Editorial: Who’s Country Is It ?

I thought it was for the people governed by the people

A political-economic oligarchy has taken over the United States of America. This oligarchy has institutionalized a body of law that protects businesses at the expense of not only the common people but the nation itself. CNN interviewed a person recently who was seriously burned when his vehicle burst into flames because a plastic brake-fluid reservoir ruptured. Having sued Chrysler, he was now concerned that its bankruptcy filing would enable Chrysler to avoid paying any damages. A CNN legal expert called this highly likely, since the main goal of reorganization in bankruptcy is preserving the company’s viability and that those creditors who could contribute most to attaining that goal would be compensated first while those involved in civil suits against the company would be placed lowest on the creditor list since compensating them would lessen the chances of the company’s surviving. This rational clearly implies that the preservation of companies is more important than the preservation of people. Of course, similar cases have been reported before. The claims of workers for unpaid wages have often been dismissed as have their contracts for benefits. But there is an essential difference between a business that lends money or delivers products or services to another company and the employees who work for it. Business is an activity that supposedly involves risk. Employment is not. Neither is unknowingly buying a defective product. Workers and consumers do not extend credit to the companies they work for or buy products from. They are not in any normal sense of the word “creditors.” Yet that distinction is erased in bankruptcy proceedings which preserve companies at the public’s expense. Of course, bankruptcy is not the only American practice that makes use of this principle. The current bailout policies of both the Federal Reserve and the Treasury make use of it. Again companies are being saved at the expense of the American people. America’s civil courts are notorious for favoring corporate defendants when sued by injured plaintiffs. Corporate profiteering is not only tolerated, it is often encouraged. The sordid records of both Halliburton and KBR are proof enough. Neither has suffered any serious consequences for their abysmal activities in Iraq while supplying services to the troops deployed there. Even worse, these companies continue to get additional contracts from the Department of State. “A former Army chaplain who later worked for Halliburton’s KBR unit . . . told Congress . . . ‘KBR came first, the soldiers came second.’” [http://www.halliburtonwatch.org/news/deyoung.html] Again, it’s companies first, people last. But Major General Smedley Butler made this point in 1935. [See http://www.scuttlebuttsmallchow.com/racket.html] And everyone is familiar with the influence corporate America has over the Congress through campaign contributions and lobbying. For instance, “the U.S. Chamber of Commerce has earmarked $20 million over two years to kill [card check].” [http://www.latimes.com/news/nationworld/nation/la-na-card-check4-2009jun04,0,7195326.story?track=rss] Companies expect returns on their money, and preventing workers from unionizing offers huge returns. And on Thursday June 4, 2009 USA Today reported that, “Republicans strongly oppose a government run [healthcare] plan saying it would put private companies insuring millions of Americans out of business. ‘A government run plan would set artificially low prices that private insurers would have no way of competing with,’ Senate Minority Leader Mitch McConnell, R-Ky, said . . . .” (Kentucky ranks fifth highest in the number of people with incomes below poverty. Why is he worried about the survival of insurers?) The profound question is how can any of it be justified? President Calvin Coolidge did say that the business of America is business and the American political class seems to have adopted this view, but the Constitution cannot be used to justify it. The word “business” in the sense of “commercial firm” occurs nowhere in it. Nowhere does the Constitution direct the government to even promote commerce or even defend private property. The Constitution is clear. It was established to promote just six goals: (1) form a more perfect union, (2) establish justice, (3) insure domestic tranquility, (4) provide for the common defense, (5) promote the general welfare, and (6) secure the blessings of liberty to ourselves and our posterity. Of course, the Constitution does not prohibit the government from promoting commerce or defending private property, but what happens when doing so conflicts with one or more of its six purposes? Shouldn’t any law that does that be unconstitutional? For instance, wouldn’t it be difficult the claim that a bankruptcy procedure that protects business and subordinates or dismisses the claims of workers and injured plaintiffs establishes justice? How can spending trillions of dollars to save financial institutions and other businesses whose very own actions brought down the global economy be construed as establishing justice or even promoting the general welfare when people are losing their incomes, their pensions, their health care, and even their homes? These actions clearly conflict with the Constitution’s stated goals. Shouldn’t they have been declared unconstitutional? Although the Constitution does provide people with the right to petition the government for a redress of grievances, it does not clearly provide that right to organizations or corporations and it certainly does not provide to anyone the right to petition the government for special advantages. Yet that is what the Congress, even after its members swear to support and defend the Constitution of the United States, allows special interest groups to do. Where in the Constitution is there a justification for putting the people last? How this situation could have arisen is a puzzle? Haven’t our elected officials, our justices, our legal scholars, our professors of Constitutional Law, or even our political scientists read the Constitution? Have they merely misunderstood it? Or have they simply chosen to disregard the preamble as though it had no bearing on its subsequent articles? Why have no astute lawyers brought actions on behalf of the people? Why indeed? The answer is that a political-economic oligarchy has taken over the nation. This oligarchy has institutionalized a body of law that protects businesses at the expense of not only the common people but the nation itself. Businessmen have no loyalties. The Bank of International Settlements insures it, since it is not accountable to any national government. (See my piece, A Banker’ Economy, http://www.jkozy.com/A_Bankers__Economy.htm.) Thomas Jefferson knew it when he wrote, “Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gain.” Mayer Amschel Rothschild knew it when he said, “Give me control of a nation’s money and I care not who makes the laws.” William Henry Vanderbilt knew it when he said, “The public be damned.” Businesses know it when they use every possible ruse to avoid paying taxes, they know it when they offshore jobs and production, they know it when the engage in war profiteering, and they know it when they take no sides in wars, caring not an iota who emerges victorious. IBM, GM, Ford, Alcoa, Du Pont, Standard Oil, Chase Bank, J.P. Morgan, National City Bank, Guaranty, Bankers Trust, and American Express all knew it when they did business as usual with Germany during World War II. Prescott Bush knew it when he aided and abetted the financial backers of Adolf Hitler. Yet somehow or other the people in our government, including the judiciary, do not seem to know it, and they have allowed and even abetted businesses that have no allegiance to any country to subvert the Constitution. Unfortunately, the Constitution does not define such action as treason. America’s youthful students are regularly taught Lincoln’s Gettysburg Address and are familiar with its peroration, “we here highly resolve that these dead shall not have died in vain—that this nation, under God, shall have a new birth of freedom—and that government: of the people, by the people, for the people, shall not perish from the earth.” If that nation ever existed, it no longer does. And when Benjamin Franklin was asked, “Well, Doctor, what have we got—a Republic or a Monarchy?” he answered, “A Republic, if you can keep it.” We haven’t. What we have ended up with is merely an Unpublic, an economic oligarchy that cares naught for either the nation or the public. To argue that the United States of America is a failed state is not difficult. A nation that has the highest documented prison population in the world can hardly be described as domestically tranquil. A nation whose top one percent of the people have 46 percent of the wealth cannot by any stretch of the imagination be said to be enjoying general welfare (“generally true” means true for the most part with a few exceptions). A nation that spends as much on defense as the rest of the world combined and cannot control its borders, could not avert the attack on the World Trade Center, and can not win its recent major wars can not be described as providing for its common defense. How perfect the union is or whether justice usually prevails are matters of debate, and what blessings of liberty Americans enjoy that peoples in other advanced countries are denied is never stated. A nation that cannot fulfill its Constitution’s stated goals surely is a failed one. How else could failure be defined? By allowing people with no fastidious loyalty to the nation or its people to control it, by allowing them to disregard entirely the Constitution’s preamble, the nation could not avoid this failure. The prevailing economic system requires it. Woody Guthrie sang, “This Land Is My Land, This Land Is Your Land,” but it isn’t. It was stolen a long time ago. Although it may have been “made for you and me,” people with absolutely no loyalty to this land now own it. It needs to be taken, not bought, back! America needs a new birth of freedom, it needs a government for the people, it needs a government that puts people first, but it won’t get one unless Americans come to realize just how immoral and vicious our economic system is. John Kozy is a retired professor of philosophy and logic who blogs on social, political, and economic issues. After serving in the U.S. Army during the Korean War, he spent 20 years as a university professor and another 20 years working as a writer. He has published a textbook in formal logic commercially, in academic journals and a small number of commercial magazines, and has written a number of guest editorials for newspapers. His on-line pieces can be found on http://www.jkozy.com/ and he can be emailed from that site’s homepage.

