In countries like Iran, most of the wealth comes from the government-controlled oil industry. Voters care more about who gets which share of the booty than about the government’s economic competence. That favors anti-market populists like Mahmoud Ahmadinejad. It doesn’t do a lot for democracy.
Ahmadinejad’s claimed victory was greeted in the West with suspicion. Fraud may have been involved, but his support came primarily from rural and poorer voters. International observers, who are concentrated in Tehran, may have overestimated the electoral strength of Mir Hussein Moussavi, the reformist candidate. The election victories of Thaksin Shinawatra in Thailand, also based on rural support and undoubtedly legitimate, were equally mysterious to the Western media.
With oil at $60 a barrel, crude accounts for 80% of Iran’s exports and about 28% of GDP. That’s a big enough share to make Iranian living standards depend largely on world oil prices, in the short run. The gains from competent management, of oil production and the rest of the economy, only come in the long term.
Voters’ living standards are much more influenced by government decisions on such matters as price controls and rationing than anything like market forces easy online payday loans. For example, Ahmadinejad’s combination of petrol rationing and price controls — the price of a liter of petrol is only slowly moving from 1,000 to 2,000 rials ($0.10- $0.20) — is popular among the poor, as is his ceiling on bank interest rates.
Removal of price and interest rate controls would damage voters’ pocketbooks, without offering much tangible benefit to living standards. Expensive oil pushes up the rial exchange rate so much that export-oriented manufacturing industries and agriculture still wouldn’t have much of a chance.
In oil-rich economies, the secret to political success is to use oil money to grease the palms of the poor. Ahmadinejad is not the only leader to have figured this out. Venezuela’s Hugo Chavez and Russia’s Vladimir Putin are on the same wavelength. That’s no way to run an economy, but the free market only works its magic over a decade or more — many elections from now.
The U.S. banking industry played down the Obama administration’s proposals on Monday for the most wrenching regulatory changes since the Great Depression as just that — proposals.
Bankers, and their lobbyists, were careful not to attack the plan, which was broadly outlined in a Washington Post op-ed piece by Treasury Secretary Timothy Geithner and White House National Economic Council Director Lawrence Summers, head on. Instead they talked about waiting to see the details due on Wednesday.
“Have we had enough say yet? No, but the process has really just gotten started,” said Wayne Abernathy, executive director for financial institutions policy at the American Bankers Association.
The plan includes raising capital and liquidity requirements for all banks, controls on asset-backed securities including a requirement that their creators retain some risk, and the regulation of derivatives contracts and dealers.
The proposals will have to travel through congressional committees in a process that will likely extend through fall.
One financial industry lobbyist, who did not want to be identified because he is not authorized to speak publicly on the matter, estimated that even after amendments, the bill would have less than a 60 percent chance of passing.
Some parts, such as consumer protection and rules requiring banks securitizing assets to retain some of the risk, might be stripped out, he predicted.
But what he perceived to be the administration’s two highest priorities — forming a systemic risk regulator and granting resolution authority for the U cash loan till in one hour.S. Treasury — would likely remain.
WAIT AND SEE
At stake is a complete overall of a system that allowed high risks and high rewards.
“We are going to have to wait and see what actually is announced and then make an evaluation,” Richard Parsons, chairman of Citigroup’s board, said at a forum sponsored by Time Warner in New York.
Some bank executives said the financial crisis has already altered banks’ businesses to such an extent that it is hard to see the days of high leverage and high profits returning even without additional regulation.
“I’m not so sure we go back to the world we were in,” said Vikram Pandit, chief executive of Citigroup, speaking at the National Summit in Detroit. He noted that the “cost of capital” is higher than five years ago. Additional regulation may further raise the cost of capital.
The government is wary of toppling the fragile financial markets’ recovery with onerous regulation, while also seeking to prevent a crisis on this scale from recurring.
“Congress and the administration didn’t step in to save the financial institutions because they loved the financial institutions,” said Brad Hintz, an analyst at Sanford C. Bernstein, adding, “They saved them because the country needs the capital markets.
U.S. Treasury Secretary Timothy Geithner said on Monday the financial system was beginning to thaw but any renewed pick-up in the economy would likely be slower than usual.
