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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

The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.

The U.S. Treasury submitted revised guidance to Congress on its plan late yesterday as lawmakers and lobbyists push their own ideas. The department also adjusted its new plan to insure money-market funds to limit protection to balances as of Sept. 19, after complaints from bank lobbyists.

Officials made the changes two days after unveiling plans for an unprecedented intervention in financial markets in an effort to halt the deepening crisis. The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress.

“The Treasury's thinking is to make it as big and wide as possible so they have the flexibility to act if need be,'' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. “There have been losses on a whole range of U.S. debts and as the economy deteriorates in response to the housing slump those losses could escalate.''

Treasury officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.

`Significantly Higher'

“The costs of the bailout will be significantly higher than originally considered or acknowledged,'' said Josh Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. “How, given these changes, can the administration and Federal Reserve believe they are being forthright in their unrevised expectation of future losses?''

Separately, the Treasury said in a statement late yesterday it would limit its $50 billion plan for insuring money-market funds to those held by investors as of Sept. 19, excluding any subsequent contributions.

The American Bankers' Association, which had expressed concern about the plan last week, praised the move, saying it would eliminate an incentive for savers to shift out of bank accounts into money-market funds. The Treasury put no limit on the money-market fund insurance, while the Federal Deposit Insurance Corp. protects bank deposits up to $100,000.

“If all money market mutual funds had been included with the government guarantee moving forward, this proposal would have threatened to take money out of local FDIC-insured banks,'' Edward Yingling, president of the ABA in Washington, said in a statement.

International Scope

In its latest guidance on the bad-debt fund, the Treasury said firms that are headquartered outside the U.S payday loans. will now be eligible.

The changes come after two days of weekend talks between administration officials and congressional staff in Washington. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke told lawmakers Sept. 18 that a comprehensive attack on the worst financial crisis since the Great Depression was critical after a series of government interventions failed to normalize markets.

Paulson on Sept. 19 announced his intention to seek legislation from Congress. Appearing on television talk shows yesterday he called for rapid passage of a bill. Congressional panels have scheduled two hearings this week on the crisis; Bernanke appears at a third hearing on the economic outlook.

Lawmakers are also seeking changes to Paulson's plan, which amounts to an unprecedented intervention in financial markets and would prevent courts from reviewing actions taken under its authority.

Lawmakers' Demands

Democrats are pressing for oversight through the Government Accountability Office, and for the inclusion of efforts to refinance mortgages for struggling homeowners. House Financial Services Committee Chairman Barney Frank wants limits on compensation of corporate executives who benefit from the program.

Republicans are urging limits on how any profits from the program could be spent.

“Just about everyone in the markets agrees the Paulson plan needs to be simple — unencumbered by complications and penalties,'' Christopher Low, chief economist at FTN Financial in New York, wrote in a note to clients. “Of course, Washington doesn't know how to do that.''

It was the third straight weekend of crisis work for Paulson and his Treasury colleagues. The previous week, Paulson and New York Fed President Timothy Geithner led talks with banks in an effort to avert the bankruptcy of Lehman Brothers Holdings Inc. While Lehman did end up in bankruptcy, Merrill Lynch & Co. agreed to be taken over by Bank of America Corp.

Weekend Warrior

On Sept. 7, Paulson seized Fannie Mae and Freddie Mac, the largest sources of U.S. mortgage financing, after the government-chartered, shareholder-owned companies failed to raise sufficient capital from private sources to satisfy regulators.

Late yesterday, the Fed approved requests from Goldman Sachs Group Inc. and Morgan Stanley, Wall Street's last two independent investment banks, to become bank holding companies.

“It's hard to say there are any illusions left'' about the seriousness of the financial crisis, said Jason Trennert, chief investment strategist at Strategas Research Partners in New York.

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Premier Dalton McGuinty is shuffling his cabinet this afternoon to underscore the importance of attracting business and new investment to battered Ontario, which has shorn more than 200,000 manufacturing and forestry jobs in the past few years.

