World financial news

Venezuela’s President Hugo Chavez has threatened to expel Japanese carmaker Toyota unless it produces an all-terrain model of 4×4 vehicles used for public transport in poor and rural areas.

The fiery socialist, in a speech late on Wednesday, also said he would not hesitate to expel and expropriate plants from other Asian and U.S. automobile companies operating in Venezuela if they failed to share technology with locals.

"What’s this that Toyota doesn’t want to make the ‘rustic’ model here?" Chavez said, during a ceremony in Caracas to hand owners the keys to economically produced cars that Venezuela’s government has imported from Argentina.

"We must force them. And if they don’t, then they should leave and we’ll bring another company in … The Chinese want to come and they make ‘rustic’ models."

During a decade in power, Chavez has nationalized large swathes of the Venezuela economy — including the oil and power sectors — as part of his "21st century revolution" but has so far left car manufacturing relatively untouched.

He turned on Toyota, the world’s biggest automaker, when a transporter said there was a scarcity of all-terrain models to serve people in under-privileged areas.

Caracas’ poor mainly live in hillside slums, while many rural areas lack decent roads, meaning tough 4×4s are the main means of transport.

Chavez ordered his Trade Minister Eduardo Saman to carry out a "severe inspection" of Toyota, and warned other companies they must start sharing technology with Venezuelans.

"You tell the people at Toyota that they have to produce this model and we are going to impose a quota, and if they don’t meet it, we will punish them," he told Saman, adding that the state would not hesitate to expropriate Toyota’s facilities and pay appropriate compensation.

Car industry in trouble

Following Chavez’s speech, Toyota has asked the Japanese government to verify the true intentions of his remarks as he has not contacted the company on the issue, Toyota’s Tokyo-based spokesman Yuta Kaga said on Friday.

Spokesmen for Toyota’s Venezuelan unit, which operates an assembly plant in the eastern state of Sucre, were not available to comment on Thursday.

But a source at the company said Toyota had stopped assembling the model in question — which he identified as Land Cruiser 70 — in 2007, with the government’s full knowledge.

It planned to import instead, but had not received the necessary licence, he added.

"The government was informed, it can’t be a surprise," the source said, adding that most Toyota managers were on holiday but were communicating with each other about Chavez’s speech.

In addition to Toyota, Japan’s Mitsubishi as well as Hyundai and General Motors have assembly plants in South America’s top oil-exporting nation, whose people are known for their love of cars.

"Companies who come here to set up must be ready to transfer technology to us," Chavez said.

"If they don’t want to, they should go away. I invite them to pick up their things and go," he added, saying companies from allies like China, Russia, Belorussia and Iran were ready to take their place.

Lack of access to dollars at the official exchange rate, and labor disputes, have combined with a recession to hit the automobile industry hard in Venezuela this year.

According to latest figures from the Venezuela Automobile Chamber, car sales in November were down 40 percent at 10,075 units, compared with the same month last year. 

Source

Coal is used to generate almost half of the world’s electricity and demand is projected to grow by more than 50 percent by 2030, according to the International Energy Agency’s most recent projections.

But burning coal to generate electricity is one of the top two sources of carbon dioxide, the main heat-trapping gas linked to global warming.

Curbing CO2 emissions from coal-fired power plants was a central theme at the Copenhagen talks this month, and the primary driver behind the establishment of the Consortium for Clean Coal Utilization at Washington University a year ago.

Richard Axelbaum, a professor of energy, environmental and chemical engineering, leads the consortium. The goal is to bring together university researchers, industry, foundations and government to research better ways to utilize one of the nation’s most abundant, but dirtiest, fuels.

The effort is partially funded by three St. Louis area companies. Peabody Energy Corp. and Arch Coal Inc., the two largest coal producers in the nation, each committed $5 million over five years and Ameren Corp., one of the nation’s biggest coal-burning utilities, agreed to give $2 million.

Does clean in "clean coal" specifically mean CO2 and other greenhouse gases?

