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Replacing a furnace is costly, ranging from $3,000 to $5,000 installed.

You can wait for an older furnace to reach the end of its life, which happens (on average) between 18 and 22 years. Or you can replace it before a breakdown to enjoy a variety of rebates, grants and tax credits that subsidize the cost.

Who knows if a helping hand will still be around by the time your furnace breathes its last?

Here are some subsidies for furnace upgrades:

• Up to $1,250 in federal and provincial rebates under the ecoEnergy retrofit program. You have to get a home energy audit and do the work within 18 months, followed by a second energy audit.
• A $125 rebate on a mid-efficiency or high-efficiency furnace with an electronically commutated motor, installed by Dec. 31, from the Ontario Power Authority’s Every Kilowatt Counts program.
• A $100 rebate from Enbridge Gas for a high-efficiency natural gas furnace, installed by Nov. 30, which carries the Energy Star mark.
• A 15 per cent tax credit on home renovation spending from $1,000 to $10,000, incurred by Feb. 1, 2010.

New federal rules will come into effect next year to stop the sale of mid-efficiency furnaces manufactured after Dec. 31.

A mid-efficiency furnace burns about 80 per cent of the gas you pay for. It’s better than a conventional gas furnace, which is 60 per cent efficient.

But with a new high-efficiency furnace, you can keep 90 to 97 per cent of the fuel inside your home.

So, why do some homeowners opt for a mid-efficiency furnace? It uses the chimney to vent gases.

A high-efficiency furnace doesn’t use the chimney. The gases are vented through a plastic pipe out the side wall or basement of the home.

Venting can be an issue if you live in a compact house in a densely packed urban area cash loans for bad credit. You can’t drill holes too close to windows or dryer outlets.

"There are real challenges doing venting in the city," says Roger Grochmal, president of Atlas Cares, a home heating and air conditioning contractor.

"Even if your mid-efficiency furnace hasn’t reached the end of its useful life, you may want to think about replacing it now."

Mid-efficiency furnaces are still installed every day, says Direct Energy’s Dave Walton, director of home ideas.

"Some people just have a preference. It’s more about venting concerns."

A home energy audit can help you pick the right furnace for your house. The cost is $300 to $350, partially offset by a $150 rebate from the Ontario government.

Many homeowners are replacing their central air conditioning, too.

"It’s a really good time to do an upgrade," says Grochmal. "Of every 10 furnaces we install, we’re doing six to seven air conditioning units at the same time."

You can get up to $500 in federal and provincial rebates for upgrading central air conditioning under the ecoEnergy retrofit program.

Another rebate for air conditioning replacement is offered by the Every Kilowatt Counts program. It’s $250 or $400, depending on the seasonal energy efficiency rating (SEER).

"The ways to max out the grants are quite astonishing. There are serious savings to be had," says Walton.

But you shouldn’t let the rebates drive your decision-making, Grochmal warns. There may be a better solution for your home that doesn’t get you the maximum rebate.

Next week, we’ll look at geothermal and solar heating systems.

eroseman@thestar.ca

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Global consumer confidence is stabilizing after falling for 18 months, providing a glimmer of hope for a shattered world economy in which three quarters of households cut spending, a survey showed on Tuesday.

Some 40 percent of consumers blame the banking and finance industry for the worst economic downturn since the Great Depression, while 19 percent also hold former U.S. President George W. Bush’s administration and their own governments responsible, the Ipsos/Reuters poll of 23 countries found.

The survey of 23,000 people, conducted between April 14 and May 7, showed 29 percent thought that the economic situation in their country is very good or somewhat good, only a slight dip from 31 percent in November 2008, but well down on 43 percent in April 2008 and 54 percent in October 2007.

“It looks like we have hit bottom and so there are glimmers of hope,” said Clifford Young of Ipsos Global Public Affairs, the international market research and polling company that carried out the online poll.

“What we’re seeing is that consumers for the most part have been scared, they have cut expenditures and increased savings,” he said. “The uptick won’t be as fast as the decline, but if the United States is stabilized that’s really important in the global sense.”

