Finance and Economic

Despite its name, the Airport Currency Exchange, a bare-bones operation across Interstate 70 from Lambert International Airport, doesn’t trade in euros, pesos or British pounds.

Instead, you can pay your electric, gas and phone bills there. And if you’re short on funds, the exchange can give you a short-term, high-interest loan. Missouri’s Public Counsel wants that to end.

The state’s consumer advocate for utility issues is hoping to prevent payday loan stores from doubling as utility payment centers.

In a recent filing with utility regulators, the Public Counsel asked for sweeping changes in billing and payment practices that include eliminating various payment fees. The proposal also would require utilities to open company-run payment centers and end the relationship between utilities and payday lenders.

Deputy General Counsel Mike Dandino said customers who most often used payday loan services were poor, elderly or living paycheck to paycheck. Many of the same customers either face threats of disconnection or have fallen behind on bills, making them easy targets for high-interest loans.

"It is not in the interest of consumers to have utility companies steer customers to these predatory lenders," Dandino said in the filing.

The Public Service Commission has yet to act on the petition. If the five-member commission decides to go ahead with a formal rule-making process, it would takes months and involve taking public comments and a hearing.

The recommendations are sure to draw stiff opposition from AmerenUE, Laclede and AT&T. They say that opening and operating payment centers across the area would be too expensive and that eliminating other payment sites would mean a loss of convenience for customers who may have to travel farther to pay their bills.

Richard J. Mark, senior vice president of energy delivery at AmerenUE, said the utility tried to provide customers as many options as possible, including payment centers spread across its 25,000-square-mile service area.

Eliminating even some of those options could especially hurt customers in rural areas and those who need to pay bills immediately to avoid disconnection, he said.

"By eliminating options, you really create hardships for customers," Mark said in an interview.

Nationally and in Missouri, payday loan stores have drawn increased scrutiny from regulators and consumer groups in recent years.

In 2007, the National Consumer Law Center, a nonprofit consumer advocacy group, urged regulators to end the relationship. The group said the added convenience of having more locations to pay bills was outweighed by steering vulnerable customers into the hands of those pitching high-interest loans.

Payday loans are generally defined as short-term cash advances usually secured by a post-dated personal check. In Missouri, the maximum loan is $500 and interest charges can’t total more than 75 percent of the principal.

Still, the average interest rate on a payday loan in Missouri last year was 431 percent, or $47.95 on the average two-week loan of $231 — a reason the state has been criticized for its lax regulation of payday lenders, at least compared with neighboring states.

"Regulated monopolies and the state PSC should not be a in a position where they’re encouraging the use of these services," said John Coffman, a lawyer and former Missouri Public Counsel who has in the past worked for consumer groups including AARP and Consumer Council of Missouri car loans.

The Public Counsel’s proposal doesn’t include evidence that utility customers are taking out high-interest loans to pay their bills; it only suggests that the relationship between utilities and payday lenders makes doing so more convenient.

In fact, prohibiting utility payments at payday loan stores also doesn’t guarantee that a cash-strapped customer won’t take out a high-interest loan and use the proceeds to pay their bill at a supermarket or bank.

About half of AmerenUE and Laclede customers still pay their bills by mail, and only about 10 percent pay in person through a third-party agent. And most of those do so at grocery stores or banks, not payday loan stores, spokesmen said.

Neither utility has a direct relationships with payday lenders. Both companies contract with FirsTech Inc. to recruit and run a network of agents and transmit payments.

Transaction fees at payment centers are capped at $1, and utilities get no part of the money. In fact, AmerenUE and Laclede subsidize the fees received by businesses that serve as payment agents.

The utilities also get no part of convenience fees charged for credit and debit card payments made electronically.

AmerenUE customers who want to pay online or by phone with a credit or debit card are assessed a $3.50 "convenience fee" by Speedpay, the vendor. Laclede similarly offers customers the ability to pay with a credit or debit card through ChoicePay for a $2.95 fee.

Justin Gioia, a Laclede spokesman, said that of the 40 percent of customers who pay their bills electronically, less than 2 percent use the convenience fee option. Only 4 percent of AmerenUE customers pay by credit or debit.

Both utilities offer customers free options for paying bills electronically via check or direct debit.