(The term) clean really goes back about 100 years, and it has meant different things at different times. Right now, the pressing issue is reducing greenhouse gases, so present perspective of the term really is focusing on ensuring that we can burn coal in a way that doesn’t emit CO2.

What do you hope the consortium can accomplish? And what’s the time frame?

As you know from Copenhagen, the critical issue that really faces us is that we have to be able to minimize greenhouse gases in a way that the entire world can accept. And, clearly, a critical issue is the economics of that.

So we have to develop technologies that will supply us with electricity in a way that the difference in the cost of electricity is minimal but, at the same time, minimizing greenhouse gases. So the focus of much of what we do, probably 80 percent of the consortium, is determine the best approaches to that sam day payday loan.

When it comes to minimizing CO2 emissions from coal-fueled power plants, the technologies most often referenced are carbon capture and sequestration (separating the carbon from coal and injecting it underground). How close are we to commercializing that technology or making it economically viable?

Right now, there are some demonstration sites that are small scale versions of carbon capture and sequestration. And there’s considerable investment right now both from government and industry to develop this at a larger scale.

I expect — and this is my perspective, and there are different perspectives on the time frame — but certainly in 10 years I expect we will be seeing large scale carbon capture and sequestration sites. And I believe that in 2020 to 2030 it will ramp up considerably.

What other technologies are being studied beside carbon capture and sequestration?

Other studies are what we consider carbon capture and utilization, where you would take the CO2 and, for example, one study is to grow algae from the CO2 and use that to process into useful products. It could be nutraceuticals. Also bioproducts, biodiesel products. Also you can convert CO2 into useful fuels not from algael approaches, but from catalytic processes. We’re studying that as well.

What role do the consortium’s international partners play?

The consortium was really founded on the principal that the challenges of clean utilization of coal and minimizing CO2 emissions were global challenges and really would require us working together, both so that we can transfer knowledge, but also so we can understand the challenges that the rest of the world faces in addressing emissions. So we have a major effort to ensure that the research that we support is actually going to support collaborative efforts between Washington University and other institutions in China, India, in Japan, Israel and other nations.

Source

Critics say a $139 million settlement reached this week between securities regulators and eight big financial institutions is small potatoes.

Don’t be fooled.

I think this settlement is a big enchilada.

It’s not far behind the $205 million paid by five mutual fund managers in 2005 to settle complaints about short-term trading of fund units.

Both cases showed that investors have rights that can’t be trampled upon by large financial firms.

In 2005, fund managers agreed they should treat investors’ money as carefully as if it were their own.

They were failing to protect the interests of long-term investors by letting short-term traders take away some of their profits.

In the current case involving third-party asset-backed commercial paper (ABCP), there were several key principles at stake for investor rights. These principles include the following:

Investment advisers should not sell products they don’t understand.

Two firms were selling ABCP to smaller retail investors.

Cannacord Financial Ltd. will pay $3.1 million and Credential Securities Inc. will pay $200,000 under a deal with the Investment Industry Regulatory Organization of Canada. IIROC said the two firms did not do enough homework on the product in order to learn about its complexities and underlying risks.

They relied primarily on the credit rating provided by Dominion Bond Rating Service, an agency whose work was paid for by the issuers of the rated securities.

Interviews with several advisers working for these firms showed they knew nothing about the issuers or the composition and structure of the product, IIROC said.

Some advisers were representing it to their clients as a safe and secure product that was similar to a T-bill, guaranteed investment certificate or a term deposit.

Investment dealers should disclose known risks of products to investors.

Two firms were selling ABCP after learning of its risks from the product issuer.

CIBC World Markets will pay $21.7 million and HSBC Bank Canada will pay $5.9 million under separate deals reached with the Ontario Securities Commission.

They were dealing with an ABCP issuer, Coventree Inc., which had said that its average exposure to U.S. subprime mortgages was 7.4 per cent.

But in late July, Coventree sent an email to all dealers noting that its exposure to subprime mortgages in some conduits was as high as 42 per cent.

Coventree did not put any limits on disclosing information in its email, the OSC said.

But neither firm notified investors of the risks.

