Finance and Economic

The dollar sank against the euro and fell against the other major currencies on Wednesday.

Oil soared to a new record past $133 and the Federal Reserve, in the release of minutes from its April meeting, forecast a softening economy and higher unemployment in 2008.

Meanwhile, an important index of German business confidence climbed unexpectedly.

The 15-nation euro rose to $1.5780 late in New York from $1.5669 late Tuesday.

The British pound climbed higher to $1.9689 from $1.9677, while the dollar was unchanged at 104.17 Japanese yen.

In later trading, however, the dollar sank to 102.97 yen.

The Fed’s minutes cut growth estimates for the rest of 2008. Economic activity was "likely to be particularly weak in the first half of 2008; some rebound was anticipated in the second half of this year," the minutes said. The central bank predicted higher unemployment and growing inflation.

But in Germany, Europe’s biggest economy, the Ifo Institute said business confidence posted an unexpected increase for May, retreating from the more than two-year low set a month earlier. That suggested that German companies have so far weathered the euro’s near-record strength against the dollar and soaring oil prices.

The unexpected increase "is accelerating the pace of the dollar decline, broadening the sell-off beyond just rising oil," said Ashraf Laidi, an analyst at CMC Markets in New York in a research note. "Considering that the US downturn has been deeper than its euro zone counterpart, a recovery in the latter suggests more positive ground for the euro than the dollar, especially as it means a possible rate hike," he said.

Oil and gas prices have hit a string of records recently, compounding inflation fears around the world. On Wednesday, oil prices rose to a new record above $133 a barrel.

Skyrocketing oil prices have contributed to worries that consumers will buy less as fuel takes a larger share of their budgets.

In other New York trading, the dollar slid to 1.0272 Swiss francs from 1.0368 francs late Tuesday, and fell to 98.48 Canadian cents from 99.23 Canadian cents. 

Sourse

Senate Banking Committee leaders said Monday that they have come to a deal on a housing bill that would prevent foreclosures, create affordable housing and revamp oversight of two of the mortgage market’s biggest players: Fannie Mae and Freddie Mac.

A major part of the legislation would allow the Federal Housing Administration to insure $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes.

The deal came as pressure has been building in Washington to respond to the huge increases in foreclosure filings. It was struck between the top Democrat and Republican on the Banking Committee: Chairman Christopher Dodd, D-Conn., and Ranking Member Richard Shelby, R-Ala.

"This legislation is good news for both the markets and homeowners," Dodd said in a statement. "The bill addresses the root of our current economic problems - the foreclosure crisis - by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes."

Dodd and Shelby had been in prolonged negotiations over the bill.

A key sticking point has been Shelby’s push to shield taxpayers if borrowers default on their payments after getting government-backed loans. He has said that he wants the FHA plan funded by redirecting money that Dodd’s original bill earmarked for a new affordable housing trust fund. The funds would be paid by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

"My primary consideration … has been to protect the American taxpayer, and I believe we’ve made significant progress toward that goal," Shelby said in a statement.

Dodd said Monday that the compromise bill would still create a fund to spur affordable housing but would use the funding for that program in the first year to backstop the FHA mortgage program.

The new FHA program could benefit an estimated 500,000 people. It could cost as much as $500 million, which would be paid for by Fannie and Freddie. If it turns out the costs fall below that level - that is, should few if any borrowers default on their new FHA loans - the funds from Fannie and Freddie would be redirected back to the affordable housing trust fund.

Regulating the big boys

Another big issue in the legislation is a measure that would provide for stricter oversight of Fannie and Freddie. The two government-sponsored enterprises guarantee the purchase and sale of home mortgages in the secondary market.

Shelby had been campaigning for more stringent safeguards than Dodd’s original bill provided. Both Fannie and Freddie have experienced accounting scandals in the past and both saw steep first-quarter losses.

The Banking Committee is scheduled to debate and vote on the bill Tuesday. The measure is certain to pass at the committee level and Dodd said he is hopeful he can get the votes he needs to pass the bill through the full Senate in time to go to President Bush before the July 4 congressional recess.

