Financial thoughts

Trying to describe the topsy-turvy economy leads folks to reach for all sorts of analogies.

This week, the president of the National Retail Federation said the post-Great Recession consumer is kind of like the tortoise.

“We all remember the fable of the tortoise and the hare,” Matthew Shay said during a conference call with reporters. “Looking at this as a marathon versus a sprint, we think this year there’s nothing wrong with being the tortoise.”

He was talking about group’s forecast that holiday retail spending this year will grow 2.8 percent. In other words, while some people might be disappointed by the painfully slow recovery, at least the economy

Forecasters say Tropical Storm Ophelia has weakened further and its strongest winds are expected to remain offshore as it races toward the Avalon Peninsula of Newfoundland, Canada.

The National Hurricane Center in Miami said early Monday that Ophelia’s top sustained winds weakened to about 60 mph (95 kph). The storm was moving northeast at 35 mph (56 kph).

Ophelia was centered about 65 miles (100 kilometers) west-northwest of Cape Race, Newfoundland, and a tropical storm watch was in effect for Newfoundland’s Avalon Peninsula easy payday loans. The center says Ophelia is expected to continue to weaken, but still pack powerful winds.

Meanwhile, Tropical Storm Philippe was moving over the central Atlantic and is not expected to affect land.

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The economy is showing signs of modest improvement

Russia’s influential finance minister resigned Monday following a televised confrontation with President Dmitry Medvedev, who had angrily demanded that Alexei Kudrin immediately explain his criticism of Medvedev’s policies or step down.

The open tension within Russia’s leadership follows the announcement over the weekend that Prime Minister Vladimir Putin plans to return to the presidency next year and Medvedev would then take his old job as prime minister. Russia will have a presidential vote despite the backroom maneuvering, but Putin is sure to win it.

The departure of Kudrin is likely to unsettle investors. He has been finance minister since 2000 and his tight hold over the budget has been seen as the key to Russia’s economic stability.

“It is difficult to see how Mr. Kudrin’s resignation can be anything but market-negative,” said Neil Shearing, chief Emerging Markets economist at Capital Economics Ltd in London. “With oil prices starting to slide and financial markets still jittery, now is not a good time for the government to lose its arch-fiscal hawk.”

Speaking over the weekend, Kudrin said he would refuse to serve if Medvedev was made prime minister because of disagreements over policy, including plans to substantially boost military spending.

Addressing Kudrin on Monday, Medvedev called the minister’s remarks “irresponsible chatter” and “improper,” especially since they were made in the United States while the minister was in Washington for meetings of the International Monetary Fund and the World Bank.

“If you disagree with the course set by the president and being implemented by the government, you have only one choice: Resign,” Medvedev said.

Kudrin said he would decide only after talking to Putin.

“You can seek the advice of whomever you want, but as long as I’m president, such decisions are made by me,” Medvedev retorted.

The Kremlin said Medvedev signed a decree on Kudrin’s resignation. Kudrin confirmed that he had quit in brief remarks reported by state news agencies.

Kudrin has been widely credited with helping Russia weather the 2008-2009 global financial crisis. During Putin’s presidency from 2000 to 2008, Kudrin stashed some of the revenue from Russia’s oil exports in a stabilization fund, despite strong opposition from other ministers who wanted to spend the money. But when the financial crisis hit and oil prices sank sharply those savings proved crucial in reducing the blow to Russia’s economy.

Some market analysts speculated that Kudrin’s departure could have a greater effect on Russia’s economy than the 2012 presidential election itself.

“It is unlikely that Mr. Kudrin’s replacement will share his predecessor’s credentials and clout,” Shearing wrote in a note to investors.

Before last weekend, Kudrin had been mentioned as a possible prime minister under Putin if Putin returns to the presidency.

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Fannie Mae missed chances to catch law firms illegally signing foreclosure documents and its government overseer did not take the right steps to ensure Fannie was doing its job, federal regulators say.

The Federal Housing Finance Agency’s inspector general said in a report Friday that Fannie failed to establish an “acceptable and effective” way to monitor foreclosure proceedings between 2006 and early 2011. Government regulators then failed to ensure it was complying with demands that it clean up its programs.

