Financial thoughts

The highest inflation-adjusted yields in the world’s most-developed bond markets are appeasing investors waiting for President Barack Obama to begin reducing the more than $1.2 trillion U.S. budget deficit.

Treasury 10-year notes pay 1.83 percent after subtracting consumer price increases, compared with 1.39 percent for German bunds and 1.1 percent for Japanese government bonds. Gilts yield 35 basis points more than the U.K.’s inflation rate.

Obama and Federal Reserve Chairman Ben S. Bernanke are benefiting from the slowest inflation, excluding food and energy costs, since before the 1960s as so-called real yields lure investors to finance the deficit and stimulate the economy. Foreign buyers, who own more than half the $8.86 trillion in outstanding U.S. marketable debt, have added to their holdings of Treasuries for 18 consecutive months through October.

“There has been grumbling about the deficit, but the market is betting that policy makers will do the right thing and focus on growth, which will help the debt picture in the long run,” Jack McIntyre, a fund manager who oversees $21 billion in debt at Brandywine Global Investment Management in Philadelphia, said. “Real yields are at levels that make them attractive with the lack of inflation pressure the market is seeing, a still weak recovery and a stubborn lack of job growth.”

Bond Rally

Real yields in the U.S. remain below the 2.66 percent average of the past 20 years even while the deficit has grown to 8.8 percent of the economy from 1 percent in 2007. Treasuries of all maturities returned 5.88 percent on average last year, including reinvested interest as the U.S. sold $2.2 trillion of notes and bonds, surpassing the $2.1 trillion record in 2009, Bank of America Merrill Lynch’s U.S. Treasury Master index shows.

Yields on 10-year Treasuries, which serve as a benchmark on everything from corporate loans to mortgages, were little changed at 3.32 percent last week. That compares with an average of 4.11 percent the past decade and the record low of 2.04 percent in December 2008. Bunds closed at 3.03 percent, gilts at 3.61 percent and Japanese bonds at 1.21 percent.

Ten-year Treasuries yielded 3.33 percent today as of 9:07 a.m. in London.

While investors are forcing European governments from Greece to Ireland to cut spending as governments prepare to sell $1.1 trillion of bonds this year, demand at Treasury auctions has been the highest on record.

The Treasury received about $2.99 in bids for each dollar of debt it sold in 2010, the highest ratio on record since at least 1994, when the government began releasing data for all maturities. That was up from $2.50 in 2009.

‘Fiscal Austerity’

Higher real yields in the U.S. than in Germany have given Obama the opportunity to add stimulus measures. Treasuries due in 10 years yielded 29 basis points, or 0.29 percentage point, than similar-maturity bunds on Jan. 14.

“We like Treasuries and our view is that they will outperform German bonds this year,” said Stuart Thomson, an international fixed-income fund manager at Ignis Asset Management in Glasgow, who oversees $110 billion in assets. “America is not a bankrupt country, and as the year progresses we are likely to see politicians there shifting from fiscal largesse to fiscal austerity.”

A 1.83 percent loss in December trimmed last year’s rally in Treasuries amid speculation the Fed’s bond purchases and an extension of federal tax cuts from Obama’s compromise with congressional Republicans will revive the economy.

‘Plug Our Noses’

The tax-cut extension will expand the federal budget deficit to $1.34 trillion for fiscal 2011, Credit Suisse Group AG strategists estimated on Dec. 7, a day after the president announced the agreement.

“We all have to plug our noses, dive in and accept the higher deficits,” said James Sarni, senior managing partner at Payden & Rygel in Los Angeles, which manages $56 billion. “People are willing to be patient because there is overriding sentiment and hope that Washington will have some credible deficit reduction plan in the future. But the first priority is making sure the economy does not slip back into a recession.”

Real yields aren’t enough to entice the manager of the world’s biggest bond fund. Pacific Investment Management Co.’s Bill Gross said investors should avoid dollar denominated assets as “mindless” spending may accelerate inflation, weaken the dollar and lose America’s AAA credit rating.

“The deficit, the debt level, the cost of that debt, ultimately bears a significant burden on an economy,” Gross said in an interview with Margaret Brennan on Bloomberg Television’s “InBusiness” program on Jan. 12.

