Treasury Secretary Tim Geithner has been waiting to sign your money for seven months, and he’ll have to wait just a bit longer.
The Bureau of Engraving and Printing has been holding off on putting Geithner’s "John Hancock" on currency while the Senate mulled whether to confirm the other co-signer of your money — the U.S. Treasurer.
That confirmation, of Rosa Gumataotao Rios, occurred on Friday.
Meanwhile, the signatures of former Treasury Secretary Henry Paulson and former Treasurer Anna Escobedo Cabral have still been appearing on new bills, long after their terms ended on Jan. 20. Based on how much money the Treasury printed in the same period last year, the names of the two out-of-office signers graced 7.2 billion new notes with a total face value of nearly $120 billion.
But don’t look for Geithner- and Rios-signed bills at an ATM near you just yet. The process of transferring the new signatures typically takes three months, a bureau spokeswoman said. The bureau must first receive the new signatures. Then they create a new series of bills, with new serial numbers and suffix letters, and they design a new plate — all before they begin printing new bills.
Though the signatures of the Treasury secretary and Treasurer may seem like a small detail, they are required to make the bills legal tender, according to the bureau business cards.
In addition to signing U.S. currency, the Treasurer of the United States advises the director of the Mint, the director of the Bureau of Engraving and Printing and the Treasury secretary "on matters relating to coinage, currency and the production of other instruments by the United States," according to the Treasury Web site.
"It is a great pleasure to have Rosa Rios as Treasurer of the United States," Geithner said in a statement released Tuesday. "She brings to this position extensive experience and knowledge, gained through her work in the public and private sectors, that will serve our nation well."
Prior to her confirmation as Treasurer, Rios served on the Treasury and Federal Reserve’s transition team, serving as the lead staff member for external stakeholder outreach on behalf of Treasury.
Rios previously served as managing director of investments at real estate investment firm MacFarlane Partners, principal for real estate consulting firm Red River Associates and director of the redevelopment and economic development for the city of Oakland, Calif.
Time Warner Inc. paid $283 million for Google Inc.’s 5% stake in AOL, the Internet company said in a U.S. regulatory filing Monday.
Time Warner (TWX, Fortune 500), which plans to spin off AOL by the end of the year, bought the stake from Google (GOOG, Fortune 500) on July 8, AOL said in the filing with the U.S. Securities and Exchange Commission.
The price that the company paid for Google’s stake implies that AOL has a total value of about $5.7 billion.
The filing is a registration statement with the government that AOL must file before its long-expected separation from Time Warner, and brings the company one step closer to ending a troublesome eight-year-old merger.
Current Time Warner shareholders are expected to be holders of the new AOL shares once the company is separated easy payday loans. Time Warner is the parent company of CNNMoney.com.
AOL Chief Executive Tim Armstrong told Reuters last week the company will focus primarily on being a Web advertising business.
In its registration statement, AOL said that it expects to incur up to about $90 million of additional restructuring charges in the last nine months of 2009.
The company already incurred $58.3 million in restructuring charges during the first quarter of 2009, which it said were related primarily to layoffs and closing facilities.
Time Warner shares rose 2 cents to close at $27.60 on the New York Stock Exchange. Google shares fell $1.92 to close at $444.80 on the Nasdaq stock market.
It’s time for your 2015 annual physical.
But your family doctor already knows all your vital readings from the self-tests you administered.
If she sees any problems, she’ll send your electronic records to a specialist and coordinate the way you’re treated. And the two of them will send periodic e-mail reminders of what you need to do to stay healthy.
This health care concept, called "patient-centered medical homes," could improve the overall quality of care, and save consumers time and money. But skeptics maintain that the financial savings aspect still has to be proven.
The model is already being tested in 44 states — with such big health insurers as UnitedHealthcare, Aetna and Medicaid taking part — and utilizes key components of President Obama’s reform effort
In medical homes, the family physician is like a personal health coach, responsible for managing all aspects of the patient’s health care needs, explained Paul Keckley, executive director of Deloitte Center for Health Solutions, a unit of consulting firm Deloitte LLP.
The doctor also leads a team of coaches — including nurses, pharmacists, nutritionists and other medical professionals — with the aim of providing a more "holistic" approach to health care.
