Welcome to Finance World

WASHINGTON—U.S. President George W. Bush said today 20 world leaders gathered here had agreed on a set of principles aimed at stabilizing the global economy and preventing future financial meltdowns.

But the outgoing president stressed in a statement that today’s historic meeting was the first in a series and he would now hand over the process to President-elect Barack Obama.

Emphasizing the need for a smooth transition, Bush wrapped up his statement at a historic downtown Washington conference centre by thanking journalists for covering his summit and ended with a simple, "Good-bye."

Today’s meeting was historic because of the attendance of 20 nations, including developing countries which had been shut out of recent economic summits.

The leaders agreed to strengthen transparency and accountability by toughening disclosure requirements on international financial transactions, requiring "complete and accurate" disclosure by firms of their financial condition and aligning incentives throughout the nations to avoid any excessive risk-taking which could cause problems to cascade worldwide.

The leaders will strengthen the oversight of credit rating agencies and financial markets, toughen their financial market regulations to prevent market manipulation and fraud, more closely co-ordinate national laws and financial regulations and modernize the International Monetary Fund and the World Bank to give more power to the developing nations at the table here.

He said the international financial institutions were still operating based on the economy of 1944, and their policies need to be updated for today’s global economy.

That was a reference to the 1944 Bretton Woods conference which established both institutions.

Bush reiterated that he was a "free market person” but not when he is told his country could have been entering a depression deeper than the Great Depression.

He also said the leaders found consensus on trade barriers, agreeing that they would resist the urge to build economic walls and retreat into protectionism.

"It makes sense to come out of here with a firm action plan, which we have, and it also makes sense to say to people that there is more work to be done, and there will be more meetings," Bush said.

One meeting, he said, cannot turn the global economy around.

"The declaration should give us all hope, and I would hope would give the markets some reassurance," Prime Minister Stephen Harper told a news conference, referring to the so-called G20 countries’ communique following the end of their emergency summit.

Canada is in relatively good shape compared to other nations as it heads off the crisis, and will issue a financial update at the end the month.

The International Monetary Fund recently forecast that the Canadian economy will grow moderately over the next year and avoid falling into a recession.

Nonetheless Harper sounded a cautious tone Saturday as he addressed the media at the Canadian Embassy.

"There are going to be very tough adjustments that will have very real effects in the Canadian economy but we will continue to be pragmatic and flexible while maintaining good, long-run economic policies," said the prime minister, flanked by Finance Minister Jim Flaherty and Ambassador Michael Wilson.

"We will respond in a way that will minimize Canadians’ exposure to these problems and maximize our ability to come out of this in a strong position creditscore.com."

The G20 leaders, who meet again April 30 left Washington armed with a series of reforms to put in motion by the end of March.

"The big question is how do we establish good regulatory structure without destroying the incentive to innovate, without destroying the marketplace," Bush said Saturday outside the stately National Building Museum where the summit was held.

"Transparency is very important so that investors and regulators are able to know the truth."

Adding that the summit "is not going to solve the world’s problems," Bush said: "There is more work to be done."

Bush called for the emergency summit a few weeks ago in the face of the worldwide economic meltdown. It’s the largest meeting of its kind in more than a decade.

The meeting comes at an awkward time for Bush, a wildly unpopular lame-duck president who’s leaving office in two months when Obama is officially sworn in as America’s 44th president.

Obama has made it clear since his historic election Nov. 4 that Bush is still the president, and must remain actively involved in dealing with the crisis in the next few weeks.

Nonetheless, many of the officials who descended upon Washington for the summit had been clamouring for access not to Bush and his people but to the man who holds the real power in the U.S. capital – Obama.

The president-elect appointed two emissaries – one-time secretary of state Madeleine Albright and former Republican congressman James Leach – to attend on his behalf, reluctant to be seen as interfering during the waning days of Bush’s presidency.

Senior Canadian officials met with Albright and Leach early Friday, hours before Harper arrived in Washington to attend the extravagant White House dinner that kicked off the summit.

While the prime minister is opposed to a vast international regulatory system that would impose global rules on each country’s banking systems, he has strongly advocated the notion of "peer review" of every G20 country’s national financial regulations.

Harper said he was pleased to see that idea was embraced at the summit.

"There is an agreement to look at transparent assessments – independent transparent assessments – of financial regulatory systems, so that will happen," said Harper.

"Canada submitted to IMF assessments in the past, and as we told our American friends and others, we found those very useful in the past … so that has been recognized in the declaration."

Not far from the summit, a handful of protesters carried neon yellow signs that read: "Money for people’s needs, not bankers’ greed" and "Money for jobs, not for war and occupation."

