Finance and Economic

Pressure continues to mount on President Obama to select Elizabeth Warren as the nation’s first consumer financial protection regulator.

Warren, 61, has become something of a cause célèbre as the administration’s top pick to run the new agency charged with protecting consumers from abusive mortgage and credit card practices.

There’s even a Hollywood-produced Elizabeth Warren rap video circulating online called "Got a New Sheriff," featuring a rapping cowboy singing the Harvard professor’s praises.

Last week, 43 House Democrats sent a letter to President Obama, asking him to nominate Warren and requesting a meeting at the White House to discuss Warren’s appointment.

"You have an opportunity to appoint to head this body a true visionary — not the usual Washington careerist. You have an opportunity to appoint to this body the single best-qualified choice," said the letter, signed by Rep. Barney Frank, D-Mass., and Rep. Carolyn Maloney, D-N.Y., among others.

Last week, Warren sat down with the head of a large and influential banking lobbying group, the Financial Services Roundtable. The group declined to comment on the meeting.

Warren, who has repeatedly declined interview requests on this topic, has also been meeting with various key administration players, including a meeting with senior White House advisers on Aug. 12th.

The public groundswell for Warren puts the White House in a tough spot. It’s not clear when President Obama will make his decision, but an announcement is isn’t expected this week.

"The administration is hesitating because they’re faced with the traditional problem that Obama has faced," said Julian Zelizer, a professor of history and public affairs at Princeton University.

If the White House passes Warren over, Zelizer says, they disappoint liberals whose support has been key throughout the administration business card templates. If Warren gets the nod, the White House must deal with "political difficulties on Capitol Hill where centrists have quite a lot of power and Republicans are becoming quite obstinate," Zelizer said.

Warren teaches contract and bankruptcy law as a Harvard University professor and she’s also written a number of personal finance books. More publicly, she chairs a congressional oversight panel that has garnered attention for its critical reviews of government spending to bail out Wall Street banks under the Troubled Asset Relief Program.

Treasury is in the planning stages of creating the consumer financial protection bureau, which will be housed inside the Federal Reserve, thanks to the new law cracking down on Wall Street banks.

Warren is not the only candidate under consideration to run the bureau. But she is the most polarizing. Senate banking chief, Seen. Chris Dodd, D-Conan., has warned her nomination would cause a protracted and lengthy battle in the Senate, adding he isn’t sure she could secure a Senate confirmation.

Banking groups and conservatives paint her as too liberal for a regulator job. They say an aggressive regulator would undermine bank safety by crafting rules that force banks to make risky loans. They’ve also accused her of lacking the chops to be a regulator.

Supporters say the consumer regulator job was written for her. Warren came up with the idea for the consumer financial protection agency and has spent her career championing consumers duped by "tricks and traps" of the financial industry, she often says.

Other candidates rumored to be in contention for the job are Michael Barr, Assistant Treasury Secretary for Financial Institutions, as well as Deputy Assistant Attorney General Gene Kimmelman. 

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Salem Hospital has agreed to pay $6 million for the campus formerly used by the Oregon School for the Blind. The state announced the sale of the 8.37-acre site in Salem on Tuesday.

The Legislature voted in 2009 to close the school and sell the property. Proceeds from the sale will be split equally between a fund to provide resources and educational services to visually impaired students and the School for the Deaf payday loan.

Pending the results of Salem Hospital's 60-day due diligence period, the sale could close by mid-October.

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The amount of foreclosures initiated by lenders in Massachusetts in June has dipped from June of last year according to a new report from The Warren Group.

June marks the second straight month that petitions to foreclose have gone down year over year, per the Warren Group. State lenders filed 2,220 petitions for foreclose — the first step in the foreclosure process — a 21.7 percent drop from 2,835 last June.

June’s foreclosure petitions were up 5.2 percent from the 2,110 filed in May.

A total of 13,338 foreclosure petitions have been filed so far this year statewide, down 3.4 percent from 13,813 during the same period last year.

