StockSHAKERS

Federal budget gap tops $1 trillion through June
Federal budget gap through June tops $1 trillion amid GOP resistance to more gov’t spending

The federal deficit has topped $1 trillion with three months still to go in the budget year, showing the lasting impact of the recession on the government’s finances.
In its monthly budget report, the Treasury Department said Tuesday that through the first nine months of this budget year, the deficit totals $1 trillion. That’s down 7.6 percent from the $1.09 trillion deficit run up during the same period a year ago.
Worries about the size of the deficit have created political problems for the Obama administration. Congressional Republicans and moderate Democrats have blocked more spending on job creation and other efforts. Republicans also have held up legislation to extend unemployment benefits for the long-term jobless because of its effect on the deficit.
Another failed effort would have provided cash-starved states with money to help avoid layoff of public employees and finance the Medicaid program for the poor and disabled.
President Barack Obama also encountered resistance to further stimulus spending at a meeting of the Group of 20 major industrial nations last month in Toronto.
Obama expressed concerns about the risks to a fragile global recovery from withdrawing spending too soon. But the G-20 adopted targets to cut deficits in half as a percentage of their economies over three years.
The deficit in the federal budget in June totaled $68.4 billion, the second highest June deficit on record, but down from the all-time high of $94.3 billion in June 2009, a month when the government was spending heavily to stabilize the financial system and jump-start economic growth.
June is normally a surplus month as the government collects tax payments from corporations and individuals who make quarterly payments. Only seven years in the past 56 have seen deficits in June.
Many private economists are forecasting that the deficit for the entire budget year, which ends on Sept. 30, will come in around $1.3 trillion. That would be the second highest deficit on record, but it would be down slightly from last year’s all-time high of $1.4 trillion.
The Obama administration is forecasting that the deficit for the 2011 budget year, which begins Oct. 1, will remain above $1 trillion for a third straight year, projecting an imbalance of $1.27 trillion. And the administration predicts the imbalances over the next decade will total $8.5 trillion.
The deficits have been driven higher by the lingering effects of the worst recession since the 1930s. About one-third of the higher deficits in this period are a result of a drop in government tax revenues.
The other two-thirds of the deficit increases reflect higher government spending to stabilize the financial system with the $700 billion bailout program and the $787 billion stimulus program that Congress passed in February 2009. The increased spending also reflected added demands for such programs as unemployment benefits and food stamps.
The tide of red ink has sparked a political backlash with surveys showing rising unhappiness among voters with the ballooning deficits.
Through the first nine months of the current budget year, government revenues have totaled $1.6 trillion, up 0.5 percent from the same period a year ago.
Government spending totals $2.6 trillion, down 2.8 percent from the same nine months a year ago. That decline primarily reflects lower spending on the financial bailout effort as banks are now repaying the billions of dollars they received to bolster their capital reserves at the peak of the financial crisis.
Obama has appointed a national debt commission to report after the November midterm elections on ways that the federal deficits can be brought under control.
The heads of the panel told the National Governors Association on Sunday that everything needs to be considered including curtailing popular tax breaks, such as the home mortgage deduction.
“The debt is like a cancer,” Democrat Erskine Bowles told the governors. “It is going to destroy the country from within.”

Dow falls over 1 percent after Spain downgrade
^DJI 10,163.16 -95.83
 
NASDAQ 2,253.83 -23.85
 
NEW YORK (Reuters) - Stocks added to losses on Friday, pushing the Dow down more than 1 percent, after Fitch downgraded its rating of Spain.

The Dow Jones industrial average (DJI:^DJI - News) was down 119.94 points, or 1.17 percent, at 10,139.05. The Standard & Poor’s 500 Index (^SPX - News) was down 15.13 points, or 1.37 percent, at 1,087.93. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 32.14 points, or 1.41 percent, at 2,245.54. The S&P 500 and the Nasdaq each fell more than 1 percent earlier in the day.

Scientists create synthetic life form with a computer and four bottles of chemicals

Published: May 21 2010 03:00

Scientists have turned inanimate chemicals into a living organism in an experiment that raises profound questions about the essence of life.

Craig Venter, the US genomics pioneer, announced last night that scientists at his laboratories in Maryland and California had succeeded in their 15-year project to make the world’s first “synthetic cells” - bacteria called Mycoplasma mycoides .

“We have passed through a critical psychological barrier,” Dr Venter told the Financial Times. “It has changed my own thinking, both scientifically and philosophically, about life and how it works.”

