Finance and Economic

The Federal Reserve is pushing back against some banks

After more than 12 hours of talks, the countries that use to euro reached an agreement early Tuesday to hand Greece euro130 billion ($170 billion) in extra bailout loans to save it from a potentially disastrous default next month, an European Union diplomat said.

The euro surged as the news broke, climbing 0.7 percent to $1.328 within minutes. While much depended on the details of the deal, a final agreement on the bailout for Greece will take some pressure off the 17-country currency union, which has been battling a serious debt crisis for two years.

The deal _ details of which were still being worked out by European finance ministers in an all-night session in Brussels _ was expected to bring Greece’s debt down to 120.5 percent of gross domestic product by 2020, according to the official. That’s around the maximum that the International Monetary Fund and the eurozone considered sustainable.

The diplomat spoke on condition of anonymity because a formal announcement was pending.

The country needs the euro130 billion ($170 billion) bailout so it can move ahead with a related euro100 billion ($130 billion) debt relief deal with private investors. That deal needs to be in place quickly if Athens is to avoid a disorderly default on a bond repayment on March 20 online pay day loans.

Last week, a new report from Greece’s debt inspectors indicated that the country’s debt would still be close to 129 percent of GDP by the end of the decade, despite massive new spending cuts planned by Athens and a tentative euro100 billion debt relief deal with private investors.

That level would have prevented the IMF and some euro countries from putting up more rescue money _ on top of a euro110 billion bailout Greece received in 2010.

Moving in and out of talks with bondholder representatives and consultations among themselves, the IMF and the European Central Bank, the ministers pushed private investors to accept steeper losses, going beyond a 50 percent cut in the face value of their bonds.

It was unclear what the final deal with bondholder representatives looked like, but the lower debt level suggested that they compromised further. The big question will now be how many banks and other investment funds will actually agree to participated voluntarily and whether Greece will have to force some holdouts to sign up to make the deal effective.

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Raise taxes on those making more than $250,000. Limit deductions for the wealthy. Make an expanded college tax credit permanent.

Sound familiar?

When it comes to taxes, President Obama’s 2013 budget proposal released Monday includes a host of repeat performances.

In fact, many of the proposals he makes have appeared in every budget Obama has put out since taking office.

One addition this year: a so-called Buffett Rule to ensure that those making more than $1 million pay their "fair share," which President Obama has defined as paying at least 30% of their income in taxes.

But his budget proposal offers few new details about how the Buffett Rule would actually work, other than to say it would be "equitable, including not disadvantaging individuals who make large charitable contributions." The fiscal blueprint reiterates that the Buffett Rule is a guiding principle for overhauling the tax code.

Obama’s tax record

Obama includes other more concrete, oft-made proposals that would increase the tax bite on high-income households, while calling for expanding or making permanent other tax breaks for the middle class.

Of course, the reason so many of the president’s earlier tax proposals appear again in his fiscal year 2013 budget is because they have yet to be adopted by Congress.

And they aren’t likely to gain much traction this year, either, given that election-year politics is expected to shut down policy-making in the divided Congress until after Nov. 6.

But the budget frames Obama’s priorities on individual taxes as he stumps for re-election. As a preview, here are some of the highlights. (Bush tax cuts: The real endgame)

Extend most of the Bush-era tax cuts: Set to expire on Dec. 31, the 2001 and 2003 income tax cuts continue to be ground zero for partisan warfare.

From his days on the 2008 campaign trail, Obama has said he wants to make the tax cuts permanent for the vast majority of Americans. The only exception: He wants to let the top two tax rates — currently 33% and 35% — revert to their pre-2001 levels of 36% and 39.6%.

Most folks in the top two brackets, however, would still benefit from the continuation of the 10%, 15%, 25% and 28% rates on the portion of their income subject to the lower brackets.

Change tax rates on investment income for the wealthy: The president would raise the long-term capital gains — currently 15% — to 20% on those making more than $200,000 ($250,000 if married filing jointly).

