Health Insurance Is Not A Tax Increase

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WASHINGTON (CNN) -- President Obama insists that requiring Americans to get health insurance does not amount to a tax increase.

In a testy exchange on ABC's "This Week," broadcast Sunday, Obama rejected the assertion that forcing people to obtain coverage would violate his campaign pledge against raising taxes on middle-class Americans.

"For us to say you have to take responsibility to get health insurance is absolutely not a tax increase," Obama said in response to persistent questioning, later adding: "Nobody considers that a tax increase."

A proposal going before the Senate Finance Committee this week includes the mandate for health coverage. Obama has praised the plan in general, and indicated in the interview conducted Friday that he could back the coverage mandate.

He noted that consumers currently pay higher health insurance premiums due to the costs run up by hospitals and other facilities providing care to uninsured people.

Those unable to afford health insurance should get government help, Obama said, but others who can afford coverage but choose not to get it should face coverage requirements similar to those for auto insurance.

"What it's saying is ... that we're not going to have other people carrying your burdens for you any more than the fact that right now everybody in America, just about, has to get auto insurance," he said. "Nobody considers that a tax increase. People say to themselves, that is a fair way to make sure that, if you hit my car, that I'm not covering all the costs."

Asked again about critics calling the requirement to pay for health insurance a tax increase, Obama said: "My critics say everything is a tax increase." Video Watch Obama strategy in health care battle »

On another aspect of his desired health care reform, Obama said cutting billions of dollars in government subsidies for Medicare Advantage would not reduce essential coverage for senior citizens in that program.

The government cites the proposed subsidy cut for Medicare Advantage -- an enhanced program within Medicare -- as an example of how it can reduce health care spending while expanding coverage to millions of uninsured Americans.

Republican opponents say cutting Medicare costs will reduce benefits for senior citizens, a claim Obama has denied as misinformation.

When pressed on that issue in the interview, Obama said Medicare Advantage provided essentially the same level of medical care as regular Medicare while costing the government much more due to the subsidies.

Insurance companies were "overcharging" for the service, Obama said, insisting that the change would mean senior citizens will get the same level of coverage at a lower cost to the government.

"Now, they package these things in ways that, in some cases, may make it more convenient for some consumers, but they're overcharging massively for it," Obama said. "There's no competitive bidding under the process." Video Watch Obama talk health care and more with CNN »

He said people currently signed up for Medicare Advantage would still get regular Medicare coverage "and the same level of benefits, but they may not be having their insurer get a 14 percent premium."

"And will the insurers squawk? You bet," Obama said, rejecting claims that those enrolled in Medicare Advantage would be left with substandard benefits. "These folks are going to be able to get Medicare that is just as good, provides the same benefits, but we're not subsidizing them for $18 billion a year."

Republican response to Obama on Sunday called the president's promises of expanded health coverage at lower costs too good to be true. Video Watch top Republican talk about health care reform »

"It's just not believable," said Michael Steele, the Republican National Committee chairman, on the CBS program "Face the Nation." No matter what Obama says, Steele added, "Taxes are going to go up for the middle class because they have to."

Sen. Lindsey Graham, R-South Carolina, said on the NBC program "Meet the Press" that Obama "is selling something that people quite frankly are not buying."

"This is not about tone -- this is about policy," Graham said.

Also appearing on the show, House Minority Leader John Boehner, R-Ohio, said health care reform as proposed by Obama and the Democrats was dead in Congress.

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How to make your money last.

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By Walter Updegrave, Money Magazine senior editor
September 21, 2009: 4:33 AM ET

(Money Magazine) -- Once you have your Social Security strategy down, there's just one little retirement question left to consider: How can you make the money that you've so diligently saved provide the life you want for as long as you live? Oh. That.

Figuring out how to draw secure retirement income from a portfolio is a challenge in the best of times; today it's made more complicated by fear. Having seen the worst-case scenario unfold in the past year, you've probably gone into loss-avoidance mode. But deflecting market risk leaves you vulnerable to inflation risk -- and the risk that you'll outlive your money. So hiding in cash won't save you.

"No one investment can protect you from every risk you'll face," says John Ameriks, head of Vanguard Investment Counseling & Research. What you need, rather, is a basket of investments that provides:

1. Stable income you're not likely to outlive.

2. The potential for that income to grow to beat inflation.

3. The ability to access cash to meet unexpected needs.

4. Adequate protection from market downturns.

Here are three smart strategies to achieve those goals. The second offers the best chance of making your money last; however, you'll lose access to a big chunk of your savings. The others give you more control, but less certainty. There's no free lunch in retirement -- but the menu that follows presents some interesting options.

Strategy 1: The traditional stock-and-bond portfolio

YOU'RE A CANDIDATE IF ...

You have enough income from Social Security and pensions to cover most of your basic expenses (so you could weather a market storm) and/or you're confident in your ability to manage your portfolio.

THE PREMISE: You invest in a diversified portfolio of stocks, bonds, and cash that has the potential to generate current income and capital gains. You pull out money as needed, starting off with a 4% annual withdrawal -- $40,000 on a $1 million portfolio -- then increasing the dollar amount by the inflation rate each year.

Done correctly, this gives you a 77% shot of your money lasting 30 years, says Ibbotson Associates. The higher the withdrawal rate, the lower your odds. So this strategy may not work if you need more income than 4% would provide.

THE DRAWBACKS: A sizable loss early in retirement could undo you. If your portfolio loses 20% the first year, the chances of your savings lasting 30 years could drop to roughly 50%. Alternatively, if the market does well over the long run, you could be left with a huge sum late in life, so you would have lived more frugally than you had to.

HOW TO PULL IT OFF: Allocation is key. Going 100% into bonds might protect you from a market meltdown, but such cataclysms are rare. And you'd lose out on inflation protection. Loading up on stocks gives you a better shot at increasing your income, yet you may get mauled by a bear market. So aim for the middle ground: For someone just entering retirement, a broadly diversified fifty-fifty stock-to-bond blend like the one in the chart above, right is a reasonable starting point.

You also have to be flexible with withdrawals. In a declining market you may have to skip the inflation boost or scale back the amount you draw down. Conversely, if the markets go on a run, you may be able to take more. Check yearly at T. Rowe Price's Retirement Income Calculator.

Finally, be strategic in the way you tap assets. Start with taxable accounts; then tax-deferred (401(k)s and traditional IRAs); then tax-free Roths. That way the latter accounts compound longer without the drag of taxes, so you can build bigger balances and draw more income over time.

Strategy 2: Stocks, bonds - and an immediate annuity

YOU'RE A CANDIDATE IF ...

You need more income for basic expenses than you'll get from Social Security and pensions. Or you'd like to avoid subjecting all your savings to market volatility.

THE PREMISE: Invest a portion of your savings in a lifetime immediate annuity, an insurance product that will send you fixed monthly checks for as long as you and/or your spouse live. You'll manage the rest of your portfolio as in Strategy 1. The payoff: You'll have another layer of guaranteed income and still have funds to tap.

This strategy provides longer income security than the first because the payout from an immediate annuity can't be easily matched by another sure-bet investment. Recently immediate annuities paid out roughly 8% for a 65-year-old man, or about $40,000 a year on $500,000. You'd have to invest significantly more to get the same assured lifetime income from long-term Treasuries. The reason immediate annuities pay so well? Investors' money is pooled, allowing insurers to essentially transfer funds from early croakers to those who hang on past life expectancy.

THE DRAWBACKS: Once you hand over, say, a few hundred grand for an immediate annuity, you typically give up access to the money. You can't use it for a new roof or a vacation in France, or pass it down to your kids. Plus, if you're hit by a bus early in retirement, the annuity will have paid out less than you put in. For those reasons, many people perceive immediate annuities as potentially wasted money.

Another concern: Annuity payments are usually fixed, meaning they'll be worth less over time because of inflation. A few insurers offer inflation-adjusted immediate annuities, but the payouts start considerably lower.

