Prosecutors in the case against Bernard Madoff on Monday submitted 113 victim statements to the New York judge that will preside over the disgraced financier’s sentencing.
The statements were emotional, blaming Madoff for ruining lives and wiping out entire life-savings.
Madoff, 70, who masterminded the biggest Ponzi scheme in history, is due to be sentenced June 29. The statements were addressed to to Judge Denny Chin of the Southern District of New York.
Madoff has been held in the Metropolitan Correctional Center in lower Manhattan since March, when he pleaded guilty to 11 criminal counts, including fraud, money laundering and perjury. He faces a potential 150-year sentence in federal prison.
"At the age of 89, I find myself and my wife (86) devoid of future hope," said one victim. "I find it hard to believe what he did to us and…all the charities affected by this Bastard."
Another victim said she and her husband had their entire life savings invested with Madoff.
"I often feel as if life is futile," the victim, who said she was a mother of three, said in a statement default payday loan. "Why bother to do ‘the right thing’ when it doesn’t mean anything?"
Eight of the victims requested to speak at the sentencing later this month, including one, who said she had known Madoff personally for 20 years.
"My family and I have lost everything," she wrote.
Thousands of investors were victimized by Madoff’s massive, long-running scheme, with losses in the billions of dollars. Investigators are still tallying up the number of victims and the amount of the money that was stolen.
Investigators are also seizing and itemizing Madoff’s assets - including those belonging to his wife Ruth - for liquidation. The assets will be used to pay back burned investors.
Attorneys for Madoff could not immediately be reached for comment.
Americans saw $1.3 trillion of wealth vaporize in the first quarter of 2009, as the stock market and home values continued to decline, according to a government report released Thursday.
Household net worth fell to $50.4 trillion, according to the flow of funds report by the Federal Reserve. Americans’ stock holdings plunged 5.8% to $5.2 trillion and mutual funds holdings slid 4.1% to $3.3 trillion, while their home value dropped 2.4% to $17.9 trillion.
The nation’s households have now seen their net worth shrink for seven straight quarters. Family net worth had hit an all-time high of $64.4 trillion in the second quarter of 2007, thanks to the housing bubble and a strong stock market.
"It’s more of what we saw late last year," said Scott Hoyt, senior director of consumer economics at Moody’s economy.com. "Consumers are cutting back on their borrowing to some extent, but the decline in value of assets is swamping that."
The results are not surprising. The Standard & Poor’s 500 index dropped 11.7% in the quarter, while home values fell 14.2% from the prior-year period, according to Zillow.com.
Though Americans are getting poorer, the rate of decline is slowing. Last year, households’ net worth dropped by a record $10.9 trillion, or 17.4%. It ended the year at $51.7 trillion. The fourth-quarter loss of $4.9 trillion, or 8.6%, was the largest quarterly plunge since the Fed started keeping records in 1951.
Americans also continued to pull back on their borrowing. Household debt fell at an annual rate of 1.1% to $13.8 trillion for the first quarter, after contracting 2% in the fourth quarter of 2008. That was the first time household debt shrank.
During the white-hot housing boom, Americans piled on debt. Between 2002 and 2006, annual household borrowing grew at double-digit rates.
Such debt levels are unsustainable and had to come down to restore Americans’ household financial health, said Amir Sufi, finance professor at the University of Chicago. This contraction is a major factor behind the recession.
"Household deleveraging has to happen even though it’s painful," Sufi said unsecured personal loans with bad credit.
Mortgage borrowing remained flat, after falling for the previous three quarters. Consumer credit, however, dropped at an annual rate of 3.5%, the largest dip in at least 35 years, as people slowed their use of credit cards and auto loans.
The plunge in consumer credit concerns Paul Wachtel, economics professor at New York University’s Stern School of Business. It shows that either consumers are not able or willing to borrow.
"The ability of the consumer sector to start spending again is what will pull the economy out of the recession," he said.
Homeowners’ equity also fell to a record low 41.4% as values continued their plunge. More than one in five homeowners now owe more than their houses are worth, according to Zillow.com.
Businesses also decreased their borrowing for the first time since 1992, slipping 0.3% for the quarter. The federal government, however, pumped up its borrowing by 22.6% in an attempt to stabilize the economy. Federal debt grew by 39.2% in the third quarter of 2008 and 37% in the fourth quarter.
