Financial thoughts

U.K. house prices fell for a sixth month in March as banks curtailed lending and consumers lost confidence in the property market, Hometrack Ltd. said.

The average cost of a home in England and Wales declined 0.2 percent to 174,100 pounds ($347,000), the London-based research company said today. The annual rate of growth slipped to 0.4 percent, the least in two years.

Banks have raised the cost of borrowing for homebuyers with the smallest deposits to a seven-year high, declining to pass on two interest-rate cuts by the Bank of England since December. Consumer confidence dropped to a 13-year low in March and house prices rose at the slowest annual pace since 1996, separate reports showed last week.

“Continued uncertainty in the financial markets, affordability pressures and weak buyer confidence are all likely to suppress levels of market activity in the months ahead, with pricing levels remaining under pressure'' said Richard Donnell, director of research at Hometrack.

The report is based on a survey of 3,500 real estate agents and surveyors, calculating average values using judgments of achievable prices rather than sale prices alone.

Prices fell in nine of the 10 regions in England that Hometrack follows, and they stayed unchanged in Wales. London, the North of England and the West Midlands led declines, with a 0.3 percent drop.

Waning Confidence

Consumers predict property values will fall 3 percent in the next six months, a Nationwide survey showed March 28. The bank's data showed house prices rose 1.1 percent in March, the slowest pace in more than a decade. Confidence among shoppers slumped on concern a recession in the U.S. will spread to Britain, a report by GfK NOP Ltd. showed the same day.

Bank of England Governor Mervyn King told lawmakers on March 26 that there is “a distinct tightening in credit conditions'' and that he “would be surprised if, in a few years' time, house prices are markedly above where they are now.''

Banks have racked up more than $200 billion in losses linked to the U.S pay day advance. housing market recession, making them reluctant to lend to one another and to make loans to consumers.

Nationwide said March 27 it raised rates on all of its mortgages, in some cases by as much as 0.57 percentage point, while it also withdrew some loans. Rival HBOS Plc said on Feb. 27 it will “favor profitable growth over market share'' after abandoning lending targets.

Mortgage Approvals

U.K. mortgage approvals fell by almost a third in February from a year earlier, the British Bankers' Association said in a separate report last week.

Three-month Libor, a measure of what banks charge each other for loans, has rose to 6.01 percent on March 28, the highest this year.

The U.K. economy will grow 1.5 percent this year, the least since 1992 and half the pace of 2007, the London-based Centre for Economics and Business Research said today. It lowered its forecast from a previous prediction of 1.8 percent.

Economists at banks including Royal Bank of Scotland Group Plc and ING Financial Markets have brought forward forecasts for the next Bank of England rate cut to next month from May. The central bank, which takes its next decision on April 10, has lowered its benchmark interest rate by a half point since December to the current level of 5.25 percent.

Source

The U.K. economy expanded slower than forecast in the fourth quarter as consumer spending growth was revised lower and government expenditure fell.

Gross domestic product increased 2.8 percent in the three months through December from a year earlier, the least since 2006, the Office for National Statistics said in London today. The result was lower than the 2.9 percent previously estimated, which was the forecast of all 25 economists in a Bloomberg News survey. On the quarter, the economy expanded 0.6 percent.

Bank of England Governor Mervyn King said this week he sees “a sharp slowing in growth coming'' as financial-industry turmoil limits expansion in other areas of the economy. Consumer confidence fell to a 15-year low in March and house prices rose the least since 1996, separate reports showed today.

“A recession is heading our way,'' Neil MacKinnon, chief economist at ECU Group in London and a former U.K. Treasury official, said in a Bloomberg Television interview. “The indicators on consumer spending and house prices are key. No-one is going to be able to escape the credit crunch.''

The pound was little changed against the dollar after the report, trading at $1.9968 at 10:09 a.m. in London.

Consumer spending expanded 0.1 percent in the quarter, half of the previous estimate, the statistics office said. Government spending fell 0.5 percent, helping to offset a 1.8 percent gain in fixed investment.

Services, Factories

Services expanded 0.7 percent in the quarter, up from a previous estimate of 0.6 percent the statistics office said. Manufacturing growth was flat.