In the past, Obama proposed the same thing for qualified dividends. But in his 2013 budget, he is calling for dividends to be taxed as ordinary income for upper-income households. That would happen in 2013 anyway if Congress makes no changes to current law.

Obama’s 2013 budget: An overview

For everyone else the rate on investment income would remain 15% (or 0% for low-income households).

Modify estate tax: Obama opposes eliminating the estate tax, but for the past three years he has pushed to keep it at a more generous level than would be the case under current law, where it would revert to a $1 million exemption level and a top rate of 55%.

Instead the president would like to raise the exemption level to $5 million and lower the top rate to 35%. (Obama’s tax record)

Limit itemized deductions for high-income households: As he has done in past budgets, Obama will propose reducing the value of itemized deductions for individuals making more than $200,000 (or $250,000 if married filing jointly). Today, they can deduct 33% or 35% of a qualified expense. Under the president’s proposal, they would only be allowed to deduct 28%.

Currently, those in the top two tax brackets (33% and 35%) have taxable income of at least $178,650 if they’re single or $217,450 if they’re married filing jointly.

Raise taxes on investment fund managers’ income: As most Americans have learned from Mitt Romney’s tax returns, managers of private equity, venture capital and hedge funds are only taxed 15% on the portion of their compensation known as carried interest.

Obama would like carried interest to be taxed as ordinary income, which means those managers would pay more than double the rate they currently pay.

Index the AMT: Obama has long supported permanently fixing the Alternative Minimum Tax to keep more than 20 million middle-class households from getting engulfed by the so-called wealth tax.

Congress typically passes temporary AMT "patches" every year to accomplish the same goal, but the president has called for it to be permanently patched. Doing so would increase the amount of income tax filers may exempt from consideration when calculating whether they need to pay the AMT.

Without the AMT patch, tax filers would only be able to exempt $33,750 in income if single or $45,000 if married filing a jointly. That is considerably less than the $48,450 that single filers and $74,450 joint filers may claim on their 2011 returns.

Should Congress embark on reforming the tax code, Obama is also proposing that the Buffett Rule should replace the AMT entirely. But that could be a costly proposition for federal coffers.

"Replacing AMT with a Buffett rule would almost certainly cost a lot in terms of lost revenue," said Roberton Williams, a senior fellow at the Tax Policy Center.

Make the expanded HOPE credit permanent: Renamed the American Opportunity tax credit and expanded in 2009, the partially refundable college credit is now worth up to $2,500 a year (up to 100% of the first $2,000 in qualified expenses and up to 25% of the next $2,500), and it may be claimed for four years’ worth of college.

Eligibility to take the credit is limited to those with modified adjusted gross income below $90,000 ($180,000 for couples filing jointly).

Make permanent the expansion of a low-income tax credit: The earned income tax credit, or EITC, is a refundable tax credit intended to help the working poor by offsetting their Social Security tax burden and providing an incentive to work.

EITC eligibility is based on income and number of dependents. Eligibility rules were made more generous after the financial crisis. And the president would like to preserve those expansions. 

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Not long after Greece made the politically unpopular decision to slash government spending as a way to ease its debt crisis, Germany’s finance minister questioned whether the deal goes far enough to earn a crucial euro130 billion bailout.

Greece’s new austerity plan would make deep cuts to jobs and wages and it ignited fresh criticism from unions and the country’s labor minister, who resigned in protest. Finance ministers from the 17 countries that use the euro are meeting in Brussels to scrutinize the plan.

Greek prime minister Lucas Papademos earlier Thursday said that all major party leaders in the country’s coalition government had given their backing to a new round of painful spending cuts he had worked out with the European Union, the European Central Bank and the International Monetary Fund and that the talks “were successfully concluded”.

However Germany’s Finance Minister Wolfgang Schaeuble on Thursday warned that on the new round of spending cuts appears to not yet fulfill all the conditions for a euro130 billion bailout.

Germany is a leading force in the group of 17 countries that use the euro as their currency _ the so-called “eurozone” _ using its considerable economic clout to influence decision-making and policy.

