GE`s Immelt says U.S. economy needs industrial renewal

By David Bailey and Soyoung Kim
DETROIT (Reuters) - General Electric Co Chief Executive Jeff Immelt said on Friday the United States needs to refocus its economy on manufacturing and exporting if it wishes to recover from a brutal recession.
The world`s largest economy can no longer count on consumer spending to drive demand, nor can it rely on Wall Street financial wizardry if it wants its population to continue to enjoy a high standard of living, the head of the largest U.S. conglomerate said.
"We should clear away any arrogance, false assumptions, or a sense that things will be `OK` just because we are America," Immelt told the Detroit Economic Club. "Our competitive edge has slipped away and this has hit the middle class hard."
The U.S. should work to have manufacturing represent about 20 percent of employment, more than double its current level, he said.
The world`s biggest maker of jet engines and electricity- producing turbines said on Friday it would be building a new manufacturing research center outside Detroit that will employ 1,100 people.
The move reflects Immelt`s belief that, like many U.S. companies GE has turned too many core technological procedures over to outside contractors and foreign operations.
"In some areas, we have outsourced too much," Immelt said, according to a copy of his prepared remarks. "We plan to `insource` capabilities like aviation component manufacturing and software development."
The United States need to reduce its reliance on financial services to drive economic growth, Immelt warned.
"While some of America`s competitors were throttling up on manufacturing and R&D, we de-emphasized technology," he said. "Our economy tilted instead toward the quicker profits of financial services."
That is a lesson GE has learned -- its shares have lost some 58 percent of their value over the past year, largely the result of falling profit at its GE Capital finance unit. Immelt is restructuring GE so it will count on finance for just 30 percent of its profit, down from half before the downturn.
"While our financial services business has performed well, I can`t tell you that we were entirely free of these errors," Immelt said. "We weren`t."
(Reporting by David Bailey and Soyoung Kim; writing by Scott Malone; editing by Andre Grenon)
Original article

Ken Lewis retains backing of key BofA exec

By Svea Herbst-Bayliss
BOSTON (Reuters) - Kenneth Lewis, Bank of America`s (BAC.N) embattled chief executive, retained the backing of a top lieutenant on Friday, when investment bank and wealth management chief Brian Moynihan called him the "right person" to lead the nation`s largest bank.
Moynihan, widely discussed as a possible candidate to replace Lewis eventually, called his 62-year-old boss the best man to lead the Charlotte, North Carolina-based bank out of its current difficulties.
Moynihan, who made the comments after delivering a speech in Boston, came to Bank of America through the FleetBoston Financial acquisition and replaced former Merrill Lynch chief John Thain in January. He rose through the ranks quickly and now oversees 80,000 employees.
Moynihan was careful to defer to his boss on when the bank may pay back its government loan and was cautious about details on how quickly his division will grow or when the bank may consider selling two of its units.
The bank`s group of 16,000 financial advisers will expand, Moynihan said, adding, "It has to be bigger than it is now." He declined to give any growth targets.
He was also mum on how quickly Bank of America may sell two businesses -- First Republic Bank, a San Francisco-based bank it acquired through Merrill Lynch, and Columbia Asset Management, which it picked up through its acquisition of FleetBoston Financial Corp.
While Moynihan called both units "good assets," he said it was difficult to own them. Columbia competes directly with asset manager BlackRock Inc, which is part-owned by Bank of America. Speculation has mounted recently that deals may be imminent, especially after BlackRock surprised the industry with its decision to buy Barclays Global Investors to become the industry`s biggest asset manager.
Investors have been keen to hear any details about the possible future of Lewis, who has been widely criticized for the bank`s falling share price and its January 1 acquisition of Merrill Lynch & Co.
"He is the right person for our company," Moynihan, president of global banking and wealth management, told reporters in response to a question.
Lewis has run Bank of America since 2001. Over the last two months, he has been stripped of his role as the bank`s chairman, and more than one-third of his board of directors has departed.
Evidence that regulators may have wanted him out altogether surfaced on Thursday when a House of Representatives subcommittee released documents subpoenaed in connection with testimony of Federal Reserve Chairman Ben Bernanke over Lewis` role in the Merrill merger.
Lewis has indicated that he may be willing to step aside by 2012, when he will turn 65.
Bank of America has taken $45 billion from the federal Troubled Asset Relief Program, and Lewis has suggested he would like to begin repaying the bailout money this year.
Moynihan deferred to Lewis when asked about how quickly the bank plans to send the money back. "As you have heard Ken say, it will be months, not years."
(Reporting by Svea Herbst-Bayliss, editing by Matthew Lewis)
Original article

