Brazil created a record number of jobs for the month of January, increasing the odds that policy makers may start raising the benchmark interest rate as early as next month to keep inflation in check.
Latin America’s biggest economy created 181,419 jobs last month, led by manufacturers, compared with a loss of 101,748 jobs a year earlier, the Labor Ministry said in a report today in Rio de Janeiro.
Yields on interest rate future contracts due January 2011, the most traded on Sao Paulo’s BM&F exchange, rose 1 basis point, or 0.01 percentage point, to 10.25 percent. Traders bet the central bank will raise rates by at least a quarter point next month, according to Bloomberg estimates based on rate futures.
“This figure clearly reinforces the view that the economy is expanding at a strong pace,” Pedro Tuesta, senior economist for Latin America at 4Cast Inc., said in a phone interview from Washington. “It increases the odds that the central bank may start raising rates in March.”
According to the median forecast in a central bank survey of about 100 analysts published yesterday, faster economic growth, fueled by domestic demand, will prompt policy makers to raise the benchmark interest rate in April from a record low 8.75 percent for the first time since September 2008 to keep inflation in check.
“Brazil is on track to reach an all-time high in job creation in 2010,” Labor Minister Carlos Lupi told reporters. “If there is an interest rate increase this year, it will be very small,” Lupi said.
Brazilian companies will continue to hire more workers throughout the year, driven by forecasts that the country will post “strong” growth in 2010, Aurelio Bicalho, an economist at Itau Unibanco, Brazil’s biggest non-state bank, said in an e- mailed comment.
Gross domestic product will expand 5.8 percent this year, after growing 0.2 percent last year, according to central bank estimates.
The government-registered job creation number is a balance of posts created minus job dismissals. Registered jobs, or so- called formal work, assure employees a range of benefits such as unemployment insurance, bonuses and retirement payments by the government.
It is hard to tell whether the federal judge in the North Face vs. South Butt trademark infringement lawsuit is laughing.
And discerning whether that’s a smile on his face could be a clue to how the judge eventually rules.
Already, the case has been rife with humorous jabs from tiny Ladue-based South Butt LLC, which claims its clothing line is a protected parody of the popular North Face brand. In South Butt’s written response to the allegations in early January, attorney Al Watkins struck a jokey tone by including a photo of South Butt’s 18-year-old founder, Jimmy Winkelmann, and describing him — apparently for the judge’s benefit — as "a handsome cross between Mad Magazine’s Alfred E. Newman [sic] of ‘What Me Worry’ fame, and Skippy the Punk from the Midwest."
Watkins also noted how North Face’s decision to sue has resulted in a financial boon for his client. "But for the actions of North Face," he wrote, "the South Butt saga might have been relegated to local Friday fish-fry banter."
The question is whether Missouri Eastern District Judge Rodney W. Sippel finds any of this funny. An answer, of sorts, arrived Tuesday.
Sippel, 53, an appointee of President Bill Clinton, issued an order that opens with a quote from humorist Franklin P. Jones: "It’s a strange world of language in which skating on thin ice can get you into hot water." The judge then ruled against South Butt’s request that the lawsuit be dismissed. The judge also noted he did not find it "implausible" that South Butt’s logo could cause confusion or dilution of North Face’s trademark. So the case will go forward.
But at the end of his order, Sippel warned South Butt’s attorney against making requests with little merit — which also could be read as a warning to be more serious. "Although this filing may not reach the level of frivolity, it approaches the line," Sippel wrote.
That might sound like a rebuke.
But Watkins, South Butt’s attorney, did not see it that way.
"I’m very pleased that the judge has adopted a tenor and demeanor that is not inconsistent with that which we have employed in this case," Watkins told the Post-Dispatch on Wednesday no fax payday loans.
The South Butt was started in 2007 by Winkelmann as a way to spoof a status symbol that crowded the hallways of his former school, Chaminade College Prep. He began selling T-shirts, fleeces and shorts at Ladue Pharmacy, which handles the South Butt products’ marketing and manufacturing details. North Face sued Winkelmann and the pharmacy over the South Butt name in December.
