Finance and Economic

ALGIERS–OPEC's next meeting must confirm that members have made all the oil output reductions they promised before taking any more action on output levels to prop up sagging prices, OPEC President Chakib Khelil said on Saturday.

"We will discuss another cut, whatever happens, but will there be a consensus? I cannot tell you today," Khelil said at a seminar on oil, referring to cuts agreed at an Organization of the Petroleum Exporting Countries (OPEC) meeting in Vienna last month.

Oil fell below $60 a barrel for the first time since March 2007 on Thursday, depressed by dismal projections for the world economy next year, and OPEC ministers are due to meet formally next on Dec. 17 in Oran, Algeria.

"There will be a consensus in Oran, and this consensus will depend on the application of the reduction," Khelil said.

"If everyone has applied (the cuts) and everything in terms of prices stays at the levels we have today, it's of course clear that we will probably go towards a decision to reduce," he said, adding that if the cuts had not all been implemented it would be difficult to decide further action.

Taking further action at a time when previous cuts had not all been implemented would send a bad signal to the markets, which reacted to "the reality on the ground" rather than mere words, he said cash advance usa.

Khelil said he expected prices to rise shortly, adding: "If we apply the reductions totally the probability of another cut is weaker."

Arab members of the group could discuss market developments informally on Nov. 29 in Cairo on the sidelines of a meeting of the Organization of the Arab Petroleum Exporting Countries, he said.

Oil's steep slide from a peak of more than $147 a barrel in July has already spurred OPEC to rein in supply by 1.5 million barrels per day (bpd) from Nov. 1. Some members of OPEC want to cut more.

Khelil said that in addition to the 1.5 million bpd OPEC cut, Saudi Arabia, the world's biggest exporter, was expected by itself to cut another 300,000 bpd that he said it had added to its own supply in recent months.

Evidence of a worldwide economic downturn has mounted. The International Monetary Fund has predicted 2009 global economic growth of 2.2 per cent, down 0.8 percentage points from its October forecast.

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American International Group’s CEO said Monday that the troubled insurer should start selling off pieces of its sprawling global business by year end.

Some 15 to 20 buyers may each walk away with a unit of the troubled insurer, Chief Executive Edward Liddy told CNNMoney.com.

Liddy declined to comment on the prices the divisions are commanding, saying it is "too soon." But he expects to be able to repay the $85 billion government loan AIG (AIG, Fortune 500) received last month to keep it afloat as it unwinds its $1 trillion in assets.

"We were in a heck of a mess," Liddy said. "It’s solvable. We can work our way out of it."

Liddy took charge of the company after the Federal Reserve arranged the unusual financing to prevent further turmoil in the already strained financial markets. In return, the government took a 79.9% stake in the company and gave the AIG two years to repay the debt by selling its assets.

The company does not expect to need additional financing beyond the $85 billion to continue operating, Liddy said. It has already drawn down $69 billion of that loan.

The Federal Reserve of New York said Oct. 8 that it would lend AIG up to $37.8 billion in exchange for investment-grade, fixed-income collateral.

The second loan was needed because AIG couldn’t access the frozen credit markets to fund its daily operations, Liddy said. Depending on how the capital markets value its securities assets in the future, it might need more, he said payday advance lender.

Liddy has spent the last month deciding which parts of the company to sell. In early October, the beleaguered insurance giant announced it would hold onto its property and casualty insurance businesses and retain a majority stake in its foreign life insurance operations. The property and casualty lines bring in more than $40 billion in revenue annually.

Everything else is on the table, Liddy said. The businesses include its aircraft leasing unit, asset management division, retirement services and U.S. life insurance operations.

Liddy said he regrets the company threw a $440,000 one-week retreat at the St. Regis Resort in Monarch Beach near San Diego, Calif., just days after the bailout. He said he was not aware of the junket at the time, but would look into recouping the costs and disciplining those involved.

AIG agreed Thursday to curb such expenditures after heavy criticism from Congress and New York state Attorney General Andrew Cuomo. The company canceled 160 conferences and events - some that carried price tags of as much as $750,000. It also has put on hold a nearly $10 million severance payment to outgoing chief financial officer Steven Bensinger.

"I apologize to the American people for those things," Liddy said on CNN. "They were terribly insensitive."  

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General Motors Corp is pushing ahead with talks to acquire Chrysler LLC in a deal that the automaker sees as a way to boost its cash position at a time when it has been shut out of debt markets and its own revenues are tumbling, sources said.

