The U.S. economy does not need a second fiscal stimulus package, instead the government should cut spending over the next two years, according to a survey of business economists released on Monday.
Most economists in the National Association for Business Economics (NABE) semi-annual poll were concerned about the outlook for the U.S. government budget. Also, they doubted health-care reforms proposed by the Obama administration would lower costs while increasing access and maintaining quality.
“This is one of the fastest-moving and most controversial economic policy environments we have experienced in a generation,” said NABE president Chris Varvares. “The more vexing policy challenges about which there is less agreement are federal health-care … budget policies.”
The government early this year stepped in with a $787 billion package of spending and tax cuts to break the worst recession since the Great Depression of the 1930s. Separately, it bailed out banks to prevent the financial system from collapsing.
Those actions left the economy saddled with a $1.58 trillion budget deficit in fiscal 2009, and a shortfall of about $9 trillion between 2010 and 2019.
The ballooning budget deficit is causing alarm and feeding into opposition to President Barack Obama’s central policy priority of overhauling the U.S. health-care system, whose price tag is $1 trillion.
While economists in the NABE survey acknowledged that the stimulus package had helped to brake the pace of the economy’s decline in the second quarter, only 35 percent viewed fiscal policy as being “about right”.
Half of the respondents saw fiscal policy as too stimulative. About 266 members took part in the poll which was conducted between August 3-18. The U.S. economy contracted at a 1.0 percent annual rate in the second quarter after collapsing 6.4 percent in the first three months of the year.
“Fully 76 percent do not believe a second stimulus package is needed. Three-quarters responded that they would like to see fiscal policy become more restrictive over the next two years, but only 28 percent expect that it will be,” the NABE said.
“In fact, the largest share, nearly 42 percent, expects fiscal policy to become even more stimulative than it is now.”
Just over half believed that fiscal stimulus would add between 0.5 and 1.5 percentage points to gross domestic product growth in the second half of 2009, while over a third saw it as adding less than half a percentage point.
About 58 percent felt the stimulus would add between half and 1.5 percentage points to growth from the fourth quarter of 2009 to the fourth quarter of 2010, the survey showed.
Nearly 70 percent of economists believed that monetary policy was “about right”. About 56 percent of respondents expected the Federal Reserve to keep interest rates unchanged over the next six months, while 44 percent saw an increase.
The Fed has cut interest rates almost to zero and pumped around $1 trillion into financial markets via a range of credit easing measures to prevent lending from freezing up, amid a global credit crisis sparked by the collapse of the U.S. housing market.
“Half of the economists do not believe quantitative easing actions of the Fed will be inflationary over the next couple of years, while 41 percent think they will,” the NABE said.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
Nine months ago, a historic meeting was breaking up in the ballroom of a Secaucus, N.J., hotel. Anheuser-Busch shareholders had just agreed to sell America’s biggest brewer to an aggressive Belgian brewer called InBev.
August A. Busch IV, whose stint as chief executive of Anheuser-Busch would end with the sale, stepped down from the podium. "A bittersweet day," he said.
And then, Busch — the fifth generation of his family to lead Anheuser-Busch — slipped out of the hotel’s lobby.
But he wasn’t supposed to slip out of the public’s eye.
The new regime had given him a seat on the board of the combined company and a lucrative consulting deal — indications that he would be a sort of public ambassador for the new Anheuser-Busch InBev. Many expected him to ease Anheuser-Busch’s transition to new ownership, and act as a liaison between the new owners and A-B’s many constituencies.
It hasn’t worked out that way.
Since the buyout, Busch has not been spotted at industry events. No quotes in media reports, no pictures at meet-and-greets. From trade meetings to sales conferences with distributors, Busch has been a no-show.
"He has not been visible in the beer industry," said Harry Schuhmacher, editor of Beer Business Daily. "I just haven’t heard of him being around."
The disappearance seems odd given how much InBev paid for Busch’s services. As part of the buyout, InBev made him a highly paid consultant for Carlos Brito, CEO of the combined company.