Ipsos polled people in the United States, Canada, Brazil, Mexico, Argentina, South Korea, China, Japan, Australia, India, Russia, Czech Republic, Poland, Hungary, Turkey, Sweden, Italy, the Netherlands, Belgium, Germany, France, Spain, and Britain.

“The stabilization is basically happening in the United States, India and China and that has staunched a bit the bleed around the world,” Young said no teletrack cash advance. “That being said Europe is still dicey as well as Brazil and Russia.”

In the United States, which sparked the global economic downturn, consumer confidence rose two percentage points to 13 percent, while in China it jumped to 61 percent from 46 percent and in India it increased five points to 70 percent.

The effect of the financial crisis has lagged in Brazil, but consumer confidence in Latin America’s largest economy dropped to 56 percent from 61 percent in the past six months, while Russian optimism fell to 35 percent from 52 percent and Europe dropped nine points to 23 percent.

“It’s an issue of confidence in institutions,” Young said of the continued fall in Europe. “For better or worse in the United States the people saw the government taking extreme actions. Though this happened in Europe it happened less so.”

The 23 countries polled make up 75 percent of the world’s gross domestic product.

Cuts in household spending have remained constant during the past six months with entertainment, vacations and luxury items the first to go for nearly three quarters of families followed by clothing for 61 percent, energy consumption for 53 percent and gasoline/driving for 42 percent.

Respondents in the online poll were recruited and screened, the survey said. The results are then balanced by age, gender, city population and education levels. The margin of error is plus or minus 3.1 percent.

(Editing by Jackie Frank)

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Sales of newly constructed homes were almost flat in April — but in a sickly housing market, economists saw a few reasons for hope.

The Commerce Department said new home sales ticked up 0.3% last month to a seasonally adjusted annual rate of 352,000. That was from a downwardly revised reading of 351,000 in March.

Analysts were looking for the rate of new home sales to rise to 360,000, according to a consensus estimate of economists compiled by Briefing.com.

"We aren’t seeing a huge upswing in market conditions. But we aren’t seeing things fall apart again, either," said Mike Larson, real estate and interest rate analyst at Weiss Research, in a research note.

New home sales — which have plunged as builders struggle to construct homes to compete with drastically cheapened foreclosure properties — were 34% below the same month a year ago, when they estimate stood at a 533,000 annual rate.

The median sales price of new homes rose to $209,700 in April, up nearly 4% from a revised median home price of $202,200. That was still 14.9% behind the median price of $246,400 the same month a year ago. The average sales price was $254,000, down 1% from a revised $257,100 in March.

Inventory reduced: Drastically reduced prices have lured in enough buyers to start chipping away at the glut of inventory that has been weighing down the market. At the end of April, the seasonally adjusted estimate of new homes for sale was 297,000, or a 10.1 month supply at the current sales rate. In January, there was a revised 12.4 months of supply on the market.

"Inventory levels continued to improve and broke through 300,000 for the first time since 2001," said Adam York, economist at Wachovia, in a research note. "We are encouraged by the relative stability in sales and the continued improvement in inventory levels installment payday loans."

Plunging mortgage rates also served to attract buyers into the market. But as Treasury yields have risen recently, so have mortgage rates. According to a weekly survey from Bankrate.com, the 30-year fixed mortgage rates rose to 5.45% in the week ended Wednesday, up from 5.24% in the prior week.

However, last week’s rate was still significantly below the 6.20% of a year ago, and the historically low rates could continue to bring buyers, according to one economist.

"We still think the combination of very low mortgage rates and falling inventory will entice people back into the market in greater numbers over the next few months," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research note.

But he called the April sales rate "a bit disappointing, given the hefty increase in homebuilder sentiment in the past couple of months."

Slow and steady: Going forward, if indeed the worst is over, economists say improvement will be slow and steady.

"Looking back, January may turn out to have been the bottom in new home sales," said Wachovia’s York. "We do not expect a major pick-up in the near term, but stability over the summer would not be a surprise."