“The foreclosure picture in Massachusetts hasn’t really improved that much. The level of foreclosure starts for the first half of the year is only slightly lower than a year ago. We have been averaging just over 2,200 foreclosure petitions a month this year compared to about 2,300 a month last year,” Warren Group CEO Timothy M. Warren said in a statement.

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Temperatures of 100 degrees-plus will spread across the Baltimore-area Tuesday and continue through the middle of the week.

The National Weather Service expects temperatures to reach 103 degrees Tuesday, with the heat index reaching as high as 107. On Wednesday, temperatures are expected to again eclipse 100, according to the NWS.

The service has issued a heat advisory for the Baltimore/Washington, D.C., region, meaning the duo of hot temperatures and high humidity “will combine to create a situation in which heat illnesses are possible payday loans guaranteed no fax.” The NWS advises people drink plenty of fluids, stay in air-conditioned rooms and stay out of the sun.

The record-high temperature for downtown Baltimore on July 6 is 104 degrees, according to Weather.com. The average is 90 degrees.

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Facebook unveiled a host of changes at its f8 developers conference that are already ruffling some users’ feathers.

Many of the changes take advantage of big revisions that Facebook made to its privacy settings in late March. Those changes opened the door to allow select third-party Web sites the ability to access and store some users’ personal information. (See correction below)

Those sites can use that information to show what a user’s Facebook friends have been doing on their sites. CNN, IMDB.com and ESPN.com are among the first sites signing up to use the technology. So if you’re a Facebook user reading CNN.com, you’ll be able to see what all your Facebook friends are looking at, view recommended stories and see which friends liked which stories.

Users will be able to share more of the outside Web with their social network.

"This is the most transformative thing we’ve ever done for the Web," said Facebook Chief Executive Mark Zuckerberg in his keynote address Wednesday. "These new technologies will help create instantly social and personalized experiences on the Web."

But even before the announcement, critics expressed concern about the privacy implications of such a service. A similar program called Beacon, unveiled in 2007, caused such a stir among users that the company canned it last year.

Some experts say Facebook learned from its mistakes with Beacon, but it still needs to frame the argument better to get its customers on board. Instead of waiting until Wednesday, Facebook somewhat covertly made the proposed change to its privacy policy late last month and opened it up for public comment.

"It’s not a surprise that the feedback has been quite negative so far," said Augie Ray, social networking analyst for Forrester Research. "Facebook needs to start framing these issues in ways that make the benefits to consumers clear. They’re being much more transparent, but there’s still a lot of room for improvement."

Despite some pushback from users, the move is part of a big effort from Facebook to continue to grow beyond facebook.com.

"It’s evident that Facebook wishes to expand its reach," said Ray. "Facebook has created a very effective and valuable destination site that eats up enormous amounts of users’ time, but for the most part, users have to go to facebook.com to get that value."

Big changes

Universal "like" button: One of the major new items that users will see is a "like" button displayed on Web sites outside of Facebook. The social network will collect that data to better understand and map its users preferences.

The "like" button on Facebook broadcasts what photos, comments or posts a user likes. Facebook announced Wednesday that "like" buttons will start to show up across the Internet, enabling users to share items with friends even when they’re not physically on facebook.com.

For instance, liking "The Godfather" on IMDB.com will put that movie in a user’s movie interests section of their Facebook page. Liking a baseball player on ESPN.com will put up-to-date information about that player in a user’s news feed.

To compliment the universal "like" button, Facebook has changed its internal "Become a Fan" button to "like" as well.

Facebook also will provide a Facebook "social bar" tool that third-party Web sites can display at the bottom of a page, which will let users access some Facebook features without leaving the site, including chat, and activity streams. Similarly, Facebook said third-party Web sites will soon be able to host a number of Facebook features on their sites.

New profiles, new pages: Facebook is changing users’ profile pages so that the "pages" section will no longer appear in a separate section on the bottom of the "info" page. Those pages will be brought up to the "interests" section.