South Butt has responded with humor over the dispute, both in its press releases and its legal filings.
Sandy Davidson, lawyer and professor of communications law at University of Missouri Columbia, said judges sometimes employ humor — and in a case like this, that could be good for South Butt.
Davidson pointed to the trademark case of Hormel, maker of Spam, suing over the puppet Spa’am, Miss Piggy’s guard in the "Muppet Treasure Island" movie. An appeals court sounded like it was having some fun when it shot down Hormel’s complaint.
"In a recent newspaper column," the court wrote, "it was noted that ‘In one little can, Spam contains the five major food groups: Snouts. Ears. Feet. Tails. Brains.’ … (One) might think Hormel would welcome the association with a genuine source of pork."
Davidson said she could see how Watkins might be "trying to invite the court to use banter that other courts have used."
Now, North Face and South Butt face court-ordered mediation in March, and, if that fails, will be back in Sippel’s courtroom.
But Watkins said the South Butt case was inherently humorous.
"No matter how much you try to suppress the levity of the issues," he said, "it is going to spontaneously emerge and spontaneously emerge often."
Health care stocks rallied Tuesday in anticipation of a Republican victory in the Massachusetts Senate race. Well, now it’s official. Scott Brown has defeated Martha Coakley.
So what’s next for health care stocks? Is the Obama reform plan dead? And if so, can health care shares continue to gain ground?
Most health care stocks took a breather Wednesday. But they didn’t fall as much as the broader market did. So this looks more your classic case of buying on speculation and selling on the actual news.
Managed care companies such as Humana (HUM, Fortune 500), UnitedHealth (UNH, Fortune 500) and WellPoint (WLP, Fortune 500) would appear to have the most to gain if Brown’s victory means little change to the nation’s health care system.
These stocks performed poorly in the early part of last year — even as the broader market started to recover — due to fears about the impact a so-called public option or other plans to overhaul how Americans get health insurance would have on profits at the big HMOs.
Major pharmaceutical firms like Pfizer (PFE, Fortune 500) and Merck (MRK, Fortune 500), as well as medical device manufacturers like Medtronic (MDT, Fortune 500), also stand to benefit if gridlock reigns supreme in the nation’s capital. Investors were worried last year that reform might have led to lower drug prices and a hefty tax on medical equipment makers.
But health care stocks have been on a tear for the past few months as it became increasingly clear that Congress would probably not pass a bill that led to a drastic overhaul of the nation’s health care system. So for health care bulls, Brown’s victory is just icing on the cake.
"The Massachusetts election results confirm our view that health care reform will either be watered down or not passed at all. Generally, that’s favorable for the sector," said David Song, a health care stock analyst with Rockefeller & Co., a wealth management firm in New York.
The Health Care Select SPDR (XLV), an exchange-traded fund that owns most of the big drug, biotech, medical device and health insurance stocks, is up nearly 20% since the start of November. The S&P 500, by way of comparison, is up about 10%.
In fact, this Health Care ETF was up 4% in just the past week, a period when the overall market was flat.
Winners and losers
Charles Fernandez, president of Fairholme Capital Management, a Miami-based investment firm that runs the Fairholme fund, said that he thinks that health insurers and drug companies still have room to run. The fund owns shares of insurers Humana and WellPoint, as well as pharmaceutical firms Pfizer and Forest Laboratories (FRX).
Fernandez said that even if health care reform isn’t completely dead, that shouldn’t be a significant concern to investors.
It’s possible that the House of Representatives could try and pass the Senate version of the heath care reform bill before Brown is sworn in, he said. But that $871 billion bill, passed on Christmas Eve, does not include the controversial public option.
So he argues that health insurers wouldn’t be hurt if this became law. What’s more, the Senate bill calls for an expansion of Medicaid, which should mean more people would have access to medication us fast cash.
"The big pharma firms would be winners because more people will be insured. As more are insured, more prescriptions would be issued," Fernandez said.