Regardless, the Public Counsel sees the convenience fees as unnecessary and wants regulators to require utilities to operate company payment centers.

AmerenUE’s Mark said the cost of renting and staffing offices across much of the state for the benefit of a relative few customers who would use them would be expensive and an unfair burden on the rest of the utility’s customers.

Eliminating credit and debit card convenience fees, a piece of which goes to the credit card companies such as Mastercard and Visa, would also mean higher rates for all customers, not just those who use the service, he said.

Meanwhile, AT&T is challenging the accuracy of the Public Counsel’s rule-making petition, which claims the telephone company is charging customers $2.49 if they want to receive a paper copy of their local phone bill.

"AT&T Missouri does not charge customers to receive a paper copy of their AT&T local telephone bill," company spokesman Kerry Hibbs said in an e-mail.

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Airline shares have rallied ahead of Labor Day, an anticipated turning point for the troubled industry when many carriers will begin slashing seat capacity to match the drop in demand.

Investors are hoping capacity cuts will allow airlines to jack up ticket prices and reverse declining revenue. But the plan could falter because business travelers, the industry’s bread and butter, have yet to return.

"We’ve seen some improvement, but I think the bulk of that is being driven by the leisure traveler," said analyst Matt Jacob. "But the business traveler, those who buy close to booking and pay a premium price, that section of the business has continued to be weak.

"So the concern is, once we reach Labor Day and the end of the leisure travel period, how will that impact the improvement we’ve seen?"

Airline stocks have been volatile as investors try to figure out that answer.

After hitting its lowest point on record in March, the NYSE Arca Airline Index has bumped along this summer as airlines readjusted outlooks because of depressed demand and declining revenue. But since late June, the industry benchmark has managed to climb more than 44 percent.

That enthusiasm is tempered among many airline analysts.

"Our short-term revenue data suggest a little strength in late summer," said UBS analyst Kevin Crissey in a recent note.

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The $10.5 million pay package for American International Group Inc’s new chief executive Robert Benmosche will likely be approved formally by the U.S. government’s compensation czar Kenneth Feinberg next week, the Wall Street Journal said, citing people familiar with the matter.

Benmosche’s pay will likely be approved before other rulings about pay at AIG are made, the paper said.

AIG, the recipient of $80 billion in taxpayer loans, said last week that its pay agreement for Benmosche had been approved in principle.

The bailed-out insurer said it will pay Benmosche, who became CEO on August 10, a salary of $3 million in cash and $4 million in fully vested stock. He also could receive a bonus valued as high as $3.5 million.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

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Toyota Motor Corp, the world’s largest automaker, said it would halt a production line in Japan as it looks to cut excess capacity to return to profitability amid an industrywide sales slump.

Car plants around the world are idle or running below capacity as the industry copes with a slide in sales that sent General Motors Co GM.UL and Chrysler Group LLC into bankruptcy and has Toyota headed for a record loss this year.

Total cuts could reach 700,000 cars, or 7 percent of Toyota’s global capacity, including a production line in Britain that may be halted and a joint venture with General Motors in the U.S. likely to be closed, a source with knowledge of the matter said.

“Though sales in some countries have been picking up, the outlook for global car demand is still uncertain,” and the company thinks it should be prepared, the source said.

Toyota’s sales have been boosted over the past few months by government incentives aimed at kick-starting demand, but it is still plagued by an excess capacity of more than 3 million vehicles following a rapid expansion earlier in the decade.

The company said it has decided to halt a production line in Japan for about a year and a half from next spring.

“The production cut is positive for its earnings, but there is room for further capacity cuts in the United States and elsewhere,” said Yoshifumi Tabei, an auto analyst at Kazaka Securities.

Shares of Toyota closed up 1.5 percent, in line with the benchmark Nikkei .N225 average, which rose 1.4 percent.

Toyota expects to lower its break-even point by halting some assembly lines, but will not dispose of them so that it can quickly raise production in the event of a demand recovery. Workers on the halted Japanese production line will be employed at other Toyota factories.

The source said the extent and timing of the output cuts had not yet been set but the Nikkei business daily reported that Toyota planned to reduce its global capacity by 10 percent, or 1 million vehicles, as early as the current financial year to March 2010.

