and we’ve been asked to take a look at the big picture,” Angelides said.Lawmakers say that the commission was modeled after the Pecora Commission, a panel that examined the 1929 Wall Street crash and other events leading to the Great Depression. The Pecora panel’s findings led to an overhaul of federal banking laws including the creation of the Glass-Steagall Act of 1933. Glass-Steagall divided investment banking from government-insured commercial banking — a wall that was torn down in the 1990s.But critics note that the commission’s impact may be blunted by the pace by which the White House and lawmakers are already working to pass bills aimed at overhauling the regulatory system. In fact, federal law requires a final commission report by December 2010. Observers expect regulatory reform to be mostly completed by the mid-term elections in 2010.”Like most great commissions in this country’s history, this one will be great at getting headlines, but the odds of it producing any kind of meaningful change are slim to none,” said Jaret Seiberg, a policy analyst with Concept Capital’s Washington Research Group. “The legislative process has already moved beyond the need for this commission.”The financial crisis panel has also been compared to the commission that investigated the Sept. 11, 2001, terror attacks. the 9/11 commission’s final report found that federal agencies missed signs of the impending terrorist attacks.But unlike the 9/11 panel, which was made up of equal numbers of Democrats and Republicans, the financial crisis commission is heavier on Democrats by 6-to-4. Republicans have some power on the panel, which can’t subpoena testimony and records without the approval of at least one member appointed by each political party.Angelides pledged that politics would not interfere with the panel’s work.”Whether you’re a Republican, Democrat or independent, that meant nothing on whether you lost your home to foreclosure or your life savings in this crisis,” he said. “I’m hopeful that this inquiry will transcend partisan politics.”The commission was created as part of massive bill Congress passed in May that also gave the Federal Deposit Insurance Corp. power to borrow more and directed more funding toward fraud-fighting agencies.Big namesOne possible challenge for the panel: It’s unclear how much information will come from the White House. When President Obama signed the bill he added what’s called a “signing statement,” pointing out that the executive branch doesn’t plan to give up any of its “constitutional privilege” to keep its records sealed.The panel includes other big names including Bob Graham, a former Democratic senator from Florida, and Brooksley Born, former chairman of the Commodities Futures Trading Commission. Born is best known for her unheeded warning about the dangers of unregulated complex financial products like derivatives.0:00
/5:26′Effective’ regulation, not ‘more’Another Democratic member appointed is John W. Thompson, board chairman of security software Symantec Corp. (SYMC, Fortune 500) who President Obama considered a candidate for Commerce Secretary. The panel also includes two major contributors to Democrats in the last election cycle: Heather Murren, a retired Merrill Lynch director, and Byron Georgiou, a Las Vegas attorney.Members appointed by Republicans include: Douglas Holtz-Eakin of DHE Consulting, a policy chief for Sen. John McCain’s 2008 presidential campaign; Peter Wallison of the conservative think tank the American Enterprise Institute; and Keith Hennessey, an economic adviser to former President George W. Bush.

