Finance and Economic

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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Mildred Elley, a two-year for-profit college, said Melissa Lurie, dean of academic affairs, has been promoted to a new post, president of the school’s Albany campus.

Lurie, who has a master’s from New York University in student personnel administration and a bachelor’s in communications from SUNY Oneonta, joined Mildred Elley in 2007.

She began as dean of student services before being promoted to dean of academic affairs in 2008. The fast growth at the college at both its Albany and Pittsfield, Mass., locations has prompted a need to create a new campus president position, said spokeswoman Danielle Palermo.

Mildred Elley has seen enrollment grow from 1,154 to 1,398 over the past two years through the addition of health care programs including a degree for licensed practical nurses. A registered nurse program will be added soon and a third campus—to be located in Manhattan—is expected to open this spring.

As Albany campus president, Lurie will oversee academic, career services and enrollment staff.

Her promotion created a vacancy in the dean of academic affairs post, which will be filled by Stephen Quick, who had been the college’s chair of business management and information technology no teletrack payday loans.

Quick, who has a master’s from the University at Albany, will supervise all academic departments and develop plans to improve student retention.

Heather Chase, a senior business management instructor, has been promoted to chair of that department, filling the vacancy created by Quick’s promotion.

Chase, who has an MBA from University of Phoenix, will oversee all instruction offered by the business management department. She will be responsible for faculty recruitment, student retention and the department budget.

Mildred Elley is operated by the Empire Education Corp., a privately-held corporation, that also owns and operates Austin’s School of Spa Technology. The corporation’s sole owner is Faith Takes who purchased Mildred Elley in 1985.

Mildred Elley's staff of 215 people is expected to grow by 50 after it opens its new campus in New York City this spring.

The college generated $14 million in revenue last year and Takes expects that number to grow in 2010.

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European Union Monetary Affairs Commissioner Olli Rehn will likely push Greece to do more to cut its budget deficit today as governments craft a possible rescue package for the cash-strapped nation.

Rehn will meet with Prime Minister George Papandreou as German lawmakers say euro-area officials are devising a plan to grant Greece about 25 billion euros ($34 billion) in aid should it need help financing its debt, possibly by using state-owned lenders such as the KfW Group to buy its bonds.

German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker signaled yesterday that Rehn will warn Greece it must do more to narrow the EU’s largest budget gap and can’t rely on taxpayers elsewhere to help until it acts. Adding to the political pressure, the fiscal strategy of Papandreou’s government may soon be tested by investors as it readies a sale of as much as 5 billion euros of 10-year notes.

“If the Greek government cannot raise the necessary funds in the commercial market, which continues to look unlikely, then bilateral loans will be forthcoming,” said Erik Nielsen, chief European economist at Goldman Sachs Group Inc. in London.

The euro weakened for the first time in four days, falling to $1.3608 from $1.3631. It declined versus 13 of 16 most-active currencies.

Deficit Reduction

Rehn arrives after European officials pored over the government’s books to verify it’s doing enough to knock 4 percentage points off its budget deficit from last year’s 12.7 percent of gross domestic product. The country has until March 16 to satisfy fellow EU governments that its deficit reduction plan is on track and faces being pressed to increase consumer taxes and lower capital spending if it can’t show sufficient progress.

Juncker, who speaks for euro-area finance ministers, yesterday indicated more will be demanded. Greece needs to “take additional actions” to pare its shortfall and “must understand that the taxpayer in Germany, Belgium or Luxembourg isn’t prepared to correct the mistakes of Greek fiscal policy,” he told Eleftherotypia newspaper.

In an interview with ARD Television, Merkel denied money has been set aside to bail out Greece and said the country has to “do its homework.” Speaking after the euro recorded its third straight monthly loss against the dollar, its longest losing streak since November 2008, Merkel said the single currency is “certainly facing the most difficult phase.”

‘May Not Survive’

Billionaire investor George Soros said on CNN yesterday that the euro “may not survive” the Greek turmoil.

Investors last week continued to question Greece’s chances of cutting its budget deficit. Greek two-year yields rose by as much as 75 basis points on Feb. 25, the most since Jan. 20. The spread between 10-year German bunds and Greek securities of a similar maturity widened 12 basis points in the week to 330 basis points payday loans with no fax.

