US banks raising ''billions'' in debt

July 30, 2010

Irish Times

US BANKS are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector's profits in coming years.

The burst of fundraising in the US is in stark contrast to Europe, where banks have struggled to issue debt as the euro-zone crisis and worries about the financial industry have undermined market confidence.

The cheap finance locked in by big institutions like JPMorgan Chase, US Bancorp, Goldman Sachs and Morgan Stanley in recent days marks a remarkable comeback for a sector that was shunned by investors during the financial crisis.

Less than two years after the government had to intervene to ease the credit crunch, US banks sold more than [euro]5.3 billion in debt last week, the largest weekly total since September 2009.

US Bancorp, a Minneapolis-based lender, raised $1 billion in five- year bonds at an interest rate of 2.45 per cent - one of the lowest ever paid by a bank. Lower funding costs boost profits because they increase the margins earned by banks on their loans to consumers, companies and investors.

Wall Street executives say recent debt issues were triggered by "reverse inquiries" - informal approaches by fund managers seeking to raise their exposure to a sector they had avoided since the crisis. "There is a bit of a food-fight among investors to get hold of paper from US banks," an executive at a big bank said.

With US treasury yields at record lows, investors seek alternatives that offer higher returns. Expectations that the Federal Reserve will keep rates at near zero have further raised demand for bonds, as a low-interest, low-growth environment is best for such investments.

Recent earnings and the passage of financial rules also contributed to the surge in debt issuance. Goldman, Morgan Stanley and JPMorgan each issued $3 billion bonds this month. - Copyright The Financial TimesLimited 2010

(c) 2010 Irish Times. Provided by ProQuest LLC. All rights Reserved.

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Kalamazoo River cleanup in high gear, but some question if leak has stopped

July 29, 2010

Detroit Free Press

KALAMAZOO, Mich._Cleanup efforts along the Kalamazoo River accelerated Thursday amid conflicting reports of the extent of the slick, calls in Congress for beefed up regulations and fines, and an abject apology from the oil company that created the mess.

Environmental Protection Agency officials said Lake Michigan appears safe, as do drinking water sources for the city of Kalamazoo.

They also said Thursday that the oil had not yet reached Morrow Lake, an impoundment east of Kalamazoo. But Michigan State Police Capt. Thomas Sands, among others, disputed that, saying an aerial photograph shows a sheen on the lake. Sands acknowledged that testing on the lake has not yet been performed.

Officials from Enbridge Energy Partners, which owns the pipeline, said 17 booms have been set up and possibly 16 more may be put in place to collect the 19,500 barrels, or 819,000 gallons, of spilled crude.

Yet while Enbridge officials say a temporary dyke has stopped oil from flowing into streams, a flight over the spill area by Detroit Free Press reporters shows continued problems, including an oily sheen flowing in colorful ribbons down much of the Kalamazoo River through Battle Creek and beyond. Many of the marshy shoreline areas were marked by oily tar deposits easily visible from 1,000 feet up.

Workers could be seen maneuvering booms and absorbent materials in the river, but the oil appeared to continue almost unabated in many areas. Tanker trucks parked on bridges continued to suck out oil with hoses. In other spots, crews in air boats worked booms in the river and marshes.

At the apparent leak source, a crew used earth-moving equipment to excavate a hole in the ground surrounded by orange fencing. Nearby, oil pooled in large quantities.

While cleanup crews worked the river, some oily stretches, hundreds of yards long, were left untended. In one, oily water flowed over an apparently saturated piece of absorbent material.

West of Battle Creek, the oil sheen became less visible Thursday as the river reached Morrow Lake. Crews with booms could be seen on both the approach into the lake and at the west end of the lake, where booms were positioned in a pyramid formation.

No other clean up activities or oil were visible west of the dam.

Enbridge President Patrick Daniel apologized Thursday "for the mess we have made" and said the company was willing to spend "whatever it takes" to clean up the spill.

Daniel said at a news conference that the company was not aware of the leak on Sunday night, despite 911 calls about a gas odor in the area. The company learned of it Monday, he said.

U.S. Rep. Mark Schauer, D-Mich., proposed a bill Thursday to speed response times to pipeline disasters and more than double fines for companies slow to report them. The bill would raise fines from $100,000 to $250,000 on companies that wait more than an hour to report a leak. Repeat offenders could be fined up to $2.5 million.

