Tim Geithner has gone from toxic asset to asset for Obama

12:01 AM ET 3/26/09 | Marketwatch

NEW YORK (MarketWatch) -- Timothy Geithner just may get it after all. You can be forgiven if you didn't see it coming.

When it was disclosed that he had failed to pay thousands in income taxes, he was belittled as a tax dodger and financial simpleton who needed TurboTax to navigate the tax code.

When he announced the Treasury Department's plan for cleaning up the banking crisis, he was lambasted for being too downbeat in his outlook and for not giving us enough details.

The spectrum of opinions on Geithner ranged from clueless numbskull to Wall Street patsy.

As the weeks dragged on after that initial bailout bombshell, Geithner appeared defeated. He was stressed and fumbling in public. He didn't address the big questions head-on. He looked dazed and confused. His own boss, the president, waited a long time to come to his defense.

Then came the disclosures that the biggest bad guys of the financial crisis, the employees of American International Group Inc.'s (AIG) WMD lab -- its financial-products division -- would get $165 million in bonuses in a deal that Geithner either signed off on or missed. For many Americans, this was the last straw.

Can you say "dead Treasury secretary walking"? Tim Geithner was a corpse being dragged down Wall Street.

The revival

Then he came to life.

For all the anguish and steady defeat the financial crisis has given us, it's had plenty of unexpected plot twists. The fall and rise of Tim Geithner may be the biggest of them all.

Faster than Geithner seemed to be going down with the financial ship, he now appears to be confidently leading us to shore. 

Geithner is the face of this week's market rally. He looks more self-assured. There's Tim Geithner writing an op-ed in The Wall Street Journal. There's Tim Geithner assertively announcing the "bad bank" plan. He's poised testifying before Congress. He's self-possessed when answering withering questions from journalists. 

And the president? 

"I have complete confidence in Tim Geithner and my entire economic team," Obama told reporters March 18. "Nobody's working harder than this guy. You know, he is making all the right moves in terms of playing a bad hand."

On "The Tonight Show with Jay Leno," Obama said the gloomy Geithner was in fact handling the pressure with "grace and good humor." Suddenly, the Harry Potter of the U.S. Treasury wasn't an overmatched kid against a financial crisis that's not been named; he was, in the words of the president, "a smart guy ... calm and steady."

Pushing the advantage

Geithner clearly has had some help. Bullish comments from Vikram Pandit, chief executive of Citigroup (C), and counterpart Ken Lewis at Bank of America Corp. (BAC), about their respective institutions' profitability this year clearly boosted confidence.

Ultimately, it's the details of the "bad bank" plan that gave the market hope that we may have turned the corner in containing the financial debacle.

It's not that the Treasury plan is perfect. Far from it. There are too many interests it attempts to satisfy: the government, banks, taxpayers and private investors. Someone is going to get the short end. 

But now that there's a clear approach to unloading -- and, more importantly, attaching a price to -- all the bad stuff, investors are betting that any action is better than standing still and waiting for the first-quarter bank financial reports to deliver more write-downs.

Geithner has gone from the geek with egg on his face to the cool egghead.

Now with the support of Federal Reserve Chairman Ben Bernanke, Geithner is pressing the advantage. He unveiled promised legislation Wednesday that would give him broader powers to seize financial institutions whose failure would threaten the economic system. See full story on Geithner's plan for 'too big to fail' companies.

Political animal

The power grab is likely to stick in the craw of anti-government, free-market types who rightfully worry that Uncle Sam is overstaying his visit to Wall Street. 

What they need to remember is that the government is not only an unwelcome guest; it's a reluctant traveler. Wall Street's despair is of its own making. Had it not threatened to bring down the rest of us with it, the government might have been justified in watching Citigroup and AIG burn in the same way it's keeping General Motors Corp. (GM) and Ford Motor Co. (F) a contained blaze.

Geithner finally seems to understand the delicate political tightrope he must navigate to push through his rescue plans. He must be tough on bonuses. He needs to protect the taxpayer. He has to be positive. That's why he sold the plan's details through multiple media outlets this week -- and sold them well.

His transformation has been so stunning that it almost makes you wonder why, if Geithner can turn it around, we can't turn around this financial mess. 

