Coins cost more to make than face value 5.10.2006

Coins cost more to make than face value Updated 5/10/2006 2:12 AM ET By Barbara Hagenbaugh, USA TODAY WASHINGTON — The next time someone offers you a penny for your thoughts, you might want to take them up on it. For the first time in U.S. history, the cost of manufacturing both a penny and a nickel is more than the 1-cent and 5-cent values of the coins themselves. Skyrocketing metals prices are behind the increase, the U.S. Mint said in a letter to members of Congress last week. The Mint estimates it will cost 1.23 cents per penny and 5.73 cents per nickel this fiscal year, which ends Sept. 30. The cost of producing a penny has risen 27% in the last year, while nickel manufacturing costs have risen 19%. BACKGROUND:A brief history of the penny The estimates take into account rising metals prices as well as processing, labor and transportation costs. Based on current metals prices, the value of the metal in a nickel alone is a little more than 5 cents. The metal in a penny, however, is still worth less than a penny. "Higher zinc, copper and nickel prices are raising the production costs of the nation's coinage," the Mint said in the letter, which it provided to USA TODAY Tuesday. Metals prices have been soaring this year as a strong economy worldwide has led to an increase in demand. The prices of metals used in coins are all rising: Zinc is up 76% this year, copper is up 68%, and nickel is up 42%, according to the London Metal Exchange. But consumers should not hoard coins or melt down the change in their kids' piggy banks, says Michael Helmar, an economist and metals analyst at Moody's Economy.com. He says the process of melting the coins, separating out the metals, then selling would be costly and time-consuming. "If they were made out of gold, sure," he says. But "there are just too many other costs." The Mint is one of the few government agencies that makes a profit. The Federal Reserve, which distributes money to banks, pays face value for coins. If a coin costs less to manufacture than the face value, the Mint makes a profit. Last year, the Mint's coin-making profit was $730 million. Mint officials estimate the added penny and nickel expenses will reduce the Mint's profit this year by $45 million. Coin compositions, which are set by Congress, have been changed in the past because of rising costs. The penny has been altered several times since it was first changed from pure copper in 1837 to add other metals. But Rep. Joe Knollenberg, R-Mich., one of the letter's recipients, says Congress is unlikely to consider changes, given that the Mint is still making money on other coins. "We'll wait this one out," he says. Contributing: John Waggoner

Copyright 2008 USA TODAY, a division of Gannett Co. Inc.

 

Student Loans: Default Rates Are Soaring

FAMILY FINANCESAPRIL 21, 2009
Student Loans: Default Rates Are Soaring
As Job Market Tightens, Graduates Are Squeezed; the 'Forbearance' Option
By ANNE MARIE CHAKER

Defaults on student loans are skyrocketing amid a weak job market for graduates and steadily rising tuition costs.

According to new numbers from the U.S. Department of Education, default rates for federally guaranteed student loans are expected to reach 6.9% for fiscal year 2007. That's up from 4.6% two years earlier and would be the highest rate since 1998.

The situation is mirrored in the smaller private student-loan market. In 2008, SLM Corp. also known as Sallie Mae, wrote off 3.4% of its private loans that were already considered troubled, according to its latest annual report -- more than double the figure in 2006. Student Loan Corp., a unit of Citigroup Inc., wrote off 2.3% of those loans in 2008, compared with 1.5% a year earlier.

"The volume of people in trouble is definitely increasing," says Deanne Loonin, a staff attorney at the Boston-based National Consumer Law Center who counsels low-income consumers on student loans and other debt issues.

Lenders say they are hearing more pleas for help as the unemployment rate worsens and debt levels soar among graduates.

Sarah Kostecki, a 24-year-old sales associate in New York, graduated last year from DePaul University with a major in international studies and $87,000 in debt, translating to monthly payments of $685, the vast majority of which are private loans.

The payments represent more than a third of her take-home pay, and to help her make ends meet, her grandparents are giving her $200 a month toward her debt this year. Beginning in January, she'll be on her own, and she worries about falling behind.

"It feels like I'm being punished for having gone to school," Ms. Kostecki says. She has contemplated some of the options offered by private loan companies, such as temporary interest-only payments. But after two years, her payments would jump by almost $200 a month on top of what she's paying now, she says. "I don't want that."