The countries represented at the summit were the U.S., Canada, Argentina, Australia, Brazil, Britain, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

Those countries and the European Union make up the so-called G20.

Source

North American stock markets were awash in red as commodities prices continued to decline and electronics retailer Best Buy diminished optimism for U.S. investors when it issued a profit warning.

Toronto's S&P/TSX composite index fell 170.90 points in early trading to 9,253.10, after falling 264.80 points on Tuesday.

The TSX energy sector slipped 2.9 per cent as the price of crude oil continued to fall. Light sweet crude for December delivery was down $2.01 at US$57.32 a barrel on the Nymex.

The gold sector was down 4.5 per cent as the price of bullion fell $8.50 to US$724.30 an ounce on the New York Mercantile Exchange.

On Wall Street, the Dow industrials were down 191.55 to 8,502.41 after falling 177 points Tuesday. The Nasdaq composite index lost 29.15 to 1,551.75 while the S&P 500 declined 17.69 to 881.26.

The TSX diversified metals sector slid 10.6 per cent. Teck Cominco Ltd. (TSX: TCK.B) dropped another seven per cent, or 64 cents, to $8.11. On Tuesday, Teck said that contrary to rumours, it is not planning a stock offering to raise money to pay debt.

The Canadian dollar dropped to 82.21 cents, down 1.37 cents from Monday's official close, before Tuesday's Remembrance Day bank trading holiday.

Finance Minister Jim Flaherty says the federal government will purchase another $50 billion in residential mortgages to ease the credit crunch facing Canadian banks. It follows a similar move last month to purchase up to $25 billion in mortgages.

Retailers continued to erode optimism around the start of the holiday shopping season. Consumer electronics seller Best Buy Co. says it is cutting its 2009 guidance on fears that consumer spending will erode even further.

Department store operator Macy's Inc. says it lost $44 million in the third quarter. U.S. investors are worrying that a severe pullback in consumer spending – which drives more than two-thirds of the U payday advance services.S. economy – will prolong a global economic slump.

ING Canada Inc. (TSX: IIC) reported a third-quarter profit drop to $57 million from year-earlier $92 million due to stock market volatility. Shares were down 23 cents to $31.60.

Research in Motion (TSX: RIM) debuted its latest challenge to Apple Inc.'s iPhone – the BlackBerry Curve 8900 smart phone, as its shares dropped 93 cents to $53.98.

Fears are growing for General Motors Corp. and the North American-based auto industry in general, with Michigan Gov. Jennifer Granholm calling for quick federal action to help the Detroit Three. Granholm says Washington has thrown $700 billion into the rescue of the financial sector, and the carmakers are "just asking for a fraction of that."

President-elect Barack Obama urged President George W. Bush on Monday to support aid for the struggling automakers. And House Speaker Nancy Pelosi says she's confident Congress would approve “emergency and limited financial assistance" for the industry under the $700-billion bailout measure passed in October.

Treasury Secretary Henry Paulson gives an update on the government's financial rescue package later this morning (at 10:30 a.m. ET).

Overseas, London's FTSE 100 index was down 0.48 per cent in afternoon trading in London. The German DAX fell 2.1 per cent and the Paris CAC-40 lost 1.2 per cent.

The Bank of England predicted inflation will fall below the government's target of two per cent next year as the economy contracts. This raised expectations that the British central bank will lower its benchmark rate – possibly to the lowest level ever.

Japan's Nikkei index closed down 1.3 per cent and Hong Kong's Hang Seng declined 0.7 per cent.

Source

DETROIT — Detroit automakers and their allies in Congress said Wednesday that Barack Obama’s victory could help U.S. automakers line up federal funding needed for them to survive a terrible economic slump.

Obama made it clear during his campaign that he understood the automakers’ problems and would work to preserve the industry, U.S. Sen. Carl Levin, D-Mich., said Wednesday.

"I’m very optimistic that we’re going to have a fighter in the White House for manufacturers, and that’s what we need," Levin said.

Levin said he was told Wednesday by Jason Furman, Obama’s senior economic adviser, that government aid is atop Obama’s agenda. Levin said the Obama adviser did not commit to a specific funding path for the industry but was supportive.

Obama has said he would meet with industry leaders and the United Auto Workers immediately to talk about helping automakers, but auto industry officials said a meeting had not yet been scheduled.

Levin noted that Obama expressed support for doubling an Energy Department loan program for automakers to develop fuel-saving technology to $50 billion from $25 billion.

The senator said he and members of Michigan’s congressional delegation would pursue several funding options to help the industry, including the $700 billion Wall Street bailout or access to capital from the Federal Reserve.

