In his victory speech on Tuesday night, President-elect Barack Obama told supporters there would be a long road ahead in fixing the nation’s problems. The construction industry hopes the first steps involve building and repairing that road.
With the economy contracting, new infrastructure construction was an underlying issue in the election campaigns, which touted it as a way to create jobs.
The topic is key for construction companies already hurt by shrinking state and federal budgets for infrastructure projects.
Obama’s platform included creating what his campaign dubbed the national infrastructure reinvestment bank — a system intended to attract public and private investment for economic development projects with an initial $60 billion infusion of federal money for construction over the next 10 years. Infrastructure could include projects such as housing.
That money could bring much-needed aid for public projects in Missouri. In June, the state’s Department of Transportation said its current transportation funds would cover just 40 percent of funding needs for the next 20 years — leaving a $938 million annual shortfall.
The situation is being made worse by rising materials and labor costs for highway and road projects. Nationally, materials costs for such projects were up 22 percent in September from the previous year, according to the American Road and Transportation Builders Association, or ARTBA, the industry advocacy group which has already begun clamoring for attention.
"We’re going to work with new administration to make sure they know transportation investment is not just a political priority but a national priority," said Jeffrey Solsby, the association’s director of public affairs.
The association also advocates increasing the federal fuel tax that drivers pay to fund road construction. Obama opposes that idea.
While Obama’s idea of stimulating job creation is popular in the construction industry, some are guarded in their optimism payday advance loans.
The $60 billion investment Obama proposed, when divided among states and spread over a decade, would need a significant contribution from state and local investors in order to have much impact, said Len Toenjes, president of Associated General Contractors of St. Louis. The group represents about 450 construction firms and suppliers that stand to gain from a slate of new projects.
"I’d hate to see people oversimplify this and think that a check is going to show up from the beltway and we’re going to have all these new projects going," he said.
One example of the challenges was the defeat of the local proposition that could have built a new MetroLink line into western St. Louis County, Toenjes said.
In addition to public opposition and funding shortfalls, projects also face regulatory barriers and extensive planning needed before an infrastructure project begins.
The Obama plan to use both public and private money also presents its own set of challenges.
Forming public-private funding partnerships is a painstaking process, said Susan Stauder, vice president of infrastructure and public policy for the St. Louis Regional Chamber & Growth Association.
And finding private money may be arduous given the current credit crisis, she added.
It may be better if the new president and congressional leaders launch a stimulus package that focused on public projects, such as roads and highways.
"That would be a really positive thing that most legislators in Congress could agree on," Stauder said. "As long as we’re going to be stimulating the economy, we might as well create jobs and put in infrastructure that can be used for the next 40 to 100 years."
The Associated Press contributed to this report.
cboyce@post-dispatch.com | 314-340-8345
Wall Street isn’t finished yet.
In a two-day span, Lehman Brothers (LEH, Fortune 500) filed for bankruptcy, Bank of America (BAC, Fortune 500) snapped up Merrill Lynch (MER, Fortune 500) and American International Group (AIG, Fortune 500) received an $85 billion government loan.
On Wednesday, rumors swirled about other banks pairing up.
Washington Mutual (WM, Fortune 500) reportedly has put itself up for sale, hiring Goldman Sachs (GS, Fortune 500) to advise it. Possible suitors include JPMorgan Chase (JPM, Fortune 500), HSBC (HBC), Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500), according to published reports.
However, a person close to the situation told CNNMoney.com that JPMorgan Chase is not bidding on WaMu.
A WaMu spokesman declined to comment on the merger reports. But the bank did say that TPG Capital, its biggest shareholder, is now allowing it to raise money or sell itself without compensating TPG. The private equity firm invested $7 billion in the struggling savings-and-loan in April.
"It became clear that it would be in the best interests of Washington Mutual and our investors to waive the price reset payment provisions that were agreed to with the bank at the time of our original investment in April 2008, TPG Capital said in a statement. "Our goal is to maximize the bank’s flexibility in this difficult market environment."