Busch, 45, received $10.35 million as a lump sum and started collecting additional fees of about $120,000 a month. He also got a personal security detail and free access to events sponsored by A-B.
The official merger document seemed to outline a clear role for him at Anheuser-Busch InBev. At Brito’s request, Busch would advise InBev on new products; review marketing programs; meet with retailers, wholesalers, advertisers and the media; scrutinize the quality of Anheuser-Busch’s beers; and give advice about A-B’s relationship with charitable organizations and local communities.
"He was supposed to represent continuity from one era to the next, but I don’t know if he’s played much of a role" in the combined company, said Benj Steinman, editor of Beer Marketer’s Insights.
The lucrative consulting deal also tied Busch and InBev to a mutual "non-disparagement" covenant, limiting what Busch could say about InBev and what InBev could say about him. The company declined to make Busch available for an interview. Reached directly by the Post-Dispatch, Busch declined to comment, citing the consulting deal.
If anyone has emerged as the public face of A-B since Busch stepped aside, it’s Dave Peacock, who was Busch’s right-hand man and is now president of Anheuser-Busch. Since InBev acquired A-B, Peacock has led the company’s efforts to maintain alliances with distributors and employees.
Peacock has represented the company for signature events such as the Super Bowl, while speaking on behalf of the company when controversies have arisen, such as the company’s decision to cut more than 1,000 area jobs in December.
A-B InBev acknowledges that Busch’s work for the company has been limited to behind-the-scenes activity. A spokeswoman told the Post-Dispatch that his contributions "have proven very valuable," especially relating to the U.S. market. She did not enumerate those contributions. The company also declined to say how many board meetings Busch attended, or when.
Did InBev ever intend to lean heavily on Busch after the takeover? Veteran consultant Tom Pirko said it was not surprising that Busch was not prominent in the new company’s dealings car loan.
InBev wanted to change Anheuser-Busch’s culture and get rid of the Busch family’s hierarchy, Pirko said. The lucrative consulting arrangement was a way of hitting "the eject button" on the Busch family that had run the brewer since the Civil War.
"They wanted a clean break, without the baggage of the past," Pirko said. "When you do that, you have to remove the faces. To be a new company, you have to have new people."
The apparent withdrawal from public life isn’t just at the brewer. In January, Busch resigned as a director of FedEx Corp., a position he had held since 2003. That same month, he was granted a divorce from his wife of 2 1/2 years.
The next month, Anheuser-Busch held a large meeting of beer wholesalers in Houston. The event, aimed at introducing distributors to the new owners, would have been a perfect place to roll out August Busch IV. It would have been an opportunity to show continuity among all the changes. But he didn’t appear, according to industry observers.
Lately, Busch is splitting time between a new home near the Lake of the Ozarks and his other residence in Huntleigh. Busch, an experienced pilot, has been devoting some time to flying.
Not long ago, Busch was leading one of the world’s biggest brewers, trying to boost it out of a period of slow growth.
After being tapped in 2006 as the new chief executive, Busch became known for a management style more easygoing and low-key than that of his hard-charging father, August A. Busch III. In public appearances, the younger Busch was personable and energetic, Anheuser-Busch’s cheerleader in chief. He popped up at numerous state meetings, industry conferences and legislative summit meetings.
In April 2008, Busch IV rallied employees at a party outside A-B’s packaging plant on Pestalozzi Street to celebrate the 75th anniversary of Prohibition’s end.
"I love you guys, you ladies!" he said to rousing applause. "What an honor. An emotional day." Busch held up a bottle of Budweiser. "Here’s to our future … and another 75 fantastic years. Let’s go get ‘em!"
A few weeks later, at the company’s annual meeting at SeaWorld, Busch showed shareholders some of the company’s Super Bowl commercials, chatted about A-B’s NASCAR sponsorship and urged the hundreds of assembled investors to try some new Bud Light Lime.
Soon after A-B’s board approved InBev’s takeover bid on July 13, Busch started slipping into the shadows.
Perhaps, this shouldn’t have been a surprise, as an early scene of the A-B InBev era suggests.
