Finance and Economic

Shareholders of Biogen Idec Inc (BIIB.O: Quote, Profile, Research, Stock Buzz) will meet shortly to decide whether one of the world’s biggest and oldest biotechnology companies should remain independent or be put up for sale by billionaire investor Carl Icahn.

Shareholders will vote at their annual meeting on June 19 either to back Biogen’s nominees for its board, or to support an alternate three-member slate proposed by Icahn, who owns roughly 4 percent of the company’s stock and whose goal is to unlock its value through a sale.

For now, Biogen is tipped to win. Last week three proxy advisory firms issued reports backing Biogen, and while investors do not always follow the advice of the advisers, their recommendations make an Icahn victory less likely.

“If I had to handicap the outcome I’d lean a little more towards Biogen’s slate,” said Damien Conover, an analyst at Morningstar.

At stake is the Cambridge, Massachusetts-based company’s future as an independent entity easy payday loans. Icahn is seeking to permanently limit the board to 12 members to prevent the company from expanding the board and diluting his power.

Currently the company would be allowed to expand the board beyond 12 members.

“When you make this vote you decide either for Biogen as an ongoing concern because you believe in its products, or you opt for a disruptive board that would probably create headwinds for the ongoing business, in return for a sales premium if the company were to be sold,” Conover said.

Biogen, which sells the multiple sclerosis drugs Avonex and Tysabri and the cancer drug Rituxan, tried and failed last year to sell itself. Icahn, who urged the sale, claims Biogen deliberately sabotaged it by conducting a flawed auction. 

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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 pay day loans. 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 

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Toyota has taken the global automotive sales lead from General Motors, selling 2.41 million vehicles to GM’s 2.25 million during the first three months of the year.

GM (GM, Fortune 500) said Wednesday its first-quarter sales dropped across the globe by less than 1%, but Toyota said its sales were up 2.7% during the January-March period.

Toyota Motor Corp. (TM), Japan’s top automaker, said its global sales rose on the back of steady demand in Asia and strong demand in Europe.

General Motors Corp. barely won the global sales race with Toyota last year, but Toyota overtook GM as the world’s top automaker as measured by global vehicle production in 2007.

GM said it posted record sales in three of its four regions, but a 10% drop in North America pulled down the overall numbers. Sales were up 8% outside of North America, the Detroit automaker said.

A record 64% of GM’s sales in the latest quarter came from outside the United States.

"While the challenges of the U.S. economy continue to put pressure on the automotive industry there, we saw nearly 20% growth in Latin America, Africa and the Middle East, and 6% growth in the Asia Pacific region," John Middlebrook, GM vice president of global sales, said in a statement.

GM sold roughly 2.27 million vehicles worldwide in the first quarter of 2007.

Mike DiGiovanni, the company’s executive director of global markets and industry analysis, said Toyota outsold GM in the first quarter of last year, too, yet GM was able to retake the lead by the end of the year.

He said the company is more focused on turning around its North American operations and becoming profitable worldwide than it is on beating Toyota.

"We obviously want to win, and we’d like to be No. 1 in sales at the end of the year," he said. "But really our focus right now is on profitable, sustainable growth across the world."

There may not be any relief in the U.S., though, in the near-term.

DiGiovanni said the company now is thinking second-quarter sales will be worse than the first quarter, largely because of rising gasoline prices. But he said the fundamentals are in place for a recovery in the second half of the year.

"This is clearly a headwind that we didn’t anticipate to be at this level, so that’s factored into our thinking as well," he told reporters and industry analysts on a conference call.

DiGiovanni said gasoline prices can’t be predicted, but GM is preparing for increases.

"It’s affected by so many factors, both political, societal, tangible in terms of what the actual physical reserves in the ground are and the cost to get at them cash advance. It’s affected by refineries. It’s affected by pipelines. It’s affected by anything that can go wrong in the whole chain. And now it’s affected by speculation, which is driving part of it. So I do not think this is something you can forecast," he said.

But DiGiovanni said GM does not use a "lower-bound" forecast anymore, and it had raised its internal forecast aggressively.

With new cars and crossover vehicles already out or coming this year, DiGiovanni said the company is well positioned to capture the market as it continues to shift away from trucks and sport utility vehicles.

"Our portfolio is moving in the direction the market is moving," he said. "Part of that’s luck and part of that’s planning."

Global production

Toyota, meanwhile, said its worldwide production expanded 7% from a year earlier to 2.54 million vehicles.

Toyota said output of popular, fuel-efficient small cars such as the Corolla model grew strongly in China, while production of pickup trucks rose steadily in Thailand during the quarter.

