Thaw Is Felt in Market for Commercial Paper

The credit market has always been a concern in dealing with the current financial crisis, but the market has been performing better over the past few months. After Lehman Brothers filed for bankruptcy, the market quite literally ground to a halt. The LIBOR rate rose to unprecedented levels, and thankfully, after moves by the Treasury, Fed, and UK, the market slowly started heading back in the right direction. if you remember, in previous posts by Joe, "Metamorphosis" and "Double, Double Toil and Trouble; Fire Burn and Cauldron Bubble", he wrote at length about the changes in the LIBOR rate.

There have been several articles written recently about the moves from U.S. Treasuries (many U.S. Treasury money market funds have closed in fact) to corporate bonds and in particular investment grade corporate bonds.

On Friday in The Wall Street Journal there was a good article pointing out the continuing movement to normalcy.

Thaw Is Felt in Market for Commercial Paper
January 30, 2009
By Liz Rappaport

A significant batch of companies that had turned to the Federal Reserve as a buyer of last resort for their commercial paper have likely moved back to private buyers, showing that the once-frozen market has thawed, but not completely.

The amount of three-month debt the Fed holds in its Commercial Paper Funding Facility fell by $102 billion in a week when about $230 billion of commercial paper the Fed owned was set to mature. That suggests some issuers likely returned to the open market.

The market for this three-month debt took the heavy new supply load in stride. While the Fed doesn't disclose whose debt it is buying, or delineate which purchases are new and which are refinancings, investors have kept a close eye this week on the commercial-paper market's reaction as a test of the Fed's efforts to restore credit markets to more-normal functioning.

"I believe the CP market has been stabilized, but it is not back to full health," says Joseph Abate, money market strategist at Barclays Capital.

Still, many issuers did resell their debt back to the Fed for another three months of financing, even though the Fed charges them higher interest rates than others pay in the open market, say traders. Meanwhile, a few have found alternatives to the market and the Fed, by turning to other, cheaper debt venues such as issuing certificates of deposit or Yankee CDs, or other shorter-term debt, say traders.

The total outstanding amount of short-term debt in the commercial-paper market fell by $86.8 billion in the week ended Wednesday -- the third straight week of decline, according to Fed data. The debt sold by financial companies fell substantially, by $93.5 billion.

The deluge of supply maturing this week didn't alter rates, a mark of strength for the market, say analysts. The Fed is buying commercial paper at rates of 1.2% to 3.2%, while borrowers with access to the open market are borrowing for three months at rates ranging from 0.4% to a little more than 2%, according to Fed data.

Money market fund managers, which buy commercial paper, still are wary of foreign bank debt, say traders and analysts, but these borrowers rely heavily on the market to borrow much-needed U.S. dollars. So these banks ended up rolling over their debt with the Fed, says one trading desk head.

Source: The Wall Street Journal

New Tax Perks For Your 2008 Return

It is getting to be tax time again, and this year, there are many, many changes. Rollins & Associates, P.C. can easily guide anyone through the issues, but below are some of the "tax perks" that may be frequently overlooked in 2008.

First, it is important to remember that homeowners have seen plenty of tax changes in recent years. For instance, those who don't itemize now have access to an extra standard deduction for property taxes paid, up to $500 for single filers and $1,000 for married-filing-joint filers. And homeowners who went through a foreclosure on their primary residence won't owe income tax on the forgiven mortgage-loan debt.

Recovery Rebate Credit

You call it the "stimulus payment," but the IRS says "recovery rebate credit." If you weren't eligible for the full payment -- or any at all -- last year, you may get more money now if a layoff or investment losses slashed your income, because the stimulus checks sent in 2008 were based on 2007 returns. The credit starts phasing out with adjusted gross income over $75,000 for single filers and $150,000 for married-filing-jointly filers.

Also, if you had a baby in 2008 you may be eligible for the additional $300 stimulus payment per child. Or if your college-age child now supports herself, she might qualify for up to $600. See this IRS page for more on claiming recovery rebate credit.

AMT Relief on Incentive Stock Options

Taxpayers who've struggled to pay the alternative minimum tax owed on incentive stock options -- exercising an ISO can result in an unexpected AMT bill -- got some good news in 2008: You don't owe the tax.

Also, Congress sped up the process by which taxpayers can take a credit against regular tax for previous AMT bills, among other provisions. See this IRS page for more information.

Perks for Higher-Income Taxpayers

Even as some wonder whether Congress will allow the 2001 tax cuts to expire in 2010, some of those tax cuts are still going into effect.

Higher earners' ability to take itemized deductions and personal exemptions is limited -- those perks phase out at higher incomes. But thanks to the 2001 tax cuts, those phase outs themselves were slowly eliminated starting in 2006. (In 2010, higher-income taxpayers enjoy these perks with no reduction at all, but as with the other tax cuts, this one expires after 2010.)

In 2008, higher-income earners will find their itemized deductions and personal exemptions are cut by just one-third the amount in effect before the tax cuts.

The phase-out on deductions starts at adjusted gross income of about $159,950 for most filers and on exemptions at $159,950 for single filers and $239,950 for married-filing-jointly.

First-time Home Buyer Credit

If you're a first-time home buyer who bought a home after April 8, 2008, and before July 1, 2009, you may qualify for a credit of 10% of the purchase price up to $7,500 on your 2008 tax return. If you buy the home in 2009, you may still be able to take a credit on your 2008 return.

The credit is more like a loan and must be repaid over 15 years. The stimulus bill under consideration now may eliminate the repayment rule for homes bought in 2009, but what's not clear yet is -- if the new stimulus plan does eliminate the repayment rule -- will people who bought a home in 2009 but claimed the credit on their 2008 return be exempt from repaying the credit? (Those who take the credit on homes bought in 2008 will have to repay the credit, under current law.)

If you buy a home in 2009 (before the July 1 deadline), your best bet is to wait until the final bill gets signed into law to see whether to claim the credit on your 2008 return or to wait and claim it next year.

Harvest Business Loss

It's not a new perk but plenty of business owners may find themselves ready and eager to take advantage now of the loss carryback that allows them to use a net loss in 2008 to offset a profit from up to two years ago -- and collect a refund for the difference.

Keep an eye on the new stimulus bill being discussed now: The loss carryback perk may get extended to five years, up from two years now.

Note that perks on your federal return may not apply to your state tax bill.

Mileage Rate

The IRS raised the standard rate for deducting mileage to 58.5 cents per mile for July through December, up from 50.5 cents from January through June. That compares with 48.5 cents in 2007.

For 2009 though, the IRS moved it back down to 55 cents due to the drop in gasoline prices. As long as gasoline fluctuates, it looks like it will fluctuate as well.

Sources: MarketWatch, IRS

Santander, Wells Fargo Offer Hope as Markets Surge

Banco Santander in Europe and Wells Fargo in the United States offered a glimmer of hope to shareholders in the financial sector after both banks held their dividends steady.

Santander, the euro zone's largest bank, also reassured investors by not just staying in the black, but also reporting higher profits, while Wells Fargo lost money (part of the loss can be attributed to adding $5.6 billion to its reserves to cover future loan losses and prepare to absorb Wachovia and $294 million in charge-offs relating to the alleged fraud of money manager Bernard Madoff), but benefited from its assurances it will not need to tap government bailout funds.

The news came as bank shares rallied on optimism governments prefer to guarantee losses on assets, rather than take more stakes in banks, helped by reports the U.S. government would set up a bad bank to mop up the toxic assets of stricken lenders.

Richard Parsons, the recently-named chairman of Citigroup, one of the biggest recipients of U.S. taxpayer funds so far, confirmed U.S. President Obama was looking at an "aggregator bank" that would take trillions of dollars of assets from banks.

Sheila Bair, chairman of the Federal Deposit Insurance Corp (FDIC), has floated the idea that her agency should manage such a bad bank, two industry sources told Reuters.

Bair contends the FDIC is best positioned to run such a government entity because it has years of experience disposing of the least-valuable assets of failed American banks, according to one of the industry sources who has direct knowledge of Bair's thinking. An FDIC spokesman declined to comment directly.

Wells Fargo, the fourth-largest U.S. bank, soared as high as 32%, while the KBW Banks index gained 14.4%. In Europe, Deutsche Bank rose 22% as peers around Europe rose by almost 12%.

Santander's surprise statement came a day after it announced compensation for losses linked to the alleged Bernard Madoff fraud.

The bank, with 2.3 billion euros ($3.1 billion) of client exposure to the scheme, tried to repair the damage on Tuesday, saying it would issue 1.38 billion euros in preferential shares to compensate customers.

The bank's stock jumped more than 13% as it unveiled 2008 recurrent net profit of 8.876 billion euros, up 9.4% from a year earlier, including a 500 million euro provision linked to Madoff.

Spain's market regulator told Santander to release 2008 profits ahead of the scheduled February 5 date to take into account the compensation package for losses linked to Madoff's alleged Ponzi scheme.

"Once again, Botin is the first," said Natalia Aguirre at broker Renta4 in praise of Santander chairman Emilio Botin. "He's protecting the bank's reputation and business and also nips what could have turned into a very big problem in the bank."