“Recovery will be slower than we would normally see,” Geithner said at an event sponsored by Time Warner. “This is still going to be an exceptionally challenging time for business and consumers budget car insurance.”
He added that unemployment will likely continue rising even as economic growth resumes.
(Reporting by Pedro Nicolaci da Costa; Editing by James Dalgleish)
Consumer attitude toward the economy may be ebbing as prices start to rise.
Confidence among U.S. consumers rose for a fourth straight month in June, reinforcing signs of an impending end to the recession but failed to meet economists’ expectations.
The Reuters/University of Michigan preliminary index of consumer sentiment increased to 69, from 68.7 in May. The confidence index was forecast to rise to 69.5, according to the median of 62 economists surveyed by Bloomberg News.
While the overall index rose, an index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 65.4 in June from 69.4 the prior month.
"Consumers are acknowledging some improvement is under way, but they’re not seeing a tremendous potential for upside in the economy," said Stephen Gallagher, chief U unsecured personal loans.S. economist at Societe Generale in New York.
Meanwhile, a Labor Department report on Friday said prices of imported goods jumped in May as oil costs climbed. The import-price index rose 1.3 percent in May, the most since July and in line with forecasts, a Labor Department report showed in Washington. The reemergence of commodity-price inflation threatens to stunt the economic recovery and constrain corporate-profit growth.
TOKYO–Honda is ready to offer bigger vehicles in North America should demand return for such models, as well as the small cars viewed as the Japanese automaker's forte, a senior executive said Thursday.
Honda Motor Co. Executive Vice President Koichi Kondo said working to please the customer has been "a basic company stance'' over its half-century history in the U.S. market. Honda reached its 50th anniversary in the U.S. Thursday.
What's so difficult to predict is whether American consumers will revert to their old tastes, he said in an interview with The Associated Press at Honda's Tokyo headquarters. When gas prices dropped after a surge in the 1970s, Americans returned to buying big models, said Kondo, who headed Honda's U.S. operations from 2003 to 2007.
"It's difficult to see who will emerge the winner, but we want to be a winner," he said of the troubled U.S. industry, which has seen General Motors Corp. and Chrysler LLC file for bankruptcy protection.
For now, Honda is focusing on smaller fuel-efficient products like the Insight hybrid, which has been a hit because of its affordable price of $19,800 in the U.S. and 1.89 million yen ($19,300) in Japan – cheaper than Toyota Motor Corp.'s Prius, the global top-seller.
Honda is promising a sporty CR-Z hybrid for early next year in the U.S., European and Japanese markets, which Kondo said would cost more than $20,000. A hybrid version of the subcompact Fit will follow, he said.
Kondo said he was pushing his engineers to further cut costs for hybrids by several hundred dollars per car and boost mileage by 10 per cent to make the ususally higher pricing of a hybrid worth it for the consumer.
Honda – which makes motorcycles, the Asimo human-shaped robot, as well as Accord sedans – will focus on a limited number of global models to achieve cost savings by producing more of each product, including hybrids, he said.
Kondo said Honda hopes to reach 500,000 hybrid sales around the world in the next year or so freecreditreport.
Kondo said there were some signs the U.S. auto downturn may be bottoming out, but he said a full recovery could not be expected for another couple of years.
Like other Japanese manufacturers, Honda has been battered by the global slump and the strong yen, which slashes overseas earnings. But it has fared relatively better than bigger rivals Toyota and GM.
Analysts say Honda can stage a recovery, partly because it has a strong motorcycle division. Honda has less excess production capacity in Japan, and has a better lineup of small energy-efficient models than its competitors, they say.
"Honda's earning power is proving resilient," said J.P. Morgan analyst Takaki Nakanishi. "Honda is reaping the benefits from the speed and diligence with which it is matching its corporate structure to the changing business environment.''
Kondo – who has worked for a decade in the U.S., about a quarter of his 40-year career at Honda – acknowledged that staying nimble was a challenge as Honda grew. What it needs to remember is its roots as a tiny newcomer in the U.S., he said.
When Honda started selling the Civic hatchback in the U.S. in 1973, it made a major error because it wasn't prepared for the car body rusting from antifreeze salts on winter roads.
