Financial thoughts

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European finance ministers are unlikely to reach an agreement Wednesday over how the region’s banks should shore up their defenses against future financial shocks, Germany’s finance chief said.

The European Union is in the process to writing an international agreement on capital buffers for banks into European law. This would determine the level of risk Europe’s banks can take and what regulators can do to ensure that financial crises like the one that brought down U.S. investment bank Lehman Brothers in 2008 do not happen again.

The so-called Basel III deal would force banks gradually to increase their highest-quality capital _ such as equity and reserves _ from 2 percent to 7 percent of risky assets they hold by 2019. An additional 2.5 percent would have to be built up during good times.

Basel III was agreed by the world’s leading economies after the 2008 financial crisis demonstrated that many banks did not have enough of a capital cushion to absorb sudden losses on loans and other risky activities. Once agreed, the new rules would apply to more than 8,300 banks in Europe, forcing them to build up billions in extra capital by selling shares or assets or reining in bonuses and dividends.

The 2008 financial panic brought on by the Lehmans collapse hit Europe hard. Between 2008 and 2010, governments across the 27-country-bloc spent (EURO)4.6 trillion ($6.1 trillion) propping up struggling banks.

What complicated efforts even more was that the open borders in the EU allow banks to operate freely across the bloc, but when lenders ran into trouble it was national governments _ and taxpayers _ who had to foot the bill. While the EU is now striving for a single set of banking rules, there is no pan-European bank resolution fund that could relieve national governments.

The U.K., which had to save three major banks, has seen its debt load almost double since 2007, while much smaller Ireland had to seek an international bailout to help stem the losses of its domestic lenders. And many economists fear that the economic recession in Spain may soon reveal massive bank losses there guaranteed payday loans.

Now, the U.K. is leading a group of countries that want to be able to force their own banks to have bigger cushions than the ones prescribed by the pan-European rules without first getting approval from the European Commission in Brussels.

“We should make it clear that the crisis did not originate exclusively from weak fiscal policy. It originated also from insufficiently strong banks,” said Polish Finance Minister Jacek Rostowski. “So therefore a group of countries including Poland, the Czech Republic, Sweden and the United Kingdom are very determined to see that banking systems in the future should be as healthy as we expect the fiscal side, the budgetary side, to be kept.”

That demand is opposed by France and the Commission, which fear that jacking up capital requirements in one country could force banks based there to cut down lending by their foreign subsidiaries. That, they argue, could hurt small states that don’t have a big domestic banking system.

To bridge the divide between the two camps, Denmark, which currently holds the EU presidency, has proposed a compromise that would allow national regulators to require an extra capital buffer of 3 percent. Anything beyond that would have to be approved by the Commission in Brussels, which would examine not only the level of risk in the home state but also the potential impact in neighboring countries.

Getting full approval for that compromise, however, may not be possible on Wednesday, officials said, partly because France is unlikely to budge from its position ahead of the second round of presidential elections this Sunday.

But German Finance Minister Wolfgang Schaeuble said that he expects an agreement before the end of June.

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Don Melvin contributed to this story.

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Malaysian Prime Minister Najib Razak

Sales of new homes probably increased in March for the first time in three months, indicating the market is struggling to stabilize, economists said before a report today.

Purchases rose to a 318,000 annual rate, up 1.6 percent from 313,000 in February, according to the median estimate in a Bloomberg News survey of 77 economists. Other reports may show consumer confidence dropped for a second month and home prices decreased at a slower pace.

Residential real estate remains a soft spot in the economy, challenged by stricter lending standards and more foreclosures, which depress property values. At the same time, an improved labor market and mortgage rates near historic lows may help prevent the market from slipping further.

Asian stock markets struggled for direction Thursday as investors remained wary following more unsettling news from economically fragile Spain and a record trade deficit in Japan.

Tokyo’s Nikkei 225 stock average slipped after the country _ which for decades has blanketed the world with its exports _ posted its biggest annual trade deficit ever.

The benchmark index fell 0.6 percent to 9,609.89 after the Finance Ministry said exports for the fiscal year that ended March 31 dropped 3.7 percent from the previous year, while imports climbed 11.6 percent.

The trade deficit for the year was 4.41 trillion yen ($54 billion). With all but one of Japan’s 54 nuclear power reactors offline in the aftermath of last year’s nuclear disaster, the country has been forced to rely on imported oil and gas to generate electricity.

South Korea’s Kospi index opened higher then slipped into negative territory, falling 0.2 percent to 2,002.75.

But Hong Kong’s Hang Seng index held onto its gains, rising 0.4 percent to 20,865.11 while Australia’s S&P/ASX 200 added 0.4 percent to 4,365.90.

Benchmarks in mainland China, Indonesia, New Zealand and the Philippines fell, while Singapore and Taiwan rose.

The Bank of Spain said the amount of bad loans held by Spanish banks rose to an 18-year high in February. If those banks falter, it would put pressure on Spain’s already troubled government to prop them up.

The next key indicator for Spain will occur Thursday when the country holds a 10-year bond auction.

Spain’s problems have added to ongoing worries about global economic growth because China’s economy also is slowing.

Wall Street fell Wednesday on concerns about Europe’s debt crisis. The Dow Jones industrial average fell 0.6 percent to 13,032.75. The Standard & Poor’s 500 fell 0.4 percent to 1,385.14. The Nasdaq composite index fell 0.4 percent to 3,031.45.

Benchmark oil for May delivery was up 10 cents to $102.77 per barrel in electronic trading on the New York Mercantile Exchange. The contract declined $1.53 to finish at $102.67 per barrel on Wednesday.