Obama’s victory over Republican John McCain came just three days before General Motors Corp. and Ford Motor Co. are to release their third-quarter results, which almost certainly will show billions in losses and cash burn rates that will push the companies closer to emptying out their treasuries if auto sales don’t bounce back soon.

Further cuts by both automakers are expected on Friday, and GM’s top executives sent an e-mail to other executives Wednesday saying "important changes" will be announced just after the quarterly results are made public payday advance loan.

Spokesman Tom Wilkinson called the announcement a routine update. The e-mail did not give specifics, and Wilkinson said he could not comment on them.

Industry analysts expect GM and Ford to make further factory job cuts to match an ever-dwindling U.S. market.

Analysts say GM could close more plants, but Ford said it likely will do temporary factory shutdowns and overtime cuts at some of its car plants.

GM is talking with Chrysler majority owner Cerberus Capital Management LP about GM acquiring Chrysler. GM reportedly is after Chrysler’s roughly $11 billion cash stockpile and is seeking federal aid to make the deal happen.

Automakers and their congressional allies say some sort of government funding is necessary to bail out the troubled industry. They have been lobbying to speed up loans from the $25 billion Energy Department pot (the department late Wednesday said it planned to distribute the money by the end of the year), and for access to part of the $700 billion Wall Street bailout plan and perhaps other funding.

"What we need is to make sure that a vital industry like autos … which is such a big part of the overall economy, doesn’t lead us into a deeper and harsher downturn," Cerberus Chairman John Snow said Wednesday in an interview on CNBC. "The collapse of the auto industry at this time would be devastating for a new president."

Source

Stocks rallied Thursday, as investors cheered news of easier credit and a report showing the economy shrank at a slower pace than expected in the third quarter.

The Dow Jones Industrial average (INDU) gained 190 points, or 2.1%. The Standard & Poor’s 500 (SPX) index rose 2.6% and the Nasdaq composite (COMP) gained 2.5%.

All three major gauges had been higher in the early going, but the buying momentum eased a bit as the session wore on.

Stocks seem to be in the process of putting a bottom in place, said Gary Hager, founder and chief executive of Integrated Wealth Management, citing the recent bear market lows hit on Oct. 10.

Looking forward, he said "We’re still going to see significant swings, but the volatility should start to decrease once we get past the election and get through the end of the year."

Rate cuts: Stocks zigzagged Wednesday after the Federal Reserve cut interest rates, as expected, and also issued a dour assessment of the economy. The central bank cut the fed funds rate, a key bank lending rate, by half a percentage point to 1.0%. That matched an all-time low for the rate last seen in June 2004.

In its statement, the central bank painted a bleak picture of the economy, touching on the lingering impact of the financial market crisis, the lack of available credit, and the erosion in consumer and business spending. The statement indicated the Fed could cut rates again if necessary.

But world markets rallied on the news, with Asian exchanges surging overnight and European markets up at the close. Hong Kong and Taiwan cut interest rates Thursday following the actions by the Fed, and by China earlier Wednesday. Speculation mounted that Japan would cut its key rate at a meeting this Friday.

The Fed has cut rates for more than a year in an attempt to help the struggling economy. The central bank has also made potentially trillions available to financial institutions as part of a broader attempt to calm roiling financial markets and get banks to start lending to each other again.

Lending has been improving slowly. On Thursday, the Fed said that the market for commercial paper grew last week, the first such expansion in nearly two months. Commercial paper is a critical form of short-term funding that companies rely on for their daily operations.

Lending rates: The credit market continued to improve, with Libor, the overnight bank-to-bank lending rate, falling to 0.73% from 1.14% Wednesday, according to Bloomberg.com. The 3-month Libor fell to 3.19% from 3.42% Wednesday. (Full story)

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed slightly to 2.82% from 2.84% Wednesday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, slipped to 0.4% from 0.57% late Wednesday, with investors preferring to take a piddling return on their money than risk the stock market.

Last month, the 3-month yield reached a 68-year low around 0% as investor panic hit its highest level.

Treasury prices slipped, raising the yield on the benchmark 10-year note yield to 3.97% from 3.85% late Wednesday. Treasury prices and yields move in opposite directions.

GDP: Gross domestic product, the broadest measure of the nation’s economy, fell at an annual rate of 0.3% in the third quarter after growing at a 2.8% rate in the second quarter.