John Kozy is a frequent contributor to Global Research. Global Research Articles by John Kozy

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Levy:

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European Markets & U.S. futures Rise

By Sarah Jones

July 9 (Bloomberg) — European stocks climbed for the first time in six days and U.S. futures gained after Alcoa Inc. kicked off the second-quarter earnings season by reporting results that beat analysts’ estimates.

Alcoa rallied 5.4 percent in German trading after the largest U.S. aluminum producer posted a smaller-than-estimated loss. Norsk Hydro ASA, Europe’s third-biggest aluminum maker, and Rio Tinto Group added more than 2 percent. Daimler AG and PSA Peugeot Citroen advanced after Bank of America Corp. upgraded European automakers to “overweight” and a report showed car sales in China surged the most in more than three years last month.

Europe’s Dow Jones Stoxx 600 Index increased 0.9 percent to 199.87 at 12:05 p.m. in London. The gauge has surged 27 percent since March 9 on speculation government measures will help to end the deepest global recession since World War II.

The earnings season has “started on the right note,” Monika Rosen, Vienna-based head of research at UniCredit Private Bank, said in a Bloomberg Television interview. “I am not sure you can make the entire trend just by Alcoa as they stand to profit from all these stimulus measures that are being put in place around the globe. So far so good.”

The Bank of England stuck to its plan to buy bonds with 125 billion pounds ($202 billion) of newly printed money today as officials wait to assess whether the worst of Britain’s recession is over.

U.K. Interest Rate

The Monetary Policy Committee kept the interest rate at 0.5 percent and refrained from expanding the asset-purchase plan, an outcome predicted by 20 of 36 economists in a Bloomberg News survey. The rest said officials would increase the bond-purchase program. Gordon Brown’s government has authorized the bank to spend a total of 150 billion pounds.

Standard & Poor’s 500 Index futures climbed 0.7 percent, indicating the benchmark gauge for U.S. equities may rebound from its lowest level since May 1. The MSCI Asia Pacific Index added less than 0.1 percent after falling for six days.

