On Friday January 14, 2011, 5:50 pm EST
Gov't and AIG announce plan
to end federal stake
NEW YORK (AP) -- The
government and AIG, the giant insurer rescued with $182 billion at the depths
of the 2008 financial meltdown, announced a plan Friday to end taxpayer
involvement in the company over the next two years.
As part of the plan, AIG
paid back its $21 billion outstanding balance to the New York branch of the
Federal Reserve. The Treasury Department will now own a 92 percent stake in the
company and begin unloading stock on the open market in March.
The rescue package for
American International Group Inc., which included loans and guarantees, was the
largest of any U.S. company that accepted government help during the September
2008 financial crisis.
At the time, federal
officials worried that a collapse of AIG, which worked with hundreds of
financial institutions around the world, would be a death blow to already
fragile credit markets and possibly bring down the financial system itself.
The insurer became a
touchstone for public outrage over excessive risk on Wall Street.
Under the plan announced
Friday, the government will sell its stock over two years as market conditions
allow.
Industrial production rises
by most in 5 months
WASHINGTON (AP) --
Industrial production rose in December by the largest amount in five months,
providing the economy with solid momentum heading into the new year.
Activity at the nation's
factories, mines and utilities increased 0.8 percent last month, the Federal
Reserve said Friday. Industrial production was up in every month but one in
2010.
Overall industrial activity
has risen 11 percent since hitting its recession low in June 2009. But it is
still 6 percent below its peak reached in September 2007.
Factory production, the
biggest slice of industrial output, rose 0.4 percent, the sixth straight
monthly increase. Makers of computers and electronic products, clothing and
leather, chemicals and other products were among the industries seeing gains.
But auto production dipped.
Jeffrey Lacker, president
of the Federal Reserve Bank of Richmond, said in a speech Friday that recent
economic activity suggests the economic recovery is through its soft patch. He
said he expects stronger growth this year, between 3.5 percent and 4 percent.
JPMorgan Chase's income
jumps 47 percent
NEW YORK (AP) -- JPMorgan
Chase & Co. pleased investors Friday with news that it will raise its
dividend soon, pending approval from the Federal Reserve. The bank also
reported that its income jumped 47 percent in the final three months of 2010 as
fewer customers defaulted on their loans.
The Fed has asked all of
the top U.S. banks to send detailed reports on their finances as part of the
central bank's annual assessment of their health. The Fed is expected to
complete its study of those plans by March, at which time it could give
permission to some banks to raise their dividends.
Most U.S. banks slashed
their dividends during the financial crisis in order to conserve cash. After
almost two years of solid profits and building up capital, banks like JPMorgan
are ready to resume paying the larger dividends that investors are accustomed
to. JPMorgan's CEO Jamie Dimon has suggested that the bank could raise its
annual dividend from 20 cents per share to as much as $1 if the Fed allows.
The New York bank earned
$4.83 billion, or $1.12 per share, as the company set aside less money to cover
loan losses. That compares with $3.28 billion, or 74 cents a share, during the
same quarter last year. Analysts surveyed by FactSet forecast the bank would
earn $1 per share.
China raises bank reserve
rate to curb inflation
BEIJING (AP) -- China's
central bank has raised the amount of money banks must keep on reserve for the
seventh time in a year, in its latest move to counter inflation.
The central bank on Friday
ordered state-owned banks to set aside an additional 0.5 percent of deposits as
reserves, effective Jan. 20. Reserves vary by institution but could be close to
20 percent for the biggest commercial lenders.
China's inflation rate
jumped to a 28-month high of 5.1 percent in November.
Mindful of the political
turmoil linked to past bouts of inflation, Beijing is trying to curb a flood of
money in the world's second largest economy following a lending spree triggered
by stimulus aimed at fighting the global financial crisis.
GM completes stock
contribution to pension plans
DETROIT (AP) -- General
Motors Co. has pumped another $2 billion into its underfunded U.S. pension
plans by giving them 60.6 million shares of common stock.
The contribution comes on
top of $4 billion in cash that the Detroit company paid into the plans in
December.
