Finance and Economic

The treasurer of Massachusetts has asked the federal government about lending Massachusetts money under the same favorable terms it has given banks and firms during the financial crisis.

Treasurer Timothy Cahill’s requests to the U.S. Treasury and Federal Reserve Bank of Boston this week were prompted by the state’s inability to borrow from the short-term debt markets, The Boston Globe reported Saturday. The financial turmoil has caused credit markets to stop lending, or to charge prohibitive rates.

California has made a similar request, saying it would run out of money by the end of the month if the short-term debt markets do not ease. The state asked whether it could not obtain loans from the Fed.

Massachusetts has enough money to cover its expenses for the coming weeks, Cahill said (cash loan). But a low-rate loan would ease a cash shortfall if the credit problems persist.

"That’s all we would ask them to do: Treat us like the investment banks," Cahill said.

Federal officials have not responded to his request, Cahill said Friday.

The state’s borrowing problems come as it deals with a $223 million shortfall in projected tax collections during the first quarter of the state’s fiscal year. On Thursday, Gov. Deval Patrick announced the first of what could be a series of cuts to programs and operations to deal with the sagging collections. 

Sourse

When Tony Tan, executive director of Singapore’s biggest sovereign wealth fund, warned in July the world might plunge into its worst recession in 30 years, many shrugged off his remarks as too gloomy.

Three months later, Tan’s prophecy of doom is becoming a reality as the credit crisis ravages U.S. and European banks and takes a growing toll on the global economy.

Tan’s Government of Singapore Investment Corp (GIC) is meanwhile sitting with 7 percent of its estimated $300 billion portfolio in cash and another 26 percent in G7 government bonds.

Tan, a 68-year old former finance minister, professor and banker, and his team are now cautiously sifting through the financial carnage to shop for distressed assets in the United States in an effort to boost long-term returns for Singapore’s central bank.

GIC released its first performance report last month, after increased scrutiny of sovereign funds by Western lawmakers who want them to be more transparent, and revealed a 4 (best payday loan).5 percent real return in Singapore dollar terms over 20 years.

“We should not assume that the worst is over and we continue to be watchful and prudent in our assessment of the economic risks and in our investments,” Tan, also the fund’s deputy chairman, told reporters at the launch of the report.

Song Seng Wun, a Singapore-based economist with Malaysia’s CIMB, said Tan’s long stint with the private and public sector makes him experienced enough to guide GIC through the crisis.

“I don’t think you can compare him to an investor like Warren Buffett,” he said. “But he is an old hand who has seen the ups and downs of the Singapore economy and it is good to have someone like him steering the ship.” 

Read more

WASHINGTON–House members are getting another chance to vote on a financial bailout bill that has infuriated millions of voters after the Senate added tax cuts and other sweeteners and passed it handily.

Senators advanced the much-criticized measure in a 74-25 vote late Wednesday, sending it to the other side of the Capitol for a showdown vote expected Friday. The move was calculated to win over enough dissenting House members to get the bill through and reverse Monday’s stunning defeat in the House. Party leaders there planned to press rank-and-file members Thursday for the dozen converts they believe they need.

U.S. President George W. Bush will continue lobbying, too, with the argument that businesses are having a tough time financing operations and payroll and need help. A day ahead of the House vote, Bush called business leaders to the White House on Thursday to make his case for the $700-billion package.

"The president will note how important it is to pass the financial rescue legislation to help to free up credit in our economy," said White House spokesman Tony Fratto. "These business owners know the consequences if the situation gets worse, so the crisis is urgent for these businesses.”

On another front, the head of the Federal Deposit Insurance Corporation, urged people to remain calm.

"I think overall the banking system remains very sound so that’s why I think it’s so important for everybody to keep their head," commission Chairman Sheila Bair said on C-SPAN. "What I don’t want is to see otherwise healthy institutions start to get into trouble just because of liquidity pressure … Wall Street should be taking their cue from Main Street right now. Main Street deposits are staying there.”

The bailout package was never in danger in the Senate. Senators instead played catalysts for the House, adding tax provisions popular with the left and right in a bid that House leaders hope – but cannot guarantee – will persuade enough of the House rank-and-file to switch from "nay" to "aye" on a highly contentious bill a month before Election Day.

They were especially targeting the 133 House Republicans who voted against the package.

California’s David Dreier said Thursday morning that "I hated” the initial version of the bill but that he plans to vote for it this time around.

"I was very concerned with the proposal that came forward that would have allowed golden parachutes to go forward," said Dreier, a Republican. But he said he likes the new version because "it puts into place growth-oriented tax cuts.”

"I will tell you, the American people are angy and frustrated," he said on ABC’s "Good Morning America," saying he’s been hearing messages like "the woman who said she was concerned about getting access to a student loan for her daughter.”

Rep. Marcy Kaptur, an Ohio Democrat, said on the same program that she plans to vote no.

"I will not support this legislation because it’s the wrong medicine," she said. Kaptur argued that the problem should be solved by the market itself, not through governmental intervention.

After the Senate vote, Majority Leader Harry Reid, D-Nev., said, “We’ve sent a clear message to Americans all over that we will not let this economy fail. This is not a piece of legislation for lower Manhattan. This is legislation for all America.”

The rescue package would let the government spend billions of dollars to buy bad mortgage-related securities and other devalued assets held by troubled financial institutions $1500 payday loan. If successful, advocates say, that would allow frozen credit to begin flowing again and prevent a serious recession.

To some degree, at least, House GOP opposition appeared to be easing as the Senate added $100 billion in tax breaks for businesses and the middle class, plus a provision to raise, from $100,000 to $250,000, the cap on federal deposit insurance.

