Finance counsels

U.K. Chancellor of the Exchequer Alistair Darling will say this week that the economic crisis will be deeper and longer-lasting that the government first predicted, the Sunday Times reported.

The government hasn't lost control of the public finances, although the crisis has hurt its revenues, Darling will say in a speech at the annual Mais lecture in London on Oct. 29, the newspaper reported, without saying how it got the information.

The U.K. economy shrank in the second quarter, its first contraction in 16 years. Prime Minister Gordon Brown and Bank of England Governor Mervyn King admitted for the first time last week that Britain is heading for a recession, while Charlie Bean, the central bank's governor for financial stability, said in an Oct. 24 interview with the Scarborough Evening News that the turmoil in the banking industry is the worst ever.

The government this month bought majority stakes in Royal Bank of Scotland Group Plc and HBOS Plc, two of the country's biggest lenders, as part of a 500 billion-pound ($793 billion) rescue plan to save the financial system from collapse. The government will formally announce spending plans in Darling's pre-budget report in the next few weeks.

The next 12 months “will be quite difficult'' for Britons, Communities Secretary Hazel Blears said in an interview on Sky News's Sunday Live television program, adding that the government will seek to help people threatened with repossession.

“There's quite a lot we can do,'' Blears said. “The fact we've got more influence in the banking sector is a very good thing.''

`Irresponsible Lending'

The government's assurances that banks will offer loans at 2007 rates aren't “empty words,'' Blears said internet pay day loans. “We won't go back to the days when people could borrow 100 percent or 125 percent mortgages. There was irresponsible lending and people took advantage of that.''

Several Treasury forecasters have revised predictions down, with some expecting the recession to be worse than the last contraction of the early 1990s, the Sunday Times said.

Darling's pledge to increase spending and prioritize housing, energy and small businesses may “stunt the private sector's recovery once the recession is past'' by putting the government in a “dominant position,'' a group of economists including Trevor Williams at Lloyds TSB Corporate Markets and Peter Spencer at Ernst Young's ITEM Club, said in a letter to the Sunday Telegraph.

Almost four in five U.K. companies are cutting back on expenses, from hiring staff to Christmas parties, the Institute of Directors said, citing a survey of 1,114 businesses. Four in 10 companies said they had cut back on hiring, 27 percent said they had reduced pay or bonuses and 27 percent said they were spending less on staff entertainment. The survey was conducted in mid- September.

“After 15 years of economic growth the party is over,'' Graeme Leach, the IoD's chief economist, said in an e-mailed statement. “Budget setting for 2009 is going to be a very tough process in order to squeeze out every possible cost saving.''

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The University of Hawaii will cut its operating budget by up to $30.6 million over the next two years.

The Board of Regents this week approved a reduced operating budget of $1.4 billion for 2009-10 and 2010-11 in response to cuts in the state budget.

The UH 10-campus system typically spends about $1.6 billion annually.

UH officials said the cuts won’t require layoffs and are aimed at only minimally affecting university services. They said most of the reductions will be achieved by energy conservation and a freeze on new hires.

The state’s Budget and Finance Department asked the university and all other state departments to submit budgets for three scenarios, which would reduce UH’s general funds budget by either $13.5 million, $22 million or $30.6 million.

Gov. Linda Lingle had asked all state departments to come up with budget proposals in which spending was cut by 10 to 20 percent, and encouraged using alternatives to general funds where possible free credit report instantly. A decline in tax revenue has led to an expected shortfall in the state budget starting next July 1.

“These reductions are occurring in the context of a surge in UH enrollment, up nearly 3,000 students in the last year, to an all-time high of 53,500,” said UH President David McClain in a prepared statement. “Our proposed operating budget reflects the need to sustain our services to this larger population.”

The $30.6 million cut would include a drop of $9 million in actual costs and authorizes the use of up to $21.6 million from tuition and research money to pay operating expenses instead of using money from the general fund.

The budget will go to the governor for approval, and be tied into the state budget to be presented to the Legislature in January.

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Solyndra Inc., a maker of photovoltaic systems designed to optimize solar electricity production on commercial rooftops, said Thursday it signed a new long-term sales contract with solar integrator GeckoLogic GmbH for about $250 million.

Fremont-based Solyndra said the contract with Wetzlar, Germany-based GeckoLogic extends through 2012 and is part of Solyndra’s previously-announced total contractual backlog of approximately $1.2 billion.

The solar panels for these contracts will be manufactured at Solyndra’s facilities in Fremont and Milpitas.

“We are very pleased to announce this relationship with GeckoLogic advance america cash advance. Their European expertise and emerging North American capabilities should enable exceptional growth in the fastest growing markets for commercial scale solar,” said Solyndra founder and CEO Chris Gronet. “We expect that the Solyndra system’s ease and speed of installation can enable GeckoLogic crews to annually outfit significantly more commercial rooftops with solar.”