Sandra Pupatello moves from economic development to a new international trade and investment ministry.

Her old duties will be taken up by Michael Bryant, who moves from aboriginal affairs and remains House leader.

Labour Minister Brad Duguid succeeds Bryant at the always challenging aboriginal affairs ministry.

Duguid will be replaced by Tourism Minister Peter Fonseca payday loan low fee.

The new tourism minister will be Monique Smith, whose responsibilities as revenue minister will be taken over by Finance Minister Dwight Duncan.

Lieutenant Governor David Onley will swear in McGuinty’s revamped cabinet at 3:30 p.m.

It’s unusual to have a cabinet shuffle just days before a new legislative session, suggesting the premier is highlighting the urgency of Ontario’s sagging economy.

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The Canadian Auto Workers union is trying to form a committee for a possible organizing drive at WestJet Airlines.

The CAW confirmed yesterday it has received calls from WestJet employees expressing interest in the union, and it is now working on a committee.

"We’re at a very preliminary stage," said union president Ken Lewenza, who took the reins of the CAW on Sept. 4. Lewenza, who ran Local 444 in Windsor for 14 years, succeeded Buzz Hargrove, who was CAW president for 16 years.

Calgary-based WestJet employs about 5,700 and promotes the idea of workers becoming owners of the company no qualifying payday advance.

The CAW wants to become more aggressive in organizing outside the manufacturing sector, where it has lost thousands of members in recent years because of plant closings. The union already represents some 5,000 Air Canada workers.

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Thompson Coburn LLP on Tuesday gave St. Louis the verdict it wanted.

The law firm agreed to keep its 595 jobs downtown instead of moving to Clayton in return for about $700,000 in tax abatements and incentives from the city.

Thompson Coburn will even get its name on U.S. Bank tower.

For the city, the retention of the high-profile law firm is a reaffirming win in a year where it suffered the loss of 850 jobs with the closing of Macy’s division headquarters and was jilted by Centene Corp.

The decision to stay downtown was a tough one for Thompson Coburn because it received a number of very competitive proposals over the last two years, Thompson Coburn chairman Tom Minogue said at a news conference. One of the locations the firm had considered was Brown Shoe Co.’s planned mixed-use development at 8300 Maryland Avenue in Clayton.

"We are confident that we made the right choice for us," he said. "We wanted to be where all our people wanted to be."

Although the city was successful in convincing Thompson Coburn to stay downtown, Armstrong Teasdale LLP, currently located at One Metropolitan Square, 211 North Broadway, is considering moving to Centene Corp’s planned headquarters building in Clayton.

A.J. Chivetta, a partner involved in the firm’s relocation efforts, could not be reached for comment.

The city is still feeling the sting of losing Centene back to Clayton. The medical plan administration firm in September announced that it was going to move its headquarters to downtown as part of the Ballpark Village development. But in July, the company pulled out of the deal after it, the city and the developers could not hammer out an agreement.

Clayton offered up to $22 million in tax incentives over 20 years to lure Centene back.

Thompson Coburn employs more lawyers than any other firm in St. Louis and generates $1.2 million a year in taxes for city services, Mayor Francis Slay said.

City officials have been aggressive in their attempts to keep jobs from leaving downtown — especially high-paying ones such as lawyers, who add to the city coffers by way of the 1 percent wage tax.

Keeping a firm of Thompson Coburn’s size downtown "is good for the city’s image and for our economy and our business," Slay said payday loans.

Thompson Coburn agreed to sign a 12-year lease at the U.S. Bank tower, located at Seventh Street and Washington Avenue. The firm will remodel its existing 240,000 square feet.

The $700,000 in incentives include abatements of personal property, construction material sales taxes and about $400,000 in forgivable loans and training funds, said Barbara Geisman, the deputy mayor for development.