The source, who declined to be named because the matter was not public, said Toyota was also considering halting a line at a UK plant.

Toyota has said it will decide this month whether to pull out of New United Manufacturing Inc (NUMMI), a California joint venture with General Motors.

Those three moves would cut capacity by 700,000 vehicles, based on Toyota factory data, from Toyota’s annual output capacity of 10 million vehicles.

Toyota has begun restoring some production cut in the wake of the global financial crisis as inventories shrink, but has yet to announce whether it plans longer-term cuts in factory capacity.

It has seen a recovery in sales of fuel-efficient cars helped by government measures to promote such vehicles, with its Prius hybrid ranking as Japan’s top-selling car in July for the second straight month, but has lagged behind its rivals in cost-cutting. 

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WASHINGTON — Last year, as the gravest financial crisis since the Great Depression shook the banking system, Ben Bernanke seemed nearly as beleaguered as the institutions themselves.

The Federal Reserve chief had initially underestimated the crisis — and then seemed to inject new risk by unleashing breathtaking sums of money to fight it. Now, a strengthening economy is raising Bernanke’s standing just as President Barack Obama must decide whether to reappoint him.

His supporters say Bernanke, 55, a scholar of the Great Depression, has the knowledge and ability to guide a sustainable recovery without igniting inflation. And they argue that without his bold interventions, the global financial crisis could have been much worse.

"He has risen to the occasion admirably after what you might argue was a slow start," says Alan Blinder, a Princeton professor who was Fed vice chairman in the mid-1990s.

Bernanke, having just wrapped up the Fed’s annual conference in Jackson Hole, Wyo., remains under pressure to help speed a recovery. Joblessness, now at 9.4 percent, is expected to hit double digits this year. Yet his riskiest task is to decide when and how to unwind the Fed’s emergency rescue programs without endangering the economy.

His critics see failures in Bernanke’s performance. They say he overplayed his hand by swelling the Fed’s balance sheet to nearly $2 trillion, a once-unthinkable threshold. They argue that the success of the emergency rescue programs has been inconsistent. And they blame Bernanke for politicizing the Fed: They point, for example, to his role in deciding which banks would benefit from taxpayer-funded bailouts and which would not.

"His handling of the crisis has put the Fed in an awkward political position," says William Poole, former president of the Federal Reserve Bank of St. Louis, who doesn’t think Bernanke should be reappointed. Other decisions, too, should have been left to Congress, says Poole, who retired in 2008 after 10 years at the regional Fed bank.

Regardless of the criticism and Obama’s verdict, Bernanke will go down as a monumental figure, for better or worse, in the history of the Federal Reserve. Ironically, when Bernanke became chairman in February 2006, after Alan Greenspan’s 18-year tenure, he tried to tilt the spotlight away from himself, preferring to elevate the agency itself.

The financial crisis demonstrated Bernanke’s ability to build consensus at the Fed and to engineer solutions not normally in the agency’s playbook, said Allen Sinai, chief global economist at Decision Economics Inc. "Those are huge pluses," Sinai said.

Although many leaders on Capitol Hill and Wall Street credit Bernanke for the unconventional thinking that defined his response to the financial crisis last fall, few said so back then. For months, the Fed chief came under intense criticism as he worked with the Treasury Department to bail out banks and pump trillions into the financial system to try to ease credit clogs.

Even before the crisis intensified last fall, the Fed took the historic step of letting investment firms draw low-cost emergency loans from the central bank — a privilege long allowed for only commercial banks. After a run on Bear Stearns pushed it to the edge of bankruptcy, the Fed and the Treasury nudged what was the nation’s fifth-largest investment bank into a takeover by JPMorgan Chase & Co.

And to revive the economy, the Fed has deployed radical new tools. This year, it rolled out a $1.75 trillion program to buy government debt and mortgage-backed securities and debt from Fannie Mae and Freddie Mac. The goal is to lower rates on mortgages and other consumer debt. Mortgage rates did ease. But many feared the Fed’s buying of government debt made it appear to be printing money to narrow a bulging federal budget gap.

