Saturday, June 27, 2009

Porsche fumes at VW, Lower Saxony "extortion"

Porsche fumes at VW, Lower Saxony extortionFRANKFURT (Reuters) - Volkswagen and its key shareholder, the state of Lower Saxony, have confronted Porsche with an ultimatum to accept a tie-up of the two carmakers under VW`s tutelage or else face more severe financial turmoil, Web site Spiegel online reported.
Porsche Chief Executive Wendelin Wiedeking and Chairman Wolfgang Porsche have been urged to agree by the end of June that VW takes a 49 percent stake in Porsche`s sports car business for 3-4 billion euros ($4.2-$5.6 billion), Spiegel magazine reported in its online edition on Saturday, without saying who provided the information.
According to the proposal, the Emirate of Qatar would buy Porsche`s stock options in VW, which would subsequently integrate the Porsche sports car business into its operations.
VW would not comment on the report. Porsche was not immediately available for comment, neither was the Emirate of Qatar.
The new merged carmaker would eventually be 40 percent owned by the Porsche and Piech families, 20 percent owned by Lower Saxony, 15 percent owned by Qatar with another sovereign wealth fund holding a further 5 percent, Spiegel reported.
VW threatened it could insist on redemption in September of a 700 million euro loan it granted to Porsche, should Porsche reject the offer, Spiegel online said.
Porsche racked up 9 billion euros of debt trying to swallow its much bigger peer Volkswagen before the financial crisis turned the tables and threatened to unravel the deal.
Porsche, which owns 51 percent in VW, had abandoned plans to raise its stake to 75 percent but still owns options to buy VW shares.
The tie-up proposal was devised by Christian Wulff, the state premier of Lower Saxony, which holds a blocking minority of 20 percent in VW, as well as Porsche co-owner Ferdinand Piech and by the CEO and CFO of VW, Spiegel online said.
Qatar would only pursue an investment in a merged VW and Porsche if all major shareholders agree on the set-up, the Web site added.
In a separate article, daily Sueddeutsche Zeitung reported on Saturday that Qatar plans to buy Porsche`s stock options in VW and is no longer interested in buying an interest in Porsche alone, citing unspecified sources.
Porsche had said on Friday it was close to reaching a deal with Qatar that could help solve its financial problems.
(Reporting by Ludwig Burger, Hendrik Sackmann and Arno Schuetze)
Original article

Hummer buyer to open talks with China regulators: report

Hummer buyer to open talks with China regulators: reportCHICAGO (Reuters) - The potential buyer of General Motors Corp`s Hummer division will begin formal talks with Chinese regulators on Monday in an effort to win approval for its acquisition, The Wall Street Journal reported on Saturday.
China`s Sichuan Tengzhong Heavy Industrial Machinery has agreed to buy the Hummer brand from the bankrupt U.S. automaker but state radio in China reported on Thursday that the country`s top economic planning agency was likely to reject the bid.
A GM spokesman was not immediately available to comment on the Journal report.
Tengzhong`s lack of experience and the gas-guzzling nature of Hummer`s sport utility vehicles were cited as reasons for the expected opposition by the National Development and Reform Commission, the report said.
However, GM and Tengzhong have yet to formally present the deal to the Chinese regulators and the parties negotiating the deal have not been told it is in trouble, the Journal said, citing unidentified sources.
The Journal quoted one unidentified GM executive as saying talk that the deal would be blocked was not true and should be considered "pure speculation."
Executives from GM and Tengzhong met this week to firm up their plans and are operating under the assumption that the deal has a reasonable chance of getting approved, according to people familiar with the meeting, the Journal said.
GM said on June 2, the day after filing for bankruptcy, that it had tentatively agreed to sell the Hummer brand to Tengzhong, saying it expected the deal to close in the third quarter. GM officials said at the time that they saw no snag in closing the deal.
Based in the Chinese province of Sichuan, Tengzhong makes special-use vehicles, highway and bridge structural components, construction machinery and energy equipment.
(Reporting by Ben Klayman; Editing by Bill Trott)
Original article