Central bankers around the world are pumping cash into their financial systems to limit the damage from the collapse of the U.S. subprime mortgage market. Banks have announced more than $200 billion in writedowns and credit losses linked to the slump, prompting firms to curb lending and weighing on the residential property market and consumer confidence.

The U.K. current account gap narrowed to 8.5 billion pounds ($17 billion) from 19.1 billion pounds in the third quarter. Foreign banks recorded losses from writedowns in the U.K., making an 8.6 billion-pound deficit on their earnings, the biggest since records began half a century ago and the first negative result since 1998, the statistics office said.

The Bank of England is counting on a weaker pound to boost U.K. exports and narrow the current-account deficit, which reached a record high in the third quarter.

Account `Concern'

“We've been concerned for some time,'' about the current account deficit, King told lawmakers March 26 http://payday-nofax.com. “Some adjustment is necessary.'' The recent decline in the pound “has been the unwinding of the appreciation'' in 2006.

A gauge of Britons' sentiment fell 2 points to minus 19 this month, a 15-year low, on concern the slowdown is poised to deepen, according to GfK NOP Ltd.

U.K. house prices rose in March at the slowest pace in more than a decade, gaining 1.1 percent from a year earlier, Nationwide Building Society said today. On the month, prices fell 0.6 percent.

Lehman Brothers Holdings Inc. yesterday said slowing house prices will tame the U.K.'s expansion. The bank cut its forecast for growth next year to 1.1 percent from a previous prediction of 2 percent. It also sees house prices declining 8 percent by the end of 2009.

The signs of slower growth are challenging policy makers charged with keeping inflation at the 2 percent target, King said. While the cooling poses a risk that the consumer price index will slip below the bank's goal, rising commodity prices threaten to keep prices elevated.

Rate Vote

Seven of the Monetary Policy Committee's nine members voted for no change in the key rate after two quarter-point reductions since December to guard against faster inflation getting entrenched in the economy. King said this week that the consumer price index may exceed the government's 3 percent limit this year.

“We have quite a sharp slowing of growth coming,'' King told lawmakers. “There's a difficult balancing act at present because there are risks at either side. There is concern and lack of confidence in all financial markets around the world.''

Some economists, including James Knightley at ING Financial Markets, have brought forward forecasts for the next Bank of England interest-rate cut to April from May after King signaled policy makers were more disposed to lower borrowing costs.

Some analysts say the threat to growth from a worldwide surge in borrowing costs adds to the case for bigger rate cuts.

“They're behind the curve,'' DeAnne Julius, a member of the bank's rate-setting panel from 1997 to 2001, said in a Bloomberg Television interview yesterday. “If I were still on the committee I'd be voting for a half-a-point cut'' in April.

Source

Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects deepened worries that the economy has fallen into recession.

The Conference Board, a business-backed research group, said Tuesday that its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The March reading was far below the 73 expected by analysts surveyed by Thomson/IFR.

Meanwhile, a widely watched index of U.S. home prices fell 11.4% in January, its steepest drop since data for the indicator was first collected in 1987. The decline reported Tuesday in the Standard & Poor’s/Case-Shiller index means prices have been growing more slowly or dropping for 19 consecutive months.

The weak readings depressed share prices on Wall Street. The Dow Jones industrial average dropped 74.37, or 0.6%, to 12,473.91 in morning trading. The Standard & Poor’s 500 index and the Nasdaq composite index also fell.

The Consumer Confidence Index has been weakening since July, and is watched because lower consumer confidence tends to result in lower consumer buying, which in turn, drags on the economy.

Lynn Franco, director of the Conference Board’s research center, said the latest reading was the lowest since the index hit 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.

"Consumers’ outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," she added.

Economist Bernard Baumohl, executive director of The Economic Outlook Group in Princeton Junction, N.J., said consumers’ pessimism "reflects the great anxiety that households have because there are just so many uncertainties that everyone faces."

These include the weakening job market, the fact that incomes haven’t kept pace with inflation and "growing recognition that households are less wealthy now than a year ago because of both the decline in home prices and in the value of their financial investments," he said.