This removes a big barrier for WaMu, whose shares have tumbled over the past week as two credit rating agencies downgraded it to junk status over concerns it could not raise much-needed capital.
Meanwhile, Wachovia (WB, Fortune 500) is said to be considering a merger with Morgan Stanley (MS, Fortune 500), whose share price has been battered despite reporting better-than-expected earnings late Tuesday afternoon payday loans in 1 hour. Morgan Stanley is one of only two stand-alone investment banks left on Wall Street.
Still, Wachovia has also been hit hard by the mortgage meltdown. The company reported a $9 billion loss in the second quarter — the company’s second consecutive loss — and also slashed its dividend by 87%
Wachovia’s problems cost then CEO Ken Thompson his job in June. He was replaced a month later by Robert Steel, a former Treasury undersecretary.
Spokespeople for Citigroup, Washington Mutual, JPMorgan Chase, Goldman Sachs, Wachovia and HSBC declined to comment. Morgan Stanley did not immediately return calls seeking comment.
The flurry of activity signals the financial industry is testing the waters, said Jason Tyler, a senior vice-president at the Chicago-based Ariel Investments, which manages about $9 billion. But he cautioned that not every merger report will turn out to be true.
"You have bankers throwing rumors around trying to see how the market would react to things," Tyler said. "It is going to be impossible to tell rumor from fact for a while. We are going to hear 10 times as many rumors for every serious conversation."
Don’t look now, but bank stocks are in the midst of a big rally.
Notwithstanding Thursday’s painful broader market selloff, shares of some of the largest names in banking are up significantly since mid-July when fears about the health of mortgage giants Freddie Mac and Fannie Mae and institutional failures were at a fever pitch.
Shares of Citigroup (C, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) have risen more than 20%. Others like regional banks Wells Fargo (WFC, Fortune 500) and U.S. Bancorp (USB, Fortune 500), which are both mentioned frequently by analysts as being among the better-managed banks during the credit crunch, have gained close to 40%.
And even beaten down shares of Wachovia (WB, Fortune 500) have recovered nicely, gaining 71% since July 15.
Two of the most closely watched measures of the industry’s performance - the KBW Bank Index and the S&P Bank Index - are up 35% and 43% percent respectively as of Thursday.
Of course, bank stocks as a group still remain about 50% below their 52-week highs.
At the same time, not every bank has taken part in the recovery. Shares of institutions perceived to be still in a very tough spot, such as savings and loan Washington Mutual (WM, Fortune 500), have only enjoyed a modest bounce.
Still, shareholders owe a debt of gratitude for the recent rally to fellow investors who covered their short positions and bargain hunters who swooped in in mid-July when bank stocks were at some of their lowest levels in about a decade.
But other factors were also at work.
Assurances by the Treasury Department that it would prop up Freddie and Fannie should the twin mortgage buyers need to be rescued helped restore some confidence in bank stocks. Better-than expected second-quarter results from the industry also has pushed bank stocks higher.
There’s also been renewed speculation about industry consolidation, most notably chatter about a takeover of investment bank Lehman Brothers (LEH, Fortune 500). That’s given bank investors something to cheer even though many analysts remain skeptical that any big mergers will be announced anytime soon.
"People felt a little more secure," said Clarence Woods Jr., chief equity trader with Baltimore-based MTB Investment Advisors, which oversees about $15 billion in assets and owned shares of JPMorgan Chase as of the end of July.
But this late summer rally isn’t the first time that bank investors breathed a sigh of collective relief only to watch their shares get hammered again later.
Earlier this year, shares of many bank stocks rallied by roughly 20% following a rough end to 2007 only to decline steadily thereafter, bottoming out following the implosion of Bear Stearns in March.
The industry staged another double-digit recovery shortly thereafter, climbing 14% between mid-March through May, only to sink to new lows by mid-July.
Bank stocks could indeed tip back to early summer levels, warn experts like Michael Morris, a senior equity analyst and portfolio manager at Delaware Investments in Philadelphia no teletrak payday loans. But what is different about this recovery, Morris noted, is that it may be more grounded in reality rather than previous run-ups.