Song said biotechs are another group that stand to gain if there is little or no reform from Washington. There have been some calls to include rules allowing more competition for so-called biologic drugs from generic makers. That, in theory, would lead to lower prices.
The Senate bill includes a provision giving biotechs a 12-year period of exclusivity before generics are made available. The Obama administration had been pushing for a shorter window of protection for biotechs.
Still, not all health care investors have reason to cheer Brown’s victory. Both Song and Fernandez said that a broader health care reform bill would have been a big boost to companies that operate hospitals.
That’s because hospitals would have fewer bad debt expenses if health insurance was available to a wider swath of the population. Now, hospitals are either faced with the status quo, or at best, an increase in lower-paying Medicaid patients.
With that in mind, shares of Tenet Healthcare (THC, Fortune 500), the nation’s second largest operator, fell 3.5% Tuesday and were down another 3.5% Wednesday afternoon. Other hospital operators were hit even harder Wednesday: Community Health Systems (CYH, Fortune 500) fell 5% while Universal Health Services (UHS, Fortune 500) fell nearly 7%.
Forget politics. Focus on profits.
To be sure, Brown’s victory does not mean that health care issues will no longer be discussed on Capitol Hill. But Wall Street’s attention may turn more to growth prospects over the next few years as opposed to day-to-day moves based on political headlines. That means opportunity for long-term investors.
"The noise isn’t gone. Assuming reform is dead, it’s not dead forever. We still have an uninsured population that’s not going away," said Sabrina Carollo, a research analyst with Ariel Investments in Chicago.
"But there are companies which would have limited exposure to negative aspects of potential reform. Now the focus should be on the availability of healthcare increasing globally due to favorable demographics, " she added.
In addition to an aging population that will require more medical care, Carollo points out that emerging markets such as China are becoming wealthier. That should lead to lucrative new markets opening up for health care companies.
Carollo said she is looking more for diversified health care companies that can take advantage of these trends. Health care giant Johnson & Johnson (JNJ, Fortune 500) is one such company her firm owns. Another is Baxter (BAX, Fortune 500), a firm that is involved in both the biotech and medical supplies businesses.
Will those stocks really be the best bets over the long-term? That remains to be seen. But it’s refreshing that investors should soon be able to finally have a health care debate about fundamentals instead of politics.
Heartland Bank sold its ownership in Heartland Payment Systems 10 years ago, but the Clayton-based bank didn’t quite escape involvement in the payment company’s massive computer security breach.
A $60 million settlement announced last week has the bank acting as a middle-man, passing settlement and fine money from the payment company to Visa, the credit card company, and other companies that issue credit cards.
A year ago, computer hackers broke into Heartland Payment’s computer system, compromising 130 million credit card accounts. Credit card issuers across the country, including Heartland Bank, replaced the compromised credit cards for customers.
Heartland Payment Systems, based in New Jersey, processes credit card payments for small and mid-sized merchants. Heartland Bank helped found the company in 1997, but sold its ownership in 2000.
However, Heartland and KeyBank of Cleveland remained as bank "sponsors" of the payment company. When Visa imposed a $780,000 fine, Heartland Bank and KeyBank paid it and collected the money from the payment company, according to a filing by the payment company with the Securities and Exchange Commission.
In the settlement, the payment company will pay up to $60 million to reimburse credit card issuers that absorbed costs because of the security breach. The payment company intends to borrow $53 million of that.
The settlement, if finalized, would let Heartland Bank, KeyBank and the payment company off the hook for any claims resulting from the hacking incident. Heartland Bank executives could not be reached for comment. The privately held bank had $967 million in assets as of September, ranking it a mid-sized player in the St. Louis banking market. It earned $1.7 million in profit in the first nine months of last year.
In a filing with the SEC in November, KeyCorp, KeyBank’s parent company, said it sponsored Heartland Payment’s participation in Visa and MasterCard. KeyBank said Heartland Payment had indemnified it against losses, but that KeyBank could face "significant" costs if the payment company can’t pay.
Burlington Coat Factory will set up shop in the former Mervyn’s store in Elk Grove in the spring, Elk Grove Economic Development Corp. officials said Friday.