The drop was not as bad as expected, with analysts having forecast that GDP would slump 0.5%. However, the decline was still the worst performance for the economy since the last recession 7 years ago. (Full story)

Company news: Exxon Mobil (XOM, Fortune 500), the oil services giant, reported a profit of $14.83 billion, the biggest quarterly profit in U.S. history. Shares rose modestly. (Full story)

But Exxon was an exception. With roughly 59% of the S&P 500 results out, profits are currently on track to have fallen 23.8% versus a year ago, according to the latest data from tracking firm Thomson Reuters.

Hartford Financial Services (HIG, Fortune 500) tumbled 51.6% after the life insurer reported a massive quarterly loss and also cut its full-year profit forecast.

Motorola (MOT, Fortune 500) warned that fourth-quarter profit would miss forecasts and said its troubled cell phone unit will continue to weaken next year. As a result, the company will delay its planned spinoff of that unit freecreditreport. The company will also cut 3,000 jobs as part of a restructuring. Motorola shares fell 5.3%.

Avon Products (AVP, Fortune 500) reported weaker-than-expected quarterly profit and warned that the impact of the recently stronger dollar will hurt fourth-quarter and full-year growth rates. Shares fell 15.4%.

In other company news, American Express (AXP, Fortune 500) announced that it will cut 7,000 jobs, or more than 10% of its staff, amid the ongoing credit crisis.

Dow component GM (GM, Fortune 500) slumped over 10% amid ongoing woes for the company and the auto sector. The governors of six states sent a letter to federal officials asking that they intervene to help the hard-hit domestic automakers. GM and Cerberus, the parent of Chrysler, are in talks about a merger, but need financing.

Also impacting the stock was GMAC, the troubled auto finance and mortgage lending company that’s 49% owned by GM. GMAC said it’s in talks with federal regulators to become a bank holding company, so that it can access government funds. Complicating matters further, Cerberus owns the other 51% of GMAC.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners by four to one on volume of 1.38 billion shares. On the Nasdaq, winners beat losers five to two on volume of 2.55 billion shares.

Other markets: The dollar fell against the euro and gained versus the yen.

U.S. light crude oil for December delivery fell $1.54 to settle at $65.96 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery fell $15.50 to settle at $738.50 an ounce.

Gasoline prices fell another 4 cents overnight, to a national average of $2.547 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 43rd consecutive day that prices have decreased. During that time, prices have fallen by $1.31 a gallon, or nearly 34%.

A good week, a brutal month: Stocks have bounced back this week, finding some momentum at the end of a wretched October. For the week, the S&P 500 is up 8.8% as of Thursday’s close.

But at the same time, investors pulled more money out of equity mutual funds than they did in the previous week, according to tracking firm Trim Tabs. The amount of money withdrawn from stock mutual funds in the week ended Oct. 29 rose to 9.2 billion from 6.5 billion the previous week.

Despite the recovery, October will go down in the history books as one of Wall Street’s worst months of all time.

As of Thursday’s close, the Dow had lost 1,670 points, the Dow’s worst month ever, according to Stock Trader’s Almanac info going back to 1901. On a percentage basis, the decline of 15.4% doesn’t rank in the top ten.

The S&P 500 lost nearly 212 points, or 18.2% in the month, and is currently on track to post its worst month ever on a point basis and ninth worst ever on a percentage basis, going back to 1930.

The Nasdaq dropped 384 points, or 18.4% in October, tracking its seventh-worst month ever on a point basis and its sixth-worst month on a percentage basis, going back to its inception in 1971.

October also brought lows that could constitute a market bottom, analysts say. However, bottoming out is a process. In the last bear market, stocks made lows in the summer of 2002, "retested the lows" in October 2002, and then retested them once more in March 2003 before finally making a sustained gain over the next few years.

The major gauges seem have hit a low on Oct. 10, when the Dow dipped below 7,900 and the S&P 500 fell below 840. The Nasdaq initially made a low on that same date, before retesting it a few weeks later and falling below 1,500. Stocks may need to fall back to those lows again before moving higher this time.

Although with the depth of the recession and the ongoing credit crisis, the stock market now is not likely to see an advance comparable to the more than 4-year bull market that followed the last bear market.

"Stocks are building a good base right now," said Will Hepburn, president and chief investment officer at Hepburn Capital Management.

He said that stocks will likely keep moving sideways in the short term, but could be setting up for a multi-month rally six months out as the economy begins to stabilize and banks start lending again.  

Source

Easing monetary policy in Asia will support what is now the only source of growth for the world economy, but oversold regional stocks and short-maturity bonds will only get a lift when central banks globally follow suit.

Such moves could provide the trigger for many investors that have switched into cash or money-market mutual funds not only to avoid spikes in volatility but also so they are ready to pounce on attractive investments when the time is right.