‘No Clear Vision’

He estimated that if interest rates went up by 50 percent, or doubled, the deficit would probably expand by $300 billion to $400 billion.

“The problem is that politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion dollar annual deficit,” Gross wrote in his January investment outlook. “As long as the stock market pulsates upward and job growth continues, there is an abiding conviction that all is well and that ‘old normal’ norms have returned. Not likely. There will be pain aplenty.”

Fed policy makers have held their target rate for overnight loans between banks in record low range of zero to 0.25 percent since December 2008 to fuel growth. They’re also purchasing as much as $600 billion of Treasuries through June to spur jobs and avoid deflation in a strategy called quantitative easing.

Government and central bank reports last week showed retail sales and industrial production rose in December. Purchases climbed 0.6 percent, capping the biggest annual increase in more than a decade, Commerce Department figures showed Jan. 14. Output at factories, mines and utilities jumped 0.8 percent, the most in five months, Fed data the same day showed.

Growth Estimates

Citigroup Inc. economists raised their 2011 gross domestic product forecast to a 3.4 percent increase from 3.1 percent, according to a Jan. 14 report. The euro-area’s economy will likely expand 2 percent this year, while Japan’s may grow 1.6 percent, according to Barclays Plc estimates.

Gains in corporate bonds, stocks, commodities and the dollar reflect optimism for faster growth. Yields on Investment- grade company notes fell to within 1.62 percentage points of Treasuries this month, the narrowest margin since early May and a sign of greater investor confidence in the economic outlook, according to Bank of America Merrill Lynch indexes.

The Standard & Poor’s 500 Index has advanced 26.5 percent from last year’s closing low on July 2, the Reuters/Jefferies CRB Index of raw materials is 33.9 percent higher than in May and IntercontinentalExchange Inc.’s U.S. Dollar Index is up 4.2 percent since November.

‘The Big Trap’

“There are structural headwinds to growth but if the U.S. can continue to grow, bondholders will feel better about deficit cuts going forward,” said Eric Pellicciaro, New York-based head of global rates investments at BlackRock Inc., which manages about $1 trillion in bonds. “The big trap Europe and Japan have is in the lack of confidence for above trend growth. Treasuries are looking good where they are on a relative basis.”

For all of 2010, consumer prices rose 1.5 percent, the smallest in two years, the Labor Department said Jan. 14. The core rate increase at 0.8 percent was the smallest since record- keeping began in 1958.

“The market is giving the benefit of the doubt to policy makers that congress and the administration have to come up with something to address structural problems,” said Scott Minerd, who helps oversee more than $100 billion in Santa Monica, California as Guggenheim Partners LLC’s chief investment officer. “We will continue to see real yields rise, which will continue to pull capital in to U.S. and dollar assets. Any rise in rates on 10-year notes, especially above 3.5 percent, we see as a buying opportunity.”

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European Central Bank Governing Council member Nout Wellink said it is not the central bank’s task to rescue euro-area countries with funding problems.

“It’s not up to the ECB to save countries where governments run the risk of becoming insolvent,” Wellink, who also heads the Dutch central bank, said at a panel discussion in Amsterdam today. “We are not here to take over, on our balance sheet, the risks of the national economies of Europe.”

The Frankfurt-based ECB wants governments to take the lead in quelling the turmoil that threatens to spread to other countries from Ireland and Greece. Last week the central bank snapped up Portuguese and Irish bonds after ECB President Jean- Claude Trichet assured investors that policy makers will delay the withdrawal of emergency liquidity.

Wellink said today he’s “not in favor” of a joint euro- area bond because it would weaken the financial system as it is “a hidden way of burden sharing instant credit report.”

German Chancellor Angela Merkel, who heads Europe’s largest economy, also rejects the common bonds and reiterated in Berlin that she opposes adding to the rescue fund for indebted nations.

Separately, Wellink said the price of gold “has increased excessively.”

Gold futures for February delivery jumped today to a record $1,429.40 an ounce on concern the U.S. will pump more cash into the economy and Europe’s debt woes will spread, boosting the appeal of the metal as an alternative to currencies.