It remains an open question whether Bush would support the bill. He has threatened to veto a similar bill sponsored by Rep. Barney Frank, D-Mass., and passed by the House on May 8 by a 266-154 vote. But Dodd said that while the White House hasn’t endorsed his bill yet, "there’s been some positive reaction out of the White House."

A spokesman for Frank said the congressman was pleased a compromise had been reached. "We look forward to working with them," he said.

- With additional reporting from CNN Producer Lesa Jansen 

Sourse

Video game publisher Electronic Arts Inc. has for a third time extended the deadline for its $2 billion tender offer to buy smaller rival Take-Two Interactive Software Inc., but it did not raise the price as many analysts had expected.

Take-Two, meanwhile, confirmed it is in formal talks with an interested party — most likely EA — even as it again spurned the offer price as too low.

Redwood City, Calif.-based EA said Monday it is extending the offer, which had expired Friday, to June 16 at 11:59 p.m. EDT. The price remains $25.74 per share although Take-Two’s stock has not traded below $26 since May 1. Analysts, such as Wedbush Morgan’s Michael Pachter, expect EA to pay more a couple of dollars more per share to get the deal done.

As of Friday, about 6.2 million shares had been tendered, representing about 8% of Take-Two’s outstanding shares. This is slightly below the roughly 6.4 million shares that had been tendered as of April 17, the day before EA last extended the deadline.

EA (ERTS) said the latest extension allows the Federal Trade Commission’s antitrust review of the proposed acquisition to continue.

New York-based Take-Two (TTWO) is best known for its "Grand Theft Auto" series of games. The latest installment of the popular franchise sold 6 million copies worldwide in its first week on sale, bringing in more than $500 million and making it the most lucrative video game launch in history.

Take-Two said the "GTA IV" launch, as well as a recently announced movie deal for its critically acclaimed "BioShock" game, shows the company is worth more money than what EA is offering. EA, meanwhile, says its offer already takes the success of "GTA IV" into account.

Earlier this month, EA, whose games include the "Madden NFL" football franchise and "The Sims," gave an outlook below Wall Street’s expectations for the current fiscal year, suggesting it could use Take-Two’s titles to boost its performance.

Take-Two urged shareholders to reject the offer.

"The small number of shares tendered into EA’s offer to date demonstrates that our stockholders agree with what our board has maintained from the beginning: EA’s proposal undervalues our company," said Chief Executive Ben Feder in a statement.

In another sign it is serious about going through with the offer, EA earlier this month disclosed it has secured debt financing commitments of up to $1 billion for the proposed acquisition. 

Sourse

Plane maker Airbus and diversified manufacturer Honeywell International Inc. on Thursday said they are developing a biofuel that by 2030 could satisfy nearly a third of the worldwide demand from commercial aircraft, without affecting food supplies.

Along with JetBlue Airways Corp (JBLU). and International Aero Engines, they plan to produce fuel from vegetation and algae-based oils that do not compete with existing food production or land and water resources.

Currently, commercial airlines run their planes on kerosene, though some alternative fuels are being tested.

The companies did not say how much they would invest in the project, nor did they give any targets for biofuel production prior to 2030. International Aero Engines is a multinational consortium whose shareholders include United Technologies (UTX, Fortune 500) Corp.’s Pratt & Whitney and Rolls-Royce. (RRYGF)

President Bush in December signed an energy bill that requires refineries to use 36 billion gallons of ethanol a year by 2022 with at least 21 billion gallons of the alternative fuel coming from nonfood raw materials.

The United States currently produces nearly 7 billion gallons of ethanol annually, all from corn. Critics say reliance on that crop has helped inflate food prices, while skeptics note there is no way to know when biofuels from other sources will be commercially available.

Airbus and its partners are undeterred.

"In order to replace a significant portion of that jet fuel with bio-jet, we need to find something that has much greater yield than the current biomass sources available," Sebastien Remy, head of alternative fuels research programs for Airbus, said in a release. "Airbus believes that second-generation bio-jet could provide up to 30 percent of all commercial aviation jet fuel by 2030."

A spokesman for Airbus, which is owned by European Aeronautic Defence & Space Co. NV, on Thursday said it’s expected the new biofuel it’s producing with Honeywell (HON, Fortune 500), will be a "drop-in" replacement for today’s kerosene jet fuel and that engine modifications should not be required. Airbus and Chicago-based rival Boeing Co. dominate the global market for commercial airplanes carrying 100 or more people.

