(Reuters) - The Obama administration's plan to reshape the opaque world of derivatives trading, unveiled on Wednesday, is only a preview of sweeping financial reform proposals that may be announced as soon as next week.
The White House and Treasury, responding to the global financial crisis, have firm ideas about tightening oversight of hedge funds, streamlining bank regulation, shaking up executive pay standards and protecting consumers.
But two key components of the administration's approach -- policing "systemic risk" and winding down troubled financial firms -- are dividing senior officials and lawmakers, which will likely cause delays in getting broad reforms enacted.
Treasury Secretary Timothy Geithner, a chief architect, acknowledged on Wednesday the proposals might not sit well with everyone. "It's not going to be comfortable for everybody but it's important to do," he told a group of bankers.
The regulatory reform drive comes as economies around the globe continue to reel from a credit market paralysis triggered by a sudden plunge in the value of exotic securities created during the U.S. real estate boom. U.S. President Barack Obama has vowed to pursue changes to prevent another such crisis.
His administration's approach centers on a powerful, new "systemic risk" regulator, likely to be the U.S. Federal Reserve, backed by a council of regulators, including the Federal Deposit Insurance Corp, which will also get new powers, according to sources briefed on the plan.
That compromise has emerged after a debate between advocates of centralized financial supervision and skeptics who fear making the Fed too powerful, especially in view of its shaky record in handling troubled insurer AIG (AIG.N).
The administration looks poised to put the FDIC at the center of newly streamlined bank regulations. Other agencies' rulebooks will be rewritten to conform with an FDIC standard, preventing banks from shopping around for a lax regulator.
But other bank overseers, such as the Comptroller of the Currency and the Office of Thrift Supervision, for now, will not be slated for shutdown, the sources said.
As part of its effort, the Treasury will emphasize the need for global cooperation, wary of the risk that financial firms might flee to jurisdictions with looser regulations.
PLANS IN CONGRESS
Geithner said on May 8 that Congress would get "the broad comprehensive framework within the next couple weeks, and we hope to move forward quickly with legislation."
Democratic lawmakers and the White House want to enact reforms by the year-end, but the deadline looks less realistic as the proposal expands.
"The problem is that as you start adding more new issues, the consensus starts breaking down," said Wayne Abernathy, an executive at the American Bankers Association.
Many of the proposals involve sensitive structural changes that threaten existing bureaucracies and cross jurisdictional lines among congressional committees.
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Thursday, May 14, 2009
GM near deal with UAW
(Reuters) - Under the direction of the U.S. Treasury, General Motors Corp is close to a deal with the United Auto Workers that would cut its hourly labor costs by more than $1 billion a year, the Wall Street Journal said, citing people familiar with the matter.
GM expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39 percent equity stake in the reorganized company, the people told the paper.
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GM expects to halve its remaining cash outlays for retiree health costs to about $10 billion, and supplement that contribution with a 39 percent equity stake in the reorganized company, the people told the paper.
Read more here
Wednesday, May 13, 2009
Panasonic seen posting $1.1 billion loss in 2009/10
(Reuters) - Japan's Panasonic Corp (6752.T) is likely to post a net loss of more than 100 billion yen ($1.1 billion) for the year ending in March 2010, the Yomiuri newspaper reported, as the consumer electronics maker grapples with a stronger yen and slowing demand.
That is in line with an average estimate of a 105.4 billion yen net loss in a poll of 17 analysts by Thomson Reuters.
Analysts expect the company to suffer a second straight year of losses this financial year, as the industry is mired in a global slump that is shaping up to be nastier than the last major downturn in 2001 after the IT bubble.
Separately, the Sankei newspaper said Panasonic was likely to forecast an operating profit for this financial year but project a net loss due to costs to pull out of unprofitable operations.
Panasonic spokesman Akira Kadota said the reported figure was not something the company had announced.
Read more here
That is in line with an average estimate of a 105.4 billion yen net loss in a poll of 17 analysts by Thomson Reuters.
Analysts expect the company to suffer a second straight year of losses this financial year, as the industry is mired in a global slump that is shaping up to be nastier than the last major downturn in 2001 after the IT bubble.
Separately, the Sankei newspaper said Panasonic was likely to forecast an operating profit for this financial year but project a net loss due to costs to pull out of unprofitable operations.