If the stock market comeback continues, though, Americans will likely see their net worth increase in the second quarter, said Michael Englund, chief economist at Action Economics. Financial assets, including stock holdings, account for 80% of a household’s wealth. The S&P 500 is up 17.7% so far this quarter.
"The gains in this quarter should more than reverse the declines of the first quarter," Englund said.
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It’s starting to look like the spring awakening in bank stocks may not be enough to save the CEOs of America’s biggest troubled banks, Citigroup’s Vikram Pandit and Bank of America’s Ken Lewis.
A top banking regulator is agitating for Pandit’s removal, according to a report Friday in the Wall Street Journal. The clash between Pandit and Sheila Bair, the head of the Federal Insurance Deposit Corp., comes just a month after restive shareholders at Charlotte-based BofA (BAC, Fortune 500) stripped CEO Lewis of his chairmanship.
The FDIC told CNN it had no comment on the story. Citi (C, Fortune 500) says it stands behind Pandit, who took over as CEO at the end of 2007 and has spent much of his tenure trying to clean up the messes left by his predecessors Chuck Prince and Sandy Weill.
In a statement to CNN Friday, Citi chairman Dick Parsons said the company was "confident in our management."
BofA has similarly endorsed Lewis, and the three-month-long rally in bank stocks has quieted talk of wholesale government takeovers of these firms.
But given the massive investor losses at these banks and the failure of their top managers to anticipate the industry’s meltdown last year, few would shed a tear at either executive’s departure.
"These companies are sort of the poster children for the excesses that created this crisis," said Eric Jackson, an activist investor and managing member of Ironfire Capital in Naples, Fla. "I think it’s appropriate for the regulators to push for substantial changes in management and on the boards." Jackson’s firm does not own shares of either bank.
Citi and BofA have been the two biggest bank recipients of federal aid since the financial crisis erupted last fall. Together they have taken some $500 billion in federal aid, the lion’s share of which has come in the form of federal guarantees of their troubled assets.
Recently, both firms have shown some signs that they have broken out of what earlier this year looked like terminal decline.
Shares of Citi have tripled since Pandit surprised Wall Street by saying Citi was on track for its first quarterly profit since mid-2007. BofA’s stock price has quadrupled during the same time frame.
Both banks went on to report better-than-expected first-quarter results in April. Those surprises further boosted the shares even as many observers warned the numbers were padded by one-time gains and legal but incredible accounting maneuvers, such as profits tied to the declining value of the banks’ own debt.
The hopes of a banking sector recovery only intensified after regulatory stress tests showed banks didn’t need that much more money quick payday loan. The findings helped spur a surge of capital raising from the private sector that has bolstered the balance sheets of many big institutions.
But while investor fears of a giant bank failure have dissipated, regulators haven’t lost sight of the problems ahead. Though the 10 of the 19 biggest banks that had to raise $75 billion in capital after the stress tests had no trouble doing so, future loan losses will surely dwarf that figure — which means further capital raises could be necessary.
"There’s a desire to make sure the banks don’t get complacent," said Douglas Elliott, a former investment banker who is an economic studies fellow at the Brookings Institute in Washington. "Until we have a better grasp on exactly how bad the losses are going to be, it’s important to be cautious."
Even before the FDIC’s push to oust Pandit came to light, it was clear that policymakers intended to shake up the big banks.
BofA named a new chief risk officer this week after regulators questioned the management failures that led BofA into its current morass. Citi shook up its own board earlier this year, with former Time Warner (TWX, Fortune 500) chief Parsons replacing Win Bischoff as chairman and Clinton administration Treasury Secretary Robert Rubin stepping down. (Time Warner is the parent company of Fortune and CNNMoney.com.)
Still, skeptics such as Jackson say a change here and there won’t be enough, given the size and visibility of the two big banks.
"How can you have such massive failures without there being accountability?" said Jackson. "Citi and BofA are so large, so critical, they’re almost a case unto themselves."
And some observers believe that even management changes won’t be enough, and BofA and Citi will have to be broken up.
Vernon Hill, a longtime bank executive who is now chairman of investment firm Hill-Townsend Capital in Bethesda, Md., notes that a recent national customer satisfaction survey showed Citi was either last or tied for last in each of the five regions in which it does retail banking.