Borrowers having trouble repaying their federally backed loans can call their lender to request that their payments be put on hold until they get back on their feet. Most types of federal loans qualify for "forbearance" -- meaning the borrower can suspend payments temporarily but is still on the hook for the interest that continues to build while payments are on hold, which is then amortized over the life of the loan.

Certain need-based loans qualify for "deferment," which means the government will cover any interest payments for a set period. Deferments and forbearances can each be used for a maximum of three years per loan.

There are fewer options for borrowers with private loans, which have soared in recent years as limits on federal borrowing failed to keep up with rising college costs. Students borrowed $19 billion in private loans in the 2007-2008 school year, six times the amount they borrowed a decade earlier, after factoring in inflation, according to the College Board, a New York-based nonprofit.

In the past, it was relatively easy to get a forbearance on a private loan, says Ms. Loonin. The lenders "gave these loans to a lot of people that couldn't afford them," she says. "To mask the problem, they kept giving forbearances." But as more borrowers are running into trouble, lenders are becoming stricter, she says.

Some major lenders, such as First Marblehead Corp. and J.P. Morgan Chase & Co., declined to say how many forbearances they've been granting. Others, including Wells Fargo & Co. and the nonprofit Vermont Student Assistance Corp., said they are granting more lately.

For private borrowers, finding what assistance programs are available is often a chore; information on Web sites can be sparse and hard to find. Here's how some private lenders are working with students who are having trouble paying back their loans:

Sallie Mae. The lending giant, which makes both federally backed and private loans, says it grants private borrowers forbearances in increments of up to three months, and may be extended several times, typically up to a total of 24 months. There's a forbearance fee of $50 per loan, up to a maximum of $150. Another option may be to extend the repayment period by several years, which in turn lessens monthly payments, though the minimum balance must be at least $20,000.

Key Corp. Key says it grants forbearances in six-month increments, with conditions depending on individual circumstances. For instance, someone struggling with a job loss may have greater need than someone else whose pay was cut. While some borrowers may qualify for a full forbearance, others may qualify only for reduced payments. Either way, Key says it doesn't charge any additional fees.

Student Loan Corp. Borrowers in trouble can make interest-only payments for a period of either two or four years. They might also qualify for a forbearance, generally up to a maximum of 12 months. There are no fees for either option.

Wells Fargo. Borrowers can apply for forbearance, granted "generally in cases of extreme financial hardship," a spokeswoman says. There are no fees, and length of time is based on individual circumstances.

Write to Anne Marie Chaker at anne-marie.chaker@wsj.com

Printed in The Wall Street Journal, page D1

This Is Why Warren Buffett Says It's a "Great Time to Be in Banking"

This Is Why Warren Buffett Says It's a "Great Time to Be in Banking"

Posted By: Alex Crippen | Executive Producer

cnbc.com

| 09 Apr 2009 | 04:32 PM ET

If you were listening carefully to Warren Buffett on CNBC one month ago today, you heard him say, "This is a great time to be in banking."

It may not have made sense to you then, but it should today.

Wells Fargo shares soared 31.7 percent today (Thursday) after the bank announced before the opening bell that it expects to report a record $3 billion in earnings for its first quarter.  

In a news release, Wells said, "Business momentum in the quarter reflected strength in our traditional banking businesses, strong capital markets activities, and exceptionally strong mortgage banking results."

At the closing bell, the stock was up $4.72 to $19.61 a share.

As of the end of December, Buffett's Berkshire Hathaway owned almost seven percent of Wells Fargo's stock.  That's over 290 million shares.  (It may have bought, or sold, shares since then.)  It's the single biggest shareholder.

Right now, Berkshire's stake in Wells Fargo is worth almost $1.4 billion more than it was worth just 24 hours ago. 

Back on March 9, Wells Fargo stock opened at $8.65. 

During a three-hour live appearance on Squawk Box that same morning, Buffett talked about how banks could take advantage of the low cost of money to make very profitable loans:

"The spreads have never been wider. This is a great time to be in banking, you know, if you just get past the past and they are getting past the past. I mean, right now every time a loan is made to somebody to buy a house--and we're making, you know, making millions of loans--four and a half million houses will change hands this year out of a total stock of less than 80 million. So those people are making good mortgages. You want those assets on your books and you get a great spread in putting them on now. So it's a great time to be in banking, but you do have to get past this past."

Today, Berkshire's stake in Wells Fargo is worth $3.2 billion more than it was when Buffett spoke those words.