Users will be asked to convert their interests into fan pages: Is one of your interests "The Beatles?" Well, now you can become a fan of The Beatles in a single click. By default, users will receive notifications from their fan pages in their news feed.

Facebook also added new privacy settings that allow a user to control who sees all of those connections.

Community pages: So what about interests like "hiking," "napping" or "cooking," which don’t have Facebook pages? Now they do.

Facebook unveiled about 6.5 million "community pages" this week, which take the "fan page" concept and apply them to ideas, locations or interests.

Currently, community pages are pretty rudimentary. A user can see posts from friends related to that topic as well as what the overall public is saying about it. There is also a link to a Wikipedia article on the subject. Users can’t yet add any content to these pages, but that ability will come soon.

Real-time search: Also among the biggest announcements is real-time search on third-party search sites, similar to Twitter’s service. Facebook announced that users’ public posts will be available for search on sites like Google and Bing.

"It remains to be seen how consumers would adopt real-time search of Facebook feeds," said Ray. "It’s a different kind of search from Google and Twitter — would you want to search on Google to see what your friends say?"

Correction: An earlier version of this story failed to state when the privacy changes were made. They were made on March 26. 

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Running with the herd is the most popular way to invest, because everyone will commend you for heading in the right direction.

Taking a contrarian view, on the other hand, opens you to ridicule from your peers. You may seem out of step, as if you missed getting the proper message or aren’t smart enough to grasp the obvious.

"Contrarian investing is basically going against the grain and doing the opposite of what the majority is doing," explained Paul Merriman, editor of www.fundadvice.com in Seattle. "Most people are emotional market timers, and this is indicated by their huge commitment right now to bonds."

Stock investing in general has probably been the most significant contrarian investment of the past year because investors have been so wary, Merriman believes. Many stock gains were missed as a result.

"The approach to contrarian investing is to look for companies in situations that are misunderstood and out of favor," said David Decker, manager of Janus Contrarian Fund, which used the market downturn of 2008 and early 2009 to snap up stocks such as Apple Inc.

"Just keep in mind that the market is right quite often, so being a ‘knee-jerk’ contrarian is dangerous because a good return shouldn’t be dependent on the future unfolding in the perfect fashion you envision."

Decker’s Janus Contrarian Fund is up 64 percent over the past 12 months with a three-year annualized decline of 4 percent. This "no-load" (no sales charge) fund requires a $2,500 initial investment and has an annual expense ratio of 1 percent.

His largest stock holding, the Florida-based St. Joe Corp. real estate development firm, is an out-of-favor investment he researched well. The stock had fallen 33 percent in 2007 and 32 percent in 2008, but gained 19 percent last year and is up 15 percent in 2010.

Although the company still isn’t making money, usually a bad sign, it owns land worth considerably more than its current stock price, he believes. With the Northwest Florida Beaches International Airport opening near Panama City, the economic development in the region is going to expand. The fact that St. Joe owns the land around the airport has yet to be reflected in its stock price, he noted.

Investors interested in a contrarian approach either invest in a fund that is truly contrarian; find an advisor with that mindset; or research, on their own, good companies with temporary woes.

"A lot of statistical work has shown that if you bought out-of-favor stocks you would have done significantly better than the market in almost every decade since they started measuring it," said David Dreman, chairman and chief investment officer for Dreman Value Management LLC in Jersey City, N.J. "Contrarian investing is a form of value investing with a powerful research background that has worked well for 40 years."

His Dreman Contrarian Small Cap Value Fund "R" is up 65 percent over the past 12 months and has a five-year annualized return of 5 percent. This no-load fund requires a $2,500 initial investment and annual expense ratio of 1.38 percent.

An indication that Dreman is a true believer in contrarian philosophy: He invests a considerable portion of his own net worth in the fund.

He prefers companies with strong cash flow, accelerating returns on invested capital and smart management — putting money in them when their stock price is temporarily cheap. He invests across all types of industries as well as overseas markets.

"There are two possible problems with contrarian investing," cautioned Merriman. "First, value can underperform growth for a decade and you give up on it; or, second, in a depression the contrarian choices are likely the first ones to go under because they already have their own problems."