Wells Fargo, BofA Soar

Wells Fargo, now the second largest U.S. bank by market value, reported $116 billion in new mortgage applications in the fourth quarter, up 40% from the third quarter. Of the $116 billion, $37 billion was for new-home purchases, and "that could be a sign" of the housing market "getting closer to a bottom," said Wells Chief Financial Officer Howard Atkins.

Wells Fargo was just one of several U.S. banks whose shares soared on hopes about the "aggregator bank."

Even Bank of America, which has made mostly negative news recently as it was forced to resort to a government bailout to plug losses from its Merrill Lynch takeover, rose 14%, and is now up nearly 50% from its year low touched earlier this month.

After the market closed on Wednesday, Bank of America expressed its backing for the institution's embattled chief executive, Kenneth Lewis, the mastermind behind the Merrill takeover.

The board's support for Lewis reflects his experience in managing through a challenging environment and assimilating mergers, lead outside director O. Temple Sloan said in a statement. Some analysts had speculated that Lewis' days at the bank were numbered.

Elsewhere

The shares of Britain's Lloyds Banking Group led the day's rally, with a 50% surge after a leading analyst said fears it will be nationalized were overblown. Royal Bank of Scotland shares leaped 36% and Barclays rallied 19%.

France's BNP Paribas jumped 21% and Fortis NV rallied 12.8% after Fortis said it reopened talks with the Belgian government and BNP over the sale of assets, potentially clearing a path for a deal.

Sources: Reuters, The Wall Street Journal

FDIC May Run U.S. "Bad Bank"

The Federal Deposit Insurance Corp (FDIC) is aiming to take control of a widely mooted "bad bank," to be set up by the U.S. government to mop up toxic assets of struggling banks, Bloomberg News reported on Tuesday.

Numerous U.S. lawmakers expect the Obama administration to produce a new strategy soon for stabilizing the nation's troubled banks, and believe several options are under discussion.

CNBC reported that the Obama administration is set to announce the outlines of its financial rescue plan early next week.

FDIC Chairman Sheila Bair would run the operation, Bloomberg said, citing a source familiar with the matter. It said another source told the news agency that Bair is arguing that her agency could help finance the effort by issuing bonds guaranteed by the FDIC.

U.S. Senate Banking Committee Chairman Chris Dodd said on Tuesday he was aware the Obama administration was discussing the idea of establishing a "bad bank" to mop up toxic assets, and added the idea made some sense.

"I'm aware they're discussing it," Dodd, a Connecticut Democrat, told reporters outside the Senate. "I think that idea has arrived. It makes some sense to me."

Dodd's committee would presumably be consulted if the administration were going to try and establish an aggregator bank, or "bad bank," to take troubled assets off banks' balance sheets, although Dodd said administration officials had not talked personally to him about it.

"There's talk about it but not to me specifically."

Source: Reuters

Take Bad Assets Out of Banks-Obama Adviser

CNBC - Repairing financial markets and revitalizing lending will require governments to remove bad assets from banks and recapitalize them, Laura Tyson, an economic adviser to the Obama administration, said on Wednesday.

"The natural next step is, which is real simple, you take the bad assets out, the balance sheets are hit really hard, you recapitalize banks with different rules, and they go out again and lend," Tyson said in a panel discussion at the annual meeting of the World Economic Forum.

The Obama administration is weighing the "bad bank" idea as part of its overhaul of the $700 billion financial rescue plan.

Tyson also said that testimony to the seriousness of the world economic crisis is that inflation is no longer the risk.

"The issue that people are concerned about is deflation, not inflation but deflation. That's the depths of the crisis that we are now confronting," she said.

She also strongly disputed views that government debt issuance to finance fiscal stimulus and bailout plans is crowding out the private sector, saying that "right now the securities markets are broken."

Source: CNBC

Geithner Sets Limits on Lobbying for Bailout Money

The Wall Street Journal has been reporting about the lobbying of the U.S. Treasury for TARP funds to be sent to certain banks. Their article focuses primarily on politicians, but there has been an onslaught of lobbyists also working to help certain banks. The push by the new Obama administration to be more transparent will hopefully make the process cleaner from both lobbyists and politicians.

From Tuesday's New York Times - The new Treasury secretary, Timothy F. Geithner, announced on Tuesday that he would crack down on lobbying to influence the $700 billion financial bailout program by companies that are receiving billions in taxpayer money.

Mr. Geithner, who was confirmed on Monday, also said he would set new limits intended to prevent political interference with decisions about which companies received bailout money.

Among other steps, the Treasury department said it would make public a log of all contacts by public officials and bank officials regarding specific financial institutions.

The log will be posted on the department’s Web site and updated weekly, it said.

The announcement followed several recent news reports about attempts by corporate lobbyists and members of Congress to influence the bailout program, including decisions about which banks should receive taxpayer funds.

"American taxpayers deserve to know that their money is spent in the most effective way to stabilize the financial system," Mr. Geithner said in a statement. "Today’s actions reaffirm our commitment toward that goal."

The details of the new rules, whose text has not been completed, were not released. But in a press release, the Treasury Department outlined the Obama administration’s intent to restrict corporate and political lobbying to influence the bailout program.

Among the changes will be rules to "combat lobbyist influence" over the bailout program, including by "restricting contacts with lobbyists in connection with applications for, or disbursements of" bailout funds, the department said.

A Treasury spokeswoman said the department’s lawyers were developing rules to adopt such a restriction to the extent allowed by law and would make the procedures public. The changes will not require legislation by Congress or regulations, she said.

Eugene Volokh, a constitutional law professor at the University of California, Los Angeles, said there was no legal impediment to barring Treasury officials from talking about specific matters with lobbyists, although the First Amendment would not permit the government to forbid people from trying to lobby it.

The New York Times reported on Jan. 24 that at least a dozen companies that received taxpayer funds from the bailout program lobbied the government about the program in the final months of 2008, according to their lobbying disclosure forms.

The new rules will also "ensure that political influence does not interfere" with bailout "decision making, using as a model for these protections the limits on political influence over tax matters," the Treasury said.

The tax investigation safeguards include rules to keep executive branch officials, including those at the White House, from ordering the Internal Revenue Service to conduct or terminate an audit of a particular taxpayer. If copied for the bailout program, the rule would prevent such officials from intervening in particular decisions about which banks get which funds.

The Treasury spokeswoman also said the department would disclose communications with members of Congress, along with bank executives, as part of its plan to make public all contacts about the bailout program.

The Wall Street Journal reported on Jan. 22 that several members of Congress, including lawmakers from Ohio and Alabama, had tried to ensure that regulators would steer bailout funds to banks in their states.

The article focused in particular on efforts by the chairman of the House Financial Services Committee, Barney Frank of Massachusetts, to help a troubled minority-owned bank in Boston. It later received $12 million in bailout money.

In a phone interview, Mr. Frank said he had no problem with Treasury posting a log of communications with members of Congress. He said he had been very public about his support for the Boston bank, and said lawmakers wanted their constituents to know of such efforts.

The Treasury said letters and calls from Congress played no role in its decisions about which banks received money. Mr. Geithner also declared that the Office of Financial Stability at Treasury, in making reports to Congress about how it was disbursing the bailout funds, would certify that each decision was based only on "investment criteria and the facts of the case."

The department said it would soon publish a detailed description of its investment review process. And it said that only banks recommended by their primary bank regulator would be eligible for bailout funds.

The announcement on Tuesday represented the latest step by the Obama administration to make the bailout program more open and accountable as it moved to disburse the second $350 billion, following criticism of the Bush administration’s handling of the first $350 billion of the program.

Another set of rules on lobbyists imposed by President Obama will affect Mr. Geithner’s chief of staff, Mark Patterson, who lobbied for Goldman Sachs as recently as last April. Under the new rules, Mr. Patterson cannot be involved in dealing with any issues involving Goldman or with other issues on which he lobbied.

The Obama administration has already said it will step up monitoring of lending patterns by financial institutions that have received bailout money. It also said it would seek to limit executive pay at banks that received taxpayer help in the future.

During his confirmation hearings, Mr. Geithner said the bailout needed "serious reform" and pledged that the administration would impose "tough conditions" to protect taxpayers.

Sources: The New York Times, The Wall Street Journal

Geithner Confirmed/Sworn in as Treasury Secretary

Timothy Geithner was sworn in Monday night as the nation's new treasury secretary, shortly after winning confirmation despite personal tax lapses that turned more than a third of the Senate against him.

Geithner, the New York Federal Reserve Bank chief, becomes the nation's 75th treasury secretary and one of the point men President Barack Obama will be counting on to help pull the country out of its worst financial slide in generations.

Obama attended the swearing-in ceremony at the Treasury Department and told his nominee, "You've got your work cut out for you."

Geithner said Treasury "will be a source of initiative" in trying to right the economy. "We are at a moment of maximum challenge for our economy and our country, and our agenda, Mr. President, is to move quickly to help you do what the country asked you to do."

The Senate earlier approved his nomination by a 60-34 vote.

Geithner, 47, served as undersecretary of the treasury for international affairs during the Clinton administration. As president of the New York Federal Reserve Bank, he's been a key player in the government's response to collapsing financial institutions and the housing and credit markets since last summer.