Current Berkshire stock prices:

Class A:

Class B:

For more Buffett Watch updates follow alexcrippen on Twitter.

Questions?  Comments?  Email me at buffettwatch@cnbc.com

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BofA CEO Says 'Credit Is Bad' And Is 'Going to Get Worse'

BofA CEO Says 'Credit Is Bad' And Is 'Going to Get Worse'

BANK OF AMERICA, BANKS, FINANCIALS, WALL STREET, EARNINGS, MERRIL LYNCH

The Associated Press

| 20 Apr 2009 | 12:11 PM ET

Bank of America warned of worsening loan default problems Monday even as it posted a first-quarter profit of $2.81 billion.

Investors concerned about the banking industry's health sent financial stocks and the overall market sharply lower.

Although Bank of America said higher revenue from the purchase of Merrill Lynch helped offset a surge in credit costs, it took a hefty $13.4 billion provision for credit losses during the first three months of the year.

The bank's stock fell sharply as the overall stock market slid.

Although last week Wall Street was happy with better-than-expected results from JPMorgan Chase , Goldman Sachs Group and Citigroup , banking companies generally benefited during the quarter from unusually strong bond trading, a trend not expected to continue while loan problems persist.

Charlotte, N.C.-based Bank of America reported a similar performance during the first quarter.

"Like it or not, capital markets is now a core business for Bank of America, and that has more volatile returns than other businesses," said Celent banking analyst Bart Narter. "Bank of America is no longer exclusively a retail bank and there can be more fluctuations."

Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

Troubled loans, or nonperforming assets, increased to $25.7 billion from $7.8 billion a year ago. The bank also lost $1.8 billion on card services, after posting a profit a year ago.

"Credit is bad and we believe credit is going to get worse before it will eventually stabilize and improve." Lewis said during a conference call with analysts, noting that the bank continues to face challenges. "Whether that turn is later this year or in the first half of 2010, I'm not going to hazard a guess."

Chief Executive Ken Lewis has been under intense pressure this year over the Merrill purchase, which closed Jan. 1.

Shareholders approved the deal before learning of big losses at the New York-based investment and reports surfaced that Merrill Chief Executive John Thain rushed out billions of dollars in bonuses to Merrill employees in his final days as CEO even as Bank of America was begging the government for aid to complete the deal.

The first quarter results include revenue from the company's acquisitions of Merrill and Countrywide Financial, which Bank of America did not own last year.

During the quarter, revenue more than doubled to $35.76 billion, mainly from the addition of Merrill. It was also helped by a $1.9 billion pre-tax gain from selling shares it owned in China Construction Bank. Bank of America continues to own about 17 percent of the common shares of the Chinese bank, it said.

Analysts expected revenue of $27.13 billion. However, Bank of America recorded a $13.4 billion provision for credit losses in the first quarter, showing that it is not immune from deteriorating credit quality and growing unemployment.

The bank set aside $6.4 billion as additional reserves to cover future losses.

Bank of America has received $45 billion in government funds as part of the Treasury Department's $700 billion financial rescue package.

© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Lehman Brothers sitting on nuclear stockpile

Lehman Brothers sitting on nuclear stockpile 17 Apr 2009, 0048 hrs IST, AGENCIES

NEW YORK: Failed investment bank Lehman Brothers sits not only on toxic sub-prime mortgage loans but also toxic nuclear stockpile.  According to reports, the bankrupt bank holds up to 450,000 pounds of uranium — called yellowcake — which can be upgraded to run nuclear plants and make nuclear weapons.  The stockpile is a hangover from a commodities trading contract undertaken before the Wall Street bank collapsed last year. Lehman filed for bankruptcy after the Bush administration refused to bail it out last September. After bankruptcy, it managed to sell its brokerage business to Barclays, leaving it saddled with $200 billion worth of sub-prime loans and yellowcake worth $20 million.  Liquidators have been trying to offload the stuff for months, but the price of uranium has fallen from $65 to $40 per pound because of the global recession, leaving Lehman's yellowcake languishing in a variety of secure storage facilities, some of which are in Canada.  "It turns out we were looking in the wrong place for weapons of mass destruction,'' said the New York Post on Wednesday in a sarcastic comment on the invasion of Iraq in search of Saddam Hussein's non-existent deadly arsenal. "They were not in Iraq. They were in Lehman Brothers' portfolio."  Bryan Marshal, Lehman's chief executive, who was appointed to salvage value for creditors, told Bloomberg News that the stockpile would be sold responsibly.  "We plan on gradually selling this material over the next two years," he said. "We are not dumping this on the market and have no fire-sale mentality."Yellowcake can be purified and enriched to fuel nuclear reactors or, theoretically, weapons. A lively financial market in uranium trading has developed in recent years. While commodities such as oil and precious metals are dealt in futures contracts which rarely see delivery, the relative immaturity of uranium trading means that trading firms sometimes end up taking ownership of the stuff. Lehman's ownership is governed by tight regulations.   What is yellowcake?  Yellowcake (also called urania) is a kind of uranium concentrate obtained from processing of uranium ore. The name comes from the colour and texture of concentrates produced by early mining operations; modern yellowcake is brown or black. Yellowcake is used in the preparation of fuel for nuclear reactors and may also be turned into enriched uranium suitable for use in weapons and reactors.