Even with home inventory levels shrinking and home prices attracting new buyers, "there is no evidence whatsoever of a renewed housing boom — just a gradual increase in activity in some markets, brought about by lower prices, lower mortgage rates, and tax and builder incentives," said Weiss’ Larson. 

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Canadian first-time home buyers are a cautious lot, but they will strike if the price is right.

While the economy remains a huge concern, lower prices and interest rates are spurring them to buy in the spring market, according to a report released yesterday by Royal LePage Real Estate Services.

According to a poll by Pollara Research, done for Royal LePage, 86 per cent of Canadians say lower interest rates make them more likely to buy a home. Eighty-one per cent say lower prices are another motivating factor.

But the economy remains a stumbling block, with 76 per cent citing job security and 64 per cent saying a stable economy are important factors in their buying decisions.

"The true impact of job loss is understated because, beyond the 8 per cent unemployment rate, you have a section of the population who are concerned about their jobs, and that is feeding into their choice to buy a home," Royal LePage CEO Phil Soper said in an interview.

Still, some buyers have returned to the market this spring. A first-time homebuyer’s tax credit and a home-renovation tax credit for 2009 have been cited by potential purchasers as influencing factors.

First-time buyers are key to the market because they allow move-up buyers to sell their homes while continuing up the housing chain to more expensive properties.

"The proof in the pudding will be whether we see if demand is sustainable to summer and early fall," Soper said.

So far, Canadian developers have avoided a disastrous spring, with new-home sales down by 26 per cent in April compared with last year, representing the slowest deceleration in six months. Sales totalled 1,880 in April, compared with 2,541 the year before, according to figures released yesterday by the Building, Industry and Land Development association.

Still, year-to-date sales are down by 52 per cent compared with 2008.

Toronto existing-home prices have also been surprisingly resilient, down by less than 1 per cent from the same period last May fastcash.

By contrast, in the United States, the Case-Shiller housing price index reported yesterday that homes have now lost an incredible 32.2 per cent in value since the correction.

In the Toronto market, condominiums remain the preferred choice of many first-time buyers based on affordability.

Some buyers are gravitating to condos built within the past five years, "questioning the viability of new build projects within the current economic climate," LePage said, as some buyers worry that some projects will not be started due to poor sales.

The typical first-time buyer is 25 to 30 and willing to spend up to $400,000 on a home for couples. Singles, mostly women, are purchasing within the $250,000 to $300,000 range according to the real estate company.

Developers say new projects are still selling, but there is uncertainty in the market over a proposed harmonized sales tax in Ontario, which would meld the GST and PST and push up the prices of homes selling for more than $400,000. Builders say the new tax could bump up costs by as much as 6 per cent on sales in a given project, making some developments unfeasible.

"We have a situation where I have no idea what to tell my customers if they are going to get hit with the tax," said Frank Giannone, president of the Ontario Home Builders’ Association in a meeting this week with the Star’s editorial board.

Giannone said he is about to launch a development in Don Mills, but uncertainty over the tax is causing buyers to hesitate.

The builders’ group wants the province to give an exemption to buyers signing sales deals before next July, when the tax is to be implemented. Under the proposed tax, homes under $400,000 are exempt from the tax, while homes between $400,000 and $500,000 will pay a portion. Homes over $500,000 bear the full brunt.

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The Federal Reserve is likely to keep benchmark interest rates near zero for a while in an economy that is pulling out of a steep decline and appears on course for a very gradual recovery, Fed Vice Chairman Donald Kohn said on Saturday.

“The economy is only now beginning to show signs that it might be stabilizing, and the upturn, when it begins, is likely to be gradual amid the balance sheet repair of financial intermediaries and households,” Kohn told a conference at Princeton University.

“As a consequence, it probably will be some time before the FOMC will need to begin to raise its target for the federal funds rate,” he said, referring to the Fed’s policy-setting Federal Open Market Committee.

The central bank has cut interest rates to near zero and committed to massive lending and securities purchases to heal shattered financial markets and pull the economy out of the longest recession since the Great Depression.

