Obama Sees Auto Revival as a Success
By JACKIE CALMES
Copyright by The Associated Press
Published: July 30, 2010
http://www.nytimes.com/2010/07/31/business/economy/31obama.html?th&emc=th
DETROIT — President Obama came here on Friday to promote an economic success story, but even before he could get out of Washington, he was handed new evidence of the continued challenge he faces from the sputtering recovery.
Mr. Obama was fired up at Chrysler and General Motors plants before enthusiastic autoworkers as he related the good news that the companies had returned to profitability and added jobs since their unpopular taxpayer bailout over a year ago. His remarks, however, competed with the news that the economy’s growth had slowed in the second quarter of the year, reinforcing the widespread view that unemployment was likely to remain high for some time.
The news that the country’s gross domestic product slowed to 2.4 percent in the second quarter, from 3.7 percent in the first quarter, is likely to complicate matters substantively and politically for Mr. Obama and Congressional Democrats.
The government has all but run out of tools to fix things. The boost from Mr. Obama’s two-year stimulus package is waning, and Republicans have worked hard to convince many voters that the tax cuts and spending did not work in the first place — a contention that many economists dispute. Senate Republicans have blocked Mr. Obama’s additional stimulus initiatives, including aid to the states and the long-term unemployed and, on Thursday, a package expanding tax cuts and lending assistance for small businesses.
Moreover, the economic slowdown is certain to embolden Republicans in arguing against letting the Bush income tax cuts for the wealthy expire as scheduled by law after this year, as Mr. Obama wants, to help reduce the federal debt.
Given that debt, other actors in the government can do little either, although Ben S. Bernanke, the chairman of the Federal Reserve, said last week that the central bank might take further actions to stimulate growth. But it is not clear that any fiscal or monetary policy proposals under consideration can invigorate the economy enough to make rapid headway in replacing the more than eight million jobs lost since 2007.
This is the backdrop at summer’s midpoint, just as voters’ views about the two parties are starting to harden and November draws nearer.
In Detroit, Mr. Obama enthusiastically accentuated the positive and got a rousing reception from autoworkers whose jobs were recently in jeopardy. He emphasized that the economy had grown in the last quarter, making for a full year of growth; it had been shrinking at the rate of about 6 percent a quarter when he took office. And he told an estimated 1,500 union workers at each of the auto plants that they had “vindicated” his belief that the widely unpopular bailout would work.
The president — showing energy reminiscent of his campaign rallies — brought the workers at both plants to their feet, applauding and cheering, when he concluded: “Don’t bet against the American worker. Don’t bet against the American people.”
The administration is planning to make much of the success story at G.M. and Chrysler in the run-up to the midterm elections, citing estimates that without the government’s intervention one million jobs would have been lost, hurting suppliers, dealers and whole communities as well. The president travels next week to a Ford plant in Chicago; Ford did not accept a bailout but its executives have acknowledged indirect benefits from the other two companies’ rescue because it helped keep the network of auto supply companies intact.
The Chrysler plant that Mr. Obama visited assembles the 2011 Jeep Grand Cherokee and since last summer has added 1,100 workers, bringing its work force to more than 2,800. Mr. Obama and the employees got more good news after his arrival with the announcement by the Chrysler chief executive, Sergio Marchionne, that a nearby assembly plant that was slated to close in 2012 would instead stay open and add 900 jobs on a second shift, with 500 more jobs for suppliers.
Mr. Obama recalled that a year ago, with G.M. and Chrysler “on the brink of liquidation,” he could either have provided another bailout without strings attached as the Bush administration did, or he could have given no help at all. The latter is what the “leaders of the ‘just say no’ crowd in Washington” wanted, he added — though polls showed that many Americans, already fatigued by the financial bailout, also were willing to say no to the auto companies.
“I refused to let that happen so we came up with a third way,” Mr. Obama said, and officials forced the firms and unions in exchange for $60 billion to overhaul their operations and to require sacrifices from all parties.
Skeptics opposed a government takeover, Mr. Obama said, but he added to some laughter, “I didn’t want government to get into the auto business. I have enough to do.”
“I want you to remember, though, that if some folks had their way, none of this would have been happening,” he said. “This plant and your jobs might not exist.”
Afterward, workers were happy to tell reporters their stories of newfound hope, even some who had not supported Mr. Obama.
“There’s still a little fear here,” said Peter Orlando, 46, a Chrysler worker who identified himself as a political independent. “But a little fear is a good thing” to motivate people, he said. Naming Southern senators who opposed the bailout, he added, “The people that nay-sayed us, I’d like them to come and work in our shoes for eight hours.”
Saturday, July 31, 2010
Advice by Panel Is to Reprimand, Not Oust, Rangel
Advice by Panel Is to Reprimand, Not Oust, Rangel
By DAVID KOCIENIEWSKI
Copyright by The Associated Press
Published: July 30, 2010
http://www.nytimes.com/2010/07/31/nyregion/31rangel.html?_r=1&th&emc=th
The panel that oversaw a two-year ethics inquiry into Representative Charles B. Rangel’s conduct recommended that the Harlem congressman be punished with a reprimand, rather than a more serious censure or expulsion from office, the chairman of the panel said Friday.
The recommendation appears to be carrying significant weight with the full 10-member House ethics committee, which will decide Mr. Rangel’s fate. On Friday, the full committee spent hours behind closed doors debating whether to agree to a settlement that would require the congressman, a Democrat, to admit to wrongdoing in exchange for receiving a reprimand and avoiding a public trial on his conduct.
A reprimand is considered a moderate punishment, more serious than the minor sanction of admonishment but not especially severe: members including Newt Gingrich, the former House speaker, and Barney Frank have received reprimands.
Word of the panel’s recommendation came on the same day that Congressional officials said that Representative Maxine Waters, Democrat of California, would face ethics charges that are expected to be announced next week.
On Thursday, the ethics committee released a report detailing 13 charges against Mr. Rangel, including his improper use of his office to solicit donations for a City University of New York center to be named in his honor; his failure to report rental income from his villa in the Dominican Republic and to pay taxes on it; his omission of some $600,000 in assets on his House financial disclosure forms; and his acceptance from a Manhattan developer of four rent-stabilized apartments, one of which he used as a campaign office.
The report said Mr. Rangel had shown “a pattern of indifference or disregard for the laws, rules and regulations of the United States and the House of Representatives.” It also documented the major charges.
Representative Gene Green, the Texas Democrat who was chairman of the investigative subcommittee, told reporters on Friday that Mr. Rangel had previously been offered the settlement that included the reprimand.
But negotiations stalled on the question of how much wrongdoing Mr. Rangel would admit to, causing the talks to break down and prompting the ethics committee to take the rare step of preparing for the public hearing — the Congressional equivalent of a trial.
“If we could have reached a settlement we would have recommended that to the full committee,” Mr. Green said, adding, “But that didn’t happen.”
Asked if Mr. Rangel had put a settlement on the table, Mr. Green replied: “At different times there were offers from both sides.” He said there was never a vote on a proposed deal.
Mr. Green’s comments added fresh drama to what has become a chaotic story on Capitol Hill.
The ethics committee is among the most secretive bodies in Washington, and after speaking to reporters, Mr. Green quickly issued an apology for his comments — saying he had erred by piercing that confidentiality.
Then, adding more confusion to the picture, Mr. Rangel reacted angrily when reporters asked his response to Mr. Green’s statement, saying it was “absolutely untrue” that he had been offered a reprimand. Hours later, his lawyer amended that statement, saying Mr. Rangel “misspoke” and acknowledging that Mr. Green’s comments were accurate.
“The appropriate sanction, including reprimand, was one of a number of issues addressed in settlement discussions,” said Leslie Kiernan, the lawyer representing Mr. Rangel before the committee. She declined to elaborate on any continuing discussions.
Predicting what punishment a House member will receive after ethics infractions is difficult; factors including the member’s contrition, level of knowledge of the misdeeds and relationships with colleagues can play a role. And given how high profile the case involving Mr. Rangel has become, especially after the public detailing of the charges, it is possible that Republicans on the committee will now face pressure to reject any settlement.
Even some Democrats seemed to grow more uncomfortable with Mr. Rangel’s continued presence in the House. Since the charges were detailed, three Democratic members have called for him to step down, joining three members who had previously asked him to leave the House.
“Too many politicians, both Democrats and Republicans, have fallen victim to the idea that they are ‘different’ than regular folks, and nothing could be further from the truth,” Representative Ann Kirkpatrick, Democrat of Arizona, said in a statement released on Friday.
“It is our job as members of Congress to hold each other accountable to a higher standard regardless of party,” she said, adding that if the charges against Mr. Rangel are accurate, “he needs to resign.”
The chairwoman of the ethics committee, Zoe Lofgren, Democrat of California, declined to comment on the committee’s discussions. As reporters waited outside the meeting room where the committee had huddled, a committee spokesman read a statement saying there would be no announcements on Friday.
Some government ethics groups said a reprimand seemed too lenient and would do little to insulate Democrats from Republicans’ charges that they had failed to deliver on Speaker Nancy Pelosi’s promise to “drain the swamp” of Washington’s murky ethical culture.
“Now that he’s put the committee through all this, to issue something as mild as a reprimand would look terrible,” said Melanie Sloan, a former federal prosecutor who is executive director of Citizens for Responsibility and Ethics in Washington.
“Some of the conduct alleged here could be a felony. If the committee lets him off that easily, it won’t do a lot to restore the public faith in Congress.”
From 1966, when the House Committee on Standards and Conduct was established, to 2008, 83 members have received some kind of ethics sanction. Mr. Gingrich, Republican of Georgia, was reprimanded for accepting improper gifts and using charitable donations for political purposes. Mr. Frank, Democrat of Massachusetts, received his reprimand for helping a male prostitute who lived in his home fix parking tickets.
Last year, the House voted against reprimanding Representative Joe Wilson, Republican of South Carolina, for shouting “You lie” during an address to Congress by President Obama.