Attacks Plague Indian Elections, Killing at Least 17

Attacks Plague Indian Elections, Killing at Least 17

By Rama Lakshmi

Washington Post Foreign Service

Thursday, April 16, 2009 3:32 PM 

NEW DELHI, India, April 16 -- Violence marred the start of the month-long national election in the world's largest democracy Thursday, as Indian voters cast ballots to choose a new government that will confront the twin challenges of the global economic slowdown and the growing threat of terrorism.

In 14 attacks on polling stations and vehicles carrying election officials, 17 people were killed in eastern and central India. The strikes were blamed on Maoist insurgents, who used landmines and rocket launchers. The Maoist groups had called for a poll boycott in several areas, and had vowed to disrupt the vote.

India's election commission said that voter turnout ranged between 46 and 86 percent among the 140 million eligible voters in the 17 states that went to the polls Thursday. The turnout was lower in areas affected by the violence.

The staggered, five-phase national election, which ends on May 13, will cost an estimated $2 billion, with about 714 million voters. The counting of votes is scheduled for May 16, with 543 lawmakers being chosen for the lower house of parliament. More than 6 million security and civil officials are responsible for helping to oversee the elections, and 1.3 million voting machines will be used.

The government deployed hundreds of thousands of police and paramilitary forces to guard polling stations, especially along thickly forested areas that security officials call India's "red corridor" because of the Maoist presence.

"Their political philosophy is such that they don't want to believe in democracy," M.L. Kumawat, director general of the Border Security Force, told reporters in New Delhi.

The attacks were targeted at security forces and polling officials, not voters. Helicopters were flown into some areas to evacuate soldiers who had come under fire. Maoists also destroyed electronic voting machines. The Maoist rebels are active in 17 of India's 28 states, and have been waging for four decades a low-grade insurgency that they say is intended to promote the rights of landless farmers and tribal people.

"The extent of violence is unprecedented and shows it will be a significant political and security challenge for the next government," said Mahesh Rangarajan, a political analyst at Delhi University. "In many parts of India, they run parallel governments."

The marathon election involves voting at polling booths from high in the Himalayans to remote islands in the Bay of Bengal. About 131 seats have been set aside for lower-caste candidates or members of indigenous tribes.

Opinion polls forecast that no party will gain a clear majority to form a government on its own. Analysts predict that a coalition of parties will be stitched together after the final results are announced next month.

The election features three primary political alliances -- the ruling, left-of-center coalition led by the Congress Party; the Hindu nationalist Bharatiya Janata Party-led group; and a third bloc consisting of smaller, regional and communist parties.

The Congress Party coalition, headed by the Oxford-educated economist Prime Minister Manmohan Singh, is appealing to voters by showcasing several anti-poverty programs that the government has launched. About 76 percent of Indians live on less than two dollars a day.

But Singh is under attack from the opposition BJP for weakening the nation's security. Several Indian cities were rocked by bombings in 2008, culminating in the deadly three-day siege in the financial capital of Mumbai that killed more than 160 people, including six Americans. The vote also comes as India battles a slowing economy after five years of heady growth.

The BJP, led by 82-year-old party patriarch L.K. Advani, says it will clamp down on terrorism. But the party has been criticized for its role in fomenting violence against Muslims and Christians.

The third front includes a group of communist parties that supported Singh's coalition until last fall, when they withdrew to protest the signing of the controversial India-U.S. civilian nuclear agreement.