Mortgage industry employees _ including law firms employed by Fannie Mae _ signed documents they hadn’t read and used fake signatures on foreclosure cases across the country. The practices, known collectively as “robo-signing,” resulted in a suspension of foreclosures last fall and a probe by all 50 state attorneys general into how corners were cut to keep pace with the crush of foreclosure paperwork.

In 2005, Fannie hired outside investigators to look into allegations about faulty foreclosure documents. A year later, Fannie received a report from the investigators that found law firms working for Fannie had filed false documents.

Fannie said it was developing a computer system to improve communication and monitor its attorneys but regulators said they found no evidence Fannie had made any improvements in overseeing its attorneys.

FHFA was created in 2008 to oversee mortgage buyers Fannie Mae and Freddie Mac. To make sure Fannie was doing its job, FHFA has the authority to fire and replace employees; issue cease and desist orders; and impose fines. To date, the agency has not taken any of those actions, the inspector general’s report said.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. As part of a nationalized system, they account for nearly all new mortgage loans. So anyone looking to buy a home would be forced to pay higher rates on new loans.

The Bush administration seized control of the mortgage giants in September 2008, hoping to stabilize the beleaguered housing industry.

In a separate report released Friday, the inspector general says the FHFA lacks examiners to monitor Fannie. Just a third of its 120 non-executive examiners are federally accredited, the report found. Other federal regulators, such as the Federal Deposit Insurance Corp., usually require all of their examiners to be accredited.

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Consumers are spending more to fill their tanks, feed their families and pay the rent. At the same time, the number of people applying for unemployment benefits has reached the highest level in three months.

The latest government data show that inflationary pressures and a depressed job market are hurting an economy that barely grew in the first half of the year.

Higher prices could also keep the Federal Reserve from taking major steps to stimulate the growth next week when policymakers meet.

When prices rise, consumers cut back on big purchases, such as appliances, furniture and vacations. Mixed reports on manufacturing Thursday and flat retail sales in August suggest that may already be happening.

A decline in demand forces businesses to put off hiring and even lay off workers. In August, the economy added zero net jobs. Unemployment benefit applications have increased in three of the past four weeks.

“Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back, and the economy will fall back into recession,” said Mark Zandi, chief economist at Moody’s Analytics.

Consumer prices rose 0.4 percent in August, according to the Labor Department’s Consumer Price Index. Prices for food, energy, rent, and clothing all increased. Excluding volatile food and energy costs, core prices increased 0.2 percent.

Some inflation can be healthy for the economy because it encourages people to spend and invest rather than sitting on their cash. More spending drives corporate growth, which makes businesses more likely to hire people.

For the 12 months that ended in August, core prices surged 2 percent. That’s the biggest year-over-year increase in nearly three years, and it’s at the high end of the Federal Reserve’s informal inflation target.

Rising inflation is a key reason Macroeconomic Advisors lowered its growth estimate for the July-September quarter from 1.9 percent to 1.6 percent. The economic consulting firm said higher prices will reduce consumer spending.

Economists don’t expect prices to rise much further, mostly because employers aren’t hiring much or handing out big raises. Still, the spike in prices over the past year has cut into consumers’ pay and limited their purchasing power.

“In an environment where you’re now looking at zero job growth, it will be difficult to have much success passing on any additional costs,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets.

Unemployment benefit applications rose to 428,000 last week, the Labor Department said in a separate report. And the four-week average, a less volatile measure, rose for the fourth straight week to 419,500, the highest level in eight weeks.

Applications need to fall below 375,000 to indicate that hiring is increasing enough to lower the unemployment rate. They haven’t been that low since February.

The unemployment rate stayed at 9.1 percent for the second straight month in August. It has been above 9 percent for all but two months since May 2009 _ one month before the recession officially ended.

U.S. factories have helped drive growth over the past two years. But manufacturing began to falter this spring, slowed by supply chain disruptions caused by the Japan crisis and diminished consumer demand.

Overall factory output rose in August for the second straight month, according to a report from the Federal Reserve. The gain was driven by strong auto production. Carmakers have rebounded over the past two months, mostly because supply chains are flowing more freely.

Many economists took that as a positive sign in the otherwise gloomy data.

Still, two regional surveys from Federal Reserve banks showed manufacturing contracted in the Northeast and Mid-Atlantic this month.