Total assets in money market mutual funds have soared this year, data from the Investment Company Institute (ICI) shows, suggesting many investors are staying on the sidelines as valuations of stocks relative to long-maturity bonds get increasingly attractive.

“Coordinated central bank action including Asian central banks would be a powerful signal to global financial markets. I wouldn’t rule it out but international coordination is very difficult to achieve,” said Stephen Roach, chairman of Morgan Stanley Asia (pay day loans).

A big 1 percentage-point rate cut by Australia’s central bank provided investors with a taster on Tuesday. Markets jumped immediately, providing relief from a credit crisis that JPMorgan economists say is driving the world economy into recession.

The economists say developing Asia-ex Japan will be spared recession and grow 7.1 percent this year, although China, Taiwan and Hong Kong have sought some insurance by cutting policy rates in the wake of Lehman Brothers’ collapse last month.

Bond markets globally are starting to price in the risk of coordinated rate cuts among the world’s major central banks, which would be an about turn for many policy makers, who until recently were largely focused on keeping monetary policy tight to combat inflation.

But time is of the essence. 

Read more

It took two tumultuous weeks of moral and fiscal debate, but Congress and the Bush administration on Friday finally put a capstone on the $700 billion bailout of the financial system.

President Bush signed the bill less than two hours after the plan, which had been amended and passed by the Senate on Wednesday, was approved by the House.

The changes the Senate made include the addition of a host of tax break extensions and some new provisions intended to help individuals and businesses.

Here’s a breakdown of some of the economic rescue plan’s main provisions:

Attacking credit crisis: The core of the plan the House voted on is the same as what it rejected on Monday: the Treasury’s proposal to let financial institutions sell to the government their troubled assets, mostly mortgage-related. It will allow the Treasury access to the $700 billion in stages, with $250 billion being made available immediately.

Protecting taxpayers: The final law is also similar to the original House bill in that it includes a number of provisions that supporters say will protect taxpayers. One will direct the president to propose a bill requiring the financial industry to reimburse taxpayers for any net losses from the program after five years. And the Treasury will be allowed to take ownership stakes in participating companies.

In addition, over time, supporters say, taxpayers are likely to make back much if not all of the money the Treasury uses because it will be investing in assets with underlying value.

The law includes a stipulation that the Treasury set up an insurance program - to be funded with risk-based premiums paid by the industry - to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 14, 2008.

Curbing executive pay: The law will place curbs on executive pay for companies selling assets or buying insurance from Uncle Sam. For example, any bonus or incentive paid to a senior executive officer for targets met will have to be repaid if it’s later proven that earnings or profit statements were inaccurate.

Oversight: The rescue plan will set up two oversight committees.

A Financial Stability Board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director, the Housing and Urban Development secretary and the Treasury secretary.

A congressional oversight panel, to which the Financial Stability Board will report, will have five members appointed by House and Senate leadership from both parties.

Tax breaks: The Senate-version of the bill that the House passed on Friday included three key tax elements designed to attract House Republican votes.

It extends a number of renewable energy tax breaks for individuals and businesses, including a deduction for the purchase of solar panels.

The law also continues a host of other expiring tax breaks (cash loans). Among them: the research and development credit for businesses and the credit that allows individuals to deduct state and local sales taxes on their federal returns.

In addition, the law includes relief for another year from the Alternative Minimum Tax, without which millions of Americans would have to pay the so-called "income tax for the wealthy."

New accounting rules: The bailout plan underlines the Securities and Exchange Commission’s power to change accounting rules on how banks and Wall Street firms value securities, and directs the agency to study the issue.

Some observers argue that tight accounting rules are a major reason for the credit crisis in the first place. Others contend that changing the so-called mark-to-market rules will just bury problems lurking beneath the surface and could further shake investor confidence in the already battered financial sector. (More about the rules.)

Shielding bank deposits: The law temporarily raises the FDIC insurance cap to $250,000 from $100,000. It allows the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit.

Federal bank regulators, who first floated the idea to Congress late Tuesday, said that bumping up the insurance limits will help improve liquidity at banks across the country. It may also provide a much-needed dose of confidence for consumers who may be worried about the health of their bank. (More about FDIC rules.)

The plan will also temporarily increase the level of federal insurance for credit union savings to $250,000.

Mitigating foreclosures: The new law calls on federal agencies to encourage loan servicers to modify mortgages by a number of means - including reducing the principal or interest rate. It also extends a temporary provision that exempts from federal income tax any debt forgiven by a bank to a borrower in a foreclosure.

Cost: The law’s tax provisions - the bulk of which come from the addition of tax breaks from other legislation - may reduce federal tax revenue by $110 billion over 10 years, according to estimates from the Joint Committee on Taxation. More than half of that is due to the one-year extension of AMT relief.