"CIBC continued to sell Coventree and certain other third-party ABCP from July 25 to August 3, 2007," the OSC said.

"During that period, CIBC sold $245 million to investors who may not have been aware of those issues."

HSBC sold $172 million in ABCP to clients who didn’t know about the risks that it had been made aware of during the same period.

Short-term credit products can be as risky as stocks.

ABCP was sold under an exemption from securities rules that allowed it to avoid much of the disclosure required for other securities, such as company shares.

The Canadian Securities Administrators has proposed that distributors of asset-backed short-term debt should have to issue a prospectus, similar to stock issuers.

It also wants to reduce reliance on the use of credit ratings in securities legislation.

I think both recommendations should go ahead.

Few investment products are safe and secure any more, even short-term debt.

Meanwhile, buyers aren’t protected in a system in which sellers rely on endorsements from for-profit commercial agencies.

eroseman@thestar.ca

Source

The U.S. economy remains mired in a recession, prospects for next year are weak and home prices may resume declines, Harvard University economics professor Martin Feldstein said.

“The recession isn’t over,” Feldstein said today in an interview on Bloomberg Radio in New York. “It will be a while before we have enough information to know if the recession ended.”

Feldstein is a former president of the National Bureau of Economic Research and remains a member of the group’s Business Cycle Dating Committee, the panel charged with determining when recessions begin and end. His comments are at odds with those of the panel’s chairman, Robert Hall, who said early this month that the recession may have ended.

Employers in the U.S. cut 11,000 jobs in November, the fewest in 23 months, and the unemployment rate unexpectedly fell to 10 percent from 10.2 percent, a government report showed on Dec. 4.

The report “makes it seem that the trough in employment will be around this month,” Hall said in an interview on the day the figures were released. “The trough in output was probably some time in the summer. The committee will need to balance the midyear date for output against the end-of-year date for employment.”

The economy has lost more than 7.2 million jobs since the recession began in December 2007. The total number of workers collecting unemployment checks as well as those taking extended government benefits totals about 10 million, according to Labor Department statistics released today.

‘Extended Period’

The Federal Reserve yesterday repeated its pledge to keep interest rates “exceptionally low” for “an extended period” and said the “deterioration in the labor market is abating.”

Ben S. Bernanke won backing for a second term as Fed chairman today in a 16-to-7 vote by the Senate Banking Committee. The nomination next goes to a vote of the full Senate.

Gross domestic product expanded at a 2.8 percent annual pace in the third quarter after shrinking for each of the previous four quarters. Growth will average 2.6 percent next year, according to the median forecast in a Bloomberg News survey of economists early this month.

Restrained consumer spending suggests “2010 is going to be a very weak year,” said Feldstein, 70, who was chairman of the White House Council of Economic Advisers during the Reagan administration.

“Thrift in the long run is a very good thing, but increasing thrift as you come out of a recession is going to be a drag,” he said easy to get unsecured personal loans.

Housing Market

Regarding the residential property market, where the recession initially emerged, Feldstein said the Obama administration’s effort to revive the housing market is a failure and home prices will continue to decline.

“It was just not well enough designed,” Feldstein said. “They ended up failing.” That suggests the housing slump will “continue to push down house prices,” he said.

“We saw a little pause in home-price declines in the summer but I think that was because of the first-time home buyers program,” Feldstein said. “We’re not going to get that boost.”

The U.S. House voted Dec. 11 to tighten rules for derivatives and create powers to break apart healthy financial firms that pose a risk to the economy. The House rejected a “cram-down” amendment that would have given federal judges the power to lengthen mortgage terms, cut interest rates and reduce loan balances for homeowners in bankruptcy court.

Mortgages Modified

Lenders permanently modified 31,382 of the 4 million mortgages targeted for loan relief under the Obama administration’s main foreclosure prevention plan through last month, the Treasury Department announced on Dec. 10.

Economic reports today suggested the government’s efforts to revive growth with fiscal stimulus may be working for now, Feldstein said in a separate interview on Bloomberg Television. “The danger is we will run out of steam,” he said.

