European, British central banks leave rates alone

Posted on November 5th, 2009 by admin.
Categories: News.

The head of the European Central Bank on Thursday hinted it could begin withdrawing some of its crisis measures soon, while the Bank of England pumped more money into the economy in an attempt to get Britain out of recession.

Neither bank touched interest rates, already at record lows of 1 percent for the eurozone and 0.5 percent in Britain.

ECB President Jean-Claude Trichet said that the 16 euro countries face an uncertain recovery. But he broadly hinted the bank was getting ready to take back some of its added lending measures that have provided banks with ready cash during the financial crisis and promised to say more at next month’s meeting.

“We will do the phasing-out in a timely and gradual fashion, I’ll give the rendezvous in a month’s time,” he said. He said he wouldn’t discourage speculation the bank will end its 12-month credits to banks, one of its crisis measures aimed at keeping the financial system afloat.

He said the eurozone faces only a gradual and uncertain recovery. “At the same time, the latest information continues to signal an improvement in economic activity in the second half of this year,” he said. The bank “expects the euro area economy in 2010 to recover at a gradual pace, recognizing that the outlook remains subject to high uncertainty.”

He urged banks to do their part to get the economy back on its feet.

“We call upon the banks, a very strong message to banks, to repair their balance sheets, to do their jobs to lend to the private sector, the economy to private households.”

With interest rates already about as low as they can go, markets are watching central bankers’ efforts to stimulate the economy by other means such as expanding the money supply. The Bank of England did that Thursday by saying it would add 25 billion pounds ($41 billiom) to its existing 175 billion pound program of bond purchases.

It was less than the 50 billion pound increase some analysts had expected.

The move follows disappointing growth data last week that showed Britain unexpectedly shrank in the third quarter. The bond purchases increase the total amount of money in the economy and puts it in the hands of banks in hopes they will lend to businesses.

The European decisions come a day after the U.S. Federal Reserve also left rates at a record low of 0-0.25 percent and said it would keep them there for “an extended period” even as growth picks up after a deep recession. The world’s central banks have slashed interest rates and pumped extra money into their economies and banking systems since the crisis began to bite in late 2007.

Attention is increasingly turning to how long those measures — which carry a long-term risk of inflation — must be maintained and when the central bankers think the economy will be strong enough to withdraw all or some.

The Bank of England’s move came after last week’s surprise news that Britain remained in recession during the third quarter, even as the United States turned to growth. Most economists expect the eurozone to show growth when third quarter figures come out next week.

Nonetheless, the Bank of England said a number of indicators of spending and confidence were up, suggested that “a pickup in economic activity may soon be evident.”

Meanwhile, Iceland’s central bank lowered its official interest rate by a full point to 11 percent as the country tries to get back on its feet after the credit crisis toppled its overweight banking system last year. It had been at 12 percent since June.

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Fitch reviews whether to cut Berkshire rating

Posted on November 5th, 2009 by admin.
Categories: News.

Fitch Ratings warned Thursday that Berkshire Hathaway Inc.’s deal for Burlington Northern Santa Fe Corp. could overexpose Warren Buffett’s company to weaknesses in the economy at the expense of its more durable investments.

The agency put Berkshire Hathaway rating’s under review for a possible downgrade in the wake of its announcement Tuesday that it will buy the rest of the railroad company based in Texas for $26.3 billion. Berkshire already owns a 22 percent stake in the railroad.

Another big ratings agency, Standard & Poor’s, placed its Berkshire ratings under review to see if a downgrade was in order on Wednesday.

Fitch said the acquisition and Berkshire Hathaway’s investments in utilities, energy and finance companies are shifting its asset profile toward businesses that use more financial leverage.

It says those investments are more sensitive to the economy than investments in insurance and holding companies.

Berkshire Hathaway did not immediately respond to an e-mail seeking comment.

Berkshire Hathaway’s issuer default rating is AA+, Fitch’s second-highest rating. The ratings agency said the high ratings enjoyed by Berkshire Hathaway and its insurance subsidiaries are due to investments in the comparatively highly-rated insurance sector and equity investments that generated significant capital growth, Fitch said.

Other ratings for Berkshire Hathaway notes and subsidiaries are at AA, A+ and AAA.

In its announcement Wednesday, S&P warned that the railroad deal could sap the liquidity and capital position of the insurance operations at Berkshire Hathaway, jeopardizing the company’s AAA rating — S&P’s prized top rating held by very few companies.

Fitch placed on its rating watch negative Berkshire Hathaway’s issuer default rating and numerous notes held by Berkshire Hathaway Finance Corp. and other entities, including its insurance company holdings.

The acquisition of Burlington Northern, the nation’s second-largest railroad, would be the biggest ever for Buffett’s holding company.