IBM accuses former M&A exec of misusing resources

By Jim Finkle
BOSTON (Reuters) - IBM (IBM.N) accused its former mergers and acquisitions chief of misusing resources, as part of a lawsuit that seeks to remove him from his new job at rival Dell Inc (DELL.O).
The suit claims the executive, David Johnson, violated a noncompete agreement by moving to Dell and bringing trade secrets with him. Both companies are looking to acquisitions to add technologies that will differentiate their products at a time when global technology spending is slumping.
In a separate document filed on Thursday, Johnson accused International Business Machines Corp of withholding $1.49 million from a retirement plan that he said was due to him upon his departure from the company.
U.S. District Court Judge Stephen Robinson is expected to rule later on Friday on IBM`s request to issue a restraining order that could force him to leave his job at Dell.
The technology giant filed the original lawsuit in May after Johnson left for Dell, saying he violated a 2005 noncompete agreement. Johnson, whose lawyer could not be reached for comment on Friday, has maintained that the document is invalid because it was not properly signed.
In an amended complaint on Thursday, IBM said Johnson secretly misused company facilities, resources and personnel to help create a venture capital firm, JSJ Capital Management, to invest in technology companies.
IBM alleged Johnson prepared investor presentations with company resources and used an IBM-funded trip to the Middle East to cultivate potential investors for JSJ.
IBM said there was a "grave risk" Johnson would disclose the company`s proprietary information to its rival Dell.
"He misled his superiors about his activities, secretly undertaken on his own behalf, misrepresented the nature and scope of his planned activities at Dell," said IBM`s complaint filed in U.S. federal court in White Plains, New York, on Thursday.
Dell spokesman Jess Blackburn said Johnson began work at the company earlier this month, but declined to discuss his job responsibilities or comment on the lawsuit.
Johnson has said in a court filing that he did not have access to confidential information at IBM that would provide a competitive advantage to Dell.
He said that he left IBM because the company broke a promise to consider him for a senior position that it made when it asked him to turn down an offer from another firm in 2001.
Johnson maintains that the noncompete agreement is invalid because he intentionally signed his name in "the wrong spot" on the document in a bid to win time to work out his differences with his superiors.
"I believed that IBM did not consider the noncompete agreement agreed upon or entered because IBM returned to me the one I had signed in the wrong spot unexecuted and asked me to sign a new form," Johnson said in an affidavit.
IBM spokesman Doug Shelton declined to comment on the charges levied by Johnson about the retirement account, saying the court documents speak for themselves.  Continued...
Original article

Freddie Mac May portfolio shrank annualized 9.9 pct

NEW YORK (Reuters) - Freddie Mac (FRE.P) (FRE.N), the second-largest U.S. home funding company, on Friday said its mortgage investment portfolio shrank by an annualized 9.9 percent rate in May, while delinquencies on loans it guarantees accelerated.
The portfolio decreased to $823.4 billion, for an annualized 5.6 percent increase year to date, the McLean, Virginia-based company said in its monthly volume summary.
In May 2008, the portfolio was $770.4 billion.
Delinquencies, which increase stress on the company`s capital, jumped to 2.62 percent of its book of business in May from 2.44 percent in April and 0.86 percent in May 2008.
The multifamily delinquency rate also rose, up 0.02 percentage point to 0.12 percent in May. A year earlier it was 0.03 percent.
Freddie Mac said refinance-loan purchase volume was $40.3 billion in May, down from April`s $43.3 billion. March`s $52 billion was its largest refinance month since 2003.
The amount of mortgage-related investments portfolio mortgage purchase and sale agreements entered into in May totaled $5.3 billion, up from April`s $956 million.
The company`s total mortgage portfolio decreased at a 1.6 percent annualized rate in May to $2.228 trillion.
In early September 2008, the U.S. government seized control of Freddie Mac and its larger sibling, Fannie Mae (FNM.P) (FNM.N), amid heightened worries about shrinking capital at the congressionally chartered companies.
The government is now relying heavily on Fannie Mae and Freddie Mac in its efforts to stimulate the U.S. housing market, which is in the midst of its worst downturn since the Great Depression, by buying more mortgage loans, easing refinancing and helping homeowners avoid foreclosure.
(Reporting by Julie Haviv; Editing by James Dalgleish)
Original article