"Citi has been dysfunctional as long as I can remember," said Hill, who owns "only minor amounts" of both stocks. "How many times are we going to let these guys get in trouble before we put an end to it?"
CNN’s Amy Sahba contributed to this report.
Financials helped send the Toronto stock market sharply higher today after four of the big Canadian banks handed in quarterly earnings reports that beat expectations.
New York markets were also higher on relief from the government's latest bond auction and durable goods data.
Toronto's S&P/TSX composite index charged ahead 250.21 points or 2.5 per cent to 10,392.37 with key support also coming from energy stocks as signs of higher oil demand pushed crude prices higher.
The TSX Venture Exchange was up 12.17 points to 1,105.16 while the Canadian dollar advanced 0.37 of a cent to 89.7 cents US.
The Dow Jones industrial average was up 103.78 points to 8,403.8.
The Nasdaq composite index added 20.71 points to 1,751.79 while the S&P 500 index rose 13.77 points to 906.83.
The TSX financial sector was 2.75 per cent higher.
"The main driver in the financial sector is the earnings from the banks and their numbers were pretty much across the board above expectations – although there were some hiccups with underlying issues with CIBC," said Jennifer Dowty, portfolio manager at MFC Global Investment Management.
TD Bank Financial Group (TSX: TD) said profits declined 27 per cent from a year ago to $618 million. Its shares were up $3.41 to $53.69 as the bank reported that provisions for credit losses rose to $656 million from $232 million a year ago.
National Bank (TSX: NA) shares ran up $1.80 to $51.30 after it said the relative strength of the Quebec economy helped offset charges related to asset-backed commercial paper in the second quarter, leading to a 46 per cent jump in profit to $241 million.
The Bank of Nova Scotia reported quarterly net income of $872 million, down 11 per cent from a year-ago although revenue grew 12 per cent to a record high.
Scotiabank's provision for credit losses ran up to $489 million, compared with $153 million in the second quarter of last year and its shares gained 15 cents to $37.90.
CIBC (TSX: CM) lost $51 million during the second quarter, down sharply from a $1.1 billion loss the bank handed in a year ago.
But its shares declined $2.56 to $54.47 as CIBC said the recent quarter's loss was partly attributable to a $324-million loss on structured credit activities.
Royal Bank (TSX: RY) reports results on Friday and its shares bounded ahead $1.50 to $45.50.
In the U.S., indexes lifted after solid demand at a Treasury auction eased fears that the appetite for U car insurance quote.S. debt would dry up and force the government to pay higher interest rates to entice buyers. That in turn could endanger an economic recovery by driving borrowing rates higher.
The Commerce Department reported that U.S. home sales rose 0.3 per cent in April to a seasonally adjusted annual rate of 352,000, which was lower than expectations.
The median sales price fell to US$209,700, a 14.9 per cent drop from a year earlier. Sales were down 34 per cent from April 2008.
The Commerce Department also said orders for durable goods rose by 1.9 per cent in April, more than four times the 0.4 per cent increase that had been expected.
But the government revised down its estimate for new orders in March to show a drop of 2.1 per cent, a much bigger fall than the 0.8 per cent decline previously reported.
The TSX energy sector was up 3.5 per cent as the July crude contract on the New York Mercantile Exchange rose $1.63 cents to US$65.08 a barrel as U.S. government data showed a surprise drop in last week's crude inventories.
Also, OPEC decided to maintain current production levels unchanged at the end of the cartel's meeting in Vienna.
"They said they are already seeing an increase in demand, that's very encouraging," added Dowty.
"And some of the economic numbers lends to itself that crude over the long period is going to go higher."
Canadian Natural Resources (TSX: CNQ) gained $2.77 to C$64.52 while Suncor Inc. (TSX: SU) moved up $1.65 to $38.76.
The gold sector rose four per cent as the August bullion contract moved up $5.80 to US$963.20 an ounce. Goldcorp Inc. (TSX: G) improved $1.11 to $43.17.
General Motors Corp. said today a committee of bondholders has agreed to a sweetened deal proposed by the U.S. government to erase the automaker's unsecured debt in exchange for company stock.