Finally, while annuities eliminate market and longevity risk, they introduce another risk: Your income security is based on the financial health of the insurer.

HOW TO PULL IT OFF: In reality, money in an annuity is no more "wasted" than the premiums you pay to insure your house. So try to get over that psychological hurdle, since this strategy presents your best chance of maintaining income.

To make it work, you want to devote enough to the annuity so that the income, along with Social Security and pensions, covers your basic expenses. But you don't want to go overboard, as you'll lose too much liquidity. Plus, you'll need to use what's left to try to beat inflation, since your annuity payments won't.

There's no one "right" mix. Splitting savings fifty-fifty between an immediate annuity and a diversified portfolio can provide the same 4% inflation-adjusted income as in Strategy 1 -- but with a 99% chance of lasting 30 years. If you can live with less certainty, you can boost your income to, say, 4.5% by drawing more from your portfolio. Or, you could invest less in the annuity.

Consider buying in stages. That prevents you from over-committing and from investing all your money when interest rates -- which drive payouts -- are lowest. To mitigate the risk of insurer failure, stick to companies highly rated by Standard & Poor's and A.M. Best, then spread your money among two or three companies. Check at nolhga.com that the amount you'll invest with each company is covered by your state's insurance guaranty association.

Strategy 3: All of the above, plus a variable annuity

YOU'RE A CANDIDATE IF ...

You need more income than Social Security and pensions will provide, but you want access to more of your savings than Strategy 2 allows.

THE PREMISE: While maintaining a stock/bond portfolio, you'll also invest a portion of savings in an immediate annuity and a portion in a variable annuity with a guaranteed lifetime withdrawal benefit (a.k.a. VA with GLWB), an investment account promising a minimum withdrawal for the rest of your life.

In a VA with GLWB, you choose the investments, within limits. You can dip into the account as needed. And you can typically leave the greater of (a) the account balance or (b) your original investment minus withdrawals to your heirs. So it's more flexible than an immediate annuity.

The other advertised benefit: Your income has the potential to grow if your investments appreciate. Say you invest $250,000 and are guaranteed 5%, or $12,500 a year. If, on your contract anniversary date, a rising market has pushed your balance to $300,000 after fees, your 5% will be applied to that amount, boosting your income to $15,000.

Even if a market crash later knocks your account to $200,000, you're still guaranteed 15 grand (though if you want to cash out, you're limited to the actual account value).

THE DRAWBACKS: Flexibility comes at a price. First, variable annuities pay significantly less than immediate annuities, only about 5% for a 65-year-old. Second, the plans come with such high fees, often 3% or more a year, that it's difficult for your account value to grow at all, let alone keep pace with inflation. Third, though you can draw more than your guaranteed amount from the account, doing so will reduce your income for future years. Last, you face the same insurer risks as in Strategy 2.

HOW TO PULL IT OFF: The high fees and low payout of the VA explain why you need an immediate annuity in the mix: Without it, the odds of maintaining your target income are slightly lower than with a stock/bond portfolio alone.

Together you want the payouts, along with Social Security and pensions, to cover your basic expenses. So how much in each? The more you put in the variable annuity vs. the immediate, the more of your assets you'll have access to.

In exchange, you'll settle for a lower guaranteed payout. A reasonable mix: Put 25% of savings into an immediate annuity, put 25% in a VA, and invest the other 50%. That gives you a 92% chance of getting the income you want for 30 years. You'll end up giving away more of your savings to fees than with the other strategies, but, alas, you have to pay for security one way or another.


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Money flowing from financial

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NEW YORK (CNN) -
President Obama said Monday that the need for the federal government to help prop up the nation's hard-hit financial system is fading."While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning," he told an audience of key financial and political leaders at New York's famed Federal Hall on Wall Street.
"After months in which public dollars were flowing into our financial system, we are finally beginning to see money flowing back to taxpayers."
Obama noted that although taxpayers won't necessarily "escape the worst financial crisis in decades entirely unscathed," banks have repaid more than $70 billion in government bailout funds.
He called for the closure of regulatory loopholes that contributed to the current financial crisis.
"We've got to close the loopholes that were at the heart of the crisis. Where there were gaps in the rules, regulators lacked the authority to take action," he said.
This weakness "in oversight engendered systematic, and systemic, abuse."
The president said that, while "holding the Federal Reserve fully accountable for regulation of the largest, most interconnected firms, we'll create an oversight council to bring together regulators from across markets to share information, to identify gaps in regulation, and to tackle issues that don't fit neatly into an organizational chart."
Obama noted that, under his plan, "we'll also require these financial firms to meet stronger capital and liquidity requirements and observe greater constraints on their risky behavior."The only way to avoid a repeat of the financial crisis, he said, "is to ensure that large firms can't take risks that threaten our entire financial system and to make sure they have the resources to weather even the worst of economic storms."
Obama said he is proposing creating "resolution authority" in the event that a failure of a particularly large financial firm threatens the stability of the financial system.
"This is intended to put an end to the idea that some firms are 'too big to fail,' " he said.
"For a market to function, those who invest and lend in that market must believe that their money is actually at risk. And the system as a whole isn't safe until it is safe from the failure of any individual institution."
The president also called for the creation of a "Consumer Financial Protection Agency" to help protect consumers and enforce new rules governing the nation's financial system.
Right now, Obama noted, "there is no single agency charged" with doing so. "That is what we'll change," he said.
The new agency, he noted, "will have the power to make certain that consumers get information that is clear and concise, and to prevent the worst kinds of abuses. Consumers shouldn't have to worry about loan contracts designed to be unintelligible, hidden fees attached to their mortgages, and financial penalties -- whether through a credit card or debit card -- that appear without warning on their statements."
The president urged closer international cooperation both to contain the current financial crisis and prevent it from repeating in the future.
"We need to close the [regulatory] gaps that exist not just within this country but among countries," he said.
"We know that abuses in financial markets anywhere can have an impact everywhere. ... Just as gaps in domestic regulation lead to a race to the bottom, so too do gaps in regulation around the world. Instead, we need a global race to the top, including stronger capital standards."
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Rural Areas Of The Country

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Finance Minister Dr. Baburam Bhattarai on Friday has urged bankers to extend services to rural areas of the country.In an interaction organized on financial inclusion by Nepal Bankers' Association (NBA), Dr. Bhattarai said that the bankers should go beyond towns to help marginalised groups like women, Dalits and Janajatis.Telling bankers to reach 80 percent of people who do not have access to financial institutions in rural areas, he also assured of government's support to such banks.Dr Dipendra Bahadur Chhetri, governor of Nepal Rastra Bank (NRB) said that the inclusion was a challenging issue. "Financial inclusion is a priority to be achieved through expansion of banking services, narrowing economic gaps and affirmative action," he said. NRB is planning to mobilize 236 banks and financial institutions in this regard.Vice chairman of the National Planning Commission Guna Nidhi Sharma said that the rural economy could be achieved through diversification of rural lives like raised income level, increased savings and provision of technology. "The role of financial institutions is important to divert the rural economy to more diversified areas," he said.Dr. Gautam Sen, director of the Gandhi-Einstein Foundation, in his keynote address on inclusive banking, said inclusion can't be achieved by the private sector alone and that the government must support it.Sen also advised of bringing economically disadvantaged groups like farmers, women and the landless to national banking net for implementing inclusion banking.
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Nepali Economy

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The Nepal Rastra Bank (NRB) on Sunday said that Nepali economy has started witnessing the impact of the global financial crisis.Speaking at a press conference organised to release NRB's mid-term evaluation of the Monetary Policy of the current fiscal year, Dipendra Bahadur Chhetri, governor of NRB said that the economic growth expected by the government could not be achieved due to global financial crisis, high unemployment and inflation.“The economy has started witnessing the impacts of the global financial crisis by the beginning of the second half of the current fiscal year and it is likely to squeeze the economic growth rate targeted for the current fiscal year,” said the report.Nepalis abroad are continuing to lose their jobs, consequently decreasing the remittance that enters Nepal, Chhetri informed.“The high inflation which touched 14.4 percent by the first half of the current fiscal year and was expected to remain at 11 percent on annual average is really a worrisome development,” said Chhetri warning that the inflation rate will stand at 11 per cent if the crisis continues.“High revenue mobilization and negative growth seen in the government’s expenditure is also resulting in the liquidity position to contract,” said the report.The report added that the expected economic recovery during the current fiscal year remained much weaker than expected mainly due to the worsening power crisis and weakening investment confidence.
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International Banking.