Kohn said that in spite of the fragile state of the U.S. economy and the prospect for low rates for a while, the Fed must make plain its plans to pull back its lending when a recovery begins to take hold.

“To ensure confidence in our ability to sustain price stability, we need to have a framework for managing our balance sheet when it is time to move to contain inflation pressures,” he said.

The Fed has said it is willing to expand extensive purchases of mortgage-related and longer-term Treasury securities to support any nascent recovery.

“The preliminary evidence suggests that our program so far has worked,” Kohn said referring to the commitments to buy securities to date cash advance loans. He said he believes they have held down long term interest rates by as much as 1 percentage point.

An analyst said Kohn’s remarks are a signal the Fed is ready to buy more longer-term securities.

“Kohn’s comments today on the effects of these actions are the most supportive to date of any Fed official and they increase the likelihood that the FOMC will extend or expand the existing asset purchase programs,” JPMorgan Economics economist Michael Feroli wrote in a note to clients.

Kohn said government spending is likely to have a more powerful effect in helping pull the economy out of recession now — with interest rates near zero — than it would if the Fed were still in a position to lower interest rates further.

“In this situation, fiscal stimulus could lead to a considerably smaller increase in long-term interest rates and the foreign exchange value of the dollar, and to smaller decreases in asset prices, than under more normal circumstances,” he added.

PRODUCTIVITY EYED

The Fed is studying how the current crisis may have affected U.S. economic productivity and how those changes may have affected the difference between how the economy grows and its full potential, he said.

“The effect of the crisis, the shifting of labor across markets, the effects on productivity have been very much one of the topics at the Fed,” Kohn said in response to questions speaking. 

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The vision that developer Paul McKee has for re-creating north St. Louis is massive indeed.

Four and a half million square feet of new office buildings and stores, stretching from downtown to Natural Bridge Road to the Mississippi. Ten thousand new homes.

New streets and sewers. Parks and a trolley line. Even its own power grid.

This is what McKee envisions over the next 15 years across roughly 500 acres on the city’s north side. Nothing less than a wholesale rebirth of a swath of St. Louis that hasn’t seen much new life in decades.

"If our city is going to be great again," McKee said, "it’s got to come from here."

The developer, head of McEagle Properties, sat down with the Post-Dispatch on Wednesday and laid out some of his ideas for the land, which his company has spent five years and $46 million secretly and not so secretly assembling.

It was McKee’s most public discussion yet of his goals, and comes a week before he intends to ask the city to provide "hundreds of millions" of dollars in financing to get the project off the ground.

All told, the price tag for NorthSide, as it’s called, would run well into the billions — McEagle estimates nearly $5.4 billion in assets created — and would need a big chunk of public money. McKee said he and his partners will seek at least $1.1 billion in aid from the city, state and federal governments.

McEagle’s goal, McKee said, is to build four "job creation centers" — office buildings, stores and light industry — and massively upgrade the neighborhood’s run-down infrastructure. McEagle wants to partner with residential developers to create urban-style, mixed-income housing across other vacant land in the area.

It’s an ambitious plan that comes during the deepest recession in decades, and will likely need a huge infusion of federal stimulus dollars. It also hinges on the success of several other major projects, including the new, $640 million Mississippi River Bridge, and will have to overcome the residue of five years of neighborhood suspicion over McKee’s north city land grab.

The key to it all, McKee said, is bringing in jobs. He envisions 22,000 permanent jobs and 43,000 to build it.

McKee cited his company’s regional successes as proof that his NorthSide plan can be achieved. McEagle helped bring MasterCard and its 2,500 employees to WingHaven, its O’Fallon, Mo., development. And the company’s NorthPark project in north St. Louis County houses the corporate headquarters of Express Scripts, with 1,000 workers. His company, he said, knows how to land big employers.

"We don’t think you can steal these jobs from Clayton or St. Charles or St. Clair County," he said. "We’ve got to create new growth."

One potential source, McKee said, is the ongoing talks with Chinese officials about an air cargo hub and other investment in St. Louis — talks he helped launch. Yet he acknowledged that the three companies most interested in moving to NorthSide are already in the St. Louis area. He declined to name the companies.