In addition to the 10 per cent of the stock in a newly formed GM that was originally rejected by bondholders, the new offer would give them warrants to acquire an additional 15 per cent stake at a deep discount. That would come only if they agree to support selling the company's assets to a new company under bankruptcy court protection. But it's still expected GM will seek creditor protection Monday.
GM shares were three cents lower to US$1.12.
Boeing Co. leaders say that the U.S. military’s airlift needs are growing and that a Pentagon proposal to halt future orders for the C-17 Globemaster III cargo plane is premature.
Boeing, whose defense unit is headquartered in St. Louis, is trying to rally support for the C-17 on multiple fronts — arguing that ceasing production would erode the U.S. industrial base, costing thousands of jobs at Boeing plants and those of its main suppliers. But Boeing officials also emphasize the plane’s strategic value.
"Right now, since 9/11, the airplane has been flying at about a 15 percent higher rate than was anticipated," said Donald A. Anderson, Boeing’s C-17 program manager in St. Louis. "In addition, they’re talking about rebasing troops in the United States. They’re talking about an increase in the size of the Marines Corps and the Army.
"So it seems like the airlift requirements are growing. And you need airlifters to meet those needs."
Starting with Secretary of Defense Robert Gates’ announcement in early April and continuing through last week, the Pentagon has said it can get by with the 205 C-17s that are either in service or on order. The Air Force also uses the Lockheed Martin C-5 Galaxy to transport weapon systems, cargo and personnel to overseas locations.
Republican Sen. Christopher "Kit" Bond and Democratic Sen. Claire McCaskill, both of Missouri, have written letters supporting more orders of the C-17, and Machinists Union officials have traveled to Washington to show their support for a program that supports 900 jobs in St. Louis.
"This is high political theater," said analyst Richard Aboulafia of The Teal Group in Fairfax, Va. "The bottom line is I don’t think the line is threatened. But it is up to everybody from Department of Defense to Congress to Boeing to the unions to make it look as though it were."
The Defense Department has not sought funding for the C-17 in the last three years. But Congress has stepped in to add funding for more of the $202 million planes through supplemental defense appropriations bills.
Bond and Boeing officials have asked why Gates would halt C-17 orders while there is a study under way into the military’s future air-mobility needs. The results are expected this fall.
"But yet we’re making that decision now to stop the airplane," Anderson said. "So it seems somewhat premature good credit score."
Bond said shutting down production of the C-17 is a "dangerous gamble" and warned that the U.S. can’t afford to "lose the capability to transport safely our troops and equipment to anywhere in the world."
In a letter to President Barack Obama, McCaskill said the U.S. is "literally flying the wings off these planes," and added "this is not the time to end its production, especially in light of projected global mission sets for the U.S. military."
Both legislators also have gone to bat for Boeing’s St. Louis-built F/A-18 Super Hornet, whose future was placed in limbo under the latest Pentagon spending plan.
The C-17 is assembled at a plant in Long Beach, Calif. But the cargo door, cargo ramp, landing-gear pods, nose and engine pylons are built in St. Louis.
A November 2008 report by the Government Accountability Office recommended "careful planning to avoid shutting down the C-17 line prematurely." Both Boeing and the Air Force believe shutting down and restarting production "would not be feasible or cost effective," the report found.
The GAO cited the high costs of hiring and training a new work force, reinstalling equipment to proper working condition and re-establishing a supplier base.
Boeing has delivered the C-17 to other countries, including Australia, Canada and the United Kingdom. The United Arab Emirates has announced its intent to buy four of the planes, and Qatar has ordered two and exercised an option on two additional C-17s.
But Anderson said international sales alone are not enough to sustain the C-17 line. Boeing officials say maintaining C-17 sales to the U.S. Air Force is necessary to keep the price of the planes competitive in the international market.
Defense analyst Loren Thompson of the Lexington Institute in Arlington, Va., said the C-17 is the best strategic airlifter ever built and "a very cogent case" can be made that terminating production at 205 planes would be too early. At the moment, he said, its future will be dictated by Congress.
"Here’s the bottom line to C-17," Thompson said. "If Congress doesn’t add money, there won’t be any more."
Chrysler dealers nationwide were fearing the UPS guy on Thursday.