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It costs more to fill up in Buffalo than in New York City. And among those who want to know why are Rep. Brian Higgins and the AAA.

According to daily AAA fuel gauge data, the average cost of a gallon of gasoline in Buffalo is $3.38, compared to Rochester ($3.28), New York City ($3.23) and Long Island ($3.11). The cheapest gas in New York state is in Albany, at $3.00 a gallon.

“The price disparity has been developing in Western New York the last few weeks,” said AAA Spokesman Shaun Seufert, who added the organization has been trying for months to get a definitive answer as to why prices are higher in Western New York. The AAA, he said, has reached out to the American Petroleum Institute, the state Attorney General’s Office and others to find out why.

“We’ve been quite unsuccessful,” he said, adding the best answer they’ve heard to date is hopefully, this is an anomaly, and it will work itself out over the next few weeks.

It appears prices in Buffalo are also among the highest among metropolitan areas in the continental U http://payday-4all.com.S. The AAA reports in San Francisco the price of a gallon of unleaded fuel is $3.52 per gallon and $3.46 in San Jose, the only markets with higher gas costs than Buffalo.

Coincidentally, Higgins sent a letter on Tuesday to the Federal Trade Commission chairman William Kovacic, asking the same question.

“I want to get good hard facts and take immediate action,” said Higgins, adding taxes and the price of a barrel of oil should affect everyone similarly, so he wants to find out why prices are higher in Western New York.

Higgins asks the FTC to investigate theories on possible causes concerning the relative distance to oil refineries, differing local taxes and fees, and the level of local retail competition.

“An investigation will help inform my colleagues and me of the best course of action to take to address gas prices and ensure Western New Yorkers are getting a fair deal,” Higgins said.

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U.K. house prices posted the biggest annual decline in at least six years in October as the British economy stared “into the abyss,'' Rightmove Plc said.

The average asking price for a home fell 4.9 percent from a year earlier, the most since records began in 2002, to 229,691 pounds ($398,000), Britain's most-used property Web site said today. In London, prices dropped 2 percent from a year ago.

“Certainly from an economic point of view, we've stared into the abyss,'' Miles Shipside, commercial director at Rightmove, said in a Bloomberg Television interview. “With unemployment growing, we can see a lot of repossessions about to happen. The situation is going to get more severe.''

Britain is in a recession and will contract for the next three quarters, according to a report published today by Ernst & Young's ITEM Club, which uses the same forecasting model as the U.K. Treasury. The financial crisis forced the government to rescue banks and has left a dearth of loans for potential homebuyers.

The government last week announced an unprecedented 37 billion-pound bailout for Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group Plc. Bradford & Bingley Plc was seized last month, and Northern Rock Plc was nationalized earlier this year after the first U.K. bank run in more than century.

The intervention in the banking sector is the biggest since the nationalization wave by the socialist government of Clement Attlee after World War II.

Brown's Rescue

Brown last month suspended the tax on home purchases of less than 175,000 pounds. The government has also promised 250 billion pounds in interbank loan guarantees to unfreeze money markets in response to the crisis that cost banks worldwide more than $600 billion in losses and writedowns.

Asking prices for a home still rose 1 percent from September, led by gains in the East and West Midlands and the Southeast, today's report showed guaranteed cash advance loan. Price declined the most on the month in Wales and the north. In London, prices increased 0.3 percent on the month.

“For those on the market now, they haven't been dropping their prices particularly,'' Shipside said. “But they're going to face fairly severe competition from some forced sales from this unfortunately high unemployment that's coming.''

The economy stalled in the second quarter, ending the longest stretch of uninterrupted growth in more than a century. A government report this week will probably show that gross domestic product contracted 0.2 percent in the third quarter, the median forecast of 35 economists in a Bloomberg News survey shows.

U.K. Forecast

The economy will shrink 1 percent next year, the ITEM Club predicted today. It forecast that the Bank of England, which lowered the benchmark interest rate by a half point to 4.5 percent on Oct. 8, will cut it further in coming months.

“The supply of credit to companies and households is likely to remain severely restricted,'' said Peter Spencer, the ITEM Club's chief economist and a former U.K. Treasury official. “The bank now has room for further cuts as early as next month. We see base rate falling to 3 percent next year.''

Economists including Citigroup Inc.'s Michael Saunders and UBS AG's Amit Kara predict that the Bank of England will follow last week's emergency interest-rate reduction with another half- point cut at the next scheduled meeting on Nov. 6. Minutes of last month's meeting, showing how each of the nine panel members voted, will be published Oct. 22.

