Regulators supply credit union aid

Regulators supply credit union aid

A government plan makes $40 billion available to credit unions hit by losses on mortgage securities. Struggling home owners get another $2 billion.

WASHINGTON (AP) -- Federal regulators said Tuesday they are making more than $40 billion available to support several credit unions that suffered losses from mortgage securities, and will provide another $2 billion to help struggling homeowners.

National Credit Union Administration Chairman Michael Fryzel said the credit unions should "use these programs constructively as they work through these difficult times."

The new borrowing from the Treasury Department will be available under a special facility that Congress approved in September for the agency, which oversees some 8,100 federally insured credit unions.

The new lending facility will provide aid for some credit unions, known as corporate credit unions, that furnish wholesale financing and investment services to the greater population of retail credit unions.

Some of the 28 corporate credit unions in the United States have sustained steep losses on paper from the depressed value of the mortgage-backed securities they hold.

The majority of credit unions, which are cooperatives owned by their members, are financially strong.

The other program will involve up to $2 billion in low-cost loans to retail credit unions to be used for reducing mortgage rates for delinquent and strapped low- and moderate-income homeowners who are their members. Credit unions will have six months to modify home loans under the program. more

In tough times many dip into retirement savings

In tough times many dip into retirement savings

NEW YORK (CNNMoney.com) -- As the economic crisis continues to hammer Americans, many are turning to desperate measures by dipping into their retirement funds to make ends meet, according to a survey released Thursday.

The 2008 Bank of America (BAC, Fortune 500) Retirement Savings Survey revealed that current financial conditions forced 18% of respondents to withdraw from their retirement accounts prematurely.

Accessing their retirement funds "should be at the bottom of the list," said Craig Averill, personal retirement solutions executive at Bank of America."They need to be cognizant of what this decision means."

The top three reasons for the early withdrawals include: credit card debt (25%); mortgage payments (22%); and recent job loss (22%), according to Bank of America.

Findings revealed 62% of the general public and 44% of affluent respondents are either behind schedule or have not started retirement planning - compared to 53% and 36%, respectively, in a March survey.

The March survey was the first conducted by the bank. The current survey was the first time it asked respondents about premature withdrawals due to the poor economic conditions.

Still despite the dramatic upheaval in the U.S. economy, Bank of America said, 68% said they haven't changed the way they save, invest, or manage retirement assets in the last three months.

"In today's economy, people are bombarded with messages that create a great deal of anxiety," Averill said. "It puts them in a position of indecision. They're concerned about making the wrong choice, so they do nothing."

The "most significant roadblock" most people face is being unable to save earlier for retirement, the report said, with 52% of the general population and 48% of the affluent responding as such.

"What the survey says on the whole is, people need to go back to basics," Averill said. "Remember the fundamentals. It can be painful sometimes to do a cash flow statement, but it's necessary. Focus not just on today, but the reasons you put a retirement plan together. "
Golden years fade into the horizon

The report states that for many Americans retirement has been pushed back. 43% of overall respondents said they believe they now face more years in the work force compared to a year ago. 36% of affluent Americans and 31% of those 50 or older expect a longer career.

Half of affluent respondents said they planned to "pursue a more cost-effective lifestyle," Bank of America said.
An unclear future

The bleak situation in many Americans' finances is compounded by future plans that are hazy, the survey found. Most - 59% of the general public and 52% of affluents - don't know or don't have a good idea of what they'll need to save to maintain their current standard of living, the report said.

Four in 10 Americans do not plan to change the way they save or invest for retirement in 2009, though 16% of the general population reported that they may not save anything for retirement in the coming year, the report said.

Almost half (44%) of the general population and close to two-thirds (61%) of affluent Americans are putting their investable dollars into savings accounts, where cash can be accessed easily, the survey said. more

Home prices in record decline

Home prices in record decline

A Case-Shiller survey shows a 16.6% annual decline in the summer months as the housing picture continues to deteriorate.

By Les Christie, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- The home price plunge stayed on a record pace this summer, according to a widely watched gauge of national real-estate markets released Tuesday.

The S&P Case-Shiller Home Price national index recorded a 16.6% decline in the third quarter compared with the same period a year ago. That eclipsed the previous record of 15.1% set during the second quarter.

Prices in Case-Shiller's separate index of 10 major cities fell a record 18.6%, while its 20-city index dropped a record 17.4%

With foreclosures soaring at record rates, the economic picture dimming and job losses ramping up, all the elements were in place to push prices lower.