Qantas cancels Dreamliners in new Boeing setback

By Mette Fraende
SYDNEY (Reuters) - Boeing Co (BA.N), the world`s No.2 plane-maker, suffered another heavy blow to its Dreamliner project on Friday when a major customer, Australia`s Qantas Airways (QAN.AX), scrapped and deferred orders for 30 new planes.
Aviation analysts warned that more Boeing customers could follow Qantas, noting that cancellations of the fuel-efficient, long-haul plane were gaining momentum as airlines worldwide looked to conserve capital during the global recession.
Citing the tough operating environment, Qantas canceled orders for 15 of the B787-9 Dreamliners that had been due for delivery in 2014-15 and deferred for four years an order for another 15 of the same aircraft. It said the decision would save the company $3 billion in capital spending.
Qantas denied it was reacting to this week`s fresh delays to the Dreamliner`s development, when the first test flight was set back for a fifth time, but analysts said there was a clear risk of more order cancellations or deferrals from other airlines.
"It wouldn`t surprise me at all if we see more deferrals and more cancellations, particularly given the economic environment in the U.S. at the moment, it`s a complete basket case," said Bruce Low, investment analyst at Australian fund manager Fortis Investment Partners.
"The aviation industry is suffering very badly ... I guess the Boeing delays actually give the airlines an opportunity to pull out or defer."
Boeing`s defense unit was recently hit hard by sweeping cuts announced by U.S. Defense Secretary Robert Gates in the Pentagon`s fiscal 2010 budget request this year.
Even before the Qantas decision, the plane-maker had logged only nine net orders so far in 2009 as global economic weakness has spurred a string of cancellations, including 58 Dreamliners.
Rival Airbus (EAD.PA) faces the same economic pressures.
In March, Air France (AIRF.PA) said it would defer taking delivery of the sixth and seventh Airbus A380 aircraft in an order for 12 of the giant planes, to save cash on down payments.
Qantas CEO Alan Joyce said in a statement that "the operating environment for the world`s airlines has clearly changed dramatically" since Qantas announced its original B787 order in December 2005.
Qantas shares rose as much as 2.5 percent in early trade.
The stock has dived 24 percent so far this year, while the wider S&P/ASX 200 index .AXJO has risen about 5 percent.
Last month, Qantas said it expected to navigate the current aviation crisis, the industry`s worst, without having to further cut capacity or jobs or raise capital.
But it has forecast a loss in the second half of its 2009 financial year, and announced in March it would shed 90 top management positions, adding to 1,500 job cuts announced in 2008.  Continued...
Original article

Capital markets save dealmakers` fees as M&A wilts

By Douwe Miedema and Jessica Hall
LONDON/NEW YORK (Reuters) - Dealmakers saw business pick up again in the second quarter as they helped companies raise cash in capital markets, but lucrative mergers and acquisitions (M&A) languished.
Worldwide combined capital markets and M&A fees rose for the first time in a year, Thomson Reuters data showed on Friday, up 29 percent from the first quarter, with share sales -- such as rights offerings -- the most buoyant.
"There`s a shift away from banks being the sole capital source for growth. There are fewer banks in the world and they have less money," David Fass, head of global banking at Deutsche Bank, told Reuters.
Banks are hesitant to lend after the credit crunch depleted their treasure chests, and cash-hungry companies are instead selling bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.
The year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more than $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.
Banks have embarked on massive rights issues to refill their coffers, with HSBC`s $19 billion share sale in April topping the table of large deals, the second-largest rights issue of all time, according to the data.
"Markets for capital raising have been extremely active, you have seen equity balance sheet repair for the financial sector and increasingly the corporate sector," Enrico Bombieri, head of European investment banking at JP Morgan Chase & Co, said at a media briefing this month.
JP Morgan benefited most from the surge in capital market transactions, topping first-half global league tables in equity capital markets, bonds and syndicated loans.
From underwriting 166 equity issues, the bank earned an estimated $1 billion in fees.
NO MORE LOANS
Global mergers and acquisitions saw the steepest decline since 2001, the data showed, dropping 44.5 percent in the first half of the year from the year-ago period, with companies wary to take on more risk and funding scarce.
Morgan Stanley took the lead in both global and U.S. M&A advisory work, edging aside Goldman Sachs Group Inc in the first half of the year.
Part of the weak deal flow is that banks can no longer support these deals with loans, scared that the recession will cause more bad loans and further toxic assets may come to light, prompting them to reduce their debt levels.
Significantly, syndicated loans -- traditionally the first point of call for acquisition funding in Europe -- all but dried up, hitting their lowest volume in 13 years and dropping 58 percent from the year-ago period.
"Europe has traditionally been a bank-financed market ... fundamentally we`re seeing a shift away from the loan market to the capital markets," Viswas Raghavan, JP Morgan head of international capital markets, said at the briefing.  Continued...
Original article