The negotiations involving Cerberus Capital Management, Chrysler’s private equity owner, have intensified in recent days and are moving closer toward a conclusion, according to people briefed on the talks who asked not to be identified.

The prospect of merging Chrysler and GM has been viewed as a deal of desperation by most analysts since both automakers are losing money and are saddled with a cash-draining surplus of American dealers, workers and plants.

But GM executives believes the automaker could clinch a deal that would give it a share of Chrysler’s remaining cash while allowing it to cut costs quickly, the sources said no qualifying payday advance.

Although it does not report financial information, Cerberus has said Chrysler ended June with $11.7 billion.

Chrysler has 14 assembly plants and the expectation is that many of those would be in danger of being shut if it merges.

Once the deal closes, GM is only interested in keeping Chrysler plants where the No. 3 U.S. automaker has made significant investments in retooling, the sources said.

That could include Chrysler’s truck plant in Saltillo, Mexico, the Jefferson North Jeep plant in Detroit and its Belvidere, Illinois car assembly plant, one source briefed on the talks said. The sources were not authorized to discuss the talks since the companies are saying nothing on the record. 

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The Canadian dollar suffered its biggest one-day drop in almost 38 years and oil slid below $78 (U.S.) a barrel yesterday as investors continued panic selling across the board on global markets.

"The dollar is in free fall along with commodity prices," said Sal Guatieri, senior economist at BMO Capital Markets.

"It’s ongoing fear that we’re heading for a global recession, and probably a deep one," he said.

When all was said and done, the S&P/TSX composite index shaved another stunning 535.02 points to close at 9065.16 for a loss of 16 per cent this week.

The Dow Jones industrial average, down nearly 700 points at one point in trading, lost 128 points to close at 8,451.19, rounding out its worst week ever.

"This is unprecedented. We don’t know when it’s going to end," said Guatieri.

"This could be a repeat of the early 1980s. It was pretty bleak for years."

Kate Warne, Canadian market specialist at Edward Jones in St. Louis, said emotions are driving behaviour in the market.

"Typically, we don’t see this kind of fear-based selling continue day after day like we’ve seen so far, but no one knows what the catalyst will be to turn sentiment around," Warne said.

"It’s very difficult to see what will change that, but we know historically it changes quite quickly and that what you tend to see is the emotions swing in the other direction just as dramatically as it’s been on the fear side so far."

As brutal as the markets looked though, most Canadians had their eyes on the ailing loonie, which at one point plunged almost five cents – its biggest drop ever – before settling halfway back.

It closed down 2.59 cents (U.S.) to 84.69 cents. The loonie has lost 7.77 cents, or 8.4 per cent, this past week alone as the U.S. dollar strengthens and as investors continue to bail out of the market on continued fears of economic instability.

"The prospects for the global economy seem to be dwindling fast and, as a result, the prospects for commodity markets are also ebbing and that’s weighing very heavily on the dollar," said Michael Gregory, senior economist at BMO Capital Markets.

"Even China, the engine of global growth, cut interest rates this week hoping to stave off lower growth there. The prospects are looking quite dim for commodities."

And the collapse in oil markets accelerated yesterday as investors grew more pessimistic about a mushrooming global crisis.

Light, sweet crude for November delivery fell $8.63 to settle at $77.99 a barrel on the New York Mercantile Exchange.

Even gold, normally the safe haven in times of turmoil, didn’t escape unscathed, falling $27.70 to close at $855.40 in New York as investors sold the metal to cover losses in the equity markets.

With files from The Canadian Press

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Drugstore chain Walgreen Co. has withdrawn its $2.8 billion bid to acquire Longs Drug Stores, apparently helping to ease the path for Longs’ $2.7 billion acquisition by CVS Caremark Corp.

Longs had already accepted CVS Caremark Corp.’s lower bid of $71.50 per share, a deal already approved by antitrust regulators.

Walgreen Chief Executive Jeffrey Rein sent a letter to Longs’ board of directors informing them of Walgreen’s decision to withdraw its bid. He cited what he called Longs’ board’s refusal to "engage in a constructive dialogue" as well as the broad financial meltdown as reasons for the withdrawal.

Some had questioned whether Walgreen would face antitrust issues because of overlap between its West Coast stores and Longs’. Longs said on Sept. 26 that the Federal Trade Commission was investigating whether a Walgreen acquisition would reduce competition among retail pharmacies in parts of California, Nevada and Hawaii, where Longs has most of its stores.