Source:CNN

NEW YORK (Fortune) — The government appears poised to come to the aid of struggling small business lender CIT Group. A federal bailout plan could be in place within 24 hours, Reuters reported Wednesday, citing a source familiar with the government’s thinking. The White House said President Obama has been briefed on CIT but referred questions to the Treasury Department, which didn’t comment. CIT didn’t immediately return an email seeking comment. Trading of CIT’s shares was halted late Wednesday afternoon. The rescue talk comes after CIT (CIT, Fortune 500), struggling with souring loans and an inability to raise money in the markets, spent days trying to persuade policymakers to lend the company a hand. Strapped for cash and hit by a series of credit downgrades, the company reportedly hired lawyers last week to prepare for a bankruptcy filing. CIT shares have dropped more than 90% from their 2007 highs as the company’s business has gone into free fall.The crisis is forcing top officials in Washington to make yet another difficult political decision. Many legislators and taxpayers have voiced their anger about the numerous bailouts that have taken place during the two-year-old financial crisis. CIT, with around 65 billion of managed loans, is just a fraction of the size of the financial titans — ranging from Lehman Brothers and Washington Mutual to AIG (AIG, Fortune 500) and Fannie Mae (FNM, Fortune 500) — that toppled last year. By comparison, the systemic fallout from a potential CIT failure appears minor. But no one knows exactly how hard the firm’s failure might hit the struggling economy. And with giant banks such as Goldman Sachs (GS, Fortune 500) having benefited over the past year from hundreds of billions of dollars of federal assistance, policymakers could find it untenable to force a self-proclaimed bridge to Main Street into bankruptcy. “We believe not supporting the lender could carry with it the stigma that the government was more willing to bail out Wall Street than small businesses,” analysts at research firm CreditSights wrote Wednesday. CIT has sought permission to borrow money under the Federal Deposit Insurance Corp.’s debt guarantee program, but the agency — already facing surging bank failures — hasn’t been eager to add to the burden on its deposit insurance fund. In part, that’s because CIT has always focused on less creditworthy borrowers — and it has the writedown numbers to show for it. Loan charge-offs — representing loans written off as uncollectible — tripled from a year ago to 313 million in the first quarter and are likely to keep climbing. “We expect non-accrual loans and charge-off levels to remain at elevated levels through the remainder of 2009,” the company said in its first-quarter report filed with regulators. Under CEO Jeffrey Peek, who took over in 2003 after stints at Merrill Lynch and Credit Suisse, CIT expanded beyond its traditional asset-backed lending business into hot areas such as home lending. The company pulled out of that business in 2007, but has been hit by rising loan nonpayments in its corporate finance segment, which includes small business lending. CIT has long borrowed in the credit markets to fund its lending activities, but since the credit markets froze in 2007 the firm has had to pull back on its own lending. 0:00
/4:22Bailout culture clashThe firm’s managed loan portfolio shrank 10% over the past year, according to Barclays Capital data. CreditSights estimates CIT lending supports less than 1% of the U.S. manufacturing and retail business. Even so, the memory of Lehman-related shock waves may make a rescue inevitable. “The government appears to be becoming increasingly sensitive to the risks to small businesses if CIT is unable to lend,” Barclays analyst Bruce Harting, who was working for Lehman at the time of its collapse, wrote in a note to clients Wednesday. That said, the “case for government action seems to outweigh the risks of inaction.”

Source:CNN

(breakingviews.com) — Credit rating firms may finally be forced to eat their own cooking.The 173 billion California Public Employees’ Retirement System is suing the top three raters over some 1 billion in losses it incurred when three top-rated structured investment vehicles collapsed. Raters have prevailed against similar legal challenges before. But Calpers might now have them over a barrel.The pension fund says Moody’s, Fitch Ratings and Standard & Poor’s should share the blame for losses in part because they helped structure the SIVs before rating them – something Moody’s, at least, denies.In fact, Calpers says, the raters were in deeper than that. They not only rated the SIVs themselves, but they rated most of the asset- and mortgage-backed securities that the vehicles purchased.To the extent they provided guidance on what banks needed to do to obtain crucial triple-A ratings, that could be the raters’ undoing. They aren’t commenting on any specifics, but Calpers alleges that SIV rating fees, which it says ranged from 300,000 to 1 million per deal, were contingent on the successful sale of the SIV securities. That, Calpers says, provided a motive for the raters to bend over backwards to ensure the SIVs would get their top ratings.More importantly, if they assisted in structuring the SIVs, that undermines the raters’ assertion that their ratings constitute opinions worthy of the same First Amendment protections afforded journalists.Fitch’s then-general counsel told lawmakers investigating the Enron debacle that a rating was “the world’s shortest editorial”. That pretense doesn’t hold up when you’re commenting on something you designed yourself.Calpers also complains that it didn’t receive enough information from the SIVs or the rating agencies to adequately understand the vehicles. That’s where the raters might be on safer ground. After all, Calpers didn’t have to buy the SIVs’ debt, and should not have done so until it was satisfied.Such a nuance could easily be lost in arguments before a jury in California, a state on the verge of insolvency. And if the case did go against the raters and cost them big money, scores of other disgruntled investors could try their luck, too.That in turn could open a whole new can of worms by putting the future of the ratings firms in doubt.