“The common thread among all of today’s data is one of weakness,” Porcelli said.

The Fed will discuss additional stimulus measures at its two-day meeting next week. Most economists expect it will announce a plan to shift money out of short-term securities and into longer-term Treasury bonds. The move could lower rates on mortgages, auto loans and other consumer and business loans.

But some Fed officials are worried the Fed’s policies could push inflation higher. Last month, three board members opposed the Fed’s decision to keep interest rates near zero for the next two years, unless economic conditions changed dramatically. It was the first time as many members dissented from a decision in almost 20 years.

Fed Chairman Ben Bernanke acknowledged last week that rising commodity prices had pushed up inflation this year. But he said it was likely to moderate in coming months.

There are some signs that core inflation, which the Fed pays close attention to, could level off soon. Cotton prices have come down from the spring, and clothing costs are expected to follow. New-car prices were unchanged for the second straight month in August, after rising earlier this year.

“The combination of disappointing growth but rising core inflation puts the Fed in a difficult situation,” said Michelle Meyer, an economist at Bank of America Merrill Lynch.

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AP Business Writer Daniel Wagner contributed to this report.

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Going to the coffee shop? Forget your wallet. Just take your mobile phone.

Bank of Montreal customers can now make payments simply by waving their mobile phone in front of a PayPass reader, the bank announced Tuesday.

The bank, which already has 7 million PayPass credit card holders, says the same service is available by simply attaching a PayPass sticker to your mobile phone.

BMO is the first major Canadian bank to offer what amounts to an interim step on the road to fully fledged mobile payment technology.

Since more than 25 million Canadians — or 70 per cent of the population — own mobile phones, the bank said the tag makes purchases easier, especially in fast-food outlets, gas stations and convenience stores.

“Say I’m in line at Tim Hortons. The phone is in my hand. I don’t have to pull my card out of my wallet. There’s a significant convenience factor,” David Heatherly, vice-president, payment products, BMO Bank of Montreal, said in an interview.

The same terms and conditions apply to the phone tag as to the regular PayPass card. For purchases under $50, no PIN, swipe or signature is required.

New with this product, however, is the option of having the details of the transaction recorded in an email.

The tags are a “bridge technology,” Heatherly said, noting that eventually the capability to swipe and pay will be embedded in all mobile phones.

They will work at the 19,000 locations across Canada that have PayPass readers.

PayPass accounts for 10 per cent of all MasterCard transactions in Canada, the credit card company said.

PayPass tag users have the same zero-liability purchase protection and anti-fraud capabilities available on all BMO MasterCard products, the bank also said. And they can collect the same rewards that they earn on their BMO MasterCard credit card.

The service is free, the bank said. Also read: 5 things you should never do with a credit card

5 things your credit card company won’t tell you

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Bank of America is slashing 30,000 jobs as part of an effort to reverse a crisis of confidence among investors. It’s the largest single job reduction by a U.S. company this year.

What CEO Brian Moynihan is trying to do is nothing less than save the nation’s largest bank. Investors have cut the bank’s market value by half this year. The bank is facing huge liabilities over soured mortgage investments and concerns over whether it has enough capital to withstand more financial shocks.

The cuts, which affect Bank of America’s consumer businesses, represent 10 percent of the Charlotte, N.C. bank’s work force. The bank said it hopes the cuts and other measures will result in $5 billion in annual savings by 2014. The bank has already cut 6,000 jobs this year. The bank also said it would look for cost savings at its other businesses in a six-month review that will begin next month.

“It’s as if someone has hit the panic button,” said Bert Ely, president of banking consultant Ely & Co.

Moynihan has been taking other steps to shore up the bank’s standing. Last week he shook up the bank’s top management ranks and has been selling parts of the company to raise cash. Last month Warren Buffett’s Berkshire Hathaway Inc. invested $5 billion in the company.

Moynihan has struggled to calm investors ever since he took the top job in January 2010. He is reversing the empire-building strategy of his predecessor, Ken Lewis, who stepped down amid controversy over the purchase of Merrill Lynch during the financial crisis. Lewis also engineered the ill-fated acquisition of Countrywide Financial Corp., then the country’s largest mortgage lender, which has led to heavy financial losses, lawsuits and regulatory probes.

