Business life: My finance news blog

Capping a week that highlighted the one-year anniversary of the financial collapse, a panel aimed at getting to the bottom of its cause is just now getting on its feet.

The Financial Crisis Inquiry Commission’s members want to "shed light" on why the collapse happened and make recommendations to avoid future crises. Their final report is 15 months away, but congressional leaders are already pushing ahead on bills to revamp financial rules to avoid the next crisis.

The congressionally appointed group, funded with $8 million, met for the first time publicly on Thursday and pledged that its work will serve as more than window dressing for politicians worried about the appearance that they allowed the financial crisis to happen.

"There’s no question that this commission had a political birth," said the committee’s second-in-command, Bill Thomas, a retired Republican congressman from California who ran the powerful Ways and Means Committee. "You can sulk about your birth or get on with your life. And frankly, this commission’s life is very, very important."

The commission plans to release interim reports as it gathers information, said the group’s chairman, Phil Angelides, a former California state treasurer who warned about financial sector abuses back in 2002 and lost a 2006 gubernatorial bid. It also plans to stay in close contact with Capitol Hill committees leading the reform of the financial system.

The group has subpoena power over records and can demand interviews with key decision-makers to figure out what caused the crisis.

One model for the panel is the Pecora Commission, which examined the 1929 Wall Street crash and other events that caused the Great Depression. That group came up with recommendations that helped redefine the financial system.

The group is most often compared with the Sept allied insurance. 11 commission, which found that the government had ignored warning signs of terrorist threats.

But unlike the 9-11 commission, which was made up of equal numbers of Democrats and Republicans, the financial crisis commission has six Democrats and four Republicans.

Such differences in opinion came out in opening statements, as panel members highlighted the issues they want to focus on.

Several Republican appointees, including former White House official Keith Hennessey, talked about the need to examine the housing crisis and "politically popular laws passed by Congress that exacerbated" the problems.

Hennessey, an economic adviser under President George W. Bush, wants to delve into the "relaxation of lending standards" and people buying homes they could not afford. Republican lawmakers often talk about such homeownership policies as a major cause of the financial crisis.

By contrast, former Sen. Bob Graham, a Florida Democrat, said the commission needs to explore how consumer protections went awry because that’s high on the congressional agenda.

Brooksley Born, former chairman of the Commodities Futures Trading Commission, called for stronger regulation of complex financial products like derivatives, which she warned about in the 1990s.

"The erroneous belief in the effectiveness of self-regulation has played a major role in bringing our economy to its knees and has cost the taxpayers trillions of dollars," Born said.

The crisis commission aims to hire top staff in October and start gathering information before the end of November. 

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France’s Publicis Groupe, the world’s No. 3 advertising group by revenue, is looking to China to underpin long-term growth as the global advertising market slows, an executive said on Saturday.

China now makes up less than five percent of Publicis’ global revenue, but in as little as five years the fast-growing market could be its second or third largest market, Chief Executive Maurice Levy told Reuters on the sidelines of the World Economic Forum.

“Without China we will have a limited future,” said Levy, who plans to double the current 3,000 staff in China within the next two or three years.

“China is crucial,” Levy said.

Publicis and bigger rivals such as Britain’s WPP are racing to establish themselves in China, a relatively new battleground where market share is still fluid and expanding, compared to mature markets in Europe or the United States.

“To win a new client in Europe is very painful,” he said.

The comments come after Publicis reported a first half like-for-like drop in sales of 6.6 percent, beating the 8.3 percent decline posted by WPP and the U.S. group Omnicom’s 8.8 percent fall.

While most analysts say global ad spending could be down 8 percent to 10 percent this year, China’s market is still growing, though down from the more than 20 percent growth in 2008.

Publicis recently maintained its 2009 financial goals, while Levy said he expected a “slow and gradual recovery” in 2010.

The French company is racing with competitors to sign up Chinese clients who are building brands domestically, but also increasingly need help in penetrating the larger, but more competitive markets in the United States and Europe.

Publicis and other foreign advertising specialists first came to China on the heels of their multinational clients, but the focus is now turning toward Chinese companies who are growing in clout and advertising budgets.

“If I am relying only on international companies, it will mean (the China strategy) will have failed,” said Levy.

Chinese companies now contribute only about one third of Publicis’s total revenue in the mainland market, a slice Levy hopes to double in five years, or longer.