Source:CNN

SAN FRANCISCO (Reuters) — Wal-Mart Stores Inc., the world’s biggest retailer, will announce Thursday the development of an index that will be used to measure the social and environmental impact of the products it sells in its discount stores.The information could be used to one day provide consumers a label assessing how “green” or “sustainable” a product is.”In 2005, Wal-Mart set an aspirational goal to sell products that sustain our resources and environment,” states Matt Kistler, Wal-Mart’s senior vice president of sustainability, on a Web site discussing the index.”While important strides have been made in this area, we believe that to drive Wal-Mart’s supply chain towards sustainable business practices we need a way to measure each of our current and potential products against this goal.”Wal-Mart (WMT, Fortune 500) has reached out to professors and environmental groups for help in developing the index. The retailer said it will be used to evaluate its 60,000 suppliers and determine which merchandise winds up on its store shelves.0:00
/2:29Paris: Green is fashionableCompany spokesman David Tovar said the retailer was not providing any comment on the event being held Thursday.Wal-Mart has laid out the far-reaching goals of one day using only renewable energy and creating zero waste.Since launching its environmental push in 2005 under former CEO Lee Scott, it has challenged the thousands of manufacturers that make the products its sells to cut waste, use renewable resources and produce products that can be easily recycled.Because of its status as the world’s largest retailer, Wal-Mart is considered one of the few companies with enough heft to force its suppliers to change. Those that do not could face the prospect of losing Wal-Mart’s business.In October, Wal-Mart held a summit in China where it said it would enforce stricter quality and environmental standards for suppliers in that country, even if that could pressure margins and result in higher prices.Wal-Mart shares were up 21 cents, or 0.5%, at 48.35 in afternoon trade on the New York Stock Exchange.

Source:CNN

NEW YORK: AIG suffered another setback in its effort to pay back the government this week, again calling into question whether the troubled insurer will ever be able to make good on the billions of dollars it owes U.S. taxpayers. A large part of the company’s plan to pay back the 83.5 billion of federal loans it owes involves selling non-core assets, including its Wall Street headquarters. That plan hit a snag over the weekend when Franklin Templeton Investments, the lead bidder for one of the insurer’s asset-management units, dropped out of negotiations, according to a source with knowledge of the deal. Franklin Templeton had been interested in purchasing AIG Investments, which managed roughly 85 billion in assets. The unit lost 4.5 billion last year.Both AIG and Franklin Templeton declined to comment for this story.The source noted that Franklin Templeton’s dropping out may not impact the final price since it was just one of a consortium of bidders, the rest of whom are still in negotiations with AIG.Offers have ranged anywhere from 300 million to 800 million, with the average bid coming in at 500 million, according to news reports. That’s a paltry figure for part of a unit that was accustomed to generating billions of dollars of revenue annually.51.8 billion to go. Low investment valuations have pretty much been par for the course for AIG since its survival strategy began 10 months ago. A still-crunched credit environment has hurt AIG’s chances at getting top dollar for many of its assets. Since its September bailout, AIG has sold or entered