It was the Monday morning after InBev’s acquisition of A-B was consummated. Busch joined the victorious Brito on a conference call with analysts and reporters. Busch spoke briefly of his faith that the Brazilian executive would "honor his public commitments and continue the traditions that have made Anheuser-Busch a success."
Then, for more than an hour, Brito talked about the future, outlining his plans for the new company. When Brito was through, he asked the St. Louis executives if they had anything to add.
Peacock offered a quick closing comment.
Busch remained silent.
ST. LOUIS — The Avalon Theater, dark for a decade and fallen into severe disrepair, is for sale — for $1 million, as is.
Bjaye Greer, listing agent for the property for the Realty Exchange, said that SOPO Corp. put the property up for sale last month. Some clarification of the building’s ownership still needs to be resolved in court, but Greer hopes a redeveloper or preservationist will soon buy the old theater, in the South Kingshighway commercial district near Chippewa Street.
Greer said the 8,500-square-foot building could be sold for renovation and adapted reuse or torn down for redevelopment.
"That’s up to whomever buys it and what they are able to do within city and zoning parameters," Greer said. The entire lot is about 25,000 square feet.
"It was a beautiful building and supposedly one of the best Art Deco buildings in St. Louis to save," Greer added. "I was hoping someone could restore it and save it. But I also know that the area is a real prime spot for redevelopment."
The area around the Avalon, 4225 South Kingshighway, was once a hub of south St. Louis activities, a destination for shoppers as well as moviegoers. The theater opened in 1935 as one of St. Louis’ "movie palaces."
Now, the building is missing large sections of the shingled roof and has a barricade instead of a box office. The property is now condemned, cited scores of times by the city for building code violations.
LANDMARK STATUS?
The Landmarks Association of St. Louis last spring put the theater at the top of its list of most-endangered historic properties. Many neighbors see it as a significant neighborhood landmark that should be preserved.
Others call it an eyesore and a threat to the health and safety of the neighborhood. They want it torn down as soon as possible.
The area’s alderman, Stephen Gregali, believes the building is probably doomed. He called the theater a "a never-ending story."
"I’d like to see some venue there, but we have made numerous attempts," he said. "We’ve tried to take it off their (the owners) hands, but they blew us off."
Gregali said the city also offered business assistance.
"Since the building has deteriorated, we may have no alternative but to tear it down," Gregali said. "The last time I was in the building 18 months ago, I had to wear a mask and a hat — the mold is that bad. It’s like ‘The Blob’ movie come to life.
"It’s really a shame because other than the Chase and Moolah and Hi-Pointe, we don’t really have movie theaters in the city. I have had theater and club groups approach me … but unfortunately, they want the building for nothing."
Richard Dempsey, an attorney representing SOPO, could not be reached for comment.
The attempt to sell the building is proceeding even though the building is the subject of a suit filed by the city in May in St. Louis Circuit Court.
The suit seeks to clarify the property’s ownership.
That is complicated because SOPO Corp., which has owned the theater since 1977, has been defunct since 1983, and its last known principals, Constantin and Kay Tsevis, are deceased.
"We don’t believe anybody has clear title to the Avalon Theater so we’ve asked the court to assign somebody to speak for the defunct corporation and take the necessary steps to transfer title to an actual person or valid legal entity," said Erika Zaza, an assistant city counselor.
Zaza said that at the city’s request, Circuit Judge Robert H. Dierker last month appointed one of the Tsevises’ heirs, Larry Tsevis, as the trustee to act on behalf of SOPO. His role will be to distribute assets to shareholders, or wind down the business. That will require the probate estate to be reopened. Once the probate matters are clarified, city officials say, there should be a clear title, allowing for the sale.
Also the city would have a legal owner that would be responsible for the current condition of the property. City officials said they wanted to make sure there was a clear title and if necessary they want to be able to hold the owners responsible for any neglect.
Dierker will hold another hearing on the matter on Sept. 14.
Time Warner Cable Inc has signed up at least seven large media companies for a test that will offer television programs on the Internet to paying subscribers, the Wall Street Journal said on Thursday, citing people familiar with the matter.