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GRAHAM BOWLEY AND LOUISE STORY, NEW YORKSeptember 12, 2009
MELBOURNE-RAISED James Gorman has ascended to one of the most prestigious roles in international banking.
Educated at Xavier College and Melbourne University's law school, 51-year-old Mr Morgan will replace legendary Wall Street blue-blood John Mack at the helm of Morgan Stanley.
Mr Mack - his bank and reputation smarting from the financial crisis - is bequeathing Morgan Stanley to a relative newcomer: Mr Gorman, the quiet power behind a new push to lure ordinary investors to the bank's blossoming brokerage business.
The appointment, announced on Thursday, ends months of speculation over who will succeed Mr Mack as head of what was, until recently, one of the most prestigious and successful banks on Wall Street. Unanswered are the many questions still swirling over Mr Mack's legacy - and, now, over Mr Gorman, his handpicked successor.
Mr Gorman will become chief executive on January 1; Mr Mack, 64, will remain chairman.
Mr Mack presided over an era of unprecedented profits - and then record losses. Only a year ago, Morgan Stanley nearly foundered like Lehman Brothers. It was saved, like so much of Wall Street, by a multibillion-dollar bail-out and other government aid.
Mr Gorman will come to the job with a far different pedigree than Mr Mack. A lanky, cerebral Australian who dislikes being called Jim, Mr Gorman is co-president in charge of Morgan Stanley's global wealth management. He joined Morgan Stanley less than four years ago, from Merrill Lynch, where he ran the global private client business. Before that, he was a senior partner at McKinsey & Co.
For much of the past year, Mr Gorman and another executive, Walid Chammah, who runs the investment banking and capital markets operations, had been vying for the top job. Mr Mack seemed to have favoured Mr Gorman, whom he had hired and promoted through the ranks.
For Mr Gorman, the good news came on Monday evening, over dinner and drinks with Mr Mack in Manhattan. After a 10am conference call on Thursday with board members, the deal was done.
R. Glenn Hubbard, dean of Columbia Business School, who has known Mr Gorman since his days at Merrill Lynch, said he was a ''strategic thinker'' and his qualities made him ''a good recipe for success''.
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An Amazing Story By Two Country

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It's an amazing story—the unprecedented rise of English-speaking people to their dominant positions of power and influence over the modern world.

History shows that their rise to greatness began in the turmoil of the Protestant Reformation. Having broken from Rome and faced with the combined hostility of both the continental church and imperial Spain, then the most powerful nation in the world, England began to look beyond the seas for her security and trade.

Explorers were sent throughout the world during the reign of Queen Elizabeth I (1558-1603). This led to the establishment of colonies that later developed into the United States of America and the nations of the British Commonwealth.

Historians have called these countries "revolutionary empires." They were not despotic tyrannies as were other countries or earlier empires in which everyone was subject to domineering autocrats.

Each colony had its own parliament or house of assembly to which voters sent elected representatives. People could own land, practice their religion and even take their government to court, while newspapers were free to criticize the authorities. Books were freely published. Innovative ideas flourished in what became the most politically stable nations in modern history.

These new ideas led to the gradual formation of a great company of nations, the British Empire and Commonwealth, and the world's most successful republic, the United States of America.

Why has history been so benevolent and economically generous to Britain and the United States? Why have they been blessed so favorably over the nations that preceded them in history? The answer lies in the understanding and fulfillment of biblical prophecy.

Surprising as it may sound, both were destined according to Bible prophecy to become superpowers. One was to precede the other to world-power status. Both would dominate international affairs in their own time. They would even be called upon to save other nations from the forces of despotism. Above all, they would make possible democratic and religious freedoms for the English-speaking nations.

In two world wars the British Commonwealth and the United States saved virtually the entire civilized world from powers intent on world domination. Without them our world would be entirely different in many ways.

The climate that encouraged freedom of expression led to the Industrial Revolution, which changed the world. In the century between the end of the Napoleonic Wars and the beginning of World War I (1815-1914), British capital and expertise developed the economies of her colonies (one quarter of the world's peoples) and contributed to the development of the fledgling United States and the newly independent nations of South America. After World War II America's economic prosperity and generosity—through the Marshall Plan—got Europe and Japan moving again.

Today the decline of Britain and America is leaving a vacuum around the globe. Already the dissolution of the British Empire has brought to the surface ethnic conflicts long held in check under colonialism. Wars in the Middle East, Africa, South Asia and the Pacific are the direct result of decolonization and have made the world more complex and unstable.

American power may seem to be successfully dealing with these problems. But the international standing of the United States itself is in decline. Long in the vanguard of progress, Britain and the United States are increasingly faced with complex and seemingly insoluble dilemmas at home and abroad. Meanwhile, other powers, in the East and West, flex their muscles, preparing to challenge America's superpower status.

For more than 400 years England and the nations spawned by her have played a crucial role in the world. Together, Britain and the United States have dominated the world scene for two centuries during a time when crucial biblical prophecies concerning the time of the end are being fulfilled before our eyes.

Now we come to some vital questions. Why are economic blessings —and democratic ideals—so evident in the English-speaking nations? Who are the British and American peoples? How do these two great powers—the United States and the nations comprising most of the former British Empire—fit into Bible prophecy?

Are the British and American peoples ignored in the pages of your Bible while less-powerful nations are mentioned specifically and often? Is it logical to believe that God, in revealing the events that would lead to the return of the Messiah in the last days, would simply overlook the United States and British Empire?

Or is it possible that most people, including many students of the Bible, have simply failed to understand the prophecies that accurately predicted the rise to greatness of these nations and what will happen to them in the end time?

Reading through the pages of this publication will take you on an incredible journey through ancient and modern history. You will meet peoples you may never have heard of and visit lands you have not seen. This knowledge is a vital key to understanding our world and age.
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China’s Economy

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China’s economy showed fresh signs on Friday that its recovery was gathering pace, with data showing that investment, industrial output and credit all expanded more rapidly in August, although the government still believes it is too soon to begin tightening policy.
Increases in output and investment both beat analysts’ forecasts and followed a series of figures in July that suggested the recovery might be weakening. The one exception was on the trade front, where the decline in exports and imports compared with the year before was sharper than expected.
“The further signs of strengthening private investment and consumer spending reinforce our view of a growth recovery that is to be sustained,” said Peng Wensheng, economist at Barclays Capital.
The robust August numbers will intensify the debate about when Beijing should begin withdrawing some of the huge fiscal and monetary stimulus measures it has put in place since the end of last year.
Speaking at the meeting of the World Economic Forum in Dalian this week, Wen Jiabao, the premier, ruled out any early change of course.
“China’s economic rebound is unstable, unbalanced and not yet solid,” Mr Wen said. “We can not and will not change the direction of our policies when the conditions aren’t appropriate.”
Asia economic weather map

One year after the global financial crisis began, confidence is soaring among Asian economists and policymakers
However, the dramatic increases in new lending and money supply this year, combined with rising property and equity markets, have raised fears that government policies are creating a series of bubbles and aggravating over-capacity in the economy. Even senior officials acknowledge this as a genuine risk.
“We are all concerned about the issue of excess capacity in some industries, which has become quite prominent,” said Zhang Xiaoqiang, vice-chairman of the National Development and Reform Commission, China’s powerful central planning agency.
Stephen Roach, Asia chairman for Morgan Stanley, said the figures showed the recovery was intact but heavily dependent on investment.
“This trend is not sustainable and, although the Chinese economy will probably expand in the third and fourth quarters this year, the real test will be next year when it becomes clear that external demand, led by the US consumer, is in big trouble,” Mr Roach said.
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Financial Speak In New York

