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State Comptroller Thomas P. DiNapoli said Sunday the Thruway Authority should call off its next round of toll increases and added, the agency "could manage its finances a whole lot better."

DiNapoli made his recommendation in a highly anticipated audit saying the agency should postpone future hikes until it has conducted a thorough analysis of its expenses and operations and prioritized capital projects.

The audit examined whether the calculations used in justifying four proposed toll increases along the highway in July 2008, January 2009, July 2009 and January 2010 were accurate and reasonable.

"It's easy to raise tolls, but the Thruway Authority should take a hard look in the mirror before it pushes another toll hike on New Yorkers," DiNapoli said. "Toll hikes are not warranted until the Thruway Authority examines its own spending. The Thruway is too important to the upstate economy to unnecessarily raise tolls and drive up the cost of everything from milk to heating oil, not to mention the impact on commuters."

Tolls on the thruway were also raised earlier this month, which sparked an outcry from motorists and elected officials.

"Comptroller DiNapoli is to be commended for investigating and bringing to light Thruway Authority mismanagement that many of us have long suspected to be true," said Rep. Brian Higgins, D-Buffalo. "Travelers along the Thruway are forced to pay for maintenance and improvements twice, once in the federal gas tax, which is paid by consumers and passed down to the Authority, and again through tolls.

Higgins, a former state Assemblyman, said the audit should be used to make sweeping reforms within the Thruway Authority.

In a response, the Thruway Authority generally agreed with the facts of the audit but disagreed with many of the conclusions, according to the comptroller.

The Thruway Authority board is considering a series of toll increases that would take effect from July 2008 through January 2010. The board will be holding hearings on the proposed hikes. These proposed toll increases are expected to generate a total of $520 million in additional revenue.

Tolls account for more than 90 percent of the Thruway Authority's operating revenue. The comptroller's report said in 2006, $554.4 million was collected at toll booths.

Thruway Authority officials say the revenue is needed to cover cash shortfalls projected over the next five years caused by a reduction in traffic growth and an increase in the use of E-ZPass discounts. Part of the revenue is also needed for the agency's $2.7 billion capital plan, which extends through 2011.

The comptroller's audit noted the agency significantly underestimated federal funding and has not taken aggressive cost-cutting measures. DiNapoli also said the Thruway Authority failed to collect $27.5 million in unpaid tolls and penalties over a six-year period, pointing out that one out-of-state trucking company was cited for 2,226 violations and owes $59,159 in unpaid tolls.

As he released the audit, DiNapoli also recommended that the state's canal system be removed from the Thruway Authority's operations and that a feasible, long-term solution for financing, managing and planning the future of the canal system be developed. The Thruway Authority took control of the canal system in the 1990s.

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Japan's inflation rate doubled in December to the fastest in more than nine years, as companies passed rising oil and commodity costs to consumers.

Core consumer prices, which exclude fresh food, climbed 0.8 percent from a year earlier, the statistics bureau said today in Tokyo. The median estimate of 44 economists surveyed by Bloomberg News was for a 0.6 percent gain.

Central bank Governor Toshihiko Fukui has said rising oil and commodity costs are complicating the task of conducting monetary policy, and today forecast growth will slow and inflation will quicken. The government is concerned that prices are being driven by surging oil, wheat and barley costs rather than consumer spending and business investment.

“The global economy is slowing while prices of food and energy keep advancing,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo, who expects the central bank to keep interest rates on hold this year. “That's the worst combination for the Japanese economy, which depends on exports and has stagnating domestic demand.''

Japan's five-year bonds fell the most in 19 months after the inflation report and a rebound in stocks. The yield on the note rose 9.5 basis points to 0.91 percent at 5:37 p.m. in Tokyo. The yen was 107.85 per dollar from 107.12 before the report.

Reduced Bets

Investors reduced bets that the central bank will lower the key lending rate from 0.5 percent later this year. There's a 43 percent chance of a cut by July, down from 67 percent before the inflation report, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps.

“The market's been underestimating the BOJ's focus on inflation,'' said Jan Lambregts, head of Asian research at Rabobank International in Hong Kong. “An actual rate cut could produce an increase in inflation expectations, which would only act to depress the consumer further.''

The Bank of Japan raised interest rates from near zero percent in July 2006, predicting that sustained growth will spur profits, feed into higher wages and consumer spending, and lead to stable price increases. Instead, inflation is being driven by energy and raw materials costs, hurting profits and eroding households' spending power.