The moves cut $6 billion
off a $27.4 billion pension liability that was on the company's books. As of
Dec. 31, 2009, the U.S. salaried and hourly plans were $17.1 billion short of
their obligations, while GM's non-U.S. pension plans were $10.3 billion short.
The plans will be revalued as of the end of 2010, and the shortfalls should be
far lower due to the contributions and investment growth in the past year.
GM said the earlier $4
billion contribution came from its cash reserves. The company announced plans
to make the cash and stock contributions in October. Its executives have said
their goal is to become debt free so they can better weather future economic
downturns.
GM has made an impressive
turnaround since its 2009 trip through bankruptcy protection. The company made
$4.2 billion in the first three quarters of last year and is expected to post a
fourth-quarter profit in the coming weeks.
Russian state-owned oil
firm takes stake in BP
LONDON (AP) -- British oil
company BP announced Friday night that Russia's state-owned oil firm Rosneft
will take 5 percent of BP's ordinary voting shares in a major stock swap.
In exchange, Rosneft will
give BP about 9.5 percent of its shares, BP said. Rosneft chairman and Russian
deputy prime minister Igor Sechin said the deal was worth about $8 billion.
The agreement follows the
disastrous spill off the coast of the U.S. last year. The company has been selling
off many of its assets to raise costs to pay for billions of dollars of
liability stemming from the spill, the worst environmental disaster in U.S.
history.
While it is not clear if
this Russian venture is connected, it does give BP access to cash and new areas
of the world to explore for oil at a time when there are concerns about the
future ability to drill offshore in U.S. waters.
The deal was announced at a
new conference in London by leading Russian politicians and oil executives from
both companies, including BP chief executive officer Bob Dudley.
Holiday spending
"record" not as good as it looks
Holiday spending reached
the highest level on record last year, but that news isn't as good as it
sounds.
The $462 billion in holiday
spending reported by a trade group on Friday handily tops the $453 billion peak
reached in 2007, before the economy took a nosedive. Take a closer look,
though, and you'll find these figures don't tell the whole story.
Just because Americans
spent more this holiday season doesn't mean they bought more. That button-down
shirt you bought your father in 2010 probably cost more than it would have
three years ago. But the government figures on which the National Retail
Federation bases its holiday sum do not take into account rising prices.
Although inflation has been tame over the past few years, holiday spending
would have had to clear $478 billion to signify spending was back to
pre-recession levels.
That's not all.
The population of the U.S.
has grown by 8 million people since the previous record was set. That means
there were millions more shoppers in stores this Christmas, driving up the
sales total. But the average spending per person is still lower than it was a
few years ago, suggesting consumers are still slower to pull out their wallets.
Regulators shut small
Georgia bank; 3rd this year
WASHINGTON (AP) --
Regulators have shut down a small bank in Georgia, the third closure of 2011
following last year's toll of 157 banks brought down by the weak economy and
soured loans.
The Federal Deposit
Insurance Corp. on Friday took over Oglethorpe Bank of Brunswick, Ga., with
$230.6 million in assets and $212.7 million in deposits. Bank of the Ozarks,
based in Little Rock, Ark., agreed to assume the assets and deposits of the
failed bank.
The failure of Oglethorpe
Bank is expected to cost the deposit insurance fund $80.4 million.
By The Associated Press
The Dow Jones industrial
average gained 55.48 points, or 0.5 percent, to 11,787.38. The Standard &
Poor's 500 index rose 9.48, or 0.7 percent, to 1,293.24. The Nasdaq rose 20.01,
or 0.7 percent, to 2,755.30.
Benchmark oil for February
delivery rose 14 cents to $91.54 a barrel on the New York Mercantile Exchange.
In other Nymex trading in
February contracts, heating oil rose 3.61 cents to $2.6452 a gallon, gasoline
futures gained 4.87 cents to $2.4946 per gallon and natural gas futures added
7.3 cents to $4.48 per 1,000 cubic feet.
Brent crude gained 62 cents
to $98.65 a barrel on the ICE Futures exchange in London.