Panasonic spokesman Akira Kadota said the reported figure was not something the company had announced.
Read more here
Most U.S. homeowners think a bottom has been reached: Zillow
(Reuters) - Most American homeowners believe their home's value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday.
A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey.
In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow's first-quarter Real Estate Market Reports.
Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.
That resulted in a Zillow Home Value Misperception Index of five -- the lowest it has been since Zillow introduced the index in the second quarter of 2008 and down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners perceptions' were in line with actual values.
"The perception of American homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in a statement accompanying the survey.
"While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well," he said.
Most homeowners -- 74 percent -- believe their home will not decline in value in the coming six months, effectively calling a bottom to their own home's housing slide, Zillow said.
Specifically, one in four homeowners, or 27 percent, think their home's value will increase in the next six months, while nearly half, or 47 percent, believe its value will remain the same. Homeowners were similarly optimistic when it came to predicting home values in their local markets, the survey showed.
Read more here
A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey.
In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow's first-quarter Real Estate Market Reports.
Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.
That resulted in a Zillow Home Value Misperception Index of five -- the lowest it has been since Zillow introduced the index in the second quarter of 2008 and down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners perceptions' were in line with actual values.
"The perception of American homeowners is finally catching up to reality, which is that 80 percent of all homes in the country lost value during this past year," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in a statement accompanying the survey.
"While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months. Unfortunately, there are few markets we expect to perform this well," he said.
Most homeowners -- 74 percent -- believe their home will not decline in value in the coming six months, effectively calling a bottom to their own home's housing slide, Zillow said.
Specifically, one in four homeowners, or 27 percent, think their home's value will increase in the next six months, while nearly half, or 47 percent, believe its value will remain the same. Homeowners were similarly optimistic when it came to predicting home values in their local markets, the survey showed.
Read more here
Tuesday, May 12, 2009
Hitachi down 10 percent, sees wider loss than consensus
(Reuters) - Shares in Hitachi Ltd (6501.T), Japan's biggest electronics maker, tumbled 10 percent after its wider-than-expected loss estimate spooked investors who expected its restructuring steps would help improve its earnings.
A price slump and weak demand have hurt almost every corner of Hitachi's sprawling operations, hitting its auto and chip businesses especially hard and forcing the company to book the biggest-ever annual loss by a Japanese manufacturer.
Hitachi shares lost 128 billion yen ($1.3 billion) in market value on Wednesday after it forecast a 270 billion yen net loss for the year to next March, more than double the consensus of a 125.2 billion yen loss predicted in a poll of 16 analysts by Thomson Reuters.
The loss estimate, meaning it would lose money for a fourth straight year, would still be much smaller than the 787.3 billion yen loss for last financial year.
That massive loss had prompted Hitachi to map out a $5 billion cost-cutting plan for the current year and shift resources to more stable infrastructure operations, and it had said it expected tough going again this year.
"Hitachi is making progress in structural reforms at its challenged businesses such as automotive and digital media/consumer electronics," Credit Suisse analyst Hideyuki Maekawa said in a note to clients.
"But its latest projection seems to make clear that its cost-cutting efforts will not be enough to offset the impact of reduced revenues in its profitable businesses."
Read more here
A price slump and weak demand have hurt almost every corner of Hitachi's sprawling operations, hitting its auto and chip businesses especially hard and forcing the company to book the biggest-ever annual loss by a Japanese manufacturer.
Hitachi shares lost 128 billion yen ($1.3 billion) in market value on Wednesday after it forecast a 270 billion yen net loss for the year to next March, more than double the consensus of a 125.2 billion yen loss predicted in a poll of 16 analysts by Thomson Reuters.
The loss estimate, meaning it would lose money for a fourth straight year, would still be much smaller than the 787.3 billion yen loss for last financial year.
That massive loss had prompted Hitachi to map out a $5 billion cost-cutting plan for the current year and shift resources to more stable infrastructure operations, and it had said it expected tough going again this year.
"Hitachi is making progress in structural reforms at its challenged businesses such as automotive and digital media/consumer electronics," Credit Suisse analyst Hideyuki Maekawa said in a note to clients.
"But its latest projection seems to make clear that its cost-cutting efforts will not be enough to offset the impact of reduced revenues in its profitable businesses."