House Republicans also welcomed a decision Tuesday by the Securities and Exchange Commission to ease rules that force companies to devalue assets on their balance sheets to reflect the price they can get on the market.

There were worries, though, that the tax breaks might cause some conservative-leaning Democrats who voted for the rescue Monday to abandon it because the revised version would swell the federal deficit.

"I’m concerned about that," said Rep. Steny Hoyer of Maryland, the Democratic leader.

The Senate-backed package extends several tax breaks popular with businesses. It would keep the alternative minimum tax from hitting 20 million middle-income Americans. And it would provide $8 billion in tax relief for those hit by natural disasters in the Midwest, Texas and Louisiana.

Leaders in both parties, as well as private economic chiefs almost everywhere, said Congress must quickly approve some version of the bailout measure to start loans flowing and stave off a potential national economic disaster.

But critics on the right and left assailed the rescue plan, which has been panned by their constituents as a giveaway for Wall Street with little obvious benefit for ordinary Americans.

Sen. Jim DeMint, R-S.C., a leading conservative, said the step was "leading us into the pit of socialism.”

But proponents argued that the financial sector’s woes already were being felt by ordinary people in the form of unaffordable credit and underperforming retirement savings. Still, they said voters were unlikely to reward those who vote for the measure.

"There will be no balloons or bunting or parades" when the rescue becomes law, said Sen. Chris Dodd, D-Conn., the Senate Banking Committee chairman.

Tax cuts new and old are favorites for most House Republicans. Help for rural schools was aimed mainly at lawmakers in the West, while disaster aid was a top priority for lawmakers from across the Midwest and South.

Another addition, to extend the deductibility of state and local taxes for people in states without income taxes, helps Florida and Texas, among others.

Increasing the deposit insurance cap was a bid to reassure individuals and small businesses that their money would be safe in the event their banks collapsed. It was particularly geared toward small banks that fear customers will pull their money and park it in larger institutions seen as less likely to fold.

The Senate vote lacked the drama of Monday’s House vote, but it had its celebrity moments. Democratic presidential nominee Barack Obama and his GOP rival, John McCain, came off the campaign trail to vote for the package, thrilling tourists who glimpsed them in the Capitol’s corridors and drawing hordes of reporters and photographers.

Source

CarMax Inc. said Wednesday it is laying off more than 600 employees, or about 4% of its total work force, as the auto retailer tries to cut costs due to a decline in car and truck sales.

The Richmond, Va.-based company said the reductions are in its service operations departments at a majority of its production superstores, where it reconditions vehicles. The production superstores make up 60 of the company’s 99 retail locations.

"Since Memorial Day, we have taken significant steps forward in aligning our costs with current sales levels," said Chief Executive Tom Folliard in a news release. "Since that time, we have achieved our store staffing objectives in most departments, but it was necessary to make further reductions in service operations in order to reach these staffing goals."

"This was a difficult but necessary decision for us to make."

The reductions were part of the company’s long-term initiative to decrease costs in the reconditioning area wile maintaining vehicle quality, Folliard said.

Employees were notified on Wednesday and were offered severance packages, said CarMax spokeswoman Trina Lee. The company, which has about 15,250 employees, said it expects about $7 million in severance costs will be included in its results for the third quarter ending Nov paydayloans.com. 30.

Its shares fell 64 cents, or 4.6%, to close at $13.36 in trading Wednesday.

Last week, CarMax (KMX, Fortune 500) said its second-quarter earnings plunged 78% due to a weak economy, high gasoline prices and losses in its financing arm. The company said earnings for the quarter ended Aug. 31 fell to $14 million from $65 million in the same quarter last year.

Total sales fell 13% to $1.84 billion from $2.12 billion a year ago. CarMax said same-store sales, or sales at stores open at least a year, tumbled 17% during the quarter.

Folliard said last week the company is taking the necessary and appropriate steps to navigate through the difficult financial environment. Those steps had included a hiring freeze at its home office and a decrease in labor hours.

The company said new vehicle sales fell to $77.8 million from $104.8 million for the quarter, while the average selling price of its used vehicles declined 6% due to industrywide decreases in used-car prices.

As gas prices have climbed, people have been abandoning once-popular trucks and sport utility vehicles in favor of fuel-efficient small cars. That has driven used-truck and SUV values lower. 

Source

The Federal Reserve and other countries’ central banks announced new steps Monday that makes billions of dollars available to squeezed banks here and abroad to battle a worsening credit crisis that threatens to unhinge the U.S. economy.

The Fed said the action is intended to "expand significantly" the cash available to financial institutions in an effort to relieve to the worst credit crisis since the Great Depression. In taking the action, the Fed cited "continued strains" in the demand for short-term funding.

Central banks will continue to work closely and are prepared to take "appropriate steps as needed" to ease the crisis and get banks lending again, the Fed said.

Under one new step, the Fed will boost the amount of 84-day cash loans available to U.S. banks. The Fed is increasing the amount to $75 billion, up from the current $25 billion starting on Oct. 6. Banks bid on a slice of the loans at an auction.

That move will triple the supply of 84-day loans to $225 billion, from $75 billion, the Fed said.

Meanwhile, the Fed will continue to make $75 billion worth of shorter, 28-day loans available to banks.

All told, the total amount of cash loans - 84-day and 28-day - available to banks will double to $300 billion from $150 billion, the Fed said.

Moreover, the Fed will make a total of $620 billion available to other central banks, expanding ongoing currency "swap" arrangements with them where dollars are traded for their currencies cash advance loans. That’s up from $290 billion previously in such arrangements.

The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Swiss National Bank and the central banks of Denmark, Norway, Australia and Sweden are involved in those swap arrangements.

The move comes as the U.S. financial meltdown’s tendrils have ensnared banks in Britain, the Benelux and Germany. 

Source