The bill also calls for a public, searchable Internet database of all reportable incidents involving gas or hazardous liquid pipelines.

"We have an estimated 1 million gallons of oil on the ground, and the people of Michigan want answers," said Schauer, who serves on a House subcommittee on railroads, pipelines and hazardous materials. "There is no excuse for the amount of time that lapsed between when Enbridge discovered the leak and when they reported it."

He said an Enbridge executive told his committee weeks ago that "safety and protection of the public environment are our highest priorities."

About 30 to 50 homes have been recommended for evacuation near Marshall. County and state officials continue to monitor other areas.

There is a drinking water advisory for about 100 homes within 200 feet of the river in Calhoun County, and bottled water is available for residents.

The slick is a problem on the surface, but probably not a threat to drinking water supplies, which are drawn from aquifers 70 to 100 feet down, said Alan Steinman, director of the Annis Water Resources Institute at Grand Valley State University.

Clay in the ground would make it difficult for the oil to penetrate, and the ground would filter much of the oil before it got that far down, he said.

Kalamazoo provides water to about 121,000 customers in the city and surrounding communities. It uses 98 wells to generate about 18.4 million gallons of water a day, according to the city's water quality report.

The greater long-term ecological risk may be in the wetlands along the tributaries of the river, Steinman said. "That's key habitat. The bugs are living, the fish are spawning. It's going to last a long time."

Enbridge pipelines in Canada have ruptured eight times since 1994, according to the country's regulators, the National Energy Board. The largest spill occurred in 1994, when 4,000 cubic meters of oil were released in Manitoba province.

Slightly smaller spills occurred in 2001, when 3,800 cubic meters of crude was released in Alberta, and in 1999, when 3,123 cubic meters of crude was released in Saskatchewan. The company's most recent rupture was in April 2007 in Saskatchewan, when 990 cubic meters of crude was released.

The National Energy Board cited fatigue, external metal loss and improper operation for the ruptures.

The Free Press reported Thursday that U.S. regulators notified Enbridge twice this year of problems involving old pipes prone to rupturing and an inadequate system for monitoring internal corrosion.

Former Michigan Gov. James Blanchard, who serves on the board of directors of Calgary-based Enbridge Inc., the parent company, could not be reached Thursday.

The Enbridge website says Blanchard owns 12,332 shares of common stock in Enbridge, which would equal $591,443 on the New York Stock Exchange Thursday. The site says Blanchard also owns 37,761 shares in deferred stock. He is currently chairman of the board's committee on corporate social responsibility, the site says.

(Staff writers Todd Spangler and Brent Snavely contributed to this report.)

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Economic growth likely slowed in second quarter

July 30, 2010

Associated Press/AP Online

By JEANNINE AVERSA

WASHINGTON - The already fragile economic recovery may be getting weaker.

Economists expect the government to report Friday that economic growth slowed in the April-to-June quarter as consumers bought less, builders pulled back further, and cash-hungry state and local governments cut spending.

Wall Street analysts surveyed by Thomson Reuters predict the economy expanded at a 2.5 percent pace in the second quarter. If they are right, that would be down from a lackluster 2.7 percent pace in the first three months of the year. And, it would mark the second straight quarter of slowing growth.

With the economy growing at such a subpar speed, unemployment - now at 9.5 percent - is likely to stay high.

It takes about 3 percent growth just to create enough jobs to keep pace with the population increase.

Growth would have to equal 5 percent for a full year to drive the unemployment rate down by 1 percentage point. Neither the Obama administration nor the Federal Reserve expect that to happen.

Gross domestic product measures the value of all goods and services - from machinery to manicures - produced within the United States. It is the best gauge of the nation's economic health.

Risks to the recovery have grown, and some fear it could stall out.

Consumer confidence is tumbling. The unemployed face fierce competition to find work. Those with jobs are seeing scant wage gains. Home values - often Americans' single-biggest asset - are weak. That explains why consumers are not in a mood to spend lavishly like they usually do in the early stages of an economic recovery.

It's also a major reason why the pace of this recovery is considered feeble by historical standards. When the country was recovering from a severe recession in the early 1980s, for instance, the economy's growth exceeded 7 percent for five quarters.