Fukui said in parliament today that growth will cool to “the low 1 percent range'' in the year ending March. A slowing economy and faster inflation makes it “difficult'' to decide interest-rate policy, he said this month.

Negative for Consumers

“Rising daily goods prices are negative for consumer spending when wage growth has stalled,'' Economic and Fiscal Policy Minister Hiroko Ota told reporters today. “We can't say Japan has made a major step'' toward the end of deflation.

Consumer confidence fell to a four-year low in December and wages only rose in two of the first 11 months of last year.

Core prices were unchanged in 2007, today's report showed. Prices started rising in October after eight months of declines. Before then, they either hovered near zero or fell since March 1998, when a sales tax increase pushed gains to 1.8 percent.

Core consumer price gains may accelerate and could even exceed 1 percent, Kazuo Momma, head of the Bank of Japan's research and statistics bureau, said today.

Tokyo's core prices, a harbinger of the nationwide index, rose 0.4 percent in January from a year earlier, following a 0.3 percent gain in December. Excluding energy as well as food, nationwide consumer prices fell 0.1 percent in December. By that measure, they've failed to rise for nine years.

Milk, Beer

Crude oil rose to a record $100 a barrel this month. A UBS Bloomberg index of 26 commodities that tracks the prices of oil, industrial metals, agriculture and livestock climbed to a record on Jan. 14 after surging 22 percent last year.

Dairy farmers in Hokkaido, northern Japan, yesterday raised the price of milk by 3 percent because of higher costs of feed for cows. Kirin Holdings Co., Asahi Breweries Ltd. and Sapporo Holdings Ltd. plan to boost beer prices in the next three months to cover higher malt costs. Nisshin Foods Inc., Japan's biggest macaroni maker, will increase pasta prices as wheat costs soar.

Smaller companies remain unable to pass on costs out of concern that sales may decline, said Ryutaro Kono, chief economist at BNP Paribas in Tokyo.

“Some companies, worrying that worsening performance may force them to go bankrupt, started to raise prices,'' Kono said. “But without wage increases, higher prices will only hurt households' purchasing power and choke off spending.''

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Canada's annual inflation rate minus volatile items such as gasoline was the lowest in two years in December, giving central bankers more room to cut interest rates.

Core prices rose 1.5 percent in December, slowing for the sixth straight month and below the central bank's target for a third month, from 1.6 percent in November. Economists surveyed by Bloomberg forecast the rate would accelerate to 1.7 percent, the median of 21 estimates. The all-items index slowed to 2.4 percent from 2.5 in November, as economists expected.

Today's report shows that core inflation is slowing even earlier than Bank of Canada policy makers predicted yesterday, two days after cutting their benchmark rate for a second month. Central bankers said prices would drop throughout 2008, and that they would likely cut rates again to shield the economy from a possible U.S. recession.

“This report gives the Bank of Canada maximum flexibility to respond to growth risks over the coming months, and is one reason why we see the bank cutting rates by'' 50 basis points on March 4, Meny Grauman, an economist with CIBC World Markets in Toronto, said in a note to clients. The numbers also “put downward pressure on the Canadian dollar,'' Grauman said.

The currency weakened 0.4 percent to C$1.0081 per U.S. dollar at 8:31 a.m. in Toronto, from C$1.0038.

March Decision

Other economists also say the central bank will cut borrowing costs by 50 basis points at its March meeting, instead of the conventional 25 basis points, to reduce the gap with U.S. borrowing costs, which the Federal Reserve this week lowered by 75 basis points to 3.5 percent.

Governor David Dodge said yesterday in his last press conference before retiring that inflation would slow to 1.5 percent by the middle of the year, giving his successor Mark Carney more room to lower rates. The central bank alters interest rates to keep inflation at or near a target of 2 percent, and uses the core rate as a gauge of future trends.

Consumer prices rose 0.1 percent in December and the core index fell 0.3 percent. Economists correctly predicted the overall index's gain and said the core gauge would drop 0.1 percent in the month.

Prices have been pushed down by a Canadian dollar that rose 15 percent over the past 12 months, central bankers said this week. The currency, which had dropped since reaching a record 90.58 Canadian cents per U.S. dollar on Nov. 7, rose this week after the Fed's move.