Baumohl believes the economy fell into recession in the current quarter and that growth probably won’t resume until the second half of the year, after government stimulus programs have had a chance to work low fees payday loan. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates starting this summer to encourage consumer spending.

The Fed on Tuesday said it had received bids of nearly $89 billion for $50 billion in short-term loans offered in its latest auction to banks. So far, the Fed has made $260 billion in such loans since December to help ease credit conditions.

Baumohl said government actions should help the economy resume growth later this year, but that the recovery could be weak.

"Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad," he said. "For most people, they won’t be able to tell if the economy is growing 1% or shrinking 1%."

The Conference Board said there were steep declines in two companion indexes.

The present situation index, which looks at current conditions, slumped to 89.2 in March from 104 the month before. The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58 in February. The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal, the Conference Board said.

In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months. On the labor market, consumers expecting fewer jobs increased to 29% in March from 28% in February, while those expecting more jobs declined to 7.7% from 8.9%.

The survey by the New York-based Conference Board is based on a sample of 5,000 U.S. households. 

Source

Malaysian Prime Minister Abdullah Ahmad Badawi said he'll introduce measures to help the poor and attract investors to the stock exchange after his ruling coalition's worst election showing.

“The result of the elections was a strong message that I have not moved fast enough in pushing through the reforms that I promised to undertake,'' Abdullah said today at an investor conference in Kuala Lumpur. “Point well made and point taken.''

Abdullah is seeking to reassert his authority and revive market confidence after opposition parties won almost half the states contested in the March 8 election, sparking concerns building contracts under a 200 billion ringgit ($62 billion) development plan will be delayed. Malaysia's key share index gained today after the premier said he'll push ahead with reform and projects across the country to promote growth.

Malaysia's stock exchange, partly owned by the government, will combine its main and second trading boards, Abdullah said today. The ruling coalition lost its two-thirds majority in parliament for the first time since 1969.

“Abdullah needs to carry on with the projects he announced,'' said Lye Thim Loong, who helps manage the equivalent of $593 million at Avenue Invest Bhd. in Kuala Lumpur. “He has to make sure they are executed well to win back confidence.''

`Very Forceful'

The country's main stock index rose as much as 2.2 percent to 1,227.01 after Abdullah's speech. It climbed 2 percent to 1,225.36 at the 12:30 p.m. break in Kuala Lumpur, set for the biggest gain in almost two weeks.

Analysts including CLSA strategist Loong Chee Wei had said property projects in Malaysia may be delayed because of spats between the federal government and opposition-led states.

Building stocks including IJM Corp., MMC Corp. and Gamuda Bhd. climbed today after Abdullah told reporters there's no sign Malaysia's construction industry is slowing, and he'll proceed with development contracts at a state and national level.

Abdullah “was very forceful,'' said Stephen Hagger, a Kuala Lumpur-based analyst at Credit Suisse Group who attended the conference payday advances. Still, “it may not be sufficient given the turmoil in the U.S.''

Malaysia is fighting rising food costs triggered by record crude oil prices, and slowing growth in the U.S., the Asian nation's largest export market. Abdullah said the country can weather a slowdown in the world's largest economy as he announced measures to boost financial services at home.

`More Competitive'

The government will make it easier for Malaysian companies with top credit ratings to sell ringgit-denominated debt by exempting them from certain approval requirements, he said.

“It will allow our private sector easier and more competitive access to capital,'' Abdullah said in his speech.

Malaysia's government, which spent about 35 billion ringgit last year subsidizing gasoline and natural gas costs, will keep fuel prices at the pump on hold, Abdullah told reporters after his speech. He said a policy to address the subsidy would be announced later, and he didn't specify what measures would be introduced to help the poor.

“The best thing is you just wait,'' the prime minister said in response to questions about subsidy levels. “It is among the very early decisions that we are going to announce.''

Second Finance Minister Nor Mohamed Yakcop told delegates at the conference that some income groups would receive direct payments from the government, replacing current subsidies benefiting the rich and poor.

Calls to Resign

The ruling coalition's election setback has also prompted some party members including former premier Mahathir Mohamad to demand Abdullah's resignation. The benchmark stock index on March 10 plunged 9.5 percent, the most in a decade, wiping $27 billion from the value of the market.