It exchanged all the damaged parts, although that cost more than all of Honda's group profits then, and that won respect from dealers and customers, Kondo recalled.
"It may sound like we're trying to sound cool. But the reason Honda is where it's today is because we've always sided with the customer," he said.
Today, it sells and makes more cars in the U.S. than in Japan.
"We are an American company," Kondo said.
For the second time this year, the Federal Reserve is under pressure to come clean on its role in a costly government bailout of a big financial company.
Two congressmen on Tuesday subpoenaed the Fed for documents tied to Bank of America’s (BAC, Fortune 500) Jan. 1 acquisition of the troubled brokerage firm Merrill Lynch.
The legislators — Edolphus Towns, D-N.Y., and Darrell Issa, R-Calif. — are seeking "emails, notes of conversations and other documents" tied to the Fed’s involvement in the BofA-Merrill deal.
The Fed said Tuesday it has received the subpoena and planned to respond "fully and completely" to its requests.
Towns and Issa are the chairman and the ranking member of the House Oversight and Government Reform Committee, which has been investigating the government’s involvement in the troubled deal. Lewis is scheduled to appear at a hearing in front of the committee on Thursday morning.
In April, investigators released a report revealing that BofA CEO Ken Lewis said he felt pressured by top officials at the Treasury Department and the Fed to complete the deal, even as it became clear Merrill was in a state of near collapse. Lewis was stripped of his chairman’s title by BofA shareholders a week later.
Lewis told investigators in the office of the New York attorney general that when he learned in December of Merrill’s deterioration, he told then Treasury Secretary Henry Paulson that BofA was considering backing out of the deal.
Paulson responded that Lewis and the BofA board would be replaced if they sought to end the merger, which Paulson viewed as integral to the good health of the U.S. financial system. Paulson told New York investigators that he threatened Lewis’ job at the behest of Fed chief Ben Bernanke.
Lewis also said he was urged by Paulson and Bernanke not to disclose his discussions with them about the extent of federal assistance that would be provided to BofA were it to complete the Merrill acquisition. Both Paulson and the Fed denied telling BofA what to disclose.
The report in which the firing threat came to light, issued in April by New York Attorney General Andrew Cuomo, said Paulson’s account "largely corroborated" the events as described by Lewis bad credit payday advance.
But Cuomo concluded that "we do not yet have a complete picture of the Federal Reserve’s role in these matters because the Federal Reserve has invoked the bank examination privilege," which bars disclosure of information gathered in a regulatory review of a bank.
The BofA-Merrill deal was valued at $50 billion when it was announced in mid-September — the same day that Lehman Brothers declared bankruptcy. But it ended up being worth $19 billion due to the plunge in Bank of America’s shares over the following three-and-a-half months.
Regulators and BofA announced later in January that the government would provide BofA with $20 billion in new capital and $118 billion in asset guarantees to cover possible losses tied to the transaction.
This isn’t the first time the Fed’s role has been questioned during the financial crisis.
In March, AIG (AIG, Fortune 500) — the troubled insurer that has gotten more than $170 billion of federal aid — released a list of the names of trading partners that received federal payments as a result of its collapse in September.
The company did so just days after legislators, including Senate Banking Committee Chairman Chris Dodd, D-Conn., demanded the Fed name those so-called counterparties.
Fed Vice Chairman Donald Kohn claimed the Fed couldn’t do so, because naming the companies could undermine confidence in the markets and reduce economic stability. That response drew a rebuke from legislators, though AIG’s decision a week later to name the parties made the matter moot.
"Public confidence in what we’re doing is at stake, and the public right now is deeply, deeply troubled," Dodd replied March 5. "I understand the legal arguments you’ve given me, but that kind of answer undermines public trust."
One week after getting word that their assembly plant was safe from closure, nearly half of the workers at General Motors Corp. plant in Wentzville learned they were not safe from a layoff.
GM told workers Monday that it will eliminate one of two production shifts at Wentzville starting Aug. 10, as the automaker realigns output with bloated inventories and weak van demand. A total of 887 hourly workers will lose their jobs.
This marks yet another blow to auto manufacturing in the St. Louis area — which once rivaled Detroit’s auto hub and now, after Chrysler closes its Fenton plants this year, will fall to just one shift of production at GM’s plant.
