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Bear CEO: Don't Blame Me
Posted Apr 04, 2008 11:31am
Thursday's Senate hearing on the Bear Stearns bailout included a lot of obligatory testimony and political grandstanding, which was predictable. Missing from the dog and pony show, however: Any sense of accountability from Bear CEO Alan Schwartz.

Schwartz blamed the disaster on a "run on the bank" stemming from "unfounded rumors and attendant speculation [which] became self-fulfilling."

And while it's true rumors persist that Bear Stearns was the target of short-sellers, rumor-mongering is part of the reality on Wall Street.

Schwartz also cited an "honest disagreement" over the length of a short-term lending facility granted by JPMorgan days before Bear's Fed-engineered rescue. As a result, "the choices we faced that Friday night [March 14] were stark: find a party willing to acquire Bear Stearns by Sunday night or face what my advisers were telling me could be a bankruptcy filing on Monday morning, which could likely wipe out our shareholders and cause losses for certain of our creditors and all of our employees."

All true, perhaps. Also true: Bear was overleveraged, overexposed to mortgage-backed securities, and didn't raise cash last summer before the crisis got out of hand. No word from Schwartz about that.

Meanwhile, NY Fed president Timothy Geithner did address one of the lingering mysteries of the Bear saga: Why didn't the Fed open up the discount window for Bear Stearns, which Schwartz said could have prevented Bears' demise?

"We only allow sound institutions to borrow against collateral," Geithner said. "I would have been very uncomfortable lending to Bear given what we knew at that time."

Jobs Slashed, Pointing to Recession
Friday April 4, 11:43 am ET

Employers Chopped 80,000 Jobs Last Month; Jobless Rate Rose to 5.1 Percent

WASHINGTON (AP) -- Employers buffeted by talk of recession slashed 80,000 jobs in March, the most in five years and the third straight month of losses.
At the same time, the national unemployment rate rose from 4.8 percent to 5.1 percent, the clearest signal yet that the economy might already be shrinking.

The new snapshot of the job market, released by the Labor Department Friday, underscored the damage that a trio of crises --in the housing, credit and financial sectors -- has inflicted on companies, jobseekers and the economy as a whole.

"The labor market has indeed turned south," said Joel Naroff, president of Naroff Economic Advisors. "That was the one last bastion of hope to stay out of a recession. Now the question is how deep and how long will it last?"

The unemployment rate was the highest since September 2005, when significant job losses followed the devastating blows of Gulf Coast hurricanes.

Job losses were widespread in March. Construction, manufacturing, retailing, financial services and various business services all racked up losses. That overwhelmed gains elsewhere, including in education and health care, leisure and hospitality as well as in government.

On Wall Street, stocks fell, with the Dow Jones industrials down more than 30 points in morning trading.

The new employment figures were much weaker than economists were expecting. They were anticipating a drop of 50,000 payroll jobs and the unemployment rate to rise to 5 percent.

The 5.1 percent rate, while relatively modest by historical standards, was the highest in 2 1/2 years.

Job cuts in both January and February turned out to be even deeper. Employers got rid of 76,000 in each month. The elimination of 80,000 jobs in March was the most since March 2003, when the labor market was still struggling to recover from the 2001 recession.

"We don't like to see one job lost, let alone 80,000," Commerce Secretary Carlos Gutierrez said in an interview with The Associated Press. "These are challenging times," he said. Gutierrez was hopeful that economy would turn around in the second half of this year given relief efforts by the government and the Federal Reserve. "We'll get through this."

The economy is suffering the effects of a housing collapse, a credit crunch and a financial system in turmoil. That's causing people and businesses to hunker down, crimping spending, capital investment and hiring. Those things in turn further weaken the economy in what has become a vicious cycle.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged Wednesday that the country could be heading toward a recession, saying federal policymakers are "fighting against the wind" in combating it. Many other economists and the public believe the recession already has arrived.

Bernanke wouldn't tip his hand about the Fed's next move. However, many economists believe the central bank will lower interest rates again when they meet later this month, and they said Friday's employment report would justify another reduction perhaps by half a point.

The Fed has taken a number of extraordinary actions recently -- slashing interest rates, providing financial backing to JP Morgan's takeover of troubled Bear Stearns and opening an emergency lending program for big investment houses. All the actions are ultimately aimed at limiting damage to the national economy.