“It has to be two thirds,” he said.

China has been Publicis’s fastest growing market, but this year other markets in Latin America and the Middle East could overtake the mainland, he said. 

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Goldman Sachs Group Inc holds a weekly meeting of its research analysts where they offer trading ideas that are given to top clients, the Wall Street Journal reported on its website on Sunday.

But the paper cited Steven Strongin, Goldman’s stock research chief, as saying these meetings did not give anyone an unfair advantage and the tips did not contradict research notes that carry predictions over a longer term.

Goldman’s analysts talk about short-term developments around specific stocks during the meeting, called a “trading huddle,” which is also attended by some of the firm’s own traders, the Journal reported.

The practice started some two years ago, and since then the Wall Street firm has given ideas on hundreds of stocks, the Journal reported, citing internal Goldman documents.

Goldman could not be reached immediately for comment on Sunday night.

The company told the Journal that its own traders were not allowed to use the information until it had been given to clients.

The Journal also cited Goldman spokesman Edward Canaday as saying that a comment that could lead to changes such as those in earnings estimate, ratings or price target must be sent out to all clients. But Canaday told the Journal that it was rare for comments to reach such levels.

(Reporting by Paritosh Bansal; Editing by Muralikumar Anantharaman)

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or tried to turn in — to get their Cash for Clunkers deal.

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Obama: 200 days in office

When he became the 44th president on Jan. 20, Barack Obama inherited the worst economic crisis since the Great Depression. After 200 days, here’s a look at the progress he’s made toward a recovery.

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Cash for Clunkers cars list: Top 10

These are the most popular cars purchased under the Cash for Clunkers program.

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NEW YORK (CNNMoney.com) — President Obama ended his first 100 days in office amid hopes that both General Motors and Chrysler Group might both still avoid bankruptcy. In his second 100 days, he created a new U.S. auto industry.

The reshaping of GM and Chrysler through bankruptcy is essentially complete, and the Treasury Department holds large stakes in both companies.

There is arguably no segment of the economy where the administration has had greater impact than in the auto sector. And there’s also no accomplishment that surprised experts more.

"It was a remarkable feat, and it surprised a lot of people," said Dave Cole, chairman of the Center for Automotive Research, a Michigan think tank.

Some critics aren’t convinced that a speedy bankruptcy was the right thing to do. Chrysler filed for bankruptcy April 30 and was out of bankruptcy on June 10. GM filed for bankruptcy on June 1. It emerged from Chapter 11 protection on July 10.

During the government-directed reorganizations, both companies shed tens of billions of debt and made deep cuts in their bloated dealership network, despite efforts by some members of Congress to protect the dealers.

But Jeffrey Manning, managing director at investment bank Trenwith Securities LLP, argues the companies would have been better off if the bankruptcy process took as much as nine months or a year credit reports free. That way, the companies may have been forced to make even bigger changes to their operations.

Manning said the government’s ability to convince bankruptcy judges in the two cases to accept that its plan was the only alternative, despite objections from some creditors, was a shock and could cause problems for the two automakers and other companies down the road.

Manning said lenders are going to be more wary about lending money to companies that are viewed as politically powerful, such as automakers, airlines and aerospace and defense manufacturers, for fear that they won’t have the same protections in bankruptcy that they once did.

"Borrowing is going to be more expensive," Manning predicted.

Too soon to say if bankruptcies worked

Regardless of whether the reorganizations fail or succeed, one thing is certain: the Obama administration will either get all the credit or all the blame.

By paying for the rescue with funds from the Troubled Asset Relief Program originally set up to fix the nation’s banking system last fall, the White House was able to reshape the auto industry without any action by Congress.

The rescue came at a significant cost to taxpayers. The Treasury Department poured $19.4 billion into GM and $4 billion into Chrysler before their bankruptcy filings and is unlikely to get much, if any, of that money back.

Still, Treasury agreed to give another $30 billion to GM and $8 billion to Chrysler to fund their operations during and immediately after the bankruptcy process, loans that it hopes will be mostly be repaid through the sale of stock in both firms at some point in the future.

But at the very least, experts said that the fact that two of Detroit’s Big Three are now beholden to the government for their survival allowed the White House to push for greater changes in the auto industry.

Automakers went along with tough new fuel economy standards the administration laid out in May. But Obama’s push for a greener auto industry included a major carrot as well. The government-financed Cash for Clunkers program helped jump start U.S. auto sales in July.