“The agreement, as far as I understand, is not at a stage where it can be signed off,” Schaeuble said as he arrived at a meeting with his eurozone counterparts as well as the heads of the European Central Bank and the International Monetary Fund in Brussels. “It’s a stance in the negotiations that was agreed on but no one expects that this negotiation stance can get support.”

The crucial agreement in Athens came shortly after Greek Finance Minister Evangelos Venizelos arrived in Brussels for talks on the new bailout with his colleagues from the 17 euro countries. Although all the other cuts demanded by the troika were approved _ including a 22 percent cut in the minimum wage, firings 15,000 of civil servants and an end to dozens of job guarantee provisions _ party leaders had balked at new pension cuts worth an estimated euro300 million ($400 million), leaving the bailout in limbo and the threat of bankruptcy high.

A spokeswoman for Papademos’ office said earlier Thursday that the deal would allow alternatives to the rejected pension cuts. She did not elaborate on what the alternative proposals were. The spokeswoman spoke on customary condition of anonymity.

Greece needs the bailout by March 20 to redeem euro14.5 billion worth of bonds coming due.

A forced bankruptcy then would likely lead to the country’s exit from the euro common currency, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal, Ireland and Italy.

But financial analysts fear a chain reaction similar to the financial meltdown triggered by the collapse of investment bank Lehman Brothers in the fall of 2008.

When eurozone leaders tentatively agreed on a second bailout for Greece in October, they set several key parameters that would have to be met for country to get more aid.

Those included bringing Greece’s debt level down to 120 percent of economic output by 2020, limiting official rescue loans to euro130 billion and getting firm approval from all Greek political forces that new spending cuts and reforms would actually be implemented.

“Those general requirements are not fulfilled yet,” Schaeuble said, adding that no decision on the new bailout was expected at Thursday’s meeting.

In addition to the new austerity measures, another method to reach the October targets is a deal with banks and other private bondholders to forgive Greece some euro100 billion in debt.

However, last week an EU official said that even taking into account the debt forgiveness and planned austerity measures, a gap of some euro15 billion remained to reach the targets.

The EU hopes that the ECB, which holds a significant amount of Greek bonds will contribute to closing that gap, but the central bank has so far dodged questions on whether it will participate.

Jean-Claude Juncker, the Luxembourg prime minister who will chair Thursday’s meeting, also said that no decision was expected. “There are still a lot of uncertainties,” he said, referring to the Athens deal.

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Consumer borrowing in the U.S. rose more than forecast in December, driven by demand for auto and student loans.

Credit increased by $19.3 billion to $2.5 trillion, Federal Reserve figures showed today in Washington. The gain topped the $7 billion median forecast of economists surveyed by Bloomberg News and followed a $20.4 billion advance the prior month.

Consumers

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WARRENTON • A billboard along Interstate 70 encourages drivers to stop in Warrenton and stay awhile.

But with just a handful of shops left at the Warrenton Outlet Center, there are fewer reasons for St. Louisans to make the trek to this city, about 60 miles west of downtown.

The Gap Factory Outlet and Dress Barn have jumped ship, finding apparently sunnier pastures last year at a strip center in Wentzville. The Levi’s Outlet Store, G.H. Bass & Company, and the Famous Footwear Outlet shuttered their locations last month.

And the Nike Factory Store, one of the last major retailers left, is closing in April and moving to the Meadows at Lake Saint Louis.

Elsewhere around the country, many outlet malls continue to thrive, and developers are rushing to build more of them. But Warrenton’s outlet center, operating under an increasingly outdated model, never managed to reach its full potential.

Now the beleaguered center will suffer an ignoble fate shared by other retail properties on the decline: the auction block.

The 200,000-square-foot outlet center will be put up for sale in a three-day online auction starting Monday morning. The minimum starting bid is $375,000.

The listing at auction.com notes that the center was 35 percent occupied in November. But that was before some of the recent departures.