Some Longs shareholders have criticized the CVS deal, saying it may undervalue Longs’ real estate.

Major shareholder Advisory Research has not decided if it will tender its shares in favor of the CVS bid but has questioned the deal direct faxless payday loans. Another major shareholder, Pershing Square Capital Research, has said it is against the CVS deal. The two firms combined own about 18% of Longs shares, and the deal requires approval from shareholders owning two-thirds of Longs stock.

Longs, based in Walnut Creek, Calif., has more than 500 stores, mostly in California, but also in Hawaii, Nevada and Arizona. The company also owns Rx America, a prescription benefits management program with more than 8 million members.

The deal would give CVS, which already has a large presence in Southern California, a deeper foothold into the northern part of that state.

Messages left with representatives of Longs and CVS were not immediately returned.

Shares of Deerfield, Ill.-based Walgreen (WAG, Fortune 500) rose 7 cents to $26.25 in after-hours trading following the announcement, while Longs (LDG, Fortune 500) shares fell $2.48 to $69.20. Shares of Woonsocket, R.I.-based CVS (CVS, Fortune 500) were unchanged after-hours after rising 71 cents to $29.84 in the regular session. 

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If there’s one bright spot in a bad economy, it’s that gasoline prices have fallen, and they’re expected to drop even further.

As the global economy falters, demand for oil has dropped. And since the price of oil makes up about half of the cost of a gallon of gas, analysts see more relief ahead at the pump.

"We ought to see prices drop pretty quickly," said American Automobile Association spokesman Geoff Sundstrom. "We’re well on our way to $3 gas within the next week or two."

The national average price for a gallon of regular, unleaded gasoline fell 2.4 cents to $3.480 from $3.504, according to a daily survey released Tuesday by AAA. That’s down 18% from an all-time high of $4.114 a gallon hit on July 17.

Gas prices rebounded last month when hurricanes Ike and Gustav passed through the Gulf Coast where the bulk of the nation’s oil refineries are located.

While the damage was not as extensive as some had expected, the storms caused a short-lived spike in oil and gas prices.

On Sept. 17, after Hurricane Ike passed through the Gulf region, the national average gas price was a full 35 cents higher than Monday’s price.

"But now that refineries are back online and more product is available, prices have no where to go but down," Sundstrom said (paydayloans).

"Demand seems to be drying up week by week," he added. And given the challenging economic environment and the strains on household budgets, Sundstrom expects American drivers to remain conservative.

Crude tumbled more than $6 on Monday to close at an 8-month low of $87.81 a barrel. That’s down 40% from its July peak of $147.27 a barrel.

"Since crude makes up about 50% of the price of gas, gas prices should go down," said Ray Carbone, president of New York commodities trading firm Paramount Options.

Carbone added that gas prices have not fallen as dramatically as crude prices because refinery utilization has been low due to last month’s hurricanes.

Still, hurricane season does not end until November and oil prices are notoriously volatile, notes AAA spokesman Troy Green. He cautioned that gas prices will continue to fall "only if conditions continue to improve in refinery capacity and oil continues to retreat." 

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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.

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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. 

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A bankruptcy judge approved a plan early Saturday under which Lehman Brothers will sell its investment banking and trading businesses to Barclays.

The deal was said to be worth $1.75 billion earlier in the week but the value was in flux after lawyers announced changes to the terms on Friday. It may now be worth closer to $1.35 billion, which includes the $960 million price tag on Lehman’s Midtown Manhattan office tower.

Lehman filed the biggest bankruptcy in U.S. history Monday, after Barclays (BCS) declined to buy the investment bank in its entirety.

The British bank will take control of Lehman units that employ about 9,000 employees in the U.S.

"Not only is the sale a good match economically, but it will save the jobs of thousands of employees," Lehman lawyer Harvey Miller of Weil, Gotshal & Manges said.

Barclays took on a potential liability of $2.5 billion to be paid as severance, in case it decides not to keep certain Lehman employees beyond the guaranteed 90 days. But observers have said Barclays’ main reason for acquiring Lehman is to get its people and presence in North America, making widespread layoffs less likely.

"It’s unimaginable to me that they can run the business without people," said Lehman’s financial adviser, Barry Ridings, of Lazard Ltd.

Barclays had little competition to land the deal.