Networks participating in the trial are expected to include General Electric Co’s Syfy, Time Warner Inc’s TNT, Cablevision Systems Corp’s AMC and the British Broadcasting Corp’s BBC America, the people told the paper.
Other companies that could be involved in the trial are CBS Corp, Discovery Communications Inc and Viacom Inc, the paper cited some of the people as saying.
The test involves TV shows being made available on the Web to a limited number of homes, the paper said.
In July, Comcast Corp signed up CBS along with 17 more cable networks to participate in the cable company’s trial to make more television shows available to its subscribers on the Web.
Time Warner Cable could not immediately be reached for comment by Reuters outside regular U.S. business hours.
(Reporting by S. John Tilak in Bangalore; Editing by David Holmes)
The German government might drop its opposition to Belgian-based financial investor RHJ International as a buyer for General Motors’ GM.UL European unit Opel, Bild newspaper reported on Thursday.
Berlin could be willing to accept RHJ if it teamed up with an international partner from the car industry, the mass-selling daily said, without saying where it obtained the information.
Germany’s Economy Ministry was not immediately available for comment.
The German government had so far favored Canadian car-parts supplier Magna over RHJ, which aims to shrink the carmaker to return it to profit.
Talks to sell Opel have dragged on for months and are a political hot potato ahead of German elections in September, because of the state support required for the eventual buyer.
GM’s board of directors on Friday postponed a decision on proposals by GM’s management to relinquish a controlling stake in Opel either to Magna or RHJ.
A GM source told Reuters on Monday the company was considering a third alternative that would see it inject billions into Opel to hold on to the company, though people close to the talks have said this might be a bargaining tactic.
(Reporting by Peter Dinkloh, editing by Will Waterman)
Growth, rather than survival, is likely to be the new driver of global asset management deals over the next 12 months, a Jefferies Putnam Lovell report predicts.
As markets recover asset management firms are likely to resume their quest for global clients and better investment capabilities, although divestitures will still account for most of the deals in the sector, according to the report by the Jefferies & Co unit released on Monday.
“People feel that the worst is now past us. With the clouds parting and a bit of sunshine, groups are starting to again think more strategically,” said Aaron Dorr, a managing director at Jefferies Putnam Lovell.
Buyers acquired full or partial interests in 73 asset managers during the first half of this year, down 33 percent from 109 in the same period last year, the report said.
Bank and insurance companies looking for capital to prop up their balance sheets were the most active sellers, accounting for 98 percent of the announced deal value.
Divestitures, such as Barclays Plc’s sale of its Barclays Global Investors unit to BlackRock Inc, accounted for more than half of all transactions for the first time in five years.
Indeed, some divestitures driven by the need for capital such as American International Group Inc’s asset management business are still being negotiated.
Jefferies Putnam Lovell said sales of asset managers by financial institutions is likely to continue as many banks and insurers may conclude that asset management is not a core business for them.
Moreover, after big financial institutions deals such as Wells Fargo’s purchase of Wachovia, buyers are reviewing their overall businesses and deciding what to keep and what to sell.
Earlier this month, Lloyds, which bought troubled mortgage lender HBOS last year, agreed to sell the bulk of its Insight Investment unit to Bank of New York Mellon.
But more traditional catalysts for deal-making, such as product diversification, retiring owners and capital and distribution needs, look set to make a comeback as well, the report predicts.
Independent firms are likely to re-emerge as sellers begin testing the waters in late 2009 and into next year, while listed companies, with their most pressing issues behind them, may go shopping, the report said.
“There is a lot more focus on doing things now,” Dorr said. “It means that more substantive and higher volume of deals coming to market and discussion taking place in the third and fourth quarter, which leads to announced deals picking up through next year.”
(Reporting by Paritosh Bansal; Editing Bernard Orr)
DETROIT — The federal government will end its popular "Cash for Clunkers" program Monday, more than two months early, because it is already running out of money.
The sudden halt means that new car showrooms are likely to be flooded by last-minute shoppers over the weekend. Dealers have until 7 p.m. Monday to submit the 13-page application to be reimbursed for the rebates they are giving out under the program.