Alcoa increased 5.4 percent to $9.97. The company’s results beat estimates after production cuts and workforce reductions helped the company save money. The aluminum producer posted a loss excluding certain items of 26 cents a share, narrower than analysts’ average estimate for a 38-cent loss.

Norsk Hydro climbed 2.1 percent to 28.92 kroner. Rio Tinto added 3.8 percent to 1,967.5 pence, while Anglo American Plc gained 4.9 percent to 1,640 pence.

Second-Quarter Earnings

Profits fell an average 34 percent at S&P 500 companies in the second quarter and will decrease 21 percent from July through September, according to analyst projections compiled by Bloomberg. Earnings slumped 33 percent during the first three months of 2009, and plunged 61 percent from October through December 2008.

Daimler gained 3.2 percent to 24.40 euros and Peugeot gained 1.3 percent to 16.73 euros. Renault SA, France’s second- biggest automaker, climbed 1.2 percent to 23.12 euros. Bank of America raised its rating on European automakers to “overweight” from “neutral” on optimism the economy will recover this year.

Separately, China’s passenger-vehicle sales surged 48 percent in June, as government stimulus spending spurred a revival in the world’s third-largest economy.

Investors should switch into stocks in the euro region and pare holdings of U.K. shares, JPMorgan Chase & Co. advised, reversing a position it had held since December 2007.

“We see continental equities relatively benefiting from improving interest rate differential, less currency headwind than the U.K., improving relative earnings drivers and more favorable sector composition,” London-based strategist Mislav Matejka wrote in a report today.

Sacyr Surges

Sacyr Vallehermoso SA jumped 12 percent to 10.80 euros after a group it leads was named as front-runner on a project to expand the Panama Canal. The Panama Canal Authority said yesterday a $3.1 billion bid from the group, which also includes Impregilo SpA, made it the front-runner for a project to build a third set of locks on the waterway. Impregilo advanced 0.4 percent to 2.44 euros.

Electrolux AB rose 2.1 percent to 109 kronor. The world’s second-biggest appliance maker was upgraded to “buy” from “sell” at UBS AG, which said “pricing will hold up in coming quarters.”

SAP AG increased 3.2 percent to 28.83 euros after the world’s largest maker of business-management software was upgraded to “buy” from “neutral” at Bank of America, which said thee company “still further earnings upside from cost savings.”

Democrats Go Robin Hood

By ERICA WERNER – 5 hours ago

WASHINGTON (AP) — House Democrats at work on health legislation are narrowing in on an income tax surcharge on the highest-paid wage earners to help pay the cost of subsidizing insurance for the 50 million who lack it.

Pushing to complete a comprehensive health care bill by Friday and bring it up for committee votes next week, House Democrats abandoned earlier money-raising proposals, including a payroll tax. They planned to meet behind closed doors Thursday to fine-tune the details.

The action in the House stood in contrast to the Senate, where Democrats edged away from their goal of passing health care legislation by early August amid heightening partisan controversy over tax increases and a proposed new government role in providing insurance to consumers.

As discussed in the tax-writing House Ways and Means Committee, the surtax would apply to individuals with adjusted gross income of more than $200,000 and couples over $250,000, according to officials involved in the discussion. Most spoke on condition of anonymity because the talks were private.

In addition, key lawmakers are expected to call for a tax or fee equal to a percentage of a worker’s salary on employers who do not offer health benefits.

Ways and Means Chairman Charles Rangel, D-N.Y., has said his committee needs to come up with $600 billion in new taxes to deliver on President Barack Obama’s goal of sweeping changes to the nation’s health care system to bring down costs and cover the 50 million uninsured. Hundreds of billions of dollars more would come from cuts to Medicare and Medicaid to pay for legislation expected to cost around $1 trillion over 10 years.

Top administration officials, including White House chief of staff Rahm Emanuel, conferred with Rangel’s committee Democrats on Wednesday as they met throughout the day.

“They know what I’m thinking about and I have no reason to believe I’ll have any problems with them on that part of the bill,” Rangel said of the tax proposals.

Rep. Shelley Berkley, D-Nev., a member of the panel, said the proposed surtax on high-income taxpayers appealed to her and others as a way to avoid a “nickel-and-dime” approach involving numerous smaller tax increases.

Lawmakers cautioned that no final decisions have been made, either by the tax-writing committee or by the Democratic leadership, which hopes to have legislation drafted by the end of the week and through the House by month’s end.

Smaller tax options remained possibilities, depending on the overall cost of the legislation, including a tax on sugared soft drinks and ending a tax break that drug companies receive for advertising.

In the Senate, New York Democrat Chuck Schumer told The Associated Press that he believes the “ultimate goal” is to have a bill by the end of the year that is signed into law by the president.

Separately, Republicans who met with Senate Majority Leader Harry Reid, D-Nev., said he expressed flexibility on the timetable, indicating that he was willing to allow more time before legislation is brought to the floor.

Oil Foils A 6 Day Losing Streak

LONDON (Reuters) – Oil rose by more than $1 on Thursday to edge back above $61 a barrel, halting a six-session losing streak which has seen prices decline by 15 percent on concerns about the timing of any economic recovery.

Prices hit a seven-week low just above $60 a barrel the previous day on bearish U.S. oil data which highlighted how weak demand is in the world’s largest energy consumer.