The government said in July last year it expects to generate 177 billion ringgit of investment by 2025 to spur growth in the nation's northern states. The area includes Penang, Perak and Kedah, three states won by the opposition parties.

Source

When Chris Dougher and Rita Navarro moved Good Works Inc., their home furnishings store, to its current Delmar Loop location 11 years ago, they were amazed at how quickly it took off, boosted only by word-of-mouth referrals.

However, as the economy slides and spending slows, they — like retailers across the country — are finding that they must take aggressive steps, and sometimes change strategies, to get shoppers into the store and willing to spend.

"From the day we opened, we were very successful," Dougher said of the store’s location at 6323 Delmar Boulevard in University City. "It was a pretty remarkable experience." The demand for Good Works’ contemporary furniture and accessories continued to grow, and about two years ago the women decided to expand. In November, they opened a store downtown at 901 Washington Avenue.

The women wanted to be part of the downtown renaissance and believed that the area would be the next Loop, Dougher said. But that was before the economy started to slow, causing declines in loft purchases, retail openings and shoppers with open pocketbooks.
"We were so successful that we thought we could take the risk of opening downtown, but it’s turned out to be riskier than we thought, " Navarro said. "We were pioneers in the Loop as well … but this is just more pioneering spirit than we had expected."

It takes an especially strong spirit to be a retailer these days. Only 10 days ago, the Commerce Department said February retail sales fell by a larger-than-expected amount. The weakness, which was widespread, marked the second month in the last three in which retail sales have stumbled.

Examples of the tough shopping climate are nearly everywhere, with retailers of all types and sizes cutting back operations, laying off staff and slashing prices. On Thursday, Borders Group Inc., the nation’s second-largest bookseller, said it might put itself up for sale. The chain has lined up $42.5 million in fresh financing to help it continue operations.

Also recently, Sharper Image Corp. and Lillian Vernon Corp. filed for bankruptcy protection, and AnnTaylor Stores Corp. started closing 117 stores. Closer to home, the area took a blow when Macy’s Inc. announced it would close its Midwest headquarters in downtown St. Louis and eliminate 850 jobs as part of a nationwide consolidation effort.

‘TRADING DOWN’

Meanwhile, the frail economy is driving many consumers to "trade down" by shopping at lower-priced retailers than they usually frequent, retail experts said.

Mary Kalinowski, 24, of Richmond Heights, said she was one of them. Although she used to shop frequently at specialty stores and Macy’s, she has become a big fan of Target Corp.’s stores.

"I used to shop at Nine West — their shoes are great and they last — but I go to Target now," Kalinowski said. "I think if I can get through the season, maybe the economy will be better next year."

Plus, going to Target allows her to do all of her shopping at one stop and cut down how much she spends for gasoline. "I can get everything there," she said. "It saves me time and money."

Judy Ross, 46, who lives in Town and Country, said that she had always been a discount shopper but that the worsening economy had pushed her to spend more of her time at TJX Cos.’ T.J. Maxx and Marshalls stores.

"I’m trying to train my 12-year-old daughter to shop at discount stores," Ross said. "When gas is $3.50 a gallon, clothes are a luxury, not a necessity."

WAL-MART’S PLANS

Indeed, discount giant Wal-Mart Stores Inc. has been one of the few retailers to offer good financial news. Its February sales gained more than the retailer had forecast as it lured shoppers by cutting prices by as much as 30 percent on groceries, electronics and other items.

Customers can expect to see more price cuts, said Carol Johnston, operations vice president and regional general manager, when asked about Wal-Mart’s strategy in a worsening economy. "Right now, we recognize these are very tough times for our customers," she said. "We will continue to lower prices."

The retailer, based in Bentonville, Ark., particularly tries to target items that are among the most popular in their categories instant payday loan. Johnston used Pantene shampoo as an example: The 12.6-ounce size is priced at $3, down from $3.76, and the 25.4-ounce size is $5.97, down from $6.32.

While Wal-Mart is cutting the prices of certain items, it also is introducing higher quality goods that cost a bit more than its basic brands but are less expensive than similar goods at its competitors.