Banks no longer suffer the drastic swoons in stock price when, for example, the S&P/Case-Shiller national home price index reveals a double-digit percentage decline in home prices, as it did late last month.
"I think a lot of the housing stuff is priced in based on how some stocks are reacting to news on the housing front," said Morris, whose firm oversees more than $135 billion in assets. "Earlier in the year they were trading as much as 20% [lower] on those announcements."
What bank investors may not be taking into account, however, is the state of commercial lending and the consumer.
As a group, banks have experienced an uptick in the number of bad loans in both categories in recent months as businesses and consumers struggle to meet their payment obligations.
But with increasing signs that the economy is in the dumps, including a sizable jump in U.S. unemployment in August, banks could see further deterioration in the health of their credit card and auto loan portfolios.
"That is the big question: ‘Are non-performing assets going to accelerate from these levels?’ " said Ralph Cole, a portfolio manager at the Portland, Ore.-based Ferguson Wellman Capital Management, which owned shares of a number of financial services firms including Wells Fargo and Bank of America as of the end of June.
Right now, analysts widely expect the industry to disclose some of those very same problems when banks start reporting their third-quarter results a month from now. Financial services firms in the S&P 500 are expected to report a 54% decline in profits from a year ago, according to Thomson Reuters.
As a result, traders are making plenty of bets, notes MTB’s Woods, signaling that bank stocks volatility is here to stay at least for the near term.
"We have a lot going on over the next six weeks which will be very crucial to financials," said Woods. "People are playing heavy on both sides."
Fearing that the recovery could be later rather than sooner, Cole is sitting this rally out.
"How can you buy now when the economy is not going to get better for the next three to six months?" he said. "We are staying back - we just don’t have the conviction that this is sustainable."
India's government, victorious in a confidence vote this week, will push to lift restrictions on overseas investors' control of privately run banks, Finance Minister Palaniappan Chidambaram said.
Stalled legislation removing a 10 percent cap on foreigners' voting rights in banks may be revived before laws on pensions and insurance, Chidambaram said today. Prime Minister Manmohan Singh remained in power July 22 with support from new allies who replaced communists opposed to foreign investment.
“We seem to have acquired the political space to take the liberalization process forward,'' Chidambaram said in a telephone interview from New Delhi. “We are looking into various aspects of the foreign direct investment regime, trying to see whether further liberalization is possible.''
The Bombay Stock Exchange's banking index is set for its biggest weekly gain since it was created 6 1/2 years ago after Singh's victory. The bill would give ING Groep NV, the largest Dutch financial services company, more control over Bangalore- based ING Vysya Bank Ltd. with its 44 percent stake.
“There is likelihood of further reforms,'' said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc. “Given the limited time at the government's disposal, and the motley group of new allies, reforms are by no means certain.''
India's stock market surged more than fourfold in the first 3 1/2 years of Singh's administration as the 75-year-old prime minister presided over an economic expansion that averaged 8.9 percent a year, the fastest since independence in 1947. The prime minister's five-year tenure comes to an end in May.
Easing Legislation
Amar Singh, whose Samajwadi Party replaced the communists as the government's main ally, said on July 10 he may back legislation easing curbs on foreign companies seeking to expand in insurance, pensions and banking.
The bill to remove a 10 percent cap on the voting rights of foreign investors in non-state banks is pending in parliament while a parliamentary committee is considering a bill to open the pensions business to overseas investors, Chidambaram said.
The draft bill to raise the foreign investment ceiling for insurers to 49 percent from 26 percent is with the government, he said. The banking and pension bills have been languishing in parliament for three years and the finance minister announced the insurance measures in 2006.
“All three are on the agenda of the ministry of finance,'' Chidambaram said. “Bills in advanced stages of consideration will be taken up first.''
Amending the legislation won't be enough for foreign banks to buy stakes as they can only invest in privately held lenders that have failed or need a bailout easy fast cash. The central bank plans to review its policy after April 2009.