Moynihan is now taking a knife to the company, hoping to shrink it down to a more manageable size even if it means losing the bragging rights of being the nation’s largest bank. “We don’t have to be the biggest company out there,” said Moynihan.

Bank of America’s stock has lost 48 percent this year, largely because of problems related to poorly-written mortgages at Countrywide. Just in the first half of the year the bank paid out $12 payday loan companies.7 billion to settle claims from investors that it sold them securities backed by faulty mortgages.

Some investors and analysts worry that the job cuts will lead to poor customer service and the bank will lose market share to rivals at a time when there are signs that the economy is slowing down. They also wonder if the job cuts are enough to produce the profits the bank needs to overcome the spiraling costs from its mortgage business.

“There is a fair amount of skepticism on Wall Street, and Brian is doing as much as he can do in the face of a worsening economy,” said Nancy Bush, an analyst and contributing editor at SNL Financial, a research firm.

The bank’s stock was down for most of the afternoon but rose along with the overall market to close up 7 cents, or 1 percent, at $7.05.

The job cuts follow a revamp of the bank’s top management team last week. Two senior executives, wealth management head Sallie Krawcheck and head of consumer banking Joe Price, left the bank. The bank also elevated commercial banking chief David Darnell and investment banking head Tom Montag to co-chief operating officers, reporting to Moynihan.

Bank of America is seen as one of the most bloated banks in the industry. The payroll cuts will bring its work force in line with some of its key rivals. JPMorgan Chase & Co. had 250,000 workers at the end of the second quarter.

“Financial companies have already been cutting for a few months now. He’s a little late to the game already,” said Walter Todd, a portfolio manager at Greenwood Capital, which owns Bank of America preferred shares.

The cuts are the largest by a U.S. employer this year, according to the outplacement consulting firm Challenger, Gray & Christmas Inc. Merck & Co. said this year it would cut 13,000 jobs. Bank of America’s cuts are the largest since the Postal Service announced 30,000 job cuts last year. General Motors Co. cut 47,000 jobs in 2009.

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Nature is pummeling the United States this year with extremes.

Unprecedented triple-digit heat and devastating drought. Deadly tornadoes leveling towns. Massive rivers overflowing. A billion-dollar blizzard. And now, unusual hurricane-caused flooding in Vermont.

If what’s falling from the sky isn’t enough, the ground shook in places that normally seem stable: Colorado and the entire East Coast. On Friday, a strong quake triggered brief tsunami warnings in Alaska. Arizona and New Mexico have broken records for wildfires.

Total weather losses top $35 billion, and that’s not counting Hurricane Irene, according to the National Oceanic Atmospheric Administration. There have been more than 700 U.S. disaster and weather deaths, most from the tornado outbreaks this spring.

Last year, the world seemed to go wild with natural disasters in the deadliest year in a generation. But 2010 was bad globally, and the United States mostly was spared.

This year, while there have been devastating events elsewhere, such as the earthquake and tsunami in Japan, Australia’s flooding and a drought in Africa, it’s our turn to get smacked. Repeatedly.

“I’m hoping for a break. I’m tired of working this hard. This is ridiculous,” said Jeff Masters, a meteorologist who runs Weather Underground, a meteorology service that tracks strange and extreme weather. “I’m not used to seeing all these extremes all at once in one year.”

The U.S. has had a record 10 weather catastrophes costing more than a billion dollars: five separate tornado outbreaks, two different major river floods in the Upper Midwest and the Mississippi River, drought in the Southwest and a blizzard that crippled the Midwest and Northeast, and Irene.

What’s happening, say experts, is mostly random chance or bad luck. But there is something more to it, many of them say. Man-made global warming is increasing the odds of getting a bad roll of the dice.

Sometimes the luck seemed downright freakish.

The East Coast got a double-whammy in one week with a magnitude 5.8 earthquake followed by a drenching from Irene. If one place felt more besieged than others, it was tiny Mineral, Va., the epicenter of the quake, where Louisa County Fire Lt. Floyd Richard stared at the darkening sky before Irene and said, “What did WE do to Mother Nature to come through here like this.”

There are still four months to go, including September, the busiest month of the hurricane season. The Gulf Coast expected a soaking this weekend from Tropical Storm Lee and forecasters were watching Hurricane Katia slogging west in the Atlantic.