Earlier this month, Wal-Mart announced it would introduce a better quality line of textiles, furnishings and dinnerware called Canopy. An example of products from this line are sets of 300-thread count, Egyptian cotton sheets. Although they are higher priced than Wal-Mart’s basic bedding, they are expected to be priced less than competitors’ similar goods.

In addition, Wal-Mart and Meredith Corp. will launch a new line of Better Homes and Gardens products in the fall. In trading last week, shares of Wal-Mart closed at $53.23, a three-year high.

CUSTOMERS CHANGE

Meanwhile, smaller retailers also are trying to find new ways to pull in reluctant spenders and to find the right niche as their customer bases change with the economy.

For example, Good Works, which has thrived on word-of-mouth referrals, is finding that they’re not enough in this economy.

"We never ever did any marketing," said Navarro. "In fact, our Yellow Pages ads kept getting smaller." Recently, however, the company decided to hire a marketing firm for the first time in hopes of attracting new customers.

Good Works also is taking other steps to make itself attractive to shoppers, such as placing more large orders directly with factories to keep prices low. It also plans to establish a "clearance corner" at its downtown store.

Meanwhile, Mavrik Jewelers, a Kirkwood retailer that specializes in original and customized jewelry and gifts, is changing its strategy to place a greater emphasis on luxury-priced fine diamond jewelry that can cost from $20,000 to $100,000. Igal Alon, an owner, said the retailer hoped to counteract an expected decrease in sales of items priced at $6,000 to $10,000.

"You have to change directions to be in the right place at the right time," Alon said. "I like to foresee things before they happen."

He said his company also was building its online business, which offers more moderately priced jewelry ranging from about $100 to $500.

To cut its overhead, Mavrik recently closed its Clayton location. Now the company’s retail, wholesale and online operations are consolidated in Kirkwood.

"It’s not a good time to be throwing away money," Alon said.

NO CHANGES

However, not all retailers are making changes. In fact, Glik’s, the Granite City-based apparel specialty chain, believes it will continue to succeed by maintaining its long-running policy of avoiding urban locations.

"We’re contrary to the trend. Our business is strong," said Jeff Glik, chief executive and president. Not only that, but the weak economy is making it cheaper for the privately held company to open new stores.

"Landlords are giving us deals like I’ve never remembered," he said.

In addition, high gas prices mean that shoppers want to stay closer to home and are avoiding trips to distant metropolitan areas.

Glik’s, with 50 stores, plans to open four more this year, in Carroll, Iowa; Virginia, Minn.; Frankfort, Mich.; and Rice Lake, Wis.

"The metro areas are over-stored," Glik said. "Small-town America’s rents are lower, our margins are higher … and stealing is very low."

And unlike many other retailers, Glik says he has no fear of Wal-Mart. Instead, he said, the proximity of Wal-Mart’s stores helps increase traffic at Glik’s.

"We love Wal-Mart," Glik said. "Mom says, ‘I’m going to Wal-Mart,’ and the daughter says, ‘Drop me off at Glik’s.’"

gappleson@post-dispatch.com | 314-340-8331

Source

Italian consumer confidence fell to the lowest in almost four years in March as rising prices and slowing economic growth sapped optimism in Europe's fourth- biggest economy.

The Rome-based Isae Institute's index, based on a survey of 2,000 families, fell to 99 from a revised 102.8 last month. The reading was lower than the median forecast of 102.4 by 17 economists in a Bloomberg News survey. Today's reading is the lowest since May 2004.

Italians have been cutting back on their spending, which makes up two-thirds of the $2 trillion economy, as a surge in the cost of food and transportation curbs disposable income. ISAE predicts the Italian economy will grow as little as 0.5 percent this year, the slowest pace since 2003.

“Economic forecasts for 2008 continue to evolve, with negative indicators for consumer spending,'' Seat Pagine Gialle SpA Chief Executive Officer Luca Majocchi said on a March 19 conference call after the publisher of phone directories announced that sales fell in 2007 online payday loan.

A measure of optimism about the current economic situation plummeted to a 14-year low of minus 132 from minus 118, ISAE said. The number of Italians who are “very concerned'' about rising prices is at a four-year high.