Although the program has brought on a welcome surge in demand for cars after months of dismal sales, some dealers will be glad to put it behind them because it has been plagued by confusion and processing delays.
General Motors on Thursday told dealers that it would give them cash advances on money the government owed them to keep them from dropping out, as some have already.
The program, formally known as the Car Allowance Rebate System, or CARS, gives consumers a credit of up to $4,500 toward the price of a new car or truck if they turn in an older vehicle with lower gas mileage. It has generated more than 457,000 sales since July 24, causing the Ford Motor Company and other automakers to increase factory output and call back some idled workers.
"It has been successful beyond anybody’s imagination," President Barack Obama said on Thursday in a radio interview with the syndicated talk show host Michael Smerconish. "And we’re now slightly victims of success because the thing happened so quick, there was so much more demand than anybody expected, that dealers were overwhelmed with applications."
As of Thursday, the Transportation Department had repaid dealers just $145 million, or 7 percent of the $1 free credit report without a credit card.9 billion that they had requested, leaving many squeezed and prompting some to withdraw from the program early. The government is tripling the size of the work force assigned to handle the applications.
In many cases, incomplete forms or errors in information submitted by dealers are slowing the process. Workers have reviewed about 40 percent of the applications, and many have been rejected and then returned for possible resubmission.
The program was initially given $1 billion of funding, enough for about 250,000 sales, and an end date of Nov. 1. That money was used up in a little more than a week, and Congress quickly approved $2 billion more to extend it.
Transportation officials say they believe reimbursement requests of about $400 million on completed sales have yet to be filed, leaving about $600 million in credits still available for the final weekend, after removing $100 million for administrative costs.
If the funding is exhausted before all reimbursements are made, some dealers — and possibly GM — could end up having to write off the unpaid credits. The administration does not plan to seek a third installment of funding.
GM decided to give dealers cash advances, though officials said earlier that the company was "not in a position" to do so.
The U.S. government’s “cash for clunkers” autos sales incentive program may be wound down as soon as early September, the Wall Street Journal said, citing a person familiar with the matter.
The U.S. government is expecting a surge in last-minute clunker deals when a closing date is announced and wants to avoid a situation where dealers agree to sales after the program’s funds have been exhausted, the person told the paper.
Under the program, the government gives consumers a rebate of up to $4,500 for trading in older, inefficient vehicles for new, fuel-sipping ones car insurance quotes. Washington scrambled early this month to add $2 billion when the popular program’s initial $1 billion funding was quickly spent.
The U.S. Department of Transportation did not immediately respond to a Reuters email seeking comment.
(Reporting by Ajay Kamalakaran in Bangalore; Editing by Hans Peters)
Reader’s Digest Association Inc, publisher of the widely-read Reader’s Digest magazine, said on Monday it would likely file for Chapter 11 bankruptcy for its U.S. businesses to cut its debt load.
The media company, known worldwide for its family-friendly namesake magazine, been trying to slash costs and boost growth since it was taken private in 2007 by an investor group led by Ripplewood Holdings LLC.
The bankruptcy would take the form of a so-called pre-arranged filing, Reader’s Digest said in a statement. A pre-arranged filing comes after a company has already reached deals with its lenders to cut its debt.
The Chapter 11 filing will apply only to the company’s U.S. businesses. Its operations in Canada, Latin America, Europe, Africa, Asia and Australia-New Zealand will not be affected.
“Restructuring our debt will enable us to have the financial flexibility to move ahead with our growth and transformational initiatives,” said President and Chief Executive Officer Mary Berner, in a statement.
Reader’s Digest calls itself the world’s largest paid-circulation magazine in the world payday loans.
The Pleasantville, N.Y., media company said the bankruptcy would help facilitate an agreement with lenders to exchange a portion of its $1.6 billion in senior secured debt for equity, and transfer company ownership to the lender group.