The center opened in 1993 during a national boom in outlet mall construction. It once boasted many notable stores such as Mikasa, Nine West and Jones New York — some names of which are still barely visible above vacant storefronts. At one time, it had upward of 45 stores. Now, only about 10 stores remain.

“Even a few years ago, it was still a vibrant center,” said Michelle Schlenther, Warrenton’s director of economic development. “People would come out and make a day trip out of it. The dad would go play a round of golf while the wife shopped.”

So what happened?

“It’s an older center,” said Linda Humphers, who tracks the outlet mall industry for the International Council of Shopping Centers as editor of Value Retail News. “It’s only 200,000 square feet, and it’s probably a little too far out of town.”

Older outlet malls like Warrenton were built about 40 to 50 miles outside cities because retailers objected to having discounted merchandise so close to their regular-price stores.

But that model has begun to change with newer outlet malls creeping closer and closer in. For example, two proposed outlet mall developments are duking it out to come to Chesterfield within a stone’s throw of Chesterfield Mall.

NOT A DESTINATION

Steve Etcher, executive director of the Boonslick Regional Planning Commission, said the Warrenton outlets never grew to be large enough to be a true shopping destination. A third phase for the center, which would have taken it to more than 100 stores, never materialized.

“You had drive-by shopping but not enough to sustain it,” he said. “It’s not a bad location — you’re right on 70, but it’s not necessarily destination. To me, Lake of the Ozarks is destination. But this ended up being more of an along-the-way thing.”

It didn’t help, he said, that ownership of the center changed hands several times. And then when St. Louis Mills opened in 2003, offering a mix of outlet and regular price stores, that took some wind out of Warrenton, too.

Schlenther also traced some of the decline to several years ago when a number of stores went bankrupt or underwent massive restructuring such as KB Toys, Liz Claiborne and Big Dog Sportswear.

“So a lot of what closed there closed not only in Missouri, but across the nation,” she said quick payday loan. “And it just happened that we had a lot of those in one facility.”

Things got worse when the property fell into receivership a couple years ago, Schlenther said. At that time, the owner was Ariel Preferred Retail Group, which had a portfolio of about seven outlet malls.

“Stores just don’t want to come in and put an investment in because they don’t know when it’s bought what the new owners are going to do,” she said.

Texas-based Woodmont Co. is the receiver that’s managing the property. An on-site outlet manager referred questions to Fred Meno, a Woodmont executive. Meno did not return requests for comment.

Despite the troubles at Warrenton, Humphers said the prospects for an outlet mall in Chesterfield are rosier because the developers behind both projects are large, reputable mall developers.

In November, Simon Property Group, the owner of St. Louis Mills, announced it was joining forces with Woodmont and EWB Development on that proposed outlet project to be called St. Louis Premium Outlets. The project previously went by the name Spirit of St. Louis Outlets.

The other proposed outlet center — Chesterfield Outlets — is being spearheaded by Taubman Centers. The city of Chesterfield has approved its zoning request. And its plans for a 472,000-square-foot upscale outlet center will go before the city’s architectural review board next week.

Aimee Nassif, the city’s planning and development director, said she’s expecting to receive the section plans from the other project any day.

“They are literally kind of racing to the finish line,” she said. “It will be very interesting.”

OTHER USES

But Donna Boehringer hasn’t given up on the Warrenton outlets yet. She has operated her Corner Quilt Fabrics store in the center for about seven years after moving there from another location in town.

The move was good for business. A billboard she has along the interstate also has helped. She estimated about 60 percent of her customers are from out of town.

“Quilters seem to have this sixth sense of quilt shops,” she said. “If there’s one around, they will stop by.”

Boehringer did have her worst year in sales last year, but she attributed that more to the economy than to less traffic at the center. She’s in the process of renegotiating her lease.

“My plans are to stay right here,” she said. “I’m trying to be optimistic because I’d like to see something else come in. But we’ll see.”

Jan Olearnick, executive director of the Warrenton Area Chamber of Commerce, thinks the property holds promise for a mixed-use project. An education center, a health facility and a technology incubator are some of the ideas that have been thrown around.