But right now, funding the project is the biggest hurdle.

McKee said he has spent $46 million of his own money on it so far. And in December he reached a financing agreement with the Bank of Washington for about $165 million, according to mortgage documents filed with the city. Otherwise, there’s no private money yet.

"I don’t have people standing in line, whether bankers or developers, to help us on this," McKee said.

So while he waits for that, he’s pushing for public help.

McEagle wants to use as much as possible of the $95 million in tax credits Missouri legislators created in 2007 for assembling distressed land, he said. It will apply, likely next week, for tax-increment financing from the city worth "hundreds of millions of dollars." McEagle plans to buy city-owned property and swap land with the Missouri Department of Transportation and other public agencies. And McKee said he’s working with area senators and congressmen to steer stimulus dollars to the project.

Several pieces of the project fit nicely with the priorities President Barack Obama has set for stimulus spending. Among them:

— Completely rebuilt sidewalks and streets, some with medians and bike lanes; separation of storm and sanitary sewer systems; new parks and green space; and better stormwater collection systems 24 hour payday advances.

— Plans being discussed with MoDOT to reconfigure the intersection of Highway 40 (Interstate 64) at 22nd Street to ease access to north St. Louis and to rework the off-ramp of the planned Mississippi River Bridge to feed directly into Tucker Boulevard.

— Co-generation power plants and renewable energy sources to power neighborhoods across the site.

— New parks, police and fire stations, community centers and an in-ground trolley line to circle the neighborhood and connect it with MetroLink.

It’s a lot of public money, but it’s the kind of investment that government should be making, said Richard Ward, a longtime economic development consultant in St. Louis and vice president of Zimmer Real Estate Services.

"There’s no reason to think that this kind of endeavor would not involve public money," he said. "If anything should and would require a partnership with the public sector, it’s this. It’s the fundamental regeneration of an entire sector of the city."

The plan is a huge opportunity for St. Louis, said Jeff Rainford, a top aide to Mayor Francis Slay. It’s "like nothing that anybody else has ever come up with," he said, and it’s worth a shot.

But, Rainford warned, McKee’s idea is a long way from a detailed plan. And it will need complete community buy-in if he wants City Hall’s support.

State highway officials said they met with McEagle several months ago and that engineers have reviewed the proposed 22nd Street interchange. But nothing has been approved, and there’s no money set aside to build it, said MoDOT director Pete Rahn.

"We have not had a formal proposal," Rahn said. "Until we have something like that, it is difficult to respond."

Any land swap would have to be "value for value," Rahn said, and fit within the state’s transportation plan.

The energy piece of the plan fits well with AmerenUE’s long-term goals for efficiency and use of renewable sources, said Steve Kidwell, the utility’s vice president for regulatory affairs, and the company will consider providing financing to help get the projects started.

"We see some really innovative and interesting ideas here," Kidwell said.

Ameren hasn’t yet decided if it will apply for stimulus money, which includes billions for energy efficiency programs, or if it will partner with McEagle for those dollars, Kidwell said.

McEagle also must assuage the concerns of neighborhood residents, who have watched with suspicion as the company has bought up more than 900 properties, many of which have fallen into decay. Parts of Old North St. Louis, where some rehabbing has already taken place and where residents were vocal in their concerns about McKee, were left out of the plan.

McKee said he plans to use eminent domain very sparingly — only a handful of homes are in the planned "job-creation areas," and the distressed-area tax credits can’t be used on eminent domain property — and will "reuse, retain and maintain every building that can be saved."

McKee also said he’s sorry for the secrecy around the project these past five years, as he bought up property without saying what he was doing. He said he was just trying to keep prices in check.

"If there’s anything to apologize for, it’s that," he said. "But I didn’t know how else to collect all this land."

McKee has met in small groups with some neighborhood residents, but he plans to attend a community meeting tonight and address them in full for the first time. He wants their input, he said, and their help, to fill in the crucial details that will make the big vision into a reality.