Miller said that before it filed for bankruptcy, Lehman had negotiated with just one other bidder, Bank of America Corp. BofA (BAC, Fortune 500) instead announced Monday that it would buy Merrill Lynch & Co., (MER, Fortune 500) saving it from a fate similar to Lehman’s. That deal was originally valued at $50 billion.

Miller said that since Lehman filed for bankruptcy, Barclays had been the only buyer to express interest in acquiring even parts of the 158-year-old investment bank.

Lehman lawyers announced a number of changes to the deal before the hearing, which started at 4:30 p.m. ET Friday and continued well past midnight.

Lehman lawyers said the value of stock Barclays will buy and liabilities it will assume has fallen since the start of the week due to market volatility. Under the new deal, Barclays will buy $47.4 billion in securities and assume $45.5 billion in liabilities.

Barclays also said it would buy three additional units - Lehman Brothers Canada Inc., Argentina-based Lehman Brothers Sudamerica SA and Lehman Brothers Uruguay SA pay day loans. The two South American entities are part of Lehman’s money management business. Barclays is not paying extra to get the three units.

There was no change to a $250 million goodwill payment and the purchase of two data centers in New Jersey that will go to Barclays, although Barclays may pay less for them. Lehman’s investment management business Neuberger Berman was not bought by Barclays.

The Securities Investor Protection Corporation liquidated Lehman accounts on Friday under a bankruptcy-style process to transfer assets from 639,000 Lehman customer accounts - about 130,000 of which are owned by individual investors - to Barclays accounts.

"The substance of this transaction is to continue a business for the benefit of the economy," Lehman lawyer Miller said in court.

The hearing drew more than 200 lawyers and observers, who spilled into overflow rooms on two floors of the U.S. Bankruptcy Court in lower Manhattan.

In response to the extraordinary events of the week, the Bush administration announced Friday the biggest proposed government intervention in financial markets since the Great Depression. Some are calling it an "RTC-style bailout" in reference to the government-owned Resolution Trust Corp. that wound down the assets of Savings and Loan Associations, mostly in the 1980s.

"Somehow Lehman Brothers gets left on the sidelines," said Daniel Golden of Akin Gump Strauss Hauer & Feld LLP, who represents clients holding about $9 billion in bonds. "We believe this was a flawed sales process. It benefits Barclays and the federal government but not the creditors of this estate.

"The economic landscape seems to have changed over the last two days," he said. "Yet the debtors and the Fed seem determined that nothing get in the way of this transaction."

Had Lehman filed for Chapter 11 a week later than it had, its fate may have been different.

"This is a tragedy - maybe we missed the RTC by a week," Miller said.

"That occurred to me, as well," the judge in the case, James Peck, said. "Lehman Brothers became a victim, in effect the only true icon to fall in the tsunami that has befallen the credit markets." 

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The U.S. economy was heading for a deeper slowdown than forecast even before this month’s collapse in financial markets, a gauge of its future performance showed.

The Conference Board’s index of leading indicators, which points to the direction of the economy over the next three to six months, fell 0.5 percent. Separately, the Labor Department reported that more Americans than forecast filed first-time claims for unemployment insurance last week because of the impact of Hurricane Gustav in Louisiana.

The August leading indicators figure was propped up by gains in the stock market that have since evaporated after the failure of Lehman Brothers Holdings Inc. and takeover of American International Group Inc. this week.

"The Wall Street crunch has definitely rolled over into Main Street," said Lindsey Piegza, a market analyst at FTN Financial, which correctly forecast the decline in leading indicators. "It’s a very dismal picture all around."
The leading-indicator index fell at a 2.1 percent annual pace over the past six months. A decline of around 4 percent to 4.5 percent at an annual pace is one signal a recession is imminent, according to the Conference Board payday advance. The gauge met that requirement in January, when it dropped at a 4.7 percent pace.

The New York-based private research group’s leading index was forecast to decline 0.2 percent, according to the median of 57 economists in a Bloomberg News survey.

The Labor Department reported initial jobless claims last week rose 10,000 to 455,000, led by a jump in Louisiana reflecting job losses in the wake of Hurricane Gustav. While the Labor Department said claims would have fallen excluding the state, the overall trend in applications still points to deterioration in the labor market, economists said.

Economists surveyed by Bloomberg in the first week of September anticipated the longest expansion in consumer spending on record will come to an end this quarter. Purchases probably will stall, according to the survey median, the weakest reading since the last three months of 1991.

The economy has lost 605,000 jobs so far this year, and the jobless rate reached a five-year high of 6.1 percent last month.

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