The New Jersey-based chain of 414 discount department stores opened a new store last March in a former Target store at County Fair Fashion Mall in Woodland.
The Elk Grove store will be located in the Marketplace 99 shopping center at Bond Road and Highway 99 and will employ about 70 people payday loans guaranteed no fax.
Burlington Coat Factory entered this market in 2001 with a store in south Sacramento on Florin Road.
Burlington Coat Factory also has a store in Citrus Heights, located in a former Furniture World.
Consumer outrage about AT&T’s 3G service for iPhones is boiling over, but the dropped calls and spotty service reflect a greater lack of foresight in the wireless industry.
Analysts say AT&T’s problems would have happened on any network that carried Apple’s (AAPL, Fortune 500) iPhone because of the overwhelming amount of data downloaded by iPhone users. Over the past three years, AT&T’s data traffic increased 5,000% because of the iPhone.
"The challenges that AT&T has are being faced by a lot of operators around the world: Very rapidly growing usage coupled with dense populations," said Daniel Hays, wireless expert and partner at consultancy PRTM. "Would it have been different on Verizon? Probably not."
AT&T accurately states that it has the nation’s fastest 3G network but it "probably bit off more than it could chew," said Doug Helmreich, program director at consultancy CFI Group. "Now some of their customers are paying the price."
IPhone users in New York and San Francisco in particular have been up in arms about frequent service interruptions. Earlier this month, AT&T’s head of mobility, Ralph de la Vega, admitted at an investors’ conference that the company’s service in those two cities was "below our standards."
It’s not just New York and San Francisco iPhone users who are grumbling. An annual Consumer Reports study recently rated AT&T (T, Fortune 500) the worst in customer satisfaction in 19 cities across the country. (Rival Verizon Wireless rated No. 1 in the study.)
In nearly three-quarters of the surveyed areas, AT&T was rated lowest for availability of service, frequency of dropped calls and quality of voice service.
Verizon vs. AT&T
Verizon (VZ, Fortune 500) has had a field day at AT&T’s expense.
"There’s a map for that" commercials have poked fun at AT&T’s smaller 3G footprint. And that has helped Verizon take market share, according to Piper Jaffray.
But studies show that AT&T’s network is actually faster than Verizon’s, and Verizon’s ad campaign may be a bit misleading.
Four recent independent studies from wireless industry analysis firms Global Wireless Solutions and Root Wireless, investment bank Piper Jaffray and tech blog Gizmodo all concluded that AT&T’s 3G network was the fastest in the United States.
"We drove millions of miles across the country, and our data support AT&T’s claim that it has the fastest 3G data network," said Global Wireless CEO Paul Carter.
The map that Verizon shows in its ads is correct, but AT&T’s 3G network still covers nearly 80% of the U.S. population, said Carter. And AT&T’s non-3G coverage is also broader than its 3G network.
With that kind of pedigree, analysts say AT&T was likely the best-equipped network to handle the iPhone.
"For Verizon … we still wonder if the network has the capacity and backhaul to support a device with an adoption curve of the iPhone," said Piper Jaffray analyst Chris Larsen in a client note.
Perception vs. reality
AT&T admits that it has had problems keeping up with the data demands of iPhone users, which has prompted the company to accelerate scheduled improvements in its network.
"There’s more work to be done and a sense of urgency to do it, but we feel like we’re on the right track with our investments," said Fletcher Cook, spokesman for AT&T.
In the next few years, AT&T said it would double its network speed, and Cook said AT&T has already improved overall network quality by 25%. The company has also deployed more than 20,000 Wi-Fi hotspots across the country, which it says may help alleviate stress on its 3G network.
PRTM’s Hays applauded the Wi-Fi solution and AT&T’s dedication to improving its network, calling them "critical levers in addressing AT&T’s network performance issues." He expects AT&T to go even further, perhaps by integrating tiered data plans that would force iPhone users to pay for the data they download.
Still, perception has hurt AT&T.