The bacteria’s genes were all constructed in the laboratory “from four bottles of chemicals on a chemical synthesiser, starting with information on a computer,” he said.

The research - published online by the journal Science - was hailed as a landmark by many independent scientists and philosophers.

“Venter is creaking open the most profound door in humanity’s history,” said Julian Savulescu, ethics professor at Oxford University. “This is a step towards . . . creation of living beings with capacities and natures that could never have naturally evolved.”

The synthetic bacteria have 14 “watermark sequences” attached to their genome - inert stretches of DNA added to distinguish them from their natural counterparts. They behaved like natural bacteria. M mycoides was chosen as a simple microbe with which to prove the technology. It has no immediate application.

But scientists at the J Craig Venter Institute and Synthetic Genomics , the company funding their research, intend to move on to more useful targets that may not exist in nature. They are particularly interested in designing algae that can capture carbon dioxide from the air and produce hydrocarbon fuels.

Synthetic Genomics has a $600m deal with ExxonMobil to make algal biofuels.

“We have looked hard at natural algae and we can’t find one that can make the fuels we want on the scales we need,” Dr Venter said.

The researchers built up the synthetic genome of M mycoides , with its million chemical letters, by stitching together shorter stretches of DNA, each about 1,000 letters long. They then transferred the completed genome into the shell of another bacterium M capricolum whose own DNA had been removed.

The transplanted genome “booted up” the host cell and took over its biological machinery. After 30 cell divisions, there were billions of synthetic bacteria in the lab dishes - all of them making exclusively the biological molecules associated with M mycoides.

Copyright The Financial Times Limited 2010. You may share using our article tools. Please don’t cut articles from FT.com and redistribute by email or post to the web.

America’s Underclass: Growing Gap Between the Rich and Poor
Macro economic data suggest the great recession is over. But the gap between the haves and the have-nots is growing, thanks, in large part, to a jobless recovery. Wall Street Cheat Sheet’s Damien Hoffman says the growing underclass now accounts for about 10% of the U.S. population.

In this clip, he and his brother Derek, who jointly run the Wall Street Cheat Sheet website, point to several signs America is turning into a two-class society:  

-The foreclosure problem. 2.8 million homes were foreclosed in 2009.  RealyTrac expects that number to increase to 3-3.5 million in 2010.  Damien Hoffman thinks it could be even higher if “strategic foreclosures” become a more accepted practice.
- Unemployment.  The official rate is 9.9% but the wider measure of under employed and those who have given up on their job search is more like 17%.   That’s more than 24 million Americans out of work.
- Record numbers using food stamps. The Agriculture Department said a record 40 million Americans, or 1 in 8 Americans, may not be able to eat without government assistance.  “This is the ultimate sign of an under class,”  the Hoffman Brothers say.
- Take a look at Dollar Tree Stores. The discounter’s stock is near an all-time high while revenues are up 12.5% this year.  In other words, more Americans are chasing cheaper goods.

House passes tax breaks for new hires
Legislation passes 217-201; many argue measure won’t create many jobs
Despite doubts among many lawmakers that it’ll create many jobs, the House on Thursday passed legislation giving companies that hire the jobless a temporary payroll tax break.

The measure passed 217-201 on a mostly party-line vote. The bill also extends federal highway programs through the end of the year.

Some Democrats feel the approximately $35 billion jobs bill is too puny, while others say the tax cut for new hires won’t generate many new jobs. However, the pressure is on to address jobs and deliver a badly needed win for President Barack Obama and a Democratic Party struggling in opinion polls and facing major losses in the upcoming midterm elections. Further jobs measures are promised.

“If that’s the only thing that I can vote on … I’ll vote for it, obviously,” said Rep. Bill Pascrell, D-N.J. “We’ve got to get something moving. We’ve got to get something done.”

“It’s really not a jobs bill,” said Rep. Barbara Lee, D-Calif. “It’s one small piece.” Lee said she instead wants money in the legislation for job training and youth summer jobs.

The House had passed a much larger measure in December that contained almost $50 billion in infrastructure funding, $50 billion in help for cash-starved state governments, and a six-month extension of jobless aid. That bill conspicuously left out the proposals to award tax credits for hiring new workers. House Speaker Nancy Pelosi was among those skeptical of that idea.

The Senate responded last week with the far smaller measure that the House is reluctantly accepting. The House amended the measure Thursday to conform with so-called pay-as-you-go budget rules that have become an article of faith among moderate Democrats. The rules require future spending increases or tax cuts to be paid for with either cuts to other programs or equivalent tax increases.