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Officials say it could take weeks or months before the bodies of the victims of New Zealand’s mining disaster are recovered.

Pike River Coal chief executive Peter Whittall said on Thursday the company was determined to recover the remains of 29 men who were declared dead after two explosions deep underground.

But there are still very high levels of potentially explosive gases in the mine that have made it too dangerous for anyone to enter since the first blast last Friday.

Whittall said various options were being considered to make the mine safe but it could take weeks.

Prime Minister John Key said it was possible the operation could take months.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

GREYMOUTH, New Zealand (AP) _ Rescue teams were in full gear and ready to begin searching for 29 missing miners when toxic gas levels suddenly increased touching off an explosion that dashed all hopes of a rescue, a lost miner’s brother and police said Thursday.

Prime Minister John Key declared the disaster a national tragedy, and across New Zealand on Thursday flags flew at half staff and many churches held services for people wanting to show respect for the miners.

Wednesday’s massive explosion deep inside the mine on New Zealand’s South Island came five days after the men were caught underground by a similar blast and only hours after rescuers reported their first progress in the rescue attempt.

A drilling team broke a narrow shaft through to the mine section believed to be holding the missing workers and two robots had crawled their way into the tunnel, providing the first view from inside the mine.

“She was all go,” said Geoff Valli whose brother Keith, 62, perished in the mine. “There was going to be more than one or two (rescuers involved)” in the rescue bid.

“They explained just how close they were to going in. It was bloody scary. It could have been so much worse,” he told National Radio.

But when toxic and explosive gas levels suddenly worsened, the first attempt to enter the mine since last Friday’s initial blast was scrapped.

Even in the unlikely event that any one had survived the first one, police said no one could have lived through the second.

“The blast was prolific,” said police superintendent Gary Knowles, in charge of the rescue operation. “Just as severe as the first blast.”

The grieving families, the company and political leaders have all pledged to retrieve the bodies of the missing men.

Mourning father Laurie Drew was one of those pleading for their retrieval from the mine.

“We are just hoping the conditions for the rescuers will allow them … to recover everything for us. Hopefully it doesn’t drag on too long to get the closure that all the families really need, as well as myself,” he said. His son Zen, 21, died in the disaster.

Pike River Coal chief Peter Whittall pledged to the families that the top priority was recovering the men from the pit no fax payday advance.

“I still want them back and their families want them back and we’ll be doing everything we can to make that happen. My love and support are with those guys,” he said.

Prime Minister Key warned it could take time to recover the 29 bodies as there would have to be efforts to stabilize the mine before people could go in.

“We know there are a number of options being explored to allow the bodies to be removed from the mine,” he said.

Key returned to Greymouth Thursday to meet with the grieving families to give them “comfort and support in probably their darkest hour.”

A series of inquiries, including a formal Commission of Inquiry and police and coroner’s investigations, are being launched into the tragedy over the next few days.

On Wednesday, shortly after the second blast, Whittall told the families a team had been getting ready to go underground _ the families applauded, thinking that a rescue was about to start.

“I had to wait till they stopped clapping to tell them … that the second explosion occurred,” Whittall said afterwards.

Some relatives collapsed. Others shouted at the police in anger.

“It is our darkest day,” said Tony Kokshoorn, the mayor of the nearby town of Greymouth, who was at the meeting.

Assistant police commissioner Grant Nicholls said that before the explosion, plans to enter the mine were in advanced stages.

“We were considering the (gas reading) assessments … as to whether or not a team could go in,” Nicholls said Thursday. “But that was simply not to be.”

Wednesday’s explosion happened with no warning, he said.

The mine was a toxic and explosive environment of carbon monoxide and methane, along with an ignition source that was likely smoldering coal, he noted.

“I can understand that people want to go in and go in quickly, but they are walking into a bomb,” Nicholls told National Radio.

Officials had become increasingly pessimistic about the chances of pulling the men alive from the mine. Nothing had been heard from them since the initial blast.

Whittall said rescue teams were not doing anything that could have set it off, and conditions inside the mine were such it could have happened at any time.

“It was a natural eventuation,” he said. “It could have happened on the second day, it could have happened on the third day.”