The agreement, which is subject to court approval, also includes a commitment from some members of the senior lender group to provide $150 million in debtor-in-possession financing, which would help fund operations during the reorganization. The pre-arranged plan proposes to cut debt by 75 percent to $550 million, from the current $2.2 billion.
The company has offices in 44 countries, marketing books, magazines, educational products, recorded music collections and home video products. It also publishes food magazine Every Day with Rachael Ray.
(Reporting by Chelsea Emery, editing by Gerald E. McCormick and Tim Dobbyn)
Missouri’s struggling dairy farmers are asking Gov. Jay Nixon for an infusion of cash to help keep them in business.
The Missouri Dairy Association met with the governor this week to ask for a $16.5 million emergency payment from federal stimulus funds to help the state’s roughly 2,000 dairy producers.
"We think it would be a good investment for the state," said Larry Purdom, chairman of the association and dairy farmer from Purdy, in the southwestern part of the state. "We’re losing money every day."
Dairy farmers are trying to cope with what they describe as the worst crisis to hit the industry in decades. With a rise in feed and fertilizer costs last year, along with slowing demand, dairy farmers are now losing as much as $4 or $5 per hundred pounds of milk. Prices per hundred pounds are roughly $11, while production costs are about $15. Farmers were fetching last year about $20 per hundred pounds, or hundredweight.
"It’s an unprecedented time for them, with the combination of low milk prices and high feed costs," said Scott Brown, a livestock and dairy analyst with the Food and Agricultural Research Policy Institute at the University of Missouri. "It is indeed a crisis."
Dairy farmers in Missouri, Illinois and other dairy-producing states are scrambling to pay their bills.
Credit has shriveled up, and some farmers, particularly those new to the industry, are unable to find cash to keep their operations running. Some are selling or retiring their herds and shuttering their businesses. And in the next couple of months, farmers will have more bills for fertilizing, seeding and harvesting.
"We’ve got a lot of expenses in the fall," Purdom said. "The banks are saying no, and I don’t blame them."
The crisis comes after four years of increased demand for American milk products — usually sold as powdered milk or cheese — from overseas. The global appetite for American milk products shot up, particularly in Asian countries, as drought conditions in dairy powerhouses Australia and New Zealand dried exports to a trickle. Prices for American products soared.
"Dairy farmers have gone from 2007 and 2008, with record prices, to this," said Jim Fraley, manager of the Illinois Milk Producer’s Association. "It’s tough no fax payday loans."
Troubles began last year when grain and feed prices rose, pushed up by high energy costs and demand for ethanol. Then the global economy started slowing and demand shrank. Meanwhile, in recent months, supply from Australia and New Zealand has come back into the export market, while American producers, who started producing more milk to meet global demand find themselves with an oversupply.
"We haven’t been in the world market for several months now," Brown said.
Domestic demand has slackened, too. Food manufacturers, anxious to lower costs, have turned to milk substitutes or have reformulated products, according to Brown, while fewer people are hitting their local cheese-heavy pizza joints.
For Midwest dairies, the slowing demand creates an added logistical problem. "Milk isn’t something you can store under the couch," said Fraley, "and all the powder plants are in California. We have to make it into cheese or ice cream."
To help, several states, including Arkansas, Connecticut, Louisiana, Maine and Vermont, have funneled cash to their dairy farmers. In Illinois, farm advocates have asked the state Department of Agriculture to buy some of the surplus, though the department has not taken action, Fraley said.
In late July, the U.S. Department of Agriculture announced that it would increase the amounts paid for dairy products through its Dairy Product Price Support Program, providing some relief.
But farmers say they need more help — fast.
Jon Hagler, director of the state’s Department of Agriculture, said Thursday that he’s sympathetic to the struggles of the state’s dairy farmers but wants to see what impact the federal action will have first. The governor’s office did not respond to a request for comment Thursday.
The funds requested would translate into about $2 per hundredweight of fluid milk, which could keep farmers in business long enough for prices to recover, analysts say.
"Two dollars won’t cure the crisis," Brown said. "But if that gets them another 60 or 90 days down the road, where we can see some rebound in milk prices, that’s what we’re hoping for."
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