It's going to take a lot of magic, Mr. Potter. 

IBM to lay off 5,000 US-based workers

AP Source: IBM to lay off 5,000 US-based workers (AP)
Posted on Wed Mar 25, 2009 7:14PM EDT

SAN FRANCISCO - IBM Corp. plans to lay off about 5,000 U.S. employees in a new round of job cuts, the Associated Press has learned. The move reflects IBM's aggressiveness in shifting labor to lower-cost regions like India and keeping its profits aloft at a time when other technology companies' earnings are tumbling.

An IBM manager knowledgeable about the plans said the cuts will come from the services division and workers will be informed Thursday. The person spoke on condition of anonymity Wednesday because he was not authorized to discuss the plan publicly.
The layoffs were reported earlier by The Wall Street Journal.

The cuts will affect about 4 percent of IBM's U.S.-based work force, which totaled 115,000 at the end of 2008. In a sign of how quickly IBM is staffing up in emerging markets, last year IBM had nearly as many workers in Brazil, China, India and Russia — 113,000 — as it did in the U.S.
IBM now has about 400,000 employees worldwide.

Unlike many other tech companies that have recently announced layoffs, IBM has managed to become more profitable despite the recession. IBM's cost-cutting, global footprint, and focus on services and software, which are often more lucrative than hardware, are key reasons why. IBM's net income was up 18 percent last year to $12.3 billion.

In January, Armonk, N.Y.-based IBM cut thousands of U.S. jobs in sales, software and hardware. IBM didn't give the precise number, saying it fell below an amount that would require disclosure.

Other tech companies are also doing big layoffs.
Hewlett-Packard Co. is slashing 24,600 positions, 8 percent of its 320,000-employee work force, in a three-year restructuring as part of its acquisition of Electronic Data Systems Corp. HP paid $13.9 billion for EDS in a bid to compete better against IBM for technology-services contracts.

Microsoft Corp. said in January it was cutting 5,000 jobs, the first mass layoffs in the company's history, after profit in the latest quarter fell 11 percent to $4.17 billion.

IBM's shares ended Wednesday down 35 cents at $97.95.

(just suck it up loser!) Buy BAC!!

Bank of America Gets Bailout, but Will Consumers?

Distressed Credit Card Holder Shares His Woes With Lawmakers

By Z. BYRON WOLF

March 24, 2009—

In one room in Capitol Hill today, lawmakers were discussing plans to help clear American banks of the enormous debt on their balance sheets. But in another room, lawmakers were hearing from individual Americans drowning in debt of their own -- with no plan in sight for a bailout.

There is no danger that the debt carried by Douglas Corey, a 44-year-old single father from Rhode Island, is going to cripple the American economy the way toxic assets have at America's premier financial institutions.

But for Corey, that same credit that Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke want to get flowing is a big part of his own economic problems. And nobody is talking about cleansing anything from his books.

Geithner and Bernanke told Congress Tuesday about the new Obama administration plan to "cleanse bank balance sheets of troubled legacy loans and reduce the overhang of uncertainty associated with these assets," which should make it possible for banks to float more credit into the economy.

Geithner and Bernanke repeated, as they have many times this year, that propping up the banking industry and insurance giant AIG getting credit flowing were imperative to guarding the U.S. economy from even deeper doldrums.

Corey received much credit from banks over the years. But when he fell on hard times, Bank of America, which has received $45 billion in taxpayer funds to keep credit flowing, doubled his interest rate.

"Senators, I find myself in the same circumstances that many parents are facing today: few job prospects, a stack of bills and the challenge of facing off against financial goliaths. There are many of us in the middle class -- the unemployed -- who may have overstepped our budgets, but although we struggle to make our payments, we make them," Corey told a Senate subcommittee.

It all started with a mistake. Corey, who was carrying thousands of dollars in debt but would not disclose the exact amount, had had a Bank of America credit card for six years and couldn't remember missing a payment. But he was on vacation and inadvertently sent less than the minimum payment in August 2008. The next month he paid the "minimum payment" listed amount on his bill instead of the "pay this" amount. There was $125 between the two amounts listed.

Interest Rate Hikes

The month after that, in October 2008, the same month that Bank of America got its taxpayer bailout, Corey's interest rate more than doubled from 12.75 percent to 28.99 percent. His monthly interest payments, he said, went from $360 to $792 plus a $39 late payment fee.