Contrarian is nonetheless a philosophy espoused by some of the best investors.

Bill Gates and Warren Buffett bought into Republic Services Inc., the second-largest waste collection firm, last November. They didn’t expect high growth, but rather consistent growth and an eventual return to favor, Merriman said. The firm’s ownership of landfills is impressive, and new competitors in the field are limited.

"If the fundamentals of a company are pretty good but for some reason or another it is out of favor, it should do well over the long run," said Dreman.

At the beginning of 2009 Dreman was buying unwanted financial stocks such as JPMorgan Chase & Co., PNC Financial Services and Wells Fargo, as well as out-of-favor oil service companies such as Devon Energy Corp., Apache Corp. and Chesapeake Energy Corp. The future of both groups was too bright to overlook, he believed.

"We look for an asymmetrically positive risk/reward in which the downside is relatively limited and the upside disproportionately large, then build a portfolio around those companies," said Decker. "As long as the company isn’t about to go bankrupt, the question is how much the market has priced in bad news and whether the price is attractive enough."

Major holdings in Janus Contrarian besides St. Joe include Kinder Morgan Management LLC, British American Tobacco Plc., DIRECTV Group Inc., CB Richard Ellis Group Inc. and Japan Tobacco Inc.

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European Central Bank council member Yves Mersch said the economic recovery in the 16 nations that share the euro will probably be uneven.

“Available data suggest the economic recovery process in the euro zone has started, though the upswing will most likely remain erratic,” Mersch said in a report from Luxembourg’s central bank, which he heads. “Risks to this outlook are balanced in a climate that continues to be marked by uncertainty.”

The ECB on March 4 left its benchmark interest rate unchanged at a record low of 1 percent and said it will tighten the terms of some long-term loans to banks as it gradually withdraws emergency lending measures used to fight the financial crisis. Mersch today reiterated ECB President Jean-Claude Trichet’s statement that the key rate remains “appropriate free 3-in-1 credit report.”

The ECB’s Governing Council “will continue to gradually unwind non-standard measures” and “absorb liquidity over time to effectively counter any remaining risks to price stability in the medium to long term,” Mersch said.

Turning to Greece’s budget crisis, Mersch said the conditional support pledged by the European Union together with the measures announced by the Greek government “should succeed in calming the concerns of the markets.”

The fiscal situation in some euro-area nations has “clearly” contributed to the euro’s decline against the dollar, he said.

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U.S. airline passenger revenue rose in January for the first time in more than a year as ticket prices increased, according to a trade group.

Revenue based on a sample of U.S. carriers was up 1.4% in January compared to the same month in 2009, following 14 consecutive months of declines, the Air Transport Association (ATA) said Tuesday.

The boost in sales came as the average ticket price to fly one mile jumped 0.6%, the first rise since November 2008, offsetting the 0 guaranteed approval cash loans.4% drop in passengers.

Revenue was also boosted by a 3.4% increase in passenger sales on trans-Atlantic routes in January, the ATA said.

In December, cargo traffic surged 17% year-over-year amid growth in international trade. That compares to an 11% decline for the full year of 2009. January 2010 cargo data were not yet available. 

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California is hurtling into the budgetary abyss — and it’s not alone.

Across the nation, state tax collections in the first three quarters of 2009 posted their steepest decline in at least 46 years, according to a report this month from the public policy research arm of the State University of New York.

At least 30 states raised taxes in their most recently completed fiscal year — which ended in most cases in mid-2009. Even more cut services. All told, states raised $117 billion to fill last year’s budget gaps, the Pew Center on the States estimates.

Yet despite all those new taxes and deep cutbacks, pressure on state finances continues to build. Economists warn that without a new round of federal stimulus spending, states could face another round of layoffs that could kneecap an already shaky economic recovery.

"We could see a real ripple effect if the states don’t take a balanced approach" by balancing cutbacks with tax raises and other new revenue, said Jon Shure, deputy director of the state fiscal project at the Center on Budget and Policy Priorities in Washington.