Round-the-clock access, electronic health records, use of e-mail and phone communication, patient feedback, fee for service and fee for performance are all central to this concept.
The concept is about meaningfully changing the daily habits in a "population of chronic diseases," Keckley said, and "to do that you have to coach people and constantly manage and track their care through text message reminders, counselors and support groups."
Eventually, a healthier population would reduce the number of medical procedures and costly hospital admissions, potentially lowering consumers’ insurance premiums.
Interest grows: Enthusiasm about medical homes is picking up, but only gradually.
There are 27 medical home demonstration programs — collaborations between purchasers, providers and payers — underway around the country, according to the Patient Centered Primary Care Collaborative (PCPCC), a trade group that’s spearheading the medical home movement.
Medicaid has pilot programs in 31 states while Medicare is gearing up to launch eight demonstration programs, said Edwina Rogers, executive director of the PCPCC,
Rogers said major corporate purchasers of health insurance, which account for about 60% of total U.S. health care spending, are driving insurers to participate in pilot programs in the search for lower-cost alternatives.
One of those companies, IBM (IBM, Fortune 500), has been working with UnitedHealthcare on a medical home initiative in Arizona.
"We like to say that we have 458,000 reasons why we like medical homes," said Dr. Paul Grundy, IBM’s director of health care, technology, and strategic initiatives, referring to the company’s total workforce, retirees and dependents receiving benefits. The nation’s fourth-largest U.S. private sector employer spends about $1.3 billion annually in health care-related costs.
"We can buy an amputation for a diabetic, but we can’t buy care that prevents that situation," Grundy said. "Corporations are half the (health care) spend. We have to rally together to change that model. We have seen in pilots that if we focus on prevention, we really begin to see results payday loans no credit check."
He cited the Geisinger Medical Home Initiative in Pennsylvania that tested a medical home pilot in 2006 — and found a nearly 8% reduction in hospital admissions among Medicare patients assigned a medical home and a 4% reduction in medical costs in the first year.
Skepticism remains: Dr. Howard McMahan, a primary care physician based in Ocilla, Ga., is on the fence about transforming his practice into a patient-centered medical home.
"I do absolutely think that this is the future model of health care. But it’s viable only if payment reform happens in the system," McMahan said.
Right now, doctors are not reimbursed for things such as e-mail or phone communication with patients, and there’s no incentive based on quality of care provided.
"I don’t learn as quickly as I used to," said McMahan, who has practiced for 26 years. "I think the medical home model is doable, but you have to provide physicians the necessary cash flow, training, and IT and ancillary services to make it a success."
Deloitte’s Keckley also said there’s a costly initial investment tied to technology adoption. And he said most physicians are trained to work independently and not necessarily as part of a team, so there’s additional training required for doctors to act as coordinators and managers.
Politics could stymie the progress as turf wars erupt. "The fear of specialists is that primary care physicians will become too powerful," Keckley said.
Hospitals have also largely been silent on medical homes. "This is the yin and the yang of the model," said IBM’s Grundy. "Hospitals are paid to get their beds filled."
Experts also said the shortage of primary care providers could delay adoption of the medical home.
"And the return on investment on this model is not three to four years but 10 to 15 years," said Keckley. "But the long-term savings it offers are exactly the discussions we’re having around health care reform right now."
Insurers on board: The insurance industry says it backs medical homes.
"In essence, this model is what we’ve always supported," said Susan Pisano, spokeswoman for America’s Health Insurance Plans, the trade group representing private insurers. "Individual patients do better with an ongoing relationship with their physician."
However, Pisano said insurers "need to make sure that we’re not looking at a one-size-fits-all model of medical homes but that we look at a number of different approaches for payment and reimbursement."
If reform doesn’t pass, Dr. Robert Berenson, a health care expert with public policy group Urban Institute, still believes that small changes to care delivery will happen, but the medical home model "will be a long way off from becoming the dominant model."
"The concept makes a lot of sense but we can’t get through with just marginal and incremental changes," Berenson said. "Health reform will produce a major commitment to test a number of approaches to medical homes so that in five years we could get a major expansion of this model."
One of the signature proposals in the Obama administration’s efforts to reshape the regulatory framework for banks has been slowed as supporters regroup in the midst of mounting opposition.