Making matters worse, Corey -- who said he had never missed a credit card payment in 19 years -- lost his job. Bank of America would not lower the rate until he made six months of payments at the new rate.

When Corey called again in December, he said Bank of America credited back almost $800 in interest that had been charged. But when he asked for another rebate in January, he was denied. But he said he was given the opportunity to buy an increase in his credit limit for $150.

By this point, Corey had made the six months of minimum payments. Days after, he called Bank of America to get back to this old rate. They lowered his credit limit by $13,000 because Corey had not yet started a new job but the bank would not lower his interest rate.

In the meantime, Corey had also fallen behind in his mortgage payments. He has since caught up, but he told the lawmakers the burden of the higher credit card rate made things more difficult during the recession.

"As a salesperson I understand the importance of making a profit, and banks are entitled to make profit, but what is enough? Over the last six months I have paid a staggering $1,600 more in interest versus what I would have paid at 12.74 percent. Their policies and actions are having a devastating effect on consumers that are hardest hit by our country's economic hardships," Corey said.

Bank of America said it does not comment on the specifics of any particular customer.

"All I can say is that our practices are fair and balanced. The safety and soundness of our business is serving our customers needs and providing credit to creditworthy customers," said Betty Riess, a spokeswoman for Bank of America.

Sen. Sheldon Whitehouse, R-R.I., is pushing a bill that would shut predatory lenders out of bankruptcy proceedings, keeping them from getting repayment. It would also roll back a "means test" enacted as part of bankruptcy reform in 2005 that keeps wage earners over the median income from filing Chapter 7 bankruptcy.

"It would be hard to believe that a trillion-dollar industry ... would be doing this accidentally," Whitehouse said, calling the practices of credit card companies predatory.

Another witness, Adam Levitin, a professor at Georgetown, tied the taxpayer bailout of the banking industry to the debt Americans owe banks on credit.

"The federal government is effectively funding credit card loans," Levitin said of the taxpayer bailouts of banks.

"If the federal government is ultimately going to be the owner of credit card loans, it should have a say in the terms of those loans," Levitin argued.

Saving Credit Card Holders?

Sen. Dick Durbin, D-Ill., talked at the hearing about his proposal to cap credit card interest rates at 36 percent -- a similar cap is in place for members of the military.

Another idea floated by Democrats is the so-called credit cardholders bill of rights, which passed the House of Representatives in 2008 but not the Senate. It could see action again this year and would guard against companies imposing arbitrary rate increases and excessive fees as well as requiring more disclosure from lenders on accounts.

Durbin, at the hearing today, said most cardholders don't realize that paying just the minimum amount can, in some instances, never pay down the credit card debt.

"The minimum monthly payment is a life sentence to this debt that they can never get out from under," Durbin said.

Even witnesses and lawmakers who argued against the government meddling in the credit card industry at this hearing had stories about changing interest rates. Sen. Jeff Sessions, R-Ala., said when his mother died, he neglected to pay her $25 credit card bill on time and ended up paying a $40 late fee.

David John of the Heritage Foundation argued against any new laws to protect consumers but said that he had missed a payment by a day only to see his rate double. He said he had talked the company into lowering the rate and now pays online instead of through the postal service.

John said more rules would hurt low-income and first-time borrowers, who rely on credit, because the rules would drive more reputable lenders out of that market.

"They're going to raise their credit standards so fewer and fewer people are going to qualify for these types of products," he said.

ABC has contacted Bank of America to comment on Corey's testimony. Meanwhile, Bank of America CEO Ken Lewis told the Charlotte News and Observer that he hopes the bank will pay back taxpayers early for the $45 billion in TARP funds accepted by Bank of America, perhaps by the end of 2009. Lewis said he hopes Bank of America will make a $30 billion profit in 2011.

Copyright © 2009 ABC News Internet Ventures

China ‘Super Currency’ Call Shows Dollar Concern (Update1)

China ‘Super Currency’ Call Shows Dollar Concern (Update1) 

By Li Yanping

March 24 (Bloomberg) -- China’s call for a new international reserve currency may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.