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WASHINGTON - President Barack Obama is delivering a speech on Wall Street Monday, exactly one year after Lehman Brothers collapsed, precipitating the financial crisis felt around the world.
The White House announced Thursday that the president will deliver a speech on the financial crisis at midday Monday at Federal Hall in New York. He is to talk about steps the administration has taken to mitigate the crisis and its commitment to winding down the government's role in the financial sector.
Citing emerging financial sector stability, Treasury Secretary Timothy Geithner said Thursday that a number of government rescue efforts in place since the Wall Street crisis are no longer needed and that banks will repay $50 billion in rescue funds over the next 18 months.
He says conditions have improved in the banking industry and the Treasury is stepping down emergency support programs implemented after the collapse of Lehman Brothers investment bank.
WASHINGTON - President Barack Obama is delivering a speech on Wall Street Monday, exactly one year after Lehman Brothers collapsed, precipitating the financial crisis felt around the world.
The White House announced Thursday that the president will deliver a speech on the financial crisis at midday Monday at Federal Hall in New York. He is to talk about steps the administration has taken to mitigate the crisis and its commitment to winding down the government's role in the financial sector.
Citing emerging financial sector stability, Treasury Secretary Timothy Geithner said Thursday that a number of government rescue efforts in place since the Wall Street crisis are no longer needed and that banks will repay $50 billion in rescue funds over the next 18 months.
He says conditions have improved in the banking industry and the Treasury is stepping down emergency support programs implemented after the collapse of Lehman Brothers investment bank.
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Dubai Financial Markets

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23 July 2009. The ADX was almost unchanged with a 0.03% rise (less than 1 point) to 2711 points from moderate turnover of AED 338m, pushed up by a large volume of trading in RAK Cement. The DFM saw a better gain of 0.68% to 1752 points from rather low turnover of AED 220m. On the Nasdaq Dubai at 14:30 UAE time, DP World is down 2.2%, Depa is down 3.6% and there has been one trade in Air Arabia derivatives (price unchanged).Dubai Financial MarketDIB was the most active stock in Dubai today, but still only saw AED 39m worth of deals as it gained 3.75% to close at 2.49, putting it in third place on the gainers list. Arabtec (ARTC) was just behind on turnover with AED 37m worth of deals, and fell 0.39% to 2.57. Emaar Properties (EMAAR) was pushed into third place on turnover with just AED 26m worth, and rose 0.39% to 2.56. Dar Takaful Insurance (DARTAKAFUL) was the best gainer with a rise of 4.35% to 2.40, level with Al Firdous Holdings (ALFIRDOUS) also rising 4.35% but on minimal trading levels. Other gainers included Emarat Takaful Insurance (TAKAFUL-EM) up 2.6%, Islamic Arab Insurance (IAIC) up 2.4%. Arab International Logistics (ARMX) up 2.0%, and most other stocks rising less than 2%. There were only 5 losers, Arab Insurance Group (ARIG) the worst of them with a 5% fall from a single trade, and only Dubai Investment Company (DIC) and Arabtec falling on turnover of more than AED 1m, both down less than 1%.Abu Dhabi Securities ExchangeDana Gas (DANA) was the most active stock in Abu Dhabi with a 3.8% rise from just under AED 100m worth of deals, followed by Ras Al Khaimah Cement (RAKCC) trading just over AED 80m worth of stocks and closing price unchanged at 1.30. Agthia Group (AGTHIA) was the best gainer with a 6.4% rise to 1.70, followed by Aabar Energy (AABAR) up 4.65% and Waha Capital (OILC) up 3.95%. Other gainers included Abu Dhabi Commercial Bank (ADCB) up 3.4%, Gulf Cement (GCEM) up 2.3% on low volumes, and the remainder up less than 2% including National Bank of Abu Dhabi (NBAD) up 1.8% to 11.10. Abu Dhabi National Takaful (TKFL) was the worst loser, closing 10% limit down from just one small trade. The next 5 losers all fell on low volumes. Ras Al Khaimah Properties (RAKPROP) was the worst of the more active stocks, down by 1.4%, First Gulf Bank (FGB) and Ras Al Khaimah White Cement (RAKWCT) fell 1.0%, and the remaining losers fell less than 1% including Emirates Telecom (ETISALAT) down 10.94% to 10.60.
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American Life Insurance Co.

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NEW YORK — American International Group Inc. is interviewing banks this week to manage a planned initial public offering of life insurance unit American Life Insurance Co., sources familiar with the matter said.
An IPO could fetch as much as $5 billion for Alico, depending on the size of the stake that is sold, the sources said. AIG has said it plans to list the company in New York.
About 10 banks, including UBS AG, Deutsche Bank AG, Citigroup Inc, Credit Suisse Group AG and Goldman Sachs Group Inc., are expected to be interviewed for the job, the sources said on Tuesday.
Morgan Stanley is expected to get a lead role as it has been guaranteed such a position by the Federal Reserve Bank of New York for any IPO of AIG units, the sources said.
An IPO of Alico is expected only after the public offering of shares in another major AIG property, American International Assurance Co Ltd. (AIA), which has been slated for early next year, one of the sources said.
Morgan Stanley and Deutsche Bank have been selected as global coordinators for the AIA offering.
AIG and all the banks declined to comment. The sources declined to be identified because the process is not public.
Alico, which was founded in 1921, sells life insurance and retirement products to 19 million customers through a distribution network that includes 40,000 agents. It operates in 54 countries but generates more than half of its revenue in Japan.
In July, another source told Reuters that AIG was in talks with MetLife Inc. for a possible sale of Alico. The status of those talks could not be determined on Tuesday.
Late last month, AIG’s new chief executive, Robert Benmosche, said the company was still planning IPOs for Alico and AIA, preparing them from an eventual sale when the time was right.
The divestitures are part of the insurer’s efforts to repay US taxpayers the roughly $80 billion it received as part of a larger federal rescue.
The company has agreed to give the US government preferred stakes in Alico and AIA to reduce its debt by $25 billion.
Separately, Credit Suisse downgraded AIG to "underperform" from "neutral," saying near-term sale of businesses would leave little to no value for common equity holders.
AIG’s shares were off $3.58, or 8.9 percent, at $36.47 during afternoon trading on the New York Stock Exchange. — Reuters
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About United Coconut Planters Bank (UCPB)

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GOVERNMENT-sequestered United Coconut Planters Bank (UCPB) is planning on tapping the local debt market within the year to raise financing for its expansion plans.
"We will ask the central bank for authority to issue Tier 2 capital," said Ramon Y. Sy, UCPB president and chief executive officer, in an interview.
He said the bank targets to raise around P4 billion-P5 billion.
Lower Tier 2 capital is supplementary capital in the form of fixed-rate debt papers subscribed to by investors. Investors’ claims are ranked below those of depositors and senior creditors in the event of bank closure.
Mr. Sy said the bank will propose the plan to the regulator, as it has not been allowed to raise capital since 1986 due to an ownership dispute.
In 2003, the Sandiganbayan ruled that businessman Eduardo "Danding" Cojuangco, Jr. illegally acquired UCPB shares by using some P160 billion in coco levy funds. This allowed the Presidential Commission on Good Government to take over the bank’s board.
Mr. Sy said the funds raised would be used to upgrade its information technology (IT) platform.
He said the bank is planning to spend a total of P1.4 billion in the next three to four years to update its automation system.
"We have to automate because we have fallen behind [in terms of IT development]. We have not been able to update our systems for many years. Our product development has been put at the backburner because [of our outdated IT system]," Mr. Sy said.
"We are changing a lot of things to improve our efficiency," he added.
Mr. Sy also said the bank intends to expand its branch network to a total of 350 in the next three to four years. UCPB currently has 178 branches, while its thrift bank subsidiary UCPB Savings bank has 33.
"We need more branches to be able to compete," he said.
The bank’s plan to hike its capital followed the government’s infusion of P30 billion in deposits as well as the conversion of a P12-billion loan from the Philippine Deposit Insurance Corp. (PDIC) into equity or Tier 1 capital.
UCPB, the 12th largest lender in the country with assets of P151.58 billion as of end-June, booked a net income of P336 million in the first half, a big turnaround from a net loss of P1 billion in the same period last year.
Its plan to float Tier 2 debt would follow the issuances made by other universal banks earlier this year, which aimed to strengthen their capital positions.
Banco de Oro Unibank raised P3 billion in lower Tier 2 notes in March; Metropolitan Bank and Trust Co., P4.9 billion in April; and Rizal Commercial Banking Corp., P4 billion in May
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The IRS Plans To Make To Encourage Workers