U.S. commercial banks see record Q1 trading revenue

NEW YORK (Reuters) - U.S. commercial banks reported record trading revenue in the first quarter of 2009, benefiting from wide trading margins and gains from interest rate products, the Office of the Comptroller of the Currency said on Friday.
Banks generated a record $9.8 billion in revenue from trading derivatives and cash instruments, compared with a loss of $9.2 billion in the fourth quarter of 2008, the OCC said.
Interest rate products, including derivatives, generated the strongest revenue, rising to a record $9.1 billion, compared with a $3.4 billion loss in the previous quarter, the OCC said. Credit trading was the only asset class to generate a loss, of $3.2 billion, trimmed from a fourth-quarter loss of $8.9 billion.
Foreign exchange revenue fell to $2.4 billion from $4.1 billion in the fourth quarter, while equity trading generated $1 billion in trading revenue compared to a fourth quarter loss of $1.2 billion, the OCC said.
Trading revenue were boosted as banks wrote down fewer losses from bad loans and recorded the declining value of their debt as a liability. Banks can book the deteriorating value of their own debt as trading revenue.
"While trading performance was strong even without the liability value changes, this source did add materially to first quarter trading performance," the OCC said.
Notional volumes in all derivatives markets increased by $1.6 trillion in the quarter to $202 trillion, as more derivative contracts were recorded by commercial banks that had formerly been investment banks.
The notional volume does not represent the actual amount of risk as it includes a number of trades that offset each other. Eighty-nine percent of derivatives exposures at commercial banks were eradicated from netting positions in the first quarter, the OCC said.
LARGEST BANKS
JPMorgan Chase & Co(JPM.N), Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N), Citigroup (C.N) and HSBC Bank USA, part of HSBC Holdings (HSBA.L), have the largest derivatives exposures of U.S. commercial banks and account for 96 percent of total exposures, the OCC said.
As of March 31, their notional derivative exposures stood at $81.2 trillion, $39.9 trillion, $38.9 trillion, $29.6 trillion and $3.5 trillion, respectively.
Of these banks, Goldman had by far the largest credit exposure relative to its risk-based capital, at 1,048 percent, the OCC said. HSBC, JPMorgan, Citibank and Bank of America`s ratios stood at 475 percent, 323 percent, 216 percent and 169 percent, respectively.
Goldman also got the largest overall boost from derivatives and cash trading revenue, which represented 69 percent of the bank`s gross revenue in the quarter, the OCC said.
Trading revenue for JPMorgan represented 13 percent of its gross revenue and contributed 8 percent of both Citigroup and Bank of America`s gross revenues. HSBC Bank USA`s gross revenue lost 4 percent from trading revenue.
JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley (MS.N) and Citigroup had the largest derivative exposures of all holding companies, at $81.1 trillion, $77.9 trillion, $47.7 trillion, $39.1 trillion and $31.7 trillion, respectively.
(Reporting by Karen Brettell; Editing by Padraic Cassidy)
Original article

Prosecutors ask judge to imprison Madoff for life

Prosecutors ask judge to imprison Madoff for lifeBy Grant McCool
NEW YORK (Reuters) - Swindler Bernard Madoff should spend the rest of his life in prison, U.S. prosecutors argued on Friday, citing the "unique scope and duration" of his crimes as the leader of Wall Street`s biggest fraud.
Madoff will be sentenced on Monday after pleading guilty in March to 11 criminal charges including securities fraud, money laundering and perjury in an investment scheme involving tens of billions of dollars.
"Madoff`s crimes were of extraordinary dimensions," the prosecutors` memorandum to a Manhattan federal court judge said. "For example, the fraud loss known to date, which is greater than $13 billion, is more than 32 times the baseline level that would carry a sentence of life under the U.S. sentencing guidelines."
It said about $170 billion flowed into the principal account used by Madoff in his decades-long scheme. It said he bilked thousands of people and caused economic hardship to individuals, charities and for-profit institutions.
"A reasonable sentence in this case would be the guidelines sentence of 150 years, or alternatively, a term of years that both would assure that Madoff will remain in prison for life, and forcefully would promote general deterrence."
The uncovering of the scheme and Madoff`s arrest in December led to calls for stricter oversight of firms.
Madoff`s lawyer Ira Lee Sorkin declined to comment on the memorandum because he said he had not yet read it.
The government argued that the Madoff case bore no comparison to corporate frauds of recent years such as WorldCom Chief Executive Bernie Ebbers and Adelphia`s John and Timothy Rigas. Ebbers is serving 25 years and the Rigases 12 years and 17 years, respectively.
"Madoff`s conduct is unique in its scope and duration," the memorandum to U.S. District Court Judge Denny Chin said.
It also cited a June 25 letter from counsel for the trustee winding down Bernard L. Madoff Investment Securities LLC saying that Madoff had not cooperated.
"Mr. Madoff has not provided meaningful cooperation or assistance to the Trustee since his arrest," the letter signed by lawyer David Sheehan said.
Madoff`s lawyer, in papers submitted to the judge this week, argued a sentence of 12 years would be sufficient. Sorkin also asked the judge not to give in to the "mob vengeance" sought by those Madoff defrauded.
Sorkin cited a recent meeting between the jailed Madoff and the inspector general of the U.S. Securities and Exchange Commission as being helpful to regulators. But prosecutors said on Friday the official "had informed the government that Madoff`s information will not `shape and fortify the future of Wall Street regulation and oversight.`"
The government said statements sent to the court by defrauded investors, showed he "was not only responsible for wiping away the financial resources of many generations within families but also for causing profound levels of stress and emotional injury."
In its memorandum on Friday and in other court papers, prosecutors said that as of November last year, Madoff`s firm issued account statements that held a total of about $65 billion when in fact he had not bought any securities.  Continued...
Original article