On Friday, President Obama publicly weighed in on the matter for the first time, saying in an interview on the "CBS Evening News With Katie Couric" that the charges against Mr. Rangel were "very troubling." Mr. Obama said he believed Mr. Rangel had served his constituents well and deserved to end his career on a better note.
"He's somebody who's at the end of his career," he said. "I'm sure that what he wants is to be able to end his career with dignity, and my hope is that it happens."
By DAVID KOCIENIEWSKI
Copyright by The Associated Press
Published: July 30, 2010
http://www.nytimes.com/2010/07/31/nyregion/31rangel.html?_r=1&th&emc=th
The panel that oversaw a two-year ethics inquiry into Representative Charles B. Rangel’s conduct recommended that the Harlem congressman be punished with a reprimand, rather than a more serious censure or expulsion from office, the chairman of the panel said Friday.
The recommendation appears to be carrying significant weight with the full 10-member House ethics committee, which will decide Mr. Rangel’s fate. On Friday, the full committee spent hours behind closed doors debating whether to agree to a settlement that would require the congressman, a Democrat, to admit to wrongdoing in exchange for receiving a reprimand and avoiding a public trial on his conduct.
A reprimand is considered a moderate punishment, more serious than the minor sanction of admonishment but not especially severe: members including Newt Gingrich, the former House speaker, and Barney Frank have received reprimands.
Word of the panel’s recommendation came on the same day that Congressional officials said that Representative Maxine Waters, Democrat of California, would face ethics charges that are expected to be announced next week.
On Thursday, the ethics committee released a report detailing 13 charges against Mr. Rangel, including his improper use of his office to solicit donations for a City University of New York center to be named in his honor; his failure to report rental income from his villa in the Dominican Republic and to pay taxes on it; his omission of some $600,000 in assets on his House financial disclosure forms; and his acceptance from a Manhattan developer of four rent-stabilized apartments, one of which he used as a campaign office.
The report said Mr. Rangel had shown “a pattern of indifference or disregard for the laws, rules and regulations of the United States and the House of Representatives.” It also documented the major charges.
Representative Gene Green, the Texas Democrat who was chairman of the investigative subcommittee, told reporters on Friday that Mr. Rangel had previously been offered the settlement that included the reprimand.
But negotiations stalled on the question of how much wrongdoing Mr. Rangel would admit to, causing the talks to break down and prompting the ethics committee to take the rare step of preparing for the public hearing — the Congressional equivalent of a trial.
“If we could have reached a settlement we would have recommended that to the full committee,” Mr. Green said, adding, “But that didn’t happen.”
Asked if Mr. Rangel had put a settlement on the table, Mr. Green replied: “At different times there were offers from both sides.” He said there was never a vote on a proposed deal.
Mr. Green’s comments added fresh drama to what has become a chaotic story on Capitol Hill.
The ethics committee is among the most secretive bodies in Washington, and after speaking to reporters, Mr. Green quickly issued an apology for his comments — saying he had erred by piercing that confidentiality.
Then, adding more confusion to the picture, Mr. Rangel reacted angrily when reporters asked his response to Mr. Green’s statement, saying it was “absolutely untrue” that he had been offered a reprimand. Hours later, his lawyer amended that statement, saying Mr. Rangel “misspoke” and acknowledging that Mr. Green’s comments were accurate.
“The appropriate sanction, including reprimand, was one of a number of issues addressed in settlement discussions,” said Leslie Kiernan, the lawyer representing Mr. Rangel before the committee. She declined to elaborate on any continuing discussions.
Predicting what punishment a House member will receive after ethics infractions is difficult; factors including the member’s contrition, level of knowledge of the misdeeds and relationships with colleagues can play a role. And given how high profile the case involving Mr. Rangel has become, especially after the public detailing of the charges, it is possible that Republicans on the committee will now face pressure to reject any settlement.
Even some Democrats seemed to grow more uncomfortable with Mr. Rangel’s continued presence in the House. Since the charges were detailed, three Democratic members have called for him to step down, joining three members who had previously asked him to leave the House.
“Too many politicians, both Democrats and Republicans, have fallen victim to the idea that they are ‘different’ than regular folks, and nothing could be further from the truth,” Representative Ann Kirkpatrick, Democrat of Arizona, said in a statement released on Friday.
“It is our job as members of Congress to hold each other accountable to a higher standard regardless of party,” she said, adding that if the charges against Mr. Rangel are accurate, “he needs to resign.”
The chairwoman of the ethics committee, Zoe Lofgren, Democrat of California, declined to comment on the committee’s discussions. As reporters waited outside the meeting room where the committee had huddled, a committee spokesman read a statement saying there would be no announcements on Friday.
Some government ethics groups said a reprimand seemed too lenient and would do little to insulate Democrats from Republicans’ charges that they had failed to deliver on Speaker Nancy Pelosi’s promise to “drain the swamp” of Washington’s murky ethical culture.
“Now that he’s put the committee through all this, to issue something as mild as a reprimand would look terrible,” said Melanie Sloan, a former federal prosecutor who is executive director of Citizens for Responsibility and Ethics in Washington.
“Some of the conduct alleged here could be a felony. If the committee lets him off that easily, it won’t do a lot to restore the public faith in Congress.”
From 1966, when the House Committee on Standards and Conduct was established, to 2008, 83 members have received some kind of ethics sanction. Mr. Gingrich, Republican of Georgia, was reprimanded for accepting improper gifts and using charitable donations for political purposes. Mr. Frank, Democrat of Massachusetts, received his reprimand for helping a male prostitute who lived in his home fix parking tickets.
Last year, the House voted against reprimanding Representative Joe Wilson, Republican of South Carolina, for shouting “You lie” during an address to Congress by President Obama.
On Friday, President Obama publicly weighed in on the matter for the first time, saying in an interview on the "CBS Evening News With Katie Couric" that the charges against Mr. Rangel were "very troubling." Mr. Obama said he believed Mr. Rangel had served his constituents well and deserved to end his career on a better note.
"He's somebody who's at the end of his career," he said. "I'm sure that what he wants is to be able to end his career with dignity, and my hope is that it happens."
Friday, July 30, 2010
Anne Rice leaves Christianity
Anne Rice leaves Christianity
Copyright by CNN News
July 30th, 2010
http://marquee.blogs.cnn.com/2010/07/30/anne-rice-leaves-christianity/?hpt=T2
Legendary author Anne Rice has announced that she’s quitting Christianity.
The “Interview with a Vampire” author, who wrote a book about her spirituality titled "Called Out of Darkness: A Spiritual Confession" in 2008, said Wednesday that she refuses to be “anti-gay,” “anti-feminist," “anti-science” and “anti-Democrat.”
Rice wrote, “For those who care, and I understand if you don't: Today I quit being a Christian ... It's simply impossible for me to ‘belong’ to this quarrelsome, hostile, disputatious, and deservedly infamous group. For ten years, I've tried. I've failed. I'm an outsider. My conscience will allow nothing else.”
Rice then added another post explaining her decision on Thursday:
“My faith in Christ is central to my life. My conversion from a pessimistic atheist lost in a world I didn't understand, to an optimistic believer in a universe created and sustained by a loving God is crucial to me," Rice wrote. "But following Christ does not mean following His followers. Christ is infinitely more important than Christianity and always will be, no matter what Christianity is, has been or might become.”
Copyright by CNN News
July 30th, 2010
http://marquee.blogs.cnn.com/2010/07/30/anne-rice-leaves-christianity/?hpt=T2
Legendary author Anne Rice has announced that she’s quitting Christianity.
The “Interview with a Vampire” author, who wrote a book about her spirituality titled "Called Out of Darkness: A Spiritual Confession" in 2008, said Wednesday that she refuses to be “anti-gay,” “anti-feminist," “anti-science” and “anti-Democrat.”
Rice wrote, “For those who care, and I understand if you don't: Today I quit being a Christian ... It's simply impossible for me to ‘belong’ to this quarrelsome, hostile, disputatious, and deservedly infamous group. For ten years, I've tried. I've failed. I'm an outsider. My conscience will allow nothing else.”
Rice then added another post explaining her decision on Thursday:
“My faith in Christ is central to my life. My conversion from a pessimistic atheist lost in a world I didn't understand, to an optimistic believer in a universe created and sustained by a loving God is crucial to me," Rice wrote. "But following Christ does not mean following His followers. Christ is infinitely more important than Christianity and always will be, no matter what Christianity is, has been or might become.”
Editorial: Midwest oil mess
Editorial: Midwest oil mess
Copyright © 2010, Chicago Tribune
5:47 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/news/opinion/editorials/ct-edit-oil-20100729,0,1046343.story
This sounds awfully familiar. An oil spill catches a company flat-footed. Initial reports downplay the seriousness of the hazard.
The response starts slowly. Oil spreads, and as the scope of the damage comes into focus, the company's stock price takes a hit. Politicians cry out for more help. Wildlife gets soaked in oil. There's fear of a massive disaster.
It's not happening in the Gulf of Mexico, but in southwestern Michigan, where a pipeline leak is fouling local waterways and threatens to reach Lake Michigan.
It may not be BP revisited, but it's too close for comfort.
How did a leak that started days ago at a river 80 miles upstream spread halfway to the lake — our lake? As of Thursday afternoon, cleanup crews said they had stopped the smelly mess short of a dam described as "a last-line of defense." A U.S. Environmental Protection Agency official said he no longer considers Lake Michigan "at risk."
He'd better be right. If we learned anything from the Gulf disaster, it's to trust, but verify. And in this incident, there's plenty of reason for doubts.
The spill supposedly occurred on Monday when a 30-inch pipeline carrying oil between Canada and Indiana burst near a pumping station in Marshall, Mich., run by an affiliate of Calgary-based Enbridge Inc. Oil poured into a tributary of the Kalamazoo River, which leads to the lake. The company said it learned of the spill Monday morning, and reported it as soon as regulations permitted.