The ambivalence dogging lawmakers was reflected in the fact that a third of the chamber voted against Geithner, in large part because of his failure to pay all his taxes on income received from the International Monetary Fund in 2001 and in three subsequent years.

Ten Republicans overlooked that matter and voted for confirmation. One Republican, Sen. Arlen Specter of Pennsylvania, told reporters earlier in the day that he would vote yes, only to change his mind and vote no.

Three Democrats and one independent voted against Geithner's confirmation, including Sen. Robert C. Byrd, D-W.Va., the longest-serving senator in history.

"Had he not been nominated for treasury secretary, it's doubtful that he would have ever paid these taxes," Byrd said in a statement.

Eye on economy

For the prevailing majority, the real reason for Geithner's likely confirmation appears to be less a matter of bipartisan cooperation than political survival. Lawmakers of all stripes are eager to set the economy in the right direction long before voters judge their progress in the 2010 midterm elections.

"People make mistakes and commit oversights," said Sen. Orrin Hatch, R-Utah. "Even the most intelligent and gifted — two adjectives that certainly apply to Mr. Geithner — make errors in their financial dealings."

Even so, not everyone was convinced that the need for a speedy confirmation should trump concerns about the candidate. Sen. Susan Collins, a Republican did not buy Geithner's contention that he skipped paying some taxes because he was confused by the complexities of the tax code.

"They were described by the nominee himself as 'careless mistakes,'" Collins said in prepared remarks. "It has become clear to me that this is not merely a matter of complexity leading to mistakes, but of inexcusable negligence."

Sen. Mike Enzi, a Republican, agreed and noted that his is one of the few voices of dissent.

"Nominees for positions that do not oversee tax reporting and collection have been forced to withdraw their nomination for more minor offenses. They have been ridden out of town on a verbal rail," Enzi told the Senate. "The fact that we're in a global economic crisis is not a reason to overlook these errors."

"The Senate," he scolded, "is not supposed to be a group of 'yes' men."

It wasn't. Democratic Sen. Tom Harkin of Iowa lined up against the nominee, asking how someone of Geithner's "financial sophistication" could innocently not pay the taxes and then head up the agency that oversees the IRS.

"How can Mr. Geithner speak with any credibility or authority?" Harkin said.

A matter of time

The 10 Republicans who voted yes were Sens. Bob Corker of Tennessee, John Cornyn of Texas, Mike Crapo of Idaho, John Ensign of Nevada, Lindsey Graham of South Carolina, Judd Gregg of New Hampshire, Hatch of Utah, Richard Shelby of Alabama, Olympia Snowe of Maine and George Voinovich of Ohio.

The Democrats voting no were Sens. Byrd, Russell Feingold of Wisconsin and Harkin of Iowa. Also voting no was Sen. Bernie Sanders, I-Vt., who caucuses with Democrats.

Sens. Kit Bond, R-Mo., Sherrod Brown, D-Ohio, Edward M. Kennedy, D-Mass. and Ron Wyden, D-Ore., were absent. Senate seats representing Minnesota and New York are vacant.

The Senate Finance Committee approved Geithner's confirmation in an 18-5 vote last week. However ambivalent, some Senate Republicans were supporting him. Specter, for example, said he's not happy that Geithner didn't pay up all of the $42,702 in back taxes and interest until after he was nominated to become treasury secretary.

As such, Geithner will be directing the nation's economic recovery from the worst financial crisis in three generations, a task that could define the first two years of Obama's term. Specific duties include directing how $350 billion of already existing Wall Street bailout money is to be spent, then making the case to Congress and the public if more is needed.

In addition, Congress is working on an $825 billion economic recovery package that dedicates about two-thirds to new government spending and the rest to tax cuts. Geithner will be playing a big role in disbursing that money, too.

Sources: Associated Press, MSN.com

Timothy Geithner was sworn in Monday night as the nation's new treasury secretary, shortly after winning confirmation despite personal tax lapses that turned more than a third of the Senate against him.

Geithner, the New York Federal Reserve Bank chief, becomes the nation's 75th treasury secretary and one of the point men President Barack Obama will be counting on to help pull the country out of its worst financial slide in generations.

Obama attended the swearing-in ceremony at the Treasury Department and told his nominee, "You've got your work cut out for you."

Geithner said Treasury "will be a source of initiative" in trying to right the economy. "We are at a moment of maximum challenge for our economy and our country, and our agenda, Mr. President, is to move quickly to help you do what the country asked you to do."

The Senate earlier approved his nomination by a 60-34 vote.

Geithner, 47, served as undersecretary of the treasury for international affairs during the Clinton administration. As president of the New York Federal Reserve Bank, he's been a key player in the government's response to collapsing financial institutions and the housing and credit markets since last summer.

The ambivalence dogging lawmakers was reflected in the fact that a third of the chamber voted against Geithner, in large part because of his failure to pay all his taxes on income received from the International Monetary Fund in 2001 and in three subsequent years.

Ten Republicans overlooked that matter and voted for confirmation. One Republican, Sen. Arlen Specter of Pennsylvania, told reporters earlier in the day that he would vote yes, only to change his mind and vote no.

Three Democrats and one independent voted against Geithner's confirmation, including Sen. Robert C. Byrd, D-W.Va., the longest-serving senator in history.

"Had he not been nominated for treasury secretary, it's doubtful that he would have ever paid these taxes," Byrd said in a statement.

Eye on economy

For the prevailing majority, the real reason for Geithner's likely confirmation appears to be less a matter of bipartisan cooperation than political survival. Lawmakers of all stripes are eager to set the economy in the right direction long before voters judge their progress in the 2010 midterm elections.

"People make mistakes and commit oversights," said Sen. Orrin Hatch, R-Utah. "Even the most intelligent and gifted — two adjectives that certainly apply to Mr. Geithner — make errors in their financial dealings."

Even so, not everyone was convinced that the need for a speedy confirmation should trump concerns about the candidate. Sen. Susan Collins, a Republican did not buy Geithner's contention that he skipped paying some taxes because he was confused by the complexities of the tax code.

"They were described by the nominee himself as 'careless mistakes,'" Collins said in prepared remarks. "It has become clear to me that this is not merely a matter of complexity leading to mistakes, but of inexcusable negligence."

Sen. Mike Enzi, a Republican, agreed and noted that his is one of the few voices of dissent.

"Nominees for positions that do not oversee tax reporting and collection have been forced to withdraw their nomination for more minor offenses. They have been ridden out of town on a verbal rail," Enzi told the Senate. "The fact that we're in a global economic crisis is not a reason to overlook these errors."

"The Senate," he scolded, "is not supposed to be a group of 'yes' men."

It wasn't. Democratic Sen. Tom Harkin of Iowa lined up against the nominee, asking how someone of Geithner's "financial sophistication" could innocently not pay the taxes and then head up the agency that oversees the IRS.

"How can Mr. Geithner speak with any credibility or authority?" Harkin said.

A matter of time

The 10 Republicans who voted yes were Sens. Bob Corker of Tennessee, John Cornyn of Texas, Mike Crapo of Idaho, John Ensign of Nevada, Lindsey Graham of South Carolina, Judd Gregg of New Hampshire, Hatch of Utah, Richard Shelby of Alabama, Olympia Snowe of Maine and George Voinovich of Ohio.

The Democrats voting no were Sens. Byrd, Russell Feingold of Wisconsin and Harkin of Iowa. Also voting no was Sen. Bernie Sanders, I-Vt., who caucuses with Democrats.

Sens. Kit Bond, R-Mo., Sherrod Brown, D-Ohio, Edward M. Kennedy, D-Mass. and Ron Wyden, D-Ore., were absent. Senate seats representing Minnesota and New York are vacant.

The Senate Finance Committee approved Geithner's confirmation in an 18-5 vote last week. However ambivalent, some Senate Republicans were supporting him. Specter, for example, said he's not happy that Geithner didn't pay up all of the $42,702 in back taxes and interest until after he was nominated to become treasury secretary.

As such, Geithner will be directing the nation's economic recovery from the worst financial crisis in three generations, a task that could define the first two years of Obama's term. Specific duties include directing how $350 billion of already existing Wall Street bailout money is to be spent, then making the case to Congress and the public if more is needed.

In addition, Congress is working on an $825 billion economic recovery package that dedicates about two-thirds to new government spending and the rest to tax cuts. Geithner will be playing a big role in disbursing that money, too.

Sources: Associated Press, MSN.com

Timothy Geithner was sworn in Monday night as the nation's new treasury secretary, shortly after winning confirmation despite personal tax lapses that turned more than a third of the Senate against him.

Geithner, the New York Federal Reserve Bank chief, becomes the nation's 75th treasury secretary and one of the point men President Barack Obama will be counting on to help pull the country out of its worst financial slide in generations.

Obama attended the swearing-in ceremony at the Treasury Department and told his nominee, "You've got your work cut out for you."

Geithner said Treasury "will be a source of initiative" in trying to right the economy. "We are at a moment of maximum challenge for our economy and our country, and our agenda, Mr. President, is to move quickly to help you do what the country asked you to do."

The Senate earlier approved his nomination by a 60-34 vote.