Read more here
Monday, May 11, 2009
Honda May Pass Chrysler in North America Production
(Bloomberg) -- Honda Motor Co., Japan’s second- biggest automaker, may build more vehicles than bankrupt Chrysler LLC in North America this year, further weakening Detroit’s grip on its home market.
Honda narrowed the gap to 17,011 vehicles at the end of April from 236,645 a year earlier, and with most Chrysler plants shut for as long as 60 days analysts expect the Japanese automaker to overtake its rival. Honda may also surpass Chrysler in U.S. sales to trail only bankruptcy-threatened General Motors Corp., Toyota Motor Corp. and Ford Motor Co.
“There’s a sea change under way,” said Michael Robinet, an analyst at forecaster CSM Worldwide in Northville, Michigan. “This crisis with Chrysler and GM has acted as an accelerant to the systemic change that was already occurring.”
Toyota passed Chrysler in U.S. sales in 2006 and then Ford in 2007, as Japanese automakers lured customers with more fuel- efficient vehicles. The big three U.S. automakers’ market share has plunged to 44.4 percent this year, from more than 70 percent a decade ago, while overall sales have slumped to the lowest volume in about three decades.
Honda, fifth in the U.S. since 1988, has outsold Chrysler this year as of April. Its sales in the country slid 32 percent to 332,014, compared with a 46 percent drop for Auburn Hills, Michigan-based Chrysler to 323,890. Overall U.S. sales are down 37 percent through the first four months of the year.
Chrysler Plunge
“Market share isn’t something we target,” said David Iida, a spokesman for Honda’s U.S. unit, based in Torrance, California. “We’re very committed to local production, irrespective of what other companies are doing.”
The automaker fell 1.6 percent to 2,855 yen as of 12:03 p.m. in Tokyo trading. The stock has risen 50 percent this year.
Industrywide North American car and light-truck production plunged 49 percent through April, with Chrysler leading declines among major manufacturers, according to Haig Stoddard, an IHS Global Insight analyst. Chrysler’s production in the period fell 57 percent to 322,773, based on company figures.
Honda built 305,762 autos at assembly plants in the U.S., Canada and Mexico through last month, down 40 percent from a year ago. The maker of Civic and Accord cars has U.S. plants in states including Ohio, Indiana and Alabama.
Chrysler, hoping to emerge from bankruptcy within 60 days as a new company led by Fiat SpA, halted work at most plants on May 4 while it reorganizes. The company also said it’s closing six factories that won’t be part of the Chrysler-Fiat deal.
Read more here
Honda narrowed the gap to 17,011 vehicles at the end of April from 236,645 a year earlier, and with most Chrysler plants shut for as long as 60 days analysts expect the Japanese automaker to overtake its rival. Honda may also surpass Chrysler in U.S. sales to trail only bankruptcy-threatened General Motors Corp., Toyota Motor Corp. and Ford Motor Co.
“There’s a sea change under way,” said Michael Robinet, an analyst at forecaster CSM Worldwide in Northville, Michigan. “This crisis with Chrysler and GM has acted as an accelerant to the systemic change that was already occurring.”
Toyota passed Chrysler in U.S. sales in 2006 and then Ford in 2007, as Japanese automakers lured customers with more fuel- efficient vehicles. The big three U.S. automakers’ market share has plunged to 44.4 percent this year, from more than 70 percent a decade ago, while overall sales have slumped to the lowest volume in about three decades.
Honda, fifth in the U.S. since 1988, has outsold Chrysler this year as of April. Its sales in the country slid 32 percent to 332,014, compared with a 46 percent drop for Auburn Hills, Michigan-based Chrysler to 323,890. Overall U.S. sales are down 37 percent through the first four months of the year.
Chrysler Plunge
“Market share isn’t something we target,” said David Iida, a spokesman for Honda’s U.S. unit, based in Torrance, California. “We’re very committed to local production, irrespective of what other companies are doing.”
The automaker fell 1.6 percent to 2,855 yen as of 12:03 p.m. in Tokyo trading. The stock has risen 50 percent this year.
Industrywide North American car and light-truck production plunged 49 percent through April, with Chrysler leading declines among major manufacturers, according to Haig Stoddard, an IHS Global Insight analyst. Chrysler’s production in the period fell 57 percent to 322,773, based on company figures.
