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Australian bank lending growth unexpectedly stalled in February, adding to signs the nation’s economy may be in its first recession since 1991.

Total loans provided by banks and other finance companies were unchanged from January, when they rose 0.6 percent, the Reserve Bank of Australia said in Sydney today. The median forecast of 18 economists surveyed by Bloomberg News was for a 0.5 percent gain.

Central bank Governor Glenn Stevens cut the benchmark interest rate between September and February by a record four percentage points to stoke an economy that shrank 0.5 percent in the fourth quarter. To spur domestic demand for homes and to prevent a slump in house prices, Prime Minister Kevin Rudd in October tripled a grant to first-time buyers of newly built dwellings to A$21,000 ($14,300).

“Business credit growth is choppy from month to month and on a weakening trend,” Bill Evans, chief economist at Westpac Banking Corp. in Sydney, said ahead of today’s report. By contrast, “housing credit growth” has been holding up, he said.

Australian sales of newly built homes rose 3.9 percent in February, with sales of detached houses gaining 4.7 percent, a report by the Housing Industry Association showed yesterday.

First-time buyers accounted for a record 26.5 percent of dwellings that were financed in January, up from 18.1 percent a year earlier, a report on March 11 showed.

Interest Rates

Stevens and his board are forecast to lower borrowing costs by at least another quarter point on April 7, according to 12 of 16 economists surveyed by Bloomberg News on March 27. Four tip no change in the overnight cash rate target.

Policy makers left the benchmark rate unchanged at 3.25 percent this month for the first time since August, saying recent cuts are supporting the economy.

Since September, commercial banks have reduced the rate on variable home loans by 375 basis points cash advance loans. The rate reductions have saved borrowers with an average A$250,000 home loan about A$600 a month. Around 90 percent of property buyers in Australia have variable-rate mortgages.

“It is clear that monetary policy has been effective in lowering borrowing rates in the Australian economy,” said Anthony Richards, head of economic analysis at the Reserve Bank said on March 26.

Treasurer Wayne Swan said yesterday Australian banks have so far this year sold as much as 10 percent of all global bonds guaranteed by governments, making Australia the third-biggest issuer of such debt behind the U.S. and France.

Job Losses

“This money is ensuring our banks continue to lend to businesses and households, which is providing vital support for Australian jobs and growth,” Swan said in Tokyo.

Still, there are signs demand for credit may wane in coming months as a deepening global recession erodes demand for natural resources from the world’s biggest shipper of iron ore and coal.

Recent reports showed business confidence held near a record low last month and the jobless rate rose to a four-year high of 5.2 percent as companies such as BHP Billiton Ltd. fired the largest number of full-time workers in almost two decades.

Lending to companies fell 0.6 percent in February, after advancing 0.7 percent in February, according to today’s central bank report. Total credit rose 5.4 percent in February from a year earlier, after gaining an annual 6.1 percent in the previous month.

Credit provided to consumers for purchases other than housing dropped 0.8 percent from a month earlier. Loans to consumers to buy houses rose 0.6 percent for an annual gain of 7.1 percent.

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The Post-Dispatch and columnist David Nicklaus have received recognition from a national journalism group for business coverage in 2008. The "Best in Business" awards from the Society of American Business Editors and Writers picks the best entries submitted by newspapers, wire services, business weeklies and business websites throughout the country.

The Post-Dispatch won in the breaking news category for large newspapers for its package of business and metro stories on Anheuser-Busch’s July 13 decision to accept InBev’s takeover bid.

The coverage, led by business reporter Jeremiah McWilliams, "conveyed the historical complexity of the deal in a readable style. Stories by the business and metro desks covered the impact on the entire brewing process, from farmers to workers, from distributors to bartenders and customers cheap payday loans. … The newspaper’s preparation for the historic story and deadline execution made it one of the best in a year of big breaking business stories," the judges wrote.

Meanwhile, Nicklaus garnered recognition for a selection of columns. "Here’s a columnist who consistently goes beyond the obvious," the judges wrote. "If you believe that a local business columnist should actually write about local business and do so with insight and verve, you can’t do much better than Nicklaus."

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A group of financial wizards looked into their crystal balls Tuesday and saw some good news.

The recession will ease by the end of this year and companies will begin adding workers, signaling the end of the worst economic downturn since the Great Depression.

Chicago-based Dow Jones indexes assembled a group of financial experts to assess the impact of government actions, whether they will work to stem the recession and what opportunities that might present investors.