The minor tweak means that the notoriously balky Senate would have to act again before Obama could sign the bill into law.

The $35 billion bill — blending $15 billion in tax cuts and subsidies for infrastructure bonds issued by local governments with the $20 billion in transportation money — is far smaller than the massive economic stimulus bill enacted a year ago.

The jobs bill has been a source of tension between House and Senate Democrats.

“It’s ridiculous that it’s taken so long for the Senate to overcome indifference and obstruction to finally send a bill back to the House which represents just a fraction of what we need to do to help the unemployed,” said House Appropriations Committee Chairman David Obey, D-Wis. “But better late than never, and better something than nothing.”

Across the Capitol, the Senate is debating a far more costly measure to clean up a lot of unfinished business from last year. The $100 billion-plus bill would extend unemployment assistance, revive a bevy of expired tax breaks, help states with soaring Medicaid costs and prevent doctors from having to absorb big cuts in Medicare payments. The popular initiatives are traditionally extended on a bipartisan basis for brief periods of time, which hides their long-term costs.

The Senate plans to act on the jobs bill after wrapping up the unfinished-business bill, which means it probably won’t be sent to Obama until next week.

The jobs bill contains two major provisions. First, it would exempt businesses hiring the unemployed from the 6.2 percent Social Security payroll tax through December and give them an additional $1,000 credit if new workers stay on the job a full year. The Social Security trust fund would be reimbursed for the lost revenue.

Second, it would extend highway and mass transit programs through the end of the year and pump in $20 billion in time for the spring construction season. The money would make up for lower-than-expected gasoline tax revenues.

Small businesses would continue to be able to write off equipment purchases as a business expense. Much of the bill is financed by cracking down on offshore tax havens.

Several lawmakers in both parties criticized the payroll tax break, saying that it wouldn’t do much to create jobs and that the bulk of it would go to employers for new hires that would be made anyway.

“It simply encourages conduct that would occur anyway,” said Lloyd Doggett, D-Texas.

Rep. Steve LaTourette, R-Ohio, said he asked businessmen at town meetings in his Rust Belt district whether they would hire people based on the payroll tax holiday. “Nobody raised their hands,” LaTourette said. “This is not going to create one job.”

“It’s an insipid, weak piece of legislation,” said Jim McDermott, D-Wash.

“It’s not that good, but it’s better than nothing,” said Jim McGovern, D-Mass. “And we’re going to have to do more. But the bill that I would have liked to have seen pass can’t pass the United States Senate.”

Economist Mark Zandi of Moody’s Economy.com said the new hiring tax credit could spur creation of about 250,000 new jobs. The economy has shed 8.4 million jobs since the recession began in December 2007.

Seven U.S. banks closed by regulators 140 have failed in 2009

Seven U.S. banks were closed by regulators on Friday, bring the total this year to 140 as the effects of the credit crisis continued to be felt across the country.

What’s more, the Federal Deposit Insurance Corp. established temporary institutions to help close two of the failed banks.

Atlanta-based RockBridge Commercial Bank became the 25th Georgia-based bank to fail this year. The FDIC was unable to find another institution to take over the failed bank, and so will mail checks to retail depositors for insured funds.

RockBridge Commercial Bank had roughly $294 million in assets and $291.7 million in deposits as of Sept. 30. Its failure will cost the federal deposit-insurance fund $124.2 million, the regulator said.

Panama City, Fla.-based Peoples First Community Bank became the 14th to fail in that state in 2009. Peoples First Community Bank had $1.7 billion in deposits as of Sept. 30, and Gulfport, Miss.-based Hancock Bank has agreed to assume those deposits.

Peoples First Community Bank’s failure will cost the deposit-insurance fund $556.7 million, according to the FDIC.

New Baltimore, Mich.-based Citizens State Bank’s failure will cost the deposit-insurance fund $76.6 million, with the FDIC creating the Deposit Insurance National Bank of New Baltimore to protect depositors of Citizens State Bank.

The new bank will remain open for 45 days to allow depositors to access insured deposits and open an account elsewhere, the agency said. Columbus, Ohio-based Huntington National Bank will operate the DINB under contract with the FDIC.

An FDIC spokesman said the agency has created such bridge banks “several times this year and in previous years.”

Irondale, Ala.-based New South Federal Savings Bank also was closed by regulators Friday. The bank had $1.2 billion in deposits as of Sept. 30, which will be assumed by Plano, Texas-based Beal Bank, the FDIC added.

New South Federal Savings Bank’s failure will cost the deposit-insurance fund $212.3 million.