As part of the agreement, U.S. Bank will donate its current 360-space garage to the Missouri Development Finance Board. An additional garage, which will contain another 360 parking spaces plus a floor of retail space, will be built in the plaza space in back of the building. The Missouri Development Finance Board will run both garages. The estimated $15 million in construction costs will be financed by revenue from both garages, Geisman said.

"This was a substantial gain for the city of St. Louis in the long run," said Robert Lewis, president of Economic Strategies, a St. Louis real estate and economic development consulting firm. By keeping Thompson Coburn with its large number of employees and high wages, the city can make up its costs within about two years, he estimated.

"It (the deal) helps a big firm with ample prestige located in a very important building stay in the city without hurting the city’s budget," he said."

"It’s not a huge amount of money," agreed Don Phares, professor emeritus of economics and public policy at the University of Missouri-St. Louis.

More importantly, he said, is the city’s image.

"If they (Thompson Coburn) left, it would indicate that downtown St. Louis is no longer the place to do business," Phares said explaining such a decision could influence other firms to leave. "Keeping them there may be a sign to other firms that being in the city is a desirable place to be."

gappleson@post-dispatch.com | 314-340-8331

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Despite Hurricane Gustav’s threat to infrastructure in the Gulf of Mexico, oil prices fell from an earlier rally Friday as the dollar gained traction against the euro.

U.S. crude for October delivery fell 13 cents to settle at $115.46 a barrel. Prices were higher earlier as investors braced for the storm, which is expected to make landfall in the U.S. on Tuesday morning.

Oil rose as high as $118.76 during Friday trading as Gustav bore down on the Gulf, but then pulled back as the dollar gained strength against the 15-nation euro.

Dollar rises: The dollar gained against the euro after a Chicago Purchasing Managers Index report showed an unexpected increase in manufacturing activity around the Chicago area.

A University of Michigan report also showed a better than expected rise in consumer sentiment.

The two reports lessened the impact of a reported decline in personal income, which signaled that the effects of the government’s $90 billion stimulus program were drawing to an end.

The decline in personal income also indicates that consumers may not have money to pay for a lot of expensive petroleum-based fuel, which pulled oil down as well.

Additionally, oil is traded in dollars, so a stronger dollar makes oil more expensive for foreign investors. As the dollar rises, many who purchase commodities as a hedge against inflation transfer their money into other markets.

The dollar rose against euro Friday, but fell against the Japanese yen.

Gustav bears down: Oil prices lost traction despite projections that Hurricane Gustav will to enter the Gulf on Sunday. Some models show the storm could reach Category 4 strength before it reaches Cuba, according to the National Hurricane Center.

Royal Dutch Shell (RDS), ExxonMobil (XOM, Fortune 500) and ConocoPhillips (COP, Fortune 500) were among the oil companies prepared to evacuate major offshore rigs Friday.

Facilities in the Gulf account for about 25% of U.S. oil production. Offshore platforms and pipelines buried in the sea bed are vulnerable to extreme storms such as hurricanes.

Just three years ago, hurricanes Katrina and Rita devastated oil facilities before battering the Louisiana coast. The storms, which reached Category 5 strength before making landfall, destroyed 113 offshore oil and natural gas platforms and damaged 457 pipelines in 2005.

Oil companies are shutting down production and oil traders are hedging their bets ahead of the weekend, according to Karen Matusic, spokeswoman for the American Petroleum Institute.

"Even if the storm doesn’t hit, you’re going to get companies evacuating the rigs for precautionary reasons," she said.

Storm upgrades: Oil companies have tried to improve the storm resistance of offshore rigs and pipelines since Katrina and Rita.

Drilling rigs and production platforms moored to the sea floor in the Gulf had been attached with eight lines, and are now required to be moored with 12 to 16 lines cashadvance. Pipelines are now required to be buried deeper beneath the sea floor.