U.S. diesel and heating oil stocks have swelled to their highest level in almost 25 years after jumping by 3.7 million barrels last week, data from the Energy Information Administration (EIA) showed.

U.S. light crude for August delivery rose $1.01 a barrel to $61.15 by 0853 GMT (4:53 a.m. EDT), having lost more than 4 percent on Wednesday.

London Brent crude gained $1.24 to $61.67 a barrel.

“It’s no more than a mild correction from the earlier decline that reflected the EIA report,” said David Moore, commodity analyst with the Commonwealth Bank of Australia.

But he did not expect prices to fall much further, he added.

“There are still concerns about the outlook for demand, particularly in the U.S. But much of the possible decline in oil prices has already happened. If we did dip below $60, you would probably see some people who might see it as a buying opportunity,” Moore said.

The 15 percent drop in oil prices since the end of June was the longest and steepest decline so far in 2009. Prices had been rising since February, more than doubling from lows hit near $33 at the depth of the economic crisis as traders started to price in an eventual recovery.

But many analysts cautioned prices had gone ahead of the real economy, with unemployment still rising and global oil inventories mounting up.

The fragile state of the global economy dominated the first day of the annual G8 summit, with the United States, Japan, Germany, France, Britain, Italy, Canada and Russia acknowledging there were still significant risks to financial stability.

OPEC’s 2009 World Oil Outlook added to the gloom as it said world demand for oil may take years to recover from the slump in 2009 because of economic weakness and demand destruction.

The Organization of the Petroleum Exporting Countries (OPEC) said consumption of its crude will not return to 31 million barrels per day (bpd), the level it averaged in 2008, until 2013.

OPEC Secretary-General Abdullah al-Badri said on Wednesday oil prices — trading just above $60 per barrel — were “comfortable,” but were still below the $75 a barrel the producer group said at its May meeting could be achieved this year.

Retailers Report Weak June Sales

Costco Reports In Line Sales Down 6% For the Q

(Reuters) – Costco Wholesale Corp on Thursday reported an in-line 6 percent fall in sales, hit by a slide in demand during the recession for higher ticket items such as cameras and cell phones.

Analysts, on average, were expecting its same-store sales at stores open at least a year in June to fall 6 percent, according to Thomson Reuters data.

Same-store sales at its U.S. locations decreased 6 percent, while international division sales fell 3 percent.

Excluding the negative impact from gasoline price deflation, it said U.S. comparable sales would have been down 1 percent, while on a local currency basis it said international same-store sales increased 8 percent.

Customers pay an annual fee to shop at Costco’s warehouses, which sell everything from laptop computers and bulk-sized packages of toilet paper to fresh fruit and frozen dumplings. Many of the clubs also operate gas stations.

“Comparable sales results for June in merchandizing are very similar for all of our categories compared to our mostly recently reported month – with stronger sales results in foods, sundries, fresh foods, and slightly softer sales results in the non-food more discretionary categories,” Bob Nelson, Vice President Financial Planning & Investor Relations, said in a pre-recorded telephone message….

Anglo Irish Bank May Stop Interest Payments on Subordinated Debt

By Ian Guider and Louisa Nesbitt

July 9 (Bloomberg) — Anglo Irish Bank Corp. said it may stop interest payments on some of its subordinated notes as it seeks approval to redeem as much as $4.5 billion of the debt.

The lender, which was seized by the government in January, may halt coupon payments on 1.2 billion euros ($1.68 billion) and 800 million pounds ($1.3 billion) of Tier 1 notes from September, the Dublin-based bank said today in a statement. The securities are issued by banks as capital required by regulators to cushion against losses.

Stopping interest payments on Tier 1 securities was a condition set by the European Commission when it approved a capital injection, the statement said. The Irish government has pumped 3 billion euros into the bank, the country’s third biggest, to boost capital eroded by losses on property loans. The bank posted a loss for the six months to March 31 of 3.77 billion euros.

“Obviously every euro less offered to bondholders is a euro gained by the Irish taxpayer,” Scott Rankin, analyst at securities firm Davy, said in a research note today. “In making its decision, the government will have to balance this upside with the possible downside associated with annoying liquidity providers.”

The bank is “actively working” on a plan to buy back the Tier 1 notes, as well as 750 million euros and 300 million pounds of higher-ranking Tier 2 debt, the statement said. The offer is subject to regulatory and Department of Finance approval, it said.

Bond Buyback….

BoE Stays The Course of quantitative Easing

By Svenja O’Donnell

July 9 (Bloomberg) — The Bank of England stuck to its plan to buy bonds with 125 billion pounds ($202 billion) of newly printed money as officials assess whether the worst of Britain’s recession is over.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, kept the interest rate at 0.5 percent and refrained from expanding its asset-purchase plan. Twenty of 36 economists in a Bloomberg News survey predicted the outcome. The rest said officials would increase it. Gordon Brown’s government has authorized the bank to spend a total of 150 billion pounds.

Britain’s recession probably eased in the second quarter and the economy may now be stagnating, the National Institute of Economic and Social Research said this week. King says evidence from the bank’s program seems “positive” so far, though the credit squeeze remains a threat to the recovery.