AT&T’s network is the No. 1 hangup for people who are in the market for an iPhone, according to a CFI Group study. The company’s woes have even become the butt of jokes on late-night TV.
"It was reported this week that Google would soon launch its own cell phone as a challenge to the iPhone," said "Saturday Night Live’s" Seth Meyers on Dec. 19. "Also a challenge to the iPhone? Making phone calls."
The building frustrations led some angry consumers to take matters into their own hands. "Operation Chokehold," which took place on Dec. 18, was an attempt to overload AT&T’s network by running data-intensive apps to try and send a message that consumers "are sick of their substandard network." The ploy failed.
"Unfortunately for AT&T, when it comes to network quality, perception is reality and right now Verizon has a more positive public perception," said Larsen. "If AT&T can continue to show improvement in network throughput, it may blunt some of the impact."
WASHINGTON–The U.S. economy grew at a 2.2 per cent pace in the third quarter as the recovery got off to a weaker start than previously thought. But all signs suggest the economy will end the year on a stronger footing.
The commerce department’s new reading on gross domestic product for the July-to-September quarter was slower than the 2.8 per cent growth rate estimated a month ago. Economists had predicted this figure would remain the same in the final estimate of the quarter’s GDP – the value of all goods and services produced in the United States.
The main factors behind the downgrade were that consumers didn’t spend as much, commercial construction was weaker, business investment in equipment and software was softer and companies cut back more on their stockpiles of goods.
Even so, the economy managed to return to growth during the quarter, after a record four straight quarters of decline. That signalled that the deepest and longest recession since the 1930s had ended and the economy had entered a new fragile phase of recovery.
Despite the lower GDP reading, many analysts still think the economy is on track for a better finish in the current quarter.
Tuesday’s report showed consumer spending grew at a 2.8 per cent pace, slightly weaker than the 2.9 per cent rate previously estimated and one of the factors behind the lower overall reading.
Retail sales, though, showed momentum in October and November. That raised hopes that holiday sales would fare better than last year’s season, the worst in nearly four decades.
The economy is probably growing at nearly 4 per cent in the October-to-December quarter, analysts say. A few peg it closer to 5 per cent. If they’re right, that would mark the strongest showing since 5.4 per cent growth in the first quarter of 2006 – well before the recession began. The government will release its first estimate of fourth-quarter economic activity on Jan. 29.
Federal Reserve Chairman Ben S. Bernanke and his colleagues may indicate the U.S. recovery is gaining strength while repeating a pledge to keep the benchmark interest rate almost at zero for an “extended period.”
The Federal Open Market Committee gathers as growth in the final quarter of 2009 accelerates to more than 4 percent, the fastest pace in almost four years, according to analysts’ forecasts. The FOMC will probably discuss how to eventually withdraw unprecedented programs to revive credit, including purchases of $1.43 trillion in housing debt, economists said.
Fed officials in a statement today may try to head off any investor expectations the improving economy will prompt them to raise interest rates early next year. While acknowledging that job losses are easing after last month’s drop in the unemployment rate, the FOMC may reaffirm that tight credit and weak income growth are among the risks to the recovery.
“The last thing they want is for people to expect that tightening is closer,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Fed governor. “They are going to increase their confidence about the sustainability of the expansion, but not become materially more optimistic about growth next year.”
The FOMC is scheduled to issue its statement at around 2:15 p.m. after the end of its two-day meeting.
“Assuming they don’t drop ‘extended period,’ market reaction will probably be limited,” said James O’Sullivan, chief economist at MF Global Ltd. in New York.
Changed Forecasts
Macroeconomic Advisers raised its forecast for fourth- quarter growth last week to a 4.2 percent annual pace from 3.1 percent, while Credit Suisse and JPMorgan Chase & Co. increased its estimate by 1 percentage point to 4.5 percent. Retail sales in November climbed twice as much as economists expected, while exports rose to the highest level in 11 months, government figures showed.
“The Fed has to fight two battles: supporting economic growth and showing the market it is concerned about potential inflation later on,” said Sung Won Sohn, former chief economist at Wells Fargo & Co. and now an economics professor at California State University-Channel Islands in Camarillo, California. “Balancing inflation and economic growth and the communications related to that will be their most difficult challenge.”