“It would take a forward-thinking person to try and revive it, but we’re ready,” she said. “Warrenton is definitely a good location for any industry because of our proximity to I-70 and to the railroad — and even to the river.”

On top of that, the city recently got federal approval to build an interchange just west of the outlet center, making for easier access to the site. But the project’s funding source has not yet been determined.

In the meantime, other enterprises have been popping up in the region — though they are not necessarily retail.

A billboard next to the entrance to the outlet center advertises one of them a bit farther west: zip line tours.

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Germany’s controversial suggestion of a European debt regulator with direct control over Greece’s spending turned out to be such a touchy subject that Chancellor Angela didn’t even mention the idea to the leaders at Monday’s European Union summit in Brussels.

In what was seen as a blow for Germany’s push for tighter European integration, national sovereignty appeared to have won the argument Monday.

Over the weekend, Germany had made a pre-summit call to give a powerful European debt watchdog direct control over Greece’s budget decisions. Despite often stinging criticism over how Greece runs it financial affairs, having a foreigner directly run a nation’s budget found no takers among the other leaders.

Even Merkel’s staunch ally, Nicolas Sarkozy, who is so close that they have morphed into the diplomatic couple “Merkozy”, could not back her.

“We cannot put a country under trusteeship and run it from abroad. It would not be reasonable, not democratic, and, in short, not efficient,” Sarkozy said after the summit.

Going into the summit, German Economics Minister Philipp Roesler had suggested the EU should take over the “leadership and supervision” of Greece’s budget.

Athens is teetering on the brink of a disorderly default and is seeking a key agreement to get a second euro130 billion ($170.43 billion) bailout. The country has been surviving since May 2010 on an initial euro110 billion package of rescue loans from other eurozone countries and the International Monetary Fund.

Greece must also cut its deficit further and push through painful public sector layoffs and sell off several state companies, and its partners are unhappy with the pace of action.

Still, a “Sparkommissar” in German_ or “savings Czar” _ was beyond the pale for Greece.

“Our partners do know that European integration is based on … the respect of their national identity and dignity,” Greek Finance Minister Evangelos Venizelos wrote in an angry retort.

“I am certain that the political leaderships of all European nations _ particularly bigger nations that bear increased responsibility for the course of Europe _ are aware of how friends and partners, who have joined their historical destinies, raise questions,” he wrote on Sunday.

Merkel got the message.

“I believe that we are having a discussion that we shouldn’t be having,” she said entering the summit.

Other European leaders have said that the Commission, the EU’s executive, needed the power to block bad spending decisions, but not only in Greece but also other highly indebted countries.

But taking over the leadership of budget went too far.

“It can only be put in place by the Greeks, in a democratic way,” said Sarkozy.

Ever since Greece threw the eurozone into financial turmoil in 2009 when it admitted previous governments had played down the amount of debt, it has been criticized as a profligate nation living off the wealthy northern nations.

It has since committed itself, under often intense pressure, to slowly move back toward a degree of fiscal discipline.

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Berkshire Hathaway Inc.’s energy business agreed to buy an 81-megawatt wind power project from Invenergy Wind LLC to expand production in Illinois.

The Bishop Hill II project, which is under construction, will use 50 General Electric Co. 1.62-megawatt turbines, according to a statement Friday from Berkshire’s MidAmerican Energy Holdings Co. in Omaha, Neb.

Berkshire, led by Warren Buffett, has been expanding renewable production at the energy unit, which also produces power with coal and natural gas. Mid-American has invested about $6 billion in wind generation and built or acquired more than 3,300 megawatts of the renewable energy source in states including Iowa, Wyoming, Washington and Oregon since 2004. Last month, the unit agreed to buy the $2 billion Topaz solar project in California from First Solar Inc payday loans.

Wind “meets current and future energy needs in an environmentally efficient and cost-effective manner,” said MidAmerican Chairman and Chief Executive Greg Abel.