Insurance Restrictions
New York-based American International Group Inc., the world's largest insurer by assets, New York Life Insurance Co. and Prudential Plc, based in London, are among insurers that are restricted to 26 percent stakes in their ventures in India.
“Insurance companies that aren't here and waiting for this to happen will come to India,'' said Analjit Singh, chairman of Max New York Life Insurance Co. “New York Life will exercise its option to raise its stake if the FDI limit is raised.''
Reviving the reforms may entice Lloyd's of London, the world's largest insurance market, to scale up its operations in India, where it writes about $400 million of business, spokeswoman Louise Shield said July 10.
Manmohan Singh's plans to give overseas companies a greater role in India's financial industry were blocked by his erstwhile communist partners, who this month withdrew support over the nuclear accord with the U.S.
Opposition Parties
Singh got 275 votes in his favor and 256 against in the confidence vote in the 541-member lower house, a margin that will force Chidambaram to secure backing from opposition parties to ensure the government's pending legislation is approved.
“In a parliamentary democracy, the ruling party reaches out to all opposition parties,'' Chidambaram said.
Chidambaram also said the government will revisit plans to list shares of government-run companies.
“Listing improves governance. There are many companies looking for capital,'' Chidambaram said, without revealing which company will sell shares. “We have to see what the market is like and what the appetite in the market is like.''
This year, foreign investors, who bought a record $17.2 billion of stocks in 2007, have turned sellers as the benchmark equity index has lost about a third of its value. The central bank expects growth in Asia's third-largest economy may slow to 8 percent this year, dragged down by record high oil prices.
To contain inflation, Reserve Bank of India Governor Yaga Venugopal Reddy has raised interest rates 15 times and ordered banks to set aside more reserves eight times since October 2004. The governor will unveil the next monetary policy statement on July 29, which will be Reddy's last policy announcement if he retires as scheduled in September.
India will announce its decision regarding the country's next central bank governor “well in time,'' Chidambaram said.
Oil dropped below $144 a barrel on Friday, but was still within sight of record highs reached in the previous session when traders bought into the market ahead of a holiday weekend in the United States.
U.S. crude oil was down $1.44 at $143.85 a barrel by 1:00 p.m. EDT, below an all-time high of $145.85 hit on Thursday. The contract has risen more than 50 percent this year.
London Brent was down $1.66 at $144.42.
Prices fell more than a dollar after Iran said it would make a response later on Friday to proposals from six world powers to try to resolve a long-running dispute over its nuclear development program.
Iran subsequently handed its response to European Union foreign policy chief Javier Solana, but did not give any details about its content.
The United States, China, Russia, Germany, Britain and France have offered trade and other incentives to Iran, which is facing sanctions because it has refused to give up its nuclear program cash advance.
PRE-HOLIDAY RUSH
Investors had rushed into crude oil ahead of the U.S. independence day holiday on July 4, because they were wary of any escalation in tensions between Iran and Israel that have contributed to oil’s rise to a record of $145.85 this week.
WASHINGTON – The U.S. Federal Reserve says the American economy remained "generally weak" heading into summer as rising costs for energy and food pounded consumers and forced some companies to push their own prices higher.
The Fed’s new snapshot of business conditions, released Wednesday in Washington, underscored two big sore spots for the country: listless economic activity coupled with lofty energy and food prices. Those rising prices raise the risks of both spreading inflation and putting another drag on overall economic growth.
Chafing under price hikes, "consumer spending slowed… as incomes were pinched by rising energy and food prices," the Fed said. Manufacturing activity, meanwhile, was "generally soft" and the housing market remained stuck in a rut.
Businesses also were hit by rising costs, especially for energy, metals, plastics, chemicals and food. Such reports were “widespread," the Fed said. To cope, manufacturers in several areas "noted some ability to pass along higher costs to customers" the Fed said. Retailers, however, reported "mixed results with respect to raising final goods prices," the Fed said.