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Despite tough times for the auto industry, Denver area auto dealer Lisa Schomp is set to open a new 86,000-square-foot BMW dealership next month, the first in the state to sell the new BMW Hydrogen 7 car.

The $20 million dealership — which will be called Schomp BMW — is located at C-470 and Lucent Boulevard in Highlands Ranch. A grand opening gala is planned for Oct. 22.

Schomp owns Ralph Schomp Automotive on South Broadway in Littleton, which sells BMWs, Hondas and Minis cash till payday advance.

BMW sales will be moved to the new facility in November. It will be among the top 15 largest BMW dealerships in the U.S., the company said.

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Shares of Morgan Stanley and Goldman Sachs, the last two big investment banks, plunged again Friday as fears about the fate of the banking sector remained front and center in the ongoing global financial crisis.

The two companies have been among the hardest hit stocks during this devastating market decline. But shares of several other big bank stocks rallied during a wild, tumultuous day for the broader market.

Morgan Stanley (MS, Fortune 500) plummeted as much as 46% at one point Friday on news that the rating agency Moody’s was weighing a potential downgrade of the long-term debt ratings of the company and its subsidiaries. The company’s stock bounced back a bit at the end of the day but still finished 22% lower.

Earlier this week, Morgan Stanley was forced to deny rumors that its proposed $9 billion stock sale to the Japanese bank Mitsubishi UFJ was in danger of falling apart.

Still, despite several reassurances from Morgan Stanley and Mitsubishi that the deal would close as scheduled next week, investors remained jittery about Morgan’s fate.

"The fundamental issue with financial stocks is that fear in the market can become self-fulfilling," said Benjamin Wallace, an analyst at the Westborough, Mass.-based wealth management firm Grimes and Company Inc.

Shares of Goldman Sachs also fell Friday after Moody’s issued a similar warning about the Goldman’s debt. Goldman (GS, Fortune 500) stock fell 12% on the news.

Calls to both Morgan Stanley and Goldman Sachs requesting comment about the Moody’s reports were not immediately returned.

But other big banks which some analysts have deemed as relatively safer than the investment banks, such as Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), bucked the trend, gaining over 6% and 13% respectively.

San Francisco-based Wells Fargo (WFC, Fortune 500), which claimed victory in its battle with Citigroup (C, Fortune 500) to buy struggling bank Wachovia (WB, Fortune 500) on Thursday, closed up nearly 4%.

The KBW Banking Index and S&P Banking Index, two key barometers of the sector that also include many regional banks, both finished more than 7% higher Friday.

Shares of regional banks SunTrust (STI, Fortune 500), KeyCorp (KEY, Fortune 500) and US Bancorp (USB, Fortune 500) all ended about 5% higher on the day.

Investors were juggling a host of other concerns about banks Friday, including an auction of credit default swaps for bankrupt Lehman Brothers.

A number of big U.S. and European banks, such as Morgan Stanley, Citigroup, HSBC, BNP Paribas, Goldman Sachs and Deutsche Bank, found themselves on the hook after the auction valued the insurance against a Lehman collapse at just 8.625 cents on the dollar, according to credit derivatives processor Creditex.

But one analyst downplayed the impact that the results of the auction were having on bank stocks.

"In the context of more than [$200 billion] of payments that will be made, it’s not that significant and on the bright side, this auction gives us clarity to pricing and closure to this situation and now the players can quantify fully their exposure to this particular event," Peter Boockvar, market analyst for Miller Tabak, wrote in a note to clients.

In the end, a lack of confidence remained the key driver in Friday’s selloff of many banks.

World governments have unleashed numerous initiatives in recent days in the hopes of restoring some much-needed calm to markets worldwide including a coordinated cut interest rates by a number of central banks. Still, those efforts have proved ineffective as the selloff continues and credit markets remain frozen.

Starting today, finance ministers from the Group of Seven, including U.S. Treasury Secretary Henry Paulson, are scheduled to meet to discuss other coordinated efforts to help stop the global market slide.

Still, Paulson and other top domestic officials are weighing other courses of action to help prop up the U.S. banking system.

One widely speculated move would involve injecting much-needed capital into banks through the purchase of shares in bank stocks. This option was made available to the Treasury under the recently passed $700 billion rescue plan.

President Bush’s chief economic adviser, Edward Lazear, told CNN Thursday that this was being considered. Many experts believe that doing so would encourage banks to lend to one another more freely.

Libor, a key rate banks use when lending to each other, has soared to record levels in recent weeks. Even as banks showed some willingness to lend on a short-term basis on Friday, longer-term Libor rates jumped to their higher level so far this year.

There is also talk that U.S. officials may take a page from the playbook of other world governments such as the U.K., which backed billions of dollars in bank debt earlier this week.