It was one of New Zealand’s worst mining disasters. The country’s industry is relatively small compared to other nations and considered generally safe, with 210 deaths in 114 years after the most recent tragedy.

New Zealand’s worst mine disaster was in 1896, when 65 died in a gas explosion at a mine on the same coal seam as the latest tragedy. The most recent was in 1967, when an explosion killed 19 miners in a mine near the Pike River site.

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Walt Disney Co., the world???s biggest media company, rose the most in six months after analysts said fourth-quarter profit topped estimates.

Excluding restructuring and impairment costs of $216 million (U.S.), profit amounted to 50 cents a share, according to Michael Nathanson, an analyst at Nomura Securities International Inc. in New York. That beat the 47-cent average of 25 analysts??? estimates compiled by Bloomberg.

Disney gained $1.99, or 5.6 per cent, to $37.92 at 11:05 a.m. in New York Stock Exchange composite trading, the biggest intraday advance since May. Disney Chief Financial Officer Jay Rasulo fully disclosed restructuring, programming and film studio writedowns during the company???s conference call after U.S. markets closed yesterday.

???Upon scanning the press release, the results seemed weak,??? Nathanson wrote in a note today. ???However, it turns out that you can???t judge a quarter by a press release.???

Thursday the stock fell $1.06, or 2.9 per cent, to $35.93 after the report was released early, before U.S. markets closed. The company said it is investigating how the information became available.

Net income fell 6.7 per cent to $835 million, or 43 cents a share, from $895 million, or 47 cents, a year earlier, Burbank, California-based Disney said yesterday. Sales slid 1.3 per cent to $9.74 billion in the period ended Oct. 2, missing the $10 billion average of 20 analysts??? estimates compiled by Bloomberg.

Disney had a $100 million writedown of film inventory, a $58 million charge for programming writeoffs at its Lifetime network, and restructuring and impairment charges of $58 million, Rasulo said on the call.

Anthony DiClemente, an analyst with Barclays Capital in New York, also told clients in a note today that adjusted earnings amounted to 50 cents a share excluding the above items. Disney reported adjusted per-share earnings of 45 cents.

DiClemente and Nathanson recommend buying the stock.

Bloomberg News

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Stocks ended a listless session modestly lower Thursday as investors focused on the job market amid signs of a sluggish economic recovery.

The Dow Jones industrial average (INDU) fell 5 points, or less than 0.1%. The S&P 500 (SPX) index slid 1.5 points, or 0.1%, and the Nasdaq (COMP) composite lost 10 points, or 0.5%.

The retreat came as investors braced for the Labor Department’s monthly jobs report Friday. The report, one of the most closely watched on Wall Street, is expected to show that the U.S. economy lost jobs in July for the second month in a row.

"We’ve got a market that seems to be waiting on pins and needles ahead of the all-important payrolls report," said Art Hogan, chief market analyst at Jefferies & Co.

Wall Street has been focused on the job market for signs that the economic recovery, which appears to be losing steam, can be sustained. Consumer spending, the main driver of U.S. economic activity, is closely linked to employment.

"Investors are waiting to see if the economy has hit a soft patch, or taken a right-hand turn," Hogan said. "Unfortunately, we need more data before we can determine that."

Reports on the job market this week have been mixed. The government said Thursday that the number of Americans filing first-time claims for unemployment insurance rose last week to a three-month high. But a payroll processing firm said Wednesday that private sector rolls grew more than expected last month.

Also weighing on stocks, the nation’s top retailers reported July sales growth that largely missed analysts’ expectations, though certain pockets remained strong.

Guarded optimism about the job market helped support stocks Wednesday, but gains were slight. The Dow added 0.4% and the broader S&P 500 increased 0.6%.

The choppy action this week came after the market rallied 7% in July, marking the best month in a year for stocks. Better-than-expected corporate earnings helped support the market as concerns about the debt crisis in Europe eased last month.

"We had a great earnings season, now reality is setting back in," said Dave Rovelli, managing director of U.S. equities at Canaccord Adams.

Jobs: The number of Americans filing for initial unemployment claims climbed 19,000 to 479,000 in latest week. It marked the highest figure in three months and compared with an upwardly revised 460,000 the previous week, the Labor Department said.