Over the past week, Federal Reserve chairman Ben Bernanke and his Fed colleagues have been sounding an ever-louder alarm against inflation. Given those concerns, Bernanke has signalled the Fed’s rate-cutting campaign, started last September to bolster the weak economy, is probably over for now.
Many economists predict the Fed will leave its key rate at two per cent, a four-year low, when it meets next, on June 24-25.
However, with inflation moving up on the Fed’s list of concerns, Wall Street investors and others are now thinking the Fed might be forced to start boosting rates later this year to curb inflation payday loans application. Raising rates too soon, though, could deal a set back to the already fragile economy.
It’s a dicey situation for Fed policy-makers.
The housing, credit and financial crises have badly bruised the economy and sharply slowed its growth. Consumers and businesses alike have hunkered down. Employers have cut jobs every month so far this year and the unemployment rate zoomed to 5.5 per cent in May, from five per cent in April – the largest one-month increase since 1986.
Bernanke, in a speech earlier this week, downplayed the big jump in the jobless rates, saying the danger that the economy has fallen into a "substantial downturn" appears to have waned over the past month or so.
The Fed’s powerful doses of interest rate cuts, the government’s US$168-billion stimulus package, further progress in the repair of problems in financial and credit markets, a gradual ebbing of the drag from the deep housing slump and still solid demand from abroad for U.S. exports should help the economy over the remainder of this year, Bernanke predicted.
At the same time, Bernanke sent a fresh warning that the Fed will be on heightened alert against inflation dangers, especially any signs that investors, consumers and businesses think prices will keep going up and change their behaviour in ways that will aggravate inflation.
The Fed "will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation," the Fed chief said Monday evening.
The U.S. trade deficit widened more than expected in April as the average price for imported oil jumped to a record $96.81 per barrel and U.S. exports and imports also set records, a Commerce Department report showed on Tuesday.
The monthly trade gap grew nearly 7.8 percent to $60.9 billion from a downwardly revised $56.5 billion in March. The gain was the biggest since September 2005.
Wall Street analysts had forecast a smaller rise in the trade gap to $59.9 billion, from the previous March figure of $58.2 billion.
Average prices for imported oil rose $6.96 per barrel in April, the second highest increase on record. Imports from Saudi Arabia, Venezuela and other members of the Organization of Petroleum Exporting Countries totaled a record $20.9 billion.
Overall U.S. imports of goods and services were a record $216.4 billion, and showed their biggest one-month gain since November 2002 fast cash online. Although oil accounted for much of the increase, imports of autos and capital goods bounced back from a drop in March.
U.S. exports also rebounded to a record $155.5 billion in April after retreating slightly in March. The month-to-month rise was the biggest in more than four years.
The weak dollar has helped push U.S. exports higher over the last several years, keeping the U.S. economy afloat during a severe housing market downturn and liquidity crisis.
This week, China’s ambassador to the World Trade Organization said the weak U.S. dollar was hurting developing countries by fueling increases in oil and food prices and he called on Washington to take quick action to stabilize its currency.
WASHINGTON — That nice annual tax refund from Uncle Sam isn’t a luxury anymore for growing numbers of people. Instead, it’s increasingly going right out the door to pay bills.
In the latest illustration of how the economic slowdown is hitting home, more than a third, or 35 percent, said they are using the money to pay utility, credit card or other bills, an Associated Press-AOL Money & Finance poll showed Thursday. A year ago, 27 percent said they were using it that way.
About a third said they are saving or investing the money, down slightly from last year. Nearly a quarter said they are using their refund to pay debt from credit cards and other loans — essentially the same as the one in five who said so a year ago.
That’s not to say some people aren’t enjoying their checks. One in five is spending it — an increase from last year — on everything from everyday needs to shopping sprees and vacations.
The average tax refund so far this year has been $2,464, up slightly from a year ago, according to the IRS.
Separately, the government soon will begin sending special tax rebates to millions of Americans in hopes that they will spend the money and spur economic growth advance america cash advance. Those checks will be up to $600 per person and are on top of the refunds.