Books, Cars

Statistics Canada attributed December's slowdown in annual core inflation to a 7.7 percent drop in prices for books and other printed material. The cost of buying or leasing a car fell 4.1 percent in December from a year earlier, the biggest drop since August 1961, the agency said. Lower prices also were recorded for computers, which cost 14 percent less than a year earlier on cheaper liquid-crystal screens and laptops.

Gasoline prices were 15 percent higher than in December 2006, and the cost of shelter rose 4 percent, as mortgages gained 7.3 percent, the statistics agency said.

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Canada's annual inflation rate minus volatile items such as gasoline was the lowest in two years in December, giving central bankers more room to cut interest rates.

Core prices rose 1.5 percent in December, slowing for the sixth straight month and below the central bank's target for a third month, from 1.6 percent in November. Economists surveyed by Bloomberg forecast the rate would accelerate to 1.7 percent, the median of 21 estimates. The all-items index slowed to 2.4 percent from 2.5 in November, as economists expected.

Today's report shows that core inflation is slowing even earlier than Bank of Canada policy makers predicted yesterday, two days after cutting their benchmark rate for a second month. Central bankers said prices would drop throughout 2008, and that they would likely cut rates again to shield the economy from a possible U.S. recession.

“This report gives the Bank of Canada maximum flexibility to respond to growth risks over the coming months, and is one reason why we see the bank cutting rates by'' 50 basis points on March 4, Meny Grauman, an economist with CIBC World Markets in Toronto, said in a note to clients. The numbers also “put downward pressure on the Canadian dollar,'' Grauman said.

The currency weakened 0.4 percent to C$1.0081 per U.S. dollar at 8:31 a.m. in Toronto, from C$1.0038.

March Decision

Other economists also say the central bank will cut borrowing costs by 50 basis points at its March meeting, instead of the conventional 25 basis points, to reduce the gap with U.S. borrowing costs, which the Federal Reserve this week lowered by 75 basis points to 3.5 percent.

Governor David Dodge said yesterday in his last press conference before retiring that inflation would slow to 1.5 percent by the middle of the year, giving his successor Mark Carney more room to lower rates. The central bank alters interest rates to keep inflation at or near a target of 2 percent, and uses the core rate as a gauge of future trends.

Consumer prices rose 0.1 percent in December and the core index fell 0.3 percent. Economists correctly predicted the overall index's gain and said the core gauge would drop 0.1 percent in the month.

Prices have been pushed down by a Canadian dollar that rose 15 percent over the past 12 months, central bankers said this week. The currency, which had dropped since reaching a record 90.58 Canadian cents per U.S. dollar on Nov. 7, rose this week after the Fed's move.

Books, Cars

Statistics Canada attributed December's slowdown in annual core inflation to a 7.7 percent drop in prices for books and other printed material. The cost of buying or leasing a car fell 4.1 percent in December from a year earlier, the biggest drop since August 1961, the agency said. Lower prices also were recorded for computers, which cost 14 percent less than a year earlier on cheaper liquid-crystal screens and laptops.

Gasoline prices were 15 percent higher than in December 2006, and the cost of shelter rose 4 percent, as mortgages gained 7.3 percent, the statistics agency said.

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What mortgage opportunities will you find when you want to buy a house in this post-subprime world?

Regardless of fears and stories you may have heard about tight credit, mortgages are available.

In fact, interest rates are low — 5? percent for a 30-year fixed-rate mortgage, said Paul Lueken, president of the Illinois Association of Mortgage Professionals.

Riskier loans that did not make sense according to traditional underwriting standards are gone or have become very rare.

These include subprime mortgages designed for borrowers with bad credit that require little equity or down payment and little or no proof of income. Rates for these loans often escalate over the years.

Now 30-year fixed loans are popular again, credit scores are important and FHA mortgages are a choice for those who don’t have large down payments.

Adjustable rate mortgages are less popular these days because rates are not much lower than 30-year fixed rate mortgages.

Experts recommend shopping around for rates and meeting with a mortgage representative to examine what options are available.

Remember, besides a down payment, with most mortgages there are $1,500 to $3,000 in closing costs and a few months of payments in savings required as a reserve.

FHA

If you are a first-time buyer, consider an FHA mortgage, said Frank May, senior loan consultant with Green Valley Mortgage in Bloomingdale.

May said such loans are good for borrowers in the 620 to 680 credit score range, which would require higher fees or interest rates with conventional mortgages. Some FHA borrowers can have credit scores as low as the high 500s.