Fed funds futures on the Chicago Board of Trade indicated yesterday a 53 percent chance that the FOMC will raise its main lending rate by at least a quarter-percentage point by its June meeting, compared with 35 percent odds a month ago.
Fulfill Mandate
Any expectation by investors that monetary policy tightening will occur sooner would complicate efforts by policy makers to reduce the 10 percent unemployment rate, said former Atlanta Fed research director Robert Eisenbeis, now chief monetary economist at Cumberland Advisors Inc saving account payday loan. in Vineland, New Jersey.
“They have a huge problem, and the risk is real,” he said. “It will take extraordinary growth for three years to significantly eat into the unemployed who have lost their jobs.”
U.S. payrolls have fallen by 7.2 million since the start of the recession in December 2007, and a growing population means more jobs must be created to restore full employment. The FOMC projects the unemployment rate will be between 9.3 percent and 9.7 percent in the fourth quarter of 2010, according to forecasts released after its November meeting.
Policy makers will probably also continue to debate the usefulness of selling assets as part of the so-called exit strategy from the unprecedented expansion of credit, Fed watchers said. Central bank officials have tested the use of reverse repurchase agreements to drain some of the cash the Fed has pumped into the economy.
Main Lending Rate
The Fed has kept the benchmark lending rate at a range from zero to 0.25 percent during the past 12 months and has adopted asset purchases as its main policy tool. Since March, the FOMC has said “exceptionally low” rates are likely warranted for “an extended period.”
Bernanke and New York Fed President William Dudley, who serves as vice chairman of the FOMC, signaled in speeches last week that they favored keeping the language.
The U.S. economy faces “formidable headwinds,” including a weak labor market and tight credit, that will probably generate a “moderate” pace of expansion, Bernanke said.
Growth will probably decline next year from the 3 percent to 3.5 percent pace likely in the last six months of this year, “mostly because some of the current sources of strength are temporary,” Dudley said.
‘Pretty Fragile’
“The economy is still pretty fragile,” said Dean Croushore, a former Philadelphia Fed economist who is now chair of the economics department at the University of Richmond in Virginia. “Because inflation has remained low and growth is positive, but not overly strong, the Fed has time to think about how to reduce the excess amount of liquidity in the market.”
The central bank will probably continue to describe inflation as “subdued” and inflation expectations as “stable,” economists said. The Fed’s preferred price measure, which excludes food and fuel, climbed 1.4 percent in October from a year earlier.
Treasury Secretary Timothy Geithner defended the Obama administration’s economic record and dismissed a call for his resignation from the senior House Republican on the Joint Economic Committee.
Geithner blamed the policies of the Republican party and President George W. Bush for the financial crisis that pushed the nation into the deepest recession since the 1930s.
Republicans “gave this president an economy falling off the cliff,” Geithner told Representative Kevin Brady of Texas as the two men interrupted each other during a hearing today. “I can’t take responsibility for the legacy of crises you bequeathed the country.”
Gearing up for next year’s elections, Republicans are training their sights on Geithner, an architect of the Wall Street bailout as Treasury secretary and in his previous job as president of the Federal Reserve Bank of New York. A report issued earlier this week critical of Geithner’s handling of the rescue of insurer American International Group Inc. has also prompted calls for him to quit.
Today, the Treasury chief fired back, saying that by “any measure” of consumer or investor confidence, the economy is “substantially stronger today than when the president took office” in January.
The “worst financial crisis in generations” happened after “almost a decade, certainly eight years, of basic neglect of basic public goods, in health care, in education, in public infrastructure, in how we use energy,” Geithner said.
Economic Management
Brady told Geithner that a growing number of liberal Democrats as well as conservative Republicans think that he is handling the economy poorly.
“For the sake of our jobs, will you step down from your post?” Brady asked. “The public has lost all confidence in your ability to the do the job, and it is reflecting on your president.”