But records show the report came hours after the company had confirmed the spill, and as long as 12 hours after area residents started making emergency calls about noxious fumes. Enbridge officials said they were unaware of a problem Sunday night.
Enbridge estimated that 819,000 gallons of oil had spilled, and stuck by that number publicly amid reports that it had provided a slightly higher estimate to state officials. On Wednesday, the EPA said more than a million gallons had been lost.
The cause of the spill remains undetermined, but poor maintenance is suspected. The company has a record of federal safety and compliance violations, and reportedly received at least two warnings this year about corrosion on the 40-year-old pipeline. The company said it has an active maintenance program, but no work was scheduled for the location where the leak occurred.
On Wednesday and Thursday, Enbridge sharply expanded the manpower and equipment deployed in the cleanup — suggesting it could have responded more aggressively at the outset. You have to wonder what took so long.
Enbridge executives have apologized for making a mess, and promised to continue cleaning up until residents are satisfied, no matter the cost. Those are words, promises. We learned from BP that promises aren't enough.
The No. 1 priority: Keep that oil from reaching any closer to Lake Michigan. The many outstanding questions about the spill require trustworthy answers. Meantime, the environmental disaster unfolding so close to Chicago serves as another reminder of the price we pay for our dependence on oil, and the advantages of conservation at every possible opportunity.
Copyright © 2010, Chicago Tribune
5:47 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/news/opinion/editorials/ct-edit-oil-20100729,0,1046343.story
This sounds awfully familiar. An oil spill catches a company flat-footed. Initial reports downplay the seriousness of the hazard.
The response starts slowly. Oil spreads, and as the scope of the damage comes into focus, the company's stock price takes a hit. Politicians cry out for more help. Wildlife gets soaked in oil. There's fear of a massive disaster.
It's not happening in the Gulf of Mexico, but in southwestern Michigan, where a pipeline leak is fouling local waterways and threatens to reach Lake Michigan.
It may not be BP revisited, but it's too close for comfort.
How did a leak that started days ago at a river 80 miles upstream spread halfway to the lake — our lake? As of Thursday afternoon, cleanup crews said they had stopped the smelly mess short of a dam described as "a last-line of defense." A U.S. Environmental Protection Agency official said he no longer considers Lake Michigan "at risk."
He'd better be right. If we learned anything from the Gulf disaster, it's to trust, but verify. And in this incident, there's plenty of reason for doubts.
The spill supposedly occurred on Monday when a 30-inch pipeline carrying oil between Canada and Indiana burst near a pumping station in Marshall, Mich., run by an affiliate of Calgary-based Enbridge Inc. Oil poured into a tributary of the Kalamazoo River, which leads to the lake. The company said it learned of the spill Monday morning, and reported it as soon as regulations permitted.
But records show the report came hours after the company had confirmed the spill, and as long as 12 hours after area residents started making emergency calls about noxious fumes. Enbridge officials said they were unaware of a problem Sunday night.
Enbridge estimated that 819,000 gallons of oil had spilled, and stuck by that number publicly amid reports that it had provided a slightly higher estimate to state officials. On Wednesday, the EPA said more than a million gallons had been lost.
The cause of the spill remains undetermined, but poor maintenance is suspected. The company has a record of federal safety and compliance violations, and reportedly received at least two warnings this year about corrosion on the 40-year-old pipeline. The company said it has an active maintenance program, but no work was scheduled for the location where the leak occurred.
On Wednesday and Thursday, Enbridge sharply expanded the manpower and equipment deployed in the cleanup — suggesting it could have responded more aggressively at the outset. You have to wonder what took so long.
Enbridge executives have apologized for making a mess, and promised to continue cleaning up until residents are satisfied, no matter the cost. Those are words, promises. We learned from BP that promises aren't enough.
The No. 1 priority: Keep that oil from reaching any closer to Lake Michigan. The many outstanding questions about the spill require trustworthy answers. Meantime, the environmental disaster unfolding so close to Chicago serves as another reminder of the price we pay for our dependence on oil, and the advantages of conservation at every possible opportunity.
Dr. Ricardo Arze and sex abuse cases shows disconnect between law enforcement, state regulators of doctors
Dr. Ricardo Arze and sex abuse cases shows disconnect between law enforcement, state regulators of doctors - In 2003, doctor's patient said he assaulted her, but it took four years and more complaints by women before he was charged or reviewed by state regulators
By Megan Twohey
Copyright © 2010, Chicago Tribune
10:17 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/health/ct-met-doctor-sex-charges-20100729,0,78308,full.story
A 17-year-old girl reported to Berwyn police in 2003 that her doctor, Ricardo Arze, had pulled off her clothes and sexually assaulted her in his exam room, state records show.
Two years later, another patient reported to Berwyn police that Arze had placed his hands on her breasts, breathed heavily on her neck and tried to touch her genitals, claiming it would help treat depression, according to a police report.
Not until 2007 — after at least four women had filed complaints — did police launch the investigation that led to Arze being charged with sexually assaulting patients and having his license suspended, records show.
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By that time, the family physician had allegedly assaulted at least 21 women and girls at his Arze Doctors Center in Berwyn, according to criminal and civil complaints that outline attacks stretching at least to 2000.
The Cook County state's attorney's office said it lacked enough evidence to prosecute Arze on the 2003 allegation and wasn't informed of the 2005 complaint until years later.
The women who made the reports said law enforcement officials brushed them aside at the time.
"If they had listened to me back then, all of this could have been avoided," said the woman who alleged assault in 2003, her eyes filling with tears. Prosecutors did charge Arze in the 2003 complaint five years later.
The case is the latest in a series of Tribune reports in which female patients have alleged that the system — law enforcement and state regulators — failed to protect them from dangerous doctors.
On Trib Nation, an essay on the common human themes at the heart of this story: Abuse of power and voiceless victims.
The newspaper has uncovered other cases in which physicians were allowed to continue practicing in spite of allegations of serious misconduct — and even convictions. Among them was Bruce Smith, a gynecologist who was not disciplined or prosecuted for years even as complaints of rape and sexual abuse multiplied against him. He was charged with sexual assault following a Tribune report in April.
The Arze case also reveals a disconnect between the criminal justice system and the state agency in charge of policing doctors. The Illinois Department of Financial and Professional Regulation and its medical disciplinary board did not learn of the 2003 and 2005 allegations against Arze until 2007, said Sue Hofer, the department's spokeswoman. State law does not require the department and police to share such complaints with each other, she said.
"It's inexcusable that the medical disciplinary board and police aren't sharing these allegations right away," said Sidney Wolfe, a director at the Washington-based watchdog group Public Citizen, which has examined the handling of sex-offending doctors nationwide.
"They should be working much more closely and much more quickly," Wolfe said. "People who engage in these behaviors are a menace to society, and it's worse when they wear the white coat and have an ethical duty to do no harm. This is a classic example of how in the absence of early intervention more people get harmed."
Berwyn police contacted state regulators in 2007 after additional complaints were made against Arze.
The Dallas-based Federation of State Medical Boards has issued guidelines instructing boards to "place a high priority on the investigation of complaints of sexual misconduct due to patient vulnerability" and making clear a single case is sufficient to proceed with a formal hearing, with or without corroborating evidence.
The guidelines support the use of undercover investigations, which were eventually used in the Arze case.
After his release on bond last year, Arze was rearrested and charged with practicing medicine without a license and aggravated fraud. After posting $1.5 million bail, he was released again and is awaiting trial on all charges.
Reached by phone at his Berwyn home, Arze denied he had resumed practicing and declined to comment on criminal charges of sexual assault, battery and unlawful restraint involving 14 patients. In court and state records, he has denied wrongdoing.
"I'm in the process of trying to survive," he said.
A native of Bolivia, Arze was granted a physician's license by the state in 1989. In addition to running his private practice, he served on the staff of Berwyn's MacNeal Hospital from 1994 until his initial arrest in September 2007.
He said in court records he was treating more than 6,000 patients at Arze Doctors Center at the time of his arrest and that his practice had a "great emphasis on mental health" — including treatment for depression and other mood disorders.
The Chicago woman who made the 2003 report said she turned to Arze as a high school senior at the suggestion of her parents, who were already his patients. She was seeking help with depression that stemmed from sexual abuse by a relative, she said. (The Tribune does not generally publish the names of alleged sexual assault victims without their consent.)
Her mother said she always accompanied the teen into the exam room but that during an April 2003 visit Arze told the parents to wait outside.
"He said he wanted to talk to her one-on-one," the mother said.
Once they were alone, Arze told the girl that he would try to stimulate her in order to help clarify her sexual orientation and determine the level of depression, she said.
He pulled off her clothes, tried to force her to masturbate, placed his fingers inside her and pressed his body against hers, according to court and state records.
"I didn't know what to do," she said. "I got mad at myself like, 'How did I let this happen again?' I froze. … I could feel my blood boil."
The teen immediately told a friend about the incident but swore her to secrecy, fearing no one would believe her word against a doctor's, she said.
But weeks later, she confided in her parents and then in a high school counselor, who called the state Department of Children and Family Services. She said she worried the doctor would hurt other patients if she didn't report him.
The school counselor and a DCFS official accompanied the family to the Berwyn police station, where everyone was separately interviewed about the allegations, said the woman and her mother.
They said police gave them a chilly reception.
"They were rude — like, 'Why did you let this happen?'" said the woman, now married with children and working as a receptionist. "They didn't show any compassion."
An investigator later interviewed the girl's friend, but the family was unaware of any other actions by police.
An assistant Cook County prosecutor decided not to file charges against Arze because the doctor denied the allegations and there were no witnesses or physical evidence, said Sally Daly, spokeswoman for State's Attorney Anita Alvarez.
"I called one time, and they said we need to wait," the mother said. "But nobody ever called us back."