The creation of a new consumer protection agency to regulate mortgages, credit cards and credit insurance was never going to be easy. But the forces trying to stop or water down the proposal have grown beyond banks and financial sector lobbyists.
Federal Reserve Chairman Ben Bernanke, testifying Wednesday before the Senate Banking Committee, argued strongly that the central bank should keep its consumer protection powers, which would otherwise move to the new agency.
Bernanke also suggested that Congress take steps to elevate consumer protection to a more prominent role at the Fed.
Fed leaders have been making their case behind the scenes for weeks. Bernanke’s comments represented the Fed’s most high-profile public opposition to a stand-alone consumer agency.
The push-back has prompted top Democrats supporting the consumer agency to change strategies.
House Financial Services Chairman Barney Frank, D-Mass., said he would delay pushing for a vote on the consumer agency bill until September, in part to give top Democrats more time to win more support in Congress and outside of Washington.
"This became somewhat more controversial than I expected," Frank said Wednesday at a press conference with consumer advocates. "I believe the votes were there, on the part of the Democrats, to put it through. Even a few Republicans or two had talked about it … but this is worthy of an actual debate."
How it would work: The Consumer Financial Protection Agency would be run by a presidentially-appointed, five member board and would wield broad power, including the ability to examine and subpoena information from banks.
A main task of the new agency would be to create simple templates for basic financial products, such as fixed-rate, 30-year mortgages. All banks and mortgage brokers would have to offer the simpler product and use an agency-approved standard, one-page application. More complicated mortgages would have to spell out how they differ from the simpler "plain-vanilla" financial product.
The agency would also have the power to ban products deemed deceptive. That has prompted critics to warn that the new agency could stifle innovation in financial products and make credit less available for consumers.
The debate: The financial services sector has come out swinging against the proposed new agency.
The head of the Financial Services Roundtable, a powerful lobbying group representing Wall Street, has talked publicly about efforts to kill the proposal. On Wednesday, the U.S. Chamber of Commerce issued a press release praising the delay of the "flawed" proposal.
Lawmakers opposed to the plan are also speaking out.
"I think this is a tremendous overreach and very disturbing to listen to," said Sen. Bob Corker, R-Tenn., last week during a hearing on the new consumer panel. "And I hope that as [the bill goes forward], we will be able to work together to do something that is not an overreach, where the federal government is telling citizens the types of products they should and shouldn’t buy and telling companies what they should and shouldn’t offer life insurance rates."
On the other side of the debate, the Treasury Department joined in the public campaign Wednesday. Deputy Treasury Secretary Neal Wolin pressed for the new agency at a meeting of the American Bankers Association, which is strongly opposed to the idea.
"The agency will not limit consumers’ ability to choose the products they want," Wolin said. "Quite the contrary, our proposed legislation explicitly charges the CFPA with preventing abusive and unfair practices and, at the same time, promoting efficiency, innovation and consumer access to financial services."
Fed pushback: On Wednesday, Bernanke added his voice to the list of those trying to reshape the proposal.
While agreeing the Fed was not "aggressive enough to address consumer issues earlier in this decade," Bernanke defended the Fed’s role as an advocate for consumers.
"We have the capacity, we have the ability [and] we have the expertise … to be effective when we are working in that direction," Bernanke said.
He recommended that Congress rewrite the Federal Reserve Act to elevate consumer protection as a "major goal" of the Fed, equal in importance to assuring full employment and price stability.
The Fed chairman could report regularly on how they’re monitoring consumer protection — similar to monetary policy updates, Bernanke said. He suggested Congress could hold hearings to question how the Fed is addressing consumer protection.
Bernanke also suggested beefing up the Fed’s Consumer Advisory Council, giving the group more power and requiring it to meet more often. Currently, the 30-member council comprises industry and consumer representatives and meets three times a year. Yet, its authority is limited to advising the Federal Reserve Board.
"I think there are steps that could strengthen the institutional framework that would address your legitimate concern about the long-term commitment of the Fed to this particular area," Bernanke said.
Campaign continues: While Bernanke testified, on the opposite side of the Capitol, House financial leaders, including Frank and Rep. Maxine Waters, D-Calif., held a press conference with a new group organized last month to push for the new consumer agency.
Americans for Financial Reform is comprised of union and consumer advocate groups. It has also signed on a few financial firms to its cause.