At the same time, top U.S. officials are also considering removing the deposit insurance cap on all domestic bank deposits, The Wall Street Journal reported Friday. European countries including Greece, Ireland and Germany have already done so in recent days.

The thinking behind such bold measures is that they could provide a psychological boost to an industry which has been shaken to its core.

But John Douglas, a former general counsel at the Federal Deposit Insurance Corp., has warned that removing deposit caps altogether could have unintended consequences.

Lifting the deposit caps might make it tougher for regulators to identify banks in trouble since a run on deposits is typically a warning signal. And commercial depositors would be less likely to take their money out of banks if all the deposits are insured, Douglas said.

In addition, Douglas, who currently serves as a partner in charge of the bank and financial institutions group at the law firm Paul Hastings, warned that lifting the cap could require financial institutions to pay higher premiums to support the insurance fund that covers deposits of failed banks.

That could prove to be an expensive proposition for capital-hungry banks.

"[The money] has to come from somewhere," Douglas said. 

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Trying to stimulate visitor demand, the Hawaii Tourism Authority on Thursday approved an additional $2 million to market the state.

That increases the HTA’s fiscal 2009 budget for marketing to $55.5 million. The $2 million will be reallocated from other, as yet unspecified, HTA funds.

HTA’s 2009 budget initially totaled $88 million but that was later adjusted to $79 million, reflecting the drop in hotel guest tax revenues that support the agency’s operations.

For the June-August period, transient accommodations tax revenue was in line with the downward forecast, said Lloyd Unebasami, the HTA’s chief administrative officer, who on Thursday was named interim president and CEO while a search begins to replace Rex Johnson, who resigned Wednesday (quick faxless payday loan).

Sharon Weiner, the HTA’s vice chairwoman, said the board would determine where to spend the extra $2 million after receiving staff recommendations.

Previous efforts have focused on public relations and advertising campaigns on the West Coast, Hawaii’s largest visitor market.

On Oct. 5, the HTA and its chief marketer, the Hawaii Visitors and Convention Bureau, launched the first phase of a $12.5 million North American campaign that will run through next March.

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The American Planning Association has named the Wilson Boulevard-Clarendon Boulevard corridor in Arlington one of 10 great streets in the U.S. for 2008.

The second annual award, sponsored by Chicago-based APA’s Great Places in America program, recognizes the role planning plays in creating communities.

Arlington’s implementation of smart growth measures in the area have resulted in above-average Metro use, mixed-use development along the two streets, increased density and a reduced carbon footprint, according to APA.

Twenty percent of Arlington residents do not own a car and 50 percent walk, bike or use public transit to get to work.

Bike lanes on the two boulevards connect to nearby Metro stations, and sidewalks continue to be widened to fit more foot traffic.

“The efforts of the community and local officials during the 1960s to get Metro routed through the commercial and business areas of Arlington shows the lasting value such planning and foresighted decisions create for a community,” said Paul Farmer, APA’s executive director, in a statement (pay day loan).

Since 1970, the number of jobs and office space — measured in square footage — in the area has quadrupled.

And more growth will spurt up soon, thanks to a two-decade plan developed by Arlington Economic Development in 2006 that envisions 1.1 million square feet of new office space.

Last year, APA called Eastern Market in D.C. one of the 10 best neighborhoods in the U.S.

On Wednesday APA also named Union Station in D.C. a great space. APA cited Union Station’s social atmosphere, transportation options, historic position in the L’Enfant plan for D.C., and its revitalization after periods of decline, as reasons for the pick.

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Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) may sell some bad assets to the Treasury Department but a decision has not yet been made, the regulator of the two mortgage finance companies said on Sunday.

“They are financial institutions that could sell assets,” James Lockhart, director of the Federal Housing Finance Agency, said during a C-SPAN television interview. “Whether they will or not certainly the decision has not been made.”

Lockhart estimated that between 2 percent and 4 percent of Fannie and Freddie’s assets are bad mortgages.

On Friday, President George W. Bush signed into law a $700 billion bailout package for the U.S. financial industry aimed at allowing Treasury to buy soured assets from institutions that have stopped lending to each other as well as individuals and businesses (cash loan).

The two government-sponsored enterprises, which were seized by the government in early September, own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt.

The first asset sale under the Treasury program is not expected to take place for at least four weeks, sources familiar with the financial rescue plan said on Friday.

“It’s very important for them that Treasury will be able to buy those, free up capital at those banks to make new mortgages that hopefully Fannie and Freddie can buy,” Lockhart said.

The U.S. financial crisis has dealt a massive blow to the lending industry on Wall Street and in Europe. Companies have collapsed under the weight of nonperforming mortgages and related securities. 

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