In March 2005, Berwyn police received a similar report about Arze from a 20-year-old Brookfield woman.
The woman alleged that during treatment for depression, Arze removed her bra, placed his hands on her breasts and tried to touch her genitals, according to a copy of the incident report and a complaint filed by the Illinois Department of Financial and Professional Regulation. The woman told the doctor his actions made her uncomfortable.
"(She) asked how his actions would help her depression. Dr. Arze related that he was trying to see if she would get sexually aroused and if so, she was not depressed," the police report said.
The woman, who came forward two days after the alleged incident, said doing so was difficult because, like the teen in the 2003 case and many of Arze's other patients, she is from an immigrant family.
"In the Hispanic community we don't like to make a big deal out of things," she said. "Opening up about something like that is one of the hardest things you can do."
The officer told the woman an investigator would contact her, but months turned into years with no word.
Police did not share the allegation with the state's attorney's office at the time, Daly said.
Jim Ritz, chief of Berwyn police, declined to answer questions about the cases.
There was no contact until fall 2007, when police arrested Arze on charges of sexually assaulting and battering patients. The state simultaneously suspended his license.
William Kushner, then chief of police, told reporters at the time the initial charges were the result of a two-month investigation by detectives and state investigators.
Patient complaints lodged with police in June and July 2007 were among the original battery charges, records show. In August and September, a Cook County sheriff's officer posed as a patient at Arze's private practice and encountered sexual advances from him, said sheriff's spokesman Steve Patterson.
After Arze's arrest made news, the charges against him multiplied — in court and with the state, painting a picture of a chronic sex abuser who allegedly preyed on vulnerable patients suffering from depression.
Among the allegations in court and state records:
•Starting in November 2004, Arze allegedly fondled the breasts of a recently divorced patient seeking treatment for depression, forced his fingers inside her and kissed her neck. She screamed, but no one came.
•In March 2005, he allegedly asked a patient to remove her clothes without providing a gown, fondled her, pushed her onto the exam table and instructed her to keep quiet while he raped her.
•In September 2007, he pulled down his pants and exposed himself to a patient, asked her to touch him and made lewd comments as she left the room, according to court records.
The 2003 allegation resulted in a 2008 felony sexual assault charge against Arze. It and the 2005 allegation also were included in a 2007 complaint filed by the state.
The women said police gave no explanation for why they did not act on their complaints sooner.
"The detective was very apologetic about it," said the woman who made the 2005 report, now 26 and living in Oak Brook. "It's not something you just file away."
That police had received allegations against Arze as early as 2003 came as a shock to one of the women who reported being abused by him in 2007.
"I am disgusted," she said of law enforcement. "They should investigate why they didn't do anything. They were accomplices."
The women said they continue to suffer trauma from the incidents. They cannot see male doctors. One has recurring dreams about her alleged attack.
Arze, who is scheduled to be in court Aug. 16, won't lose his medical license for good even if convicted of all the sexual assault and battery of patient charges.
The Illinois Department of Financial and Professional Regulation has interpreted the state Medical Practice Act to mean that it cannot permanently revoke a physician's license unless a doctor has been twice convicted of felonies involving controlled substances or public aid offenses.
A Tribune review uncovered 16 convicted sex offenders who have held Illinois medical licenses within the past 15 years. Not one had his license permanently revoked. One doctor convicted of sexually abusing a patient was never disciplined by the state in any way.
mtwohey@tribune.com
If you have a complaint about a doctor, contact the police department nearest the doctor's office and the Illinois Department of Financial and Professional Regulation at http://www.idfpr.com/dpr/FILING/Complaint.asp or 312-814-6910.
By Megan Twohey
Copyright © 2010, Chicago Tribune
10:17 p.m. CDT, July 29, 2010
http://www.chicagotribune.com/health/ct-met-doctor-sex-charges-20100729,0,78308,full.story
A 17-year-old girl reported to Berwyn police in 2003 that her doctor, Ricardo Arze, had pulled off her clothes and sexually assaulted her in his exam room, state records show.
Two years later, another patient reported to Berwyn police that Arze had placed his hands on her breasts, breathed heavily on her neck and tried to touch her genitals, claiming it would help treat depression, according to a police report.
Not until 2007 — after at least four women had filed complaints — did police launch the investigation that led to Arze being charged with sexually assaulting patients and having his license suspended, records show.
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By that time, the family physician had allegedly assaulted at least 21 women and girls at his Arze Doctors Center in Berwyn, according to criminal and civil complaints that outline attacks stretching at least to 2000.
The Cook County state's attorney's office said it lacked enough evidence to prosecute Arze on the 2003 allegation and wasn't informed of the 2005 complaint until years later.
The women who made the reports said law enforcement officials brushed them aside at the time.
"If they had listened to me back then, all of this could have been avoided," said the woman who alleged assault in 2003, her eyes filling with tears. Prosecutors did charge Arze in the 2003 complaint five years later.
The case is the latest in a series of Tribune reports in which female patients have alleged that the system — law enforcement and state regulators — failed to protect them from dangerous doctors.
On Trib Nation, an essay on the common human themes at the heart of this story: Abuse of power and voiceless victims.
The newspaper has uncovered other cases in which physicians were allowed to continue practicing in spite of allegations of serious misconduct — and even convictions. Among them was Bruce Smith, a gynecologist who was not disciplined or prosecuted for years even as complaints of rape and sexual abuse multiplied against him. He was charged with sexual assault following a Tribune report in April.
The Arze case also reveals a disconnect between the criminal justice system and the state agency in charge of policing doctors. The Illinois Department of Financial and Professional Regulation and its medical disciplinary board did not learn of the 2003 and 2005 allegations against Arze until 2007, said Sue Hofer, the department's spokeswoman. State law does not require the department and police to share such complaints with each other, she said.
"It's inexcusable that the medical disciplinary board and police aren't sharing these allegations right away," said Sidney Wolfe, a director at the Washington-based watchdog group Public Citizen, which has examined the handling of sex-offending doctors nationwide.
"They should be working much more closely and much more quickly," Wolfe said. "People who engage in these behaviors are a menace to society, and it's worse when they wear the white coat and have an ethical duty to do no harm. This is a classic example of how in the absence of early intervention more people get harmed."
Berwyn police contacted state regulators in 2007 after additional complaints were made against Arze.
The Dallas-based Federation of State Medical Boards has issued guidelines instructing boards to "place a high priority on the investigation of complaints of sexual misconduct due to patient vulnerability" and making clear a single case is sufficient to proceed with a formal hearing, with or without corroborating evidence.
The guidelines support the use of undercover investigations, which were eventually used in the Arze case.
After his release on bond last year, Arze was rearrested and charged with practicing medicine without a license and aggravated fraud. After posting $1.5 million bail, he was released again and is awaiting trial on all charges.
Reached by phone at his Berwyn home, Arze denied he had resumed practicing and declined to comment on criminal charges of sexual assault, battery and unlawful restraint involving 14 patients. In court and state records, he has denied wrongdoing.
"I'm in the process of trying to survive," he said.
A native of Bolivia, Arze was granted a physician's license by the state in 1989. In addition to running his private practice, he served on the staff of Berwyn's MacNeal Hospital from 1994 until his initial arrest in September 2007.
He said in court records he was treating more than 6,000 patients at Arze Doctors Center at the time of his arrest and that his practice had a "great emphasis on mental health" — including treatment for depression and other mood disorders.
The Chicago woman who made the 2003 report said she turned to Arze as a high school senior at the suggestion of her parents, who were already his patients. She was seeking help with depression that stemmed from sexual abuse by a relative, she said. (The Tribune does not generally publish the names of alleged sexual assault victims without their consent.)
Her mother said she always accompanied the teen into the exam room but that during an April 2003 visit Arze told the parents to wait outside.
"He said he wanted to talk to her one-on-one," the mother said.
Once they were alone, Arze told the girl that he would try to stimulate her in order to help clarify her sexual orientation and determine the level of depression, she said.
He pulled off her clothes, tried to force her to masturbate, placed his fingers inside her and pressed his body against hers, according to court and state records.
"I didn't know what to do," she said. "I got mad at myself like, 'How did I let this happen again?' I froze. … I could feel my blood boil."
The teen immediately told a friend about the incident but swore her to secrecy, fearing no one would believe her word against a doctor's, she said.
But weeks later, she confided in her parents and then in a high school counselor, who called the state Department of Children and Family Services. She said she worried the doctor would hurt other patients if she didn't report him.
The school counselor and a DCFS official accompanied the family to the Berwyn police station, where everyone was separately interviewed about the allegations, said the woman and her mother.
They said police gave them a chilly reception.
"They were rude — like, 'Why did you let this happen?'" said the woman, now married with children and working as a receptionist. "They didn't show any compassion."
An investigator later interviewed the girl's friend, but the family was unaware of any other actions by police.
An assistant Cook County prosecutor decided not to file charges against Arze because the doctor denied the allegations and there were no witnesses or physical evidence, said Sally Daly, spokeswoman for State's Attorney Anita Alvarez.
"I called one time, and they said we need to wait," the mother said. "But nobody ever called us back."
In March 2005, Berwyn police received a similar report about Arze from a 20-year-old Brookfield woman.
The woman alleged that during treatment for depression, Arze removed her bra, placed his hands on her breasts and tried to touch her genitals, according to a copy of the incident report and a complaint filed by the Illinois Department of Financial and Professional Regulation. The woman told the doctor his actions made her uncomfortable.
"(She) asked how his actions would help her depression. Dr. Arze related that he was trying to see if she would get sexually aroused and if so, she was not depressed," the police report said.
The woman, who came forward two days after the alleged incident, said doing so was difficult because, like the teen in the 2003 case and many of Arze's other patients, she is from an immigrant family.
"In the Hispanic community we don't like to make a big deal out of things," she said. "Opening up about something like that is one of the hardest things you can do."
The officer told the woman an investigator would contact her, but months turned into years with no word.