With a public on edge, Congress, the White House and presidential contenders are scrambling to come up with their own relief plans even as they engage in a political blame game.

In March, construction companies cut 51,000 jobs, factories eliminated 48,000 positions, retailers cut payrolls by more than 12,000. Professional and businesses services lost 35,000 jobs and temporary help firms cut nearly 22,000 jobs. Financial firms chopped 5,000 jobs.

When government hiring was removed, the numbers looked even worse. Private employers shed 98,000 jobs in March.

With the pace of hiring slowing down, the number of unemployed people increased to 7.8 million in March; workers with jobs saw only modest wage gains at the same time.

Average hourly earnings for jobholders rose to $17.86 in March, a 0.3 percent increase from the previous month. That matched economists' forecasts. Over the past 12 months, wages grew 3.6 percent. With lofty energy and food prices, workers may feel like their paychecks are shrinking.

Many analysts believe the economy shrank in the first three months of this year and could still be ebbing now. The government will release its estimate of first-quarter economic growth later this month. Under one rough rule, if the economy contracts for six straight months it is considered in a recession.

Bernanke and the Bush administration, however, are hopeful the economy will improve in the second half of this year, helped by the government's $168 billion stimulus package of tax rebates for people and tax breaks for businesses, as well as the Fed's rate reductions.

Still, even Bernanke predicted this week that the unemployment rate would rise in the months ahead. Some analysts say it could climb to 5.5 percent or higher by year's end.

US to provide technical assistance to HPCL
4 Apr, 2008, 2051 hrs IST,

NEW DELHI: The US has extended a grant to Hindustan Petroleum Corporation Limited (HPCL) to adopt world class inspection and maintenance practices at its refinery in Mumbai.

HPCL and US Trade Development Agency (USTDA) signed a Grant Agreement under which technical assistance will be provided for the proposed HCPL Asset Integrity Management Project.

The agreement was signed during the visit of Undersecretary in the US Department of Energy Clarence Albright.

"Basically, it reflects HPCL's need and desire to upgrade inspection practices which are based on advanced inspection technologies that relate to maintenance of refinery, safety practices and also protection of the key process units in the refinery," Henry Steingass, Regional Director (South and Southeast Asia) USTDA told reporters here.

Altogether, this is known as Asset Integrity Management in the refinery industry that is beginning to be adopted in some refineries in India and becoming a standard in the industry worldwide.

The two countries also signed a Memorandum of Understanding for cooperation in gas hydrates which, among other things, would facilitate the establishment of Gas Hydrate Technology Center in India.

The Working Groups established under the India-US Energy Dialogue on oil and natural gas, coal, power and energy and new and renewable energy met between March 31 and April three.

UBS under attack as former head urges investment bank sale
4 Apr, 2008, 1707 hrs

ZURICH: Embattled Swiss banking giant UBS faced calls for its break up on Friday as its former boss called for the sale of the troubled investment banking unit and the head of its newly installed chairman.

Analysts warned however that any divestment would be a long and complicated process -- assuming that a buyer could be found for the bank which has had to own up to billions of dollars in losses due to the US subprime home loan crisis.

Luqman Arnold, who was forced out of his job in 2001 after clashes with other board members, also launched a blunt attack on what he called UBS' "ineffective corporate governance and insular culture."

On Tuesday, UBS announced new massive writedowns, taking the total damage it has suffered so far from the US subprime mortgage crisis to 37.4 billion dollars (24 billion euros).

Arnold, who holds a 0.7 percent stake in UBS through his London-based investment firm Olivant, said the bank should hive off its asset management and investment banking arms, and also called for the departure of chairman Peter Kurer who was only appointed this week.

He proposed the bank sell its asset management division and its Brazilian subsidiary and subsidiaries in Australasia, and separate its investment and private banking arms.

UBS shares rose on the prospect, up 3.09 percent at 33.40 Swiss francs in midday trading on the Zurich stock exchange.

"The idea is that the value of the bank will increase because at present there is a discount because of the investment bank," said Madeleine Hoffmann, equity analyst at Julius Baer.

However, Andreas Venditti at Zuercher Kantonalbank took a more cautious line, highlighting the hurdles any spin-off would face.