Geithner, 47, served as undersecretary of the treasury for international affairs during the Clinton administration. As president of the New York Federal Reserve Bank, he's been a key player in the government's response to collapsing financial institutions and the housing and credit markets since last summer.

The ambivalence dogging lawmakers was reflected in the fact that a third of the chamber voted against Geithner, in large part because of his failure to pay all his taxes on income received from the International Monetary Fund in 2001 and in three subsequent years.

Ten Republicans overlooked that matter and voted for confirmation. One Republican, Sen. Arlen Specter of Pennsylvania, told reporters earlier in the day that he would vote yes, only to change his mind and vote no.

Three Democrats and one independent voted against Geithner's confirmation, including Sen. Robert C. Byrd, D-W.Va., the longest-serving senator in history.

"Had he not been nominated for treasury secretary, it's doubtful that he would have ever paid these taxes," Byrd said in a statement.

Eye on economy

For the prevailing majority, the real reason for Geithner's likely confirmation appears to be less a matter of bipartisan cooperation than political survival. Lawmakers of all stripes are eager to set the economy in the right direction long before voters judge their progress in the 2010 midterm elections.

"People make mistakes and commit oversights," said Sen. Orrin Hatch, R-Utah. "Even the most intelligent and gifted — two adjectives that certainly apply to Mr. Geithner — make errors in their financial dealings."

Even so, not everyone was convinced that the need for a speedy confirmation should trump concerns about the candidate. Sen. Susan Collins, a Republican did not buy Geithner's contention that he skipped paying some taxes because he was confused by the complexities of the tax code.

"They were described by the nominee himself as 'careless mistakes,'" Collins said in prepared remarks. "It has become clear to me that this is not merely a matter of complexity leading to mistakes, but of inexcusable negligence."

Sen. Mike Enzi, a Republican, agreed and noted that his is one of the few voices of dissent.

"Nominees for positions that do not oversee tax reporting and collection have been forced to withdraw their nomination for more minor offenses. They have been ridden out of town on a verbal rail," Enzi told the Senate. "The fact that we're in a global economic crisis is not a reason to overlook these errors."

"The Senate," he scolded, "is not supposed to be a group of 'yes' men."

It wasn't. Democratic Sen. Tom Harkin of Iowa lined up against the nominee, asking how someone of Geithner's "financial sophistication" could innocently not pay the taxes and then head up the agency that oversees the IRS.

"How can Mr. Geithner speak with any credibility or authority?" Harkin said.

A matter of time

The 10 Republicans who voted yes were Sens. Bob Corker of Tennessee, John Cornyn of Texas, Mike Crapo of Idaho, John Ensign of Nevada, Lindsey Graham of South Carolina, Judd Gregg of New Hampshire, Hatch of Utah, Richard Shelby of Alabama, Olympia Snowe of Maine and George Voinovich of Ohio.

The Democrats voting no were Sens. Byrd, Russell Feingold of Wisconsin and Harkin of Iowa. Also voting no was Sen. Bernie Sanders, I-Vt., who caucuses with Democrats.

Sens. Kit Bond, R-Mo., Sherrod Brown, D-Ohio, Edward M. Kennedy, D-Mass. and Ron Wyden, D-Ore., were absent. Senate seats representing Minnesota and New York are vacant.

The Senate Finance Committee approved Geithner's confirmation in an 18-5 vote last week. However ambivalent, some Senate Republicans were supporting him. Specter, for example, said he's not happy that Geithner didn't pay up all of the $42,702 in back taxes and interest until after he was nominated to become treasury secretary.

As such, Geithner will be directing the nation's economic recovery from the worst financial crisis in three generations, a task that could define the first two years of Obama's term. Specific duties include directing how $350 billion of already existing Wall Street bailout money is to be spent, then making the case to Congress and the public if more is needed.

In addition, Congress is working on an $825 billion economic recovery package that dedicates about two-thirds to new government spending and the rest to tax cuts. Geithner will be playing a big role in disbursing that money, too.

Sources: Associated Press, MSN.com

The Fight Over Wind Power

Late last summer The Rollins Financial Blog had a series of articles discussing alternative energy sources - nuclear, solar, wind, and ethanol (click to read the old articles). When oil and gasoline prices started to fall, many people thought that maybe these alternative sources would just be forgotten for the immediate future.

In his statements before and after his inauguration, President Obama has not forgotten. He has continued to push his agenda of alternative energy for many reasons - jobs, the environment, dependence on foreign oil, etc. Some applaud and some argue with many aspects of the proposals, but they look to be moving ahead.

This weekend, The Wall Street Journal had an Op-Ed column discussing the interesting twists in the "Cape Wind Project" in Cape Cod, Martha's Vineyard and Nantucket. I place this article here not to bash one side or the other but to point out the old notion that I am for it... unless it affects me.

Blowhards
The fabulous debate over wind power on Nantucket Sound.
The Wall Street Journal
January 24, 2009

For all the hype about the Bush Administration's oil-and-gas energy bias, one of its last official acts was to give the go-ahead to what could be America's first offshore wind farm -- thus enraging more than a few self-deputized environmentalists. Such are the ironies of the wilderness of mirrors known as the Cape Wind project.

For the last seven years and counting, the green entrepreneur Jim Gordon has been trying to build a fleet of wind turbines in federal waters near the upscale seascapes of Cape Cod, Martha's Vineyard and Nantucket. The site seemed ideal, given the stiff ocean breezes and the eco-friendly politics in Massachusetts. The company says its 130 towers could meet 75% of the region's electricity needs and reduce carbon emissions by some 734,000 tons every year.

The sort of people who can afford to use "summer" as a verb are in favor of all that. Completely in favor, really. But they did want to raise one quibble. Unfortunately, the wind farm would create "visual pollution" in Nantucket Sound, particularly the parts within sight of their beachfront vacation homes.

Mr. Gordon went ahead anyway, and the opposition rose to gale force. Supposedly the wind farm will lead to everything from the disruption of seabird habitats to "desecrating ancient American Native burial sites," in the words of Glenn Wattley, the head of an antiwind outfit funded by the likes of Bunny Mellon. But what really upsets these well-to-do Don Quixotes is the thought of looking at windmills that would appear about as tall on the horizon as the thumbnail at the end of your outstretched arm.

Then there is the political saga, with the Kennedy family as the Hyannis Port Sopranos, supplying the muscle. While Ted Kennedy was castigating President Bush for destroying the environment, the Senator was working furiously behind the Congressional scenes to kill Cape Wind. He even had the inspiration of getting former GOP colleague Ted Stevens of Alaska to slip wording into a spending bill that would have handed a veto to then-Governor Mitt Romney, another aesthetically minded opponent. Robert Kennedy Jr., a Time magazine "hero of the planet," tried to get the Sound designated as a national marine sanctuary to bar development.

Incredibly enough, this political sabotage has so far failed. And last week the Interior Department issued its long-awaited regulatory study, mostly finding "negligible" environmental impact -- apart from a "moderate" impact on the scenery. If the Obama Administration signs off, construction could begin next year.

Mr. Kennedy blustered that the report was rushed out: amusing, considering it runs to 2,800 pages. Bill Delahunt, the windy Cape Democrat, also denounced the action as "a $2 billion project that depends on significant taxpayer subsidies while potentially doubling power costs for the region."

Good to see the Congressman now recognizes the limitations of green tech, such as its tendency to boost consumer electricity prices -- but his makeover as taxpayer champion is a bit belated. Green energy has been on the subsidy take for years, including in 2005 when Mr. Delahunt was calling for "an Apollo project for alternative energy sources, for hybrid engines, for biodiesel, for wind and solar and everything else." The reality is that all such projects are only commercially viable because of political patronage.

Tufts economist Gilbert Metcalf ran the numbers and found that the effective tax rate for wind is minus-163.8%. In other words, every dollar a wind firm spends is subsidized to the tune of 64 cents from the government. The Energy Information Administration estimates that wind receives $23.37 in government benefits per megawatt hour -- compared to, say, 44 cents for coal. Despite these taxpayer crutches, wind only provides a little under 1% of U.S. net electric generation.

We'd prefer an energy policy that allows markets to shape the sources that predominate -- which would almost certainly put Cape Wind out of business. But President Obama seems determined to unload even more subsidies on green developers as he seeks to boost renewables to 10% of the U.S. electricity mix by the end of his first term and 25% by 2025; their share today is about 9% (5.8% of which is hydropower).

We wouldn't be surprised to see the President's green future wrestled to the ground by the likes of Mr. Delahunt, the Kennedys and other anticarbon Democrats. Environmentalists love the idea of milking Mother Nature for power, but they hate the hardware needed to make it work: huge windmills, acres of solar panels, high-voltage transmission lines to connect them to the places where people live. Of course, they still totally, absolutely, wholeheartedly support green energy -- as long as it gets built where someone else goes yachting.

----

Want to read more about the Cape Wind Project? You can Google "Cape Wind Project" and find many articles, but one article - called "Green Power" (linked here) - that gave some information that I found interesting was from a magazine called Fast Company. "A well-funded group, the Alliance to Protect Nantucket Sound, cropped up and recruited (Walter) Cronkite and historian David McCullough as its spokesmen. Senator Ted Kennedy wrote an editorial in the Cape Cod Times opposing the project."