The very best credit scores are above 800, May said.

FHA (or VA loans if you are a veteran) have advantages:

• A borrower can pay as little as 3 percent for a down payment, which can come from either the buyer or as a gift from a relative. Closing costs are additional but can be paid by the seller.

• Generally, FHA borrowers should have housing expenses at or less than 29 percent of gross income and minimum payments for all debt at 41 percent. However, these numbers are flexible, and the FHA Web site, www.fha.gov, urges home buyers to consult with a mortgage professional.

However, such loans also have drawbacks:

• A mortgage must be $275,200 or lower. The median price for homes in the Chicago area in November was $247,000, according to the Illinois Association of Realtors.

There is talk of Congress raising the limit and lowering the cash requirement.

• If you have a down payment in the 20 percent range, you might want to get a conventional mortgage because mortgage insurance is still required with FHA loans.

Freddie and Fannie

So-called conventional loans sold to Freddie Mac and Fannie Mae are the backbone of American mortgages.

With such a loan, a mortgage cannot be more than $417,000.

If your credit score is good — but between 620 and 680 — you will pay a slightly higher interest rate and closing costs will be increased by hundreds or a few thousand dollars, May said.

A 30 percent down payment would negate less-than-perfect credit.

Borrowers also pay more if the down payment is less than 20 percent, but it can be as low as 5 percent, May said.

A conventional borrower should keep housing expenses within 33 percent of gross income and all debt within 38 percent. These guidelines are flexible depending on circumstances like great credit, assets, family size and expenses, or expectations of increased income.

Jumbo

What if you can afford a more expensive home — say one with a mortgage higher than $417,000?

You will need to have good credit and a down payment of at least 10 percent, but 20 percent is better, said Lueken, who is also president of 1st Advantage Mortgage in Lombard.

A credit rating should be 680 or higher, May said.

Such a loan also will cost more. The interest rate will be about a half-percentage point higher than a conforming mortgage, he said.

This is one area where second mortgages can be allowed, said Paul Diamond, executive vice president for sales at Flagstar Bank in Gurnee.

His company did a loan for a buyer in Chicago’s Trump Tower for which the person got a conventional loan, and a second mortgage for part of the amount above the conventional limit.

Credit dings

Then there are those people who are going to find it very difficult to get a mortgage. Experts recommend their best choice is to work for a year or so to fix their credit rating.

Nonprofit agencies like the DuPage Homeownership Center in Wheaton offer advice on how to do this.

Subprime mortgages for people with bad credit have become scarce.

Etc.

It is difficult for people who have not established credit or cannot produce tax returns that reflect all their income to obtain mortgages.

Self-employed people can still get what are called stated-income mortgages without providing all their tax information, May said.

Good credit is essential, and the rates might be a quarter- to a half-percentage point higher than with conventional mortgages.

People who fall below loan guidelines for homeownership still have some options.

For example, through its House America program, Countrywide offers ways to count extra income and help people with higher-than-average housing expenses or debt.

Counties and other local governments also have programs to help low-income buyers.

Some of the now-disappearing loans for people without income they can document made sense, Lueken said.

For example, someone with a large down payment and cash in the bank but no current income, which can happen in divorces, could be a good risk, he said.

The mortgage association is trying to change Illinois laws that eliminate all loans for which borrowers do not have to prove their income.

Because of new state laws starting July 1, FHA borrowers will not be able to take advantage of easier methods to refinance into a lower rate, he said.
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FRESH interest rate cuts may be needed to shore up US economic growth amid a protracted housing slump and financial market turmoil, Federal Reserve chairman Ben Bernanke said overnight.
The central bank chief said the outlook for economic growth in 2008 had “worsened” because of the housing meltdown, rising oil prices and weakened stock markets.

“In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary,” Mr Bernanke said during a speech in Washington.

“We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.”

Mr Bernanke said the Fed will remain “exceptionally alert and flexible.”

Economists said Mr Bernanke’s remarks suggested the central bank will slash interest rates by more than expected at a two-day meeting on interest rates scheduled for January 29-30.

Stephen Gallagher, an economist at Societe Generale, said Mr Bernanke had raised “the odds for the larger 50-basis-point move”.

Most Fed-watchers expect the central bank to cut its key federal funds rate, currently at 4.25 per cent, at its first meeting of the year.

The Fed has trimmed borrowing costs by a full percentage point since September as concerns about the mortgage and credit markets have spiked.