GM filed for bankruptcy protection June 1 and identified 14 plants and three distribution centers it plans to close by December 2011. Wentzville’s operation was not among them.
The automaker employs more than 1,800 hourly and salaried workers at the St. Charles County location, which is the only facility to make GM’s full-size vans, the GMC Savana and Chevrolet Express. In the past few months, analysts have said that product lineup has saved the plant from major cuts or closure.
But orders for these vehicles have slipped, and GM does not expect demand to recover anytime soon. For now, there is no recall date for the laid-off workers.
"While we certainly hope the market rebounds for the vans, we are not in a position to predict what the market will do," said Chris Lee, a GM spokesman.
Wentzville Mayor Paul Lambi remained hopeful that the jobs will come back.
"The fact they are keeping (the plant) open means they believe they will have two shifts again in the future," he said.
AREA EFFECT
Workers learned of the cuts by watching a video during their shift Monday. As Nancy Markovich watched, her thoughts went to her three young children.
"How am I going to support my kids?" said Markovich, a single mom from O’Fallon, Mo., who turns 35 today. She has been employed with GM in Wentzville for nearly 10 years.
"I have a house payment. I need to make sure they have medical care. I haven’t had time to think about this," said Markovich, who works on engines.
Although he’s safe from the cut, Glenn Andersen, 59, of Lake Saint Louis, said he is considering a buyout offer from GM.
"I feel the people that need the jobs have little kids," said Andersen, who also works on engines. "I’m ready to do something else with my life."
Beyond the direct layoffs in the plant, these losses can create a ripple effect throughout the community.
They cause additional layoffs at nearby parts suppliers and lead to less revenue at area restaurants and small businesses supported by the workers. Calls to several suppliers were not returned Monday.
As part of GM’s previous plans to slim down inventory, the Wentzville operation already was scheduled to temporarily halt production starting this week through July 26. That extended summer shutdown still will happen.
Only workers on the first shift, the morning production shift, are scheduled to return on July 27, but both the first and second shifts will return for the week of Aug. 3, Lee said.
Layoffs will start the following week, on Aug. 10.
GM originally planned to slow the production speed this summer by reconfiguring the assembly line, which would result in an estimated 250 to 300 workers losing their jobs.
Those plans have been "overruled" by the decision to cut one production shift, Lee said individual health insurance. The plant will continue to make 38 vehicles per hour.
Tom Brune — a representative for United Auto Workers Local 2250, which represents most of the plant’s work force — said workers knew about possible production adjustments, such as additional weeks of temporary shutdown and slower line speeds, but they had hoped GM wouldn’t resort to a shift elimination.
The cut is "not a total surprise … but certainly not the way we would have preferred," he said.
All of Wentzville’s UAW members will receive a combination of state unemployment and supplemental unemployment benefits from GM during the extended shutdown. Second-shift workers will continue to receive these benefits once their shift is cut.
TURNAROUND TIME
GM’s Wentzville plant has been open since 1983 and started assembling vans in 1995.
Like the rest of the auto market, sales in the full-size van segment have taken a hit. U.S. sales for this niche group — the Express, Savana, Ford E-series and Dodge Sprinter — declined 24 percent last year to 248,619 vehicles, according to J.D. Power and Associates Forecasting.
GM’s Savana and Express products account for 40 percent of the full-size van market. Most of the vans made in Wentzville are cargo vehicles, used for delivery or repairs. Others are modified into ambulances or moving vans, airport shuttles or fancy conversion vans for family travels.
Most of these uses, analysts have said, are not recession-proof.
From January through May, U.S. sales of the Express and Savana combined fell to about 27,640 vehicles, down 37 percent from the same time in 2008.
"This will mark the first time the Wentzville plant has gone to one shift since we started building vans, and it will be a hardship for many of our members both laid off and working," UAW Local 2250 said in a statement Monday. "We are hopeful that sales will rebound with the overall economy in the second half of the year and look forward to calling back all of our members."
Auto production analyst Haig Stoddard predicts a turnaround will take longer.
Stoddard, of IHS Global Insight, estimates GM will make about 59,000 Savana and Express vans this year — fewer than half of the vans it built in 2008.