agreements to sell just 23 of its units for at least 6.7 billion (terms of 11 of the sales were not disclosed).The company has ramped up its efforts. More than a third of the asset sales have taken place since mid-May, and the company has fast-tracked plans to sell stakes in three of its biggest insurance units later this year. In April, AIG began the process of selling off a minority stake in its property and casualty businesses, called AIU Holdings. AIG did the same with its AIA Asian life insurance business and ALICO foreign life insurance unit last month.The government will take a stake in AIA and ALICO by October, and in return, will forgive 25 billion of its loans to AIG. But combined with its announced sales, AIG still has 51.8 billion to go.0:00
/4:26AIG could not failAIG Chairman and Chief Executive Edward Liddy said at the company’s shareholders meeting in late June that there is “an excellent chance” the company will be able to repay the taxpayers. He stood by the timeframe of paying back the government in three to five years.Analysts say that’s wishful thinking, given poor market conditions and AIG’s continued losses.”It’s a total disaster in terms of trying to figure out how AIG can earn enough within its timeframe to pay this back,” said Andy Barile, chief executive of Andrew Barile Consulting Corp. “AIG keeps praying for a hard market.”The bonus obstacle. Liddy has said on many occasions that one of the chief obstacles to paying back the government is AIG’s dedication of resources to the handling of its controversial bonuses. He argued that public outrage about bonuses, including hundreds of millions of dollars to financial products employees, has limited the company’s ability to move forward with its plan to repay the government.AIG found itself in the spotlight again last week, after it asked the Obama administration’s pay czar to review more than 200 billion of bonuses it plans to pay out to employees and executives this year and next.”All this stuff just hurts the government, because it makes people less likely to want to work there if they don’t get their bonuses,” said David Schiff, editor of the insurance industry publication Schiff’s Insurance Observer. “It feels good to [complain], but doesn’t save the taxpayers any money.”A company in transition. AIG’s three trustees, who represent the government’s near-80% controlling interest in the company, elected six new directors on behalf of the taxpayers last month. The directors include former board members of American Express (AXP, Fortune 500), Boeing (BA, Fortune 500), KPMG, Delphi, Sears (SHLD, Fortune 500) and Northwest Airlines (DAL, Fortune 500). “Notice how a number of these guys are coming from troubled companies,” said Stewart Johnson, portfolio manager at Philo Smith & Co. “Perhaps their experience at troubled companies will serve the board well in terms of trying to help AIG.”But others wonder if AIG’s strategy will ultimately be self-defeating.”Independent directors should be experienced in the insurance business, but can someone from Boeing explain compensation structure?” asked Andrew Barile, chief executive of Andrew Barile Consulting Corp. “These people are not going to bring value to the company.”Just three of the 11 directors that oversaw the company’s downward spiral in September remained on AIG’s board. Two directors, who were placed on the board after the company came undone, including Liddy, also stayed in place.Liddy said in May that he planned to step down and one of the board’s first tasks will be to find a replacement CEO and chairman. The roles are expected to be separated.
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Source:CNN