“The case has been made to stop and wait and see for a bit,” said Colin Ellis, an economist at Daiwa Securities SMBC Europe Ltd. and a former official at the central bank. “There are signs the economy is bottoming out and the mood music is getting better.”

Government bonds tumbled after the decision. The yield on the benchmark 4.5 percent gilt due March 2019 jumped as high as 3.764 percent as of 12:06 p.m. from 3.59 percent earlier today. It was 3.62 percent before the plan’s announcement in March. The pound rose as much as 0.6 percent to $1.6265.

The bank said policy makers “will review the scale of the program again at its August meeting, alongside its latest inflation projections.”

‘Encouraging’….

Treasury Taps 9 Money Managers For Toxic Asset Program, But PIMPCO Pulls Out

By Rebecca Christie

July 8 (Bloomberg) — The U.S. Treasury named BlackRock Inc., Invesco Ltd. and seven other managers for its Public- Private Investment Program, in an effort to remove as much as $40 billion in distressed assets from financial institutions.

The government will invest as much as $30 billion, and the nine participants may raise a total of $10 billion, the Treasury said today in a statement. GE Capital Real Estate, Marathon Asset Management LP and AllianceBernstein LP were also selected. Pacific Investment Management Co., which runs the world’s biggest bond fund, withdrew, citing “uncertainties regarding the design and implementation of the program.”

Today’s announcement is a scaled-down start for a program promoted in March as having the potential to absorb $1 trillion in devalued loans, mortgage-backed securities and other assets. Officials have indicated the purchases may now be less important after banks issued billions of dollars of new capital to shore up their balance sheets, and analysts note financial firms have already recorded $975 billion in writedowns and losses.

“Banks have written down their asset-backed securities holdings, pretty much to zero,” said Joseph Mason, a banking professor at Louisiana State University in Baton Rouge who previously worked at the Treasury’s Office of the Comptroller of the Currency. “There is nothing to get rid of there. At that point, you might as well sit and hold.”

Smaller Commitment…

FLR & DCP Win A $15 bln Contract In Afghanistan

By AUGUST COLE

DynCorp International Inc. and Fluor Corp. won Army contracts that could be valued at $15 billion over the next five years to build bases and other infrastructure for U.S. forces in Afghanistan.

The deals show how lucrative logistics contracts in Afghanistan will be, since the country has a far less developed infrastructure than Iraq. Each company could receive up to $7.5 billion, depending on the Pentagon’s needs.

KBR Inc. held the predecessor contract that covered Afghanistan, Iraq and elsewhere, but lost out in bidding for the new Afghanistan work. KBR could still be retained down the line. KBR said Wednesday it would request a briefing on the selection and would decide later whether to lodge a protest.

The Obama administration’s strategy in Afghanistan is at a turning point as Gen. Stanley McChrystal assesses how many troops are needed for a new counterinsurgency strategy.

Meanwhile, Pentagon acquisition officials are trying to make sure logistics contracts avoid the types of snafus and scandals that dogged work in Iraq.

Fluor, Aliso Viejo, Calif., said this latest round of work, on a large Army contract known as Logistics Civil Augmentation Program IV, will cover 74 bases in northern Afghanistan. It will include power, water, housing, construction services, base operations, and logistics support.

DynCorp, Falls Church, Va., said its first year of work, which will cover southern Afghanistan, will be valued around $644 million. DynCorp gave a conservative value for the total contract at about $5.9 billion for the next five years.

While the Obama administration has been pushing to bring thousands of systems-engineering and weapons-acquisition jobs back onto the government payroll, logistics work such as that won by Fluor and DynCorp hasn’t received the same level of attention, said David Berteau, who directs defense-industry research for the Center for Strategic and International Studies, a Washington think tank. “We’re clearly at the point where there’s a dependency on contractors by the military,” he said. “There’s not a lot being done to change that dependency.”

KBR’s previous work sparked criticism from lawmakers and government watchdogs that the work was poorly run. Houston-based KBR said it has worked to keep down costs, which were often high because of difficult and unpredictable wartime conditions.

Bond Holders On Subprime Flood The Market With Cheap Homes

By CARRICK MOLLENKAMP

The U.S. housing market is facing new downward pressure as holders of subprime-mortgage bonds flood the market with foreclosed homes at prices that are much lower than where many banks are willing to sell.

While nationwide figures are scarce, a review of thousands of foreclosures in the Atlanta area shows that trusts managing pools of securitized mortgages sold six times as many properties as banks during the six months ended March 31. And homes dumped by subprime bondholders sold for thousands of dollars less on average than bank-owned properties, the data show.

Experts say this is a bad omen for residential real-estate prices and homeowners trying to sell or refinance, because the fire sales, many to cover soured subprime loans, put downward pressure on the value of nearby homes. All of this undermines federal efforts to stabilize the housing market and revive the broader economy.

“While the banks are trying frantically to get loans off their books, they face the problem of large shadow inventories of housing being dumped on the market, which would depress prices further,” said Anthony Sanders, real-estate finance professor at George Mason University in Fairfax, Va.

In the Atlanta area, hit hard by foreclosures and declining home values in the past two years, mortgage-backed securitization entities completed 6,260 foreclosures in last year’s fourth quarter and the first quarter of 2009, according to data compiled by Data Intelligence Corp., a Marietta, Ga., real-estate analytics firm which reviewed the records for The Wall Street Journal. That was more than double the 2,737 foreclosures by banks in the same period…..

