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.
Switzerland’s UBS will not have to pay a fine as part of the settlement of a tax evasion dispute with the United States, two Swiss newspapers reported on Sunday.
The NZZ am Sonntag and SonntagsZeitung both also reported that data of some 5,000 UBS clients would be released to the U.S. authorities. The two papers cited unnamed sources familiar with the case.
Spokesmen for the Swiss justice and the foreign ministry declined to comment on the reports. UBS was not immediately available.
The U.S. government and UBS struck a deal to settle a dispute over tax evasion and Switzerland’s bank secrecy on Friday, heading off a showdown that had threatened to sour relations between the U.S. and Switzerland.
The main sticking point was that U.S. authorities wanted UBS to disclose the names of 52,000 wealthy American clients suspected of using the bank to evade taxes — a demand that tested Switzerland’s vaunted tradition of bank secrecy.
The parties still have to work out details, which are expected by Friday, when a new pretrial status conference is scheduled. The court trial against UBS has been reset for Aug 10, but would be called off if a final deal is signed.
Switzerland’s top-diplomat Michael Ambuehl told the NZZ am Sonntag, the deal would not violate Swiss law.
“The Swiss legal system is maintained, because the U.S. have promised to act on the basis of the current agreements and to ask for legal assistance again,” said Ambuehl, who is state secretary in the foreign ministry cash advance lenders.
Swiss justice minister Eveline Widmer-Schlumpf, whose ministry is in charge of the negotiations together with the foreign ministry, said in a newspaper interview the parties had still to agree on important details.
“I am optimistic, that an agreement can be reached,” she told Swiss paper Sonntag.
But she warned that worries of a failure were not unfounded.
“There are still details to be cleared, which are of importance to us,” she said. “Should we not reach an agreement, which is in line with our Swiss laws, a deal would be put into question.”
IN PRINCIPLE
Under the settlement, described as an “agreement in principle” expected to be finalized by next Friday, UBS is likely to reveal far fewer than 52,000 client names, but would include the biggest accounts, a U.S. government source had told Reuters.
UBS Chairman Kaspar Villiger said earlier this month the tax talks were focusing on client names rather than on a potential payment by UBS.
A U.S. government source who has followed the case closely had downplayed talk of a financial penalty.
Legal “safety valves,” allowing countries to suspend or waive trade commitments, can damage the global economy if abused for protectionist purposes, the World Trade Organization said on Wednesday.
In its annual World Trade Report, the WTO examined the use of “contingency measures,” a topic it said was particularly timely given fears of protectionism in the global crisis.
The global trade watchdog has been monitoring restrictive measures taken by countries — both those that violate trade agreements and those that are allowed under existing deals.
In the latest assessment, issued this month, WTO Director-General Pascal Lamy said governments were unfairly blocking trade in response to the downturn.
“Contingency measures are more likely to be used in difficult economic circumstances. However, the evidence cannot preclude the possibility that such measures are sometimes used as a protectionist device,” the WTO said.
“At a time of global crisis, a proliferation of such measures among trading partners would have adverse economic effects with few of the positive offsetting advantages that might otherwise by invoked to justify such measures.”
An analysis of the measures concluded that their design should aim to limit circumstances in which they can be used for protectionism and that their design should not undermine trade agreements.
The WTO noted it was easier to track the contingency measures analyzed in the report than to identify trade-restrictive measures or subsidies embedded in financial rescue and fiscal stimulus packages favored by rich nations and some emerging ones such as China and Brazil 500 fast cash.
TAXES AND TARIFFS
Protectionism can deepen and prolong an economic crisis even if it does not cause a downturn, Lamy said in an introduction to the report, noting that restrictive trade policies did not actually trigger the 1930s Great Depression.
“A seemingly attractive short-term solution of keeping production and consumption at home soon becomes a millstone around a nation’s neck, the more so when trading partners retaliate in kind,” he said.
The WTO examined the use of contingency measures such as safeguards, antidumping and countervailing duties, as well as measures such as renegotiating tariff commitments, export taxes and increases in tariffs to the maximum agreed ceiling.
Economic research showed that the use of such measures — especially antidumping — increases during downturns, it noted.
Antidumping is when a government imposes a compensatory duty on imports it says are being sold for less than they cost at home — and is a frequent cause of trade disputes.