The index of leading economic indicators rose for an eighth consecutive month in November, a sign growth will extend into the first half of 2010. The Conference Board’s gauge of the outlook for the next three to six months increased 0.9 percent after climbing 0.3 percent in October.

Manufacturing in the Philadelphia region expanded in December for the fifth month, led by sales and employment gains. The Federal Reserve Bank of Philadelphia’s general economic index climbed to 20.4 this month. Readings greater than zero signal growth. The bank’s district covers parts of Pennsylvania, New Jersey and all of Delaware.

(In the U.S., hear Bloomberg Radio on satellite radio: Sirius Channel 130 and XM Channel 129. In New York City, tune to WBBR 1130 on the AM dial.)

Source

The Supreme Court again Monday turned away the latest challenge to Chrysler’s bankruptcy and sale to Italian automaker Fiat.

The justices declined an appeal filed by three Indiana state pension funds which hold a portion of Chrysler’s nearly $7 billion in secured debt. The court said the issue is moot since the Chrysler sale was formally completed six months ago.

The three funds — representing police officers and teachers — sought greater compensation for their share of the debt.

A federal appeals court — as well as a bankruptcy judge — approved the sale of the Chrysler assets.

The financially troubled domestic automaker had filed for bankruptcy April 30, and at the time pinned its future on the restructuring plan pushed by the White House.

Chrysler had been trying to leave behind its debt as part of the Chapter 11 process, a step that would wipe out much of the Indiana pension funds’ holdings.

The funds held about $42 million, or less than 1%, of Chrysler’s debt.

Lawyers for the funds argued to the Supreme Court that the Obama administration improperly used money from a federal bailout to help Chrysler. That money was designed, they say, to help only struggling financial institutions payday loan lenders.

Indiana Treasurer Richard Mourdock said the pension funds are secured creditors and, therefore, deserved a say in the outcome. They said they were no longer were seeking to block the sale but simply wanted to recover money for their investors.

Both Chrysler and the federal government said the sale to the Italian automaker had to be completed quickly to ensure domestic jobs were not lost and to keep Chrysler financially afloat for the long term.

The Justice Department, in a filing with the high court, said the president had the authority to tap into the Troubled Asset Relief Program (TARP) to help Chrysler. "As an economic matter … blocking the transaction would undoubtedly have grave consequences," wrote Solicitor General Elena Kagan.

The deal with Fiat and Chrysler was finalized in June, but legal appeals continued. The new company for now is to be owned jointly by the federal government, an autoworker’s union retiree fund and Fiat.

The case is Indiana State Police Pension Trust v. Chrysler LLC (09-285). 

Source

After a 38-day trip through bankruptcy, small business lender CIT Group emerged on Thursday and says it’s ready to charge back into the lending fray. Its next challenge: Rebuilding relationships with customers damaged by the bank’s struggles.

The Melting Pot once counted CIT (CIT, Fortune 500) as one of its preferred lenders. The fondue franchise has 145 restaurants in 37 states, and opened more than a dozen new outposts each year in 2007 and 2008. But as CIT’s troubles deepened, its lending to franchise operators — once a core part of its customer base — came to a near standstill.

None of the seven Melting Pot franchises that opened this year borrowed money from CIT, or any other national bank: "We didn’t do one loan with a major player," said Dan Stone, director of franchise development for Tampa, Fla.-based Melting Pot.

The CIT account representative that worked with Melting Pot has left. "Even if things turn around, we’ve lost that relationship and knowledge of our concept," Stone said. "We have to start over again."

CIT will be starting over with many customers. In 2008, it was the top lender through the Small Business Administration’s flagship financing program, investing $771 million to fund more than 1,200 loans. But this year, as CIT struggled unsuccessfully to avoid bankruptcy, its lending dried up. In the SBA’s 2009 fiscal year, which ended Sept. 30, CIT funded just 142 loans, totaling $105 million.

Now CIT says it’s ready to reopen its coffers. The bank announced this week that it has $500 million in funding available to make SBA-backed loans this year. To win back potential customers, CIT plans to waive packaging fees for the loans for 90 days starting Monday.