One thing both the critics and the supporters of the two reorganizations agree upon is that it is much too soon to declare either effort a success.

"The story is not over yet. We don’t know how it ends," said Tom Libby, president of the Society of Automotive Analysts, who said the administration deserves a log of credit for the changes put in place and the pace at which it achieved the change.

"I think it’s a major feather in the cap for the administration," he said. "It’s something the management should have done over the last 20 years."

Manning is not as confident that enough was done to solve the industry’s problems.

"Chrysler and GM took a lot of baggage with them out of bankruptcy, and they both have a lot of operational challenges," he said. "Until I can see evidence of strong consumer demand, I’m not optimistic."

Talkback: Do you think Obama’s forcing of GM and Chrysler into bankruptcy will help save the U.S. auto industry? Share your comments below. 

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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." 

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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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China could still increase its holdings of U.S. Treasuries if the dollar is stable, even though the long-term trajectory is to diversify its foreign exchange reserves, a former central bank governor said in an essay.

A number of senior Chinese officials have voiced concern recently about Beijing’s exposure to U.S. debt, given what they see as a mounting medium-term risk of inflation in the United States.

About 70 percent of China’s $1.95 trillion in official foreign exchange reserves is held in dollar assets.

The article by Dai Xianglong, former head of the People’s Bank of China (PBOC) and currently chairman of China’s National Social Security Fund (NSSF), echoed similar comments he made last week that Beijing has little choice but to keep buying U.S. debt.

“It is still possible for China to increase its investment in U.S. treasuries at appropriate times,” Dai wrote in the article, published in the latest issue of China Finance magazine, which is backed by the PBOC guaranteed approval payday loans no teletrack.

But Dai said that it was not correct to “simply describe the current situation of China’s foreign-exchange reserve management as one of falling into a ‘dollar trap.’”

The World Bank said on Thursday that the pace at which China accumulates forex reserves will slow dramatically.

The bank expects they will rise by $218 billion this year after increasing by $419 billion in 2008 and $462 billion in 2007, as outward foreign direct investment increases and due to losses on foreign assets, repatriation of profits and “hot money” outflows.

Dai was governor of the PBOC from 1998 to 2002. The NSSF that he now heads is a fund of last resort for China’s patchwork of underfunded provincial pensions schemes.

(Reporting by Jason Subler and Zhou Xin; Editing by Ken Wills)

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China could still increase its holdings of U.S. Treasuries if the dollar is stable, even though the long-term trajectory is to diversify its foreign exchange reserves, a former central bank governor said in an essay.

A number of senior Chinese officials have voiced concern recently about Beijing’s exposure to U.S. debt, given what they see as a mounting medium-term risk of inflation in the United States.

About 70 percent of China’s $1.95 trillion in official foreign exchange reserves is held in dollar assets.

The article by Dai Xianglong, former head of the People’s Bank of China (PBOC) and currently chairman of China’s National Social Security Fund (NSSF), echoed similar comments he made last week that Beijing has little choice but to keep buying U.S. debt.

“It is still possible for China to increase its investment in U.S. treasuries at appropriate times,” Dai wrote in the article, published in the latest issue of China Finance magazine, which is backed by the PBOC fast payday loan no faxing.

But Dai said that it was not correct to “simply describe the current situation of China’s foreign-exchange reserve management as one of falling into a ‘dollar trap.’”

The World Bank said on Thursday that the pace at which China accumulates forex reserves will slow dramatically.

The bank expects they will rise by $218 billion this year after increasing by $419 billion in 2008 and $462 billion in 2007, as outward foreign direct investment increases and due to losses on foreign assets, repatriation of profits and “hot money” outflows.

Dai was governor of the PBOC from 1998 to 2002. The NSSF that he now heads is a fund of last resort for China’s patchwork of underfunded provincial pensions schemes.

(Reporting by Jason Subler and Zhou Xin; Editing by Ken Wills)

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CALGARY–TransCanada Corp. shares fell six per cent in Wednesday trading on the TSX after the company announced a $1.6 billion financing and said it will acquire full control of the Keystone Pipeline System, a major oil delivery project.

TransCanada shares fell $1.99 to $31.07 on the Toronto Stock Exchange, as investors worried about the share dilution effects of its financing, which will be used in part to pay for the Keystone buyback.