In the latest such case, China plans to challenge antidumping duties imposed by the European Union on Chinese screws and bolts.
OTTAWA–A new poll suggests more than one in three Canadians plan to take advantage of the federal government’s home-renovation tax credit.
More than eight in 10 questioned in the Harris-Decima/Canadian Press survey said they were aware of the program, under which eligible applicants can receive a tax rebate of as much as $1,350 if they invest up to $10,000 in renovations on their home.
"Unlike many new tax policies, which only get noticed by accountants and actuaries, the government of Canada has successfully communicated the introduction of the home-renovation tax credit to Canadians," said Harris-Decima’s senior vice-president, Jeff Walker.
"This program appears to be helping stimulate the economy as well."
Nationally, 82 per cent of respondents were aware of the home-renovation tax credit, while 17 per cent said they were unaware. Those under age 35 and those with annual incomes below $60,000 were least likely to know of the tax credit car insurance.
Overall, 35 per cent of respondents said they planned on taking advantage of the program, while 60 per cent said they would not.
The ratio of those who planned to take advantage of the program increased with income.
More than half of those earning more than $100,000 a year (51 per cent) responded positively, compared with 41 per cent of those making between $60,000 and $100,000 and just 27 per cent of those earning less than $60,000.
Respondents west of Ontario were the most likely to be taking advantage of it.
Some 1,000 Canadians were surveyed June 18-21, with a margin of error of plus or minus 3.1 percentage points, 19 times in 20.
The Canadian Press
Palm Inc posted a narrower-than-expected fiscal fourth quarter loss on Thursday, and highlighted strong demand for its just-unveiled Pre smartphone.
Palm’s shares rose more than 14 percent in after-hours trading.
Executives said early signs were promising for the Pre, which will compete head-to-head with Apple Inc’s iPhone and Research in Motion’s BlackBerry and which Palm hopes will lead the company out of persistent losses.
Palm said demand for the Pre was exceeding its expectations. The device is expected to enhance margins at the company, which in past years has steadily relinquished market share to rivals.
Avian Securities’ Matthew Thornton estimated Palm booked revenue for 70,000 Pre units in the May quarter, which ended May 29. He said that, along with a more favorable tax rate and lower-than-expected operating expenses, helped the company blow by Wall Street estimates.
“We’re successfully ramping supply to meet demand that is strong and growing,” Chief Executive Officer Jon Rubinstein told analysts on a conference call, referring to the Pre.
The device, which went on sale at the beginning of June, has garnered generally favorable reviews. Analysts estimate Palm has shipped about 150,000 units so far.
The Pre’s impact will be more fully reflected in the current quarter, because of its June launch date. Sprint Nextel Corp is the exclusive U.S. carrier for the device.
Palm said it could turn cash-flow positive in the second-half of fiscal 2010 and reassured analysts that its capital position was sufficient, which Thornton called the “most interesting takeaways payday loan online.”
The company posted a net loss applicable to common shareholders of $105 million, or 78 cents a share in the fiscal fourth-quarter ended May 29, compared with a loss of $43.4 million, or 40 cents a share, in the year-ago period.
Excluding items, Palm’s loss was 40 cents a share, compared with an average analyst estimate for a loss of 65 cents a share, according to Reuters Estimates.
Revenue fell 71 percent to $86.8 million. The Wall Street estimate was for revenue of $80.3 million.
Palm pioneered the market for handheld devices in the 1990s, but it has fallen behind competitors like Apple and Research in Motion, which were quicker to roll out models with popular applications.
The Pre, featuring Palm’s new WebOS, is now entering a market chock-full of other competitors from Nokia to HTC. A new iPhone 3GS launched last Friday and sold more than 1 million units in the first three days.
Rubinstein, appointed chief executive days after the Pre was launched to the public, pointed to a rapid shift to smartphones from standard mobile phones, creating a market big enough for all.
The United Auto Workers union Friday overwhelmingly ratified a labor deal with General Motors that included concessions, but is not enough to keep the company out of bankruptcy.
Seventy-four percent of UAW members voted for the contract, which will allow the company to cut costs and "eliminate the wage and benefit gap" with competitors, according to the UAW president and a statement from GM.