NEW YORK: The small business credit market is about to take another major hit. Six weeks after Advanta abruptly froze all of its 1 million credit-card accounts, lending giant CIT Group hangs in limbo and is reportedly eying bankruptcy.But over the past nine months, the one-time financial services powerhouse has all but ceased making new loans, leaving small business advocates and owners with mixed feelings about whether CIT should be left to fail.CIT was historically the biggest issuer of Small Business Administration-backed loans, topping the agency’s lender list year after year. Last year, it made 1,195 loans through the SBA’s 7(a) program, totaling 766.6 million. But in the wake of the credit crisis that followed Lehman Brothers’ September collapse, CIT’s lending came to a standstill. Since October, CIT (CIT, Fortune 500) has funded fewer than 100 SBA loans, totaling 65.7 million.”In order to service its debt and meet obligations, [CIT] has been cutting back on new originations,” explains David Chiaverini, research analyst at BMO Capital Markets.CIT CEO Jeffrey Peek said in November that his company was “the bridge between Wall Street and Main Street,” and “one of the few significant sources of liquidity for small and mid-sized businesses who are struggling to survive.” But by then, CIT was already burning down its bridge, turning away many of the small businesses that had come to rely on the company.Craig Moore is president of CiCi Enterprises, a pizza franchisor based in Coppell, Texas. CIT Group was CiCi’s go-to lender for financing new franchises.”We had used them quite a bit in the past years because they made the process easy to get through. But at the end of last year, they tightened so quick they almost stopped lending to us overnight,” Moore says.Moore had 300 franchise candidates in the pipeline. Very suddenly, half of them couldn’t get loans and became non-viable. Moore says some are still hanging on, hoping the credit markets loosen up, while other potential owners are tapping family and friends for startup money.”We had a goal of building 80 stores this year and we may end up with 40. That drop is due to the financing issues,” says Moore. “On a bigger scale, that’s 40 stores which each could have hired 35 employees.”Diverse financial servicesCIT wasn’t just known for its startup loans. It also provided loans and lines of credit to existing small businesses. If the company falls into bankruptcy, those credit lines will vanish.J.P. Morgan’s analysts estimate that CIT had 1.5 billion in unfunded commitments in March, primarily comprising untapped credit lines and other guarantees that customers could draw down if they chose. That’s a big deal for affected business, but it’s a comparatively small amount in the overall lending landscape. When Advanta froze its small business credit cards, it had about 5 billion in outstanding balances.CIT is also a major playing in factor financing. Factoring companies buy invoices from manufactures and retailers, immediately paying them a portion of the invoices’ face value and assuming the task — and the risk — of collecting payments from customers. For businesses that can’t afford to wait, factoring offers fast access to operating cash.CIT Trade Finance processed a factoring volume of 8.3 billion in the first quarter of 2009, but there too, signs of the company’s cutbacks are showing. CIT’s factoring volume dropped 21% from the same quarter a year earlier, which the company attributed to the weakened retail environment.If CIT falls into bankruptcy, its factoring clients will need to find a new lender. Some may also be left chasing CIT for unpaid balances. As of March 31, CIT held 2.7 billion in credit balances for its factoring client, according to an SEC filing.Robert Saquet, president of Eggers Furniture, a retail store in Middleboro, Mass., is wondering how his shop will be affected if CIT disappears from the factoring market.”Many manufacturers would not be able to stay in business without a factor creating immediate cash flow,” Saquet says. Three of his largest suppliers use CIT as a factor. “Without a source of cash, they would have to demand pre-payment from retail stores. Retail stores are struggling and are not able to get the credit to raise more cash, so they would have to stop buying from factories that are not able to extend terms.”Soaring defaultsSmall companies have been hit hard by the recession, and CIT is suffering in tandem with those it serves. Defaults and delinquencies are rising as cash-strapped business owners fall behind on their bills. Meanwhile, the value of the collateral pledged against CIT’s loans is deteriorating, as home and commercial real-estate prices plunge.”The weak economic environment had a much greater impact on certain segments of our corporate loans portfolio than we have anticipated previously,” CIT CEO Peek told analysts in a conference call to discuss the company’s most recent quarterly results.CIT received 2.3 billion in TARP money in December and converted itself into a bank-holding company. But other help from the federal government has been elusive. CIT applied in January for access to a debt-guarantee program run by the FDIC, but its application has been left languishing. Analysts say there’s little chance at this point that it will be approved.BMO Capital Markets’ Chiaverini sees bankruptcy as CIT’s most likely next step.”The best case for CIT is to get its liquidity issues resolved — bankruptcy could actually get things back to normal on the lending front,” he says. “If it does go into bankruptcy, I think what will happen is unsecured debt holders will convert their debt into equity and it will emerge stronger without the overhang of debt coming due. Then, it can start lending again.”Some small business advocates are crossing their fingers for a bailout. In a letter to Treasury Secretary Timothy Geithner, the International Franchise Association said that “we are very concerned that allowing CIT to enter bankruptcy will send the wrong signal to small businesses on Main Street.”CIT’s financing volume is way down this year, but in past years it has been “one of, if not the, top lenders to the franchise industry,” says IFA spokeswoman Alisa Harrison.Lloyd Chapman, president of the American Small Business League, also issued a statement urging government assistance. “CIT’s unique ability to work with new entrepreneurs and small business owners trying to expand their businesses will be impossible to duplicate,” he said. “If our hard-earned tax dollars are going to be used to save financial institutions, we should use those funds to save firms like CIT that have a 100-year track record of helping those small businesses where most Americans work.”CIT’s role in small business financing will be hard to fill, but for many companies, the damage is already happening. Saving CIT will only help Main Street businesses if the company becomes healthy enough to resume making loans.CiCi’s President Moore doesn’t want to see the bank propped up by the government. Still, he realizes that his company’s fortunes are tied to those of CIT and its Wall Street brethren.”A business will last only if it learns to live within rules,” he says. “But I hope they come back alive, because then there’s a better chance we will flourish.”
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Source:CNN