For 789 dealerships, the man in brown came carrying an overnight letter from Chrysler LLC indicating that they are being closed as part of the automaker’s bankruptcy. Some dealers received additional phone calls from company representatives, while others discovered their fate after being contacted by reporters.
Those calls and letters informed dealers that on Thursday morning Chrysler had filed a plan with the bankruptcy court listing the 789 Chrysler, Jeep and Dodge dealers it selected to discontinue operations. Under the plan - which is still subject to review by the bankruptcy judge - the dealers have until June 9 to close their Chrysler franchises.
Frederick George, who is a partner in the Flint., Mich.-based dealership his grandfather founded in 1928, received his letter on Thursday morning. "The UPS truck came in this morning with a package," he said. "We’re upset, stunned. We were not expecting it. We thought we were pretty safe, even in the area that we’re in."
George Chrysler Jeep has 100 new Chrysler vehicles on the lot, along with 40 used vehicles. "They told us they weren’t going to give us any monetary help, but they would help us get rid of the vehicles and the parts," George recounted.
The dealership has 31 employees, and George said layoffs are imminent; the partners will also be meeting to decide the future of the business.
"We’ve been in the car business since 1928, so it’s devastating to us," he said.
James "Buddy" Jones, owner of Buddy Jones Chrysler, Dodge and Jeep in Greenwood, Miss., said he had no indication his dealership would land on the list cheap payday loans. "We are not the problem," he said. "Their investments are their own. The cars and facilities and investments are strictly our own."
Jones said that after Chrysler declared bankruptcy, he threw caution to the wind and started scaling back on his inventory. Because he had already anticipated transferring some Chrysler staff to his Ford dealership across the street, Jones believes he will land on his feet.
"Scaling back may have played into our being cut, but we made the right decision and we won’t look back," he said.
On a conference call with reporters, Chrysler executives acknowledged that they had sent letters notify the dealerships. But they did not address the lag time between the closures becoming public and the letters arriving.
"It is with a deep sense of sadness that we must take steps to end some of our Sales and Service Dealer Agreements," Steven Landry, Chrysler’s executive vice president for North American sales, said in a prepared statement. "The decision, though difficult, was based on a data-driven matrix that assessed a number of key metrics."
About half the dealerships being closed sell fewer than 100 vehicles per year, Landry said in the conference call. About 44% also sell vehicles other than Chrysler products, he added. As a result, not every business receiving a letter will be completely shuttered.
CNNMoney.com staff writer Aaron Smith contributed to this report.
Stocks rallied Thursday, bouncing back after several down sessions as investors weighed some weaker-than-expected reports with growing economic optimism.
The Dow Jones industrial average (INDU) gained 46 points, or 0.5%. The S&P 500 (SPX) index rose 9 points, or 1%. The Nasdaq composite (COMP) gained 25 points, or 1.5%.
The S&P and Nasdaq fell for three sessions in a row and the Dow fell for two of the last three sessions as investors stepped back after the earlier spring rally.
But on Thursday, investors used the recent selloff as an opportunity to dip back into stocks, particularly technology, telecom and consumer issues.
Bets that the economy is closer to stabilizing has fueled the recent rally, lifting all three major gauges by more than 30% over 9 weeks. But a few recent reports have raised worries that investors may have gotten ahead of themselves, including Wednesday’s weak retail sales report and Thursday’s surprise rise in jobless claims.
"The thinking today is that we have had a couple of bad numbers, but they are not enough to derail the perspective that conditions are not as bad as they have been and are getting better," said Phil Orlando, chief equity market strategist at Federated Investors.
"The question going forward will be whether these were random reports or an indication of a reversal," he said. "There will be other disappointing reports, but I think the trend is still toward improving data."
Government reports are due in the morning on consumer prices, manufacturing, capacity utilization and industrial production and consumer sentiment.
Company news: Chrysler said it wants to close 789 dealerships, or roughly 25% of those in business, according to a plan filed in bankruptcy court.
General Motors (GM, Fortune 500) is expected to announce Friday that it will close 1,000 to 2,000 of its dealerships, according to reports.
GM said Thursday that it has agreed to accelerate payments to its parts suppliers, as it teeters closer to bankruptcy. The automaker has until the end of the month to gain enough concessions from its creditors and union to remain viable easy to get unsecured personal loans. However, GM is not expected to meet that deadline and the company’s CEO has said that a bankruptcy is "probable."