"The turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals," said David Blitzer, Standard & Poor's spokesman for the indexes, in a press release. "All three aggregate indices, and 13 of the 20 metro areas, are reporting new record rates of decline...Prices are back to where they were in early 2004."

The 10-city index is now 23.4% off its peak price, which came in June 2006; the 20-city index is down 21.8% from its July 2006 high and the national index has fallen 21% since the third quarter of 2006.

Home prices in the 10-city index have fallen for 26 consecutive months. The decline has broadened over the past 12 months, with prices dropping in every city of the 20-city index during September.

In the weakest market, Phoenix, the 12-month loss came to 31.9%. Las Vegas prices plummeted 31.3% and San Francisco recorded a 29.5% decline. The best performing markets, Dallas and Charlotte, N.C., still posted drops - 2.7% in Dallas and 3.5% in Charlotte. more

Obama Says Wall Street Executives Should Forgo Holiday Bonuses

Obama Says Wall Street Executives Should Forgo Holiday Bonuses

President-elect Barack Obama said executives at Wall Street banks should forgo their Christmas bonuses.

By Kim Chipman

Nov. 26 (Bloomberg) -- President-elect Barack Obama said executives at Wall Street banks should forgo their Christmas bonuses.

“That’s an example of taking responsibility,” Obama told Barbara Walters in an interview to air on ABC later today, referring to executives who have already said they won’t take holiday bonuses. “If you are already worth tens of millions of dollars, and you are having to lay off workers, the least you can do is say, ‘I’m willing to make some sacrifice as well.’”

Obama also said chief executive officers at General Motors Corp., Ford Motor Co. and Chrysler LLC -- who last week flew to Washington in private planes to ask lawmakers to back an aid package for the industry -- are “tone-deaf” to the struggles of ordinary Americans, according to excerpts of the interview released by ABC.

Obama called for CEOs to pay attention to the well-being of their workers, communities and shareholders.

“There’s got to be a point where you say: ‘I have enough, and now I’m in this position of responsibility. Let me make sure that I’m doing right by people and acting in a way that is responsible,’” Obama said.

Obama also spoke to Walters about his concerns that he could become too isolated from everyday life once in the White House. more

Pandit Says Citi Rescued to Keep ‘America’s Strength’

Pandit Says Citi Rescued to Keep ‘America’s Strength’

Citigroup Inc. Chief Executive Officer Vikram Pandit said the U.S. government pumped $20 billion into the bank to send a signal that regulators will stand behind the country’s financial system.

By Bradley Keoun

Nov. 26 (Bloomberg) -- Citigroup Inc. Chief Executive Officer Vikram Pandit said the U.S. government pumped $20 billion into the bank to send a signal that regulators will stand behind the country’s financial system.

“We’re in 109 countries around the world, and Citi’s strength is viewed to be America’s strength in many ways,” Pandit, 51, said in an interview with PBS’s Charlie Rose show that aired yesterday. The bailout “was really about the entire financial system. It was about confidence in the financial system. It was about stability,” he said.

Citigroup’s stock last week fell below $5 for the first time since 1994, sparking concern that customers might pull their money and destabilize the New York-based bank, which has $2 trillion in assets. The government on Nov. 23 agreed to support the company with a $20 billion capital injection and a shield against losses on $306 billion of mortgages and other loans.

Pandit, who took over as Citigroup’s chief 11 months ago, was making his first public comments since the deal with the government was announced. The guaranteed assets had a face value of about $340 billion to $350 billion, he said, before they were written down amid the credit crisis.

All banks have experienced declines in the value of their loans and securities partly because so many of the assets are being dumped into the market at the same time, he said.

“Some of them are toxic, some of them are good,” Pandit said. “There is just too many of them. And there has to be a plan to clean out these assets and have institutions and/or funds buy them, and the Treasury has been working on them.”

Better Deal?

Citigroup’s deal, which followed a $25 billion infusion from the Treasury in October, drew criticism from U.S. legislators including Senate Banking Committee Chairman Christopher Dodd. The government should have struck a better deal and insisted on management changes, Dodd said yesterday.

The bank has reported four straight quarterly losses totaling $20 billion. The stock price plunged as low as $3.77 a share on Nov. 21. Since the government pledged its support, the stock has rallied 61 percent to close yesterday at $6.08 in New York Stock Exchange composite trading.