The Congressional Budget Office said it cannot estimate the net budget effects of the troubled asset program because of the many unknowns about that piece of the bill. However, the agency noted in a letter to lawmakers on Wednesday, it expects the program "would entail some net budget cost" but that it would be "substantially smaller than $700 billion."

Overall, the CBO said, "the bill as a whole would increase the budget deficit over the next decade." 

Sourse

Oil prices tumbled more than $6 a barrel Monday, briefly slipping below the $100 level as traders bet that global demand for petroleum products will keep falling despite a planned $700 billion U.S. financial bailout.

A stronger dollar also weighed on crude prices as investors who bought oil and other commodities as a hedge against inflation sold their contracts.

Light, sweet crude for November delivery fell as low as $99.80 a barrel in morning trading on the New York Mercantile Exchange, before edging up slightly to $100.28, down $6.61.

The contract fell Friday $1.13 to settle at $106.89. Crude has now fallen 31% since surging to an all-time record of $147.27 on July 11.

Monday’s sell-off was tied to anxiety over the pending U.S. rescue plan. Following a week of intense negotiations, lawmakers could hold a final vote on the emergency measure Wednesday.

But investors are doubtful whether the plan will be enough to unfreeze global credit markets and restore calm to the financial system.

Global credit markets remain extremely tight, crippling companies’ ability to raise capital and cover basic costs like payroll. If the economy weakens further, consumers and businesses around the globe would likely cut back on energy use even more, analysts say.

"The market is clearly questioning whether the bailout will be enough to prevent a stronger economic downturn. That obviously has potentially negative implications for oil demand growth," said Michael Wittner, global head of oil research at Societe Generale in London.

In another sign of declining U.S. demand for fuel, pump prices kept falling Monday. A gallon of regular slipped about a penny overnight to a new national average of $3.643, according to auto club AAA, the Oil Price Information Service and Wright Express.

The rescue plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

Congress insisted on a stronger hand in controlling the money than the White House had wanted no fax payday loan. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

Oil prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.

While dollar gained as details of the bailout package become known, analysts said the euro was weaker also because of growing economic problems in Europe.

"It is also a question of the euro losing ground due to a continued deterioration in the euro zone," said Olivier Jakob of Petromatrix in Switzerland. "With the rate of bank failures increasing in Europe and the economy slowing more rapidly than expected, pressure will continue to mount on the [European Central Bank] to lower [interest] rates."

Foreign exchange rates

The 15-nation euro fell Monday to $1.4437 from $1.4614 on Friday.

In other Nymex trading, heating oil futures fell 14.51 cents to $2.8732 a gallon, while gasoline futures dropped 15.57 to $2.5094 a gallon. Natural gas futures lost 40.7 cents to $7.221 per 1,000 cubic feet.

In London, November Brent crude fell $5.73 to $97.81 a barrel on the ICE Futures exchange. 

Source

How much is good advice worth? At least one St. Louis company paid a director more than $1 million, most of it in stock that has since declined in value.

Other directors collected hundreds of thousands by serving on multiple boards.

For fiscal 2007, David M. Meyer, who serves as non-executive chairman of CPI Corp., got compensation worth $1.4 million from the company, which operates Sears Portrait Studios and other photography businesses. At CPI, he outearned many directors who serve on two or more boards. Meyer also drew $143,679 in pay as a director of Ashworth Inc., a California clothing maker.

Meyer is a co-founder of Knightspoint Partners LLC, a New York-based investment company that led a shareholder ouster of CPI directors in 2004. He served as the company’s interim chief executive until 2005.

Meyer’s pay includes $16,500 in cash and $7,810 in miscellaneous pay in addition to 28,253 shares of restricted stock valued at $1.4 million in the proxy statement. Meyer got a little over half of the shares for his help with an acquisition last year and the rest for unspecified services he provided to the company in 2006.

Meyer’s case illustrates one of the problems with the way companies are reporting pay for directors. They’re required to report the accounting expense of the compensation, not what directors actually received.

Until the restrictions on the shares expire, they’re carried on the company’s ledgers. When the value of the stock declines, its value on the books must be written down.

The stock Meyer received was valued at an average of $48.56 a share in the proxy, but CPI’s stock has fallen recently in value, hitting a low of $12.39 Aug. 21 and trading recently for less than $13 a share.

If the company marks the value of the shares down, it could mean that CPI will report Meyer’s pay as a negative number next year.

That’s exactly what happened at Brown Group.