Even his supporters concede Bernanke was among many regulators who failed to detect early hints of the housing and mortgage collapse. Yet once the credit crisis erupted in the summer of 2007, "Mr. Bernanke engineered a U-turn in Fed policy that prevented the crisis from turning into a near depression," Nouriel Roubini, a New York University economics professor and former Bernanke critic, wrote recently in support of his reappointment.

Bernanke’s advocates point to two steps that they say were especially critical in managing the crisis:

— In January 2008, Bernanke started pushing through super-sized rate reductions.

— Early last fall, after the Fed and Treasury stood by as Lehman Brothers collapsed, Bernanke set programs to spur lending and stabilize financial markets.

Some who think Bernanke went too far in supporting bailouts and low-cost loans for big banks argue he shouldn’t be reappointed.

The use of a $700 billion taxpayer-financed fund to bail out big institutions, such as insurer American International Group Inc., angered many Americans.

"Just the fact that (the Fed) can issue a lot of loans and special privileges to banks and corporations — that’s political," huffs Rep. Ron Paul, R-Texas.

Bernanke also failed to detect early on the scope of potential damage from high-risk mortgages.

Still, sentiments on Capitol Hill suggest his chances of reappointment have risen.

"We all look forward to continuing to partner with you," Senate Banking Committee Chairman Christopher Dodd, D-Conn., who has been critical of the Fed, told Bernanke last month.

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WOOD RIVER — A $19.5 million hotel development is expected to be the next big project in a continuing commercial boom in the city’s east end.

The national economy may be in recession, but commercial growth continues in the area near Illinois Route 255, a controlled-access highway that links the area to Interstates 255 and 270. Construction continues northward on the highway, which eventually will connect to U.S. Route 67 in Godfrey.

Aventurs Development LLC, of St. Louis, plans to develop a 14-acre site west of Route 255 and north of Route 143. Mark Hubbs, one of the company’s principals, said it will include a 110-room Holiday Inn Express, a Country Kitchen restaurant and several gas stations and convenience stores.

"We’re excited about Wood River," Hubbs said. "It’s convenient to St. Louis. I think it’s a hidden gem. Nationally, the economy is down, but Wood River, they’re kind of creating their own economy."

Aventurs was originally a partner in the hotel project with YTB International, an Internet travel company that has its headquarters nearby. Hubbs said YTB opted out and Aventurs decided to buy the land and complete the project free credit report instantly. He said the hotel should attract significant business from YTB representatives visiting the home office and construction workers involved in the $3.6 billion expansion now under way at the nearby Wood River Refinery.

Wood River Mayor Fred Ufert said hotels in his area have been operating at 85 percent capacity.

"There’s a need for hotel rooms," he said. "It’s a great thing for us."

Ufert credits the new highway with recent retail growth that has included a new Super Wal-Mart in 2006, new Walgreens and CVS stores and two new car dealerships. (One relocated from a nearby Wood River location, and one relocated from Alton.)

The mayor said the city’s sales tax revenue has increased this year despite the recession and said city officials expect continued growth. He said it’s not only the new stores boosting those numbers but also the many workers who are employed in the refinery expansion.

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Rio Tinto Ltd/Plc, the world’s second-largest miner, posted a record drop in first-half profit, in line with market forecasts, and said it was confident about the future after a tough 18 months.

The company, which has eased its debt woes with recent asset sales and a $15.2 billion share sale, forecast that cost cuts would pay off in the second half, and in a sign of its confidence said it expected to pay a final dividend this year.

“There is more work to do, but we are better positioned with renewed financial strength and a leaner cost base,” Chairman Jan du Plessis said in a statement.

The key challenge for Rio Tinto is to resolve a stalemate with Chinese steel mills on price talks for iron ore, its biggest earner, amid tension with the Chinese government over the arrest of four staff in Shanghai on suspicion of bribery.

Rio this week flagged it would not cave in to selling iron ore at the price set by Australia’s No.3 miner, Fortescue Metals Group, for Chinese mills, which was slightly cheaper than the 33 percent price cut Rio has offered.

“We remain cautious about the recent rally in prices,” du Plessis said.

Rio Tinto is still pushing for more asset sales to bolster its balance sheet, damaged by the costly takeover of Alcan two years ago at the peak of the commodities boom.

With the $2 billion sale of most of its remaining Alcan packaging businesses to Australia’s Amcor Ltd agreed this week, Rio has passed the half-way mark on its target to sell $15 billion worth of assets in two year free car insurance quotes.