"That’s one reason the response to this storm has been somewhat muted so far," said Jim Ritterbusch, president of oil advisory firm Ritterbusch and Associates.

The new safety measures should make facilities much more resistant to storm damage, but Gustav would be their first real-world test.

"There’s concern for the offshore platforms," said Michael Lynch, president of Strategic Energy & Economic Research, Inc. But the biggest concern is "power loss at some facilities," he said.

If the storm disrupts electricity, the platforms may be unable to operate. However, facilities are generally better equipped to handle power outages now than they were in 2005, according to Lynch.

"The biggest risk is that you get the major loss of a natural gas processing facility," said Lynch. Fluctuations in natural gas prices can also affect crude oil, since both are used in similar applications such as home heating.

On Thursday, Gustav sent crude prices as high as $120.50, although prices later fell in part because of a report that there was a large increase in natural gas supplies.

If the storm does make a direct hit on Gulf facilities, the Energy Department said Thursday it was prepared to release supplies from the government’s 700 million barrel Strategic Petroleum Reserve to cushion the blow. 

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Lending between U.K. banks slumped 68 percent in July as financial institutions hoarded cash to shore up their balance sheets, signaling Bank of England efforts to revive money markets aren't working.

The volume of interbank lending in the British currency fell to 205 billion pounds ($370 billion), from 635 billion pounds in July last year, according to central bank data published today. Lending averaged 269 billion pounds a month since the credit crunch started in August 2007.

Banks are curtailing lending while losses from the collapse of the U.S. subprime-mortgage market climb above $500 billion. Interbank lending rates are little lower now than they were in April, when the Bank of England offered to take on damaged mortgage-backed bonds in an effort to unfreeze lending. The strains in global money markets will probably persist “for some time,'' the Bank for International Settlements said today.

“We're in the same position we were in last year, with banks hoarding cash to refinance their own beleaguered balance sheets,'' said Christoph Rieger, a fixed-income strategist at Dresdner Kleinwort in Frankfurt. “The Special Liquidity Scheme has helped individual banks by preventing them from becoming illiquid, but it hasn't helped money markets return to normal.''

The July figure, which excludes central bank transactions, is up from 195 billion pounds in June. The total peaked at 656 billion pounds in February last year, and has averaged 270 billion pound since the data began in 1997.

Brink of Recession

The central bank program allows commercial banks to swap mortgage-backed securities harmed by the credit squeeze for government bonds. The lending freeze led to the collapse of mortgage lender Northern Rock Plc in September, triggering the first run on a U.K. bank in more than 140 years.

The credit famine and the fastest inflation in at least a decade have brought the U.K. to the brink of a recession. Gross domestic product stagnated in the second quarter, ending the nation's longest stretch of economic growth in more than a century, according to government data paydayloans.

Bank of England Governor Mervyn King said in June he will unveil a new money-market system this year to cope with both “normal'' and “stressed'' conditions. He hasn't said when or whether banks will reveal their participation in the April plan.

“It's significant that lending volumes have stopped falling, but what's worrying is the level where they've stabilized,'' said Lena Komileva, an economist at Tullett Prebon Plc in London. “This new order reflects weak confidence in credit quality as a result of banks struggling to refinance their loan books. It's a striking illustration of a crisis at its height.''

Pressures `Continue'

Interest-rate derivatives imply that banks are becoming more hesitant to lend on speculation credit losses will increase as the global economic slowdown deepens.

The premiums banks charge each other for three-month cash relative to the overnight indexed swap rate widened to 78 basis points today from 12 basis points on July 31, 2007, before the credit crunch took hold in the U.K. It has averaged 69 basis points in the past 12 months, up from an average of 11 basis points in the preceding year.

“The term structure of Libor-OIS spreads suggests the interbank market pressures are expected to continue for some time,'' Ingo Fender and Jacob Gyntelberg, analysts at the BIS, wrote in the Basle-based bank's quarterly report.