The coalition was the brainchild of consumer groups disappointed with their failure to convince Congress to pass a measure that would have allowed judges to modify underwater mortgages, a move successfully blocked by the financial sector industry.
Texas Instruments Inc. posted a stronger-than-expected quarterly profit and outlook, but was wary about declaring that the worst was over for the economy and demand for its chips.
TI (TXN, Fortune 500), whose chips are used in cell phones, televisions and industrial equipment, gave a wide forecast for revenue in the current quarter, indicating that visibility was still poor, and said high unemployment would likely hurt holiday season sales.
"End demand is still low in relation to where it was six to 12 months ago. We need to be prepared for slow to no growth for a while," TI Chief Financial Officer Kevin March told Reuters in an interview.
"We’re getting close to finding the bottom of the economy although I don’t think we’ve found it yet."
March said he saw growth in Asian markets, but the United Europe remained "soft to down." He was referring to analog chip sales and some strength in demand for notebook personal computers, hard-disk drives, smartphones, LCD TVs and video games.
Shares of TI, which had risen 13% in the week since Intel Corp.’s (INTC, Fortune 500) results beat Wall Street expectations, fell 1% in extended trading on Monday.
Analysts said that while TI had topped estimates, investors’ expectations were already high after Intel and they were staying on the sidelines until they had more concrete signs that end customer demand was improving.
"The numbers were good. They were solid. The only possible negative could be that the wide revenue range signals that visibility is not improving," said Broadpoint Amtech analyst Doug Freedman.
TI, which competes with Qualcomm Inc. (QCOM, Fortune 500) in the wireless chip market, forecast third-quarter earnings per share of 29 cents to 39 cents, including 1 cent in restructuring charges, on revenue of $2 fast loans.5 billion to $2.8 billion.
That was better than analysts’ average forecast for earnings, excluding restructuring charges, of 28 cents on revenue of $2.53 billion, according to Reuters Estimates.
Profit down 56%
Company executives said the supply chain was moving much closer to being in balance with demand. They said inventory levels were declining at a slower rate, but did not believe there was any inventory build-up.
TI posted a second-quarter net profit of $260 million, or 20 cents per share, compared with $588 million, or 44 cents a share, in the same quarter a year ago.
Profit excluding restructuring costs was 25 cents per share, beating analysts’ average forecast of 23 cents, according to Reuters Estimates.
Revenue fell 27% to $2.46 billion, close to the average Wall Street forecast of $2.42 billion.
Ashok Kumar, analyst at Collins Stewart LLC, said it could be September before there were clear signs of how much, if at all, end demand was improving.
"Q3 to Q4 (chip) demand will be more in line with end (product demand) as opposed to continued benefits of restocking," he said. "Now is where the rubber meets the road in terms of end demand."
TI shares fell to $23.35 following the results, after closing up 2.6% at $23.61 on the New York Stock Exchange.
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NEW YORK (Fortune) — I’ve always thought that the guys running Goldman Sachs were really smart, not only about making money, but also about projecting a classy image to the world outside of Wall Street. Clearly, I overestimated them.
If there was ever a firm with the motivation — and the money — to be gracious to the U.S. taxpayers who kept it alive when the financial markets were imploding, it’s Goldman. It had a chance to look good and do good for taxpayers and itself and Wall Street for a relative pittance — and has blown it. Horribly.
As you have probably noticed, Goldman is getting attacked for posting record profits and setting aside a record amount for employee compensation about three seconds after it repaid its $10 billion of loans from the Troubled Asset Relief Program. Repaying those loans freed Goldman from pay restrictions on its top honchos, who seem headed for record or near-record bonuses unless things go badly for the firm in the second half of the year.
What you probably don’t know is that Goldman, flush with cash and profits, is squabbling with the Treasury about how much it should pay taxpayers to buy back the stock purchase warrants it gave the government as part of the TARP deal. Talk about tacky.
Had Goldman retained something it was once reputed to have — a sense of short-term sacrifice in return for long-term profit — it would have agreed to pay the government generously for the warrants. It could have announced that on Tuesday, along with its profits, and looked like a decent, concerned corporate citizen instead of Greedhead Central.