The deal requires approval from Burlington shareholders and antitrust regulators and is set to close early next year.

Berkshire’s Class B shares were up $9.98 at $3,390.98 in late trading Thursday.

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JPMorgan settles SEC ‘pay-to-play’ charges in Ala-1

Posted on November 5th, 2009 by admin.
Categories: News.

JPMorgan Chase & Co. has agreed to pay $75 million in fines and forfeit $647 million in fees to settle federal regulators’ charges that it made unlawful payments to friends of public officials to win municipal bond business in Jefferson County, Ala.

The Securities and Exchange Commission on Wednesday announced the settlement with JPMorgan.

The SEC had alleged that JPMorgan and former managing directors Charles LeCroy and Douglas MacFaddin made about $8.2 million in undisclosed payments in 2002 and 2003 to close friends of several Jefferson County commissioners. The money went to local brokerage firms whose principals or employees were friends of the county officials, the SEC said. Starting in July 2002, LeCroy and MacFaddin solicited the county for a $1.4 billion sewer bond deal.

Swayed by the payments, the county commissioners voted to select JPMorgan’s securities division as managing underwriter of the bond offerings and its affiliated bank as swap provider for the transactions, the SEC said. The $5 billion in municipal bond business and interest-rate swap agreements awarded to JPMorgan was the largest such deal in its securities division’s history, according to the SEC.

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JPMorgan settles SEC ‘pay-to-play’ charges in Ala-2

Posted on November 5th, 2009 by admin.
Categories: News.

JPMorgan failed to disclose any of the unlawful payments or conflicts of interest in the bond offering documents, but passed on the cost of the payments by charging the county higher interest rates on the swap transactions, the SEC said.

“The transactions were complex but the scheme was simple,” SEC Enforcement Director Robert Khuzami said in a statement. “Senior JPMorgan bankers made unlawful payments to win business and earn fees.”

Under terms of the settlement, the Wall Street bank did not admit or deny the SEC allegations in agreeing to pay a $25 million civil fine and make a $50 million payment to the county, and to forfeit $647 million in termination fees it claims the county owes on the canceled interest-rate swap contracts worth hundreds of millions of dollars.

JPMorgan also was censured and agreed to refrain from future violations of the securities laws.

Regulators have issued warnings for years over so-called “pay-to-play” relationships between investment firms and government officials in the $2.7 trillion municipal bond market, tapped by state and local governments around the country to finance schools, roads, hospitals and public works projects. The Jefferson County scandal has roiled Alabama’s most populous county and last week brought the federal bribery conviction and ouster of Birmingham’s mayor.

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JPMorgan settles SEC ‘pay-to-play’ charges in Ala-3

Posted on November 5th, 2009 by admin.
Categories: News.

The move lowers Jefferson County’s bond debt to about $3.2 billion from $3.9 billion, but officials had no immediate comment on whether that was enough to help the county avoid filing what would be the largest municipal bankruptcy ever.

In a civil lawsuit filed Wednesday, the SEC also accused LeCroy and MacFaddin of securities law violations. The agency is seeking unspecified restitution from them. They plan to contest the charges.

MacFaddin’s attorney, Richard Lawler, said his client “has at all times acted properly” in his dealings with Jefferson County. “He denies he has violated any securities laws and we’re confident he’ll be vindicated after trial,” Lawler said.

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JPMorgan settles SEC ‘pay-to-play’ charges in Ala-4

Posted on November 5th, 2009 by admin.
Categories: News.

LeCroy’s lawyer, Lisa Mathewson, said he “believes that the SEC has overreached with this complaint, both by overstating its jurisdiction and by labeling permissible business practices as fraudulent.”

New York-based JPMorgan said in a statement it has since discontinued its municipal swap-exchange business. The settlement with the SEC “does not impair any outstanding Jefferson County bonds and JPMorgan continues to work to achieve a responsible restructuring of Jefferson County’s financial affairs,” the statement said.

The SEC last year charged now-ousted Birmingham mayor Larry Langford and two others for undisclosed payments to Langford related to municipal bond offerings and swap agreement transactions made while he was president of the Jefferson County Commission. On Oct. 28, Langford was found guilty in the related criminal case on 60 counts of bribery, mail fraud, wire fraud and tax evasion.

Retail investors increasingly participate in the municipal bond market, seeking safe investments with reliable returns. The financial crisis and tight credit have made it more difficult for some municipal securities deemed higher risk to be sold.

In July, the SEC proposed tightening rules governing disclosures about municipal securities to aid investors in the municipal bond market. Brokers and dealers in municipal bonds and other securities are required to make fuller and more timely disclosures to investors.