The increase in short-term borrowing costs triggered questions over the accuracy of the London interbank offered rate, the benchmark interest rate administered by the British Bankers' Association and used to calculate rates on $360 trillion of financial products worldwide.

The BIS said in March some banks may have understated their borrowing costs to avoid being seen as having difficulty raising financing.

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Oil traders have long been accustomed to reading the tea leaves for clues to the true state of fuel consumption in China, but even the savviest analysts are being tested this year by a befuddling mix of signals.

An unexpected second month of weak crude oil imports reported on Monday gave fresh vigor to the bears, who read it as a signal that refiners had overestimated demand; bulls are still enraptured by surging diesel and gasoline imports, which they say may continue as industries resume operations after the Olympics.

Both could be wrong.

With major new refiners being started toward the end of this year, China’s crude oil import growth should accelerate but its massive products stockpiling will slow, cutting fuel imports.

Between the rapidly shifting trade flows and the lack of transparency around inventory levels, which were built up substantially ahead of the Olympic games this month, traders will be hard pressed to determine whether a U.S.-spawned economic slowdown is finally taking the wind out of China’s sails.

That’s a key question for oil markets that have risen sixfold in as many years, driven in large part by burgeoning Asian demand.

Some closest to the pump say the day has already arrived, nearly two months after Beijing surprised the nation with a near 18 percent rise in subsidized gasoline and diesel prices.

“Demand is definitely coming off after the price hike bad credit payday loans. Among the worst hit is the transportation sector, which had been operating on razor-thin margins even before the increase,” said Qi Fang, a long-time independent dealer who owns a dozen petrol stations in Hebei province, near Beijing. 

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Connecticut sued Countrywide Financial Corp. on Wednesday, becoming the latest state to take the mortgage lender to court over its lending practices.

State Attorney General Richard Blumenthal alleges that Countrywide (CFC, Fortune 500) misled borrowers into taking on risky home loans they could not afford. California, Illinois, Florida and the city of San Diego have made similar claims in their own lawsuits against the company.

Countrywide, once the nation’s largest mortgage originator before a jump in bad loans ravished its business, has been blamed for helping to cause the nation’s mortgage meltdown.

The lawsuit was filed in Hartford Superior Court on Wednesday, and the company was served with the legal papers earlier in the day, Blumenthal said.

Blumenthal’s office and Connecticut’s departments of Banking and Consumer Protection are the plaintiffs in the lawsuit. They’re alleging that the company violated state consumer protection and banking laws and charged unjustified fees to homeowners who defaulted.

"Countrywide conned homeowners into mortgages they simply could not afford," Blumenthal said, adding that hundreds, possibly thousands, of Connecticut homeowners were affected.

Countrywide, based in Calabasas, Calif., said in a statement Wednesday that it cannot comment on pending litigation.

But the company noted that it had previously announced its commitment to responsible lending practices, including an effort to keep an estimated 265,000 customers in their homes by modifying at least $40 billion in troubled mortgages.

"We will respond to the AG in due course," the company said, referring to Blumenthal.

Countrywide’s shareholders approved a takeover by Charlotte, N.C.-based Bank of America (BAC, Fortune 500) in June.

"Since taking ownership of Countrywide in July, Bank of America has been involved in a detailed review of Countrywide’s operations," Countrywide’s statement said cash advance now. "Practices that established Bank of America’s positive reputation and record in home lending are an illustration of how we will operate the combined company."

Like Connecticut, the other states suing Countrywide want the company to pay restitution to borrowers who lost their homes or paid excessive fees.

Blumenthal said Wednesday that when homeowners defaulted on their Countrywide loans, the company "bullied" them into repayment plans known as "workouts" with excessive fees that made it nearly impossible for consumers to dig out of the debt.

"Countrywide stacked the deck and the deal against its customers," Blumenthal said. "Our goal is to unstack the deck and undo the deals, restoring fairness and fiscal sense to mortgages."