"The recovery looks subpar and risks are growing," said Chris Rupkey, economist at the Bank of Tokyo-Mitsubishi.

Businesses are wary, too. Uncertain about the durability of the recovery, they are sitting on record piles of cash, loath to use the money to hire new workers and expand operations. Caterpillar Inc., Dupont Co. and Microsoft Corp. are among companies reporting strong second-quarter earnings in the past two weeks yet they aren't ready to bulk up their work forces.

"There is a high degree of uncertainty. There is a recovery underway. It is going to be choppy," said United States Steel Corp. Chairman and CEO John Surma earlier this week.

The weak economy leaves Democrats and Republicans on Capitol Hill vulnerable as they head into the November midterm elections. Democrats, who now control both chambers, have the most to lose. The gloomier outlook is also a liability for President Barack Obama.

A new AP Economy Survey out this week found that weak consumer spending poses a major risk to the recovery.

Consumer spending, which accounts for roughly 70 percent of overall economic activity, clocked in at a 3 percent pace in the first three months of this year. It's expected to be slower in the second quarter.

For all of 2011, economists in the AP survey are forecasting only 3 percent growth. That's historically weak for consumer spending during recoveries. By contrast, consumer spending exceeded 5 percent in 1983, 1984 and 1985, when the economy was rebounding from a deep recession.

Another major risk: budget woes of state and local governments, according to the AP survey. When states and localities tighten spending by trimming services and jobs, the cutbacks ripple through the broader economy and cause individuals to spend less.

Still Rupkey and other economists in the AP survey said they thought the recovery is still alive, suggesting that a double-dip recession can be avoid. The survey found that 55 percent of economists described the recovery as "on track" as of the middle of this year.

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UPI NewsTrack Business

July 29, 2010

United Press International

Stocks weighed down by earnings reports NEW YORK, July 29 (UPI) -- U.S. markets turned lower Thursday despite a Department of Labor report that said 11,000 fewer first-time jobless claims were filed last week.

The department said 457,000 initial benefits claims were filed in the week ending July 24.

Corporate earnings reports were mixed. Exxon said its profits surged 91 percent in the second quarter compared with the same period a year ago. Royal Dutch Shell profits rose 15 percent, while Sony Corp. said revenue rose 3.8 percent.

Several technology firms, including LSI, Akami Technologies, Nvidia and Symantec found their shares lower after submitting disappointing quarterly results.

By close, the Dow Jones industrial average shed 30.72 points or 0.29 percent to 10,467.16. The Standard & Poor's 500 index fell 4.60 or 0.42 percent to 1,101.53. The Nasdaq composite index dropped 12.87 or 0.57 percent to 2,251.69.

On the New York Stock Exchange, 1,591 stocks advanced and 1,423 declined on a volume of 5.3 billion shares traded.

The benchmark 10-year U.S. treasury note rose 1/32 to yield 2.992 percent.

The euro rose to $1.3074 from Wednesday's $1.2986. Against the yen, the dollar fell to 86.79 yen from Wednesday's 87.46 yen.

In Tokyo, the Nikkei 225 index fell 0.59 percent, 57.25, to 9,696.02. Component Intel slid 1.59 percent.

In London, the FTSE 100 index lost 0.11 percent, 5.73, to 5,313.95.

Partisan squall sinks small-business bill WASHINGTON, July 29 (UPI) -- Partisan bickering surrounded and sunk a $42 billion bill meant to help small businesses as U.S. senators rejected the measure by sticking to party lines.

The Senate turned down the bill with a procedural vote that would have put it up for a floor debate, The New York Times reported Thursday.

The 58-42 vote included Senate Majority Leader Harry Reid voting no as a method of using Senate rules to preserve a chance to bring it up for another vote.

The bickering centered around a Republican effort to tack on more than three amendments to the bill, with Democrats seeking to limit amendments they said had nothing to do with the effort to help small businesses.

"The majority leader has graciously given us three amendments and what I'm saying is three amendments is not enough," said Sen. Mitch McConnell, R-Ky., the minority leader.

The bill included $30 billion in lending programs that would have been managed by the U.S. Treasury and $12 billion in tax breaks. Senate Republicans helped write the bill, which became bogged down in the peripheral argument over how many amendments would be included.

Sen. George LeMieux, R-Fla., said the bill was "good for the country" but voted against it.