Some economists have said the prospect of an unstable and unwieldy coalition government is worrisome for an economy that is saddled with job losses and the biggest fiscal deficit in two decades.

But not everybody agrees.

"It is a mish-mash of different smaller contests in the states that will eventually form the big, national picture in this election. But stimulating the economy will be a priority for whoever forms the government," said Rangarajan, the political analyst. "India has had coalition governments for more than a decade now. They are not a blessing from heaven, but they are not a complete disaster, either."

• 

• BUSINESS
• APRIL 15, 2009

Wall Street Still Finds Ways to Hire Foreigners

By ROBIN SIDEL

Some big U.S. banks that have received billions of dollars from the government are shipping some of their newest recruits overseas in order to comply with a federal law that restricts their ability to hire foreign workers for U.S. jobs.

Although some financial firms have rescinded job offers to such prospective employees, J.P. Morgan Chase & Co., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley are offering international jobs to foreign students whom they have recruited from U.S. colleges and graduate schools. The new hires are being sent to global financial centers like London and Hong Kong.

The overall numbers affected by the restrictions are small, but the moves represent the banking industry's latest effort to deal with what they consider to be untenable consequences of the Troubled Asset Relief Program.

"There are no U.S. immigration restrictions on people working outside the U.S., so anyone who wants to can have folks work in London versus New York," says Allen Erenbaum, a lawyer specializing in immigration issues at Mayer Brown LLP in Los Angeles.

Under the federal economic-stimulus package signed by President Obama in February, companies that receive TARP funds face additional hurdles before they can hire skilled foreign workers who need temporary work permits known as H-1B visas. Firms that have received government money must prove they have tried to recruit American workers for those jobs and that the foreigners aren't replacing U.S. citizens.

Bank executives have privately lambasted some of TARP's restrictions, particularly those that seek to limit compensation.

Some firms already are exploring loopholes that would allow them to raise base salaries in order to offset potential restrictions in bonus packages.

Restrictions on foreign workers have frustrated bank executives who compete to recruit students fresh out of college or graduate school. They say it is in the nation's interest for them to hire highly skilled foreigners who are educated in the U.S. rather than have non-U.S. companies benefit from their American training.

Such recruitment efforts are a Wall Street tradition, with firms establishing formal relationships with the U.S.'s top universities. Wall Street firms also use these programs to hire minority students from the U.S. and abroad.

Lloyd Blankfein, Goldman's chief executive, described the visa restrictions as "protectionist and self-defeating" in a speech this month to the Council of Institutional Investors.

"Especially at this time in our economy, do we really want to tell individuals who will help companies to grow and innovate -- ultimately creating more jobs -- that they should go work elsewhere?" Mr. Blankfein said.

About 50 of J.P. Morgan's 225,000 employees, or 3% of its graduating hires, are affected by the new restrictions, according to a person familiar with the matter. Most of them work in the firm's investment bank. Rather than rescind offers, J.P. Morgan is sending those new hires to London, São Paulo and Hong Kong, say people familiar with the bank's strategy. J.P. Morgan CEO James Dimon has said the firm, which received $25 billion under TARP, took the money after the government requested it to do so and would like to pay it back.

Less than 1% of Citigroup's roughly 300,000 U.S. employees hold H-1B visas, according to a person familiar with the situation. The firm, which has received $50 billion in TARP funds, is sending affected employees to assorted foreign locations based on factors such as the worker's specific skills and native language.

The firm "is exploring potential opportunities in our non-U.S. global operations for those who may be affected by the law," a Citi spokesman said.

A Goldman spokesman said the firm will ask recruits to work in other offices if they can't get a U.S. visa. "We will honor the offers we have made," he said.

Other companies are leaving it up to the prospective employee to pursue overseas jobs. A spokeswoman for Bank of America Corp. says the firm rescinded a small number of job offers to prospective employees who need H-1B visas, but "like anyone, these individuals are welcome to pursue opportunities with the company based outside of the U.S."

The visa restrictions are also proving to be nettlesome to hedge funds and other investors who may seek to participate in a government-backed program designed to stimulate credit markets. Those firms, too, may be subject to the limitations on H-1B visas under certain circumstances.

—David Enrich contributed to this article.

Write to Robin Sidel at robin.sidel@wsj.com