Still, the cost of insuring against default on Greek government debt fell for the first day in more than a week on Feb. 26 on speculation the nation will pledge tougher steps. Credit-default swaps on Greece dropped 35.6 basis points to 364.02, according to CMA Datavision. The contracts are down from Feb. 4’s record 428.25 basis points.

Papandreou told the Greek parliament on Feb. 26 that the nation will “meet the challenge with whatever cost and pain we will need to go through.” Government spokesman George Petalotis said in an interview the same day that more measures will be concerned if the EU deems it necessary.

EU Limit

Greece needs to raise 53 billion euros this year and redeem more than 20 billion euros of bonds by the end of May, according to data compiled by Bloomberg. It vows to reduce its budget gap below the EU limit of 3 percent of GDP in 2012. The European Commission forecasts a debt equivalent to 124.9 percent of GDP this year.

KfW’s purchase of Greek bonds, backed by German government guarantees, would be an emergency measure as it would risk inviting investors to speculate against other euro region countries, the German lawmakers said on condition of anonymity because the information is confidential. France’s state-owned Caisse des Depots may also be involved, Greece’s Ta Nea newspaper reported Feb. 27. The Wall Street Journal said the plan may total 30 billion euros.

“Greece won’t be allowed to sink on the condition it respects its commitments to stabilize its budget,” French Finance Minister Christine Lagarde told Europe 1 radio yesterday. “We have a certain number of proposals in the euro zone, involving either private partners or public partners or both.”

Strikes

EU leaders ordered Greece on Feb. 11 to slash its budget deficit, while promising “determined” yet unspecified action to help if needed. Papandreou will on March 5 meet with Merkel, who yesterday suggested she is worried “emotions” may be spinning out of control.

Complicating the country’s efforts last week were another round of strikes and warnings from Standard & Poor’s and Moody’s Investors Service that they may soon cut Greece’s debt rating if the government flounders in reducing its deficit.

The government intends to sell 10-year notes by early March, according to a Jan. 26 statement from the Public Debt Management Agency. Fund managers who may take part in the issue say Greece must offer the biggest premium over benchmark German debt since 1998, paying a coupon of about 7 percent.

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The number of Americans filing for initial unemployment insurance fell sharply last week, according to government data released Thursday.

There were 440,000 initial jobless claims filed in the week ended Feb. 6, down 43,000 from a revised 483,000 the previous week, the Labor Department said in a weekly report.

Economists were expecting initial claims to drop to 465,000, according to a consensus estimate from Briefing.com.

The 4-week moving average of initial claims, which smoothes out volatility in the measure, was 468,500. That’s down 1,000 from the previous week’s revised average of 469,500.

A Labor Department spokesman said the snow storm that crippled much of the East Coast last week did not impact the number of jobless claims filed.

"Next week’s numbers will definitely be impacted by weather," said Mark Vitner, senior economist at Wells Fargo Securities. "But a drop in claims fits with the more positive news we saw in the January jobs report."

The Labor Department said last week that the U.S. unemployment rate fell unexpectedly in January to 9.7% from 10%. Businesses shed 20,000 jobs for the month, far fewer than the 150,000 jobs that were lost in December.

"There are some clear positives in the labor market," Vitner said, pointing to the manufacturing sector, to which some workers have returned to work after being unemployed for a short period of time Business Card Holders.

Still, weekly initial claims totals remain "extremely high" and it is difficult to glean anything about the underlying trends in the job market from just one week of data, Vitner warned.

Continuing claims: The government said 4,538,000 people filed continuing claims in the week ended Jan. 30, the most recent data available. That’s down 79,000 from the preceding week’s revised 4,617,000 claims.

Economists were expecting continuing claims to have declined 2,000 to 4,600,000.

The 4-week moving average of continuing claims was 4,603,500, a drop of 17,750 from the preceding week’s revised average of 4,621,250.

However, many economists say the decline in continuing claims reflects a growing number of filers who have dropped off the jobless rolls into extended unemployment benefits.

Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those people who have moved to state or federal extensions, or people whose benefits have expired.

"The number of people receiving extended benefits is unprecedented," Vitner said.  

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Bank of Japan board members were divided over how financial markets might interpret their range for price stability in December, minutes show.

Some members said it “might be acceptable” for investors and traders to see the inflation range of up to 2 percent as indicating the duration for maintaining the central bank’s low interest-rate policy, according to minutes of the Dec. 17-18 meeting released today in Tokyo. Another member said the range “wasn’t aimed at the so-called policy duration effect.”

Bank of Japan policy makers this week affirmed their forecasts that consumer prices will keep falling through March 2012, marking a third consecutive year of declines. Keisuke Tsumura, a parliamentary secretary at the Cabinet Office, said yesterday that he assumes the BOJ’s range is “effectively inflation targeting” and indicates the bank is far from ending its accommodative monetary stance.

“Given that the Bank of Japan predicted prices won’t rise for a few more years, it can’t be helped that the range is regarded as some kind of policy commitment,” said Mari Iwashita, chief market economist at Nikko Cordial Securities Inc. in Tokyo.

Japan’s central bank has kept interest rates at 0.1 percent since December 2008 as the country grapples with deflation. Consumer prices excluding fresh food fell 1.3 percent in December from a year earlier, a 10th monthly decline, government figures showed today.

Deflation Spurs Bonds

Bond yields are close to the lowest level this year as signs that deflation will linger underpin demand for government debt. The yield on the benchmark 10-year bond was at 1.315 percent as of the morning close in Tokyo after earlier reaching 1.305 percent, the lowest since Jan. 4.

BOJ policy makers said at last month’s meeting that they consider consumer prices to be stable as long as they stay in a positive range of 2 percent or below over the medium to long term. The board said it “doesn’t tolerate” price declines and the median estimate is about 1 percent.

Kazumasa Iwata, a deputy governor until 2008, speaking at the same event as Tsumura yesterday said the bank’s range is vague and policy makers should clearly state that they consider prices to be stable is 1 percent.

Variety of Risks

Some members said the bank needs to assess a variety of risks when it sets policy, not just price stability. The board should consider factors such as asset prices and imbalances in financial markets, taking a lesson from “the experience of the recent global financial crisis,” the minutes show.

The central bank has specified policy-duration commitments in the past. When it introduced a quantitative-easing policy of pumping cash into the banking system in March 2001, it said the measure would remain until consumer prices stopped falling.

The central bank today also released minutes from a Dec. 1 emergency meeting at which it unveiled a 10 trillion yen ($112 billion) credit program.

At that gathering, the board judged that reducing short- term interest rates would be the most effective way to support the recovery and concluded that a volatile yen poses a threat to the economy, the minutes show.

“Given that the overnight call rate had been virtually at zero percent, encouraging a further decline in interest rates on term instruments in the money market would be most effective” to guide borrowing costs lower, many members said.

Surging Yen

The central bank introduced the facility for commercial lenders after the yen reached a 14-year high against the dollar and Cabinet ministers urged it to step up its fight against deflation. Governor Masaaki Shirakawa has said the bank can lend beyond the limit should demand for the program increase.

“The Bank of Japan still has policy options, and the first choice is probably to increase the size of the loan program or extend the period of lending,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo.

One board member said recent discussions about Japan’s deflation might have “negative effects on household and business confidence” and “intensify the downward pressure on economic activity,” the minutes show.

The government in November declared a state of deflation for the first time in three years, and Finance Minister Naoto Kan has been leading calls for the central bank to do more to stem price declines.

More households are expecting prices to fall over the next year, a central bank survey showed this month. The government’s declaration was a “big factor” in fueling people’s expectations for lower prices, said Izuru Kato, chief market economist at Totan Research Co. in Tokyo.

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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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The Greater Capital Association of Realtors installed new board officers to lead the organization in Albany, N.Y.

The group also recognized five Realtors with 40 years of service during a Jan. 14 meeting at the Mohawk Golf Club in Niskayuna.