Springfield, Ill.-based Independent Bankers’ Bank was closed, with $511.5 million in deposits as of Sept. 30.

The FDIC said it created the Independent Bankers’ Bank Bridge Bank to allow client banks of Independent Bankers’ Bank “to maintain their correspondent banking relationship with the least amount of disruption.”

Independent Bankers’ Bank’s failure will cost the deposit-insurance fund $68.4 million.

Two Southern California banks were closed Friday, the 16th and 17th such failures in the Golden State as a whole.

First Federal Bank of California in Santa Monica was taken over by regulators. OneWest Bank of Pasadena will assume all of its deposits and take over First Federal’s 39 branches, the FDIC said.

OneWest Bank agreed to purchase all of the $6.1 billion in First Federal Bank assets and did not pay the FDIC a premium for the $4.5 billion in total deposits; the hit to the deposit-insurance fund will be $146 million.

Separately, La Jolla, Calif.-based Imperial Capital Bank was closed. It had $2.8 billion in deposits as of Sept. 30, the FDIC said, and its failure will cost the deposit-insurance fund $619.2 million. City National Bank of Los Angeles is assuming all of the deposits in the “least costly” resolution, according to the agency.

Credit card’s newest trick: 79.9 percent interest
First Premier card carries heavy interest rate

It’s no mistake. This credit card’s interest rate is 79.9 percent.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It’s a strategy other subprime card issuers could start adopting to get around the new rules.

Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card’s credit line.

In a recent mailing for a preapproved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.

“It’s the highest on the market. It’s the highest we’ve ever seen,” said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can’t get approved for cards elsewhere. It’s a group that tends to lean heavily on credit too, meaning they’ll likely incur steep financing charges.

So for a $300 balance, a cardholder would pay $20 a month in interest.

First Premier said the 79.9 APR offer is a test and that it’s too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards.

According to First Premier’s Web site, the credit cards are issued by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.

In a mailing sent to prospective customers in October with the revamped terms, First Premier writes “…you might have less-than-perfect credit and we’re OK with that.” The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.

The letter also states there are no hidden fees that aren’t disclosed in the attached form. That’s where the 79.9 percent interest rate and $75 annual fee are listed. There’s also $29 penalty if you pay late or go over your credit limit. The credit limit is $300.

The bank did not say how many people were offered the 79.9 APR card, but noted that it needed to “price our product based on the risk associated with this market.”

Even if First Premier doesn’t stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9 percent to offset the lower fees, said Shahani of Synovate.

The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.

The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84 percent of its offers were sent to subprime households, down from 91 percent the same period last year, according to Synovate.

First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won’t issue cards as liberally to those with bad credit.

As harsh as First Premier’s terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.

“Even when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit,” said Papadimitriou.

Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.

Gold futures top $1,100/oz for first time
Gold falls on investor disappointment, eyes $1,100
 
Gold futures in New York rose to a record above $1,100 per ounce on Friday as the dollar eased in the wake of disappointing U.S. employment data.

At 9:48 a.m. EST (1448 GMT) December gold GCZ9 was up $10.20 at $1,099.50 an ounce at the COMEX division of the New York Mercantile Exchange, having topped at $1,101.90 in morning trade.

Spot gold XAU= reached a record at $1,100.90 per ounce.

Life settlements
A life settlement generally refers to the sale of a life insurance policy by a policyowner for less than the face value of the policy to third party investors.[1] The third party investor(s) plans to profit at death of the insured by collecting more in death benefits that were paid out (e.g., the purchase price, the transactions costs, and premiums). This translates into higher profits the sooner the policy holder dies. A “viatical settlement” is the same as a life settlement except the insured is chronically or terminally ill (as defined by the IRS Code).

Transactions of this type have been available for Americans since 1911. Aids sufferers created a small market in the 1980’s when their policies were sought out by speculators. The credit crisis has seen a rise of elderly Americans for whom their life-insurance policy is one of their more valuable assets.

The Economist reports estimates of it being a $18-19 billion market as of June, 2009.

The following was provided by the life settlement industry:

Generally speaking, life settlements are an option for high-net-worth policy owners age 70 or older. Independent estimates report that among this group, over 50% of policies have a market value that exceeds the cash value offered by the carrier. A growing number of experts now believe that informing clients about offering life settlements should fall under the fiduciary duty of a financial adviser.[citation needed] With this being said, those established in the industry are now placing an emphasis on life settlement education for financial professionals so that they can accurately present the life settlement option to all clients who might benefit from it.