“Bernanke’s comments indicate the Fed had done nothing to dissuade the market from an expected 50-basis-point rate cut later this month,” said Marc Chandler, an analyst at Brown Brothers Harriman.

Wall Street appeared to welcome Mr Bernanke’s stance, as the Dow Jones Industrial Average rose to around 12,818.14 points in mid-afternoon trading.

The Dow has plummeted from a record high of 14,164.53 points in early October.

“Financial markets had already raised the odds of a 50 basis point cut in the target federal funds rate to near 75 per cent, and Mr Bernanke’s speech did not dissuade the markets from the view that this is the most likely outcome,” said Brian Bethune, an economist with Global Insight.

Economists at Goldman Sachs warned in a briefing note Wednesday that the world’s biggest economy appears to be “falling into a recession.”

Mr Bernanke said the Fed is not forecasting a recession at present, but is anticipating slower economic growth.

The central bank chief said the housing downturn had shaken the financial markets which he described as “fragile” and made big banks more cautious about lending. Such strains would continue to pose economic risks, he said.

He said the housing market’s woes and “the subprime crisis,” home loans granted to Americans with poor credit, had heavily dented the earnings of some major banks, but stressed the “banking system remains sound”.

Mr Bernanke said the Fed’s new system of credit auctions, which have helped boost liquidity in the financial market, appears to have eased a wide-spread credit crunch.

The Fed chief also said the latest survey on the job market had revealed slower employment growth and that this could affect consumer spending, especially if companies cut back on hiring.

Consumer spending is a critical economic motor accounting for some two-thirds percent of gross domestic product (GDP).

Mr Bernanke said recent economic news suggested “the downside risks to growth have become more pronounced”.

“The demand for housing seems to have weakened further, in part reflecting the ongoing problems in mortgage markets. In addition, a number of factors, including higher oil prices, lower equity prices, and softening home values, seem likely to weigh on consumer spending as we move into 2008,” he said.

Some economists believe the central bank will have to cut rates as low as 2.50 per cent by the end of 2008 to keep the economic ticking along.

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Outside auditors charged with overseeing the State Board of Administration knew more than a year ago that an internal report had red-flagged the agency for not adequately supervising the risky investments made by its money managers.

The SBA’s internal auditor, Flerida Rivera-Alsing, reported the findings in fall 2006 to the three-person panel of inspectors general who in turn are answerable to the governor, attorney general and chief financial officer, officials said.

Among the audit’s findings: the agency lacked adequate risk-management reviews, senior managers weren’t involved in setting investment goals, and the agency relied too heavily on a handful of large brokers to make investments.

“There was lots of discussion about that particular report because it did raise some concerns,” Melinda Miguel, chief inspector general to Gov. Charlie Crist, said Monday.

Miguel chairs the SBA’s Audit Committee, which last month began an investigation of the agency’s investments in shaky, mortgage-backed securities that prompted a $14 billion wave of withdrawals in November from a local government investment pool. A withdrawal freeze to stop the run forced some cities and schools, which used the fund to invest spare operating funds, to scramble to pay salaries and bills.

Miguel, officials from the agency and Chief Financial Officer Alex Sink were grilled Monday by a panel of legislators who wanted answers about how those mortgage-backed investment decisions were made.

Lawmakers on the Joint Legislative Auditing Committee questioned why the SBA and auditors who oversaw the agency couldn’t say what had been done to fix problems spotted by the 2007 audit.

“Who was minding the store, and why didn’t we see the red flags in March and get on them?” said Rep. Susan Bucher, D-West Palm Beach.

Miguel, who is heading up the new audit, said she recalled discussing the slow progress of the audit in late 2007, and that copies were forwarded last spring to all three trustees who oversee the SBA. Although the agency hasn’t said what fixes it made, Miguel said the process shows investigators were keeping an eye on the agency.

“It shows we weren’t asleep at the wheel,” she said afterward.

Acting SBA Executive Director Bob Milligan said Monday he has been trying since last week — when the Orlando Sentinel first reported the existence of the audit — to find out what the response to it was and asked for patience while he gets answers.

“Some things have been acted upon — not all,” he said. “I’m trying to sort through that right now.”

In the final audit finished in March, SBA managers wrote they would “consider” most of the 18 “high priority” recommendations. A follow-up report that was supposed to be produced three months ago highlighting what was done has yet to be produced.
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