Sources: The Wall Street Journal, Fast Company

Ford CEO - We Don't Need Loans

Ford Motor has enough liquidity to fund its restructuring plan and despite the deep downturn in auto sales still sees no need to ask for government loans, Chief Executive Alan Mulally said on Saturday.

"We don't want to borrow any more money. We have sufficient liquidity to fund our transformation plan, which means our business is in a relatively good shape," Mulally told reporters on the sidelines of the National Automobile Dealers Association convention.

Ford's U.S. rivals, General Motors Corp and Chrysler LLC, won approval in December for $17.4 billion of government loans to avert collapse. Ford has asked for access to a $9 billion credit line from the U.S. government but has not sought loans. Washington has not yet responded to Ford's request.

Mulally said Ford was in a better situation than its rivals because it borrowed more than $23 billion in 2006, using most of the company's assets as security, including its well-known blue oval logo.

Mulally said U.S. industry-wide sales in January had been similar to those in December, when they fell about 36% from a year earlier to 10.3 million units on an annualized basis.

Ford expects an economic stimulus package being pushed by new President Barack Obama to drive a recovery in auto sales starting in the second half and maintains its forecast of U.S. auto sales at 12 million to 12.5 million units, he added.

The forecast represents the high end of prevailing expectations. Analysts have forecast U.S. sales in a range between 10.1 million and 12.5 million units for 2009.

"Right now, I think with everything planned in the fiscal and monetary policy, I am very comfortable that we are going to start to turn things around through the second half of the year," Mulally said.

Source: Reuters

Geithner Wants Stronger Rules for Derivatives and Hedge Funds

Treasury Secretary-nominee Timothy Geithner on Friday pledged to strengthen regulation of over-the-counter derivatives and pursue registration of hedge funds to improve market transparency.

In written responses to questions from Sen. Carl Levin, a Michigan Democrat, Geithner said the current regulatory system for derivatives and complex structured financial products failed to adapt to new risks.

"We are going to need sweeping changes, in regulatory policy, the oversight structure and in our tools for crisis management," Geithner said in his responses.

Geithner faces a confirmation vote by the full Senate on Monday amid controversy over his underpayment of self-employment taxes. It is believed that while the tax issue is controversial, Geithner will easily be confirmed.

He said if confirmed, he would pursue a stronger and more comprehensive framework for regulating derivatives markets to bring greater transparency, accountability and safety to these markets, which have been blamed for deepening the current financial crisis and recession.

"There may be a number of ways to achieve this, but steps to be taken in the short-term include bringing standardized products within centralized clearing mechanisms and setting an effective statutory and regulatory framework for regulating all derivatives," Geithner said.

He added that he would also consider the consolidation of financial regulatory agencies -- a goal proposed by the previous Treasury secretary Henry Paulson.

Regarding hedge funds, Geithner said he believes better federal oversight was needed for hedge funds, whose destabilization could seriously disrupt markets and credit flows.

"I support the goal of having a registration regime for hedge funds because we need greater information and better disclosure in the marketplace. I believe that we should also establish an effective regulatory framework for derivatives dealers."

Geithner also endorsed continuation of mark-to-market accounting rules, saying they help protect investors and promote transparency.

Source: Reuters

Reid Says Geithner Will Win Senate Approval

President Barack Obama's pick for treasury secretary, Timothy Geithner, won Senate Finance Committee backing on Thursday, and the chamber's majority leader said he expected the full Senate to confirm him.

Obama's top economic Cabinet member needs full confirmation to start work tackling a financial crisis threatening to worsen a yearlong recession as job losses mount.

With an 18-5 vote, the Finance Committee largely overlooked Geithner's underpayment of $34,000 in taxes, clearing the way for a confirmation vote that Senate Majority Leader Harry Reid said he hoped to hold around 6 p.m. on Monday.

"I do," Reid told reporters when asked if he expected Geithner to be confirmed.

Republicans could try to stop him with a procedural roadblock. Reid said that would "be very unwise" politically, adding, "We will have the votes" to clear any such hurdle.

Finance Committee Chairman Max Baucus, a Montana Democrat who has been shepherding Geithner's nomination through controversy, had pushed for floor vote on Thursday, but Republicans objected, asking for more time. "The president needs his team. I'm trying to help him get his team in place," Baucus told reporters.

Geithner told the committee on Wednesday the Obama administration in coming weeks would unveil a multi-pronged effort to stabilize the housing market, strengthen core banks and support consumer credit to help foster economic recovery.

Geithner, who now heads the New York Federal Reserve Bank, was considered by many to be an ideal candidate for the job because he has already been deeply involved in government efforts to prop up financial institutions and markets.

Geithner's nomination appeared without controversy until revelations last week that he underpaid self-employment tax for several years when he worked for the International Monetary Fund earlier this decade.

Although Geithner corrected what he called "careless" and "unintentional" mistakes, the tax errors cost him some votes on the committee.

"I don't believe that the requisite candor exists for me to indicate my support for him with an affirmative vote," Republican Sen. Jon Kyl of Arizona said before voting "no."

Democrats and some Republicans on the panel said Geithner was well qualified and needed on the job as soon as possible.

Sen. Kent Conrad, a North Dakota Democrat, said he would not vote for Geithner in "normal times." "But these are not normal times. And I personally don't think we can afford a further delay in the filling of this critically important position," Conrad said. As he continued, "it is absolutely imperative that we get a secretary in place."

Strong Dollar

Geithner answered dozens more written questions from senators in a 102-page document released on Thursday, reaffirming the Treasury's long-standing currency mantra.

"A strong dollar is in America's national interest," he wrote in the document. "Maintaining confidence in the longterm strength of the United States economy and the stability of the U.S. financial system is good for America as well as our trading and investing partners."

Geithner also issued a stern warning to China, which has a huge trade surplus with the United States, saying Obama believed Beijing was manipulating its yuan currency.

"President Obama -- backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency," Geithner wrote. "President Obama has pledged as president to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices."

But Geithner said that due to the global economic crisis, the immediate focus of U.S.-China relations "needs to be on the broader issue of stabilizing domestic demand in China and the U.S."

"The immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home," Mr. Geithner wrote.

A Chinese central bank official said the bank had noted Geithner's recent comments on the yuan and reported them to relevant Chinese government departments.

Geithner also said the Treasury had no current plans to request more bailout money beyond the $700 billion already authorized, but that the situation was "dynamic."

"We have to be prepared to act flexibly and with speed if conditions worsen appreciably, to devote more resources if that is necessary to secure our objectives, and we have to make it clear that we will continue to act until we have restored the strength and vitality of the U.S. financial system," he wrote.

Sources: Reuters, The Wall Street Journal

Nation's Banks Are Well-Capitalized: FDIC's Bair

On Wednesday morning, Sheila Bair, the FDIC Chairman, was interviewed on CNBC, and she talked at length about the health of the financial system.

The nation's banking system remains generally sound despite the doom and gloom that has dominated some of its biggest names, FDIC Chairman Sheila Bair said Wednesday.

"It was a tough quarter. We knew it was going to be a tough quarter. Banks have some real challenges," Bair said during a CNBC interview. "But I think it needs to be emphasized and re-emphasized these banks are solvent, they're well-capitalized overwhelmingly, and that really is what creditors and depositors seem to be focusing on right now."

Moreover, Bair rejected predictions in some areas that the bank industry as a whole is facing ruin, though she did acknowledge problems. She said 98 percent of all banks are well-capitalized, representing 99 percent of all assets.

"There is a fear factor," she said. "You're seeing that in the stock market, you're seeing that in other places. People don't know how bad the economy is going to get, what the outer limit on these losses could be."

"This is why we need a Troubled Asset Relief Program to get banks lending again so we get out of this self-reinforcing cycle of a deteriorating economy."

See the article and full video for the Bair interview at CNBC.com.

Of the TARP plan, Bair indicated support for the government creating an aggregating institution--a "bad bank" as some refer to it--that would be a repository for the billions in toxic assets on the balance sheets of the nation's banks.

Dumping the assets would free up lending, something she called critical for the economy.

"The aggregated bank might have an advantage in the sense that it actually moves the assets off the balance sheets, freeing up better lending capacity, which is really the whole public purpose of all these initiatives," she said.

Getting the banking crisis resolved will require patience and determination, something Bair said was emphasized by President Obama in his inauguration speech Tuesday.

"What made us great in the first place was a lot of hard work and diligence and courage and that's what we need right now," she said. "It's going to take time to dig out of this but we will dig out of this. We will right the ship."

Source: CNBC.com

Bank of England Prepares Plan to Buy Assets

The Bank of England will soon ready a plan to buy assets in an effort to free up credit markets and restore lending to businesses and individuals if needed, Bank of England Governor Mervyn King said in a speech Tuesday night.

Despite a series of sharp rate cuts that have taken the key lending rate from 5% to 1.5% -- its lowest level since the central bank was founded in 1694 -- there remains a risk that inflation will fall below the Bank of England's 2% target, King said, according to remarks delivered to a business group in Nottingham.