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DynCorp 2Q profit rises on revenue growth

Posted on November 4th, 2009 by admin.
Categories: News.

Military contractor DynCorp International Inc. said Wednesday that its second-quarter profit jumped 60 percent on strong revenue growth.

The company, which trains police, provides aviation support in Iraq, and helped flood victims in Iowa, said it earned almost $20.6 million, or 37 cents per share, during the quarter that ended Oct. 2. That was up from $12.9 million, or 23 cents per share, during the same period a year earlier.

Revenue rose 5 percent to $821.4 million, from $779.2 million a year earlier.

The profit matched the expectation of analysts surveyed by Thomson Reuters, although they had been expecting slightly higher revenue of $836.1 million.

DynCorp said the second-quarter improvement was driven by a combination of profitable revenue growth, award fee bookings on parts of its contracting work in Kuwait and Afghanistan, and one-time revenue in its Worldwide Personnel Protective Services division.

Those increases were offset by lower profits in its Civilian Police program as some work ended.

For the full year, the company said it expects revenue of $3.3 billion to $3.5 billion, and a profit of $1.46 to $1.58 per share. Analysts are expecting a profit of $1.58 per share on revenue of $3.53 billion.

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Afghan corruption tough to combat-1

Posted on November 3rd, 2009 by admin.
Categories: News.

President Hamid Karzai promised to stamp out corruption. The image suggested otherwise. Standing at Karzai’s side on Tuesday were his two vice presidents — both former warlords widely believed to have looted Afghanistan for years.

Reform is a tall order in a country awash in drug money. Afghans pay bribes for everything from driver’s licenses to police protection, and the elite all too often treat state property as their own.

“Right now 85 percent of the government is corrupt,” said Ahmed Shah Lumar, a businessman in the southern city of Kandahar. He said bribery, extortion and other corrupt practices extend “from the very small person” in government to the very top.

International pressure is mounting on Karzai to make clean government a top priority as he begins his second term after an election marred by fraud. President Barack Obama wants concrete steps, White House spokesman Robert Gibbs said Tuesday.

Gibbs told reporters that the U.S. Embassy in Kabul was working with the Afghans on an anti-corruption compact, but he refused to comment on specific benchmarks or deadlines.

“We’re going to look for President Karzai to move boldly and forcefully to initiate internal reforms,” State Department spokesman Ian Kelly said. “And we stand ready to assist him in that regard, to help him improve governance in Afghanistan, to provide security for the Afghan people and provide the kind of services that the people of Afghanistan deserve.”

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Afghan corruption tough to combat-2

Posted on November 3rd, 2009 by admin.
Categories: News.

In Kabul, Karzai acknowledged to reporters that Afghanistan “has a bad name from corruption.” He added, using a local expression, that “we will do our best through all possible means to eliminate this dark stain from our clothes.”

Karzai said corruption could not be erased simply by replacing certain officials. Instead, “we need to review the law, where we have problems,” he said. One issue regarding the law has been a failure to define bribery and other such practices.

The president also promised to strengthen a government commission established a year ago to fight corruption.

“We ought to be skeptical about promises from Karzai with respect to corruption,” said Mark Moyar, professor of national security affairs at U.S. Marine Corps University in Quantico, Va. “He has promised to stamp out corruption on many previous occasions, in response to pressure from Afghanistan’s foreign patrons, and has consistently failed to deliver.”

Even with a good faith effort, corruption is so deeply entrenched in Afghan society that it could take decades to clean up.

A March report by the U.S. Agency for International Development found that corruption had reached “an unprecedented scope in the country’s history.”

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Afghan corruption tough to combat-3

Posted on November 3rd, 2009 by admin.
Categories: News.

Corruption is not limited to the rich and powerful. It is woven into the very fabric of everyday Afghan life.

Villagers in the southern province of Helmand say police routinely stop them on the highways and demand money just to pass. In the capital, Kabul, government employees shake down people applying for driver’s licenses, passports or building permits.

“If you have some work to be done, you need to get 30 people to sign one piece of paper for you,” said bank employee Safiullah Habibi. “Then you have to pay each person a small bribe to sign.”

The system feeds on itself. Several years ago, U.S. military officials began hearing complaints that lower-ranking police officers and soldiers never received their full salary. As the money was transferred down the chain of command, officers and sergeants would siphon off a portion for themselves.

Soldiers and police make up for the shortfall by stealing food from merchants or shaking down motorists. U.S. Embassy and military officials say the country’s drug trade flourishes in part because police take bribes to turn a blind eye to trafficking.

U.S. officials have since tried to institute an electronic payment system to prevent commanders from taking cuts from paychecks, but some soldiers still complain they do not receive all they’re owed.

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