The recession has affected every region of the country and nearly every sector of the economy, said Gus Faucher, director of macroeconomics at Moody’s Economy.com, which conducts independent research and provides economic forecasts.
"It’s really unprecedented in the U.S. to have nearly the entire country in a recession simultaneously," he said.

The good news is there’s an end in sight.

The economy will pull out of the recession at the end of this year, marking a duration of 24 months, about twice as long as the average post-World War II recession, Faucher said. He said we are at or near a stock-market bottom, and stock prices should soon stabilize.

Home sales will turn around by midyear and home prices will begin recovering by the end of this year after bottoming out at 35 percent of their value from peak to trough. Home prices won’t return to their values of a few years ago during the boom, but will recover from current lows, he said paydayloans.

Banks probably will begin seeing improvement in capital as the government program to remove bad assets kicks in and the Federal Reserve provides more economic support. Faucher predicted major bank and financial services company failures will abate in the second half of this year and credit will begin to move again.

The stimulus package will spend $50 billion on roads, bridges, utilities and other infrastructure, said Craig Noble, portfolio manager, for Brookfield Redding LLC, a Chicago-based investment manager of global real estate and infrastructure securities.

He sees a potential sweet spot for investors in companies that own the assets that will benefit from the needed spending. He said the stimulus package is only a small portion of government spending on transportation and utilities. Congress must reauthorize this year a multiyear transportation bill that provides hundreds of billions of dollars in spending and sets priorities for the next five years or more.

"The infrastructure class currently offers a unique and compelling investment case with trillions needed to be spend across the globe in coming years," he said.
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The state of Connecticut is analyzing the details of bonuses paid by American International Group to see whether they violated state law and what possible remedies might be pursued, the Commissioner of Consumer Protection said on Monday.

The list of remedies includes issuing a cease and desist order or restitution to the federal government, Commissioner Jerry Farrell, explained by telephone no fax payday loans.

Connecticut Attorney General Richard Blumenthal said there were $218 million of bonuses, a higher figure than the $165 million the Connecticut governor said the company reported.

This discrepancy now will be probed, Farrell said.

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With Pfizer Inc. about to acquire rival drug maker Wyeth and its expertise in making pricey and complex biologic drugs, Pfizer Chief Executive Jeffrey Kindler strongly supports allowing generic versions of them.

"Done right, with regard to the safety of the products, biological follow-ons are a very appropriate thing to do," he said in an interview with The Associated Press.

Top drug makers are piling into this area because biologic drugs, made in living cells, can cost $1,000 and more per month and so far haven’t faced lower-price generic competitors. But legislation was introduced last week to create a pathway for regulators to approve what have been called "biosimilar" drugs, and President Barack Obama has been touting the idea as one way to control health care costs.

Kindler said Pfizer’s increasing expertise in the area "could provide us with an opportunity to make biologic follow-ons" of its own, Wyeth’s and possibly rivals’ biotech drugs.

He also backs government-sponsored research comparing drug effectiveness, unlike many in his industry concerned that could cut into sales.

Kindler called it "an area with a lot of promise, if it’s done right," openly, and not "driven entirely by cost considerations but rather by considerations of value."

His somewhat contrarian views come as the drug industry is in upheaval, forced to slash jobs and other costs as a tidal wave of generic competition to 1990s’ blockbuster pills cuts revenue while research operations aren’t producing nearly enough replacements payday loans. Those two trends are behind the recent flurry of mergers, including Pfizer’s.

Meanwhile, the Obama administration is promising to revamp the nation’s health care system to help the 48 million Americans without health insurance. Such an overhaul could boost drug sales if millions more people get insured but could hurt drug makers if they lose pricing power.

Kindler was the only chief executive from the drug industry at the White House summit on health care reform two weeks ago.

"We have an obligation as an industry to participate (in reform) and try to contribute to the solution of these problems," said Kindler.

Among other changes, he supports more emphasis on preventive care, expanding government insurance and having an independent federal board oversee standards, coverage and pricing. And Kindler says it makes more sense to support beneficial changes than just to block ones the industry doesn’t like.
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Rita's Italian Ice stores will be holding the company's annual first day of spring promotion, giving each guest a free Italian ice. The giveaway, which is in its 17th year, runs from noon to 10 p.m. Friday. Guests will receive a regular-sized 10 oz. cup of Italian ice, and can participate in the naming of a new flavor of ice.

Rita's Franchise Co fast cash., the parent of Rita's Italian Ice, is headquartered in Trevose, Pa. There are 10 locations in the Pittsburgh area, including SouthSide Works, Oakland and Squirrel Hill.