"With bank rate already at its lowest level in the bank's history, it is sensible for the [central bank's monetary-policy committee] to prepare for the possibility -- and I stress that we are not there yet -- that it may need to move beyond the conventional instrument of bank rate and consider a range of unconventional measures," the bank governor said.

Such measures would include purchases by the Bank of England of a range of financial assets to expand the amount of reserves held by commercial banks and to increase the availability of credit to companies, he added.

The conventional approach to such unconventional measures is to buy assets, like government bonds, or gilts, which are traded in liquid markets to boost the supply of money, King commented.

On Monday, the U.K. Treasury authorized the Bank of England to make initial purchases of as much as 50 billion pounds of assets. Such moves would be offset by issuing U.K. Treasury bills, making for no impact on money supply.

Yet the Treasury also said that it would consider allowing the central bank to use asset purchases for monetary-policy purposes, effectively opening the door to "quantitative easing" through operations similar to those at the U.S. Federal Reserve.

"In addition to these conventional unconventional measures there are also unconventional unconventional measures," King said. "When credit markets are dysfunctional, as some are at present, targeted purchases by the Bank of England of assets may improve liquidity in markets for those credit instruments. The objective of such purchases would be not only to boost the supply of broad money, but also to increase liquidity and trading activity in the markets for those assets."

Corporate bonds and commercial paper are examples of such markets, he added, but emphasized that the bank was carefully weighing its options and would offer a more detailed plan on potential asset purchases at the end of the month.

"It will be a matter of weeks, not days, before a program of purchases can begin, but it will be weeks, not months," King said.

Source: MarketWatch

WSJ - When Inaugural Speeches Work

Welcome to a very early edition of today's Rollins Financial Blog. Since most of America will be watching the Inauguration of our 44th President, I wanted everyone to have the ability to read this post prior to the day's festivities.

As someone that has always enjoyed history, I have watched most of the Inaugurations that have been televised (seeing most of them repeated again on C-Span every four years). From the first televised, Harry Truman in 1949, to now, they have all been quite interesting. The backbone of the Inauguration though has always been the Address. Future Presidents and speech writers spend days and weeks huddled coming up with "the line" that they hope will be the cornerstone of a memorable Presidency.

On this note, in Monday's Wall Street Journal there was a very good article discussing the Addresses that I thought I would share.

When Inaugural Speeches Work
By David Greenberg
January 19, 2009

Knowing the expectations that hang over an inaugural address, presidents-elect agonize in trying to craft a document for the ages. James A. Garfield, for one, vowed to read each of the 19 speeches that preceded his own, ultimately delegating the task to an assistant. Little matter: efforts to write an immortal piece of rhetoric -- whether by Democrats or Republicans, with speechwriters or alone -- almost always fail. A few contribute memorable lines, like Ronald Reagan's pithy summation of his philosophy from 1981: "In this present crisis, government is not the solution to our problem; government is the problem." But in general, for all the anticipation they provoke, the substance of most kick-off speeches is soon forgotten.

Over the decades, indeed, only a few have gained canonical status—for the sublimity of their prose, the eloquence of their delivery or the aptness of their message for a concurrent crisis. Widely credited with writing stirring prose and with speaking mellifluously, Barack Obama will get rave reviews even if he reads straight from the Federal Register. But, taking office at a time of no little urgency, he still might seek to live up to his reputation by consulting five classics.

5. JFK, 1961
Kennedy speechwriter Ted Sorensen has a stock reply when questioned about the authorship of the 1961 inaugural. "Ask not," he tweaks his interrogator. The celebrated inversion of words, or chiasmus, to which Sorensen's quip alludes—"ask not what your country can do for you, ask what you can do for your country"—stands as the most remembered snippet from what's commonly thought of as a summons to sacrifice. But JFK was always more realist than idealist, and self-abnegation wasn't really a key theme of his presidential debut. The speech's enduring value stems, rather, from two qualities: Its status as the last expression of a now-eclipsed strain of Churchillian oratory and its brilliant articulation of a liberal internationalism in what Kennedy called, with some exaggeration, an "hour of maximum danger" in geopolitics.

While short-changing domestic crises—only at the urging of his civil rights advisers did JFK shoehorn in the words "at home" in avowing his commitment to human rights—Kennedy fashioned a quintessentially Cold War document. "Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe, in order to assure the survival and the success of liberty," he pledged. But he balanced that tough talk with conciliation: professions of peaceful intentions, praise for the United Nations, warnings about the nuclear arms race, pledges to alleviate world poverty, and overtures to Khrushchev's Soviet Union. The choicest line, penned by John Kenneth Galbraith, may have been another chiasmus: "Let us never negotiate out of fear. But let us never fear to negotiate." Negotiate Kennedy did, not just in resolving the Cuban Missile Crisis but in signing the nuclear test-ban treaty in 1963 and thus hastening the first thaw in the Cold War.

4. Jefferson, 1801
After serving as John Adams's vice president, back when presidential runners-up assumed the No. 2 spot in the executive, Jefferson challenged Adams again in 1800. The election was ugly. Adams and Jefferson now led clearly distinct parties, the Federalists and the Democratic Republicans, who attacked each other fiercely. Worse, the outcome remained unresolved into February 1801, since Aaron Burr, Jefferson's intended running-mate, drew as many electoral votes as the presidential candidate and, according to the rules at the time, the House of Representatives had to pick the winner.

Jefferson's ultimate selection marked the first transition from one party to another, and Jefferson used his speech to acknowledge the importance of the peaceful transfer of power—a theme presidents still sound. "We are all Republicans, we are all Federalists," he said in the speech's most memorable sentence. He went on to praise the American experiment in democracy, still relatively untested. "Let us, then, with courage and confidence pursue our own Federal and Republican principles, our attachment to union and representative government."

3. FDR, 1937
FDR's first term had transformed government's role in people's lives; it also turned the economy around—though not enough to end the Depression. Now he faced the challenge of sustaining popular morale. In the first inaugural given in January (following the ratification of the 20th Amendment), he looked back on his first-term achievements and pledged not to rest on the road to recovery. If his first term hadn't buried talk of the infallibility of unfettered capitalism, he sought now to nail the coffin shut. "We have always known that heedless self-interest was bad morals; we now know that it is bad economics." He made the plight of the worst-off his chief concern, insisting that "hard-headedness will not so easily excuse hard-heartedness." (To ensure that he didn't transpose the words and muff the line, FDR drew a circle above "headedness" and a heart above "heartedness.")

The capstone was Roosevelt's moving portrait of the worst off, rendered with the classical device of anaphora, the repetition of a phrase to start successive clauses. "I see millions of families trying to live on incomes so meager that the pall of family disaster hangs over them," FDR said. "…I see millions denied education, recreation, and the opportunity to better their lot and the lot of their children. I see one-third of a nation ill-housed, ill-clad, ill-nourished." The passage, and the speech, was a small foray into political philosophy, presenting a moral rationale for government's enlarged involvement in economic life.

2. Lincoln, 1865
Regarded by most historians as the greatest inaugural, Lincoln's lightning-brief sermon on the need for "malice toward none … charity for all" at the Civil War's end was not without flaws—notably an overreliance on the trope of God's inscrutability. ("The Almighty has his own purposes.") A gem nonetheless, delivered as the Union forces marched toward victory, the speech endures for spurning triumphalism in favor of humility at a time when the North's chief war aim—national unity—remained elusive. Admirably, Lincoln declined to outfit the divinity of which he spoke on the side of the Union forces. Both sides, he observed wryly, "read the same Bible and pray to the same God, and each invokes his aid against the other."

For all the attention that historians have devoted to the war's causes, Lincoln had it right: slavery and its expansion "somehow" lay at the source. But, again, instead of reproving the nearly vanquished South for choosing to "make war rather than let the nation survive," Lincoln suggested that divine justice had given "to both North and South this terrible war as the woe due to those by whom the offense came"—retribution on all Americans, all of whom were implicated in the grand sin of human chattelhood. Only with such a realization could the nation move forward.

A spare speech of 700 words, some 500 of them monosyllabic, the address ended with an earnest plea "to bind up the nation's wounds." Some Americans heeded the prayer; some didn't. In the audience that day were not only thousands of freed slaves but also John Wilkes Booth, who would assassinate Lincoln 41 days later.

1. FDR, 1933
With the nation engulfed in depression and panicked by a banking crisis, Roosevelt gave his first inaugural under pressure to be as aggressive in meeting these emergencies as Herbert Hoover, his routed predecessor, had been feckless. Seventeen minutes long, the speech squarely faced the moment's exigencies. In his opening, FDR spoke the line that everyone today knows: his assertion of his "firm belief that the only thing we have to fear is fear itself." Much like Kennedy's "ask not" dictum a generation later, the aphorism was not original; Roosevelt's was inserted by his aide Louis Howe, who is believed to have seen it in a department-store advertisement.

To justify the call for optimism, Roosevelt disingenuously scapegoated "unscrupulous money changers" for what was clearly a much more systemic failure. But he went on, inspirationally, to demand "action and action now"—the organizing message of the speech. To much applause, he appealed for "broad executive power"—not the dictatorial control that some people had expected, but a temporary measure of authority much as a wartime leader might assume—along with public sacrifice and pulling together for a "disciplined attack upon our common problems." When the address ended, reporters noted tears streaming down listeners' faces, and editorialists cheered. "Well," said Raymond Moley, a close FDR aide, "he's taken the ship of state and he's turned it right around."