Nigerian rebels say hit Shell site despite amnesty

By Nick Tattersall
LAGOS (Reuters) - Nigeria`s main militant group said it had blown up a well-head in a Royal Dutch Shell oil field in Delta state late Thursday, hours after President Umaru Yar`Adua announced an amnesty offer for gunmen.
The Movement for the Emancipation of the Niger Delta (MEND) accused the military of going on a "punitive expedition" to hunt down suspected militants in the Agbeti community of Delta state after Yar`Adua`s amnesty proclamation.
"In response ... (operation) Piper Alpha continued its rampage on the Nigerian oil industry by blowing up the second remaining well-head of the Shell Afremo offshore oil fields in Delta state," MEND said in a statement e-mailed to media.
The military denied carrying out any such campaign.
"Our troops did not carry out any operation in Agbeti. This is a lie, propaganda by these miscreants to justify their attacks on isolated oil facilities," said Colonel Rabe Abubakar, spokesman for the joint military taskforce in the Niger Delta.
Afremo was one of the sites MEND also claimed to have attacked in a triple raid Sunday. It described the field as being 14 miles from an export terminal through which crude oil from Shell`s Forcados fields is pumped.
A senior industry source said at the time the location was not a deepwater installation, but a facility located in or close to the mangrove creeks, where pipelines and equipment run across broad stretches of water.
Shell has said it is checking its operations for damage from Sunday`s attacks.
BILLIONS IN LOST REVENUE
Yar`Adua Thursday offered the amnesty to gunmen who laid down their weapons during a 60-day period ending on October 4, in a bid to end years of unrest which have cost Africa`s top oil exporter billions of dollars in lost revenue.
Pipeline bombings, attacks on oil and gas installations and the kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two thirds of its installed capacity of 3 million barrels per day of oil.
The supply disruption has at times helped push world energy prices higher and cost Africa`s most populous nation, which relies on crude oil for 90 percent of its foreign earnings, tens of millions of dollars a day.
MEND`s latest campaign of sabotage, which began just over a month ago and which it has dubbed "Hurricane Piper Alpha," has already forced at least 133,000 barrels per day (bpd) of production to be shut down.
It has again had an impact on global energy prices, helping push oil toward $71 a barrel Friday.
One faction leader, Ateke Tom, has indicated he would consider taking part in an amnesty while a lawyer for Henry Okah, the suspected leader of MEND who is on trial for treason, has said he hoped his client would be covered by the proposal.  Continued...
Original article

Oil rises above $70 on Nigeria attacks, econ hopes

By Jennifer Tan
SINGAPORE (Reuters) - Oil surged above $70 a barrel on Friday, extending a 2 percent gain the day before, after rebel attacks on Nigerian oil facilities disrupted supply and equity markets rallied on optimism the global recession was ebbing.
The release of the June consumer sentiment index by the Reuters/University of Michigan Surveys of Consumers later is expected to reflect a mildly improving outlook for the U.S. economy, auguring well for ailing world energy demand.
U.S. crude futures for August gained 36 cents to $70.59 a barrel by 11:33 p.m. EDT, off a morning high of $70.77 and after settling at $70.23 in the previous session. London Brent crude rose 28 cents to $70.06
Oil is on course for a 1.5 percent gain this week, buoyed by optimism over a potential economic recovery that has lifted prices from below $40 over the past three months.
"Worry over the geopolitical situation is a big factor right now, and that`s what`s giving the market traction," said Peter McGuire, managing director of Commodity Warrants Australia, referring to the situation in Iran.
"We had a correction earlier in the week, and the technicals still look a little bearish, but you can`t rule out the fundamentals, and you can`t rule out the geopolitical."
About 20 people have been killed in protests after Iran`s June 12 presidential election, the worst unrest since the 1979 Islamic revolution.
Investors are also keeping their eyes peeled on Nigeria, where President Umaru Yar`Adua on Thursday offered amnesty to gunmen in the Niger Delta who lay down their weapons by October 4, a bid to end unrest which has cost Africa`s top oil exporter billions of dollars in lost revenue.
The main militant group, the Movement for the Emancipation of the Niger Delta (MEND), sabotaged a Royal Dutch Shell (RDSa.L) oil pipeline on Thursday, the latest act in a month-old campaign which has shut in at least 133,000 barrels per day. The attack helped push oil to near $71 a barrel.
Fuelling oil`s rise, Exxon Mobil (XOM.N) said its huge Baytown refinery suffered an operational glitch that triggered flaring, sparking worries the largest U.S. oil refinery could tighten gasoline stockpiles during this summer`s peak demand driving season.
Firmer Asian stocks on the back of Wall Street`s rally also lent support to oil, with shares outside Japan .MIAPJ0000PUS climbing 1 percent and Japan`s Nikkei .N225 up 0.2 percent.
A further boost came from a fall in the dollar against most major currencies on Friday, extending losses the previous day, as investors shifted funds back into risky assets after the Federal Reserve this week appeared to confirm it would keep interest rates low for a while. <USD/>
The Reuters/University of Michigan final June consumer sentiment index, due at 1355 GMT, is expected to show a reading of 69.0 compared with 68.7 in the May report, a Reuters poll of economists showed.
(Editing by Ben Tan)
Original article