"I think it’s a disgrace we had to do anything," said UAW president Ron Gettelfinger during a press conference. "We tried to inflict the least amount of pain possible on our retirees."
It was widely expected that rank-and-file members would ratify the revised labor deal, even as General Motors (GM, Fortune 500) seems destined for bankruptcy.
The deal greatly reduced the amount of money that GM is required to contribute to union-controlled trust funds to cover health care costs for hundreds of thousands of retired union members and their families.
In return, the trust fund will receive a 17.5% stake in the reorganized GM starting next year, and the right to buy an additional 2.5% stake in the company.
In addition, the fund will receive $6.5 billion in preferred stock that pays a 9% interest rate, and GM will owe it an additional $2 cash advance lenders.5 billion. GM will not have to contribute more than $20 billion in cash it owed the trust fund.
The union will have to reduce retiree health care coverage. But the union did not agree to any wage or benefit cuts for the 61,000 UAW members working at GM. However, the job protections for those members were reduced and GM has announced plans to cut hourly employment by about a third to 40,000 by next year as it shuts more than a dozen plants.
The union did win guarantees that GM would build its new small car at a factory that has previously been closed. And the company agreed to put four closed plants on "stand by" status to be restarted if demand for autos bounces back.
The union agreed not to fight plans to import some small cars from outside of North America, such as GM’s growing manufacturing base in China.
UAW members at Chrysler had already voted overwhelmingly in favor of contract revisions. The union won assurances the company would not use the bankruptcy process to try to gain more painful concessions from hourly workers. A federal judge is weighing Chrysler’s restructuring plan.
Prominent hedge fund firm Pequot Capital told investors on Wednesday it will shut down because of a reopened government probe into possible insider trading.
“Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction,” the firm’s founder Arthur Samberg, long one of the hedge fund industry’s best-known managers, wrote in a letter obtained by Reuters.
“With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business as an investment adviser.”
In the past, Samberg and Pequot have denied allegations of insider trading.
The fund’s closure is likely to reignite controversy over the firing of an SEC lawyer whose earlier probe into Pequot led him to request an interview with John Mack, who is now the powerful head of Wall Street investment bank Morgan Stanley.
The lawyer, Gary Aguirre, said he was fired because of his persistent requests for the interview.
Mack, a friend of Samberg, had worked at the Westport, Connecticut-based hedge fund firm from 2004 to 2005 before taking the Morgan Stanley position in the summer of 2005.
A Morgan Stanley spokeswoman declined to comment.
The SEC’s Inspector General last year said there was a connection between Aguirre’s firing and his efforts to interview the influential Wall Street executive in connection with the probe.
Pequot, which once invested $15 billion and most recently managed $3 billion, became the target of a Securities and Exchange Commission and U payday advance.S. Attorney’s office investigation several years ago when investigators reviewed trades made by Samberg in Microsoft stock in 2001 by the Core Funds.
Although regulators and prosecutors brought no charges and closed the probe in 2006, the government reopened the matter in 2008.
Samberg told investors that the firm will spin off two portfolios and liquidate its Core Funds. Fund manager Mike Corasaniti will run the Matawin fund while Rob Webster and Paul Mellinger will lead the Special Opportunities fund as separate entities before the end of the year, Samberg said. Other investors will begin to get their money back by the end of next month.
Samberg’s illustrious career has included growing Pequot into one of the world’s most powerful hedge funds and being counted among industry leaders whose opinions could move markets.
The 68-year-old trader, who famously once had a basketball court built in his offices for his employees, started his career by focusing on stocks. He later moved into other areas.
Now he joins the growing ranks of shuttered hedge funds, a list that also includes his former partner, Dan Benton, who shocked investors by his decision to close down last year.
No. 1 U.S. trucking company YRC Worldwide Inc plans to seek $1 billion in federal bailout money to help it cover its pension obligations, a spokeswoman said on Friday.
The company, which has been shedding jobs and closing facilities to cut costs in the face of a brutal U.S. recession faces an estimated $2 billion in pension obligations over the next four years, spokeswoman Suzanne Dawson confirmed
The move was first reported by the Wall Street Journal.
Its shares were down 2 percent, or 7 cents, to $3.20 in early electronic trading.