"Legal issues could take at least six months,but operational issues could take years to resolve; it's really an integrated bank," he said.

"There could be potential uncertainty to the franchise and client relationships" while the bank works to resolve these operational issues, he added.

And in any case, Venditti posed the question: "Who would be interested in buying an investment bank at this time?"

UBS managing board member Juerg Zeltner told Austrian business daily WirtschaftsBlatt on Thursday that disposals were not part of the company's strategy at the moment.

"None of our core businesses is up for sale," he told the newspaper. The latest losses prompted the departure of chairman Marcel Ospel, who will be replaced on April 23 by the bank's chief counsel, Peter Kurer.

The appointment of the 59-year-old Swiss lawyer raised eyebrows because of his lack of financial sector experience and Arnold said bluntly he was not the right man for the job.

"His appointment as chairman perpetuates UBS's ineffective corporate governance and insular culture," Arnold said.

"This is not an appropriate way to ensure a radical review and correction of mistakes that led to the largest trading losses in European banking history.

"It appears to us essential that an outstanding Swiss banker with proven strategic, risk management and communications skills be brought in as soon as possible to lead the supervisory board," he added.

A UBS spokeswoman told AFP that the bank had received Arnold's letter and would consider it in due course but that there were no plans to change the current integrated strategy.

The Anglo-Indian Arnold recently led an unsuccessful bid to take over the British mortgage lender Northern Rock, which was brought to its knees by the global credit crunch and was taken into public ownership in February.

Budget Bonanza: Real estate sector shining
4 Apr, 2008, 2119 hrs IST


The Union Budget, may not have done wonders for the real estate developers but has certainly proved to be a blessing in disguise for the industry with both the movers (builders) and shakers (buyers) sounding equally enthusiastic about it.

To explore this Budget bonanza which the real estate sector is about to witness, Times Property takes a look at the new tax breaks on spending and investment avenues of the potential home buyers.

A city based young couple, which together fetches an annual income of Rs 10 lakh per annum sound really enthusiastic about the entire tax break provision.

Shikha, who works in a bank herself is happy about the fact that her additional spending power would not only make her feel liberated to shop but also help them save better for the prospective property that she and her husband will soon be buying in the Hazratganj area.

She expands, “Rishi, my husband and I had zeroed down on a house last year itself, but since we didn’t have the paying capacity then, we decided not to indulge in the house buying, while now since its an absolute wow situation as we have more disposable income, we surely can fulfil this dream of ours.”

On the same note, Niranjan Hiranandani, Director, Hiranandani Constructions, believes that those thinking of buying a 1 BHK can now plan for a 2BHK flat through this increased affordability. This will specially help those in the income bracket of Rs 2.5 to 2.9 lakh, he says.

While, Assem Vivek, Branch Head HDFC Home Loans, adds, “Certainly the budget which directly didn’t affect the realty market is going to move it in totality. Since the tax bracket has changed for both men and women, at an average a person with 30 percent bracket would save Rs 40,000 more.”

He further expands, “Real estate has always witnessed growth and this rate sensitive industry which now to a common man assures no further hiking of interest rate is surely a treat to the potential buyers and of course the investors.” Gaurav Agarwal, Fortuna Builders (P) Ltd opines, “In my opinion the budget has not done any particular wonders to the realty sector yet the tax break sounds like a boon to the middle income group. It certainly provides them a possibility of better housing facilities.”

Rahul Agarwal, Tirath Builders adding his views to the same avers, “The budget on the large has not been pro-realty , as no special mentions were made in its regard. Though like all would agree, the tax break would benefit, though only the upper middle class segment.”

He also adds that it’s not just going to be the budget which will affect real estate in the coming months but largely the very buoyant stock market. For sure all this upheaval will inject a sudden competitiveness amongst the builders especially the so called branded builders and the local Lucknow builders and to meet the same competition, some new selling concepts would have to be floated.



Rahul Agarwal further adds, “Since there are a large number of branded players in Lucknow already, the local builders will have to come up with some unique propositions. We personally feel, that to attract more buyers towards our projects, we will have to provide better facilities at lower cost, without plainly focusing at the high end living concepts.”