Economists surveyed by Briefing.com had expected 455,000 Americans to have filed for first-time jobless claims last week.

On Friday, the Labor Department is expected to report that the economy lost 87,000 jobs in July, according to a consensus of economists surveyed by Briefing.com. The unemployment rate is forecast to rise to 9.6% from 9.5%.

In June, payrolls declined for the first time this year, with the economy suffering a net loss of 125,000 jobs. The drop was primarily due to the end of 225,000 temporary Census jobs that had swelled payrolls in May.

Before that, payrolls had been growing modestly since January as the economy gradually recovered from the depths of the recession. But the recent declines have raised questions about the pace of the recovery and stoked fears that the economy could slip back into recession.

Still, private sector employment has expanded for the last six months and job growth is typically sluggish following a recession, notes John Challenger, chief executive officer of global outplacement firm Challenger, Gray & Christmas.

"The job numbers may be weaker than some are expecting," he said. "However, dips in the job numbers and other indicators do not necessarily mean an early sequel to the recession."

Retail sales: The nation’s top retailers reported mixed sales for July as the back-to-school shopping season got off to a sluggish start.

Sales tracker Thomson Reuters, which looks at monthly same-store sales for 28 chains, said that July sales were up 2.9%, just below the 3.1% growth expected by analysts. Same-store sales are a key gauge of a retailer’s performance at stores open at least a year.

Target (TGT, Fortune 500) said sales rose 3.8% last month, driven by apparel purchases, while electronics and other discretionary items remained soft. Shares were up more than 2%.

Wholesale discounter Costco (COST, Fortune 500) reported a 6% increase in sales, slightly higher than the 5.5% that had been expected. Excluding the impact of higher gas prices and favorable foreign exchange rates, however, sales rose 4% in the month. Shares fell 1.7%.

Teen stores The Buckle (BKE) and Hot Topic (HOTT) were two of the worst performers, reporting deep declines in sales for the month of around 9%, But two other teen apparel chains - Zumiez (ZUMZ) and Abercrombie & Fitch (ANF) - surprised analysts with much stronger-than-expected sales.

World markets: European markets ended mixed. Britain’s FTSE 100 fell 0.4%. Germany’s DAX and France’s CAC 40 were little changed.

The European Central Bank voted to hold its benchmark interest rate steady at 0.1%, as expected. In a statement, ECB President Jean-Claude Trichet said the EU economy strengthened in the second quarter and that activity in the current quarter has been better than expected. Looking ahead, he said growth is expected to be "moderate" and "uneven."

Separately, the ECB, European Council and International Monetary Fund said in a statement that efforts to stabilize the shaky Greek economy are off to a good start, though challenges remain.

Greece is undergoing a painful restructuring of its economy with the help of an €80 billion loan from euro area nations and a €30 billion facility from the IMF. The debt-ridden nation is expected to receive additional loans later this month.

In Asia, Japan’s Nikkei rallied, climbing 1.7%. The Shanghai Composite fell 0.7% and the Hang Seng in Hong Kong finished little changed.

Currencies and commodities: The dollar gained against the euro and the British pound, but fell versus the Japanese yen.

U.S. light crude oil for September delivery fell 46 cents to $82.01 a barrel.

COMEX gold’s December contract rose $3.40 to $1,199.30 per ounce.

Bonds: Treasury prices climbed Thursday, with the yield on the 10-year note falling to 2.92% from 2.95% late Wednesday. Bond prices and yields move in opposite directions.  

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Sensor technology developed by Southwest Research Institute has been named one of the 100 most significant technological achievements by R&D Magazine.

Southwest Research Institute (SwRI) created an underwater cave-mapping sensor that has the capability of traveling down a cave to gauge the path, dimensions and morphology of the tunnel. SwRI officials say these remote neutrally buoyant sensors work by injecting a dye in the water that can be used to determine the path and travel time of water through caves. The sensors are designed to float through the cave or conduit to measure the path by using an array of ultrasound sensors.

Local scientists say cave diving is extremely dangerous and is limited to large passageways, relatively shallow caves and limited distances.