In currency trading, the euro fell to $1.3120 from $1.3133 late Wednesday in New York. The dollar rose to 81.46 yen from 81.24 yen.

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President Barack Obama said Tuesday the choice facing voters this November will be as stark as in the milestone 1964 contest between Lyndon Johnson and Barry Goldwater _ one that ended up with one of the biggest Democratic landslides in history.

The president made his comments during a fundraising blitz in Florida, and right before his general election foe was essentially decided. Republican Rick Santorum dropped out of the presidential contest, making it clear that Obama would face off against Mitt Romney, the former Massachusetts governor.

Obama used a daylong trip to Florida to call again for Congress to raise taxes on millionaires, a populist pitch on an issue that he hopes will help define the differences with nominee-to-be Romney.

“This election will probably have the biggest contrast that we’ve seen maybe since the Johnson-Goldwater election, maybe before that,” Obama told donors at the first of three campaign events in this battleground state. The events were expected to raise at least $1.7 million.

In his 1964 race against Goldwater, Johnson carried 44 of 50 states and won 61 percent of the popular vote, the largest share of any candidate since 1820.

Running on a record that included the Great Society, Johnson portrayed Goldwater as a dangerous extremist. He was aided by Goldwater’s GOP convention speech, in which the candidate proclaimed, “Extremism in the defense of liberty is no vice.”

Republicans said Obama’s tax proposal was aimed at dividing Americans along class lines and gave him an excuse to raise more money for his re-election campaign.

“He can’t run on his record so he is coming down here to raise money using taxpayers’ funds to do so,” said Rep cash advance loans. Mario Diaz-Balart, R-Fla.

In a reception at a gated community in Palm Beach Gardens, Obama said Democrats would ensure the rich pay their fair share, while focusing on investments in education, science and research and caring for the most vulnerable.

By contrast, he said, Republicans would dismantle education and clean energy programs so they can give still more tax breaks to the rich.

Obama did not mention Romney by name, but the economic fairness message was the theme of his day _ and aimed squarely at the wealthy former Massachusetts governor.

Obama later outlined his support for the so-called Buffett rule at a speech at Florida Atlantic University in Boca Raton, Fla., arguing that wealthy investors should not pay taxes at a lower rate than middle-class wage earners.

The push for the Buffett rule, named after billionaire investor Warren Buffett, comes ahead of a Senate vote next week and as millions of Americans prepare to file their income tax returns. The plan has little chance of passing Congress, but Senate Democrats say the issue underscores the need for economic fairness.

Obama was capping his day at a large rally-style event in Hollywood, Fla., that was to include a musical performance by singer John Legend, and a fundraising dinner in nearby Golden Beach, Fla.

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A few members of the Federal Open Market Committee meeting said the central bank may soon have to consider more asset purchases, while others said the economic outlook would have to deteriorate first.

A few members said economic conditions

Regulatory hurdles regarding the marketing of its prenatal drug, Makena, contributed to KV Pharmaceutical Co.’s continuing losses for the third quarter of fiscal year 2012, which ended Dec. 31. The Bridgeton-based drug maker reported a net loss of $37.8 million for the quarter, or a loss of 63 cents a share, compared to a loss of $47.8 million, or loss of 96 cents a share, a year ago. Net revenues rose 46 percent to $5.1 million. “There is substantial doubt about the company’s ability to continue as a going concern,” KV said in a filing lodged at the Securities and Exchange Commission.  

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An official at the main airport serving Yemen’s capital says that protesting troops have closed the runways with armored vehicles, demanding that the commander of the country’s air force be replaced.

The garrison at Sanaa airport’s attached military air base is demanding the removal of Maj. Gen. Mohammed Saleh, the brother of outgoing President Ali Abdullah Saleh, the official says.

He says the Sunday protest has caused two flights to be diverted to the airport at the southern city of Yemen.

Another official at the airport in the southern city of Taiz says troops there have been staging a similar protest demanding the ouster of their commander since Saturday. Both officials spoke anonymously in accordance with regulations.

Yemen has experienced an 11-month uprising against Saleh’s rule.

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Lee Enterprises Tuesday reported a profit of $14.624 million, or 32 cents per share, for the quarter that ended Dec. 25.  That compares to $18.980 million, or 42 cents per share, in the same quarter of 2010.

The newspaper company, owner of the St. Louis Post-Dispatch, said the year-over-year comparison would be positive if not for refinancing costs and other unusual items.  Excluding such matters, profits would equal 38 cents per share for the recent quarter, compared to 32 cents a year earlier.  

The company filed for bankruptcy last month, submitting a reorganization plan pre-approved by the vast majority of its creditors.  Chief Financial Officer Carl Schmidt said the court will be asked to set Jan. 30 as the date to make the plan effective and conclude the bankruptcy. 

Operating revenue was down 3.9 percent in the December quarter compared to a year earlier payday loans online. Operating expenses were down 5 percent, excluding unusual items, and the work force was down by 7 percent.

As in earlier periods, the company showed sharp gains in digital advertising while print ads, which make up the bulk of its advertising, continued to decline. Combined print and digital advertising was down 6.1 percent. 

CEO Mary Junck said she expects slowly improving revenue trends in 2012.  “Our refinancing agreements, along with our continued strong cash flow, will provide a solid financial footing as we continue reshaping Lee for future growth,” said Junck.

Lee, based in Davenport, Iowa, owns 48 daily newspapers, holds an interest in four others, and owns 300 specialty publications in 23 states.

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