C Rivals Lobby Government to Curb its Operations if it is Nationalized

Rivals want limits on its business model

Citigroup’s rivals are lobbying the government to shackle its investment banking business and international operations if the authorities nationalise or take a large stake in the troubled financial group.

The increasing likelihood that the US Treasury will end up with a big holding in return for throwing Citi its third lifeline in under four months has prompted other Wall Street groups to go on the offensive in Washington.

Citi insiders dismiss calls to limit its activities in areas such as proprietary trading, prime brokerage and derivatives, and its vast international business, as the self-serving desires of rivals.

Yet the prospect that one of the world’s largest banks could be taken over by the government revives questions about the shape of the financial sector and rules for banks that are nationalised.

A senior executive at a Citi rival said: “What cannot happen is that a government-controlled Citi does better than healthier institutions because it has access to cheap funding and it is effectively backstopped by the US.”

The crucial question for the administration and Wall Street is whether a new wave of government help would end a decade of aggressive deregulation.

Ever since 1999, when the Glass-Steagall Act, passed in 1933 to curb the excesses that led to the 1929 stock market crash, was repealed, regulators have encouraged banks to spread their wings.

By removing the barriers Glass-Steagall had erected between retail banking and the securities businesses, the Gramm-Leach-Bliley Act enabled commercial banks and investment groups to invade each other’s turf. Indeed, the creation of Citi – the product of the 1998 merger of Citicorp, a commercial and retail bank, with Travelers, a securities and insurance group – was predicated on, and a big factor in, the repeal of Glass-Steagall.

Analysts and rivals argued that Citi’s failure to manage its sprawling business and keep adequate controls over its investment bank’s risk-takers stem directly from that deregulatory spree.

“It is time to ask whether we should not reinstate Glass-Steagall-like barriers,” said a Wall Street executive. “You could argue the repeal caused the current problems by allowing commercial banks with their big balance sheets and willingness to lend to enter the investment banking game”.

But even if Congress and the administration decide against such a radical change, they will have to decide what a government-controlled entity could do.

“Share going down is undesirable”

The Japanese government is considering ways to prop up the ailing stock market, as tumbling share prices threaten to erode further Japanese banks’ capital and damage their ability to lend to cash-strapped businesses.

Kaoru Yosano, who currently occupies the three key posts of finance minister, financial services minister and economics minister, on Tuesday said he had instructed government staff to look into measures to counter falling stock prices.

“It is undesirable for share prices to fall, causing unnecessary consequences. I discussed with government staff last Friday what we could do generally to deal with [falling] share prices. We must consider this, keeping an eye on market moves,” he said.

Mr Yosano’s comments come as the broad-based Topix index closed at its lowest level in 26 years, at 730.28.

The benchmark Nikkei average also came dangerously close to a 26-year low before paring losses to close down 1.5 per cent at 7,268.56.

The stock market’s relentless decline ahead of the March year-end has alarmed business leaders as well as policymakers.

Fujio Mitarai, chairman of the influential Keidanren business lobby, on Monday called on the government to set up a public body to buy shares in the market.

After expressing appreciation for the government and Bank of Japan’s measures to assist companies to meet their borrowing needs, Mr Mitarai said: “In addition, if it is possible to support stock prices using public funds, we can expect a strengthening of the financial health of financial institutions and an increase in lending.”

Japanese banks, which hold a high level of stocks as capital, have suffered from the sharp plunge in share prices.

The Tokyo market is down about 18 per cent so far this year and analysts note that if share prices continue to slide, Japanese banks – which have already turned to investors for billions of dollars in additional capital – could be forced to raise further funds in order to meet capital adequacy requirements.

A loss of $54 million was recorded after charges

ATLANTA (AP) — Home Depot, the nation’s largest home improvement retailer, reported a fiscal fourth-quarter loss of $54 million mostly due to its plan to shut its four smaller home-improvement brands, but adjusted results topped analysts’ estimates.

The Atlanta-based company posted a loss of 3 cents per share. That compares with a profit of $671 million, or 40 cents per share, a year ago.

Excluding the charge related to the closings and other items, Home Depot Inc.’s profit was 19 cents per share.

Revenue slid 17 percent to $14.61 billion, with comparable-store sales down 13 percent.

Analysts forecast a profit of 15 cents per share on revenue of $14.67 billion.

Home Depot says it expects earnings from continuing operations to fall about 7 percent, with total sales down about 9 percent.

2/3rds of stores say Mac sales are down

Apple’s (AAPL) Mac sales aren’t doing better this month, according to a survey by Channel Checkers, a research firm that does work for hedge funds and money managers. According to a report:

* Two-thirds of Apple retail stores surveyed said that Mac sales are down in February from January. A third say sales are up this month.
* A majority say that Apple’s high-end MacBook Pro is the top seller.
* And a majority of stores say that they aren’t discounting iPods or Macs.

We caution reading too far into this: It’s just one survey (of 15 stores) by one company. And February isn’t exactly a big month for computer buying.

But it gels with last week’s report from retail research firm NPD Group, which said that Mac sales were soft in January, but that demand for high-end Mac laptops more than $1,500 — like MacBook Pros — were doing well.