“The information captured from these sensors is critically important for water-resource management and geotechnical risk assessment,” says Ronald Green, a scientist in the geosciences and engineering division at SwRI and a principal developer of the sensor paperless payday loans. “Adequate management of karst aquifers requires knowledge of water flow through caves and conduits, including location, size and morphology of the complex interconnected voids.”

SwRI officials say there could be applications in pipelines or sanitary sewers. Also, there could be future applications in flooded underground mines, tunnels or conduits that are not safe for manned entry.

San Antonio-based SwRI is an independent, nonprofit applied research and development organization. It has more than 3,200 employees and an annual research volume of more than $564 million. The institute has won 35 R&D 100 Awards since 1971. SwRI will accept its 2010 R&D Award Nov. 11 in Orlando.

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U.S. stocks were set for a lower open Tuesday, ahead of another batch of corporate earnings.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were all down ahead of the opening bell.

Futures measure current index values against perceived future performance.

Stocks ended Monday’s session with gains, although economic worries tempered positive earnings results.

"Earnings are a mixed picture right now, and people are still trying to determine whether we are seeing signs of the economy recovering," said Derek Hoffman, founder of The Wall Street Cheat Sheet. "There’s a lot of uncertainty, so investors are sitting on the sidelines and buying into companies based on these earnings, and that’s really what is moving the market from day to day."

Earnings: Companies due to report their results Tuesday include Wall Street firm Goldman Sachs (GS, Fortune 500) and tech heavyweights Apple (AAPL, Fortune 500) and Yahoo (YHOO, Fortune 500).

After U.S. markets closed Monday, IBM (IBM, Fortune 500) posted a jump in second-quarter earnings, but the tech bellwether’s sales fell short of estimates.

Economy: A reading on housing starts and building permits from the Department of Commerce comes out at 8:30 a.m. ET.

Economists surveyed by Briefing.com expect permits to have edged down to an annual rate of 572,000 in June from 574,000 in the previous month, while housing starts are forecast to have dropped to a 575,000 rate from 593,000.

A state unemployment report from the Department of Labor is due out at 10 a.m. ET.

World markets: European shares were lower in midday trading. The FTSE 100 in Britain lost 0.5%, France’s CAC 40 dropped 1.1% and Germany’s DAX fell 0.9%.

Asian markets ended mixed. The Shanghai Composite rallied 2.2% but Japan’s Nikkei tumbled 1.2%. The Hang Seng in Hong Kong added 0.9%.

Dollar and commodities: The dollar was up against the euro, the British pound and the Japanese yen.

U.S. light crude oil for August delivery edged down 2 cents to $76.52 a barrel.

COMEX gold’s August contract fell $2.60 to $1,179.30 per ounce.

Bonds: Treasury prices rose, pushing the yield on the 10-year note down to 2.95% from 2.96% late Monday. Bond prices and yields move in opposite directions.

How much of a hit did you take in the recent correction? Are you worried about a bear market? What changes have you made in your portfolio and what changes do you plan on making for the rest of the year? E-mail your story to realstories@cnnmoney.com and you could be featured in an upcoming article. For the CNNMoney.com Comment Policy, click here. 

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Janet and John Beardsley could retain ownership of the Historic U.S. National Bank Block under a bankruptcy plan slated for approval in August.

The Beardsleys placed the property in bankruptcy on Oct. 9, 2009 in the face of mounting debts over the downtown Portland building, 321 S.W. Sixth Ave. The Chapter 11 reorganization case was filed in U.S. Bankruptcy Court for Oregon.

An amended reorganization plan was filed June 2 and approved by the court June 9. A confirmation hearing is set for Aug. 4, at which point the property would exit bankruptcy.

The reorganization plan anticipates that creditors will be repaid within seven years, if not earlier. The plan claims the property is appraised at $27.9 million. It would need to sell for a minimum of $22.5 million to net enough money to repay creditors at the $20.92 million owed under the plan.

John Beardsley and Janet Beardsley each own 50 percent of the company. They will retain ownership but could be required to invest an unspecified amount of new equity to retain their position bad credit payday advance. The reorganization also would allow them to draw up to $12,000 per month to pay “reasonable” living expenses, including income taxes.

Beardsley filed a separate Chapter 11 case covering other real estate assets. The Fountain Village Development case is pending. A reorganization plan was filed March 19, 2010 but has not been confirmed.