Oil prices above $100 a barrel have driven the Italian inflation rate to 3.1 percent, the highest in 11 years, and saddled households with higher energy bills. Italian retail sales dropped in February for a 12th consecutive month, the Bloomberg purchasing managers index showed.

Complicating the economic climate is the current election campaign, which was triggered by the collapse of Prime Minister Romano Prodi's government in January after 20 months in power. Both leading candidates, two-time premier Silvio Berlusconi and former Rome Mayor Walter Veltroni, are promising tax cuts to help revive growth.

Source

The IRS on Monday said it would begin sending out 130 million tax rebate payments aimed at boosting the economy on May 2.

The order in which tax filers will receive their rebates will be based on the last two digits of their Social Security numbers, when they file and whether they opt for direct deposit.

The IRS said it expects to send out more than 25% of all rebate payments within the first three weeks. Most people will get their payments by July 11.

Filing a 2007 tax return is a prerequisite to getting your stimulus rebate check. And to receive that rebate this year, you will need to file no later than Oct. 15. The rebate will be sent separately from any 2007 refund you may have coming to you.

The most clear-cut schedule is for those whose returns are filed and processed by April 15. Generally speaking, it takes the IRS about two weeks to process a return, said IRS spokesperson Nancy Mathis.

For those filing on April 15 or beyond, they should receive their rebate payments about two weeks after receiving their refund if they’re owed one, the IRS said.

To be eligible for a full rebate, single tax filers must have 2007 adjusted gross income (AGI) below $75,000 and joint filers must have AGI below $150,000 fast cash payday loan.

Single filers with AGI below $75,000 will get rebates of as much as $600. Couples with AGI below $150,000 will receive rebates of up to $1,200.

In addition, parents will also receive $300 rebates per child under 17; there is no cap on the number of qualifying children eligible.

The IRS has created an online calculator to help tax filers figure out whether they’re eligible for a rebate and how large it would be.  

Source

Federal Reserve Chairman Ben S. Bernanke has the skills to guide the U.S. economy through a credit squeeze, now in its eighth month, said Bank of Israel Governor Stanley Fischer.

“You can inject liquidity in the economy and it happens that Ben Bernanke is an expert on this issue,'' Fischer, 64, who advised the Fed chief on his doctoral thesis at the Massachusetts Institute of Technology in the 1970s, said in an interview in his Jerusalem office yesterday. “That the Fed will get on top of this, I don't doubt.''

A student of the Great Depression, Bernanke is rewriting the Fed's play-book as he seeks to prevent a financial market meltdown and recession. Economists say the central bank will cut its key interest rate by at least 75 basis points today. Two days ago, the Fed lowered its rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds.

The latest round of action accompanied the emergency purchase of Bear Stearns Cos. by JPMorgan Chase & Co. after a run on Wall Street's fifth largest securities firm. The Fed will provide up to $30 billion to JPMorgan to help fund the purchase.

Fischer rejected the view that the Fed was orchestrating a bailout that would encourage investors to take greater risk in the future. He pointed out that shareholders of Bear Stearns will get stock in JPMorgan equivalent to about $2 a share, compared with $30 at the close on March 14.

No Bailout

It's important “you maintain the capacity of the financial system to operate,'' Fischer said in a Bloomberg Television interview. “Whoever was the owner of Bear Stearns was not bailed out.''

The Fed has lowered its benchmark overnight rate five times and the discount rate seven times since the middle of August, when the collapse of U.S. subprime mortgages started to infect markets around the world. Since then, the S&P 500 stocks index has dropped 11 percent and the dollar has fallen 14 percent against the euro payday loan low fee.

Fischer gained insight into rescuing economies as the International Monetary Fund's number two official during the Asian financial crisis and Russian debt default of the 1990s. In that period, the IMF made a quarter of a trillion dollars in emergency loans to countries including Argentina and Korea.

Still, the implication of the U.S. slump “for the global economy far exceeds the things I've seen previously,'' he said. “I haven't seen anything on this scale for the global economy at least since I've been active.''

Growth vs Inflation

Complicating Bernanke's task is that even as growth slows, inflation is accelerating as rapid expansion in China and other emerging markets pushes up consumer prices through higher food and energy costs.