Some analysts say it’s only a matter of time before Toyota - which built its business in the decades after World War II by imitating American automakers - overtakes GM in terms of annual global sales as well as production.

GM shares rose 62 cents, or 3%, to $21.13, in midday trading Wednesday while Toyota fell 56 cents, or 0.56%, to $100.

In the Japanese fiscal year through March 2008, Toyota’s global output rose 6.4% from a year earlier to 9.66 million vehicles.

Honda Motor Co. (HMC), Japan’s No. 2 automaker, said its global production rose 4.5% from a year ago to 1.02 million vehicles in the January-March quarter.

Nissan Motor Co. (NSANY) said its global output rose 9.4% from a year ago to 950,878 vehicles during the quarter. 

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Jerome Kerviel, the trader blamed by French bank Societe Generale (SOGN.PA: Quote, Profile, Research) for huge losses, was jailed while police questioned a broker on whether he knew about Kerviel’s illicit deals.

Kerviel was taken to La Sante prison, close to the centre of Paris, where high-profile suspects such as business leaders and politicians are often held while under investigation.

His lawyer, Elisabeth Meyer, was seen by reporters at the scene leaving the hearing in tears. She said she would appeal the decision of the Paris appeals court.

The court ruled that Kerviel, a junior staffer blamed by SocGen for a $7 billion trading loss, should be held in custody during the investigation because he might try to run or act in concert with any accomplices he may have had.

Meanwhile, police questioned a second person, identified by two sources familiar with the matter as Moussa Bakir guaranteed approval cash advance loans. Bakir works at Newedge, a brokerage formerly known as Fimat that carried out orders on behalf of Kerviel.

Newedge’s offices were raided by police on Thursday. Bakir’s initial 24-hour detention period had been extended by another day, a legal source said.

If the investigation finds that others had a hand in Kerviel’s illicit trades, prosecutors may have new grounds to press fraud charges.

SocGen has maintained that Kerviel acted on his own and SocGen lawyer Jean Veil said it was “premature” to comment on the developments in the probe. 

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Barring a change in the rules, my wife, Georgina, and I are set with our plan for when to claim — or wait on — Social Security benefits.

Using a little known “file and suspend” strategy, I expect us to receive higher combined benefits over the long run, while protecting Georgina if I die first. We also expect to save on taxes.

Discussed in a working paper for the Pension Research Council at the University of Pennsylvania’s Wharton School, this strategy calls for the lower-earning spouse — Georgina in our case — to file for benefits first under her work record.

Depending on their circumstances, some spouses may wish to do so as early as possible, which is age 62. Georgina will wait until her full retirement age of 66 in 2010 primarily because her earnings from freelance work would reduce her benefits until then.
As the higher-earning spouse, I will then “file and suspend” when I reach my full retirement age of 66 in 2011.

That means I will file for my full retirement benefits but immediately ask that they be voluntarily suspended, which can be done in the remarks section of the application, said Dorothy Clark, a Social Security spokesperson.

I then will wait to collect until I am 70. If we need money before then, we can tap our IRAs and other retirement plans.

Why do this?

•Once I file for benefits, even if I immediately suspend them, Georgina will become eligible for the spousal benefit.

•This benefit — 50 percent of what I would have received at full retirement age — will be higher than the benefit under her work record. (If the lower-earning spouse files for benefits before full retirement age, the spousal benefit is reduced.)

•My benefit at age 70 will be considerably higher than at 66 overnight payday loans. For every year I wait up to age 70, I get a credit of 8 percent a year on top of annual cost-of-living adjustments.

•If I die before Georgina, instead of the spousal benefit, she would receive a survivor benefit equal to whatever I was getting (or, generally, was entitled to get if I die before age 70).

•By taking withdrawals from IRAs if needed, we reduce mandatory distributions after age 70 1/2, potentially keeping more Social Security benefits tax free.

Intrigued? The paper for the Pension Research Council argues that the full value of delaying Social Security, particularly for the higher-earner spouse, has not been properly measured because the tax advantages and spousal, survivor and cost-of-living-adjustment benefits have not been adequately considered.

“In the future, Social Security benefits will become increasingly valuable due to their tax-favored status, inflation protection, survivor protection and longevity protection,” said the paper, “Rethinking Social Security Claiming in a 401(k) World,” by James Mahaney and Peter Carlson of Prudential Securities. (Even under the worst-case tax scenario, depending on other income, 15 percent of Social Security benefits are tax free. Under the best-case scenario, all is tax free.)

“This strategy gives you the best of both worlds,” that is, allows the lower-earner spouse to collect spousal benefits while the higher earner waits to receive higher benefits later, said Taylor M. Gang, an investment adviser with Evensky & Katz in Coral Gables, Fla.

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