"This is the beginning of a 15-year process," he said. "It’s a vision. Not a plan. We’re a long way from the finished product."

Jake Wagman and Ken Leiser of the Post-Dispatch contributed to this report.

GRAPHIC:
Developer Paul McKee’s concept for remaking north St. Louis includes new homes,
infrastructure, stores and office buildings over 500 acres. Four "job creation centers"
would be established in the shaded green areas.

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The Empire State Building kicked off a major energy-saving retrofit Monday, and promoters hope one of the world’s most iconic skyscrapers can become an efficiency model for buildings worldwide.

From the cloud-shrouded observation deck on the building’s 80th floor, former President Bill Clinton, New York City Mayor Michael Bloomberg and others detailed $20 million in cutting-edge conservation measures they hope will cut energy use by 38% for the 1930’s-era behemoth.

They stressed the retrofits weren’t green altruism or part of a government program. Instead, they say they’re being done simply to save the building’s owners a lot of money.

"I can’t tell you how important this day is," said Clinton, who founded the Clinton Climate Initiative where the retrofit plan was hatched. "In order for the world to meet [the greenhouse gas reductions] most scientists say we should, we have to prove it’s good economics."

The retrofits are expected to save building owners $4.4 million in annual energy costs. They are part of an overall $500-plus million rehab plan for the building, which is estimated by its owners to be worth $2.2 billion.

Buildings, including offices and homes, use some 40% of all energy consumed worldwide, according to the Alliance to Save Energy. The typical house produces twice as much carbon dioxide as the typical car.

The conservation measures at the Empire State building include:

• Filling the existing windows with an energy saving gas and adding an additional plastic pane.
• Upgrading the building’s cooling system.
• Using computerized "smart" energy management technology that can adjust temperatures floor by floor.
• Provide tenants with detailed energy use in their space.
• Shut off lights in unused areas.

Much of the interior lighting is also being replaced with more efficient fluorescent bulbs. The famous spire lights, which change color throughout the year in accordance with different holidays and events, are not getting an upgrade. But engineers on the project said the spire may get ultra-efficient LED lighting when the price for that technology drops enough, perhaps by 2013 instant cash advance.

Global reach

The retrofit is being hailed as a breakthrough in energy conservation. It uses a new computer model developed by the Department of Energy to look at all aspects of the building’s energy use and run a cost benefit analysis to see what changes would provide the biggest payoff.

In addition to its fame - it was the world’s tallest building for over 40 years - it’s also an important testing ground because of its age. The building is made of granite and was completed in 1931.

"The Empire State Building was the perfect opportunity," said Ian Campbell, an executive at Johnson Controls, the company performing the retrofit. "You can teach an old building new tricks."

Campbell said once completed, the makeover should put the building among the top 10% of energy efficient buildings worldwide.

Campbell and others working on the project hope to take the skills and lessons learned at this retrofit and promote it in other similar projects worldwide.

"This need not be a rare accomplishment at all," said Raymond Quartararo, a director at Jones Lang LaSalle, a real estate consultancy that’s helping manage the retrofit. "If it can be done at the Empire State Building, it can be done in thousands of buildings around the globe."

A spokesman for CB Richard Ellis, the world’s largest commercial real estate company, said they’ve seen an increase in the number of building owners interested in doing similar retrofits.

"Owners generally recognize the need to take steps in energy efficiency," said the spokesman. "This will accelerate that interest."

There’s certainly lots of room for savings.

"Buildings are perhaps the biggest key to the climate issue," said energy efficiency guru Amory Lovins, on hand for the event. "As soon as people realize efficiency is cheaper than new power, opposition [to higher efficiency standards] will melt faster than the glaciers."  

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Obama administration officials and lawmakers lambasted plans by American International Group Inc., the insurer rescued by the government, to dole out $1 billion in bonuses and retention pay to employees.

Lawrence Summers, director of the White House National Economic Council, called the payments “outrageous” in an interview on ABC’s “This Week” program yesterday. AIG is “abusing the system,” Barney Frank, the Massachusetts Democrat who heads the House Financial Services Committee, told “Fox News Sunday.”