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WASHINGTON (CNNMoney.com) -- President Obama on Saturday announced changes that the IRS plans to make to encourage workers to save more of their paychecks.
"Even before this recession hit, the savings rate was essentially zero, while borrowing had risen and credit card debt had increased," Obama said in his weekly radio and Internet address. "More broadly, tens of millions of families have been, for a variety of reasons, unable to put away enough money for a secure retirement. ... We cannot continue on this course."
Most of the following changes will take effect immediately because of rule changes made by the Treasury Department.
Auto enrollment in retirement plans: To make it easier for smaller and medium-sized employers to automatically enroll workers into retirement plans, the administration will clear up some bureaucratic paper-work hurdles for employers to offer that option. Employees could still choose to opt out of the retirement plans.
Saving tax refunds: To make it easier for those owed tax refunds to save, the IRS will allow tax filers in 2010 to recoup their refund by issuing U.S. savings bonds.
Sick days and vacation time become 401(k) money: To make it easier for workers to rack up savings, the White House will make it easier for employers to convert (or allow workers to convert) unused vacation and sick leave pay into 401(k) contributions.
Americans have not been good savers in recent decades.
Recently, personal savings rates have increased, rising from essentially zero last year to about 4.2% in July, according to government statistics.
But even among those with savings in the bank, the nest egg is relatively lean. Of workers 55 years or older, about half have less than $50,000 in savings, excluding their homes and pensions, according to the Employee Benefit Research Institute.
"Today, the administration announced steps we are taking to make it easier for working families to save, particularly for retirement," said Treasury Secretary Tim Geithner in a prepared statement. "Working Americans should be able to retire with dignity and security, but nearly half of the nation's workforce has little or nothing beyond Social Security benefits to get by on in old age."
However, the impact of many of the administration's changes could be modest, since the changes will be voluntary for employers and employees.
Senior administration officials explained that the moves are meant to complement legislative proposal announced earlier to encourage workers to build retirement savings, which wouldn't go into effect until 2011.
The officials said they're not sure how much the new rules will help boost national savings rates but that they're targeting those who are saving too little.
They acknowledged that a spike in short-term savings could hurt the recovery, but say they believe their changes will have a longer-term impact.
Most of the changes would not impose new mandates on employers.
For example, a company that doesn't compensate employees for unused vacation and sick leave, under "use it or lose it" policies, would not be required to start compensating employees for unused time through 401(k) contributions.
The measures detailed Saturday are in addition to two other Obama proposals to promote retirement savings. Both seem to be in limbo, pushed behind bigger priorities like health care
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Democratic Party

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The opposition Democratic Party was handed a historic victory in an election on Sunday, ousting Prime Minister Taro Aso's Liberal Democratic Party and ending a half-century of nearly unbroken rule by the conservative pro-business party.

It is unclear who the Democrats might appoint as finance minister as the country emerges from its worst postwar recession.

Party leader Yukio Hatoyama has said the post will go to a lawmaker, effectively ruling out private-sector candidates floated by analysts such as Eisuke Sakakibara, known as "Mr. Yen" for spearheading currency market intervention in the 1990s.

Following are some Democratic Party names seen by political analysts as possible candidates for finance minister and other leading minds behind its economic policy:

HIROHISA FUJII, 77:

Fujii, a former finance ministry official, served as finance minister in an anti-LDP coalition from 1993 to 1994. Now the head of the Democratic Party's tax panel, Fujii has called for funding Japan's social welfare costs with consumption tax revenue and discussing over the next four years the issue of raising the sales tax.

He said Tokyo should not intervene in the foreign exchange markets unless currency rates swing abnormally and that he saw no need to alter Japan's dollar holdings in its $1 trillion foreign exchange reserves, the world's second biggest after China.

Fujii also said the Democrats would cut what they consider wasteful spending in Tokyo's $160 billion stimulus measures, which he said includes such spending as on construction projects, to reduce new bond issuance totaling a record 44.1 trillion yen (FX) in the fiscal year that started on April 1.

KATSUYA OKADA, 56:

Some party officials say the post of finance minister may go to veteran lawmaker Katsuya Okada, a policy expert with a "Mr Clean" image and the party's No. 2 executive.

Okada, a former trade ministry official, said this month Tokyo should not intervene in markets to weaken the yen as long as currency moves match fundamentals. He also said Japan's policy of export-led growth was reaching its limits.

He also said the party wanted to set a target for fixing Japan's tattered finances when it compiles the budget for the fiscal year from April 2010, if the economy stabilizes by then.

NAOTO KAN, 62:

Naoto Kan is another party veteran who, together with party leader Yukio Hatoyama, founded the party a decade ago.

Kan has said the Democrats would aim not only to strengthen the social safety net for those out of work but create jobs in sectors such as agriculture and 'green' technology as part of an "Environmental New Deal."

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Poland's Finance

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Poland's Finance Minister Jan Rostowski said he expected a record public deficit for 2010 of "up to 52.2 billion zloty (12.7 billion euros) in an interview published on Saturday.

"We expect that the deficit will go up on this year, as high as 52.2 billion zloty," he told the newspaper Rzeczpospolita.

The deficit will rise to 3.8 percent of gross domestic product.

It will be a record, and almost twice this year's deficit, the paper noted.

Rostowski already warned in June that this year's budget deficit had risen from 18.2 billion to 27 billion zloty (from four to 5.9 billion euros), with projected growth of the economy shrinking slightly from 0.5 to 0.2 percent.

He emphasised that the liberal government's privatisation drive would be crucial to ensuring Poland's debts remained less than 55 percent of GDP.

He estimated that privatisations in 2009 and 2010 would bring in 28.5 billion zloty in revenue, a more cautious estimate than Treasury Minister Aleksander Grad, who in July predicted income of 36.7 billion zloty.

"One of the main reasons for the rise in public deficit is the expenditure connected to road construction, which we simply cannot do without," the minister said.

For 2008-2012 Poland has set aside 121 billion zloty (27.5 billion euros), of which nearly a third is coming from EU funds, to modernise its road infrastructure before the Euro 2012 football championships, which it won the right to host jointly with Ukraine.

Poland is the only country in the European Union to have retained economic growth this year, with its economy due to mark an expansion of 1.0 percent of GDP.