Honda built 305,762 autos at assembly plants in the U.S., Canada and Mexico through last month, down 40 percent from a year ago. The maker of Civic and Accord cars has U.S. plants in states including Ohio, Indiana and Alabama.
Chrysler, hoping to emerge from bankruptcy within 60 days as a new company led by Fiat SpA, halted work at most plants on May 4 while it reorganizes. The company also said it’s closing six factories that won’t be part of the Chrysler-Fiat deal.
Read more here
Sunday, May 10, 2009
Spanish Solar Subsidy Seduces FPL, Scorches Consumers
(Bloomberg) -- Spain has turned itself into the world’s biggest builder of solar-energy plants, attracting developers from the U.S. and France by guaranteeing prices that weigh down Spanish consumers.
The government promotes clean fuels by letting generators charge as much as 10 times more for power from the sun or wind than from burning coal. The premium, added to bills of homes and businesses, has spawned a solar-investment boom by utilities, from Florida’s FPL Group Inc. to Electricite de France SA.
As a result, developers now plan enough solar thermal projects to generate the power of nine new atomic reactors, or 14,000 megawatts if all get built, Spain’s industry ministry said. That’s the biggest project pipeline, beating sun-blessed Australia and the U.S., where Congress increased aid this year for alternative energy, an Emerging Energy Research study said.
“Who wouldn’t want to enter a business that’s paid many times more than the market rate, and where the customer is guaranteed for life?” said Gabriel Calzada, an economist and professor at Rey Juan Carlos University in Madrid.
Spanish law forces distributors to buy all clean energy produced in the first 25 years of a plant’s life and resell it to consumers. With little oil and lots of sun, Spain is betting the sacrifice will pay off as fossil fuels get more expensive and need costly emission permits under global-warming treaties.
Forty-two percent of power bills, or 95 euros ($127) for every Spaniard, will cover subsidized clean energy in 2009, the ministry estimates.
‘Heavy Price’
“We’re all paying a heavy price for green power,” said Calzada, an opponent of subsidies.
The government raised rates in May 2007 for solar thermal plants, which concentrate sunlight to make steam for power generation. They now earn about 300 euros a megawatt-hour, seven times the average rate coal- or natural gas-fired plants got this year.
A megawatt-hour supplies about 1,500 Spanish homes for an hour, or about half as many homes in the U.S.
“The guarantee is more attractive than what other countries offer,” said Karsten von Blumenthal, an industrial analyst at Hamburg-based SES Research GmbH. “Actually the U.S. has better space for solar, in the deserts of California and Nevada.” Still, the combination of U.S. tax credits and grants are a lesser incentive for developers, he said.
Florida to Spain
Spain’s solar deal was interesting enough for Juno Beach, Florida-based FPL to cross the Atlantic and propose two 50- megawatt solar thermal plants. EDF, France’s biggest power company, raised its stake last year to 90 percent in Fotosolar, a Spanish photovoltaic developer. FPL, the largest U.S. producer of wind power, wouldn’t say which subsidy system it preferred.
“I would not define Spain as more or less attractive, rather it is a new opportunity,” Steven Stengel, a spokesman for FPL unit NextEra Energy Resources LLC, said in an e-mailed response. FPL plans two U.S. plants totaling 325 megawatts.
Neither country gets more than 1 percent of power yet from solar thermal or photovoltaic plants, which use a technology that turns sunlight directly into electricity. Spain installed the most of both technologies last year, trade group data shows.
The two nations lead the world in solar thermal projects coming online by 2011, according to Cambridge, Massachusetts- based Emerging Energy Research. About 1,750 megawatts will be switched on in the U.S. by that year and twice that level in Spain, the research firm said in April.
U.S. Momentum
The U.S. now is regaining momentum lost almost 10 years ago when the government “changed policy, leaving solar technology on the shelf,” said Edward Soler, a business development executive for Spanish builder Abengoa SA. During that decade “Spain underwent a learning curve that was aided by a change in regulations” that improved incentives, he said.
Abengoa, which set up a 20-megawatt solar thermal plant near its Seville, Spain, headquarters, plans one 14 times that size, billed as the world’s biggest, about 60 miles outside of Phoenix to feed local utility Arizona Public Service Co.
In the U.S., where President Barack Obama backed increased incentives this year, 6,000 megawatts of solar thermal projects are under way, said Fred Morse, an official at the Washington- based Solar Energy Industries Association trade group.