BAC & JPM Takes Fixed Rate Card Holders To Variable Usury Rates

By Jonathan Stempel

NEW YORK (Reuters) – Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) are switching some customers who have fixed-rate credit cards to potentially higher variable rates, acting before a new law takes effect that limits what card issuers can charge.

The largest U.S. banks, which are also the largest card issuers, plan to tie more cardholders’ rates to the prime rate, a benchmark that is traditionally 3 percentage points above the Federal Reserve’s key lending rate, the federal funds rate.

With the Fed’s target rate now in an abnormally low zero to 0.25 percent range to help lift the economy out of recession, the prime rate is 3.25 percent, a level last seen in 1955.

Yet when the central bank starts boosting its target rate, the prime rate should follow, boosting borrowing costs. That could help issuers absorb record amounts of customer defaults.

“Variable rates reflect Chase’s changing costs for funding credit card loans,” JPMorgan Chase spokeswoman Stephanie Jacobson said. “As a result, our customers may benefit from lower rates when the costs to Chase are decreased, or may experience higher rates as costs increase.”

Bank of America spokeswoman Betty Riess said switching to variable rates “enables us to better manage our business as market conditions change.” She said the variable rates will not “at this time” result in rate changes, and that customers will see the variable rates beginning on their August statements.

The Los Angeles Times earlier on Wednesday reported the changes. It said Citigroup Inc (C.N) and American Express Co (AXP.N), two other large card issuers, had no current plans to switch fixed-rate accounts to variable rates, but would not rule it out. Neither immediately returned calls seeking comment.

In May, U.S. President Barack Obama signed into law the Credit Card Accountability, Responsibility and Disclosure Act, setting new restrictions on card rates and fees.

That law was adopted in response to anger among consumer advocates and recession-strapped cardholders at an industry they say “nickels-and-dimes” many of the 90 million card-carrying households, especially those least able to afford high costs.

But card companies got a break because the law does not take full effect until next February, giving them a window to change some of their policies.

JPMorgan is based in New York, and Bank of America in Charlotte, North Carolina. They are expected to report second-quarter results on July 16 and July 17, respectively.

AIG In Talks With Met Life To Sell Alico for $15 bln

NEW YORK (Reuters) – American International Group Inc (AIG.N) has resumed talks to sell its American Life Insurance Co unit to MetLife Inc (MET.N) in a transaction that could help the stricken insurer raise more than $15 billion, the Financial Times said.

The preliminary talks over the unit known as Alico could break down, as they did earlier in the year when AIG and MetLife disagreed over the price, the newspaper said, citing people close to the situation.

AIG spokeswoman Christina Pretto declined to comment on what she called rumor and speculation. MetLife spokesman John Calagna declined to comment.

AIG is selling assets to help repay $83 billion of loans from the federal government, which has a nearly 80 percent stake in the New York-based company.

According to the newspaper, AIG, after receiving its latest federal bailout in March, halted sales talks for all or part of Alico with bidders including France’s Axa SA (AXAF.PA), Britain’s Prudential Plc (PRU.L) and the state investment fund China Investment Corp.

None of these entities is now interested, the newspaper said, citing the people.

Last month, AIG set plans to partially spin off Alico into a new unit partially owned by the Federal Reserve Bank of New York, which would take a $9 billion preferred stake.

While a spinoff could be a precursor to an initial public offering of Alico next year, a sale could allow the government to recoup some of its investment sooner.

Alico operates in more than 50 countries but generates more than half its revenue in Japan….

All The Jobs Created Since 2000 Are Gone

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Asia Opens Mixed With Japan to the Downside

By Patrick Rial

July 9 (Bloomberg) — Japanese stocks fell for a seventh day as the yen strengthened to a four-month high against the dollar and commodity prices extended declines.

Yamaha Motor Co., the world’s second-largest motorcycle maker, dropped 3.3 percent after Nomura Holdings Inc. gave the stock a “reduce” recommendation. Komatsu Ltd., the world’s No. 2 maker of construction machinery that gets more than half its revenue from overseas, retreated 2.5 percent. Japan Petroleum Exploration Co., the nation’s No. 2 oil explorer, lost 3.2 percent after crude fell to a seven-week low yesterday.

The Nikkei 225 Stock Average fell 75.76, or 0.8 percent, to 9,344.99 as of 9:49 a.m. in Tokyo, dropping 6.1 percent in a seven-day losing streak. The broader Topix index lost 1.1 percent to 879.20.

In New York, the Standard & Poor’s 500 Index slipped 0.2 percent, led by telecommunications companies after a brokerage cut their profit estimates. Alcoa Inc., which kicked off second- quarter earnings announcements yesterday, jumped 4.9 percent in late trading after reporting a narrower loss than analysts had expected.

The Topix soared as much as 36 percent from a quarter- century low reached in March on rising confidence government stimulus steps would revive growth. Worse-than-expected U.S. unemployment data on July 2 prompted concern the recovery will be delayed and helped send the gauge lower for seven straight days, its longest losing streak since July 2008.