Countrywide, which faces numerous other lawsuits related to its lending practices, has also been under scrutiny by federal authorities.

A federal grand jury has been investigating Countrywide, New Century Financial Corp. and IndyMac Bancorp Inc. — a sign that prosecutors are looking into whether fraud and other crimes might have contributed to the mortgage crisis that led to the demise of all three California-based lenders.

Washington state Gov. Chris Gregoire also has accused Countrywide of discriminatory and predatory lending practices that targeted minority borrowers, and of cheating Washington state out of $5 million in fees.

That state’s Department of Financial Institutions is seeking to revoke Countrywide’s license and impose a $1 million penalty for predatory lending practices. 

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Consumer spending probably slowed in June as the boost from tax rebates waned, signaling near-record gasoline prices and a weakening labor market hurt households, economists said before a report today.

The 0.4 percent increase followed a 0.8 percent rise in May, according to the median forecast of 67 economists surveyed by Bloomberg News. The report may also show inflation accelerated.

The tax rebates from the government's stimulus plan will provide only a temporary boost for Americans in the face of $4-a- gallon gasoline, tumbling home prices and mounting job losses. The Federal Reserve is projected to hold interest rates unchanged tomorrow as prices rise and the economy slows.

“Consumer spending still has tremendous headwinds and it will no longer be fueled by the tax rebates,'' said Bill Hampel, chief economist at the Credit Union National Association in Washington. “Consumer spending will be weak at least through the middle of next year.''

The Commerce Department's report is due at 8:30 a.m. in Washington. Spending estimates in the Bloomberg survey ranged from 0.5 percent drop to a gain of 0.9 percent.

Separately, the Commerce Department may report that factory orders rose 0.7 percent in June compared with a 0.6 percent gain the prior month, according to economists surveyed by Bloomberg. Commerce will release its report at 10 a.m.

The tone of spending today's report will hinge on whether the jump in prices accounted for much of the expected increase in purchases, economists said.

Incomes Fall

Incomes likely fell 0.2 percent in June after a 1.9 percent gain the prior month, when most of the tax rebates were delivered. About $28 billion went out in June, compared with about $50 billion in late April and May, according to Treasury Department figures.

The Fed's preferred price gauge, known as the core measure because it excludes food and fuel, probably rose 0.2 percent last month after a 0.1 percent May gain, the median forecast showed http://paydayintime.com.

Core prices in the 12 months ended in June probably climbed 2.2 percent, the biggest year-over-year increase since December, according to the survey median.

Investors are betting the Fed will hold the benchmark rate unchanged at 2 percent tomorrow, according to federal funds futures contracts. Fed Chairman Ben S. Bernanke on July 15 told lawmakers that the economy faced threats to both growth and inflation.

There are “significant downside risks to the outlook for growth'' and “upside risks to the inflation outlook have intensified,'' he told the Senate Banking Committee in Washington.

Spending to Slow

Most economists are forecasting the lift from the rebates will fade in the second half of the year. Retail sales rose 0.1 percent in June, less than forecast, indicating consumers may already have started to retrench. Purchases of autos and light trucks dropped in July to the lowest level since 1993, industry figures last week showed.

Economists surveyed by Bloomberg in the first week of July forecast economic growth would slow to a 1.4 percent annual pace in the third quarter and to 0.5 percent in the fourth quarter.

The economy shrank at a 0.2 percent rate in the last three months of 2007 and grew at about an average 1.5 percent pace in the first six months of 2008, government data last week showed.

With the economy teetering on the brink of a recession, consumers are focusing their purchases on staples while cutting back on luxuries like $4 lattes, causing sales to slump at Starbucks Corp. the world's largest chain of coffee shops.

Starbucks Corp. last week said it will close more U.S. stores than it will open next year after it posted its first loss in 16 years as a public company.

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