“Some of the issues about Citi’s assets and asset quality were being translated into people taking action on the stock, not only some people who had stock they were selling, but particularly short sellers,” Pandit said, referring to investors who try to profit from betting on a stock’s decline. more

Consumer Spending in U.S. Probably Dropped by Most in 7 Years

Consumer Spending in U.S. Probably Dropped by Most in 7 Years

The U.S. sank into a deeper recession as consumer spending, the biggest part of the economy, dropped in October by the most since the 2001 contraction, economists said before a government report today.

By Shobhana Chandra

Nov. 26 (Bloomberg) -- The U.S. sank into a deeper recession as consumer spending, the biggest part of the economy, dropped in October by the most since the 2001 contraction, economists said before a government report today.

Purchases fell 1 percent after declining 0.3 percent in September, according to the median forecast in a Bloomberg News survey. Orders for long-lasting goods, sales of new houses and consumer sentiment also fell, other reports may show.

The biggest spending slump in three decades is likely to persist as home prices fall and job losses mount, threatening the holiday sales outlook at retailers from Zale Corp. to Best Buy Co. Faltering demand has caused the Federal Reserve, Treasury and President-elect Barack Obama to ratchet up plans to ease the credit crisis.

“Consumers are likely to continue to pare back spending,” said Michelle Meyer, an economist at Barclays Capital Inc. in New York. The pullback is “setting the stage for a bleak holiday shopping season.”

The Commerce Department’s spending figures are due at 8:30 a.m. in Washington. Estimates of the 72 economists surveyed ranged from declines of 0.4 percent to 2 percent. Incomes probably grew 0.1 percent, the smallest gain in three months, the survey also showed.

Also at 8:30 a.m., Commerce may report that orders for durable goods, those meant to last several years, fell 3 percent in October, according to the survey. Excluding transportation equipment, orders probably fell 1.6 percent, a third consecutive decline.

Sentiment Fades

The Reuters/University of Michigan’s final estimate of consumer sentiment for this month, due at 10 a.m., probably fell, approaching June’s 28-year low, according to the survey median.

A jump in firings is one reason Americans’ moods have darkened. A Labor Department report at 8:30 a.m. may show initial claims for jobless benefits last week held close to the 16-year high reached the prior week, according to the survey.

Retailers are concerned about the November-December holiday season, which brings in one-third or more of annual revenue. Zale, the biggest U.S. jewelry chain by stores, yesterday rescinded its annual forecast, saying in a statement that it “does not believe it can reliably gauge likely holiday performance or sales in the balance of fiscal 2009.”

Today’s spending report is also likely to confirm that inflation is retreating as demand wanes. The Fed’s preferred price gauge, which is linked to purchases and excludes food and fuel costs, was probably unchanged in October, according to the survey median. It would be the first time in almost two years it didn’t increase.

Bigger Drop

Consumer spending dropped at a 3.7 percent annual pace in the third quarter, more than the government had previously forecast and the biggest plunge since 1980, revised Commerce figures showed yesterday. The economy shrank 0.5 percent, also faster than initially estimated. more

Asian, American leaders back free trade to ease crisis

Financial News

LIMA (Reuters) - Leaders from Asia and the Americas promised on Saturday to push for a global free trade deal and reform international lenders in an effort to keep the world from sliding into a deep recession.

U.S. President George W. Bush, Chinese President Hu Jintao, Japanese Prime Minister Taro Aso and other members of the 21-nation Asia-Pacific Economic Cooperation group, or APEC, said they would refrain from raising trade barriers over the next 12 months.

They also supported overhauls of the International Monetary Fund, or IMF, and the World Bank at a time when more countries need emergency bailouts to avert economic devastation.

"The current situation highlights the importance of ongoing financial sector reforms in our economies," the leaders said at the mid-point of a two-day summit meeting at a fortified defense compound in Peru's capital, Lima.

On his last scheduled trip abroad before handing over power to President-elect Barack Obama on January 20, Bush joined APEC peers in rejecting protectionism even if economies worsen.

The leaders committed to try to reach a breakthrough in the stalled Doha round of trade talks before the end of this year.

"It's important for us to continue to work together in this time of economic turmoil," Bush said.

Despite calls by all sides for a trade deal, disputes between the United States, the European Union, China, India and other key players have repeatedly wrecked hopes for a breakthrough during the last seven years of negotiations and it is not clear what concessions they are prepared to make now.

The APEC group accounts for more than half of global output and includes countries such as Russia, Indonesia, Australia, Canada and Mexico. more