Central bank Governor Zhou Xiaochuan yesterday urged the International Monetary Fund to create a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets

“China is concerned about the potential for a slide in the dollar as the U.S. attempts to stimulate its economy,” said Mark Williams, a London-based economist at Capital Economics Ltd. The “rare” sight of a Chinese official attempting to reframe an international debate may be “a sign of China becoming more engaged,” he said.

Zhou’s comments may also signal ambitions for the yuan to play a bigger global role. The central bank this week signed a currency swap with Indonesia, adding to agreements since December with South Korea, Hong Kong, Malaysia and Belarus. It’s also preparing for trade settlement in the Chinese currency with Hong Kong, Macau and the Association of Southeast Asian Nations.

“There is concern and even frustration among top policymakers in Beijing about China’s high exposure to U.S. dollar-denominated financial assets,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong.

Yuan forwards rose the most in three months with traders betting on appreciation for the first time since September on speculation that the U.S. policies will weaken the dollar. The 12-month forward rate gained 0.9 percent.

Support for Dollar

U.S. policy makers testifying before lawmakers in Washington today affirmed their support for the dollar.

Treasury Secretary Timothy Geithner, asked at a House Financial Services Committee hearing whether he rejected moving toward a global currency, replied, “I would, yes.”

“I would also,” said Federal Reserve Chairman Ben S. Bernanke. The question was asked by Representative Michele Bachmann, a Minnesota Republican.

Premier Wen Jiabao called on March 13 for the U.S. “to guarantee the safety of China’s assets.” China’s Treasury holdings climbed 46 percent in 2008 and now stand at about $740 billion, according to U.S. government data. The nation is the biggest holder of U.S. debt.

Raising Yuan’s Status

China is promoting use of the yuan to smooth currency volatility and to serve “a long-standing interest” to raise its status to that of a global reserve currency, said Ben Simpfendorfer, an economist at Royal Bank of Scotland Group Plc in Hong Kong. Such moves are not “a knee-jerk response” to the economic crisis, he said.

“If turning the Chinese yuan into a global reserve currency sounds ambitious, then encouraging its adoption as a regional reserve currency is more straightforward,” said Simpfendorfer.

G-20 leaders will gather in London on April 2 to forge a common response to the financial crisis that has spawned a global recession. The summit will discuss proposals for reforms of the International Monetary Fund.

Flexing ‘Some Muscle’

The timing of Zhou’s proposal is “the latest example of China’s policy of neo-assertiveness in world affairs,” said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong. “China is starting to flex some muscle and generally steer the debate in China’s own direction.”

Zhou’s article highlighted the “dilemma” that countries issuing reserve currencies face in balancing their own monetary- policy goals with other nations’ demand for their money.

The global crisis raised the question of which reserve currency would secure “global financial stability and facilitate world economic growth,” Zhou said. He proposed expanding the use of the IMF’s Special Drawing Rights, which are currency units valued against a composite of currencies.

“The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies, and gross domestic product may also be included as a weighting,” said Zhou.

Some economists back his case.

“The world economic landscape has been changed since the establishment of the SDR 40 years ago,” said Ha Jiming, chief economist at China International Capital Corp. in Hong Kong. “Specifically, no such reserve currency would make sense without the yuan being included.”

To contact the reporters on this story: Li Yanping in Beijing at yli16@bloomberg.net

Last Updated: March 24, 2009 13:00 EDT 

Now thats Socialism!!!

The List: The Best Places to Lose Your Job

By Annie Lowrey

 

Posted March 2009 

SOURCE: http://www.foreignpolicy.com

As many as 50 million people could be out of work by the end of 2009. But the unemployed in some countries definitely have it better than others.

Ralph Orlowski/Getty Images

SCANDINAVIA

Benefits: 80 to 90 percent of prior income

For how long? 10 months to four years

Life on the dole: Denmark, Finland, Norway, and Sweden. They’re cold. They’re dark. And they’re the best places on Earth to be sacked. On virtually every metric, these countries outspend and outdo all others in supporting the involuntarily unemployed. Denmark -- home to the most generous entitlement in the world -- offers up to 90 percent of prior earnings for up to 48 months. Average-income workers in Finland take home about 85 percent for up to 500 days, a little over 17 months. Comparatively stingy Sweden provides about 80 percent of earnings for about 10 months.