Defensive Stocks

Shun Maruyama, a strategist at Credit Suisse Group AG, lifted his stance on “defensive” stocks and downgraded cyclical shares on the view that the market won’t make additional gains until concerns about the economy have subsided.

Yamaha fell 3.3 percent to 956 yen. The company’s earnings from U.S. motorcycle and boat sales have suffered as a result of the recession, Shotaro Noguchi, an analyst at Nomura, wrote in a report dated yesterday. Noguchi began coverage yesterday of the auto industry with a “neutral” stance.

“While the demand outlook remains gloomy, we consider automakers capable of transforming Japan’s industrial landscape if that is the price of survival,” the analyst wrote. “We think forex movements represent the greatest risk.”

Komatsu fell 2.5 percent to 1,351 yen, while Kubota Corp., the nation’s largest maker of farm machinery, slid 2.6 percent to 713 yen.

Commodities Fall…

AA Says Stimulus in Asia & The U.S. Should Revive Cash Flow

By Rob Delaney

July 9 (Bloomberg) — Alcoa Inc., the largest U.S. aluminum producer, expects government economic-stimulus spending in China and the U.S. to boost metal demand enough to help the company start generating cash again.

China’s measures have spurred infrastructure projects and boosted consumer spending, pushing domestic aluminum demand beyond supply for the first time since the global recession forced metal producers to curtail output, Chief Executive Officer Klaus Kleinfeld said yesterday.

“One of things that the Chinese government very smartly does these days is that they are stimulating people that it’s good to not have too much savings and to buy new cars and get a new air-conditioner,” Kleinfeld said on a call with analysts.

Alcoa, the first company in the Dow Jones Industrial Average to announce results for the three months through June, yesterday reported a second-quarter loss excluding certain items of 26 cents a share. That was smaller than analysts’ average estimate in a Bloomberg survey for a 38-cent loss. The company will be “free cash flow positive very soon,” Chief Financial Officer Charles McLane said on yesterday’s call.

The loss was New York-based Alcoa’s third straight, the first time that has happened since 1992

Alcoa rose 38 cents, or 4 percent, to $9.84 at 7:59 p.m. in trading after the official close of the New York Stock Exchange. The shares declined 16 percent this year through the close of regular U.S. trading on July 8.

The Chinese government is spending 4 trillion yuan ($585 billion) to stimulate its economy, the world’s third-largest.

U.S. Stimulus

Australia Cuts 21,400 Jobs as Exports Fall

By Jacob Greber

July 9 (Bloomberg) — Australian employment fell in June as the global recession reduced demand for exports such as iron ore and coal, prompting mining companies to fire workers.

The number of people employed dropped 21,400 from May, the statistics bureau said in Sydney today. The median estimate of 21 economists surveyed by Bloomberg was for a decline of 20,000. The jobless rate rose to 5.8 percent, the highest level in almost six years, from 5.7 percent.

Central bank Governor Glenn Stevens left borrowing costs at a half-century low of 3 percent this week for a third month to help stem firings at companies including BHP Billiton Ltd. Advertisements for job vacancies tumbled in June for a 14th month, a sign unemployment may rise in coming months.

“Forward-looking indicators continue to imply a fall in employment at least as pronounced as” when Australia was last in a recession in 1991, Riki Polygenis, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said ahead of today’s report.

The number of full-time jobs dropped 21,900 in June and part-time employment increased 400 today’s report showed.

The Australian dollar traded at 78.17 U.S. cents at 11:44 a.m. in Sydney from 78.04 cents before the report was released. The two-year bond yield was little changed at 3.68 percent.

Australia’s economy has so far skirted the worst global recession since the Great Depression. Gross domestic product rose 0.4 percent in the first quarter, making it one of the few major economies including China and India to expand.

Cash Handouts….

China Car Sales Jump 48%

By Bloomberg News

July 9 (Bloomberg) — China’s passenger-vehicle sales rose 48 percent in June, the biggest jump since February 2006, as tax cuts and government subsidies helped the nation extend its lead over the U.S. as the world’s largest auto market this year.

Chinese motorists bought 872,900 cars, sport-utility vehicles and other passenger vehicles last month, the China Association of Automobile Manufacturers said in a statement today. Overall vehicle sales, which include buses and trucks, rose 36 percent to 1.14 million.

In the first half, China’s vehicle sales surpassed the tally in the U.S. by about 27 percent as the government cut retail taxes and handed out subsidies in rural areas to revive consumption and economic growth. U.S. auto sales have plunged on the recession and job concerns, threatening to end the country’s at least 63-year reign as the world’s largest auto market.

China’s first-half vehicle sales rose 18 percent to 6.1 million. Sales of passenger vehicle climbed 26 percent to 4.53 million, while commercial-vehicle sales fell 0.5 percent to 1.57 million, the association said. U.S. vehicle sales dropped 35 percent to 4.8 million.

Bank of Korea Keeps Rates Steady @ 2%

By Seyoon Kim

July 9 (Bloomberg) — The Bank of Korea kept the benchmark interest rate unchanged for a fifth month on signs that record- low borrowing costs and government stimulus are cushioning the economy against the worst of the global recession.

Governor Lee Seong Tae and his board left the seven-day repurchase rate at 2 percent in Seoul today, as expected by all 15 economists surveyed by Bloomberg News. The bank cut rates by 3.25 percentage points between October and February, the deepest reductions since it began setting a policy rate a decade ago.