Police did not share the allegation with the state's attorney's office at the time, Daly said.
Jim Ritz, chief of Berwyn police, declined to answer questions about the cases.
There was no contact until fall 2007, when police arrested Arze on charges of sexually assaulting and battering patients. The state simultaneously suspended his license.
William Kushner, then chief of police, told reporters at the time the initial charges were the result of a two-month investigation by detectives and state investigators.
Patient complaints lodged with police in June and July 2007 were among the original battery charges, records show. In August and September, a Cook County sheriff's officer posed as a patient at Arze's private practice and encountered sexual advances from him, said sheriff's spokesman Steve Patterson.
After Arze's arrest made news, the charges against him multiplied — in court and with the state, painting a picture of a chronic sex abuser who allegedly preyed on vulnerable patients suffering from depression.
Among the allegations in court and state records:
•Starting in November 2004, Arze allegedly fondled the breasts of a recently divorced patient seeking treatment for depression, forced his fingers inside her and kissed her neck. She screamed, but no one came.
•In March 2005, he allegedly asked a patient to remove her clothes without providing a gown, fondled her, pushed her onto the exam table and instructed her to keep quiet while he raped her.
•In September 2007, he pulled down his pants and exposed himself to a patient, asked her to touch him and made lewd comments as she left the room, according to court records.
The 2003 allegation resulted in a 2008 felony sexual assault charge against Arze. It and the 2005 allegation also were included in a 2007 complaint filed by the state.
The women said police gave no explanation for why they did not act on their complaints sooner.
"The detective was very apologetic about it," said the woman who made the 2005 report, now 26 and living in Oak Brook. "It's not something you just file away."
That police had received allegations against Arze as early as 2003 came as a shock to one of the women who reported being abused by him in 2007.
"I am disgusted," she said of law enforcement. "They should investigate why they didn't do anything. They were accomplices."
The women said they continue to suffer trauma from the incidents. They cannot see male doctors. One has recurring dreams about her alleged attack.
Arze, who is scheduled to be in court Aug. 16, won't lose his medical license for good even if convicted of all the sexual assault and battery of patient charges.
The Illinois Department of Financial and Professional Regulation has interpreted the state Medical Practice Act to mean that it cannot permanently revoke a physician's license unless a doctor has been twice convicted of felonies involving controlled substances or public aid offenses.
A Tribune review uncovered 16 convicted sex offenders who have held Illinois medical licenses within the past 15 years. Not one had his license permanently revoked. One doctor convicted of sexually abusing a patient was never disciplined by the state in any way.
mtwohey@tribune.com
If you have a complaint about a doctor, contact the police department nearest the doctor's office and the Illinois Department of Financial and Professional Regulation at http://www.idfpr.com/dpr/FILING/Complaint.asp or 312-814-6910.
Citi to pay $75m to settle SEC charges
Citi to pay $75m to settle SEC charges
By Suzanne Kapner, Justin Baer and Brooke Masters in New York
Copyright The Financial Times Limited 2010
Published: July 29 2010 22:05 | Last updated: July 29 2010 22:05
http://www.ft.com/cms/s/0/2e668780-9b50-11df-baaf-00144feab49a.html
Citigroup has agreed to pay $75m to settle Securities and Exchange Commission charges that it failed to disclose to investors more than $40bn in exposure to subprime mortgages.
Thursday’s deal comes two weeks after the SEC levied a record $550m fine against Goldman Sachs to settle allegations the bank defrauded investors in a collateralised debt obligation that was based on subprime mortgages.
Citi did not admit wrongdoing but the settlement includes information that could prove useful in investor lawsuits filed against it.
“The SEC complaint confirms our core allegations and we can use the documents that they cite,” said Steven Singer, lead attorney in a suit filed by investors in Citi bonds.
The SEC said Citi stated four times in July and October 2007 that it had reduced its subprime exposure from $24bn to $13bn at the end of 2006. Yet the bank failed to inform investors until November 2007 that it held more than $40bn in “super senior” tranches of CDOs backed by subprime mortgages and related instruments called “liquidity puts”, the SEC claimed.
Citi executives did not initially classify those assets as subprime because they believed there was little chance of default, the SEC said. By the time Citi disclosed the full extent of its subprime holdings in November, the value of the securities had plunged, helping to cost former chief executive Chuck Prince his job. Mr Prince was not charged with any wrongdoing in this case.
The SEC alleged that Gary Crittenden, former Citi chief financial officer, and Arthur Tildesley, former investor relations director, helped to draft and approve misleading statements.
Mr Crittenden agreed to pay $100,000 and Mr Tildesley, now head of cross marketing for the bank, agreed to pay $80,000. A spokesman for Mr Crittenden said he was pleased to resolve the matter. Mr Tildesley’s lawyer declined to comment.
Like both executives, Citi has neither admitted nor denied wrongdoing, but pointed out that the SEC did not charge anyone with reckless misconduct.
By Suzanne Kapner, Justin Baer and Brooke Masters in New York
Copyright The Financial Times Limited 2010
Published: July 29 2010 22:05 | Last updated: July 29 2010 22:05
http://www.ft.com/cms/s/0/2e668780-9b50-11df-baaf-00144feab49a.html
Citigroup has agreed to pay $75m to settle Securities and Exchange Commission charges that it failed to disclose to investors more than $40bn in exposure to subprime mortgages.
Thursday’s deal comes two weeks after the SEC levied a record $550m fine against Goldman Sachs to settle allegations the bank defrauded investors in a collateralised debt obligation that was based on subprime mortgages.
Citi did not admit wrongdoing but the settlement includes information that could prove useful in investor lawsuits filed against it.
“The SEC complaint confirms our core allegations and we can use the documents that they cite,” said Steven Singer, lead attorney in a suit filed by investors in Citi bonds.
The SEC said Citi stated four times in July and October 2007 that it had reduced its subprime exposure from $24bn to $13bn at the end of 2006. Yet the bank failed to inform investors until November 2007 that it held more than $40bn in “super senior” tranches of CDOs backed by subprime mortgages and related instruments called “liquidity puts”, the SEC claimed.
Citi executives did not initially classify those assets as subprime because they believed there was little chance of default, the SEC said. By the time Citi disclosed the full extent of its subprime holdings in November, the value of the securities had plunged, helping to cost former chief executive Chuck Prince his job. Mr Prince was not charged with any wrongdoing in this case.
The SEC alleged that Gary Crittenden, former Citi chief financial officer, and Arthur Tildesley, former investor relations director, helped to draft and approve misleading statements.
Mr Crittenden agreed to pay $100,000 and Mr Tildesley, now head of cross marketing for the bank, agreed to pay $80,000. A spokesman for Mr Crittenden said he was pleased to resolve the matter. Mr Tildesley’s lawyer declined to comment.
Like both executives, Citi has neither admitted nor denied wrongdoing, but pointed out that the SEC did not charge anyone with reckless misconduct.
Today's Financial News Courtesy of the Financial Times
Today's Financial News Courtesy of the Financial Times
Investors drop risk after US GDP data
ByTelis Demos in London
Copyright The Financial Times Limited 2010
Published: July 30 2010 08:45 | Last updated: July 30 2010 14:50
http://www.ft.com/cms/s/0/810e448e-9ba3-11df-9ebd-00144feab49a.html
Friday 14:45 BST. Markets are quickening the sale of risk after US GDP growth in the second quarter came in lower than expected.
The FTSE All-World index is down 0.8 per cent, with the S&P 500 index opened down 0.7 per cent, on track for its a fourth successive day of losses. Benchmark US Treasury bonds yields are several basis points lower, and the yen saw new highs for the year.
Economists had forecast second-quarter GDP growth in the US of 2.5 per cent, but it was revealed today to be 2.4 per cent. The US also revised its first-quarter growth upwards, from 2.7 per cent to 3.7 per cent.
“The details suggest growth may have been weakening more than expected from a higher base,” said Sebastien Galy, currency strategist at BNP Paribas in New York. He said the yen could rise to its 2009 post-crisis high below Y85 to the dollar.
European markets are also down following the continent’s own mixed economic data, a turnround from recent trends, including slower German retail sales. The Eurofirst 300 index of big companies is 0.7 per cent lower, and “peripheral” European debts are being sold off.
The euro, however, is paring losses against the dollar following the GDP data, as investors bet on likelier interest rate increases in Europe. The yen is again in demand as a haven, gaining against higher-yielding currencies in Australia and Europe and reaching the highest level since November against the dollar.
The slowing economy was not entirely unexpected. On Thursday James Bullard, a regional Fed president, warned that the US risked a “Japanese-style outcome” if it did not consider using measures beyond the Fed funds rate to inject liquidity into the economy, including quantitative easing. Earlier in the week, the Fed’s Beige Book survey said that some regions were seeing slowing manufacturing activity.
Though earnings season has seen strong headline expectation-beating profit reports, and banks globally have enjoyed an uptick in confidence following the European stress tests, investors have been hesitant to buy shares and other risky assets without some sense that the world’s largest importer is on solid footing. Japan’s Nikkei, heavily reliant on exporting companies, has nosedived in the past two sessions as businesses warned of a third-quarter slowdown.
Even in Europe, where economic news has been surprisingly good of late, traders are keenly aware that it is exports – thanks in large part to a cheap euro – that have led German manufacturing activity into an expansion phase and unemployment to its lowest level since 2008.
“Germany and Europe’s other big economies are export-driven. We acknowledge that if there were to be a big problem in the US, it would have an impact on the eurozone,” said Astrid Schilo, an economist at HSBC.
• Europe. A bit of economic data weakness knocked markets at their open. Spanish unemployment ticked up higher than forecast and German retail sales were reported to have fallen more than forecast in June. Eurozone unemployment and inflation both matched expectations exactly – at 10 per cent and 1.7 per cent respectively.