The warrants are very valuable, especially with the recent sharp run-up in Goldman’s stock price. The warrants carry the right (but not the obligation) to buy 12.2 million Goldman (GS, Fortune 500) shares at $122.90 each. Goldman’s closing price of $156.84 yesterday put the warrants "in the money" by a bit over $400 million. (That’s the $33.94 difference between $156.84 and $122.90, multiplied by 12.2 million.)
Given that the warrants still have more than nine years to run, they’re clearly worth more than $400 million, because its owner has years of upside. However, because there’s no existing market for such long Goldman warrants, their value is in the eye of the beholder (and the pricing modeler).
Alas, no one would tell me what the government is asking for the warrants or what Goldman is offering for them car insurance. "We are in discussions with the Treasury on the buyback of the warrant," said Goldman spokesman Lucas VanPraag. "The purchase price has yet to be determined…. We believe that taxpayers should get a decent return, and we hope that our discussions with the Treasury will do just that." The Treasury declined comment.
My estimate — okay, my SWAG (for scientific wild-assed guess) — is that the Treasury is asking for $1 billion to $1.5 billion and Goldman is offering $500 million or so.
Under the law, Goldman, like other early TARP repayers, has the right to force the Treasury to sell back the warrants after a lengthy set of price arbitrations.
When I say that taxpayers kept Goldman alive, I’m not talking about the $10 billion of TARP money or the $12.9 billion of AIG (AIG, Fortune 500) bailout money that Goldman got. The $10 billion was nice, but not necessarily essential to Goldman’s survival, and Goldman says it was holding enough assets and collateral to get all or almost all of the $12.9 billion had the government not bailed out AIG.
Rather, I’m talking about the way that U.S. and foreign governments — in other words, taxpayers — saved the world’s financial system, saving Goldman in the process. Had many of the world’s biggest institutions collapsed, which would have happened without taxpayer aid, Goldman would have been wiped out because the firms that owed it money wouldn’t have been able to meet their obligations.
I’m also talking about the Federal Reserve Board moving with lightning speed last fall to allow Goldman to become a bank holding company. By giving Goldman access to vast amounts of money it was making available to bank companies, the Fed ended panicky demands from Goldman customers that the firm immediately return the cash and securities it was holding for them. That was the equivalent of a run on the bank, which no institution can survive. Stopping it saved Goldman.
Now this is how Goldman shows its gratitude. It could have shelled out a few extra bucks and done the right thing for taxpayers (and ultimately for itself) by exercising good business judgment and looking generous. Instead, it’s behaving in a way that brings to mind one of my favorite Biblical verses, Deuteronomy 32:15: "So Jeshurun waxed fat and kicked…and spurned the Rock of his salvation." In these ultra-political days, filled with economic pain for so many Americans, that’s not only the wrong way to act, it’s foolish. A word I never thought I’d associate with Goldman.
With reporting by Mina Kimes
Starbucks Corp next week will open a new neighborhood cafe pilot store that will feature beer and wine, night-time hours and live entertainment such as music and poetry readings.
That Seattle cafe, called 15th Avenue Coffee and Tea, takes its name from its street address and borrows heavily from neighborhood coffee shops.
A Starbucks (SBUX, Fortune 500) spokeswoman said the cafe and any others that follow, would return to making espresso drinks by hand and sell products without the Starbucks logo guaranteed payday loans.
The coffee chain, which has been slashing costs and closing hundreds of poorly performing Starbucks outlets amid a long recession, said the first pilot store is a renovated Seattle Starbucks that was slated to be shuttered by year end.
Starbucks stores around the world currently do not serve alcohol.
The foreclosure plague is not going away — it’s only getting worse.
A record 1.53 million properties were in the foreclosure process — default notices, auction sale notices and bank repossessions — during the first six months of 2009. That was 9% more than the previous six months and 15% more than the same period of 2008, according to a report released Thursday by RealtyTrac.
There were a total of 1.91 million filings resulting in 1 out of every 84 U.S. properties receiving at least one filing in the first half of the year. Banks repossessed 386,800 properties.
"What this means is, despite the intensity of the efforts on the part of government and lenders we don’t have a handle on foreclosures yet," said Rick Sharga, a spokesman for RealtyTrac.