The company, which had the highest paid director a year ago, this year reported that most of its directors lost money on their service to the company. Big gains in stock values that had been reported on last year’s proxy were reversed when the value of Brown Shoe stock fell from a high of $37.39 in February 2007 to $11.91 on Jan. 8.

Directors who deferred their pay saw the biggest declines. Brown defers pay into "stock units," which correspond in value to the company’s common stock. They’re paid out in cash when a director leaves the board.

Patricia McGinnis, who deferred all of her cash pay, was the area’s highest-earning director for 2006 at $754,358. Brown reported her 2007 pay as a negative $639,858. The company valued her stock-based pay at $699,858 for 2006 but as a negative $699,858 for 2007.

Brown Shoe said McGinnis’ negative stock award reflects a paper loss on deferred compensation from earlier years through 2006. For 2006, the number was positive, reflecting a gain in value through the end of 2006. For 2007, the company marked the value down because of the lower stock price, but it could not reduce the award by more than the amount it increased in 2006 fiscal year. Brown declined to provide further details.

According to Brown’s proxy, the figure the company reported doesn’t reflect the market value of the underlying stock or what McGinnis would receive if she left the board. That would depend on the number of stock units she had accumulated and the stock prices when she leaves.

Peter Lupo, managing director of Pearl Meyer & Partners, a New York-based compensation consulting firm, agrees that the way directors’ stock-based pay is reported can be confusing. If a company provides information about the amount of stock given and its vesting schedule, you can calculate the "consulting value" of the stock. However, assigning a value could be arbitrary if the company doesn’t tell you when the director got it.

This year’s second-highest paid director was Patrick T. Stokes, the former chief executive of Anheuser-Busch Cos. Stokes serves on the boards at A-B, Ameren Corp. and U.S. Bancorp. Altogether, Stokes took in $1.3 million, including $1.07 million from the two companies based here.

Stokes’ biggest paycheck, $927,018, came from his former employer, where he has a post-retirement consulting gig that paid $750,000 last year. A-B provides Stokes with an office and administrative help as well as transportation when he is providing the consulting service. It spent $390,000 on the office and other expenses for Stokes’ consulting arrangement last year.

Stokes’ consulting was due to end next August, but it will come to an early end as a result of Belgian giant InBev’s agreement to buy A-B pay day loans. The deal is expected to close later this year.

August A. Busch III, also a former A-B chief executive, took home more than $1.1 million in pay for serving as a director of A-B and Emerson here and at AT&T of San Antonio.

Busch III’s $579,649 in pay from the brewery includes $392,168 for personal security and $16,992 in consulting fees. According to company documents, the company provides security at Busch’s home "in recognition of Mr. Busch III’s continued prominence resulting from his years of service to the company."

A-B also provides Busch with an office, administrative help and transportation when he consults for the company. It also pays some bills related to aircraft owned by Busch or companies in which he has an interest. Busch’s consulting and other post-retirement arrangements cost the brewer $635,000 over and above his director pay.

A-B paid another $407,611 to Ginnaire Rental Inc., a company that Busch owns, to lease aircraft for business use.

William P. Stiritz was the next-highest paid director at $818,233, including $610,622 from three St. Louis area companies. Stiritz, the former chief executive of Ralston-Purina Co., once served on more than 10 boards.

Stiritz, 74, has cut his board commitments in half. He now serves at Ralcorp Holdings Inc., Energizer Holdings Inc., Reliance Bancshares Inc., Macy’s and Vail Resorts Inc. Ralcorp and Energizer both were spun off from Ralston under Stiritz’s guidance. Ralcorp owns about 19 percent of Vail Resorts.

Public companies here spent amounts ranging from $93,500 to nearly $4 million on director pay last year.

Anheuser-Busch topped the list, spending $3.96 million on 15 directors, followed by Express Scripts Inc., which spent $2.66 million for 11 directors. Twenty-one boards spent more than $1 million.

Companies pay directors in cash, stock awards, stock options and miscellaneous pay, which can include travel for spouses, consulting fees and things like insurance or home security.

About 46 percent of the $46.6 million St. Louis companies paid directors here last year was cash — a combination of retainers, fees for attending meetings and extra pay for serving as committee chairmen. The pay total is for 339 outside directors occupying 363 board positions; some directors serve on multiple boards.

Another $16 million or 33 percent of pay was stock, and $7.5 million or 16 percent was in stock options. The amounts listed in these categories represented the company’s cost for the stock-based pay, not necessarily what directors will realize if they sell the stock or exercise the options.