In notable earnings, French construction giant Lafarge beat analysts’ profit projections but lowered its forecast. Renault and Michelin also came in well, with the carmaker’s sales rising and the tyre maker’s margins at record levels. France’s Cac 40 index is down 0.4 per cent, while the the UK’s FTSE 100 index is down 0.8 per cent and Germany’s Dax is 0.6 per cent lower.
• Asia. Regional bellwether Samsung joined Nissan and Hyundai on Thursday, reporting a strong second quarter but warning that second-half profits would not be as strong. Japan’s Nikkei 225 index was down 1.6 per cent as the yen strengthened, making Japan’s exports more expensive. Japanese industrial production and inflation figures also came in lower than expected.
The FTSE Asia-Pacific was down 0.4 per cent, with across-the-board losses. The Hang Seng index in Hong Kong slipped 0.3 per cent and the Shanghai Composite index dropped 0.4 per cent, coming off a two-month high. Australia’s S&P/ASX 200 was lower by 0.7 per cent.
• Currencies. Traders are selling risky currencies against the safe-haven yen. The New Zealand dollar is down 0.7 per cent against the yen, and the South African rand is also down 0.7 per cent. The yen is up 0.6 per cent against the US dollar, at Y86.39.
The euro is down 1 per cent against the yen, tumbling in the afternoon in spite of expected unemployment and inflation figures for the eurozone. The euro is down 0.4 per cent to $1.3019 against the US dollar, paring losses as traders flee the dollar post-GDP figures. The pound is near-flat against the buck at $1.5600.
• Debt. US Treasuries are seeing their heaviest demand in several sessions, with the 10-year yield down 6 basis points to 2.93 per cent. Japanese 10-years are down 3 basis points to yield 1.06 per cent, matching their post-crisis low.
Core German 10-year Bund yields are down 5 basis points as European investors embrace safer assets, at 2.67 per cent. Credit default swap spreads are widening in Greece, Portugal and Ireland. Greek two-year bond yields are up 24 basis points, and
Portuguese debt is also being sold off.
• Commodities. US crude oil is down 1.5 per cent to $77.18 a barrel after a week of inventory expansion has driven up supply. The US has reported a growing excess in its markets, a sign of a moderating economy, and Opec on Thursday said its production had continued to increase.
Gold is up 0.7 per cent to $1,168 an ounce. Deflationary fears in the US have counteracted the declining view of lending and currency risk in Europe and bullion has risen as the week has worn on. Also affecting the price, as the FT reported, was a swap between the Bank for International Settlements and big European banks.
Following the Global Market Overview on Twitter at @telisdemos
US growth slows in second quarter
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 14:03 | Last updated: July 30 2010 15:05
http://www.ft.com/cms/s/0/a7b55d0a-9bd2-11df-9ebd-00144feab49a.html
US economic growth slowed in the second quarter of the year as a swelling trade deficit and weaker consumer spending dragged on the recovery.
Gross domestic product increased at an annualised rate of 2.4 per cent in the second quarter after growing by a revised 3.7 per cent in the first, according to official figures released on Friday. Output was slightly weaker than Wall Street analysts had projected, although the revision added a full percentage point to first-quarter growth.
The second quarter was the fourth consecutive period that the US economy expanded after four quarters of contraction, which had marked the longest recession since the Great Depression. However, the slowing rate of growth and stubborn unemployment have raised anxiety that the recovery is losing steam.
The disappointing data rattled US investors on Friday morning. The S&P 500 fell 1.2 per cent to 1088.31 in early trading with all 10 main sectors down and six dropping more than 1 per cent.
A surge in imports, which far outpaced exports, was the biggest drag on output. Meanwhile, the swing in inventories that had fuelled growth at the end of 2009 failed to provide much of a boost.
Consumer spending also slowed in the second quarter of the year, rising at a rate of 1.6 per cent following a 1.9 per cent rise in the first quarter. Consumers have been holding back amid uncertainty about employment and the housing market.
However, there were some positive signs within the report. Residential investment soared at a rate of almost 28 per cent after declining at the start of the year, and real final sales, which factor out inventories, rose at a rate of 1.3 per cent after a 1.1 per cent in the first quarter.
Also supporting growth was a jump in business investment in equipment and software, which grew at a rate of 21.9 per cent. Signs of capital spending are welcome because they signal that businesses are gaining confidence and could begin to ramp up hiring.
“Investment spending by businesses appears to be ramping up at a faster pace than we expected and, judging by the orders data for the second quarter,” said John Ryding and Conrad DeQuadros, of RDQ Economics.
The commerce department figures were released a week after Ben Bernanke, chairman of the Federal Reserve, told Congress that the economic outlook was “unusually uncertain”.
The Fed has said that it will take action if the economic recovery begins to stall. Fears of a slowdown have grown in recent weeks, with signs emerging of a double dip in the housing market and jobless claims remaining stubbornly high.
A separate report on Friday confirmed that consumer confidence is continuing to wane. The Thomson Reuters/University of Michigan survey of consumer sentiment fell to 67.8 in July from 76 in June.
Richard Curtin, they survey’s chief economist, said that “scarce jobs and stagnating incomes” are weighing upon the minds of consumers.
Fed reports paper profit on Bear and AIG bail-outs
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 00:27 | Last updated: July 30 2010 00:27
http://www.ft.com/cms/s/0/309310ce-9b68-11df-8239-00144feab49a.html
The US public’s hope of getting repaid for the bail-outs of Bear Stearns and AIG in the financial crisis increased on Thursday after the Federal Reserve reported a paper profit for the first time on all the holdings of securities bought from the companies.
A rise in the value of the mortgage-related securities that caused Bear’s demise and AIG’s near-collapse enabled the Fed to report unrealised gains on all three vehicles it set up to hold assets from the two stricken financial groups.
The Fed’s paper profit on the three vehicles, known as Maiden Lane I, II and III, highlights the recovery in the value of securities that were once considered toxic, and could allay criticism of the federal bail-outs of large companies.
Ben Bernanke, Fed chairman, has repeatedly expressed confidence that the central bank will be repaid for its aid to the financial system.
As of Wednesday, the Maiden Lane portfolios’ unrealised gains – the difference between the market value of their securities and the outstanding amount of the authorities’ loans to the vehicles – stood at $10.8bn, official documents showed.
The two vehicles created to unburden AIG’s balance sheet of billions of dollars of troubled assets – Maiden Lane II and III – had been showing a paper profit for some time.
This week, Maiden Lane I – a $30bn vehicle that took on Bear’s worst assets, enabling JPMorgan Chase to buy the investment bank in March 2008 – also swung into the black. The improvement was driven by a rise in the value of residential mortgage-backed securities and commercial property loans, according to people familiar with the situation.
The paper profit means that, in theory, the Fed could sell all its holdings in the market and repay the loans, which have maturities of between six and 10 years. In practice, the securities are complex and illiquid and a rapid sale is unlikely.
At the height of the crisis, the Fed extended loans of more than $72bn to the three Maiden Lane vehicles to buy troubled securities from Bear and AIG.
Although the securities had suffered sharp falls in values during the credit crunch, most continued to pay interest and dividends to the authorities.
The Fed used the cash to reduce the outstanding amount of the loans, increasing its potential profits on the increase in the value of the securities.
Disney sells Miramax studio for $660m
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 10:24 | Last updated: July 30 2010 13:12
http://www.ft.com/cms/s/0/79d354c0-9bb7-11df-9ebd-00144feab49a.html
Walt Disney said on Friday that it would sell Mirimax, the movie studio, to a group of investors for $660m as it focuses on its other film production brands.
The group acquiring Mirimax is Filmyard Holdings, and includes Ron Tutor, a construction executive, Tom Barrack, and his real estate investment firm Colony Capital.Through the acquisition, they will gain the rights to more than 700 movie titles, including Chicago, Shakespeare in Love and No Country for Old Men.
“Although we are very proud of Miramax’s many accomplishments, our current strategy for Walt Disney Studios is to focus on the development of great motion pictures under the Disney, Pixar and Marvel brands,” Robert Iger, Disney’s chief executive, said in a statement.
Filmyard will also receive the rights to certain books, development projects and will have the rights to the name “Mirimax”.
Disney has been in a deal-making mood lately, agreeing on Tuesday to buy Playdom, a two-year old company that makes social games for Facebook. It paid $563m to acquire the company, which will provide a new stage for Mickey Mouse and Iron Man.
The deal for Mirimax, which was founded by Bob and Harvey Weinstein and acquired by Disney in 1993, requires regulatory approval regulators but is expected to close by the end of the year.
Shares of Disney fell 0.97 per cent to $33.71 in pre-market trading in New York on Friday.
US banks in rush for cheap finance
By Francesco Guerrera and Aline van Duyn in New York and David Oakley in London
Copyright The Financial Times Limited 2010
Published: July 29 2010 22:39 | Last updated: July 29 2010 22:39
http://www.ft.com/cms/s/0/4c68466e-9b3d-11df-baaf-00144feab49a.html
US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years.
The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence.
The cheap finance locked in by big institutions such as JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis.
Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7bn in debt last week – the largest weekly total since September 2009, says Dealogic.
US Bancorp, a Minneapolis-based lender, raised $1bn in five-year bonds at an interest rate of 2.45 per cent – one of the lowest ever paid by a bank.
Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.
Wall Street executives say recent debt issues were triggered by “reverse inquiries” – informal approaches by fund managers seeking to raise their exposure to a sector they had largely avoided since the crisis.
“There is a bit of a food-fight among investors to get hold of paper from US banks,” an executive at a big bank said. “After leaving the sector alone for so long, there is renewed appetite.”
With US Treasury yields at record lows, investors seek alternatives that offer higher returns. Expectations that the Federal Reserve will keep rates at near-zero have further raised demand for bonds, as a low-interest, low-growth environment is best for such investments.
Recent earnings and the passage of financial rules also contributed to the surge in debt issuance. Goldman, Morgan Stanley and JPMorgan each issued $3bn bonds this month.