State and local governments have cut 132,000 jobs since August 2008, the center says. Fiscal problems appear most acute in California, whose general obligation bonds were downgraded this week after Gov. Arnold Schwarzenegger declared a fiscal emergency.

The state has already said it will increase tuition by a third in the University of California system, among other cash-raising moves. At one point, it was projected to spend nearly 50% more than it stands to garner in revenue in this fiscal year, by one count. California has asked for federal help and warned it could run out of cash in March.

And California’s not the only state facing an almost unfathomable shortfall. Like California, Arizona and Illinois face budget gaps above 40% of projected general fund spending, according to Pew data.

Arizona put its state office buildings on sale this week in a bid to raise $700 million. The University of Illinois furloughed some workers this week after the state failed to come up with $436 million in expected funds. Budget officers in those two states describe their outlooks for fiscal 2010 as "dire," according to a National Conference of State Legislatures report.

Alaska, Nevada, New Jersey and New York face gaps of at least 30% of their planned general fund spending by the end of this fiscal year. A dozen more states face a fiscal 2010 budget gap of between 20% and 29%.

"California is playing out on the biggest stage, but there are states around the nation facing problems of equal or greater magnitude," said Corina Eckl, who runs the fiscal affairs program at the National Conference of State Legislatures in Denver. "We are seeing some frightening situations."

Big shortfalls scare legislators because states by law must balance their budgets every year. After revenue and spending rose steadily in the middle of this decade, bolstered by a housing bubble that boosted employment and fed a stream of property transfer fees, state funding went into freefall when the recession started at the end of 2007.

Given the depth of the recession, few states are expecting an uptick in employment or consumer spending that would translate into bigger tax collections anytime soon. Nine states are forecasting they won’t return to their peak revenue years of 2007 or 2008 until at least 2014.

Adding to the pressure, job losses spur demand for the services states devote the lion’s share of their budgets to: education and Medicaid, which provides healthcare for low-income people.

"The needs grow as states’ ability to meet those needs declines," said economist Andrew Reschovsky, a professor at the University of Wisconsin in Madison.

So far, the worst cuts have been avoided with the help of billions of dollars of federal stimulus money — including $135 billion for education and Medicaid.

But the flow of those funds will start to slow down in the second half of 2010 and will stop altogether at year-end, unless Congress appropriates more money for state assistance.

States have used $53.6 billion in Medicaid funding through Jan. 8, according to government data. If Congress doesn’t extend the Medicaid funding beyond the end of the year, "states are looking at a stimulus cliff," said Robert B. Ward, deputy director of the Rockefeller Institute of Government at the State University of New York at Albany.

The only way to make up those shortfalls is through more new taxes, cutbacks and borrowings.

Local and state governments have had little problem borrowing in the bond market, where analysts expect issuance of $400 billion or more this year. California has had to pay higher-than-average interest rates to sell its debt, but there seems to be little fear of a default, given the state’s giant economy and its relatively small $64 billion worth of general obligation bonds outstanding.

But borrowing is no help in fixing so-called structural deficits, in which spending exceeds revenue over a prolonged stretch. And so far there has been little sign legislators are willing to make the obligatory tough choices, particularly issuing more or higher taxes.

Many of the so-called fixes for current state deficits are mere Band-Aids that push the problem forward rather than address it, observers said.

"It’s surprising that political leaders don’t seem to be taking seriously the magnitude of the problems," said Reschovsky. "You would hope it wouldn’t come to this, but it might take schools closing and programs being eliminated to create a sense of urgency." 

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New orders for long-lasting U.S. manufactured goods fell unexpectedly in October, according to government data on Wednesday that reinforced views of a gradual economic recovery from recession.

The Commerce Department said durable goods orders dropped 0.6 percent after rising by an upwardly revised 2.0 percent in September. New orders in September were previously reported to have increased 1.4 percent.

Analysts polled by Reuters forecast orders rising 0 cash advance loan no fax.5 percent in October. Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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