It said it had cut net debt by nearly 40 percent.

Underlying January-June earnings fell to $2.565 billion from $5.526 billion a year ago, matching analysts’ forecasts for around $2.6 billion.

Rio’s bottom line was hit by writedowns and a $195 million break fee paid to Chinalco for spurning the Chinese state-owned group’s planned $19.5 billion tie-up in June. Rio instead launched a rights offer and lined up an iron ore joint venture with rival and former suitor BHP Billiton().

First-half iron ore earnings fell by one-third, while coal earnings rose 48 percent.

Rio’s aluminum division posted a loss of $689 million.

Rio shares closed at A$58.03 ahead of the results. The stock has nearly doubled this year, outperforming BHP’s 21 percent gain.

BHP last week gave a guarded outlook for global commodity demand after a slump in metals prices triggered its first profit decline in seven years.

Analysts said then that BHP was the low risk alternative for investors looking to take a position in the diversified mining sector given its strong balance sheet, ability to raise its dividend and its commodity and geographical diversification.

(Reporting by Sonali Paul; Editing by Ian Geoghegan)

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U.S. homebuilder sentiment in August rose to its highest level in over a year, a private survey showed on Monday, adding to mounting evidence that the housing market and economic recession were leveling out.

The National Association of Home Builders/Wells Fargo Housing Market Index edged up to 18 from 17 in July, in line with market expectations.

It was the highest level since June 2008 and marked the second consecutive monthly gain in the gauge, which measures builder confidence in the market for newly built, single family homes.

The NAHB attributed the rise to the government’s tax credit incentive for first-time buyers, but warned the small gains in the housing market could be wiped-out if that incentive was not extended when it expires in November.

“There is definitely a sense of hope among builders that the worst of the downturn is over and that a turning point is near at hand,” said NAHB Chief Economist David Crowe.

“Meaningful action by Congress could ensure that this upward momentum continues and that housing can help push the economy back onto solid ground payday loans.”

Recent data ranging from housing starts to sales have suggested a bottoming in the three-year slump. Housing is at the center of the worst U.S. recession since the Great Depression of the 1930s.

Restoring stability to the housing market is crucial to reviving the economy. The 20-month-old recession is showing signs of winding down.

The NAHB survey also showed two out of three subindexes of the Housing Market Index rising in August.

The current sales conditions gauge was unchanged at 16, while the sales expectations measure for the next six months climbed four points to 30 in August. The traffic of prospective buyers index rose three points to 16 in August. (Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Elizabeth Cowie chose to step away from teaching nutrition at Fontbonne University this year to become the store nutritionist at Sappington Farmers’ Market. The change in her audience has been the sharpest difference.

Cowie conducts store tours by appointment, giving shoppers meal ideas and introducing them to special products. She also shares strategies on how to save money by adding shelf life to fruits and vegetable bought fresh at the store.

She is also facilitating a program the grocery recently began that fights childhood obesity by delivering locally grown fruits and veggies to area day-care centers.

While she does miss the eager students whom she formerly lectured, Cowie said her new audiences have been receptive to her message to buy local produce.

What’s the most common question you get/expect to get?

Gluten-free is big. Probably the next most is just helping people find product that is local and sustainable. They want help (identifying products) that are from the metro area and (I tell) them why those would be a better choice as opposed to another product.

How do you prepare yourself to be a store nutritionist?

I don’t know that I prepared myself, I just kind of dove in. The inspiration for eating more eco-friendly was a personal thing that started probably a few years back when I read the book, "Animal, Vegetable, Miracle: A Year of Food Life" (by Barbara Kingsolver, with Steven L. Hopp and Camille Kingsolver). That was just so inspirational to me. I’ve always eaten well and educated people to eat well, but this took it a step further where you’re not just eating healthily but you’re also eating for a bigger cause — to help the environment. That was moving to me.

What advice do you give in economic times like these when its cheaper to eat unhealthy and where poverty and unhealthy eating can go hand in hand?

It’s in our advantage to help people save money by eating healthy. Some of the sizes (of our fruits and vegetables) are bigger so (consumers) can get a lot more bang for their buck payday advance. Then I can help them on how to process and store it, freeze it or maybe even can it.