The spike in fundraising is enabling US banks to replace existing bonds with new, cheaper ones. Jean-Francois Tremblay, a Moody’s analyst, estimates that US banks have refinanced $200bn of the $372bn of debt coming due in 2010.
In Europe, analysts say banks have raised only 40 per cent of the €450bn they need this year.
But since publication of the stress tests there have been signs of improvement. This week BBVA, Spain’s second-biggest bank, sold the first bond by a Spanish lender since April.
Gregory Peters, at Morgan Stanley, said: “The banks that don’t need funding can do it, the smaller banks that do need funding probably can’t.”
Coffee hits 12-year high on Colombia shortage
By Javier Blas in London
Copyright The Financial Times Limited 2010
Published: July 30 2010 11:45 | Last updated: July 30 2010 13:12
http://www.ft.com/cms/s/0/c26406ce-9bc3-11df-9ebd-00144feab49a.html
Coffee prices on Friday hit their highest level in 12 years on the back of low availability of premium Arabica coffee from key producer Colombia, after a string of disappointing crops in the Latin American country.
In New York, ICE September Arabica coffee jumped 3.2 per cent to 178.75 cents a pound, the highest since February 1998. In London, Liffe September lower quality robusta coffee rose 3 per cent to $1,810 a tonne.
Industry executives believe prices could rise towards 200 cents a pound in New York before the arrival of the new Brazilian crop later this year. “Until October, it is going to be tight on high-quality coffee,” said one.
Colombia coffee production last year plunged to a 33-year low of 7.8m bags, each of 60kg, down nearly a third from 11.1m bags in 2008.
After a meeting with Brazilian officials, the London-based International Coffee Organisation said on Friday that the “current tight demand-supply situation” in the coffee market was “likely to persist in the near- to medium term.”
Executives said, nonetheless, that after the arrival of the Brazilian crop – which is expected to be the largest ever – prices should decline in early 2011.
Elsewhere in commodities markets on Friday, global wheat prices surged further, propelled by fears of lower production from Russia, Kazakhstan and Ukraine – three of the world’s top 10 exporters – because of a drought in the region.
In Paris, Liffe November European milling wheat hit €194.50 a tonne, the highest level in 22 months. The contract was later up 2.3 per cent at €192.30 a tonne.
In Chicago CBOT September soft winter wheat rose to a fresh 13-month high of $6.37 a bushel, up 1.5 per cent on the day. Wheat prices in Chicago, the global benchmark, have jumped 36.7 per cent per cent so far this month.
The International Grain Organisation on Thursday said wheat production would drop to 651m tonnes in 2010-11. That projection was down from the 664m tonnes it forecast last month and sharply lower than the 677m tonnes harvested in the 2009-10 season. The IGC said consumption would hover around 655m tonnes in 2010-11.
Industry executives fear that Russia could impose export limits if the drought damage is worse than currently expected, tightening supplies for importers in North Africa and the Middle East. Executives said bread price rises were likely.
Traders are also concerned about supplies from Canada, which exports the bulk of the world’s top quality, high-protein wheat. Planting in Canada’s prairies was delayed this year by unusually heavy rains and officials said output was expected to decline by at least 25 per compared with 2009.
Meanwhile, oil prices moved lower, but remained anchored within the trading range of $70-$80 a barrel that has been in place for most of the year. Nymex September West Texas Intermediate dropped 54 cents to $77.82 a barrel while ICE September Brent fell 48 cents to $77.11 a barrel.
Investors drop risk after US GDP data
ByTelis Demos in London
Copyright The Financial Times Limited 2010
Published: July 30 2010 08:45 | Last updated: July 30 2010 14:50
http://www.ft.com/cms/s/0/810e448e-9ba3-11df-9ebd-00144feab49a.html
Friday 14:45 BST. Markets are quickening the sale of risk after US GDP growth in the second quarter came in lower than expected.
The FTSE All-World index is down 0.8 per cent, with the S&P 500 index opened down 0.7 per cent, on track for its a fourth successive day of losses. Benchmark US Treasury bonds yields are several basis points lower, and the yen saw new highs for the year.
Economists had forecast second-quarter GDP growth in the US of 2.5 per cent, but it was revealed today to be 2.4 per cent. The US also revised its first-quarter growth upwards, from 2.7 per cent to 3.7 per cent.
“The details suggest growth may have been weakening more than expected from a higher base,” said Sebastien Galy, currency strategist at BNP Paribas in New York. He said the yen could rise to its 2009 post-crisis high below Y85 to the dollar.
European markets are also down following the continent’s own mixed economic data, a turnround from recent trends, including slower German retail sales. The Eurofirst 300 index of big companies is 0.7 per cent lower, and “peripheral” European debts are being sold off.
The euro, however, is paring losses against the dollar following the GDP data, as investors bet on likelier interest rate increases in Europe. The yen is again in demand as a haven, gaining against higher-yielding currencies in Australia and Europe and reaching the highest level since November against the dollar.
The slowing economy was not entirely unexpected. On Thursday James Bullard, a regional Fed president, warned that the US risked a “Japanese-style outcome” if it did not consider using measures beyond the Fed funds rate to inject liquidity into the economy, including quantitative easing. Earlier in the week, the Fed’s Beige Book survey said that some regions were seeing slowing manufacturing activity.
Though earnings season has seen strong headline expectation-beating profit reports, and banks globally have enjoyed an uptick in confidence following the European stress tests, investors have been hesitant to buy shares and other risky assets without some sense that the world’s largest importer is on solid footing. Japan’s Nikkei, heavily reliant on exporting companies, has nosedived in the past two sessions as businesses warned of a third-quarter slowdown.
Even in Europe, where economic news has been surprisingly good of late, traders are keenly aware that it is exports – thanks in large part to a cheap euro – that have led German manufacturing activity into an expansion phase and unemployment to its lowest level since 2008.
“Germany and Europe’s other big economies are export-driven. We acknowledge that if there were to be a big problem in the US, it would have an impact on the eurozone,” said Astrid Schilo, an economist at HSBC.
• Europe. A bit of economic data weakness knocked markets at their open. Spanish unemployment ticked up higher than forecast and German retail sales were reported to have fallen more than forecast in June. Eurozone unemployment and inflation both matched expectations exactly – at 10 per cent and 1.7 per cent respectively.
In notable earnings, French construction giant Lafarge beat analysts’ profit projections but lowered its forecast. Renault and Michelin also came in well, with the carmaker’s sales rising and the tyre maker’s margins at record levels. France’s Cac 40 index is down 0.4 per cent, while the the UK’s FTSE 100 index is down 0.8 per cent and Germany’s Dax is 0.6 per cent lower.
• Asia. Regional bellwether Samsung joined Nissan and Hyundai on Thursday, reporting a strong second quarter but warning that second-half profits would not be as strong. Japan’s Nikkei 225 index was down 1.6 per cent as the yen strengthened, making Japan’s exports more expensive. Japanese industrial production and inflation figures also came in lower than expected.
The FTSE Asia-Pacific was down 0.4 per cent, with across-the-board losses. The Hang Seng index in Hong Kong slipped 0.3 per cent and the Shanghai Composite index dropped 0.4 per cent, coming off a two-month high. Australia’s S&P/ASX 200 was lower by 0.7 per cent.
• Currencies. Traders are selling risky currencies against the safe-haven yen. The New Zealand dollar is down 0.7 per cent against the yen, and the South African rand is also down 0.7 per cent. The yen is up 0.6 per cent against the US dollar, at Y86.39.
The euro is down 1 per cent against the yen, tumbling in the afternoon in spite of expected unemployment and inflation figures for the eurozone. The euro is down 0.4 per cent to $1.3019 against the US dollar, paring losses as traders flee the dollar post-GDP figures. The pound is near-flat against the buck at $1.5600.
• Debt. US Treasuries are seeing their heaviest demand in several sessions, with the 10-year yield down 6 basis points to 2.93 per cent. Japanese 10-years are down 3 basis points to yield 1.06 per cent, matching their post-crisis low.
Core German 10-year Bund yields are down 5 basis points as European investors embrace safer assets, at 2.67 per cent. Credit default swap spreads are widening in Greece, Portugal and Ireland. Greek two-year bond yields are up 24 basis points, and
Portuguese debt is also being sold off.
• Commodities. US crude oil is down 1.5 per cent to $77.18 a barrel after a week of inventory expansion has driven up supply. The US has reported a growing excess in its markets, a sign of a moderating economy, and Opec on Thursday said its production had continued to increase.
Gold is up 0.7 per cent to $1,168 an ounce. Deflationary fears in the US have counteracted the declining view of lending and currency risk in Europe and bullion has risen as the week has worn on. Also affecting the price, as the FT reported, was a swap between the Bank for International Settlements and big European banks.
Following the Global Market Overview on Twitter at @telisdemos
US growth slows in second quarter
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 14:03 | Last updated: July 30 2010 15:05
http://www.ft.com/cms/s/0/a7b55d0a-9bd2-11df-9ebd-00144feab49a.html
US economic growth slowed in the second quarter of the year as a swelling trade deficit and weaker consumer spending dragged on the recovery.
Gross domestic product increased at an annualised rate of 2.4 per cent in the second quarter after growing by a revised 3.7 per cent in the first, according to official figures released on Friday. Output was slightly weaker than Wall Street analysts had projected, although the revision added a full percentage point to first-quarter growth.
The second quarter was the fourth consecutive period that the US economy expanded after four quarters of contraction, which had marked the longest recession since the Great Depression. However, the slowing rate of growth and stubborn unemployment have raised anxiety that the recovery is losing steam.
The disappointing data rattled US investors on Friday morning. The S&P 500 fell 1.2 per cent to 1088.31 in early trading with all 10 main sectors down and six dropping more than 1 per cent.
A surge in imports, which far outpaced exports, was the biggest drag on output. Meanwhile, the swing in inventories that had fuelled growth at the end of 2009 failed to provide much of a boost.