Wall Street rallies on Bernanke relief, consumer shares

By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks rallied on Thursday as investors were relieved Fed Chairman Ben Bernanke withstood a barrage of pointed questions from Congress on the Bank of America-Merrill Lynch deal relatively unscathed.
Retailers and home builders led stocks higher for much of the session, helped by a surprising profit increase from retailer Bed Bath & Beyond Inc(BBBY.O). Energy companies` shares also rose as oil prices climbed above $70 a barrel.
Stocks extended gains shortly before midday as investors took Bernanke`s hearing in stride. Despite lawmakers` criticisms of Bernanke, the Fed chairman is well liked on Wall Street and most analysts anticipate he will be reappointed.
The U.S. House of Representatives Oversight and Government Reform Committee questioned Bernanke on the Fed`s role in Bank of America`s takeover of Merrill Lynch, and whether he pressured Bank of America`s CEO Ken Lewis to go through with the deal after Lewis raised objections.
"There was concern as to what might happen there. He seemed to give some pretty decent testimony; at least it didn`t get out of hand," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average .DJI jumped 172.54 points, or 2.08 percent, to 8,472.40, snapping a four-day losing streak. The Standard & Poor`s 500 Index .SPX gained 19.32 points, or 2.14 percent, to 920.26. The Nasdaq Composite Index .IXIC advanced 37.20 points, or 2.08 percent, to 1,829.54.
With the second quarter ending early next week, some portfolio managers have already begun their end-of-quarter "window dressing" of selling some shares with big losses and buying some of the quarter`s best-performing stocks to help improve their returns. This Wall Street ritual also is likely to have helped ignite Thursday`s rally.
The S&P 500 is up 36 percent from a 12-year closing low hit on March 9.
Another sign that encouraged investors was news the Federal Reserve was scaling back some emergency funding programs even while extending a number of others.
"What we saw is an improvement here in that one program went away, but also the flexibility that these other ones are staying around in case they`re needed," Hellwig said.
PALM POPS UP AFTER THE BELL
After the close, Palm Inc (PALM.O) shares rose 10.2 percent to $15.45 after the smartphone maker posted a narrower-than-expected loss despite a steep revenue decline.
On Nasdaq, Palm added 0.6 percent to close at $14.02 ahead of the results.
During the regular session, shares of energy companies gained, including Exxon Mobil Corp (XOM.N), up 2.1 percent at $69.88. Oil jumped $1.56 to end at $70.23.
Also boosting the market was home builder Lennar Corp (LEN.N), which posted a wider quarterly loss, but noted an increase in new home sales and orders. Its stock shot up 17.5 percent to $9.19.  Continued...
Original article