For more information, click here.

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By committing to buy Treasuries and double his purchases of mortgage debt, Federal Reserve Chairman Ben S. Bernanke signaled his determination to avoid a repeat of the Great Depression and his willingness to pump as much cash into the economy as needed to end the current crisis.

U.S. central bankers decided yesterday to buy as much as $300 billion of long-term Treasuries and more than double mortgage-debt purchases to $1.45 trillion, aiming to lower home-loan and other interest rates. The Fed kept its main rate at almost zero and may keep it there for an “extended” time.

The moves sparked the biggest drop in 10-year Treasury yields since 1962, rallies in the stock market and gold and a plunge in the dollar against the euro. Economist Richard Hoey said Bernanke has created the “Rambo Fed,” referring to the Sylvester Stallone character skilled with weapons.

“This is a very powerful and aggressive move,” Hoey, chief economist at Bank of New York Mellon Corp., said in an interview with Bloomberg Television. “One of the reasons I’ve been arguing we won’t have a depression is we’ve got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine.”

With the purchases of Treasuries and housing debt, Bernanke is effectively using the Fed’s powers to print money and aim it where he and other officials believe it will have the greatest impact in lowering borrowing costs.

Unanimous Decision

The Federal Open Market Committee’s decision was unanimous, indicating the agreement to start buying Treasuries quelled disputes over how the central bank should expand its balance sheet. Richmond Fed President Jeffrey Lacker and others favored government-debt purchases instead of intervening in credit markets, as Bernanke has pioneered in the past six months.

Bernanke has studied the Great Depression extensively and published a book of his papers on the subject in 2000. In 1929, the Fed was “essentially leaderless and lacking in expertise,” Bernanke said in a November 2002 speech. The situation led to decisions that were associated with a “massive collapse of money, prices, and output,” he said.

Yesterday’s decisions will add $750 billion in purchases this year of mortgage-backed securities issued by government- sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae, for a total of $1.25 trillion. The Fed has already announced $217.1 billion in net purchases out of $500 billion planned through June, under a program unveiled in November.

The central bank will also double to as much as $200 billion this year its planned purchases of debt issued by Fannie Mae, Freddie Mac and Federal Home Loan Banks. The Fed bought $44.4 billion of the so-called agency debt as of March 11.

Jumpstart Lending

The $1 trillion Term Asset-Backed Securities Loan Facility, which is opening this week to jumpstart consumer and business lending, “is likely to be expanded to include other financial assets,” the FOMC statement said, without elaborating faxless payday loans.

The Obama administration is considering melding the Treasury’s plan to set up private investment funds to buy frozen assets with the Fed program, known as the TALF, people familiar with the matter said. Treasury Secretary Timothy Geithner may make an announcement as soon as this week, after his first unveiling of the strategy caused a sell-off in financial stocks.

“This is not really a victory for Lacker,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. “Lacker seems to be arguing for Treasury purchases instead of targeted programs. They are instead supplementing the targeted programs. They are just using all tools.”

Double Balance Sheet

The New York Fed will concentrate Treasury purchases among two- and 10-year securities. The transactions will take place two to three times a week, and the Fed may also buy other maturity Treasuries and Treasury Inflation-Protected Securities, according to a New York Fed statement.

The moves may more than double the Fed’s balance-sheet assets by September to $4.5 billion from $1.9 trillion, said John Ryding, founder of RDQ Economics LLC in New York.

At the same time, the changes increase the danger, once the economy recovers, that the Fed won’t be able to unload the securities quickly enough to raise interest rates and counter inflation, said Ryding, a former Fed economist.

Bernanke floated the idea of buying Treasuries in a Dec. 1 speech. Then the FOMC said in its last statement on Jan. 28 that the Fed would be “prepared” for the purchases if “evolving circumstances” indicated their effectiveness.

Bank of England

The option gained ground after the Bank of England succeeded in lowering long-term rates by buying U.K. government bonds known as gilts in a program announced this month, said Lyle Gramley, a former Fed governor. The 10-year gilt yield slid to the lowest level in at least 20 years after the purchases began.

“Our objective is to improve the functioning of private credit markets so that people can borrow for all kinds of purposes,” Bernanke said at a Feb. 24 Senate hearing. “We are prepared, and we want to keep the option open to buy Treasury securities if we think that is the best way to improve the functioning or reduce interest rates in private markets.”