The bill received support from the National Federation of Independent Business and the U.S. Chamber of Commerce, groups traditionally in the Republicans' corner. The NFIB said it was for the bill, but for additional amendments, also.

Fed policymaker Bullard warns of deflation ST. LOUIS, July 29 (UPI) -- Federal Bank of St. Louis President James Bullard warned Thursday that the U.S. economy could be headed toward a sluggish period marked by falling prices.

Deflation can set the economy on a prolonged downward spiral, as it leads to smaller profits for companies, which leads to layoffs. In addition, consumers put off spending, as prices could improve if they wait. That further disables the economy.

In an executive summary of Bullard's manuscript, "Seven Faces of 'The Peril,'" the St. Louis Fed branch said, "the Federal Open Market Committee's extended period language may be increasing the probability of a Japanese-style deflationary outcome for the United States within the next several years."

The Federal Reserve has consistently issued statements to the effect that it would keep its monetary policy at historically low levels for "an extended period." The bank-to-bank lending rate is currently set at zero to 0.25 percent.

Japan from 1981 through 1991 suffered through an economy-stalling deflationary period.

Bullard, who is on the FOMC, warned that low interest rates could prompt deflation. Further, "Promising to remain at zero for a long time is a double-edged sword," the summary explained.

"This policy is consistent with the idea that inflation and inflation expectations should rise in response to the promise and that this will eventually lead the economy back toward the targeted equilibrium," the statement said.

On the other hand, "It is also consistent with the idea that inflation and inflation expectations will instead fall," Bullard argues.

Summer classics signal a shift at GM WARREN, Mich., July 29 (UPI) -- Classic Camaros, Pontiac Trans Ams and Corvettes took center stage at General Motors Thursday, as a sign of recovery for the U.S. automaker.

GM reinstated an annual summer ritual of inviting workers to bring in their classic cars and put them on display at the Warren Tech Center in Warren, Mich., the Detroit Free Press reported.

The annual day of company pride was canceled a year ago, when GM was in the midst of a bankruptcy proceeding.

Employee and 1968 Chevy Chevelle owner Tom Hipple said, "We're as good as or better than the imports."

Tom Stephens, vice chairman of global product operations, said, "They don't write songs about washing machines and Apple computers. We're trying to get that pride back into the organization.

"I try to get myself out of the building and in the seat of a car as often as possible," he said.

The newspaper said nearly 700 classic GM cars were put on display.

A year away from bankruptcy, although pared down considerably, GM posted a profit of $865 million in the first quarter and is expected to be in the black for the second quarter as well.

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Google site blocked in China

July 29, 2010

San Jose Mercury News

By Mike Swift, San Jose Mercury News, Calif.

July 29--A Google website said Thursday that its Internet search in mainland China was "fully blocked" and that other services also were compromised, but many users in China said Google's services were operating normally.

Google's automated daily report on its services in China said that for the first time in recent weeks its Internet search, ads and mobile services were fully blocked, while other services including Image search and News were partially blocked. Gmail was the only service Google said was operating normally, compared to five services that were operating normally the day before.

Indications from actual users in China, however, where it was early Friday morning, was that there was nothing amiss with Google's services.

"I haven't heard from anyone in China (using Google) who is blocked," said Rebecca MacKinnon, an expert on Chinese censorship who was using Twitter to communicate with numerous people in Beijing and Shanghai.

Google did not immediately respond to requests for comment, and it was unclear whether Google's services were blocked elsewhere in China, or if the report was due to a software glitch at Google. If the government has begun to block search and other Google services, it would be a new and troubling turn for the search giant's status in the world's largest Internet market.

Just three weeks ago, China granted Google a license to continue operating. That license was in question after Google in January

said it would stop censoring search results, triggering an angry reaction from Chinese officials. Google later tried to end the stalemate over search censorship by automatically redirecting Chinese users from its censored google.cn site to its uncensored search engine in Hong Kong, google.com.hk.

However, after talks with the Chinese government, Google said it realized that plan was not acceptable to the officials. In late June, Google stopped automatically redirecting users to the Hong Kong site, although users could still click on a link at google.cn to access the uncensored Hong Kong site.

Contact Mike Swift at 408-271-3648. Follow him on Twitter at Twitter.com/swiftstories.

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