Even in 2010, Stoddard predicts, GM will produce about 93,000 full-size vans — still doable on one shift with overtime pay.
"I would guess the Wentzville plant wouldn’t have to go back to a two-shift operation until 2011," he said.
Automakers and analysts consider a one-shift plant to be financially inefficient.
Chrysler’s plants in Fenton, for example, faced that pattern. When minivan sales slid, Chrysler cut one of two minivan shifts at the start of 2008 and idled the plant in October. It also cut one of two shifts at the Dodge Ram plant in September 2008, and announced last month that it would close the pickup plant by the end of this September.
However, the move to one shift does not necessarily make Wentzville more vulnerable to a permanent closure, Stoddard said.
He thinks it’s unlikely that GM will exit the van market or take the expensive step of retooling another plant to build these vehicles.
Steve Giegerich of the Post-Dispatch contributed to this report.
Bakers Footwear Group Inc., the St. Louis-based shoe retailer, said first-quarter sales rose and the company’s loss narrowed.
The company posted a net loss of $2.8 million, or $0.39 per share, for the quarter ended May 2, compared to a loss of $4.9 million, or $0.70 per share, in the first quarter last year.
Net sales were $45 million, up 3.3 percent from $43.5 million in the same period a year ago.
In stores open at least a year, sales increased 4.8 percent. That is a closely-watched metric for determining the health of a retailer such as Bakers, which has 239 stores selling moderately priced footwear for young women.
"We began the year solidly," Peter Edison, chairman and chief executive, said in a statement payday advance. "Our performance, in an ongoing difficult economy reflects the desirability of our footwear offerings."
Edison said sales trend remained positive in May, leading the company to expect that it will generate better results from operations in the rest of the year.
The company also said it believes it has adequate liquidity to fund anticipated working capital requirements and expects to comply with its financial covenants throughout the remainder of the year
The U.S. Federal Reserve is expected to say Goldman Sachs Group Inc, JPMorgan Chase & Co and perhaps a few other banks will be allowed to repay money to the Troubled Asset Relief Program, The Wall Street Journal said on Monday, without saying where it got the information.
Some of the banks expected to get the green light to pay back TARP money include Goldman, JPMorgan, American Express Co, Morgan Stanley, State Street Corp and U.S. Bancorp, the New York Post said on Monday, without saying where it got the information.
These banks, as well as BB&T Corp, have already signaled their intent to repay TARP money to the government.
Later this week, the government is expected to disclose which of the 19 largest U business cards.S. banks will be allowed to repay some or all of their TARP money.
The banks recently underwent “stress tests” of their ability to handle a deep recession.
Regulators ordered 10 of the banks to raise more capital. Among the banks mentioned above, only Morgan Stanley had a shortfall, and that bank said it had since more than filled it. Capital One Financial Corp also had no shortfall.
Monday is the deadline for regulators to approve capital-raising plans at the banks found to need more capital.
(Reporting by Jonathan Stempel)
Despite unprecedented turmoil in the auto industry General Motors, Chrysler LLC and Ford Motors all reported auto sales that, while still anemic, were much better than expected.
Overall industry sales tumbled 34% during the month, according to sales tracker Autodata. That’s better than the 36.1% decline predicted by Edmunds.com, and it matches the 34% year-over-year drop in April.
GM’s market share increased last month, and Ford Motor Co.’s May sales helped it to climb to its highest market share in three years.
In their monthly reports all the major automakers said that they believed economic conditions were improving and that auto sales have largely bottomed out.
"Consumer confidence, a key factor in car buying, rose in May by the most in six years and is now at a level not seen since last September," said Michelle Krebs, of Edmunds.com. "This good news couldn’t come soon enough for the auto industry, and the benefits are already coming in for most automakers."
The seasonally adjusted annual sales rate, or SAAR, rose to 9.91 million vehicles, according to Autodata, up from a pace of 9.32 million in April. Sales slipped below 10 million units per year for the first time in 26 years in January.
A Ford executive said it expected a bumpy recovery.
"This is still a very fragile industry," said Ken Czubay, Ford’s vice president of sales, on a conference call with reporters. "It won’t be a straight line up from here to the end of the year."