The insurance company Munich Re calculated that in the first six months of the year there have been 98 natural disasters in the United States, about double the average of the 1990s.

Even before Irene, the Federal Emergency Management Agency was on pace to obliterate the record for declared disasters issued by state, reflecting both the geographic breadth and frequency of America’s problem-plagued year.

“If you weren’t in a drought, you were drowning is what it came down to,” Masters said.

Add to that, oppressive and unrelenting heat. Tens of thousands of daily weather records have been broken or tied and nearly 1,000 all-time records set, with most of them heat or rain related:

_ Oklahoma set a record for hottest month ever in any state with July.

_ Fairbanks, Alaska, hit 97 degrees on July 11, a record.

_ Houston had a record string of 24 days in August with the thermometer over 100 degrees faxless pay day loans.

_ Newark, N.J., set a record with 108 degrees, topping the old mark by 3 degrees.

Tornadoes this year hit medium-sized cities such as Joplin, Mo., and Tuscaloosa, Ala. The outbreaks affected 21 states, including unusual deadly twisters in Minnesota, Wisconsin and Massachusetts.

“I think this year has really been extraordinary in terms of natural catastrophes,” said Andreas Schrast, head of catastrophic perils for Swiss Re, another big insurer.

One of the most noticeable and troubling weather extremes was the record-high nighttime temperatures, said Tom Karl, director of NOAA’s National Climatic Data Center. That shows that the country wasn’t cooling off at all at night, which both the human body and crops need.

“These events are abnormal,” Karl said. “But it’s part of an ongoing trend we’ve seen since 1980.”

Individual weather disasters so far can’t be directly attributed to global warming, but it is a factor in the magnitude and the string of many of the extremes, Karl and other climate scientists say.

While the hurricanes and tornado outbreaks don’t seem to have any clear climate change connection, the heat wave and drought do, said NASA climate scientist Gavin Schmidt.

This year, there’s been a Pacific Ocean climate phenomenon that changes weather patterns worldwide known as La Nina, the flip side to El Nino. La Ninas normally trigger certain extremes such as flooding in Australia and drought in Texas. But global warming has taken those events and amplified them from bad to record levels, said climate scientist Jerry Meehl at the National Center for Atmospheric Research.

Judith Curry of Georgia Tech disagreed, saying that while humans are changing the climate, these extremes have happened before, pointing to the 1950s.

“Sometimes it seems as if we have weather amnesia,” she said.

Another factor is that people are building bigger homes and living in more vulnerable places such as coastal regions, said Swiss Re’s Schrast. Worldwide insured losses from disasters in the first three months this year are more than any entire year on record except for 2005, when Hurricane Katrina struck, Schrast said.

Unlike last year, when many of the disasters were in poor countries such as Haiti and Pakistan, this year’s catastrophes have struck richer areas, including Australia, Japan and the United States.

The problem is so big that insurers, emergency managers, public officials and academics from around the world are gathering Wednesday in Washington for a special three-day National Academy of Sciences summit to figure out how to better understand and manage extreme events.

The idea is that these events keep happening, and with global warming they should occur more often, so society has to learn to adapt, said former astronaut Kathryn Sullivan, NOAA’s deputy chief.

Sullivan, a scientist, said launching into space gave her a unique perspective on Earth’s “extraordinary scale and power and both extraordinary elegance and finesse.”

“We are part of it. We do affect it,” Sullivan said. “But it surely affects us on a daily basis _ sometimes with very powerful punches.”

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Researcher Julie Reed Bell contributed to this report.

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Unemployment rates fell in a majority of U.S. cities in July, despite the weak economy that is producing few jobs.

The Labor Department says unemployment rates dropped in 193 large metro areas, increased in 118 and were flat in 61.

The biggest monthly decrease was in Morgantown, W.Va. A burst of hiring at the West Virginia University lowered the rate there from 6.6 percent in June to 5 percent in July. Yuma, Ariz., a farming hub, experienced the largest increase, from 27 percent in June to 30 percent in July cash advance. Metro unemployment data is not adjusted for seasonal changes, such as the start of the school year.

In July, the U.S. economy added 117,000 net jobs and the national unemployment rate fell to 9.1 percent.

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