AIG, which has received $170 billion in taxpayer money, succumbed to demands from the U.S. Treasury to scale back the payments. AIG agreed to reduce some retention payments in 2009 by 30 percent and tie bonuses to the company’s recovery. The New York-based insurer still plans to hand out about $165 million on March 15 because of legally binding contracts, according to a person briefed on the matter.

Public anger has been stoked by revelations of bonuses paid by firms at the center of the financial-market meltdown that has plunged the U.S. into what may become the deepest recession since World War II. New York Attorney General Andrew Cuomo is investigating $3.6 billion in bonuses paid by Merrill Lynch & Co. shortly before it was acquired Jan. 1 by Bank of America Corp.

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous,” Summers said yesterday on CBS’s “Face the Nation.”

Safeguarding Taxpayer

Summers said the Obama administration’s priority is safeguarding the U.S. taxpayer. “No one cares about the shareholders of AIG. No one feels the slightest obligation to people who led us into these difficulties.”

Even so, the administration can’t abrogate existing contractual obligations without shaking confidence in the legal system, Summers said.

“The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts,” he said. “But you have to think about the consequences of breaking contracts for the overall system of law.”

Frank said that starting when the Federal Reserve initiated the AIG rescue last September there should have been stricter rules on executive compensation and clearer guidelines for major financial institutions getting a government bailout payday loans.

“Clearly there was a mistake at the beginning,” Frank said on Fox. “These people who were receiving this should have been given much stricter rules at the beginning.”

‘Abusing System’

AIG is “abusing the system,” said Frank. “Any bank that thinks we’re being too tough on compensation, or trying to get foreclosures reduced, or stopping some of the lavish entertaining, they can give the money back.”

“With AIG, I would just say we need to find out, one, are they legally recoverable,” Frank added. “But I do want to find out at what point these illegal obligations were incurred, who said, and at what point, we’re going to give these bonuses no matter what.”

Senate Minority Leader Mitch McConnell, speaking on ABC’s “This Week,” said the example of AIG might be followed by other companies lining up for government assistance.

“The message here, I’m afraid, to any business out there that’s thinking about taking government money, is let’s enter into a bunch of contracts real quick, and we’ll have the taxpayers pay bonuses to our employees,” the Kentucky Republican said. “This is an outrage.”

Treasury Secretary Timothy Geithner was “really upset” by AIG’s plan to distribute the $165 million, Austan Goolsbee, a top White House economist, said on Fox. “You worry about that backlash” from the public, “but you’re also angry,” he said.

‘Not Sensible’

“I don’t know why they would follow a policy that’s really not sensible, is obviously going to ignite the ire of millions of people,” Goolsbee said. “And we’ve done exactly what we can do to prevent this kind of thing from happening again.”

AIG Chief Executive Officer Edward Liddy, who was recruited by the U.S. to run the insurer after the bailout, has vowed that the company will repay “every penny” to the U.S. of its bailout package by selling subsidiaries, and said the retention pay for talented people helps taxpayers by making the units attractive to buyers.

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European Central Bank President Jean-Claude Trichet’s new weapon to battle the recession is taking him closer than it seems to zero interest rates.

Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to usurp the benchmark refinancing rate and become the main driver of short- term borrowing costs. At just 0.5 percent, the deposit rate matches the Bank of England’s key setting and is only a step away from the zero-to-0.25-percent range the Federal Reserve uses.

That is pushing interest rates for banks down, helping Trichet answer critics who accuse him of not doing enough as the euro-region economy sinks into its deepest recession since World War II. The deposit rate is “very, very low,” Trichet said three times in an hour at a press conference on March 5.

He “is implicitly admitting that the deposit rate has now become the key barometer of the ECB’s policy,” said Nick Kounis, chief European economist at Fortis in Amsterdam. “The ECB has become more and more comfortable in pointing that out, not least because it’s been accused of keeping interest rates too high.”