And, in a bad sign for a housing recovery, there was no recorded improvement in June, the last month of the cycle. More than 336,000 homes reported foreclosure filings, the fourth straight 300,000-plus month. Filings were up 33% over last June and nearly 5% compared with May.
"Foreclosure activity continues to increase to record levels," said James J. Saccacio, chief executive officer of RealtyTrac in a prepared statement. "Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent a potentially significant future risk."
It’s the economy
The biggest problem affecting foreclosure figures is the recession. As job losses mount, more out-of-work borrowers are falling behind on payments. And home prices are still falling, albeit at a slower rate, which by itself is enough to drive more homeowners into default.
The home-price drop means more homeowners are underwater on their mortgages, owing more than their home is worth. That discourages some borrowers from repaying loans because they see it as a poor financial decision to keep paying on a declining asset.
Homeowners are apt to walk away from their mortgages once their home values fall 15% below their mortgage balances, according to recent research reported by Paola Sapienza of the Kellogg School of Management at Northwestern University, and Luigi Zingales of the University of Chicago Booth School of Business.
They claim that at least 25% of all mortgage defaults may be "strategic," borrowers walking away from their homes because they’ve lost so much value. And in many of the areas hardest hit by foreclosure, home prices have fallen by 40% or more.
Others, however, are working with their lenders, trying to get the terms of their loans modified so they can stay in their homes. But that process has been slow and infuriating to many borrowers and community activists.
The Federal Housing Finance Agency, the government watchdog created to manage Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), reported Wednesday that only 13,800 mortgages had been modified by Fannie/Freddie lenders in April faxless payday loan. That is down 12% from March.
The stats did not include workouts arranged through the Home Affordable Modification Program, the administration’s foreclosure prevention effort that seems to be making very slow progress.
The program, which got up to speed in April, has resulted in 43,000 refinances and more than 325,000 offers to modify loans. Another 160,000 have borrowers accepted and are currently in the process of restructuring. But before these modifications can be recorded as final, the borrowers must make three months of on-time payments.
Another reason for the slow progress, according to a research paper released by the Federal Reserve of Boston, is that some banks have some sound financial reasons to drag their heels.
Many delinquent homeowners, for example, "self-cure," that is, start paying again without assistance. In a report issued last week, the Fed found that an estimated 30% of all borrowers who miss two payments start repaying on their own.
If the lenders had modified these loans, the would have lost money unnecessarily.
A second reason, according to the report, is that so many modified loans re-default, with up to 50% of all modified mortgages succumbing. That costs the banks twice: They bear the expenses of the initial workouts and they pay again to finish the foreclosures, including any additional missed payments.
And by postponing foreclosures, lenders absorb any subsequent housing value losses. If the final repossessions are delayed a year, the lenders could be getting houses worth 10%, 20% or even 50% less than they were at the point of the original default. The banks would have been better off foreclosing then.
"We think these are very powerful forces [acting against modification]," said Manuel Adelino, one of the authors of the report.
Where the pain is
The Sun Belt suffered more foreclosures than other region during the last six months.
California, with 391,611 filings, one for every 34 households, recorded more than any other state. Nevada had the highest foreclosure rate with one for every 16 households. Arizona, one for every 30, and Florida, one for every 33, were next. Utah had the fifth highest rate at one for every 69.
Midwestern industrial states did little better with Michigan recording one foreclosure for every 74 households, seventh among the states. Illinois came in eighth with one for every 76; and Ohio, with one for every 86, was twelfth.
Georgia, at one for every 70 households, and Idaho, one for every 79, were sixth and ninth respectively. Colorado, with one for every 80, rounded out the top 10.
Goldman Sachs proved that it was well on its way towards making a full recovery from last fall’s crisis, after its latest quarterly results shattered even the most bullish of expectations on Tuesday.
Just six months after reporting its first loss as a public company, the New York City-based firm delivered its second straight period of better-than-expected results, this time earning $3.44 billion, or $4.93 a share for the second quarter.
Just a year ago, Goldman Sachs reported a profit of $2.1 billion, or $4.58 per share.
"It was a phenomenal quarter all the way around," said Mark Lane, an equity research analyst who tracks Goldman Sachs for at Chicago-based investment firm William Blair & Co.
Helped by a strong performance within the firm’s fixed-income and its broader trading business, much of Wall Street was anticipating a blowout quarter from the investment bank, heading into Tuesday’s announcement.