The bank follows counterparts in Australia and Europe, which both kept key rates unchanged at historic lows in the past week to ensure a recovery in their economies. The International Monetary Fund and Goldman Sachs Group Inc. this week upgraded forecasts for the South Korea’s gross domestic product in 2009, citing the stimulus from rate cuts and extra government spending.

“The central bank is likely to keep rates unchanged throughout this year as it waits until there are clear signs the economic recovery is solid,” said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “South Korea’s economy has been performing relatively well, but it’s too early to say demand is fully back.”

Korea’s Kospi stock index climbed 15 percent in the three months ended June 30, the most since the second quarter of 2007. The index rose 0.5 percent to 1,438.11 at 10:08 a.m. in Seoul today. The won fell 0.3 percent to 1,279.9 against the dollar.

IMF Outlook

The IMF said yesterday the global economic rebound next year will be stronger than it forecast in April as the financial system stabilizes and the pace of contractions from the U.S. to Japan moderates. Japan’s industrial output rose for a third month in May and China’s new lending surged almost fivefold in June, recent reports showed.

South Korea joined India, China and Australia as one of the few major economies to grow in the first quarter, with GDP expanding 0.1 percent from the previous three months. Consumer confidence jumped to the highest in almost two years in June and bank lending to households rose by the most since December 2006.

Exports are also starting to recover. Samsung Electronics Co., the world’s second-largest chipmaker, said this week that second-quarter operating profit probably jumped more than fivefold from the previous quarter….

Taiwan Requests For Tariffs To Be Lifted on Display Panels

By Yu-huay Sun

July 9 (Bloomberg) — Taiwan’s government wants China to remove import tariffs on display panels produced on the island by Taiwanese makers, the Economic Daily News reported, citing an unidentified economic ministry official.

Taiwan will call for the removal of the 3 percent levy when the island negotiates with the mainland on an economic cooperation pact, the Taipei-based, Chinese-language newspaper said. A removal would help Taiwanese makers compete with Korean and Japanese producers, according to the report.

Taiwan and China are in informal talks at an “academic level” on preparing an economic cooperation agreement to ease restrictions on trade, the island’s Deputy Economic Affairs Minister John Deng said July 3.

Hong Kong Wins Approval For $12 bln Bond Sale

By Bob Chen

July 8 (Bloomberg) — Hong Kong legislators today approved the sale of up to HK$100 billion ($12.9 billion) of government bonds to promote the development of the local debt market.

A resolution to authorize the bond issue was approved by 40 lawmakers, more than half the members present, Legislative Council President Jasper Tsang said. The debate was broadcast on local television today.

The sale would bolster Hong Kong’s $88 billion bond market, comprised of 23 percent government debt and 77 percent corporate bonds, according to the Asian Development Bank. Adding to the depth of the sovereign market, often used as a benchmark, would give investors more confidence to buy company bonds.

“We believe that a local bond market with sufficient breadth, depth and liquidity would help develop another effective channel of financial intermediation apart from our banking and equity markets,” Financial Secretary John Tsang told the Legislative Council today.

The government estimates the market can digest HK$10 billion to HK$20 billion of debt a year, Secretary for Financial Services and the Treasury K.C. Chan said April 28. Proceeds will be put in a fund and used to make investments rather than for fiscal purposes, he said.

The plan was opposed by lawmakers including Albert Ho, who said the government didn’t provide sufficiently clear guidelines on how the fund will be administered.

Sharp Shares Blast Off On Upward Guidance of LCD Capacity

By Mariko Yasu

July 9 (Bloomberg) — Sharp Corp., Japan’s largest maker of liquid-crystal displays, rose after the company said it will boost production capacity of LCD panels.

Sharp gained 1.1 percent to 916 yen as of 10 a.m. on the Tokyo Stock Exchange, the biggest advance since June 25 after reversing a drop of as much as 1.7 percent. That compared to a 2 percent decline by rival television maker Panasonic Corp. The benchmark Nikkei 225 Stock Average slid 0.7 percent.

The Osaka-based company said Yoshiaki Ibuchi, an executive vice president, will brief at 3 p.m. today at its headquarters on the plan to boost production of the No. 2 factory in Kameyama, central Japan, the company’s main plant for making LCD displays.

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A Top and Bottom Line Beat

* Net loss is 47 cents/share

* Revenue drops to $4.2 billion

* Results beat Wall Street estimates

(Updates with more details, estimates)

NEW YORK, July 8 (Reuters) – Alcoa Inc (AA.N) posted its third consecutive quarterly loss on Wednesday as aluminum demand remained weak and the price of the metal was depressed, despite a recent rally.

The second-quarter net loss was $454 million, or 47 cents per share, compared with earnings of $546 million, or 66 cents per share in the same quarter of 2008, the Pittsburgh-based aluminum producer any said. The loss from continuing operations, was 32 cents per share and excluding restructuring, the loss was 26 cents.

Analysts on average were expecting a loss of 38 cents per share, excluding restructuring, according to Reuters Estimates.

Revenue slumped to $4.2 billion from $7.2 billion a year earlier, as metal prices and the autos industry slumped and global demand fell in the economic downturn.

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