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The Financial Instruments

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It is two years since the first casualties of the US sub-prime mortgage market flagged up more deep-rooted flaws in the global banking sector and the financial instruments it was selling, but there is still no sign (perhaps unsurprisingly) of any institution or individual taking the bold step to say that they are responsible for wiping trillions of dollars worth of wealth off the face of the Earth...Instead, bankers, boards, regulators and so on in Europe and the US are more disposed to admitting some degree of fault as part of a collective effort, while still largely pointing their fingers at others. For example, regulators blame banks and their boards for not following their regulations, rather than blame themselves for not providing adequate enforcement of the rules. Credit agencies blame investors for not questioning the flawed research they were putting out, and investors blame bank boards for pursuing such high risk business strategies, even though large institutional investors, such as pension funds, effectively sanctioned these pursuits by either voting in favour of them at the annual general meeting, or not voting at all. Below are the main culprits behind the recent economic turmoil – no one is still quite sure yet if some markets are heading for recession or even a depression – and what part they played in the enveloping crisis. Readers can judge for themselves what degree of culpability should be accorded to each group.BoardsAs those in charge of their organisations’ business strategy and appetite for risk, the first finger of blame is definitely pointing towards board members. However, not many have accepted any personal fault. Of the four disgraced UK bankers hauled before the Treasury Select Committee on February 10 – Andy Hornby and Lord Stevenson, former HBOS CEO and chairman respectively, and Sirs Fred Goodwin and Tom McKillop, former CEO and chairman of Royal Bank of Scotland respectively – only Sir Tom admitted that he did not understand some of the details of the financial instruments he had to approve. Management’s failure to appreciate the risks inherent in parts of their business strategy has long been a bone of contention with some investors (institutional and private) for some time, especially with regards to the suitability of non-executives to be on the board. Supposed to challenge management’s thinking, critics have argued that they cannot fulfil that role if they are unable to grasp what is actually going on, especially since they do not need to be from the same industry sector – the idea being that these “independent” executives can bring their different experiences into the boardroom and raise a fresh perspective on management thinking.However, there are obvious pitfalls – namely, that they have none or little relevant industry experience, or understanding. For example, only by May 2007 did HBOS boast a senior experienced banker as a non-executive (John Mack), and by then it was too late. But even where experienced bankers acted as non-executives, it seems that they made little impact. Colin Buchan, a former investment banker, served as a non-executive at RBS between 2002 and 2007, while Sir Derek Wanless, a former NatWest banker, was a non-executive at Northern Rock.Robin Ashby, spokesman for the Northern Rock Small Shareholders’ Group, has long been concerned about the performance of the non-executive directors of Northern Rock in their role of holding the executive to account on behalf of the shareholders. “What did they do to earn the fat fees they received? Did they do much except warm chairs? They were supposed to be industry experts,” he said.Steve Tatton, Editor of Income Data Services’ latest executive compensation review, which showed that non-exec salaries had risen once again last year, told the Financial Times this February: “Shareholders have a right to wonder where all this investment of time and money into corporate governance has got them and what steps now need to be taken to get the corporate governance framework to function properly.”Audit committees’, in particular, have been blamed for rubber-stamping boardroom strategies that they did not fully understand. Peter Montagnon, Director of Investment Affairs of the Association of British Insurers (ABI), said that people were not sufficiently aware that some of the off-balance sheet structures that were blowing multi-billion pound holes in company balance sheets actually existed. “Investors tell me frequently that they audit committees don’t know enough about what is going on. This relates to the committees’ knowledge and also to the accounting standards and what has to 
be reported. We need to make it clear to committees that they need to be on top of what is going on and on top of how this is being reported.”RegulatorsThe UK’s “light touch” system of principles-based regulation has come a cropper during the credit crisis, but so too has the US’ rules-based system. So what’s the answer? Increased regulation and rules are not usually at the forefront of any request a financial services firm might make to the FSA, but there does seem to be a consensus among investors and the UK watchdog itself that more effective enforcement – rather than drafting in new rules – and a “harmonisation” of existing regulations and principles would help achieve greater compliance, disclosure and understanding. However, at the heart of any effective regulation lies the integrity of the regulator, and “the UK’s FSA just doesn’t have it,” says one City insider. “No one has any faith in the FSA – consumers or the industry. It’s useless,” said another source. Such views may be borne out by the fact that the people in charge of “improving” the UK’s financial regulatory system have also come a cropper. Sir Derek Higgs, the architect of the last revamp of corporate governance following the Enron and WorldCom scandals, which designed to make non-executive oversight more effective, became chairman of Alliance & Leicester. Though he left in 2007, the bank needed to be rescued last year by Spanish banking group Santander because of excessively risky lending. Meanwhile, Sir Steve Robson, a non-executive director at RBS which is now 70 percent owned by the public purse, is also a non-executive director of the Financial Reporting Council – the UK’s corporate reporting and corporate governance watchdog.The recent resignation of FSA Deputy Chairman Sir James Crosby over allegations of his involvement in sacking HBOS’ head of group regulatory risk because he dared to warn the board of the bank’s high risk exposure (said to be without merit by HBOS, the FSA and Sir James) have not helped the watchdog’s profile. Furthermore, the FSA tried to extricate itself from the furore by saying that it had been aware of HBOS’ high-risk strategy since 2002 – while not doing anything about it. In June 2006 the FSA continued to pose “concerns” about the strategy of HBOS but, despite flagging up these issues, the bank did not act, and the regulator did not flex any muscles. There are also claims that even the regulator does not understand some of the financial instruments it is meant to be keeping an eye on, and that some products are largely free of regulatory oversight. Speaking at the FSA’s Asset Management Conference, Robert Jenkins, Chairman of the Investment Management Association, the trade body for the UK’s £3.4trn asset management industry, said: “Investment banks are creating and distributing structured investment products aimed at the retail investor. Deceptively simple in sales pitch but complex in construction, they carry issuer risk, liquidity risk, and a level of costs which the retail buyer may not fully understand. Yet this is an area largely free from regulatory oversight and competes directly with a highly regulated traditional investment industry where agency status is central, transparency of fees and holdings de rigueur and government pressure to raise levels of treating customers fairly foremost. Is someone asleep at the watch?”Granted, the FSA has made serious errors. On March 26 2008 it admitted a catalogue of mistakes in the run-up to the collapse of Northern Rock in 2007, the first UK casualty of the current crisis to be nationalised – the most alarming of which included the fact that no senior FSA member had a meeting with the bank between January 2005 and August 2007, and that until February 2007 the team responsible for regulating Northern Rock were experts in insurance, not banks. The FSA’s internal probe also revealed that despite the Rock’s highly aggressive business plan, just eight meetings were held between the bank and FSA staff during the period, including two by telephone and five on one day. A typical rival bank would have had nearly 30 FSA meetings over the same period. However, the British Bankers’ Association insists the real blame lay with the bank’s management, not the regulator. It says: “No amount of regulation can ensure that wrong decisions are never made.”Credit rating agenciesThe role of a credit rating agency – such as Fitch, AM Best, Standard & Poor’s and Moody’s – is to gauge the creditworthiness of organisations issuing debt instruments, such as corporate and government bonds, so that investors, banks, regulators and other market operators can use them to measure relative credit risk. Billions of dollars-worth of debt is issued and borrowed based on their analysis. If a company is “downgraded”, investors either feel compelled to dump shares, or force the company to dump executives and change tack – quickly. But as well as rating traditional bonds, credit rating agencies also offer advice on structured financial products, such as collateralised debt obligations (CDOs), complex portfolios of fixed-income assets that are divided into “tranches”, with each tranche containing assets holding a different level of credit risk. It is here that credit rating agencies became unstuck. While CDOs became a favourite for investors, many included sub-prime mortgage bonds. The rest is history. Attacks on rating agencies focus on two charges. Firstly, agencies receive fees from organisations issuing debt and constructing debt instruments such as CDOs, so they are being paid by the issuers whose securities they rate. This, critics argue, makes them unable to provide objective information about the risks associated with investing in these debt instruments. Secondly, credit rating agencies’ methods of rating and categorising CDOs do not make it easy enough for investors to see the true levels of risks they