While Treasury yields fell, the strategy isn’t guaranteed to work in reducing other rates.

The Fed is “naive” if officials think the move will lower borrowing costs, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management. The “historic precedent” of when the Treasury Department was buying back debt amid the budget surpluses of the Clinton administration show it may fail to do so, he said.

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For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance.

The main tool in the appraiser’s kit is the sale prices of homes in the area. If they can find similar houses nearby in similar condition that sold recently for, say, $300,000, they can assume that the home they are appraising is worth a comparable amount.

But with sales volume falling, there are fewer homes with which to compare. In fact, sales of new homes crashed in January to the lowest level in 45 years, and existing home sales fell to a 12-year low.

And even when there are recent sales figures, they often don’t hold up as a reliable baseline. Appraisals are estimates of market value at a given time, and with prices in free fall, values "age" quickly.

"We just don’t have a flow of transactions to be able to come up with credible values," said Jonathan Miller, president of Miller Samuel, a noted New York appraisal firm. "Closed sales are now largely irrelevant because they’re so far behind the market."

In fact, Marc Savitt, president of the National Association of Mortgage Brokers, recently had a bank underwriter object that none of the appraiser’s comparable homes were near enough.

"They told him they wanted comps within a mile," said Savitt. "But, the market the way it is, there haven’t been many sales and there were no recent comps within a mile."

Other options

So in lieu of good sales figures, appraisers often consider contract prices, the ones first agreed to between buyers and sellers. But those are not much better because many sales don’t close.

And listing prices are "hit or miss," Miller said, because most sellers overestimate the value of their homes. Columbia business professor Eric Johnson calls that the "endowment effect," which causes people to place higher values on properties once they own them.

Sellers set their listing prices far too high, as a result, and that leads to a big chasm between list and sale price. In the New York region, for example, there’s a 16% gap, on average.

During the boom, pressure was put on appraisers to inflate values so that sales would go through. Sellers, buyers, real estate agents, loan officers and mortgage brokers all had a vested interest in getting the sale completed. So if appraisers weren’t cooperative and raise their values, they often got frozen out of deals.

Now, there’s pressure on appraisers to be too conservative, so many homeowners are finding themselves unable to purchase a new home or refinance their existing mortgage.

"Lenders want the appraisal at the lower end of the range," said Joni Herndon, a Tampa, Fla free credit report.-based appraiser. "The lender may want it at $100,000 and the appraiser thinks it’s worth closer to the high end of his or her range, say $115,000."

If the lender does reject the appraisal, one of three things usually happens. "Lenders can order a second appraisal, the seller can lower the price on the house or the buyer can come up with more cash," according to Jim Amorin, president of the Appraisal Institute, the industry’s professional standards organization. "In some cases, none of those happens and the loan doesn’t go through."

Making adjustments

One way appraisers are addressing stale comps is by using a "negative time adjustment." If a comparable property sold for $200,000 three months ago in a market where prices are falling at a 12% annualized pace, the comp can be reduced in value by 3% to reflect the market.

In some areas more than half the appraisals come in with these adjustments, according to David Adamo the CEO of mortgage broker Luxury Mortgage,

Another option is an "automated valuation model," which uses a mathematical formula to set home values. They establish a baseline home price by examining sales prices and the square footage of recently sold homes in the neighborhood. So if a house is 1,500 square feet in a community where the average home sells for $200 a square foot, the AVM puts the appraisal value at $300,000 and increases or decreases it as new sales data is recorded.

However, these valuations don’t take into consideration a home’s condition or appearance - or even verify the square footage - so the results can be very far off.

Plus, "those AVMs can have trouble keeping up with the market, too," said Nanette Traylor, an underwriter with Salt lake City-based mortgage lender Castle & Cooke Mortgage.

Impact on Obama’s plan

But finding accurate appraisals is more important than ever now that the Obama administration has announced its Homeowner Affordability and Stability Plan. The first prong of this program allows homeowners with Freddie Mac or Fannie Mae loans to refinance into current record-low rates even if they are slightly underwater, meaning they owe more on their mortgages than their homes are worth.

However, eligibility will directly hinge on appraisals: Anyone who owes more than 105% of the value of the home won’t qualify. That adds to the pressure appraisers may feel to "hit the number" so people on the bubble can slide in and refinance.

"There’s clearly a heightened sensibility among lenders today," said the Appraisal Institute’s Amorin. "They’re saying, ‘We better take a really good look at the collateral." 