Atul Saxena, Eldeco, asserting his take on the same concept of competitiveness avers, “We welcome competitiveness and happy with the take that the other groups are also happy with the budget. The motto for now in for all builders would be catering to all segments of the society, especially with the tax bracket decreasing; we surely shall see a large number of buyings in the property sector.”

In lieu to pointing the finer benefits of the budget, Saxena informs, “To tackle the competition, we plan to also focus at the medium buying strata and therefore are soon planning to launch our projects on the Sitapur Road.”

So isn’t that indeed a god news for the middle class buys who for a long time now have been unable to decide where and when to buy a house of their own. Another important provision in the budget has been about how reverse mortgages should be treated by the tax men.

The budget has clarified that reverse mortgages should not be treated either as income or capital gain and hence not be taxed. This would go a great deal towards creating more confidence among senior citizens planning to take advantage of this product, says R Verma, Executive Director, National Housing Bank.

Analysts also believe that this move will go a long way towards popularising the product, which, though launched a over a year ago, has not found enthusiastic takers. They believe that these schemes, where senior citizens can mortgage their property and either get a lump sum amount worth a certain percentage of the value of their home or choose to get a monthly installment over 15 or 20 years, would now be promoted in a big way by players like banks and housing finance companies.

Brick Bytes

▪ Developers say that those buying a 1BHK can now plan for a 2BHK flat, thanks to increased affordability.
▪ All this upheaval will inject a sudden competitiveness amongst the builders, especially the so called branded builders, and the local Lucknow builders and to meet the same competition, some new selling concepts would have to be floated.
▪ Another important provision in the Budget has been about how reverse mortgages should be treated by the tax men.
▪ The Budget has clarified that reverse mortgages should not be treated either as income or capital gain and hence not be taxed.
▪ Analysts believe that this move will go a long way towards popularising the product, which, though launched a over a year ago,has not found enthusiastic takers.
▪ Real estate has always witnessed growth and this rate sensitive industry, which now to a common man assures no further hike in interest rate, is surely a treat to the potential buyers and of course the investors.

Pakistan may introduce visa-free regime for Indians
4 Apr, 2008, 2207 hrs IST

NEW DELHI: The new Pakistan government is likely to consider a visa-free regime for Indians who want to visit that country, former Prime Minister Nawaz Sharif has indicated.

Sharif, whose party PML(N) is in the ruling coalition with PPP, told in an interview to a news channel that Pakistan should unilaterally abolish the mandatory visa requirement for Indians who want to visit Pakistan whether India reciprocates or not.

"There should be free movement of people. I am of the opinion that we (Pakistan) should unilaterally announce a visa free regime for the people (of India) who want to visit Pakistan, whether India reciprocates this or not not. I have spoken to Zardari Sahab about it and I think he too feels the same," he said.

Sharif refuted allegations of Pakistan's involvement in harbouring terrorism and contested Home Ministry report that there were terrorist training camps which were still operating in Pakistan.

"There are no such camps operating in Pakistan," he claimed.

BHEL bags Rs 50,000 cr order to supply critical equipments
4 Apr, 2008, 2142 hrs IST

BHOPAL: Public sector giant, Bharat Heavy Electricals Limited (BHEL) bagged Rs 50,000 crore order for supply of critical equipments including transformers for power generation in the last fiscal ended March 31.

"Competition is growing. Inspite stiff challenges from India's Crompton and Greaves and International player like Siemens, BHEL bagged order of over Rs 50,000 crore including Rs 1200 crore for export", BHEL Bhopal unit Chief Executive Officer R K Singh told reporters today at the annual press conference here.

Singh said the unit bagged an order of Rs 4,014 crore during 2007-08, as compared to Rs 3,065 during 2006-07.

At the national level, BHEL bagged an order of Rs 23,000 crore while it was just Rs 16,000 crore two years back.

He said the unit has earned Rs 504 crore profit during 2007-08 as compared to Rs 410 earned during 2006-07, registering a profit of atleast 23 per cent over the last year.

It has also registered an increase of more than 15 per cent in turn over, Singh said and added that the export turnover of Rs 368 crore was more than 32 per cent as compared to previous year.

He said by June-July 2008, the BHEL would be able to achieve 30,000 MW target of power generation, which is 18,000 MW at present.

Tatas pick up 60 pc stake in Spanish firm
4 Apr, 2008, 1630 hrs IST,..............