All of the Scandinavian countries require registration with public offices that connect job seekers with employers and retrain workers into high-demand industries. Denmark, for instance, staffs 190 such offices. They offer computer training and résumé review, and even help place unemployed workers into temporary positions, filling in for employees who leave for educational sabbaticals and parents on maternity or paternity leave.

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GERARD CERLES/AFP/Getty Images

BENELUX

Benefits: 60 to 85 percent of prior income

For how long? One year to indefinitely

Life on the dole: Second to Scandinavia come Belgium, the Netherlands, and Luxembourg. In Luxembourg, a single, unemployed worker gets 80 percent of her income, up to 250 percent of the minimum wage -- currently more than €1,300 ($1,690) a month. The Netherlands shells out up to €168 ($218) a day and provides Dutch-as-a-second-language programs and short-term work placements for the unemployed. Belgium offers 60 percent of salary for an indefinite amount of time -- distributed by separate Flemish and French offices, naturally. The country also offers cash and retraining to recent university graduates having trouble finding work in the declining job market.

The government of Luxembourg, however, has recently grown fed up with wastrel youths applying for unemployment benefits while still living with their parents. Anyone applying for social benefits now has to take minimum-wage government jobs or attend subsidized vocational training instead.

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FABRICE COFFRINI/AFP/Getty Images

SWITZERLAND

Benefits: 70 to 80 percent of prior income

For how long? 400 to 520 days

Life on the dole: The Swiss government metes out generous weekly checks from unemployment pools to avoid anyone taking a lump sum and fleeing the country (depositing in a Swiss bank account, perhaps?). In 1997, the country began requiring districts to fund job-retraining courses and offices to aid job seekers. Those who miss their classes can forfeit up to a month’s unemployment benefits.

And it isn’t just the unemployed who benefit from the Swiss state’s generosity. If you find a job that pays less than two thirds of your prior salary, the government will subsidize your wages. Despite the generosity of its benefits, the country maintains a low rate of unemployed and underemployed workers. Switzerland also does one of the world’s best jobs at keeping tabs on its social assistance figures and programs. Kept like clockwork since 1948, all stats are online.

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CYRIL FOLLIOT/AFP/Getty Images

FRANCE

Benefits: 57 to 75 percent of prior income

For how long? Up to three years

Life on the dole: If you’re fired in France, expect a weekly benefit check if you were a salaried employee who worked six months out of the past 22. The country scales its payouts depending on how long the worker paid into a national unemployment insurance fund; checks average €1,100 ($1,430) a month. Minimum-wage workers receive 75 percent of their last paycheck; higher-income workers receive about 57 percent. France is also one of the toughest countries on Earth to get laid off in. The country requires companies to justify themselves to unions or trade commissions when they feel the need to fire workers to cut costs.

Unfortunately, because the French workforce is so cushy, it can be a very tough club to join. France has astronomically high rates of unemployment among youths -- up to 40 percent in some areas -- who’ve never held jobs and therefore do not qualify for benefits. This génération stagiaire, or “work-experience generation,” of 20-somethings who accept short-term and unpaid work experiences to remain active has taken to the streets in protest in past years.

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TORU YAMANAKA/AFP/Getty Images

JAPAN

Benefits: 50 to 80 percent of prior income

For how long? Six months to a year

Life on the dole: The country’s unemployment benefits calculation works like a Rube Goldberg machine, involving length of employment, age of the worker, non-bonus pretax income, and a number of other data points. If a worker can muddle through the paperwork, though, he may receive between 50 and 80 percent of salary, for up to six months. Workers are supported even longer if their industry is deemed to be in decline.

Japan also offers other perks, such as retraining and unemployment health insurance. The Ministry of Labor’s employment bureau, called -- really -- “Hello Work,” has bolstered these benefits since the financial crisis took hold. It now subsidizes public housing for the laid-off, many of whom had been receiving housing as part of their compensation. It has also shortened the minimum time a worker needs to pay into the system to become eligible. Still, Japan’s safety net has a huge hole. It excludes most temporary and short-contract workers, who now make up more than 30 percent of the workforce. They’re completely out of luck.

Annie Lowrey is an assistant editor at FP.