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Warren Buffett’s Berkshire Hathaway was stripped of its ‘AAA’ credit rating by Fitch, barely hours after S&P cut General Electric Co’s top-tier rating, as the global financial crisis pummels America’s corporate titans.

Citing concerns about Berkshire’s equity and derivatives investments, as well as Buffett’s tight grip on the company, ratings agency Fitch cut the insurance and investment company’s issuer default rating by one notch to ‘AA+’.

The downgrade is another setback to Buffett, 78, coming a day after the billionaire lost his position as the world’s richest man to Microsoft Inc founder Bill Gates, according to Forbes’ annual list. Buffett’s net worth plunged to $37 billion from $62 billion last year, the list said.

"Fitch views the company’s potential earnings and capital volatility derived from its large, unhedged market exposures as inconsistent with the stability required at the ‘AAA’ level," the ratings agency said in its statement on Berkshire.

Those exposures include Berkshire’s equity investments, as well as its holdings of derivative contracts tied to equity and credit markets, Fitch said.

Fitch is the first major credit agency to cut Berkshire’s ‘AAA’ rating. The move comes after General Electric Co. (GE, Fortune 500) was stripped of its ‘AAA’ rating by Standard & Poor’s on Thursday.

Berkshire invested $3 billion last year in GE, buying preferred shares with the option of acquiring another $3 billion in common stock at $22.25 per share.

Known as the Sage of Omaha for his long history of successful investments, Buffett was caught out by the global financial crisis.

Berkshire’s net worth tumbled $10.9 billion in the final quarter of 2008 and profits fell 96%, due mostly to losses on derivatives contracts tied to the stock market. Berkshire had $4.65 billion of net investment and derivative losses in 2008.

Tied to Buffett

Buffett has defended his use of the derivatives, which helped drive Berkshire’s annual profit to a six-year low.

Investors should distinguish Berkshire’s derivatives from others that dramatically increased financial leverage, made banks "almost impossible for investors to understand," and threatened the collapse of companies such as investment bank Bear Stearns Cos no fax payday loans. and mortgage financiers Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), Buffett said in his annual letter to Berkshire shareholders.

Fitch also noted Berkshire remains too closely linked to Buffett to merit a ‘AAA’ rating.

"Fitch views this risk as unrelated to Mr. Buffet’s age, but rather Fitch’s belief that BRK’s record of outstanding long-term investment results and the company’s ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett," it said, referring to Berkshire.

Berkshire generates about half its results from insurance, including auto insurer Geico Corp, but operates more than 70 businesses that offer such things as carpeting, ice cream, paint, real estate services and underwear.

Fitch lowered Berkshire’s senior unsecured ratings by two notches to ‘AA’. However, it affirmed its ‘AAA’ insurer financial strength ratings on the company’s insurance and reinsurance subsidiaries. The ‘AAA’ ratings of the insurance subsidiaries "continue to reflect their strong capitalization and competitive positions, and underlying underwriting results," Fitch said.

The outlook for all of Berkshire’s entities is negative.

Fitch said the current ratings on Berkshire assume that the company will continue to aggressively deploy its cash and capital as companies look for investors with strong balance sheets.

Besides the cash infusion into GE (GE, Fortune 500), Berkshire has agreed to make a 3 billion Swiss franc investment in Swiss Re and has bought $5 billion worth of preferred shares of Goldman Sachs.

Berkshire Class A (BRK.A) shares closed on Thursday at $87,500 on the New York Stock Exchange. They have fallen 34% over the past year, while the Standard & Poor’s 500 has dropped 43%. 

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Job discrimination complaints hit record levels in fiscal 2008 nationwide, the U.S. Equal Employment Opportunity Commission reported.

There were 95,400 workplace discrimination claims filed for the year ended Sept. 30, the most recent data available. That’s up from 82,800 the previous year.

Complaints based on race, gender, age and religion all saw year-over-year gains.

Workers can file discrimination complaints with the commission, which can seek to remedy the situation including via lawsuits. Some of the complaints lead to financial settlements and mediation, while others are determined to have no merit.

Employment attorneys expected the increase as businesses cut back on hiring and increase layoffs because of the weak economy bad credit payday loans.

"It is no surprise that the number of charges have increased," said John Lomax, a labor and employment shareholder with the law firm Greenberg Traurig.

"During our annual labor seminar in October 2008, we projected that we would see an increase in the number of discrimination charges due to the fact that companies, for numerous reasons, would be forced to cut back in light of the current economic conditions; however, what is a bit surprising is the rate at which that number is increasing," Lomax said.

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