Another Republican on the panel, Representative Michael Burgess of Texas, told Geithner that he disagreed with Brady.
“I don’t think you should be fired,” Burgess told Geithner. “I thought you should have never been hired.”
Democrats on the panel defended Geithner .
“It just amazes me how there are some people here who are trying to pretend, and I think consciously and intentionally pretending, that the economic circumstances that we’re confronting, all of them, mysteriously materialized over the course of the last nine months or so, which is totally, completely false,” said Representative Maurice Hinchey, a New York Democrat.
White House Comment
The White House stepped in to defend the Treasury chief later in the day. “Secretary Geithner has helped steer the American economy back from the brink, and is now leading the effort on financial reform,” White House spokeswoman Jennifer Psaki said in an e-mailed statement. “His focus today — and ours — is on economic recovery and addressing the challenges the American people face every day.”
Earlier this week, former Republican congressman Rob Simmons, seeking a U.S. Senate seat from Connecticut, called on Geithner to resign over his role in the AIG bailout.
Simmons, who is bidding to challenge Democratic incumbent Christopher Dodd in the 2010 election, cited the report issued Nov. 16 by the watchdog of the $700 billion Troubled Asset Relief Program that faulted the New York Fed — with Geithner at its helm — for making “limited efforts” to protect taxpayer funds during last year’s rescue of AIG.
Dodd chairs the Senate Banking Committee, which is considering legislation to toughen oversight of the U.S. financial system.
In today’s hearing, Geithner also told lawmakers that the Treasury wants to end the TARP as soon as possible.
“We are working to put TARP out of its misery,” he said.
The Obama administration is moving “aggressively” to shut down “the programs that defined TARP at the beginning of the crisis,” he said.
The department has already completed its guarantee for money-market mutual funds and it has ceased making capital injections into large banks.
Private equity firm TPG could partner with American Airlines on a minority investment in Japan Airlines to prevent its defection to a rival airline group, the chief financial officer of American parent AMR Corp said.
The emergence of TPG as a potential investor comes as the loss-making Japan Airlines seeks its fourth state bailout since 2001, saddled with $15 billion in debt, a massive pension deficit and dozens of unprofitable routes.
The Japanese government pledged on Tuesday to enlist a state bank to offer bridge loans to prevent the airline from running short of cash and said it may introduce legislation to cut a pension shortfall that hit $3.7 billion in March.
Even as it struggles to avoid bankruptcy, JAL is being wooed separately by American Airlines and Delta Air Lines, which are keen to gain access to JAL’s network in Asia and a stronger foothold in Japan. JAL is Asia’s largest carrier by revenues.
AMR’s Thomas Horton said TPG, which helped fund Continental Airlines emergence from bankruptcy in 1993 and backed a failed takeover attempt for Australia’s Qantas Airways in 2007, has agreed to potentially invest in JAL as part of any deal with American Airlines.
“As appropriate and if it were welcomed by Japan Airlines and the government of Japan, TPG could also be part of a comprehensive recovery plan,” Horton told reporters in Tokyo.
“They have been active in the airline space over the years payday cash loan.”
A spokesman for TPG in Tokyo declined to comment.
American partners JAL in the Oneworld alliance, which pools frequent flyer miles and feeds passengers between members, and is keen to block it from joining Delta in the rival SkyTeam group.
American has argued that JAL and Delta would have difficulty clearing regulatory hurdles if they sought antitrust immunity for closer business ties because the alliance would give SkyTeam control of 60 percent of air traffic between Japan and the U.S.
American, which has hired Rothschild ROT.UL as an adviser on the deal, also estimates that defecting to SkyTeam could drain JAL of about $500 million in revenues during a transition period of 18-24 months.
A Delta spokeswoman in Tokyo declined to comment.
SIDE SHOW
In addition to a capital investment, American has been talking with JAL on forming a joint venture to cooperate more closely on scheduling, pricing and marketing. American estimates this could bring another $100 million in annual revenue to JAL.
Such close cooperation requires an “open skies” agreement between Japan and the United States. The two governments are in negotiations and are aiming for a deal this year.
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