Consensus estimates among analysts polled by Thomson Reuters was for net income of $1.73 billion, or $3.54 a share. But the firm managed to blow past even high-end estimates of $4.65 a share.
Still, Wall Street was reluctant to buy on the news after a big run up in the company’s stock just a day earlier. Shares of Goldman (GS, Fortune 500) edged higher in midday trading Tuesday.
The good and the bad. Driving much of the firm’s latest performance was its fixed income business, which also deals in trading currencies and commodities. Net revenue in the division surged 186% from a year ago to $6.8 billion.
Strong stock issuance activity during the quarter, particularly among some of the nation’s top financial firms, also pushed Goldman’s equity underwriting business to record revenue levels.
"We did well across a variety of businesses," said David Viniar, Goldman Sachs’ chief financial officer. "It was basic blocking-and-tackling for the firm."
Of course, a smaller field of investment bank competitors certainly didn’t hurt either, noted Viniar. With Lehman Brothers and Bear Stearns now gone, Goldman Sachs and others have scooped up much of their rivals’ former business clientele.
Still, there were pockets of sluggishness for the firm. Traditional investment banking suffered as deal activity languished, as did revenues at Goldman’s asset management and securities services businesses health insurance quotes.
The firm also said it took a $426 million charge related to its repayment of $10 billion in money received as part of the government’s Troubled Asset Relief Program, or TARP.
A bonus boost? Goldman’s latest results, which mark its highest level of profitability in more than a year, come at a time when there has been increased scrutiny about the firm’s compensation policies, namely its bonuses.
Last month, the Guardian reported that Goldman is on track to pay record bonuses after a stellar performance during the first half of 2009.
Currently, the pool of funds out of which the company pays bonuses stands at $11.36 billion. Were Goldman able to maintain its current performance during the second half of the year, its bonus pool would exceed the lofty levels reached in 2007, when the company spent $20.2 billion on employee salaries and bonuses.
That year, the firm doled out compensation packages that averaged roughly $661,400 for the more than 30,500 workers the firm employed at the time. And with far fewer individuals employed by the company nowadays, the average pay package could be even larger.
Of course, the firm is no longer bound to government compensation restriction after winning its freedom from TARP last month. But it remains to be seen whether the bonuses could raise eyebrows among regulators or the American public.
Viniar noted that there is nothing his firm could do to prevent such a response, instead pointing out that employee compensation rises and falls with the firm’s fortunes. If the second half of the year proved tough for the company, he said, pay packages would fall in tandem.
With Goldman’s results now public, Wall Street’s attention turns towards the rest of the big name financial firms. Peers JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) are both set to deliver results later this week, while Goldman Sachs rival Morgan Stanley (MS, Fortune 500) is set to report next Wednesday.
The Ilikai Hotel, which was made famous by the TV show "Hawaii Five-0," could soon reopen its doors after the company that recently bought the Waikiki landmark shut it down last week.
Real estate investment firm iStar Financial Inc., which purchased the Ilikai for $51 million at a foreclosure auction in May, said that the hotel "will reopen as soon as practically possible under a new management team and operational structure."
The announcement came after iStar, which is based in New York City, said its subsidiary had reached an agreement with the union representing workers at the hotel. iStar had shut the Ilikai down Thursday after efforts to cut costs and become more efficient fell short.
The Ilikai was Hawaii’s first high-rise luxury hotel when it opened in 1964. The distinctive Y-shaped building became an icon after being featured in the opening sequence of the 1970s police drama "Hawaii Five-0."
During its heyday, the Ilikai played host to U fast cash now.S. presidents Lyndon Johnson and Gerald Ford. World famous celebrities such as Elvis Presley and baseball great Mickey Mantle also visited the hotel.
The 30-story hotel has 203 guest rooms, as well as 806 condominium and timeshare units that were not directly affected by the closure, iStar (SFI) said.
Under the new union contract, the Ilikai will rehire about 50 hotel employees. The hotel had roughly 65 full-time employees before it was shut down last week.
"We are optimistic that this new agreement will not only help to preserve jobs but also to help achieve the operational efficiencies that are needed to succeed," said Andrew Backman, an iStar spokesman, in a statement.
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