MUMBAI: Sealing its second acquisition in a week, Tata group company, Telcon, on Friday said that it has signed a deal for acquiring a 60 per cent stake in Spanish company, Comoplesa Lebrero SA.

An agreement was signed with existing shareholders of Comoplesa, a construction equipment company, to acquire 60 per cent stake in the company, Telcon said in a press release issued here.

The balance 40 per cent will be retained by the existing shareholders who will continue to be associated with the venture, the release said.

Telcon (Telco Construction Equipment Company), a subsidiary of Tata Motors, had acquired over 79 per cent stake in another Spanish company, Serviplem SA, last week. Tata Motors had also acquired the British luxury brands Jaguar and Land Rover on March 26.

Tata Motors holds a 60 per cent stake in Telcon with the remaining 40 per cent held by Japan's Hitachi Construction Machinery Company.

Telcon, Hitachi and Lebrero would work together to identify opportunities and leverage their presence in the global market, Telcon Managing Director Ranaveer Sinha said in the release.

The acquisitions would not defocus Telcon from its core business in India, he added. It would help Telcon strengthen and add relevance to last week's Serviplem deal, Sinha added.

Retail prices jump by up to 11%

New Delhi, April 04: Retail prices of gram, sugar, mustard oil, vanaspati and onion have increased by up to 11 per cent in the national capital in last one month, felling the inflation rate to rise to 39-month high of seven per cent.

The prices of gram (chana) rose by 2.7 per cent to Rs 38 per kg on April 1 as against Rs 37 a month earlier, according to the data provided by the Department of Consumer Affairs.

Sugar prices increased by nearly 6 per cent at Rs 18 per kg, mustard oil by 2.6 per cent to Rs 77 per kg, vanaspati by 10.14 per cent at Rs 76 per kg and onion by 11.11 per cent at Rs 10 per kg.

However, prices of rice, wheat, atta, tur, groundnut oil, milk, potato and salt remained stable during the last one month while tea (loose) became cheaper.

Rice is available in the retail market at Rs 18 per kg, while wheat at Rs 13 a kg, atta Rs 14, tur Rs 42, groundnut oil Rs 121, potato Rs 9.

The wholesale price-based inflation rose to seven per cent in the week ended March 22 from 6.68 per cent in the previous week as prices of vegetables, cereals and various manufactured goods continued to rise.

The government has announced plethora of measures to rein in the rising inflation, including scrapping of customs duties on all crude edible oils, reduction of duties on refined edible oils, ban on exports of non-basmati rice and increase in export price of basmati rice.

The impact of these decisions would be felt only in next 7-10 days at the retail level, traders said.

According to the inflation data, prices of fruits and vegetables went up by one per cent, gram by three per cent, masur by two per cent while urad and moong, eggs, meat and fish got dearer by one per cent each.

At the same time sesame, rape seed and mustard seed were expensive by five per cent and linseed by three per cent. However, condiments and spices declined by two per cent and fish-marine products by four per cent.

In the manufactured items, sunflower oil shot up by nine per cent and vanaspati by four per cent, while butter, mustard oil, sugar and groundnut oil became expensive by one per cent each. Ghee and coconut oil, however, softened by one per cent each.

Amitabh Bachchan cleared in tobacco ad case

Panaji, April 04: In a relief for superstar Amitabh Bachchan, a local court has cleared him in a case of an alleged violation of Goa's law against smoking after a poster showed him puffing a cigar.

National Tobacco Eradication Organisation (NOTE), an anti-tobacco organisation, had filed a suit against Bachchan along with others objecting to his poster on the hoarding which showed him smoking a cigar and accusing him of violating Goa Prohibition of Smoking and Spitting Act, 1997.

District and Sessions Judge U V Bakre nullified the legal process against Bachchan initiated by judicial magistrate first class (JMFC) in the case.

NOTE had accused the actor of indirectly suggesting and promoting smoking on a multi-coloured billboard advertisement that depicted him puffing a cigar while endorsing a brand of electric appliances.

The board was prominently displayed on Goa's national highway.

NOTE had asked the court to prosecute Bachchan for violations the Goa Prohibition of Smoking and Spitting Act.

Bachchan's lawyer had in a revision petition filed before sessions court said the criminal case was registered despite the actor conveying in writing that he was not a party to the hoarding.