The euro overnight index average, or Eonia, fell to 0.85 percent yesterday after the ECB’s latest rate cuts took effect — about 0.7 percentage point below the 1.5 percent benchmark rate. Overnight deposits dropped to 56.3 billion euros, the lowest amount since Oct. 8.

Unlimited Cash

The ECB’s decision to offer banks unlimited amounts of cash, announced on Oct. 8, has culminated in the deposit rate setting the new de facto cost of short-term money. The measure removed the need for banks to borrow in the money market to meet their reserve requirements.

Banks have been reluctant to lend to each other since Lehman Brothers Holdings Inc. went bust on Sept. 15, preferring to stash excess money with the ECB instead of taking the risk.

As demand dried up, interbank-lending rates dropped toward the deposit rate. The Eonia rate averaged 106 basis points above the deposit rate in the seven years before the ECB started providing unlimited liquidity in October. Since then, the gap has shriveled and yesterday stood at just 35 basis points.

Unlimited cash “results in refinancing costs for banks well below the current benchmark interest rate,” ECB council member Axel Weber said on March 5. “We expect banks to pass this on to consumers and companies to stimulate the economy.”

Boost for Economy

The overnight Eonia rate “is a very important starting point for all market expectations,” said Julian Callow, chief European economist at Barclays Capital in London. “Any further reduction in Eonia expectations would lower Euribor rates and so be a considerable benefit for the real economy.”

The euro interbank offered rate, or Euribor, that banks say they charge each other for six-month loans dropped to a record low of 1 quick cash.79 percent today. Market rates of the same maturity traded at 2.07 percent in the U.K. and 1.90 percent in the U.S.

Trichet hasn’t ruled out further rate cuts. The ECB has “not decided ex-ante that the present level was the lowest,” he said during a press conference in Vienna today. Still, “we are at very low rates.”

Officials are hesitant to go much lower. There is “no reason to see the refinancing rate below 1 percent,” Weber said on March 10. “I also see a problem with lowering the deposit rate to zero. I would prefer to leave it at 0.5 percent.”

That reticence may be linked to Japan’s experiment in the 1990s, when it lowered its key rate to zero to revive its economy in what became known as the “lost decade.”

‘Excessively Low’

Japan shows that keeping rates too low for too long “will cause interbank trading to run dry, despite the ECB’s efforts to revive it,” said Michael Schubert, an economist at Commerzbank AG in Frankfurt.

Some ECB officials are concerned that too-low market rates will become counterproductive because they will sap banks’ returns and give them less incentive to trade with each other. That would undermine the ECB’s aim to revive interbank lending through its unlimited liquidity operations.

“If we had excessively low interest rates, why would banks start lending to each other?” ECB council member Yves Mersch asked March 10. “It would be much safer to put their excessive funds into the central bank rather than engage in the interbanking market.”

The ECB has cut its main refinancing rate, which is used as a benchmark in money-market operations, by a total of 2.75 percentage points since early October.

Not so Different

That’s still well above the key rates of the Fed and the Bank of England, which have started buying assets such as commercial paper and government bonds to ease credit tensions and boost their countries’ economies.

So far, the ECB is focusing its efforts on providing unlimited liquidity to banks and said on March 5 it will provide these funds until at least the end of the year.

“With the extension of providing unlimited liquidity, the ECB committed to keep the overnight rate very low for the foreseeable future,” said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Group Plc in London.

That is allowing Trichet to argue “that the ECB does not have such a different monetary-policy stance from the Fed and Bank of England,” said Gilles Moec, an economist at Bank of America Merrill Lynch in London.

He is “driving home the point that the ECB is doing much more than people think.”

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The Environmental Protection Agency on Tuesday proposed mandatory reporting of the gases blamed for global warming from approximately 13,000 facilities nationwide.

The regulation would cover companies that either release large amounts of greenhouse gases directly or produce or import fuels and chemicals that when burned emit heat-trapping gases.

Refineries, automobile manufacturers, power plants, coal mines and large manure ponds at farms would all have to report to the government emissions of at least six different gases payday loan lenders.

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