carry. The triple-A ratings assigned by credit rating agencies would have led some investors to believe that these complex debt structures were bomb-proof. But not all AAA securities are created equal. As demonstrated in the current credit crisis, structured products typically perform very differently from traditional corporate bonds, despite the identical symbols. This is a fact that has not escaped US and European regulators. In May 2008 Ingrid Bonde, the chair of the task force on credit rating agencies for the Committee of European Securities Regulators (CESR), which groups the EU’s national supervisors, said that “the events of last year surely merit a thorough re-evaluation of the current self-regulatory regime. Although credit rating agencies ratings are legally no more than opinions, there is a clear public interest aspect to the information they provide.”As a result, market regulators are taking another look at the industry’s practices. At the beginning of July last year the SEC, the US financial regulator, concluded that credit rating agencies failed to manage conflicts of interest in assigning top ratings to bonds backed by sub-prime mortgages and other assets. The conclusions were far from complimentary. “The public will see that there have been significant problems,” said Christopher Cox, SEC chairman. “There have been instances in which there were people both pitching the business, debating the fees and were involved in the analytical side”, adding that credit raters were “deluged with requests” for ratings and “the volume of work taxed the staffs in ways that caused them to cut corners” and “to deviate from their models”.But actual rules-based reform of the industry does not seem to be on the agenda. Instead, principles rather than rules seem to be the way forward, with self-regulation to be kept intact. The irony has not been lost on some highly-placed critics. In December European Commissioner for Internal Markets Charlie McCreevy said that the trust placed in many credit ratings to determine capital requirements had now been shown “to be wholly misplaced”. He added that he was “flabbergasted at the naivety of anyone who thinks these same credit rating agencies should be trusted to abide by a non-legally enforceable voluntary code of conduct drawn up under palm trees – a code that has proven itself to be toothless, useless and worthless time and time again. Fool me once, shame on you. Fool me twice, shame on me.”InvestorsInstitutional investors have been keen to pour scorn on directors and audit committees, but they have been reticent about their own voting records and engagement activities with boards. Armed with three mighty weapons – the vote at the annual general meeting, the option to disinvest, and the ability to issue governance warnings, like the ABI and its “red-top reports” – critics say that they are rarely used, and that pension funds are largely “toothless tigers” or “sleepy”. The Trades Union Congress’ Fund Manager Voting Survey 2008 found that a significant number of fund managers support the large majority of remuneration reports, even when there are contentious issues at stake. It also found that half of the fund managers responding to the survey supported 80 percent or more of the remuneration resolutions on which they voted, despite widespread public and professional condemnation of the levels of executive pay.Furthermore, investors’ have also been slow to challenge “positive” financial data. Their over-reliance on the reports and ratings of credit ratings agencies such as Moody’s and Standard & Poor’s led to a burgeoning trade in high-risk investments, such as collateralised debt obligations. Arthur Levitt, a former chairman of the Securities and Exchange Commission, the US financial services watchdog, said in September 2007 as the scale of the crisis was dawning, that “we need investors to accept more responsibility for evaluating structured financial products.” He added: “Credit ratings agencies play a critical role in the capital markets, but their judgments are guides, not stamps of approval. Too often, institutional investors have been investing in sophisticated credit products on the basis solely of the credit rating and without fully understanding the inherent risks they are undertaking.”AuditorsThe government is under pressure to investigate the role of external auditors in the British banking collapse following revelations that the Big Four firms have generated as much revenue from providing non-audit services as they have from their audit work since 2000. Following the collapse of Enron and the revelation that its external auditor Arthur Andersen was also providing internal audit services, the types of extra consultancy services that auditors provide to their clients has come in for criticism – though not much scrutiny or 
censure, argue some. John McFall, the Labour chairman of the Treasury select committee, has laid the problem out to parliament: “What is the role of auditors? Is it to examine the books and provide a company’s board, and the public, an accurate view of the health of that company? Or is it to provide other services that are more profitable than the auditing undertaken for that company?” Moves are afoot to try to resolve some of these issues. Just before Christmas the Financial Reporting Council (FRC), the UK’s corporate governance watchdog, revealed its draft plan for its Audit Inspection Unit in 2009 and 2010. Among the big issues it plans to examine is whether auditors can maintain the quality of their work in a transformed economic environment and that, as more risks will be more prevalent, whether auditors can step up to the mark and audit them appropriately. Its inspection work is expected to mirror that of the Financial Reporting Review Panel, which checks that financial information complies with accounting standards, and which has already revealed it will look at banking. But auditors believe that the FRC needs to place more focus on directors and their financial reporting. Phil Crooks, head of assurance at Grant Thornton, says that while the focus on audit and the pressure on auditors is fair, “there needs to be a lot more focus on companies’ understanding of disclosures”. Others also believe that auditors are unfairly being blamed for not giving opinions on issues outside of their remit. Appearing before the Treasury Select Committee investigation into the banking crisis on January 28 this year Professor Michael Power of the London School of Economics defended the performance of the audit industry, saying that expectations on auditors are too high and the profession should not be expected to avert management failure or challenge flawed business models. “Auditors are not there to challenge business models with finance directors. That is not their job. For that to happen, things would have to change substantially. Auditors ultimately rely on a variety of external sources including market prices and management,” he said. Risk management/corporate governanceThe success or failure of any entity is dependent on the nature of the risks inherent within the business, and how they are identified, controlled, mitigated, and leveraged. Ultimate responsibility for risk management and corporate strategy rests with the board, but boardroom thinking is meant to be challenged by assurance functions such as internal audit and risk management. However, these functions say that they are only meant to raise concerns – not ensure that they are addressed. This view is hardly a ringing endorsement for sound corporate governance.For example, several risk managers and heads of internal audit have told this magazine that they and their colleagues in other financial institutions had told their boards and senior management “for years” that they were at risk due to their dependence on certain product lines, particularly in the housing market, but their concerns were ignored. One head of internal audit at a major European financial services provider told World Finance that “our team had identified a number of risk areas with regards to some of the products we were selling. We flagged it up to the board as high-risk, but they responded that they wanted to pursue a high-risk strategy because they were looking for high returns. That strategy worked for a while, and then it didn’t, and we ended up in deep shit. The point is simple: we can tell the board about their exposure to risks, but it is not our role or responsibility to make it change the business strategy.”This view appears to be shared by management, if the allegations made by one former risk manager are to be believed. Paul Moore, formerly head of group regulatory risk at beleaguered bank HBOS has told MPs that former HBOS CEO Sir James Crosby sacked him in 2005 after he warned the bank’s board about its potentially dangerous “sales culture”. Mr Moore said that he saw evidence of “negligence” and even “recklessness” during his time at the bank, adding that: “I realised the bank was moving too fast and I raised those challenges very strongly at board level. I also raised issues of cultural indisposition to challenge and inappropriate behaviours, and ultimately I was sacked… I told the board they ought to slow down but was prevented from having this properly minuted by the chief financial officer.” The bank, however, says that Mr Moore was made redundant and that his allegations have “no substance and no merit”. Mr Moore claims he was “summarily dismissed” by Sir James, who said that Moore “had lost the confidence of key executives and non-executives but refused to explain why”. Moore said that, after suing for unfair dismissal, he received “substantial damages” but was subjected to a “gagging order” preventing him from speaking out. He had decided to talk publicly about the issue now because, he said, “the public interest demands it”. Mr Moore’s account of his warnings and his alleged treatment by Sir James was disclosed in an evidence session of the Treasury committee, at which figures including former HBOS Chief Executive Andy Hornby and former chairman Lord Stevenson apologised for bringing their banks to the verge of collapse. However, Lord Stevenson said Mr Moore’s claims had been rejected after a nine-month inquiry by the FSA. Mr Hornby also rejected Mr Moore’s claim that he was met with “threatening behaviour” from some HBOS executives when he tried to raise concerns. In his written evidence to the committee, Mr Moore said the HBOS story was like the “Emperor’s new clothes” with no one prepared to “step out of line” and say what was going wrong.
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Hard Economic Times