Bernanke denies Fed threatened BofA over Merrill deal

By Mark Felsenthal and Kim Dixon
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke, facing his toughest grilling yet by U.S. lawmakers, said on Thursday he had never threatened to fire Bank of America`s management if they pulled the plug on a planned merger with Merrill Lynch.
During a tense three-hour hearing, lawmakers repeatedly pressed Bernanke on whether he had coerced Bank of America chief Kenneth Lewis in December to go forward with the deal despite Merrill`s quickly deteriorating finances.
Bernanke, holding his ground, told the members of the House of Representatives Oversight and Government Reform Committee the Fed never did anything "beyond the law or unethical."
"I did not tell Bank of America`s management that the Federal Reserve would take action against the board or management," he said.
Bernanke also said neither he nor other Fed officials had "ever directed, instructed, or advised" the bank to withhold information about Merrill`s mounting losses from the public, another charge lawmakers have leveled at the central bank.
The Fed has faced intense scrutiny from both Democrats and Republicans on Capitol Hill for many of the extraordinary actions it has taken since the financial crisis erupted in the summer of 2007.
After Bank of America`s eventual decision to go through with its purchase of Merrill, the bank received a fresh injection of $20 billion in public funds and a government backstop on potential losses on a $118 billion pool of shaky assets.
"It is still unclear whether Bank of America was forced by the federal government to go through with the Merrill deal or whether Ken Lewis pulled off what may have been the greatest financial shakedown in a long, long time," the committee`s chairman, Representative Edolphus Towns, said.
Representative Darrell Issa, the panel`s top Republican, charged on Wednesday that the Fed had covered up its involvement in the merger and "deliberately hid" important details from other federal regulators.
During the hearing, lawmakers cited an e-mail written by Richmond Federal Reserve Bank President Jeffrey Lacker as possible evidence of undue Fed pressure on Lewis. In the e-mail, Lacker said Bernanke had told him he planned to make it clear that pulling back from the merger could result in managers losing their jobs if Bank of America ended up needing aid.
SYSTEMIC RISK ROLE QUESTIONED
The probe into the merger comes as lawmakers debate an Obama administration plan for a regulatory overhaul that would expand the Fed`s powers over the financial system. Some lawmakers said lingering questions over the Fed`s role raised doubts about whether it should be given more power.
Financial market participants watched the hearing with some anxiety that it signals a search for a scapegoat for the financial crisis and a possible erosion of political support for a Fed chairman who has earned high marks on Wall Street.
"It does have a kind of a Watergate feel to it," said Chris Rupkey of Bank of Tokyo/Mitsubishi UFJ in New York, referring to dramatic congressional hearings in the early 1970s that were precursors to the resignation of President Richard Nixon.
The controversy over the Fed`s role in the Bank of America-Merrill deal could also color President Barack Obama`s looming decision on whether to reappoint Bernanke when his four-year term as chairman expires January 31.  Continued...
Original article

Allen Stanford pleads not guilty in fraud case

By Anna Driver and Eileen O`Grady
HOUSTON (Reuters) - Texas financier Allen Stanford will spend another night in a Texas jail after he pleaded not guilty on Thursday to 21 criminal charges that he ran a $7 billion Ponzi scheme.
U.S. Magistrate Judge Frances Stacy set Stanford`s bond at $500,000 with a $100,000 cash deposit. But Judge Stacy stayed her order until 4:30 p.m. CDT on Friday (2130 GMT) after the U.S. Justice Department said it plans to appeal, arguing that Stanford was likely to flee the country rather than face life in prison if convicted of the charges.
The once high-flying billionaire and sports promoter has been in federal custody since June 18, when he surrendered to the FBI in Virginia after a Houston grand jury indicted him on 21 counts of conspiracy, fraud and obstruction of justice.
"Not guilty, Your Honor," said Stanford, 59, wearing an orange jump-suit and with his hands manacled in front of him.
Stanford is the second high-profile fraud case to shake public confidence in Wall Street and the U.S. financial regulatory system, after veteran financier Bernard Madoff pleaded guilty to a massive Ponzi scheme that could have cost investors as much as $65 billion.
Stanford, who once owned a fleet of 6 private aircraft, a luxury yacht and houses and castles stretching from Houston to the Caribbean, has spent a week in detention centers in Virginia and recently in the Montgomery County Jail in Conroe, about an hour`s drive north of Houston.
"The big fight is still ahead and I`m confident the world will see Stanford didn`t defraud anybody," Stanford`s criminal attorney, Dick DeGuerin, told reporters outside the courthouse.
Stanford is taking the anti-anxiety drug Ativan after initially turning to alcohol to deal with the stress of the case, DeGuerin said in a filing.
Professional golfer Vijay Singh had offered to cosign Stanford`s bail bond but the court rejected the offer because Singh is not a U.S. citizen, DeGuerin said.
Fijian Singh had an endorsement deal with Stanford and sported a shirt and hat emblazoned with Stanford Financial Group`s eagle insignia when he was competing in last week`s U.S. Open at Bethpage Black in New York.
"HI, DADDY"
Dozens of Stanford`s family sat in the packed courtroom, including James Stanford, his father, and Andrea Stoelker, his girlfriend. "Hi Daddy," his daughter said as Stanford entered the court room after a lunch recess. Stanford winked at her.
According to the U.S. Securities and Exchange Commission, Stanford, with the help of executives at his firm and a top Antigua and Barbuda financial regulator, ran a "massive Ponzi scheme" for over a decade that centered on certificates of deposit in his bank in Antigua.
Stanford says he is innocent of the charges and that his multinational business was legitimate until the SEC "disemboweled" it by filing civil charges, which led to the confiscation of all his assets by a court-appointed receiver.
U.S. District Judge David Hittner will decide on Friday whether the court should keep Stanford in custody, after Justice Department attorneys argued that Stanford was a "serious flight risk."  Continued...
Original article