Promoters in the U.S. must convince utilities to contract their power, a necessary step for most project financing. Also, they may be reimbursed for 30 percent of the plant’s cost through a tax credit or grant and can apply for federal loan guarantees. They earn no special power rate.
The U.S. can’t catch up until more rules on aid are published, Morse said.
Read more here
The government promotes clean fuels by letting generators charge as much as 10 times more for power from the sun or wind than from burning coal. The premium, added to bills of homes and businesses, has spawned a solar-investment boom by utilities, from Florida’s FPL Group Inc. to Electricite de France SA.
As a result, developers now plan enough solar thermal projects to generate the power of nine new atomic reactors, or 14,000 megawatts if all get built, Spain’s industry ministry said. That’s the biggest project pipeline, beating sun-blessed Australia and the U.S., where Congress increased aid this year for alternative energy, an Emerging Energy Research study said.
“Who wouldn’t want to enter a business that’s paid many times more than the market rate, and where the customer is guaranteed for life?” said Gabriel Calzada, an economist and professor at Rey Juan Carlos University in Madrid.
Spanish law forces distributors to buy all clean energy produced in the first 25 years of a plant’s life and resell it to consumers. With little oil and lots of sun, Spain is betting the sacrifice will pay off as fossil fuels get more expensive and need costly emission permits under global-warming treaties.
Forty-two percent of power bills, or 95 euros ($127) for every Spaniard, will cover subsidized clean energy in 2009, the ministry estimates.
‘Heavy Price’
“We’re all paying a heavy price for green power,” said Calzada, an opponent of subsidies.
The government raised rates in May 2007 for solar thermal plants, which concentrate sunlight to make steam for power generation. They now earn about 300 euros a megawatt-hour, seven times the average rate coal- or natural gas-fired plants got this year.
A megawatt-hour supplies about 1,500 Spanish homes for an hour, or about half as many homes in the U.S.
“The guarantee is more attractive than what other countries offer,” said Karsten von Blumenthal, an industrial analyst at Hamburg-based SES Research GmbH. “Actually the U.S. has better space for solar, in the deserts of California and Nevada.” Still, the combination of U.S. tax credits and grants are a lesser incentive for developers, he said.
Florida to Spain
Spain’s solar deal was interesting enough for Juno Beach, Florida-based FPL to cross the Atlantic and propose two 50- megawatt solar thermal plants. EDF, France’s biggest power company, raised its stake last year to 90 percent in Fotosolar, a Spanish photovoltaic developer. FPL, the largest U.S. producer of wind power, wouldn’t say which subsidy system it preferred.
“I would not define Spain as more or less attractive, rather it is a new opportunity,” Steven Stengel, a spokesman for FPL unit NextEra Energy Resources LLC, said in an e-mailed response. FPL plans two U.S. plants totaling 325 megawatts.
Neither country gets more than 1 percent of power yet from solar thermal or photovoltaic plants, which use a technology that turns sunlight directly into electricity. Spain installed the most of both technologies last year, trade group data shows.
The two nations lead the world in solar thermal projects coming online by 2011, according to Cambridge, Massachusetts- based Emerging Energy Research. About 1,750 megawatts will be switched on in the U.S. by that year and twice that level in Spain, the research firm said in April.
U.S. Momentum
The U.S. now is regaining momentum lost almost 10 years ago when the government “changed policy, leaving solar technology on the shelf,” said Edward Soler, a business development executive for Spanish builder Abengoa SA. During that decade “Spain underwent a learning curve that was aided by a change in regulations” that improved incentives, he said.
Abengoa, which set up a 20-megawatt solar thermal plant near its Seville, Spain, headquarters, plans one 14 times that size, billed as the world’s biggest, about 60 miles outside of Phoenix to feed local utility Arizona Public Service Co.
In the U.S., where President Barack Obama backed increased incentives this year, 6,000 megawatts of solar thermal projects are under way, said Fred Morse, an official at the Washington- based Solar Energy Industries Association trade group.
Promoters in the U.S. must convince utilities to contract their power, a necessary step for most project financing. Also, they may be reimbursed for 30 percent of the plant’s cost through a tax credit or grant and can apply for federal loan guarantees. They earn no special power rate.
The U.S. can’t catch up until more rules on aid are published, Morse said.
Read more here
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