U.S. regulators close four small banks

WASHINGTON (Reuters) - U.S. regulators closed four small banks on Friday -- two in Georgia, one in Minnesota and one in California, bringing the total of U.S. bank failures to 44 this year.
The Federal Deposit Insurance Corp said the closings were:
-- Community Bank of West Georgia, a small bank in Villa Rica, Georgia, with assets of $199.4 million and total deposits of $182.5 million, as of May 15. A buyer could not be found, so the FDIC was appointed as receiver and will mail checks to insured depositors for their insured funds on June 29.
-- Neighborhood Community Bank, of Newnan, Georgia, with $221.6 million in assets and $191.3 million in deposits, as of March 31. CharterBank, of West Point, Georgia, agreed to assume the insured deposits and $209.6 million of the assets. Neighborhood`s four offices will reopen as CharterBank branches.
-- Horizon Bank, of Pine City, Minnesota, with $87.6 million in assets and $69.4 million in deposits as of March 31. Stearns Bank, NA, of St Cloud, Minnesota, agreed to assume all of Horizon`s deposits and to buy $84.4 million of its assets. Horizon`s two offices will reopen on Saturday as Stearns branches.
-- MetroPacific Bank, of Irvine, California, with $80 million in assets and $73 million in deposits, as of June 8. Sunwest Bank, of Tustin, California, agreed to assume all of the deposits, excluding those from brokers, and virtually all of MetroPacific`s assets. MetroPacific`s sole office will reopen on Monday as a branch of Sunwest Bank.
Customers can access their money over the weekend by check, teller machine or debit card, the FDIC said.
In 2008, 25 U.S. banks were seized by officials, up from only 3 in 2007.
During the current financial crisis, Seattle-based lender Washington Mutual became the biggest bank to fail in U.S. history. It was closed in September while suffering from losses from soured mortgages and liquidity problems.
The FDIC will insure up to $250,000 per account.
The agency also has running a tally of problem banks that its examiners closely monitor. At the end of the first quarter, 305 undisclosed institutions were on that list.
(Reporting by Charles Abbott and Karey Wutkowski; Editing by Gary Hill)
Original article

IBM loses injunction against Dell executive

IBM loses injunction against Dell executiveBy Jim Finkle
BOSTON (Reuters) - A U.S. judge turned down a request from International Business Machines Corp to bar its former head of mergers and acquisitions from working at Dell Inc over allegations that he would disclose trade secrets.
The ruling means the executive, David Johnson, will be able to continue to work as Dell`s senior vice president of corporate strategy while IBM proceeds with a lawsuit that claims he violated a non-compete agreement.
It often takes several years for such suits to work their way through the court system.
IBM spokesman Doug Shelton said his company intended to appeal Friday`s ruling.
M&A is a priority for both companies, which are looking to add technologies that will differentiate their products at a time when global technology spending is slumping. Dell has said it wants to increase sales of servers, storage equipment and expand its business to large corporations -- key areas for
IBM.
Johnson, a 27-year IBM veteran whose lawyer declined comment on Friday, has maintained that his 2005 non-compete document is invalid because it was not properly signed.
The battle has gotten increasingly bitter in recent days. 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.
"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.
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.
Federal District Court Judge Stephen Robinson said in his ruling on Friday that IBM had yet to demonstrate what type of trade secrets Johnson might bring to Dell.
A Dell spokesman declined comment.
Johnson has said 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.
He maintains that the non-compete 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 non-compete 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.  Continued...
Original article

U.S. spending and income rise, mood improves

U.S. spending and income rise, mood improvesBy Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - U.S. consumer spending in May rose for the first time since February and savings hit a record high as federal stimulus measures boosted incomes, while consumer sentiment edged higher in June, bolstering the view that the economy was close to emerging from recession.
Consumer spending, which accounts for more than 70 percent of U.S. economic activity, rose 0.3 percent in May, the Commerce Department said on Friday. The department also revised up April`s figure to unchanged from a small decline previously.
Personal income jumped 1.4 percent last month, propped by social benefit payments from the government`s massive economic stimulus.
U.S. stocks fell as the jump in savings to the highest level since records began in 1959 boosted worries the economic recovery will not make much headway if consumers save rather than spend. The U.S. dollar extended losses versus the euro as the data reduced safe-haven demand for the greenback.
"Though consumption is positive, it`s kind of a tepid rebound versus the huge bounce-back everyone was expecting. So we have to see if this is stabilization," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.
"The government programs are new. We really have no history on it, and the rules tend to be changing as well. Right now we`re on new ground with a lot of this, at least in the short-term."
The stimulus provided for one-time payments of $250 to people receiving Social Security, supplemental security income, and other benefits.
Personal savings jumped to a record annual rate of $768.8 billion. The saving rate climbed to 6.9 percent, the highest since December 1993, the department said.
CONSUMER SENTIMENT RISES
A separate report showed U.S. consumer confidence improved in June to the highest since February 2008.
The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for June stood at 70.8, up from 68.7 in May, equaling February 2008`s reading. This was above economists` median expectation for a reading of 69.0, according to a Reuters poll.
The index of consumer expectations edged lower, however.
"Over the past four months, sentiment has improved moderately, suggesting that consumers` attitudes about the economy are improving," said Steven Wood, chief economist at Insight Economics in a research note.
"However, they remain very cautious. Nevertheless, these data do suggest consumers are no longer shell shocked."
Since the November 2008 low of 55.3, the sentiment index has gained 15.5 points, recouping about one-third of the loss posted since the peak in January 2007.  Continued...
Original article
 

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