On Wednesday, DuPont executives said a new joint venture with a Danish company will enable production of cellulosic ethanol that costs less to manufacture than corn-based ethanol and won’t drive up food prices.

The companies plan to invest $140 million in the U.S.-based venture and hope to have a commercial-scale demonstration facility, making fuel from the leaves and stalks of corn and from the remnants of sugarcane stalks, operating by 2012.

Speaking a Wednesday hearing on the global rise in food prices, Sen. Joseph Biden, D-Del., applauded DuPont’s plan.

"We must push harder in the search for alternatives, and not just because of the price of food," Biden said. "Our foreign policy is held hostage to our dependence on imported oil." 

Sourse

FBI officials Tuesday disclosed complaints of mortgage fraud are piling up at record levels this year, and appear certain to shatter last year’s record.

Financial institutions received 33,359 "suspicious activity reports" through the first six months of the current fiscal year, which ended April 30, compared with 46,717 for the entire previous year, the FBI said.

"We could be headed for 70,000 for this year," said FBI spokesman Stephen Kodak, who acknowledged the increased complaints to be among the reasons FBI Director Robert Mueller predicted last month the mortgage fraud problem will get worse this year.

The new volume of formal complaints buttresses Mueller’s public warning that "as housing prices continue to fall, more financial misdeeds will no doubt come to light."

Integrity needed: In a speech in April to the American Bar Association, Mueller called for a "culture of integrity" to combat rampant corporate fraud and other white collar crime.

He said the FBI is investigating more than 1,300 mortgage fraud cases, including 19 that involve potential crimes by corporate entities.

The FBI Tuesday also released its finalized mortgage fraud report for fiscal year 2007, which ended October 31. It showed mortgage fraud investigations increased by 47% over the previous year.

Fraud hotspots: The report also showed the 10 "hot spots" for mortgage fraud last year were generally states where real estate prices had soared most during the early 1990s.

Those hot-spot states, in order, were: Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado, and Minnesota.

The report also identified 10 "other states significantly affected by mortgage fraud": Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey and Connecticut. 

Sourse

The European Central Bank left its interest steady at 4% on Thursday, following a similar decision by the British central bank to leave its rate at 5%.

ECB president Jean-Claude Trichet will present the bank’s rationale for leaving the rate for the 15-nation euro zone at 4% - where it has stood since last summer - when he meets with reporters in the Greek capital.

Analysts had expected Thursday’s decision by both banks as evidence mounted that growth in the euro zone and in Britain is likely to slow in coming months.

Higher rates, used to combat inflation, also can strengthen a currency and are considered to be supporting the euro.

While the U.S. Federal Reserve has lowered rates seven times in seven months to 2%, the ECB has been content to stand pat to try to combat rising inflation in the bloc of 317 million people, which accounts for 22% of global gross domestic product - more than Japan and China and below the U.S. at 27%.

"While the U.S. economy has succumbed to stagnation and the U.K. economy is decelerating sharply, the euro zone has so far held up fairly well," said Holger Schmieding, Bank of America’s chief European economist. "For the time being, that is until the summer break ends in September, the ECB is probably firmly on hold," he said.

In London, the Bank of England shied away from back-to-back trims despite slowing economic growth.

The decision to keep rates on hold was anticipated by most analysts after the bank’s monetary policy committee made a quarter of a percentage point cut last month. The bank had to balance its decision with concern about inflation that remains above target levels.

"Current elevated inflation levels and risks deterred the MPC from cutting interest rates for a second successive month in May despite mounting signs that the U.K. economic downturn is deepening and widening amid ongoing tight credit conditions," said Global Insight economist Howard Archer.

Chiara Corsa, a UniCredit economist in Milan, said that the BoE was "well aware that, against the backdrop of tighter credit conditions, growth momentum will definitely lose steam."

It’s a similar quandary for the ECB now that inflation in the euro zone has slipped back to 3.3% in April from 3.6% in March - still well above the ECB’s own guideline of just under 2%. The bank is also pointedly concerned about the fluctuation in exchange rates, including the record setting euro, and what it may portend for future economic stability.