These speeches are among the few we study today as masterpieces. It seems likely that Obama will draw upon more than a few of them, in spirit if not in words. The call for unity in Jefferson and Lincoln, the advocacy of urgent action promised by Roosevelt, Kennedy's gesture at sacrifice and hand extended in friendship overseas—we can expect to hear most or all of these notes.

But cribbing, or even learning, from great speeches will not make Obama's speech great. For all their poetry and music, these few classics endure mainly for another reason: because of the greatness of the presidents who delivered them. Had Roosevelt not led America out of the Depression, had Kennedy not lessened the Cold War danger, had Jefferson not shored up America's national identity, had Lincoln not forged a nation more true to its principles, then it is likely we wouldn't recall their words so fondly today. And so, writing a crackerjack inaugural address will be only the first, and easily the smallest, of Obama's forthcoming challenges.

Want to know more about the Inauguration?

In reviewing the Inauguration, it is important to understand how they have changed over the years. If you are at all interested, I would suggest going to the website Inauguration of the President made by the Joint Congressional Committee on Inaugural Ceremonies. It details everything you would ever want to know about the Inaugurations and ascensions to the presidency of the great men who have led our country.

Sources: The Wall Street Journal, Joint Congressional Committee
on Inaugural Ceremonies

Microsoft & Yahoo Deal on the Way?

Microsoft's Chief Executive Steve Ballmer and Yahoo's Chairman Roy Bostock met in New York last week, according to media reports.

The New York Times reported on Friday that the two had met, citing a person briefed on the meeting.

Earlier, the gossip blog Valleywag reported that Ballmer and Bostock were spotted in Manhattan's Time Warner Center. Valleywag is a part of Gawker Media.

This would be the second contact in recent days between top executives at the two companies.

Yahoo's new chief executive, Carol Bartz, told employees earlier this week that she had a phone conversation with Ballmer, who has repeatedly said he remains interested in pursuing a search partnership with the Internet company.

A source familiar with the matter described Bartz's call to Ballmer as a "courtesy call," but declined to give further details of the conversation.

Bartz also told Yahoo employees her gut instinct is to hang on to the company's search business, another source earlier told Reuters.

Analysts have said Bartz's appointment could pave the way for a sale to Microsoft or a search deal.

Microsoft proposed to buy Yahoo's search assets after Yahoo rejected its $47.5 billion buyout offer, first made nearly a year ago.

Details of Ballmer and Bostock's conversation could not be learned, the New York Times said.

Yahoo and Microsoft declined comment.

Sources: New York Times, Valleywag, Reuters

You Can't Fire Me, I'm Drunk!

Are you tired of not being able to have that martini lunch while working because of "rules"? Well, maybe Peru is the place for you.

Peru's top court has ruled that workers cannot be fired for being drunk on the job, a decision that was criticized by the government on Wednesday for setting a dangerous precedent.

The Constitutional Tribunal ordered that Pablo Cayo be given his job back as a janitor for the municipality of Chorrillos, which fired him for being intoxicated at work.

The firing was excessive because even though Cayo was drunk, he did not offend or hurt anybody, Fernando Calle, one of the justices, said on Wednesday.

Calle said the court would not revise its decision, despite complaints from the government.

"It's not a good idea to relax rules at workplaces," said Labor Minister Jorge Villasante.

Celso Becerra, the administrative chief of Chorrillos, a suburb of Lima, denounced the ruling.

"We've fired four workers for showing up drunk, and two of them were drivers," he said. "How can we allow a drunk to work who might run somebody over?"

Source: Reuters

Dudley Favorite to Be New NY Fed chief

William Dudley, who runs the markets desk at the Federal Reserve Bank of New York, is the likely front-runner to become next president of the bank, The Wall Street Journal reported.

Citing people familiar with the search, the newspaper said another leading candidate for the job, Fed governor Kevin Warsh, withdrew from the race.

New York Fed board members interviewed several candidates for the job last Saturday and have met again this week, said the report on the Journal's web site.

Once they make a final choice, the Federal Reserve Board in Washington needs to sign off on the decision, which it is expected to do quickly. The process has been slowed by the uncertain status of outgoing New York Fed president, Timothy Geithner.

Geithner has been tapped by president-elect Obama to take over the U.S. Treasury, but his confirmation, thought to be straight-forward, has been complicated by revelations he failed to pay taxes and also that working papers for his housekeeper were not in order.

Sources: The Wall Street Journal, Reuters

Consumer Prices Show Smallest Gain in 54 Years

The Consumer Price Index (CPI) was released on Friday morning, and in some good news for the consumer, the index was up only 0.1% for 2008. This is the smallest increase in 54 years according to the Labor Department.

The CPI fell 0.7% in December, the third decline in a row, led by an 8.3% drop in energy prices and a 0.1% drop in food prices. Economists surveyed by MarketWatch expected a 0.8% decline.

The CPI hasn't risen since the 0.8% gain in July. Since then, energy and commodity prices have plunged. Read the full government report.

Core prices - which exclude food and energy prices - were flat in December for the second straight month, as expected. The core CPI hasn't risen since September.

Consumer prices were up 0.1% in 2008, the slowest annual inflation since prices fell 0.7% in 1954. The core CPI was up 1.8% in 2008, the smallest increase since 2003. If the CPI had fallen 0.8% in December as expected, prices would have been down for the year as a whole.

A separate CPI for urban workers showed prices fell 0.5% in 2008, the biggest decline since 1949. The CPI-W is used for many cost-of-living adjustments.

With prices for urban workers down 0.9% in December and average weekly earnings down 0.3%, real (inflation-adjusted) weekly earnings rose 0.6%. In 2008, real earnings were up 2.9%.

Most economists expect inflation to ease for much of this year as global demand weakens. Federal Reserve officials say they aren't especially concerned about deflation taking hold, and insist that they are ready to shrink the money supply once the economy begins to recover in order to prevent a bout of inflation next year.

Details of CPI

In December, prices were flat or falling in most major consumer categories, with health and education the exceptions.

Energy prices fell 8.3%, including a 17% drop in gasoline prices and a 13% drop in fuel oil prices. Excluding energy, the CPI was flat.

Food prices fell 0.1%, led by declining prices for fruits, vegetables, dairy and meat.

Shelter prices - which represent about a third of the CPI - were flat in December. Hotel fares fell 0.7%, rents rose 0.2%, and homeownership equivalent rent rose 0.1%.

Apparel prices fell 0.9%.

Transportation prices fell 4.4% on lower fuel bills. Airfares fell 1.2%. New vehicle prices fell 0.4%.

Medical care prices increased 0.3%.

Education and communication prices rose 0.3%, led by a 0.6% rise in tuition.

Source: MarketWatch

Senate Passes "TARP II" While the House Unveiled $825 Billion Stimulus

The Democratic-led U.S. Congress took steps on Thursday to give President-elect Barack Obama the weapons he wants to fight a worsening economic recession by advancing legislation to provide nearly $1.2 trillion in emergency spending.

The House of Representatives and Senate worked on two separate but related tracks in an attempt to speed the money along and with an eye toward Obama's inauguration on Tuesday as the 44th U.S. president.

House Democrats unveiled an $825 billion bill that would couple tax cuts and spending projects to try to jolt the economy out of a yearlong recession that appeared to be deepening.

Obama called the proposal "a significant downpayment on our most urgent challenges" and praised the House for moving ahead quickly, but Republicans criticized the high cost.

The Democratic bill could see changes between now and mid-February when the House and Senate hope to present it to Obama. It is unclear whether the overall price tag will rise.

Senators backed the incoming president when they voted to let him spend the $350 billion remaining in a $700 billion financial industry bailout fund created in October. That fund is formally known as TARP, the Troubled Asset Relief Program.

With the vote, the Treasury Department, under Obama, will have the authority to use the $350 billion, although the House might decide to stage a symbolic vote next week. Both chambers would have had to vote to block the funds.

The Senate's 52-42 vote allowing the money to go forward came after a top economic aide to Obama, Lawrence Summers, issued a letter assuring the money would be more targeted and better managed than the Bush administration's handling of the first $350 billion of bailout funds.

Underscoring the situation of the U.S. financial sector because of the credit crisis resulting from a housing bust, the Senate's vote came amid new developments involving two of the three largest U.S. banks.

Bank of America is in talks to receive about $15 billion in additional bailout funds, according to sources. There were also concerns that Citigroup was having trouble coping with soaring credit losses.

Source: Reuters

Jobs As the Public Face of Apple

Steve Jobs became a household name as the founder and chief executive of Apple Inc, marshaling his bravado and charisma to drive the innovation machine behind the iPod and iPhone.

Deemed irreplaceable by legions of Apple fans and investors alike, Jobs said on Wednesday he would take a medical leave of absence until the end of June because his health problems are "more complex" than he had thought.

Jobs, 53, turned around the once moribund Apple in large part due to the blockbuster success of the ubiquitous iPod digital music player.

A showman, he often unveiled the latest Apple products at trade shows and conferences amid cheers and applause from thousands of software developers, customers and employees.