Wal-Mart Stores (WMT, Fortune 500) reported higher quarterly earnings that met estimates on weaker revenue. The No. 1 retailer also forecast second-quarter earnings in a range that could surpass analysts’ current forecasts. Shares fell 1.9%.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by seven to three on volume of 1.52 billion shares. On the New York Stock Exchange, advancers beat decliners by two to one on volume of 2.23 billion shares.
Economy: The number of Americans filing new claims for unemployment last week surged to 637,000 from 601,000 the previous week, the Labor Department reported. The rise in jobless claims reflects the extensive layoffs in the auto industry after Chrysler filed for bankruptcy.
Economists surveyed by Briefing.com had expected 610,000 new claims.
The Producer Price index (PPI), a measure of wholesale inflation, rose 0.3% in April after falling 1.2% in March, according to a government report released Thursday. PPI was expected to rise 0.2%.
The so-called core PPI, which strips out volatile food and energy prices, rose 0.1% in the month, as expected, after holding steady in the previous month.
Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.10%, down from 3.11% Wednesday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian and European markets ended lower.
In currency trading, the dollar fell versus the euro and gained against the yen.
U.S. light crude oil for June delivery rose 60 cents to settle at $58.62 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery climbed $2.50 to settle at $928.40 an ounce.
Bank of America Corp was involved in accounting for fourth-quarter writedowns at Merrill Lynch & Co before it acquired the brokerage firm, the Financial Times reported on Thursday.
Bank of America’s chief accounting officer, Neil Cotty, was influential in determining writedowns for complex debt instruments and leveraged loans among other assets at Merrill, people familiar with the matter told the newspaper.
Charlotte, North Carolina-based Bank of America bought Merrill Lynch in January and sought government assistance to complete the deal after learning of massive losses at Merrill in December fast cash.
Merrill Lynch said in February it lost $15.84 billion in the fourth quarter, about $533 million more than the loss estimated by Bank of America in January.
(Reporting by Elinor Comlay; Editing by Gary Hill)
Wal-Mart Inc. and Federal Express are using solar heating systems manufactured by Conserval Engineering Inc. Sheraton Hotels selected EnviroTower Inc. for its chemical-free cooling tower technology. Meanwhile, several U.S. utilities are deploying energy-management software from Lixar SRS Inc. All three cleantech ventures are from Toronto.
If "made-in-Ontario" clean technologies are good enough for the above-mentioned customers located outside the province, then why not purchase these same energy-saving, environment-friendly technologies here at home?
That’s the question Céline Bak, a partner with management consultancy Russell-Mitchell Group, believes the Ontario government should be asking as it tries to position the province as a leader in green technology development and deployment.
Bak spearheaded a report released last month that, for the first time, came up with an inventory of clean technology companies in the province. A total of 110 ventures were identified, nearly half of them based in the Greater Toronto Area. They’re mostly small private companies with little, if any, revenues. Many have commercial product and limited sales, but are lacking the capital to support breakout growth.
To its credit, the Ontario government has done a decent job of funding demonstration projects that give some of these companies a chance to showcase their products. Bak says the one-off demonstrations are helpful, but government can play a much more valuable role as procurer of these technologies.
"It’s moving from government as funder of demonstration projects to government as smart procurer," she says.
But Bak goes one step further. She’s proposing that all annual energy savings from the large-scale deployment of these technologies in government buildings, schools, hospitals and other public assets be set aside in an Ontario Clean Technology Commercialization Fund.
The money in such a fund, which could easily expand to hundreds of millions of dollars, could be reinvested through an independent third party in earlier-stage Ontario cleantech companies hungry for venture capital to support product commercialization and growth.
"This proposal is, in effect, a `local savings and loans’ strategy," according to a one-page brief Bak prepared with Kevin Jones at the Ontario Centre for Environmental Technology Advancement instant payday loan. But the two are under no illusion it will be an easy undertaking. "Implementing this proposal would require significant political will."
Got that right. Still, it’s a compelling funding model that deserves serious consideration.
One obvious concern any politician would have relates to the idea of governments picking winners. The public has rightly demanded that procurement be done in an open, transparent manner that promotes competition and seeks the greatest value for every dollar of taxpayers’ money. There’s also the protectionist aspect of such a policy and the possible retaliation from other jurisdictions.