GCAR officers for 2010 are: President Laurene Curtin of Albany Realty Group in Colonie; President-elect Paul Semanek of Realty USA in Clifton Park; Secretary/Treasurer Nina Amdaon of Weichert Realtors Northeast Group in Loudonville.

Five Realtors were acknowledged for their four decades working in the real estate industry:

D guaranteed high risk personal loans. Wallace Bryce of Bryce Real Estate in Troy; Joyce Carlow of Weichert Realtors Northeast Group in Loudonville; Jeffrey Christiana of Prudential Manor Homes in Colonie; Robert King of Prudential Manor Homes in Rensselaer; and C. Douglas Volean of Prudential Manor Homes in Clifton Park.

GCAR has 3,100 members, including real estate agents and brokers working in 11 local counties.

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O’FALLON, ILL. — Balke Brown Associates of St. Louis plans to start work this spring on a 232-unit, high-end apartment development near the intersection of Green Mount Road and Frank Scott Parkway East.

The CEO, Steve Brown, said he thinks Parkway Lakeside Apartment Houses will be the premier upscale apartment complex in the St. Louis area.

Brown said the $27 million project makes sense because of its location. He said there is a strong market for luxury apartments in the area around Scott Air Force Base, which employs about 15,000 people and is largely unaffected by the current recession.

"(Many) people don’t understand that Scott Air Force Base is the Number 3 employer in the St. Louis area," Brown said. "Scott is growing and adding people."

The apartments will be built on a 20-acre site on the north side of Frank Scott Parkway, about 2,000 feet west of Green Mount Road. It will be adjacent to Green Mount Lakes Apartments, built by Balke Brown Associates five years ago and later sold. The two projects are at the edge of a booming restaurant and retail district and about a minute’s drive from Interstate 64. The company owns five acres of adjacent land planned for commercial development.

The building contractor will be Holland Construction Services of Swansea. Riverstone Residential of Dallas will manage the property for Balke Brown.

Humphreys & Partners of Dallas designed it, using the "big house" concept pioneered by that firm.

The 20 two-story apartment structures will have 10 to 14 units and be designed to look like large houses. The buildings will have only single front entrances with no breezeways or exposed stairways. Many units will have enclosed parking. Other amenities will include fireplaces, patios, balconies, a clubhouse, a swimming pool, a putting green, a walking trail and a recreational lake.

Prices will range from $950 monthly for a one-bedroom apartment to $1,650 for a two-bedroom unit with two-car garage no teletrack payday loans.

Some aldermen questioned the company’s proposal to make some parking spaces a foot shorter than the city’s 19-foot requirement, but the City Council ultimately agreed to variances that will allow 11 fewer parking spaces than the 476 that otherwise would be required by city code.

Brown said the council agreed that 60 percent of those could be 18 feet rather than 19 feet deep and said the variances will allow a design that will feature 45 percent open or green space.

"We made the argument that green is better than black," he said. "I think the project would have been less eco-friendly" if built to the letter of the code.

Ted Shekell, O’Fallon’s planning and zoning director, said city officials welcome the project.

"Balke Brown has been a great part of our town so far," he said. In addition to the earlier apartment development, the company also built an office building on the other side of I-64.

Shekell said he thinks the new development will be "a good fit for O’Fallon and this area. In a tough economic environment, we’re happy to have them interested in our community. I think it’s the kind of project you need for people who aren’t looking to buy (single-family houses) right now."

Shekell said development has slowed in O’Fallon, but the city of 30,000 still had 110 new houses started in 2009. That’s down from a 15-year average of 240, but house building is a near standstill in many area communities and around the country.

"Scott is a leveling influence on the economy of this area," Shekell said. There has been a downturn but investment has not stopped."

Brown said the area "feels like a young Chesterfield" to him.

"There is no recession there," he said.

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Citigroup will suspend foreclosures and evictions for 30 days, giving 4,000 at-risk borrowers a break during the holiday season, the company said Thursday.

The New York-based bank said distressed homeowners with first mortgage loans owned by CitiMortgage or CityFinancial North America who also meet certain other criteria will not be subject to foreclosure sales or notifications between Dec. 18 and Jan. 17.