NEW YORK: The unemployment rate could top 10% later this year, the Federal Reserve said Wednesday, but the central bank also said it believes the end of the recession could be in sight.These forecasts were included in the minutes of the central bank’s June 24 meeting. At that meeting the Fed left its key interest rate near zero percent, but said there were signs of a recovery in some sectors, including the financial markets.Fed policymakers now believe that the unemployment rate will rise to between 9.8% and 10.1% in 2009 before declining modestly next year. The Fed had forecast in April that unemployment would top out in a range of 9.2% to 9.6% this year, but the rate reached 9.5% in June. The Fed also issued a slightly more optimistic forecast for the economy. The Fed said the nation’s gross domestic product, the broadest measure of economic activity, should decline by between 1% and 1.5% in 2009, compared to an earlier forecast of a drop of between 1.3% to 2%. Policymakers also raised their forecast for GDP growth in 2010.

Source:CNN

NEW YORK: General Motor’s Vice-Chairman Bob Lutz is back and he’s ready for a fight.Having reversed his earlier to decision to resign rather than work for what he feared would be a government-run company, Lutz, a famously straight talker, promises to take on competitors shot for shot as the carmaker’s marketing head.”I am very much in favor of blunt talk,” said Lutz.No more Mr. Nice Guy. Lutz says he intends to challenge the competition with messages like, “The Chevrolet Equinox has the highest highway fuel economy of any crossover SUV on the market” or “The Cadillac CTS-V is the best performing luxury sedan in the world.”"We’ve been too reticent to take the gloves off,” Lutz said.Expect fewer ads showing lovely shots of attractive young people driving cars down impossibly empty country roads. Lutz points to Lee Iacocca, the iconic former Chrysler chief with whom he worked — and clashed — during 12 years at Chrysler in the 1980s and ’90s, as providing a model for how the direct approach can change minds. Lutz didn’t say he was about to turn pitchman, but Iacocca’s famous line, “If you can find a better car, buy it,” strikes the tone Lutz wants. Iacocca’s stark challenge forced Americans to reconsider Chrysler products and helped bring that carmaker back from a near-bankruptcy, avoided only with government loan guarantees, in the early 1980s.A renewed confidence. During a half-hour interview with CNNMoney.com, Lutz was just as blunt about his feelings and fears regarding GM’s brush with bankruptcy, which he said was ultimately the best thing that could have happened.”I was a little demoralized around February or March,” he said.0:00
/2:00Cadillac tunes up the SRXThat was when Lutz announced his intent to retire as vice-chairman and head of product development. He was sure the government would take over GM and run it according to a political playbook, he said, and he wanted no part in it.Products like the new Chevrolet Camaro muscle car, which is now selling faster than the factory can make them, and the Corvette, which remains an iconic car for GM, would have been shoved aside, he feared, because they lack the “green” image politicians and the media like to see.As it turned out, Lutz said, he was pleasantly surprised when he met with the government’s auto task force. Their focus was on making the business healthy, he said, not on turning GM into a laboratory for high-mileage but low-profit “green cars.”"There was no ‘We want to see your hybrid line-up’ and stuff like that,” he said, “None of that.”The government-run bankruptcy has left the company leaner, stronger and more competitive than it’s been in decades, he said. He called GM’s emergence from bankruptcy after 40 days “like having died and being re-born.” The carmaker was suddenly shorn of much of its once-crippling debt, unprofitable car bands and excess dealers network.”This was the only way that we could correct 30 or 40 years worth of decline,” he said, “Much of it was our own doing.”Lutz doesn’t let GM’s past leadership take all the blame, though. Government policies that favored Japanese imports, making their products impossibly cheap compared to domestic cars, also did a lot of damage, he said. American carmakers were forced to compete by cutting corners and cheapening their own products.While Lutz expressed relief that the government didn’t ask about GM’s “hybrid line-up,” the carmaker does, in fact, have hybrid vehicles and there are plans for more. A plug-in hybrid small SUV is in the works and a source within GM recently confirmed that a hybrid-only car, something to compete with the Toyota Prius and Honda Insight, is in the carmaker’s longer-term plans as well.The carmaker’s environmental showpiece, the Chevrolet Volt, a plug-in car that’s scheduled to go on sale next year, was created largely at Lutz’s insistence.But Lutz made it clear that this “green car” stuff can’t be allowed to get out of hand. The simple fact is that, especially with gas prices well under 3 a gallon, there is even less demand than usual for hybrid cars, which sell in small numbers and are unprofitable even with relatively high gas prices.”There’s about 5% to 10% of the customer base in the U.S. that desperately wants a hybrid,” he said.The rest just want the best possible vehicle they can afford to pay for and fuel.They also want great design, Lutz said, and that’s something he also oversees in his newly created role. Design has become a strong point for GM in recent years, with critics and buyers praising handsome new cars like the Cadillac CTS, Buick Enclave and Chevrolet Malibu.While GM quality is now competitive, or better than the competitive, in every respect, Lutz said, the products need the added pull of striking design to make sure customers take notice. Otherwise, they’re not going to take a chance on a GM car.During his time at GM, Lutz made a mission of elevating design to a primary, rather than secondary, consideration. There’s still more work to be done, though, in reworking a culture that spreads responsibility too thinly, he said.”It’s unbelievably consensus driven,” he said, “and there’s lots of delegation and a lot of arguing, but very nice arguing.”"Less consensus means clearer, more consistent vision,” he said, “and quicker decisions,” when it comes to almost everything the public can see, hear and touch from GM. For now, that vision will come from Lutz.