Because this is the first year all St. Louis-based companies were required to disclose director pay, it’s almost impossible to determine whether director pay is increasing overall. Eleven companies increased the retainers they pay to directors. RehabCare Group and First Banks Inc., which were among a handful not paying director salaries in prior years, added them this year.

Some companies require directors to take all of their pay in stock or units that rise and fall in value along with the company’s stock. Others encourage it by giving directors a bonus for selecting stock rather than cash pay. Still others divide directors’ pay between stock and cash.

Corporate governance experts say that requiring directors to hold stock aligns their interests with those of other shareholders.

Arch Coal, for example, requires directors to defer $40,000 of their $120,000 retainer into a hypothetical investment in Arch stock, which is paid in cash when a director leaves the board.

Belden Inc. pays a $60,000 cash retainer and also gives directors restricted stock worth $115,000. Similarly, Charter Communications Inc. pays directors $40,000 in cash and gives them restricted stock worth $65,000.

At Emerson, $100,000 of each director’s $150,000 retainer is paid in restricted stock.

Express Scripts gives directors $115,000 in stock at the first meeting and a $200,000 grant every year in addition to a $30,000 cash retainer.

Bill Coleman, chief compensation officer for Salary.com, says he thinks it’s good for directors to hold stock because it aligns their interests with shareholders. However, he thinks directors’ pay should be kept pretty simple, with few benefits, because they should be paid for their knowledge and what they can contribute to the company.

jerristroud@post-dispatch.com | 314-340-8384

Source

Will the tightening of the global credit markets throw InBev’s takeover of Anheuser-Busch Cos. off track? Not if you ask the Belgian brewer. But the mood on Wall Street is a little less certain.

In the wake of meltdowns at Bear Stearns and Lehman Bros., there may be traces of skepticism floating around one of the biggest buyouts in history.

Shares of Anheuser-Busch Cos. dropped nearly 3 percent to $66.20 on Monday in the midst of a market-wide slide, and closed at $66.05 Tuesday.

Anheuser-Busch’s stock has never risen above $68.43, even after Anheuser-Busch’s board agreed to the $70 per share. Is that an indication that investors are not quite sure that InBev will be able to secure credit and complete its $70-per-share, $52 billion buyout?
InBev said it is still on track to close the transaction by the end of the year. But Edward Jones analyst Jack Russo lowered his rating on Anheuser-Busch’s stock from ‘hold’ to ’sell’ on Tuesday, citing risks to InBev’s financing package.

"While we still see it as probable that the deal closes as planned at $70 in an all-cash offer, fragile credit markets increase the risk that financing falls through, gets delayed, or gets restructured," he wrote in a research note. He said the risk/reward ratio for owner Anheuser-Busch stock is poor, since there is "substantial downside" if the transaction does not go through.

Morningstar analyst Ann Gilpin likewise urged caution.

"Given the recent deterioration in the credit markets and general uncertainty in financial institutions worldwide, we feel it is prudent to raise our uncertainty rating for Anheuser-Busch," she wrote in a note to clients payday loans. "While we think the deal will likely go through, the state of the credit markets adds some uncertainty around our ($70) fair value estimate, which is based on the transaction price agreed to with InBev."

InBev said it has "fully committed financing" in place, with signed credit facilities from a group of leading financial institutions. It has already completed the primary syndication phase of lining up financing, spokeswoman Marianne Amssoms said in an e-mail.

The aligned banks represent "a very diversified group of strong banks, giving InBev access to all significant capital markets," she said.

jmcwilliams@post-dispatch.com | 314-340-8372

Source

The future of Wall Street is up for grabs — and changing by the minute.

In the course of a few hours Sunday, Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz), the fourth-largest investment bank hobbled by toxic real estate assets, was left for dead and may file for bankruptcy before Monday.

Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz), the No. 3 investment bank and weakest remaining firm after $40 billion of write downs, rushed into the arms of Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) for $29 a share — less than half its 52-week high but almost $12 higher than its closing price Friday.

These moves, coming after the U.S. government’s takeover of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and six months after the meltdown of Bear Stearns and its shotgun marriage to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz), renew questions of what Wall Street will look like in an environment of lower leverage and reduce appetite for risk.

Now there are questions whether any of the independent firms will still be around pay day loans. Certainly, for those that survive the current 100-year storm, Wall Street will look a lot different.

“It seems perfectly clear leverage is going down, that banks will be more careful who they do business with, and that there is a desire to be more of an agent than a principal,” said Donald Marron, head of private equity firm Lightyear Capital and former CEO of PaineWebber Group.

“There will be a trend toward specialization. It’s hard to be in too many different places. Firms will concentrate on their strengths.”

After more than 13 months of a global credit crunch, the rules of the marketplace have changed. 

Read more