In the poll, 56 percent said they have received or expect a refund this year, a significant drop from 66 percent a year ago.
According to IRS figures, refunds have been sent to 80 percent of those who filed returns through March 29, down from 85 percent of those who filed during the same period last year. David R. Williams, IRS director of electronic tax administration, said in the end, the proportion getting refunds this year should be the same as last year.
Facing record-high fuel costs and a weakening economy, Delta Air Lines and other carriers on Tuesday made moves to cut costs.
Delta said it will park twice as many planes as it planned and offer buyouts to 30,000 employees. Delta hopes to cut 2,000 non-pilot jobs in the United States, or 3.6 percent of its work force, through buyouts and voluntary retirements for which more than half of employees qualify, Chief Financial Officer Ed Bastian said. As many as 45 jets will be grounded as flights and routes shrink, he said.
Delta, which emerged from bankruptcy in April and has been in merger talks with Northwest Airlines Corp., is struggling with an 87 percent surge in fuel prices in the last year. The third-largest U.S. carrier said this year’s jet-fuel bill will be $2 billion higher than last year’s.
Other U.S. airlines disclosed less-dramatic moves. United Airlines parent UAL Corp. said it plans to pull as many as 20 older and less-efficient aircraft from its fleet to lower costs, and JetBlue Airways Corp. said it will sell four more Airbus SAS A320 aircraft, bringing the number of jets it’s shedding to 10.
Northwest said its U.S. passenger capacity will be "significantly smaller" this quarter and that further cuts may occur in August or September freecreditreport.
AMR Corp.’s American Airlines, the world’s largest carrier, said it’s reviewing 2008 capacity plans again, just a month after lowering them.
The moves come as airlines face a flood of red ink. The nine biggest U.S. airlines probably will lose a total of $1.5 billion this year, Merrill Lynch & Co. analyst Michael Linenberg said.
Delta plans to reduce its domestic passenger capacity 10 percent by August, double the 5 percent reduction the carrier previously targeted. The cuts include reducing the frequency of flights and cutting unprofitable routes. That will affect as many as 20 mainline jets and 25 regional aircraft, Bastian said.
About 1,300 of the jobs Delta plans to cut will be so-called frontline workers who handle ticketing, baggage and other operations, with the remainder coming from management, Bastian said.
Delta had the equivalent of 55,044 full-time employees at the end of last year.
U.S. investment firm Aetos’ 900 billion yen ($8.6 billion) plus bid for Japanese property developer Daito Trust Construction Co (1878.T: Quote, Profile, Research) is moving forward but struggling to secure enough capital from banks, financial sources familiar with the matter said.
Aetos Capital LLC’s consortium, comprising real estate group Mori Trust Co and local private equity firm Unison Capital, have been left in the lurch by Sumitomo Mitsui Banking Corp (SMBC), the lending arm of Japan’s Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research), which has decided not to help fund the deal, the sources said.
Other banks that Aetos has asked for loans, including Bank of Tokyo-Mitsubishi UFJ, Mizuho (8411.T: Quote, Profile, Research), Shinsei (8303.T: Quote, Profile, Research), Deutsche Bank (DBKGn.DE: Quote, Profile, Research) and Aozora (8304.T: Quote, Profile, Research), are still pondering how much they want to commit to the deal.
Nomura Capital Investment Inc, wholly owned by Japan’s largest brokerage Nomura Holdings Inc (8604.T: Quote, Profile, Research), is also considering stepping into the breach to help finance the buyout; but it is not clear whether it will be willing to shore-up the financing completely payday loan.
Both Aetos and Sumitomo Mitsui Financial Group could not be immediately reached for comment.
Among other issues, the prospective lenders are uneasy because Sumitomo Mitsui Financial Group has historical ties to Daito, and is familiar with the inner workings of the company.
Another concern for the lender banks is that market conditions for condominium makers have deteriorated in recent months and vacancy rates may start to rise.
Daito Trust’s core business is to build, lease and manage apartment blocks and if vacancy rates rise, it would be left with a cash-flow shortfall.
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