While Fischer acknowledged the “Fed is clearly more concerned about growth than inflation,'' he ruled out a repeat of the early 1980s when the U.S. central bank confronted double- digit inflation and unemployment. That is unlikely to happen because Bernanke's Fed would raise interest rates “long before'' inflation got out of hand, he said.

“The world is full of surprises, but I don't think that is a likely scenario,'' he said. “Ben Bernanke is an outstanding economist.''

Fischer is rare among the current crop of central bankers in that he has experience of academia, policy making and banking. As well as working at the IMF and teaching at MIT, he served as chief economist at the World Bank and, prior to moving to Israel in 2005, was employed by Citigroup Inc. as a vice chairman.

He declined to forecast when the credit squeeze will pass, only that it would. “I've lived through crises, they have a rhythm,'' he said. The U.S. economy is “not going to collapse, it will come back.''

Source

A woman born out of wedlock to a direct descendant of the family that struck it rich marketing Jell-O more than a century ago has been denied what she considers her just desserts.

The Court of Appeals, New York’s highest court, ruled Thursday that Elizabeth McNabb of Longview, Wash., can’t share in the multimillion-dollar estate of her late mother, Barbara Woodward Piel.

Piel’s grandfather, Orator Francis Woodward, bought the Jell-O trademark in 1899 from inventor Pearle Bixby Wait and, within a decade, turned it into a million-dollar business. Thus was born a ubiquitous 20th-century American dessert, a wobbly standby at church potlucks, school cafeterias and summer camps.

Piel became pregnant in 1955 after a liaison with a married man and put the child - later named Elizabeth McNabb - up for adoption in Oregon. She later married and had two other daughters.

A search for her roots. At age 19, McNabb embarked on a long quest to find her birth mother. She finally traced her birth certificate through a court order in 1988 and learned about her family history during a four-day visit with Piel in rural Genesee County near Rochester.

After Piel’s death in 2003, McNabb was told two trusts established in 1926 and 1963 barred her from sharing in the family fortune 500 fast cash. A county surrogate judge decided in December 2005 that, as an "adopted-out" child, McNabb was not a descendant or child of Piel under the terms of the trust.

An appellate court in Rochester reversed that decision a year ago, effectively awarding McNabb a one-third share. It determined the trusts predated amendments to New York law dictating that an adopted child could not inherit from a biological parent unless it was clear the parent planned to include the child among descendants.

The appeals court in Albany disagreed, saying there’s no evidence in the legislative history, even before the amendments, indicating that a child put up for adoption should share in an inheritance.

The Jell-O brand is now owned by Kraft Foods Inc. (KFT) 

Source

Government officials urged credit rating agencies Wednesday to rethink the way they rate municipal bonds, arguing that the current system saddles local governments and taxpayers with unnecessary costs.

Lawmakers and witnesses testifying before the House Financial Services Committee said that many cities and states are being given high-risk ratings when the likelihood of their defaulting on their bonds is slim. As a result, agencies are paying for bond insurance they don’t really need, they said.

Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the bond insurers that guarantee the debt.

"This has got to be fixed," said Rep. Barney Frank D-Mass. "We cannot tolerate as a society this situation where people are required to pay so much."

Calls by lawmakers were echoed by state officials, including California State Treasurer Bill Lockyer and Connecticut State Attorney General Richard Blumenthal, who were among the dozen witnesses set to testify Wednesday.

State and federal officials argued that municipal bonds, used by local governments to fund projects like repairing roads or building schools, be rated the same way that corporate debt is measured and based on the likelihood of default.

Moody’s Investor Services and Fitch Ratings, two of the three major credit rating agencies, did not immediately respond to calls seeking comment cashadvance.

Standard & Poor’s said it has not initiated any changes, but defended the way it rated municipal debt in a statement last week, arguing that local governments and their respective credit quality acted in a distinctly different manner from public companies.

Wednesday’s hearing comes at a time of great turmoil for municipal bond market.

Some financial guarantors have already lost their AAA ratings, while others like Ambac (ABK) and MBIA (MBI) remain at risk of downgrades.

The insurers’ troubles are causing local governments to rethink buying bond insurance. A downgrade of their financial guarantor would drive up their cost of borrowing. 

Source