Consumer spending also slowed in the second quarter of the year, rising at a rate of 1.6 per cent following a 1.9 per cent rise in the first quarter. Consumers have been holding back amid uncertainty about employment and the housing market.
However, there were some positive signs within the report. Residential investment soared at a rate of almost 28 per cent after declining at the start of the year, and real final sales, which factor out inventories, rose at a rate of 1.3 per cent after a 1.1 per cent in the first quarter.
Also supporting growth was a jump in business investment in equipment and software, which grew at a rate of 21.9 per cent. Signs of capital spending are welcome because they signal that businesses are gaining confidence and could begin to ramp up hiring.
“Investment spending by businesses appears to be ramping up at a faster pace than we expected and, judging by the orders data for the second quarter,” said John Ryding and Conrad DeQuadros, of RDQ Economics.
The commerce department figures were released a week after Ben Bernanke, chairman of the Federal Reserve, told Congress that the economic outlook was “unusually uncertain”.
The Fed has said that it will take action if the economic recovery begins to stall. Fears of a slowdown have grown in recent weeks, with signs emerging of a double dip in the housing market and jobless claims remaining stubbornly high.
A separate report on Friday confirmed that consumer confidence is continuing to wane. The Thomson Reuters/University of Michigan survey of consumer sentiment fell to 67.8 in July from 76 in June.
Richard Curtin, they survey’s chief economist, said that “scarce jobs and stagnating incomes” are weighing upon the minds of consumers.
Fed reports paper profit on Bear and AIG bail-outs
By Francesco Guerrera in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 00:27 | Last updated: July 30 2010 00:27
http://www.ft.com/cms/s/0/309310ce-9b68-11df-8239-00144feab49a.html
The US public’s hope of getting repaid for the bail-outs of Bear Stearns and AIG in the financial crisis increased on Thursday after the Federal Reserve reported a paper profit for the first time on all the holdings of securities bought from the companies.
A rise in the value of the mortgage-related securities that caused Bear’s demise and AIG’s near-collapse enabled the Fed to report unrealised gains on all three vehicles it set up to hold assets from the two stricken financial groups.
The Fed’s paper profit on the three vehicles, known as Maiden Lane I, II and III, highlights the recovery in the value of securities that were once considered toxic, and could allay criticism of the federal bail-outs of large companies.
Ben Bernanke, Fed chairman, has repeatedly expressed confidence that the central bank will be repaid for its aid to the financial system.
As of Wednesday, the Maiden Lane portfolios’ unrealised gains – the difference between the market value of their securities and the outstanding amount of the authorities’ loans to the vehicles – stood at $10.8bn, official documents showed.
The two vehicles created to unburden AIG’s balance sheet of billions of dollars of troubled assets – Maiden Lane II and III – had been showing a paper profit for some time.
This week, Maiden Lane I – a $30bn vehicle that took on Bear’s worst assets, enabling JPMorgan Chase to buy the investment bank in March 2008 – also swung into the black. The improvement was driven by a rise in the value of residential mortgage-backed securities and commercial property loans, according to people familiar with the situation.
The paper profit means that, in theory, the Fed could sell all its holdings in the market and repay the loans, which have maturities of between six and 10 years. In practice, the securities are complex and illiquid and a rapid sale is unlikely.
At the height of the crisis, the Fed extended loans of more than $72bn to the three Maiden Lane vehicles to buy troubled securities from Bear and AIG.
Although the securities had suffered sharp falls in values during the credit crunch, most continued to pay interest and dividends to the authorities.
The Fed used the cash to reduce the outstanding amount of the loans, increasing its potential profits on the increase in the value of the securities.
Disney sells Miramax studio for $660m
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: July 30 2010 10:24 | Last updated: July 30 2010 13:12
http://www.ft.com/cms/s/0/79d354c0-9bb7-11df-9ebd-00144feab49a.html
Walt Disney said on Friday that it would sell Mirimax, the movie studio, to a group of investors for $660m as it focuses on its other film production brands.
The group acquiring Mirimax is Filmyard Holdings, and includes Ron Tutor, a construction executive, Tom Barrack, and his real estate investment firm Colony Capital.Through the acquisition, they will gain the rights to more than 700 movie titles, including Chicago, Shakespeare in Love and No Country for Old Men.
“Although we are very proud of Miramax’s many accomplishments, our current strategy for Walt Disney Studios is to focus on the development of great motion pictures under the Disney, Pixar and Marvel brands,” Robert Iger, Disney’s chief executive, said in a statement.
Filmyard will also receive the rights to certain books, development projects and will have the rights to the name “Mirimax”.
Disney has been in a deal-making mood lately, agreeing on Tuesday to buy Playdom, a two-year old company that makes social games for Facebook. It paid $563m to acquire the company, which will provide a new stage for Mickey Mouse and Iron Man.
The deal for Mirimax, which was founded by Bob and Harvey Weinstein and acquired by Disney in 1993, requires regulatory approval regulators but is expected to close by the end of the year.
Shares of Disney fell 0.97 per cent to $33.71 in pre-market trading in New York on Friday.
US banks in rush for cheap finance
By Francesco Guerrera and Aline van Duyn in New York and David Oakley in London
Copyright The Financial Times Limited 2010
Published: July 29 2010 22:39 | Last updated: July 29 2010 22:39
http://www.ft.com/cms/s/0/4c68466e-9b3d-11df-baaf-00144feab49a.html
US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years.
The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence.
The cheap finance locked in by big institutions such as JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis.
Less than two years after the government was forced to intervene to ease a dramatic credit crunch, US banks sold more than $7bn in debt last week – the largest weekly total since September 2009, says Dealogic.
US Bancorp, a Minneapolis-based lender, raised $1bn in five-year bonds at an interest rate of 2.45 per cent – one of the lowest ever paid by a bank.
Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.
Wall Street executives say recent debt issues were triggered by “reverse inquiries” – informal approaches by fund managers seeking to raise their exposure to a sector they had largely avoided since the crisis.
“There is a bit of a food-fight among investors to get hold of paper from US banks,” an executive at a big bank said. “After leaving the sector alone for so long, there is renewed appetite.”
With US Treasury yields at record lows, investors seek alternatives that offer higher returns. Expectations that the Federal Reserve will keep rates at near-zero have further raised demand for bonds, as a low-interest, low-growth environment is best for such investments.
Recent earnings and the passage of financial rules also contributed to the surge in debt issuance. Goldman, Morgan Stanley and JPMorgan each issued $3bn bonds this month.
The spike in fundraising is enabling US banks to replace existing bonds with new, cheaper ones. Jean-Francois Tremblay, a Moody’s analyst, estimates that US banks have refinanced $200bn of the $372bn of debt coming due in 2010.
In Europe, analysts say banks have raised only 40 per cent of the €450bn they need this year.
But since publication of the stress tests there have been signs of improvement. This week BBVA, Spain’s second-biggest bank, sold the first bond by a Spanish lender since April.
Gregory Peters, at Morgan Stanley, said: “The banks that don’t need funding can do it, the smaller banks that do need funding probably can’t.”
Coffee hits 12-year high on Colombia shortage
By Javier Blas in London
Copyright The Financial Times Limited 2010
Published: July 30 2010 11:45 | Last updated: July 30 2010 13:12
http://www.ft.com/cms/s/0/c26406ce-9bc3-11df-9ebd-00144feab49a.html
Coffee prices on Friday hit their highest level in 12 years on the back of low availability of premium Arabica coffee from key producer Colombia, after a string of disappointing crops in the Latin American country.
In New York, ICE September Arabica coffee jumped 3.2 per cent to 178.75 cents a pound, the highest since February 1998. In London, Liffe September lower quality robusta coffee rose 3 per cent to $1,810 a tonne.
Industry executives believe prices could rise towards 200 cents a pound in New York before the arrival of the new Brazilian crop later this year. “Until October, it is going to be tight on high-quality coffee,” said one.
Colombia coffee production last year plunged to a 33-year low of 7.8m bags, each of 60kg, down nearly a third from 11.1m bags in 2008.
After a meeting with Brazilian officials, the London-based International Coffee Organisation said on Friday that the “current tight demand-supply situation” in the coffee market was “likely to persist in the near- to medium term.”
Executives said, nonetheless, that after the arrival of the Brazilian crop – which is expected to be the largest ever – prices should decline in early 2011.
Elsewhere in commodities markets on Friday, global wheat prices surged further, propelled by fears of lower production from Russia, Kazakhstan and Ukraine – three of the world’s top 10 exporters – because of a drought in the region.
In Paris, Liffe November European milling wheat hit €194.50 a tonne, the highest level in 22 months. The contract was later up 2.3 per cent at €192.30 a tonne.
In Chicago CBOT September soft winter wheat rose to a fresh 13-month high of $6.37 a bushel, up 1.5 per cent on the day. Wheat prices in Chicago, the global benchmark, have jumped 36.7 per cent per cent so far this month.
The International Grain Organisation on Thursday said wheat production would drop to 651m tonnes in 2010-11. That projection was down from the 664m tonnes it forecast last month and sharply lower than the 677m tonnes harvested in the 2009-10 season. The IGC said consumption would hover around 655m tonnes in 2010-11.
Industry executives fear that Russia could impose export limits if the drought damage is worse than currently expected, tightening supplies for importers in North Africa and the Middle East. Executives said bread price rises were likely.
Traders are also concerned about supplies from Canada, which exports the bulk of the world’s top quality, high-protein wheat. Planting in Canada’s prairies was delayed this year by unusually heavy rains and officials said output was expected to decline by at least 25 per compared with 2009.
Meanwhile, oil prices moved lower, but remained anchored within the trading range of $70-$80 a barrel that has been in place for most of the year. Nymex September West Texas Intermediate dropped 54 cents to $77.82 a barrel while ICE September Brent fell 48 cents to $77.11 a barrel.
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