The euro reached a record $1.6018 on April 23 after a pair of ECB governors said that high inflation could cause the bank to raise interest rates. They quickly backed off the assertion and the euro has since slid to around $1.55 this week. 

Sourse

It’s official: the guys who founded Google are grown up.

That was the pronouncement on Thursday from Google (GOOG.O: Quote, Profile, Research) Chief Executive Eric Schmidt, who was hired in 2001 to provide mature, traditional business savvy to the Internet search company founded by whiz kids Larry Page and Sergey Brin.

“The boys have grown up,” Schmidt told a news conference ahead of the wildly successful company’s annual meeting.

Now billionaires, the two who formed the company, which has the motto “Don’t Be Evil,” were seen as “brilliant young founders,” Schmidt said.

“They now function in the company as the senior executives with the kind of skills and experience –”

“– We wish he had five years ago,” Page said, finishing Schmidt’s thought.

Page, 35, and Brin, who was born in the Soviet Union 34 years ago, made history in their 20s when they set up the Google search engine.

“Now we don’t have to have the same kind of arguments,” said Schmidt, who at 53 qualifies as an old man by the standards of the youthful Google campus. 

Read more

Insulin pumps are used by tens of thousands of teenagers worldwide with Type 1 diabetes, but they can be risky and have been linked to injuries and even deaths, a review by federal regulators finds.

Parents should be vigilant in watching their children’s use of the pumps, researchers from the Food and Drug Administration wrote. They didn’t advise against using the devices. But they called for more study to address safety concerns in teens and even younger children who use the popular pumps.

The federal review of use by young people over a decade found 13 deaths and more than 1,500 injuries connected with the pumps. At times, the devices malfunctioned, but other times, teens were careless or took risks, the study authors wrote.

Some teens didn’t know how to use the pumps correctly, dropped them or didn’t take good care of them. There were two possible suicide attempts by teens who gave themselves too much insulin, according to the analysis.

"The FDA takes pediatric deaths seriously," said the agency’s Dr. Judith Cope, lead author of the analysis. "Parental oversight and involvement are important. Certainly teenagers don’t always consider the consequences."

The pumps are popular because they allow young people to live more normal lives, giving themselves insulin discreetly in public and getting pizza with friends late at night. And they’re a growing segment of diabetes care, with $1.3 billion in annual sales worldwide, said Kelly Close, a San Francisco-based editor of a patient newsletter. She said 100,000 teenagers may be using them.

The pumps are used for those with Type 1 diabetes, which accounts for about 5 to 10% of all diabetes cases and used to be called "juvenile diabetes." The more common form is Type 2, which is often linked to obesity and more often affects adults.

Type 1 affects an estimated 12 million to 24 million people worldwide and occurs when the body attacks insulin-producing cells in the pancreas. Insulin regulates blood sugar levels, which when too high, can lead to heart disease, blindness and kidney damage.

Insulin pumps are the size of a cell phone and worn on a belt or pocket. They send insulin into the body through a plastic tube with a small tip that inserts under the skin and is taped in place. They cost about $6,000 and supplies run $250 a month. Most health insurers cover much of the cost.

Users must tell the device how much insulin to give before each meal, based on the estimated carbohydrates in the meal. The devices also deliver a continuous low level of insulin.

In the FDA study, appearing in the May issue of the journal Pediatrics, the reports of adverse events and deaths in adolescents using the pumps occurred from 1996-2005.

The FDA requires manufacturers to report injuries that could be linked to medical devices. The authors analyzed reports from patients 12 to 21 years old. They emphasized that the reports aren’t always clear about the cause of death or injury.

The devices provide an alternative to multiple daily injections of insulin by syringe; some come with glucose monitors that reduce the number of times the finger must be pricked to test blood sugar.

While some teenagers want to switch from insulin injections to pump therapy to gain more flexibility in their lives, doctors said device problems such as a blocked tube can lead quickly to dangerous episodes of high blood sugar.

"In a matter of a few hours, all the insulin in the body disappears. Metabolically, the child starts to spiral out of control," said Dr. John Buse, the American Diabetes Association’s president for medicine and science. Kids need to be aware of the risk, monitor their blood sugar and be ready to give themselves an insulin injection.