CORRECTION: Pre helps Palm beat expectations, shares rise

(Corrects ninth paragraph and bullet point to show Palm is saying it "could turn cash-flow positive, not "expects" to)
By Gabriel Madway
SAN FRANCISCO (Reuters) - Palm Inc (PALM.O) posted a narrower-than-expected fiscal fourth quarter loss on Thursday, and highlighted strong demand for its just-unveiled Pre smartphone.
Palm`s shares rose more than 14 percent in after-hours trading.
Executives said early signs were promising for the Pre, which will compete head-to-head with Apple Inc`s (AAPL.O) iPhone and Research in Motion`s (RIM.TO) BlackBerry and which Palm hopes will lead the company out of persistent losses.
Palm said demand for the Pre was exceeding its expectations. The device is expected to enhance margins at the company, which in past years has steadily relinquished market share to rivals.
Avian Securities` Matthew Thornton estimated Palm booked revenue for 70,000 Pre units in the May quarter, which ended May 29. He said that, along with a more favorable tax rate and lower-than-expected operating expenses, helped the company blow by Wall Street estimates.
"We`re successfully ramping supply to meet demand that is strong and growing," Chief Executive Officer Jon Rubinstein told analysts on a conference call, referring to the Pre.
The device, which went on sale at the beginning of June, has garnered generally favorable reviews. Analysts estimate Palm has shipped about 150,000 units so far.
The Pre`s impact will be more fully reflected in the current quarter, because of its June launch date. Sprint Nextel Corp (S.N) is the exclusive U.S. carrier for the device.
Palm said it could turn cash-flow positive in the second-half of fiscal 2010 and reassured analysts that its capital position was sufficient, which Thornton called the "most interesting takeaways."
The company posted a net loss applicable to common shareholders of $105 million, or 78 cents a share in the fiscal fourth-quarter ended May 29, compared with a loss of $43.4 million, or 40 cents a share, in the year-ago period.
Excluding items, Palm`s loss was 40 cents a share, compared with an average analyst estimate for a loss of 65 cents a share, according to Reuters Estimates.
Revenue fell 71 percent to $86.8 million. The Wall Street estimate was for revenue of $80.3 million.
Palm pioneered the market for handheld devices in the 1990s, but it has fallen behind competitors like Apple and Research in Motion, which were quicker to roll out models with popular applications.
The Pre, featuring Palm`s new WebOS, is now entering a market chock-full of other competitors from Nokia (NOK1V.HE) to HTC. A new iPhone 3GS launched last Friday and sold more than 1 million units in the first three days.  Continued...
Original article

GM says bankruptcy sale delay would kill suppliers

DETROIT (Reuters) - General Motors Corp needs to exit from bankruptcy quickly in order to avoid a "fatal" blow to many of its suppliers and the loss of thousands of jobs, Chief Executive Fritz Henderson said in a court filing on Thursday.
"Many of GM`s suppliers are already in the midst of a severe liquidity crisis, which has only been exacerbated by the current shutdown of certain GM production facilities," Henderson said.
GM has shut 13 of its U.S. assembly plants for up to 11 weeks in some cases as part of a bid to cut production and run down inventory as it reorganizes.
Henderson said tentative plans to resume operations at some GM plants by July 13 could be endangered if the court does not approve GM`s sale of its best assets out of bankruptcy in a deal brokered by the Obama administration`s autos task force and funded by the U.S. Treasury.
"If ... (the) new GM is not able promptly to commence operations, many of GM`s suppliers will have further draconian reductions in revenue and no income," Henderson said.
That could force suppliers "to shut down their respective operations -- perhaps permanently -- and thereby (terminate) thousands of jobs."
GM, which filed for bankruptcy on June 1, is seeking bankruptcy court approval to sell its best assets to a reorganized company funded by the U.S. Treasury .
Judge Robert Gerber of the federal bankruptcy court in Manhattan has scheduled a June 30 hearing on the proposed sale.
Some of GM`s smaller unions, including the IUE-CWA and the United Steelworkers and a group of states, including Ohio and Connecticut have filed objections to the sale.
No competing bidders have emerged as an alternative to the U.S. government`s $60 billion financing for GM, including a proposed equity investment of $50 billion that would give the U.S. Treasury a 60 percent ownership stake.
At least 15 auto parts suppliers have filed for bankruptcy or had their assets seized by creditors in 2009, according to the Motor & Equipment Manufacturers Association, which represents the industry.
Those suppliers include Visteon Corp, Metaldyne Corp and Noble International Ltd.
Last week, the White House rejected a request for up to $10 billion in additional emergency funding from the auto parts industry.
The case is In re: General Motors Corp, U.S. Bankruptcy Court, Southern District of New York, No. 09-50026.
(Reporting by Kevin Krolicki; editing by Andre Grenon)
Original article