At the same time, there’s a general appreciation that small, innovative companies often don’t have enough capital or sophistication to participate in traditional procurement processes. Indeed, some U.S. jurisdictions have small-business laws that allow a certain amount of procurement from local companies with revenues below, say, $50 million a year. "We’ve been talking about that law in Canada for ages," says Bak.
So, let’s assume it’s a path worth taking. How, then, do we do it?
The first step, argues Bak, is a comprehensive assessment of the clean technology companies in Ontario and an independent validation of what they have to offer. Which ones are unique and have no obvious competitors? In which product categories are more than one Ontario-based company capable of doing the job? The government would also have to identify and prioritize projects to get a clear sense of its needs.
If a local company meets a need and has no obvious competitor, then direct procurement may be justified. If this company has one or more local competitors, then a locally focused competitive tender is required. If no local company meets the need, then a traditional procurement process is used.
"It’s an idea that requires some work," Bak admits.
There’s no denying that using the massive purchasing power of government to support local innovation could go a long way toward putting Ontario cleantech companies on the global map. Likewise, reinvesting the government’s resulting energy savings in early-stage companies is a sensible way to close the loop.
Is it a good idea? Or is it begging for trouble? Please, share your thoughts.
Tyler Hamilton’s Clean Break column appears Mondays. Email him at thamilton@thestar.ca.
WASHINGTON–The deepening recession caused worker productivity to slide by a worse-than-expected amount in the fourth quarter while wage pressures shot up at the fastest clip in two years.
The Labor Department said Thursday that productivity, the amount of output per hour of work, fell at an annual rate of 0.4 per cent in the October-December period. At the same time, unit labor costs were surging by 5.7 per ent.
While the combination of falling productivity and rising wage pressures would normally raise alarm bells about inflation, the threat of any resurgence of price pressures is seen as remote given the severity of the current recession.
The 0.4 per cent decline in productivity was far weaker than the 1.5 per cent increase that economists had expected. It represented a revision from the government's initial estimate a month ago that productivity in the fourth quarter was rising at an annual rate of 3.2 per cent.
The sharp reduction reflected the fact that the overall economy was contracting by a much larger amount in the fourth quarter than the government initially thought. The Commerce Department reported last week that the gross domestic product, the economy's overall output of goods and services, fell at a 6.2 per cent pace in the fourth quarter, the worst showing in a quarter century and much worse than the 3.8 per cent drop originally estimated.
Since productivity is the amount of output per hour of work, the big decrease in output translated into a sharp fall in productivity. And even with the massive layoffs that have been occurring in recent months, output was falling at a faster pace than companies were slashing their payrolls. That meant labour costs per unit of output showed an increase.
The 5.7 per cent rise in unit labor costs was the largest quarterly gain since a 9.6 per cent surge in the final three months of 2006 totally free credit score.
For all of 2008, unit labor costs rose by a much more modest 0.9 per cent, down from a gain of 2.7 per cent in 2007. Economists said the decrease in the annual figure was more representative of the trend in labor pressures currently.
They do not expect wage pressures to represent an inflation threat for some time given the current environment in which workers are more worried about keeping their jobs than about demanding higher wages.
For the entire year, productivity rose by 2.8 per cent, double the 1.4 per cent rise in 2007.
Productivity is considered the key ingredient needed for rising living standards because it allows businesses to pay their employees higher wages financed by their workers' increased output. That means companies can increase employee compensation without increasing the prices of their products which could boost inflation.
The severe recession, which has triggered massive layoffs, is keeping a lid on wage pressures and economists believe that will not change until a sustained rebound has started, something they don't see occurring for many more months.
Just this week, more companies announced they were cutting jobs. United States Steel Corp., the largest U.S.-based steel maker, said it was temporarily idling some operations in Canada, a move that will affect 1,500 workers, due to slumping demand for steel.
Tyco Electronics Ltd., which makes electronic components, and Diageo PLC, the world's largest producer of alcoholic drinks, also announced further layoffs.
In its latest survey of economic conditions, the Fed reported Wednesday the economy deteriorated further in the last two months and that business people expect no improvement until late this year at the earliest.
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