If true, it’s not good news for Apple’s March quarter. Last year, March quarter Mac unit sales were especially strong — up 51% year-over-year — fueled by the MacBook Air launch and a stronger economy. This year, with a crappy economy, stale Mac lineup, and falling PC industry sales, Apple’s growth machine is sputtering — and Apple’s Mac business could realistically post a year-over-year decline in unit sales.

Meanwhile, Kaufman Bros. analyst Shaw Wu says his checks with Apple’s supply chain suggest that March quarter iPhone sales are tracking around 3.5 million, more than the 3 million he’s estimated for the quarter. If Apple does sell 3.5 million iPhones this quarter, that would represent roughly 105% year-over-year growth, better than the 88% year-over-year growth Apple reported last quarter.

Silicon Alley poses MSFT should buy RIMM for $35 billion

If Microsoft (MSFT) is going to make mobile a big, profitable business it needs to do better than the Windows Mobile updates that Steve Ballmer announced last week.

So what’s the next step?

Microsoft should buy Research In Motion (RIMM), the company that makes BlackBerry smartphones.

RIM shares fell another 4% today, and have lost about a third of their value this month. With RIM’s market cap down to around $21 billion, Microsoft might be able to get the deal done for $35 billion.

Why buy RIM?

* The smartphone market (and ultra-mobile computing in general) is growing.
* RIM has a higher market share than Microsoft, and it’s growing. Microsoft’s is shrinking.
* RIM has a huge enterprise business with a high cost of switching, one that complements Microsoft’s enterprise business. Microsoft should own that business.
* RIM’s products are, in many respects, better than Microsoft’s.

But the best reason for Microsoft to buy RIM is that RIM has a better mobile business — collecting revenue from BlackBerry device sales and service fees, instead of just software licensing fees.

RIM, for instance, gets several hundred dollars in revenue for each BlackBerry sold, plus BlackBerry email/Web service fees. Microsoft, on the other hand, has stuck itself with a lousy business selling Windows Mobile operating system licenses for $8 to $15 per phone, according to research firm Strategy Analytics.

So while analysts expect RIM to top $14 billion in revenue next fiscal year, Microsoft will be lucky to reach $400 million in Windows Mobile revenue (30 million Windows Mobile licenses at an average $12 a pop). That’s couch change for Microsoft, whose revenues should top $60 billion this year.

Sure, this would be a tricky deal to integrate, and there are a lot of big decisions to make. Microsoft will eventually have to pick one software platform — Windows Mobile or BlackBerry — and stick with it. It might have to abandon dozens of partners. It might blow up.

But Apple (AAPL) and RIM have shown that owning both the hardware and software platforms make for better mobile products. And Microsoft has enough to lose — to Apple, Google (GOOG), etc. — to avoid being a weak player in what could be the next major platform war. Meanwhile, RIM has today what could take Microsoft many years to build — a real, big, mobile business.

And why should RIM do this deal?

Because smartphones have become a waltz of elephants. With Apple, Google, Microsoft, Nokia, and other giants in the market — and RIM trying to win the hearts and minds of consumers — having the deep pockets and global reach of Microsoft behind it would be a major asset. And direct access to the world’s dominant desktop operating system could potentially give Microsoft-RIM phones an advantage over rivals.

If RIM doesn’t execute perfectly over the next three years, it could become the next Palm. (Before the Pre.) If it has the full weight and resources of Microsoft behind it, meanwhile, it can afford to ramp up its investment without killing its stock… and fight off increasingly powerful competition.

hahaha…more like the last to admit or tell the truth

BEIJING, Feb. 23 (Xinhua) — China’s central bank on Monday warned of deflation in the near term caused by continuing downward pressure on prices.

Commodities prices were low and weak external demand could exacerbate domestic over-capacity, the People’s Bank of China (PBOC) said in an assessment of fourth-quarter monetary policy.

“Against the backdrop of shrinking general demand, the power to push up prices is weak and that to drive down prices is strong,” the PBOC said. “There exists a big risk of deflation.”

China’s consumer price index (CPI), a major gauge of inflation, rose 1 percent in January from a year earlier. In that period, the producer price index (PPI), a measure of inflation at the wholesale level, dropped 3.3 percent.

But the PBOC also warned of medium and long-term inflation risks.

As the central banks worldwide injected a huge amount of liquidity into the financial system, commodities prices could repeat earlier rallies if market confidence recovered, it said.

The PBOC stated that China’s economy faced further downside risks because of slackening external demand, over-capacity in some sectors and increases in urban job losses.

The gross domestic product expanded at a slower rate of 6.8 percent in the fourth quarter of 2008, as exports slumped and the property sector sagged, dragging down growth for the whole of 2008to a seven-year low of 9 percent

But China had huge market potential and as the macro controls started to take effect, its economy was likely to maintain stable and relatively fast growth, it said.

To spur growth, the PBOC said it would ensure ample liquidity in the banking system and promote the reasonable and stable growth of credit.

It also reaffirmed that China would keep the Renminbi (RMB) exchange rate basically stable, while making it more flexible in a self-initiated, gradual and controllable manner.