The Fountain Village case covers the Fountain Village block at Southwest Second Avenue near Burnside, the New Market Theater Block at Southwest First Avenue and Ankeny Street, the Loyalty Building, 317 S.W. Alder St., the Hamilton Building, 500 block of Southwest Third Avenue, other buildings in downtown and an airplane hangar in Juneau, Alaska.

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Interior Secretary Ken Salazar reiterated Wednesday that the U.S. government is doing all it can to put an end to the oil spill in the Gulf of Mexico, and to enforce ethics requirements in the federal agency responsible for inspecting oil wells.

He also reiterated that the oil spill is causing President Obama to consider adjustments to his plan to open exploration wells for drilling in the Arctic.

The Interior Department faced criticism in a hearing before Congress Wednesday, two days after an inspector general report showed Minerals Management Service (MMS) inspectors took gifts from big oil companies, watched pornography and used crystal meth at work.

But in the hearing before the House Natural Resources Committee, Salazar said he believes most of the bureau’s 1,700 employees are "good public servants" and abide by ethics requirements put in place by the Obama administration. He said the department has "zero tolerance" for the ethical lapses, which he also called "reprehensible" and even "criminal."

"I would say, there are bad apples and those bad apples will be rooted out with every power that we have," he said.

Salazar’s testimony occurred hours before BP (BP), the company responsible for the spill, attempted what it called a "top kill" procedure aimed at plugging the 37-day-old leak.

The hearing was the first of seven by the House Natural Resources Committee investigating the Deepwater Horizon oil rig explosion and examining the future of America’s offshore oil and gas policy. The committee oversees the country’s offshore drilling policy and MMS, which collects about $13.7 billion per year in revenue from federal offshore and onshore drilling leases.

The discussion at the hearing bounced around as lawmakers questioned why the Interior Department wasn’t better prepared for the Gulf Coast oil spill, and Salazar repeatedly criticized the previous administration of President George W payday advances. Bush for not keeping oil companies at a proper "arms length" from federal regulators.

"We’ve done a lot to clean the house at MMS," he said. "Unlike the prior administration, this is not the candy store of the oil and gas kingdom."

Salazar reiterated a proposal to break up MMS into three divisions, separating the agency’s revenue collectors from the leasing and enforcement functions of the organization.

Asked several times whether the Gulf Coast oil spill will be a "game changer" for President Obama’s plan to open new areas to offshore drilling, particularly off the coast of Alaska, Salazar said more questions need to be answered first, and lawmakers should "stay tuned" for the Interior Department’s safety review he will deliver to the president on Thursday.

"There will be a series of decisions that will be made with respect to whatever adjustments need to be made," Salazar said. "And so stay tuned on your question relative to this specifics on the exploration wells approved in the Arctic."

In March, Obama announced plans to open up a few new areas for drilling in the eastern Gulf of Mexico, off the East Coast and in Alaska. But the Interior Department suspended new applications for drilling permits after the explosion of the Deepwater Horizon oil rig led to an environmental disaster. 

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BankUnited wants to seize two stalled residential projects in southern Miami-Dade County.

The Miami-based bank filed a foreclosure action March 9 against Lucky Start at Lake Frances, NewSouth LLC and managing members Antonio Balestena and Jorge Fernandez, according to Miami-Dade County Circuit Court records. It concerns a mortgage last modified at $19.2 million in October 2008.

The failed BankUnited FSB issued the loan, so most of the losses would be shouldered by the Federal Deposit Insurance Corp. under its loss-sharing agreement with the new BankUnited.

Lucky Start was building the Lake Frances single-family home project near Homestead Air Force Base. It owns 135 lakefront home sites at the southeast corner of Southwest 280th Street and Southwest 132nd Avenue. Only eight homes have been sold.

NewSouth owns 20.3 acres of industrial and agricultural property at 13700 S.W. 248th St., in the Princeton area. The developer received approval to build 126 townhouse units, 268 apartment units and 8,523 square feet of retail space, but construction never began.

Miami attorney Andrew C. Hall, who represents BankUnited in the lawsuit, did not immediately return a call seeking comment.

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