Source:CNN

WASHINGTON (Reuters) — The Obama administration on Wednesday will send Congress legislation demanding that hedge fund managers submit to new registration and disclosure rules to boost transparency and limit any risks they pose to the financial system, a senior U.S. Treasury official said.”Later today, we will send legislative language to the Hill that requires registration of all hedge funds and other private pools of capital over a minimum threshold in size,” Treasury assistant secretary Michael Barr said in prepared remarks to a business group in Washington.The bill, one of many Obama administration proposals to revamp financial regulation, would require all investment advisers with more than 30 million under management to register with the SEC and disclose key information about their funds to regulators and investors.These disclosures would include asset size, borrowings and off-balance-sheet exposures, among other information, Barr said.

Source:CNN

NEW YORK (Fortune) — Investors now have an easy way to bet on the direction of housing prices. Expect prices to rise? You can buy MacroShares Major Metro Housing Up (UMM). Fear they have further to fall? Go for MacroShares Major Metro Housing Down (DMM).Both products were created by MacroMarkets, an investment management company co-founded by Yale economics professor and housing expert Robert Shiller; and they started trading on the New York Stock Exchange on June 30.The vehicles are similar to exchange-traded funds (ETFs), in that they track an index. In this case, MacroShares track the S&P/Case-Shiller home price index of 10 major cities.But unlike ETFs, they do not hold a basket of securities. Instead, they each have a pool of assets invested in short-term Treasury bills and overnight repurchase agreements.Assets shift back and forth between the two trusts quarterly to reflect changes in the home price index. At present, UMM has about 9 million in assets, while DMM has a little more than 13 million.”They work like a teeter-totter,” says Matt Hougan, editor-in-chief of IndexUniverse.com and the Exchange-Traded Funds Report. “It’s an odd mechanism for accessing the market, but with housing there is no other way to invest in housing prices.”0:00
/02:38Detroit’s housing baronBecause share prices change based on investor demand, they will sometimes be higher or lower than the assets they represent, much like closed-end mutual funds, which almost always trade above or below their net asset value.Since the shares were launched, the housing bears have held sway. UMM has lost 27% and is trading at around 14. DMM has gained 16% and is trading at around 36.This isn’t MacroMarkets’ first venture into new investment products. In 2006 it launched a pair of instruments that tracked oil prices. It liquidated them in 2008 when oil prices soared from 88 to 145 in only five months, which pushed all the assets into the up shares.”The teeter-totter can only go so high or so low, so eventually all the money flowed into the Oil Up side and they had to shut them down,” says Hougan. “But housing prices don’t fluctuate as wildly. It’s very unlikely that the value of my house will go from 200,000 to 1 million in just five months.”The housing shares are scheduled to terminate on November 25, 2014; MacroShares will pay investors in the two securities based on the value of the index on that date. Investors can buy and sell the securities at any time they like until the payout date.So how does this fit into an investor portfolio?MacroMarkets hope that investors will use them to hedge housing exposure. For example, a homeowner is worried that prices may drop, he can buy Housing Down shares. If prices then fall, the increase in value of the Down shares will help offset the loss of home equity.”These products are for investors with a view on housing who wants to execute a short-term strategy around that view,” says Tom Lydon, the editor of ETFtrends.com. “If you have a huge amount of your net worth tied up in your home and you want to hedge that because you believe prices will fall further, now you have a tool.”

Source:CNN