Nominees emerge for U.S. panel on Wall Street meltdown

By Karey Wutkowski
WASHINGTON (Reuters) - A bipartisan panel armed with subpoena power to investigate causes of the Wall Street meltdown is on the brink of being launched, as Congress embarks on an ambitious effort to reform policing of the financial sector.
A short list of names has emerged for the Financial Crisis Inquiry Commission that includes former Republican presidential candidate Fred Thompson; former Democratic head of the Commodities Futures Trading Commission Brooksley Born; and Alex Pollock, a fellow at the conservative think tank American Enterprise Institute, according to a source familiar with the matter.
Congress last month created the 10-member commission to study how fraud, regulatory lapses, monetary policy, accounting, lending practices and executive pay contributed to the worst U.S. financial crisis since the Great Depression.
House of Representatives Speaker Nancy Pelosi has said the panel is modeled after the Pecora Commission, a Depression-era U.S. Senate panel that investigated the causes of the 1929 Wall Street crash.
"I think the announcement should be coming in the near future," Pelosi spokesman Nadeam Elshami said about the naming of the appointees.
The source, speaking anonymously because discussions were still ongoing, said other possible appointees include Bill Thomas, former Republican chairman of the House Ways and Means Committee; Jake Garn, former Republican senator; and Bob Graham, the former Democratic senator and Florida governor.
Born, Pollock and Thomas declined to comment. Thompson, Garn, and Graham did not immediately respond to messages.
The crisis commission must report its findings to Congress in December 2010. Its work will run parallel to Congressional efforts to draft the most dramatic overhaul of the financial regulatory system since the 1930s.
President Barack Obama has said he hopes reform legislation can be finalized by the end of this year. Obama`s proposal, unveiled earlier this month, calls for the Federal Reserve to police systemic risks to the economy and proposes consolidating primary bank supervision into a new regulator.
The plan also calls for creating a new consumer financial product watchdog and for giving the federal government the power to unwind troubled firms whose stability impact the broader financial system.
The Financial Crisis Inquiry Commission will study what led to the failure of several large Wall Street firms, which prompted Congress last year to pass a $700 billion financial bailout that has been unpopular among voters.
The U.S. economy has shed six million jobs since December 2007 in the midst of a recession that has seen the jobless rate hit 9.4 percent.
The crisis commission was given the power to hold hearings and to subpoena witnesses` testimony as well as correspondence and documents.
(Reporting by Karey Wutkowski, additional reporting by Jeremy Pelofsky; editing by Carol Bishopric)
Original article

Lear prepared to file for bankruptcy next week: report

DETROIT (Reuters) - Auto parts supplier Lear Corp (LEA.N) is preparing to file for bankruptcy as soon as next week, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
The news comes as Lear faces a June 30 window, through which its lenders have agreed to waive the existing defaults under its primary credit facility.
Lear, which warned in March it might have to file for bankruptcy, has been exploring alternatives to restructure its debt outside of bankruptcy over the past months.
Lear spokesman Mel Stephens declined to comment.
The Journal reported that Lear had been in talks with banks in recent days for debtor-in-possession loans, the funding companies typically use to finance their stays in bankruptcy court. JPMorgan Chase (JPM.N) and Citigroup (C.N) will provide the bulk of the loan, according to the report.
Shares of Lear closed down 39 percent, or 34 cents, at 54 cents on the New York Stock Exchange before the news.
Southfield, Michigan-based Lear was in breach of its leverage covenants at the end of 2008 after borrowing all of the $1.2 billion available to it under the primary credit facility during the fourth quarter.
It had $3.5 billion of outstanding debt at the end of 2008, according to a filing with the Securities and Exchange Commission.
Lear, which makes seating and electrical equipment for vehicles, has suffered because of steep production cuts by General Motors Corp (GMGMQ.PK) and Ford Motor Co (F.N), which accounted for 42 percent of its global revenue in 2008.
U.S. auto sales fell 36.5 percent in the first five months of 2009 to their lowest level in nearly three decades.
The U.S. auto parts sector, already teetering on the brink of failure, has come under further pressure after Chrysler shut down nearly all of its production for the duration of its bankruptcy reorganization.
GM, which filed for bankruptcy on June 1, has also idled 13 assembly plants in North America for as long as nine weeks starting in mid-May.
(Reporting by Soyoung Kim; Editing Bernard Orr)
Original article