YRC will submit an application to the Treasury as early as Friday quick guaranteed personal loans.
In January, its unionized workers agreed to a 10 percent pay cut in return for a 15 percent stake in the company.
Over the past year, YRC shares have fallen 82 percent, a far steeper drop than the 43 percent fall of the Dow Jones Transportation Average .DJT.
(Reporting by Nick Carey in Chicago, additional reporting by Ajay Kamalakaran in Bangalore, writing by Scott Malone; Editing by Derek Caney)
The United States recession could end in the second half of this year but will likely not give way to a robust rebound in growth, Janet Yellen, President of the Federal Reserve Bank of San Francisco, said.
“The good news is that, for the first time in a while, there is some good news to savor,” Yellen said in a speech to the Haas Business School of the University of California, Berkeley, on Tuesday.
“I am hopeful that the recession will end in the second half of this year due to aggressive monetary and fiscal policies, and the operation of typical business cycle mechanisms.”
Still, Yellen said that a raft of uncertainties still faced the United States, and that a robust, “V-shaped” recovery looked unlikely from what she said will probably end up being remembered as the worst downturn, domestically and globally, since the Great Depression of the 1930s.
Yellen quipped to an audience packed with business students that the recovery would hopefully be shaped “like a U, rather than an L.”
“I expect the U.S. recovery to be frustratingly tepid once it does get started,” she said, adding that unemployment will probably take “several more years” to return to long-run equilibrium levels.
“My forecast that output growth will turn positive in 2009 and proceed near trend in 2010 implies that the unemployment rate will rise from 8.5 percent now to around 9.5 percent by the end of this year.”
U.S. households are unlikely to repeat the “spending spree of major proportions” seen in the years prior to the recession, which started in December 2007, she said cheapest cash advance. “The deleveraging of household balance sheets could restrain spending for years.”
Yellen said recently released figures on first-quarter U.S. gross domestic product, while very weak, contained some positive signals such as the large decline in business inventories that many see as a prerequisite to a turn in the economy.
“The first-quarter data suggest that the necessary inventory correction may be quite far along,” she said, adding that recent data also hinted at a stabilization in the housing sector.
Yellen, a voting member of the Federal Open Market Committee in 2009, taught economics at Berkeley for many years and got a rousing ovation from the students packing the audience.
SKEPTICAL ON INFLATION RISK
Yellen said she was “quite skeptical” about the risk of inflation being kicked up by the Fed’s extraordinary efforts to restore credit markets by pumping up its balance sheet.
The suggestion that the Fed will find it politically difficult to pull the plug on private sector borrowers it has supported during the crisis — in other words, to draw down its balance sheet — was not persuasive, Yellen said.
“I want to assure you that the Fed is well aware of this danger and is readying the tools even now,” she said, referring to the risk of not removing monetary accommodation quickly enough.
A record 32.2 million people — one in every 10 Americans — received food stamps at the latest count, the government said Thursday, a reflection of the recession now in its 16th month.
Food stamps, the major U.S. anti-hunger program, help poor people buy groceries. The average benefit was $112.82 per person in January.
The January figure marks the third time in five months that enrollment set a record.
"A weakened economy means that many more individuals are turning to SNAP/Food Stamps," said the Food Research and Action Center, an anti-hunger group, using the acronym for the renamed food stamp program, the Supplemental Nutrition Assistance Program.
The U.S. unemployment rate was 8.1% in February, the highest in 25 years. New claims for jobless benefits totaled 669,000 last week, the highest in 26 years, the government said Thursday.
Food stamp enrollment rose in 46 of the 50 states during January as the national total rose by 580,000 people, or 1 free car insurance quotes.3%, from December, when the previous record was set, said Agriculture Department figures.
Vermont, Alaska and South Dakota had increases of more than 5%. Texas had the largest enrollment, 2.984 million, down 65,000, followed by California at 2.545 million, up 43,000, and New York with 2.211 million, up 37,000.
"It is a very difficult time for low-income families and individuals and also a difficult time for the groups that serve them," said Valentine Breitbarth of Bread for the City, a group that works with poor families in Washington.
Food stamp benefits get a temporary 13% increase, beginning with this month, under the economic stimulus law signed by President Barack Obama. The increase equals $80 a month for a household of four.
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