General Motors: GM (GMGMQ) said total car and light truck sales fell 29% compared to a year earlier. That was a much narrower decline than the Edmunds.com analysts’ forecast of a 36.9% drop and better than the 33% retreat in April.
"May results really do reflect consumer confidence about GM’s long term viability across the globe,"said Mike DiGiovanni, head of market research at GM. "May was a good sign, because of all the press we’ve had to deal with, and the positive sales results give us a good foundation to build on as we reinvent the company."
The May numbers were unadjusted for an extra sales day this year.
Its four brands which will be dropped in a restructuring of the company - Pontiac, Saturn, Saab and Hummer - each reported much bigger sales declines than GM’s overall drop, the worst being a 63.5% plunge in Saab sales.
GM announced Tuesday it sold its Hummer line to an undisclosed company. A person with knowledge of the deal told CNNMoney.com GM will sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery Company Ltd. in China.
When it emerges from bankruptcy, GM is expected to continue with its four core brands, Chevrolet, Buick, GMC and Cadillac. Collectively, those brands’ sales were up 18% from April to May, compared to 11% month-over-month increase company-wide.
After it drops four of its brands, GM acknowledged that it will likely lose a sliver of its market share. But the company said it believes it will be able to make up some of the lost share with its core brands.
Chrysler: Chrysler, which entered bankruptcy on April 30, also reported better than expected sales in May.
Sales tumbled 47% from May 2008, better than the 53.9% drop forecasted by analysts easy fast payday loans. Like its rivals, Chrysler also reported the company’s best retail sales of 2009.
"We are pleased that consumers responded to Chrysler’s reorganization by purchasing our products," said Jim Press, Chrysler president, in a statement. "The uncertainty that has been surrounding Chrysler for the last few months is coming to an end, and a vibrant, new company is beginning to take shape."
Sales were dragged down by fleet vehicles, which are typically sold to businesses or car rental companies. Fleet sales, which accounted for just 5% of Chrysler’s total sales last month, compared to 27% a year ago, tumbled 90% after Chrysler halted all fleet vehicle production in May.
Chrysler said Tuesday that those plants will not return to operation until the last week of June.
Retail sales, however, fell just 30%, buoyed by dealer incentives after the company filed Chapter 11.
"In the very unique situation of bankruptcy, the perception was that there are good deals out there, and to a large extent there were," said Steve Landry, Chrysler’s vice president of North American sales, on a conference call.
Ford: Ford (F, Fortune 500) reported Tuesday its U.S. auto sales were the highest since July 2008, even as sales fell 24.3% from last year.
Ford’s year-over-year sales drop was a narrower than analysts’ forecast of a 28.5% drop and much improved over the 32% retreat in April.
Despite flailing competitors, the company said it believed the sales improvement from April to May had more to do with increasing consumer demand than turmoil at GM and Chrysler. Accordingly, Ford said it will begin to raise its production as the company sees sales beginning to pick up, even as its competitors continue to slow or halt production.
Though Ford’s car models fell by 25.5%, sales of its mid-sized Fusion model were actually up 9.4% last month, the only Ford brand model that rose from last year. Crossover SUV sales dropped 9%, and traditional SUV sales tanked 37.4%. Overall, Ford truck sales fell 23.4%.
Toyota: Japanese automaker Toyota Motor Corp. said its May sales tanked 40.7% from May 2008, slightly worse than analysts’ expectation of a 40.6% decline.
Ford’s domestic brands outpaced Toyota’s (TM) for the second straight month, making it the second-largest automaker in terms of monthly U.S. sales behind GM.
Still, Toyota, like Ford and GM, reported its highest monthly sales total of 2009. The company cited a "big jump" in consumer confidence in May for the improved month-over-month results.
"We’re encouraged that consumers are beginning to return to showrooms and that the industry continues to show signs of stabilization," "said Don Esmond, Toyota’s senior vice president of automotive operations, in a statement.
Other automakers: Also Tuesday, rival Japanese automaker Nissan reported May sales fell 33.1%, better than the 35.1% analysts expected.
Honda Motor Co. (HMC) reported sales dropped 41.5% in May, slightly worse than the 39.3% forecasted by analysts, and Hyundai sales fell 20.4%, also a bit worse than expected.
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