I’ve only been here a couple of months, but that’s one thing I’d love to talk about with more people. (She will soon start a blog on the store’s website). I would love to see more people who think they can only get fresh produce in the summer realize we’ve got fresh produce well into the fall; it’s just going to be different seasonal produce. A lot of those keep well into the winter.

How do health fads affect your job and what the store carries?

It is my duty to educate consumers on the best choices. Those choices always go back to the same foundation — lots of fruits and vegetables, lots of whole grain and eating as close to the earth as possible.

Fads come and go, some are dangerous, unhealthy and temporary. … I just keep leading them back to the principles. There’s not any (fad) right now. The biggest trend — and I hope is not a temporary thing —is eating more eco-friendly. I’m thrilled that’s happening. It’s only going to do good. Thankfully the low-carb, low-fat diets seem to be taking a back seat right now.

Are there certain foods you’re going to try help the store sell?

We’re trying to add more local products. … We need more whole grain options, such as whole wheat pizza crusts, whole grain graham crackers. Some options that are healthy for kids are what I’m focusing on outside the store and for the store too. We have plenty but want to keep finding more.

The other thing we’re working on is denoting what items are local and also ones that are high-fructose corn syrup-free and gluten-free. We’re coming up with a labeling system that helps to identify those products clearly.

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Warren Buffett’s Berkshire Hathaway Inc underestimated the risks of falling stock prices to its billions of dollars of derivatives bets, yet still believes it is valuing the contracts fairly.

Berkshire revealed its error in a June 26 letter to the U.S. Securities and Exchange Commission, one of several pieces of correspondence with the regulator about the company’s annual report, and made public on Thursday.

It also agreed to SEC demands for more explanation on $1.8 billion of writedowns on stock investments, and $2.7 billion of auction-rate and other municipal debt holdings. On June 29, the SEC said it completed its review without further comment.

The correspondence shows Omaha, Nebraska-based Berkshire, which has close to 80 businesses and ended June with more than $136 billion of stocks, bonds and cash, is struggling to comply with SEC requirements to disclose enough about its finances.

This issue had surfaced in June 2008, when the regulator demanded “a more robust disclosure” of how the insurance and investment company values its derivatives. Buffett did provide some additional disclosure, in what he called “excruciating detail,” in his annual shareholder letter in February.

Berkshire, through Buffett’s assistant Carrie Kizer, had no immediate comment.

The derivatives contracts are tied to four equity indexes in the United States, Europe and Japan, and are a big reason Berkshire’s earnings fell for six straight quarters. That string ended in the April-to-June period as stocks rebounded.

In the June 26 letter, Berkshire’s Chief Financial Officer Marc Hamburg told the SEC that last year’s 30 percent to 45 percent declines in the equity indexes “are in excess of our volatility inputs 500 fast cash.”

He nevertheless said Berkshire’s expectations for stock market volatility are “reasonable” given the long-term nature of the contracts, which expire between 2018 and 2028.

Berkshire ended June with $8.23 billion of paper losses and $37.48 billion of potential liabilities on the contracts.

Buffett expects the contracts to be profitable and can invest upfront premiums as he wishes. This is one reason the world’s second-richest person believes the contracts are unlike derivatives that are “financial weapons of mass destruction.”

The $1.8 billion of “other-than-temporary impair losses” in 2008 related mainly to 12 equity securities that “generally” lost 40 percent to 90 percent of what Berkshire had paid for them, Hamburg wrote on May 22. Berkshire did not write down six other securities that fell 20 percent to 40 percent, he said.

Hamburg also wrote that Berkshire had reduced its stake in auction-rate and similar municipal debt to $2.7 billion at year end from $6.5 billion six months earlier, but that the credit crisis slowed the runoff in the fourth quarter.

The auction-rate market seized up in February 2008 and has not recovered. Berkshire has said it does not plan to sell its auction-rate holdings at below face value and can hold them until they are auctioned off or redeemed.

In afternoon trading, Berkshire Class A shares rose $1,750, or 1.7 percent, to $102,750 on the New York Stock Exchange.

(Reporting by Jonathan Stempel and Lilla Zuill; editing by Andre Grenon)

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