The Bishop Hill II wind project is near the town of Galva, Ill., about 40 miles northwest of Peoria. The project is expected to be in commercial operation in the fourth quarter. A unit of Ameren Corp. in Illinois has agreed to buy electricity from the project under a 20-year power-purchase agreement. Terms of the Invenergy deal weren’t disclosed.

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An email landed in my inbox the other day from a startup called Timehop. In that email, there were pieces of my online life posted a year ago that day.

"Feeling inspired," I had tweeted January 6 , 2010. And then there was a picture I had posted of my best friend sitting at our favorite local restaurant in the East Village, the one that months later closed its doors after 20 years.

The next day, I received an email documenting a tweet I’d sent to another good friend leaving CNN. "We’re losing a good one," I tweeted him in farewell. Later that day, I posted a picture of my favorite building lit by afternoon sunlight in what has now become my old neighborhood.

Nostalgic? Just a bit.

That’s why Timehop is betting our social media history will become more important in a world where much of our lives are documented online.

Sign up and connect your Twitter, Foursquare, Facebook, and Instagram account and every morning a piece of your social media history will land in your inbox showing what you tweeted a year ago on that date, the pictures you posted, and the places you were.

"We’re producing enough content in digital form that we have a digital past," Timehop co-founder Jonathan Wegener said. "You’re following your own life story, which is pretty interesting." Wegener added that Timehop has tens of thousands of subscribers.

The interest in eventually looking back online is part of the reason Facebook overhauled its interface to create Timeline, a new version of the site that would also serve as a digital scrapbook and essentially, a story of our lives.

Until Facebook launched Timeline, it was tough to view your past actions on the service.

"We knew people wanted to dig back in," Meredith Chin, manager of product communications at Facebook said. "We wanted people to be able to see a return on investment they put in over the years and also look back and reflect things that were important to them."

Companies like Foursquare and Twitter don’t allow users an easy way of looking back at old tweets and check-ins, and Timehop hopes to position itself as the place to do that.

"Everyone’s focused on real time and there’s an incredibly powerful product to be built on the past," Wegener said. "That’s the product we’re building."

Code Year draws 200,000 aspiring programmers

Timehop was a spin off of 4SquareAnd7YearsAgo, which was originally built out of a Foursquare hackathon in February of last year. That service simply sent you reminders of your Foursquare check-ins in the past credit reports free.

Wegener was a part of the latest Techstars class, an influential incubator program in New York that matches entrepreneurs with mentors. He was working on another startup called FriendsList, which was meant to take on Craigslist.

Wegener said Timehop was always a side startup but people just latched on to it. So he stopped working on FriendsList and is now working on Timehop full time with two other coworkers. He wouldn’t comment on VC funding.

The service uses the public APIs from social networks like Twitter and Foursquare to collect that data and send it to users in a daily email.

"What’s the point?" you might ask. I thought the same, but in a world where our musings are tweeted and our favorite moments shared on our smartphones, it doesn’t hurt to have a little reminder of where we were a year ago.

Wegener says the gentle digital reminders from the past in a daily email are "emotionally powerful," citing users who are reliving their child’s birth and viewing pictures they posted a year earlier.

But what happens when we don’t want to be reminded of the past? What if the daily reminder mentions an ex-boyfriend or someone who has since died?

Wegener admitted that’s been a problem for Timehop. "We’ve had a surprising number of people unsubscribing due to people not wanting to relive a tough patch of history," he said.

The crew is currently working on a filter that would allow users more control over their reminders and a snooze feature that would turn off the service temporarily.

Wegener, who has spent nearly a year on the project, says the tweets we send, the pictures we post, and the other bits of media we’ve started creating on a daily basis will ultimately gain value.

"The content you create gains value with time. So whether it’s a photograph or tweet, it becomes more emotional with time — it ages like wine," he said.

Of course, the philosophy must be backed by a business plan and it’s not clear whether Timehop will be able to pull that off. Timehop eventually hopes to make money from advertising. Wegener said there is also potential for virtual gifts connected with a service that celebrates the past.

Only time will tell if our digital past will be a success in the future. We’ll sign up for Timehop and check back in a year. 

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