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Hard economic times are correlated with protectionism, as each country blames others and protects its domestic jobs. In the 1930’s, such “beggar-thy-neighbour” policies worsened the situation. Unless political leaders resist such responses, the past could become the future.

Ironically, however, such a grim prospect would not mean the end of globalization, defined as the increase in worldwide networks of interdependence. Globalisation has several dimensions, and, though economists all too often portray it and the world economy as being one and the same, other forms of globalisation also have significant effects – not all of them benign – on our daily lives.

The oldest form of globalisation is environmental. For example, the first smallpox epidemic was recorded in Egypt in 1350 BC. It reached China in 49 AD, Europe after 700, the Americas in 1520, and Australia in l789. Bubonic plague, or the Black Death, originated in Asia, but its spread killed a quarter to a third of Europe’s population in the fourteenth century.

Europeans carried diseases to the Americas in the fifteenth and sixteenth centuries that destroyed up to 95 percent of the indigenous population. In 1918, a flu pandemic caused by a bird virus killed some 40 million people around the world, far more than the recently concluded world war. Some scientists today predict a repeat of an avian flu pandemic.

Since 1973, 30 previously unknown infectious diseases have emerged, and other familiar diseases have spread geographically in new, drug-resistant forms. In the 20 years after HIV/AIDS was identified in the 1980s it killed 20 million people and infected another 40 million around the world. Some experts project that that number will double by 2010. The spread of foreign species of flora and fauna to new areas has wiped out native species, and may result in economic losses of several hundred billion dollars per year.
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Sector's Return To Expansion

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The U.S. manufacturing sector's return to expansion should be music to equity investors' ears, but bankers say past experience as well as the circumstances of the current rebound suggest a good deal of caution is warranted.
The U.S. Institute of Supply Management's (ISM) index of national factory activity rose to 52.9 in August, expanding for the first time since January 2008, data released on Tuesday showed.
While on the surface this might seem like good news, past correlation between the index and the equity market presents a more complex picture.
Based on a study comparing the range of ISM readings and the average S&P 500 index performance over a 60-year period, JPMorgan concludes that, when the U.S. manufacturing sector is in expansion mode, investors should take risk off the table.
"In a nutshell, the 'second derivative' trade is getting exhausted, and the bullish view is becoming more mainstream," say JPMorgan analysts Mislav Matejka and Emmanuel Cau in a recent note.
"This calls for a more balanced portfolio positioning."
In the bank's view the second derivative - based on the perception that the pace of economic contraction was slowing and an inflexion point approaching - is what has driven the 60 percent rally in global stocks over the six months.
JPMorgan's conclusions prompted it to downgrade the metal and mining sector, which typically benefits from strong economic growth, to "neutral" from "overweight." It upgraded telecoms, which is a more defensive sector, to "overweight."
"From the trough of the ISM to 50, cyclicals tended to outperform defensives by 13 percent, but from 50 to ISM peak, the outperformance would slow to 5 percent," Matejka and Cau said.
WALL STREET OVERVALUED?
Also pointing to the ISM data as a guide, Credit Suisse reduced its recommended exposure to U.S. equities to 5 percent underweight from benchmark just before the numbers came out.
"The worst phase of the cycle for the U.S. is when the ISM is above 50 and rising -- i.e. the phase we are in at the moment," Credit Suisse research analysts said in a note.
They said U.S. stock valuations looked slightly stretched compared with other developed markets and that U.S. households' liabilities were $3.5 trillion above trend relative to assets.
The S&P 500 had a one-year forward price-to-earnings ratio -- a measure of valuations -- of 14.93. That compared with 13.04 for the pan-European FTSEurofirst 300 index and 12.45 for Germany's blue chip DAX.
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The Nation's Chain Stores

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Stocks slipped Wednesday, ending a choppy session lower following the previous day's battering as nervous investors continued to worry that the market rally may have outpaced any recovery.
The Dow Jones industrial average (INDU) lost 30 points, or 0.3%. The S&P 500 (SPX) index slid 3 points, or 0.3%. The Nasdaq composite (COMP) managed a tiny gain of 2 points, or 0.2%.
Stocks seesawed throughout the session Wednesday as investors mulled a pair of unemployment reports that signaled the pace of job cuts was moderating, ahead of Friday's bigger August jobs report.
With little else on tap to provoke investors in any direction, trading remained largely rangebound.
The 2 p.m. ET release of the minutes from the last Fed meeting failed to propel markets in either direction. The minutes showed the central bankers thought the economy was stabilizing, after weakening in 2008 and early 2009, and that construction was starting to pick up, which is a good sign for the housing market.
The bankers also discussed the need to keep refining the Fed's so-called exit strategy after injecting billions into the financial system to help manage the meltdown.
"Investors have built in a lot of the numbers we've been seeing showing economic improvement," said Haag Sherman, managing director at Salient Partners. "What they want to see now is some of that improvement manifesting in topline growth for businesses, not just cost cutting."
Second-quarter earnings were generally better than expected, due to trimming costs, but revenue growth was moderate.
Thursday preview: The nation's chain stores will be releasing August sales info throughout the morning. Investors will be looking to see if the stock rally and signs of recovery in the economy have had any impact on consumer spending.
The Institute for Supply Management's services sector index for August is also due in the morning, along with the weekly jobless claims report.
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Industrial Relations Commission

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Prime Minister Kevin Rudd says his statement that no worker or employer would be left worse off by the award modernisation process was an objective, not a guarantee.
When the Government asked the Industrial Relations Commission to simplify the award system, it said workers should not be worse off and businesses should not face higher costs.
But the Industrial Relations Commission says some workers will have reduced pay and conditions and some employers will have to pay more.
Yesterday the Commission announced a five-year phase-in to help all sides adjust to the new system.
On Fairfax radio, Mr Rudd has stopped short of giving a guarantee that no-one will be worse off.
"The objective for both for employers and employees - consistent with what we always said - is that when we introduced these modern awards system [we said] it's not intended there be disadvantage for employers and employees in terms of increased costs," he said.
Mr Rudd has conceded some workers and some employers will be left worse off but he also says the five-year transition period is to help them adjust.
"We will work always to ensure that in the implementation of this overall scheme we can have a system whereby employers and employees can deal with any costs associated with this over that period of time," he said.
Small Business Minister Craig Emerson has conceded that businesses will face higher costs because of the award modernisation process.
Mr Emerson says that transition will help employers who face higher costs.
"The commission is ensuring that any cost increases are minimised for businesses so that they are phased in over that five-year period, and that we have a proper safety net for working Australians, especially our vulnerable working Australians," he said.
The Government is trying to simplify the thousands of industrial awards into 130 national ones.
Former prime minister John Howard says he is concerned the Government's overhaul of employment awards will hurt small business.
And he says any extra burden on small business will hurt employment.
"I fear that in two years' time, the re-regulation of the labour market will have imposed burdens and costs on small- and medium-sized businesses," he said.
"We're seeing some evidence of that in the restaurant and catering industry, where the award rationalisation process is resulting in possible increases in penalty rates and other loadings."
Meanwhile the Finance Sector Union says it will seek an urgent meeting with Industrial Relations Minister Julia Gillard over a decision to have new workplace conditions take an immediate effect next year instead of being slowly phased in.
Yesterday the Industrial Relations Commission ruled that a loss of conditions under the new awards system will take effect from the January 1, 2010.
Wage increases will still be phased in over the five-year period.
Finance Sector Union policy director Ross Masson says the slow transition was in place to make sure workers would not be worse off under the new award.
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Child In Modern Western Industrial Society

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What is the value of a child in modern Western industrial society? More specifically, what is the value of a middle-class or upper-middle-class or upper-class child in America? And does this have anything to do with the fact that the birth rate among American women has been falling for decades and that the age of first childbirth among educated women is far higher than among less-well-educated women?
Start with economics. People in a free society will choose to have more of something if its return exceeds its cost. On the other hand, people in a free society will choose to have less of a good or service if its value is less than its cost.
Now, what is a modern child? Obviously, not a good or service, but something more and also something less. Long ago, as we all know, humans had children because they liked having sex and because children had some value as assistant hunters and gatherers and keepers of the hearth.
Then, as society became more organized, families chose to have children because the parents (we assume) still liked having sex and the resulting children were helpful on the farm or the ranch or in the village smithy. The kids did not require much -- just food and shelter and occasional loving and cuffing about to keep them in line.
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