Late Tuesday, the Calgary company said it will pay US$500 million and assume US$200 million of short-term debt to buy out its partner, U.S. oil giant ConocoPhillips (NYSE: COP).

The deal, which is slated to close in the third quarter, means TransCanada will be forced to spend $1.7 billion more on building the pipeline through 2012.

"This acquisition represents a unique opportunity for TransCanada to become the exclusive owner of an important oil transmission system that will play a vital role in transporting a growing supply of Canadian crude oil to the largest refining markets in the United States for decades to come," said Hal Kvisle, TransCanada president and chief executive.

"We believe the significant commercial support Keystone has received to date highlights the value it will create for our customers and our shareholders."

The deal follows TransCanada's acquisition of a 29.9 per cent stake in Keystone from ConocoPhillips last year, which left the U.S. company with a 20.1 per cent stake.

It originally owned 50 per cent of Keystone, but has been lowering its stake to use its cash for other oil and gas projects.

When completed, Keystone will be one of the largest oil delivery systems in North America with the capacity to ship 1 credit scores.1 million barrels a day of oilsands crude from Northern Alberta to refineries in the United States.

Keystone has secured long-term commitments for 910,000 barrels per day for an average term of approximately 18 years which represents 83 per cent of the commercial design of the system.

In the financing, the country's largest natural gas shipper said a syndicate of underwriters led by RBC Capital Markets, BMO Capital Markets and TD Securities has agreed to purchase the shares for $31.50 per share.

The underwriters also have the option to purchase as many as 7.62 million additional common shares at the same price for potential proceeds of another $240 million.

TransCanada currently has about 620 million shares outstanding.

The US$12-billion Keystone pipeline will eventually ship oil from Alberta to the lucrative U.S. Gulf Coast market, where refineries are able to handle heavy oilsands feedstock.

Calgary-based TransCanada is involved in several major new projects to expand its transmission system, including the Keystone oil pipeline, the North Central Corridor expansion and three large-scale, gas-fired power plants that will be completed and placed into service over the next four years.

It also recently won a contract to build, own and operate a US$320-million pipeline that will run from a liquefied natural gas terminal on Mexico's Pacific coast to the city of Guadalajara, and it will collaborate with ExxonMobil Corp. (NYSE: XOM) on a US$26-billion natural gas pipeline in Alaska.

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U.K. Business Secretary Peter Mandelson called for greater efforts to boost employment and the economy in the European Union, including a proposal for 50 billion euros ($70 billion) of loans to help companies.

Mandelson urged the 27-nation bloc to implement up to 1,600 rules aimed at cementing a single market and to fight pressure from national governments to protect their economies. He will outline Britain’s priorities as the EU prepares to appoint a new European Commission this month.

“No matter how badly a downturn might tempt us to think and act in national silos, the next five years will in fact demand an even greater Europeanism from us,” Mandelson said in Berlin today, according to his office.

Later today, Mandelson will meet with German Economy Minister Karl-Theodor zu Guttenberg, who helped broker the sale of General Motors Corp.’s Opel unit in Germany to Magna International Inc.

The British government is working to protect 5,500 jobs at GM’s Vauxhall factories in Luton and Ellesmere Port and has kept open the possibility of granting state aid. Mandelson made no comment about the issue in his prepared remarks.

The U.K. backs Commission President Jose Barroso and his pro-business stance for a second five-year term at the helm of the EU’s executive arm cash till payday advance. Barroso has pledged “ambitious” European action to halt the recession and fight global warming.

“Europe must not retreat in on itself, but instead improve its competitiveness through an integrated approach to Single Market and industrial policy,” U.K. Prime Minister Gordon Brown said in a letter released by his office to Barroso.

EIB Lending

Mandelson said the European Investment Bank should lend 50 billion euros over the next two years to help companies and fund infrastructure projects. He also called for renewed efforts to slash red tape costs for small companies by 10 billion euros.

The EU should also map out clear strategies for services industries, renewable energy and digital industries, Mandelson will say.

Barroso’s bid for a second term got a lift in weekend elections that made his center-right allies the largest party in the EU Parliament, which has to approve the appointment.

The center-right group known as the European People’s Party got 263 out of the total 736 seats in the European Parliament. The Socialists won 161 seats, the Liberal Democrats 80 and the Greens 52.

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