"We hope that with this suspension we can make the holidays a little less stressful for our customers who are going through a very difficult time," said Sanjiv Das, chief executive of CitiMortgage, in a statement.

Citi (C, Fortune 500) said the suspension affects 2,000 borrowers scheduled to have foreclosure sales and another 2,000 that were to receive foreclosure notices during the period, which amounts to approximately 20% of the company’s $746 billion mortgage servicing and lending portfolio low interest personal loan.

Fannie Mae (FNM, Fortune 500) also announced Thursday that it was suspending all foreclosure evictions from Dec. 19 through Jan. 3. All owners and tenants living in foreclosed properties that the mortgage financing company holds will not be subject to evictions during the holidays. 

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Bank of America pledged Monday to increase its lending to small and medium sized businesses by $5 billion next year. The announcement immediately followed a White House meeting at which President Obama pressured the nation’s biggest bailed-out banks to start reinvesting in the rest of the economy.

"Bank of America is determined to do our part to help the economy grow next year and reduce unemployment by making every good loan we can make," CEO Ken Lewis said in a statement.

Lewis acknowledged the key role that small businesses play in creating jobs, calling them the "lifeblood" of the U.S. economy. "Our improved financial condition and our optimism about the economy will allow us to step up lending to support these clients," he said.

Bank of America (BAC, Fortune 500), based in Charlotte, N.C., is currently the second largest small business lender in the U.S., behind only Wells Fargo (WFC, Fortune 500), according to reports filed to the Treasury Department. Bank of America ended September with $41.9 billion in small business loans outstanding. That tally includes credit lines, credit cards, traditional loans and other financing.

But like most other big banks, Bank of America has pared back its lending through the recession. Since April, when top banks began submitting monthly reports on their small business lending, Bank of America has shaved its outstanding loan balance by 5%, or $2.2 billion.

Bank of America also cut back drastically this year on its lending through the Small Business Administration’s flagship loan program. SBA lending represents a small sliver of all small business lending, but it’s an important indicator of trends in the broader credit market.

Bank of America made 308 SBA-backed loans, totaling $17.6 million, in the SBA’s 2009 fiscal year, which ended in September. That’s a 90% drop from the bank’s year-earlier lending, when Bank of America made 3,354 loans, totaling $121.4 million.

Bank of America has struggled this year with big losses in its small business loan portfolio.

Last fall, as the Wall Street crisis turned critical in the wake of Lehman Brothers’ collapse, CEO Ken Lewis famously referred to the bank’s small business portfolio as a "damn disaster." In the first nine months of this year, Bank of America wrote off $2 guaranteed payday loans.2 billion in small business lending as bad debt, a default rate of almost 16%. By comparison, the bank’s charge-off rate on commercial loans to larger companies was just 1%.

But the bank’s executives have recently taken a more optimistic tone. "We think we are close to the peak in small businesses losses," CFO Joe Price told analysts in October.

Obama turns up the heat: The next set of Treasury reports are due later this week, with updates on October lending from the 22 biggest recipients of government bailout funds. In previous six months, those banks cut their small business lending by a cumulative total of $10.5 billion.

In his Monday meeting with the chief executives of 12 of the nation’s largest banks, President Obama emphasized the "extraordinary assistance" the financial industry received from taxpayers.

"We expect some results," Obama told the bankers. "I’m getting too many letters from small businesses who explain that they are credit worthy, and banks that they’ve had a long-term relationship with are still having problems giving them loans."

Banking industry representatives point to rising default rates, and say they’re having trouble finding creditworthy small business borrowers. Obama is unimpressed by that excuse.

"I urged these institutions here today to go back and take a third and fourth look about how they are operating when it comes to small business and medium-sized business lending," Obama said after his meeting.

All of the participating banks said they would be willing to institute a policy of "second looks" at loans that had thus far been rejected, White House Press Secretary Robert Gibbs said in a press briefing after Obama’s meeting.

So far, despite multiple attempts by Washington policymakers to revive the small business lending market, bank vaults have stayed slammed shut. The White House is trying yet again to change that.

"I think that the bully pulpit can be a powerful thing," Gibbs said. 

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