In past months, however, questions about his health and his ability to lead the company he created have overshadowed his past achievements and clouded his future prospects.

Industry and investor fears about Jobs' health have not dimmed in more than a year, especially after he appeared dramatically thinner in public last summer. At the time, Apple said he was fighting a "common bug" and taking antibiotics.

Rumors abounded on blogs about whether Jobs, a pancreatic cancer survivor, was suffering from complications related to the disease. Then, nine days ago, Jobs sought to soothe concerns by saying his weight loss was caused by a hormone imbalance that was relatively simple to treat.

Now, some analysts bet that Jobs is getting ready to step down for good and hand Apple over to an unknown successor.

Jobs, a college dropout, started Apple Computer with his friend Steve Wozniak in the Jobs family garage in Silicon Valley more than 30 years ago. The company soon introduced the Apple 1 computer. But it was the Apple II that became a huge success and gave Apple its position as a critical player in the then-nascent PC industry.

Jobs, who became a multimillionaire after Apple's IPO in December 1980, in 1983 famously lured John Sculley, then CEO of Pepsi, to lead Apple with the question: "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?"

In 1984 came the Macintosh, the first commercially successful computer that had an easy-to-use graphical user interface. Despite the success of the Mac, or perhaps partly because of it, the relationship between Jobs and Sculley soured, and in 1985 the board removed most of Jobs' powers and he left the company. Soon after, he sold all but one share of his Apple holdings.

Apple's purchase of NeXT -- the computer company Jobs founded after leaving Apple -- in 1997 brought Jobs back to Apple. Later that year he became interim CEO and in 2000 the company dropped "interim" from his title.

In 2001, Apple launched the iPod, whose elegant and simple design cemented Jobs' legacy as an innovator able to marry technology and media.

In addition to his Apple pursuits, Jobs co-founded the animation studio Pixar in 1986 with Edwin Catmull and Alvy Ray Smith, buying Lucasfilm's computer graphics division for $10 million. In 1995 came "Toy Story," the breakout computer animated film. Academy Award winners including "The Incredibles" and "Ratatouille" have followed.

Jobs became a board member and the largest individual shareholder of Walt Disney Co when Disney purchased Pixar, now known as Disney-Pixar, in 2006.

Source: Reuters

Bernanke Proposes Using the TARP for Toxic Assets

Federal Reserve chief Ben Bernanke on Tuesday suggested the incoming Obama administration may want to retool the government's approach to fighting the credit crisis and tap a $700 billion financial rescue fund to sop up bad assets on the books of banks.

In his first policy speech since early December, Bernanke said that while an expected U.S. fiscal stimulus package could provide a "significant boost" to the economy, the government may need to inject more capital into banks and consider steps to clear the financial system of toxic mortgage-related debt.

"Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system," Bernanke said at the London School of Economics.

U.S. President-elect Barack Obama, who takes office in a week, is pressing a skeptical Congress to let his Treasury Department access the remaining $350 billion.

Bernanke said the government could consider using the money to buy up bad debt, as originally intended, or could offer asset guarantees or set up a so-called bad bank to take over the assets as a way to strengthen the financial system and help the U.S. economy pull out of its recession.

"The presence of these assets significantly increases uncertainty about the underlying value of these institutions and may inhibit both new private investment and new lending," Bernanke said.

John Bovenzi, chief operating officer for the FDIC, told a congressional panel removing bad assets from bank balance sheets should be "a key component" of how the final $350 billion in bailout funds is used.

A rising tide of U.S. mortgage delinquencies has saddled the global banking system with distressed assets, choking off lending and sending many economies tumbling.

Outgoing U.S. Treasury Secretary Henry Paulson and Bernanke had pressed Congress in September to approve the $700 billion bailout fund so the government could buy up the bad debts to stave off a financial calamity. Paulson, however, quickly turned his focus toward purchasing equity in banks, which he has argued was a quicker way to shore up the system.

Bernanke said how governments respond to the financial crisis would determine the timing and strength of recovery, and he stressed that the Fed still had 'powerful tools' to deploy even though it has cut benchmark interest rates to near zero.

When the U.S. central bank dropped overnight rates to a range of zero to 0.25 percent in December, it said monetary policy would now focus on the size of its balance sheet, which has exploded as officials pumped funds into stressed markets.

"The Federal Reserve's credit-easing approach focuses on the mix of loans and securities that it holds and on how this composition of assets affects credit conditions for businesses and households," he said.

In outlining the Fed's emergency tools, Bernanke said a program to support consumer and small business credit, which will begin providing loans to investors next month, could be expanded or widened to cover additional classes of securities.

He also reiterated that the Fed was considering buying longer-term government debt.

Some analysts have warned that the Fed's aggressive efforts may end up fueling inflation.

Bernanke, however, played down that concern, noting that many of the Fed's lending facilities will wind down as demand for the money winds down. With many of the assets held short-term in nature, a "significant shrinking" of the Fed's balance sheet could happen quickly, he said.

"We see little risk of inflation in the near term; indeed, we expect inflation to continue to moderate," Bernanke said.

In answer to a question, Bernanke said he was expecting the economy to stabilize later this year, but suggested it could take longer for the labor-market to heal.

Historically, the economy and stock market will move higher prior to the labor market recovering. Thus, a slow down in the unemployment figures would be considered a final act in proving a market recovery. Labor figures will generally lag the economy and market by several months as businesses remain lean several months into any recovery.

Source: Reuters

Obama Scrambles on Geithner, Bailout Concerns

President-elect Barack Obama on Tuesday scrambled to answer questions about the nomination of Treasury Secretary pick Timothy Geithner amid anguished congressional negotiations over a $350 billion financial bailout.

The twin troubles emerged for Obama as he attempts to lay the groundwork for a strong response to the U.S. economic crisis a week before he takes over the presidency.

Geithner faced questions about a housekeeper whose work papers lapsed while she was employed by his family, and about several years when Geithner did not pay Social Security and Medicare taxes for himself.

At his request, Geithner met with members from both parties on the Senate Finance Committee after Iowa Sen. Charles Grassley, ranking Republican on the committee, raised questions about the issues. Grassley made no immediate comment to reporters after the meeting.

The normally drama-free Obama team went into a rare episode of damage control.

Obama's White House spokesman, Robert Gibbs, said in a statement that Geithner -- the president of the New York Federal Reserve Bank whose selection by Obama as Treasury chief in November cheered U.S. financial markets -- had committed honest mistakes that he quickly addressed upon learning of them.

"He made a common mistake on his taxes, and was unaware that his part-time housekeeper's work authorization expired for the last three months of her employment. We hope that the Senate will confirm him with strong bipartisan support so that he can begin the important work of the country," Gibbs said.

Senate Majority Leader Harry Reid, a Nevada Democrat, said he was not concerned at all over the Geithner nomination. "There's a few little hiccups but that's basically what they are," he told reporters.

New York Democratic Sen. Charles Schumer said he strongly backed Geithner while Max Baucus, a Montana Democrat, said that Geithner corrected the tax errors as soon as they were brought to his attention.

"I believe that these areas while serious, do not rise to the level of disqualification. He's an extremely competent man," Baucus said. Baucus, chairman of the Senate Finance Committee, sought consent from panel members to hold a hearing on Geithner's nomination on Friday, the panel said.

His nomination needs approval by the full Senate.

Problems related to household employees have sunk previous nominees. In 1993, President Bill Clinton had to withdraw two nominees for attorney general, Zoe Baird and Kimba Wood, for hiring undocumented immigrants as nannies.

But a Democratic official said that Geithner's part-time housekeeper was never an illegal alien. Her work authorization papers were up-to-date when Geithner hired her but they later expired because she forgot to update them.

Geithner was unaware that three months before she stopped working for his family to have a baby that her documents expired, another official said.

"Nevertheless, she continued to reside legally in the United States, she was married to a U.S. citizen, and she was granted a green card a few months later," the official said.

Geithner, before becoming New York Fed president, worked for the International Monetary Fund from 2001 to 2003.

Transition aides said he paid all of his income taxes on his IMF income, but made a common mistake on his tax returns with regard to self-employment taxes. Geithner realized the error in November during the review process for his nomination.

The aides said he voluntarily corrected the mistake by paying $25,970 in taxes for the two years.

At the same time, Obama used a closed-door lunch with Democratic senators on Capitol Hill to lobby for the second half of the outgoing Bush administration's $700 billion financial bailout.

Democrats say they want greater detail and assurances about how the money will be used, after the first half of the package was faulted for an absence of details and for being used to buy stakes in financial lenders and bailing out automakers instead of helping homeowners with mortgage problems.

Connecticut Sen. Joe Lieberman, an independent, was quoted as saying after the hearing that Obama vowed to veto any attempt to block his own administration's use of the money.

Obama's White House budget director-nominee, Peter Orszag, faced some tough questioning at his Senate confirmation hearing about Obama's absence of details for using the $350 billion bailout and an $800 billion economic stimulus.

"I think in this era of freshness and transparency, that the new administration would want to come forth with detail instead of this mumbo jumbo that is going on," said Florida Democratic Sen. Bill Nelson.

Source: Reuters