Dr. Christina Luedke of Children’s Hospital Boston said she carefully screens teenagers and their families before prescribing a pump. She has refused it for some young patients.

"Without appropriate glucose monitoring, the pumps can increase the risk of getting sick more quickly compared to injections," Luedke said. However, she said, proper use makes life more bearable and can improve glucose control.

Teenagers also have problems keeping their diabetes under control with multiple daily insulin injections, doctors and manufacturers said.

"It is a constant struggle for a patient who is an adolescent to stay in control of any therapy," said Steve Sabicer, a spokesman for Minneapolis-based Medtronic Inc (MDT, Fortune 500)., which makes the top-selling insulin pump. The company stands behind the product’s safety and "the many years of clinical evidence that support the benefits of insulin pump therapy," he said.

Other companies with insulin pumps either on the market or in development include Abbott Laboratories (ABT, Fortune 500), Johnson & Johnson’s (JNJ, Fortune 500) Animas Corp., DexCom Inc. (DXCM) and Insulet Corp. (PODD) 

Sourse

A bill meant to help homeowners caught up in the spreading mortgage crisis received committee approval Thursday after Democrats fended off numerous Republican challenges to the bill.

The bill would authorize the Federal Housing Administration to guarantee up to $300 billion in new mortgages offered by government-approved private lenders.

The House Financial Services Committee passed the bill on a vote of 42 to 21. The full House is expected to take up the measure next week, committee aides said.

The committee estimates the program could help 1.5 million homeowners who are having difficulty paying their mortgages.

Committee chairman Rep. Barney Frank, the main author of the bill, says the millions of individuals who might face foreclosure because of the expanding credit crisis deserve help, even if they made a mistake by borrowing beyond their means.

"There are people who made loans that should not have been made; there are some people that were wrong to take the loans out, some wrong to make the loans. If nothing happens and all those loans go under foreclosure, the economy suffers," he said.

Republican amendments defeated. On Wednesday, the Democratic members of the House Financial Services Committee defeated several GOP amendments to the proposal, which would have excluded people with bad credit, limited the program to low- and middle-income borrowers and eliminated a requirement that lenders accept losses. They were all defeated on mostly party-line votes.

The Bush administration also "strongly opposes" the legislation, calling the bill a "bailout." The administration expressed its objections in a letter send last week to Franks.

The bill would not authorize the government to loan money directly to homeowners, but would guarantee new mortgages offered by government-approved private lenders. The new mortgages could at most equal 90% of a home’s current value.

Only homeowners who have a mortgage-debt-to-income ratio of 35% or higher and who entered into a mortgage before January would qualify for the program.

For a homeowner to get a new FHA-backed loan, the holder of the current mortgage would have to accept a loss and take a payment totaling no more than 85% of the home’s value.

The government would also get a share of profits if the homeowner sold the house in the future and would have to pay the lenders only if homeowners defaulted on FHA-backed mortgages. The Financial Services committee estimates that 1 to 2% of the new loans would default, costing the government $3 billion to $6 billion.

The administration touted existing FHA programs, including the FHASecure plan the president announced in August, calling them "simpler and more targeted" ways to help homeowners who are behind on their mortgage payments.

The administration says the FHASecure program will help half a million homeowners by the end of the year.

By Scott J. Anderson and Lesa Jansen 

Sourse

President Hugo Chavez of Venezuela signed a decree Wednesday that orders the nationalization of the country’s leading steel producer.

Chavez nationalized Sidor, a steel making company, a Venezuelan government official told CNN. The Argentine company Ternium owns the majority of shares in Sidor, according to a report about Chavez’s decision in the Venezuelan-based Bolivariana News Agency.

The leftist administration of Chavez has nationalized companies from several industries.

About three weeks ago, government ministers told three foreign-owned cement companies that Venezuela planned to nationalize the cement industry. Those plans affect Cemex (CX), a Mexican firm; Holcim Ltd. of Switzerland and Lafarge, which is based in France. Those companies control 92% of the cement market in Venezuela.

Chavez also has nationalized telephone and power companies.

The decree that Chavez signed Wednesday will create a commission "to take control of the company and make it work in the best interests of the nation, its workers" and the Guyana region of Venezuela, the Bolivariana News Agency reported. 

Sourse