Given that CIT was the No. 1 SBA lender in the U.S. for nine years straight, people should have no qualms about seeking financing from the company now that it’s back in the lending business, said Chris Reilly, president of CIT Small Business Lending.

"We have the infrastructure to lend that much money," she said. "The team and I are pretty confident the demand is out there. Realistically, I think there is going to be a lot of competition for loans."

Financing the retail supply chain

While the SBA-backed loan program took a hit, CIT Group’s factoring business — a type of financing that lets companies borrow against their customer invoices — remained relatively unscathed.

An estimated 2,000 manufacturers rely on CIT’s factoring services to finance the goods they supply to some 300,000 retailers. That cash pipeline kept operating through the past year and was unaffected by CIT’s bankruptcy. But there, too, CIT has some rebuilding to do.

The company pumped $23 Same day payday loans.7 billion through its factoring business in the first nine months of 2009 — down 32% from the same period a year earlier. The weak retail environment reduced demand for CIT’s services, but customers have also expressed wariness about running credit balances with a financially strapped lender. In a recent regulatory filing, CIT said that the uncertainty surrounding its business resulted in a "virtual standstill" in signing new business last quarter.

Meanwhile, existing customers took steps to shield themselves from CIT’s risks. Hooker Furniture, a home furniture manufacturer in Martinsville, Va., changed the terms of its financing agreement with CIT in July, when it heard the company was considering bankruptcy. Hooker now retains ownership of its customer invoices. Hooker also immediately drew down its entire available credit balance with CIT in July, to avoid losing access to the money.

"It’s a better situation for us going forward," said Larry Ryder, Hooker’s executive vice president of finance and administration. But with those new safeguards in place, Hooker is happy to remain a CIT customer, he said.

Many customers, like Hooker, changed their financing terms and drew down their credit lines in recent months, CIT said in its filing. The company held credit balances of $898 million for its factoring clients as of Sept. 30, down from $3 billion nine months earlier.

But analysts think CIT has a fighting chance to get back onto solid ground.

As far as bankruptcies go, CIT’s was relatively short, and the company was savvy in structuring its reorganization plan, particularly in terms of debt, said Brian Charles, an equity analyst with New York-based brokerage firm RW Pressprich & Co.

The company has not only reduced its debt by $10.5 billion, but has pushed out the maturity of its remaining debt to 2013 and beyond, he said, buying CIT time to reinvest in the parts of its business that will be most profitable.

"They can work off of its existing portfolio and realize the cash flow from that without having to worry about debt maturities in the near term," Charles said. "This gives them the ability to put that back into the business."

The money is ready to flow again. Now CIT has to convince borrowers that it’s back in the game.

"We as a company would be willing to work with CIT again," said Dan Stone of Melting Pot. "But I could understand if some franchises were hesitant and, if given the option of going with a local bank that hasn’t had as much difficulty, would do that instead." 

Source

Here’s a conundrum for yield-seeking investors: What buys and then gets rid of stocks, behaves like a bond fund and is taxed like a stock fund?

Answer: A specialty fund that mimics the returns of a bond portfolio while spinning off capital gains.

Recent new offerings of these bond fund alternatives, both launched in November, include Claymore Advantaged Canadian Bond ETF (CAB/TSX) and Renaissance Corporate Bond Capital Yield. Similar financial engineering is occurring in the fixed-income portions of some balanced funds.

Simply put, here’s how interest is transformed into capital gains: First, the fund buys stocks. Then it sells the stock portfolio in what’s called a forward agreement.

The counterparty, commonly a bank, agrees to pay a future price that’s tied to the returns of a bond index or bond portfolio. This enables interest to be re-characterized as capital gains.

Som Seif, president of Claymore Investments Inc., says the returns of his firm’s exchange-traded fund are not related in any way to the equities that are bought and then sold forward. "The equities are only there for the purpose of providing the tax efficiency," Seif says.

If you’re investing in an RRSP or other registered account, your decision is simple. Avoid these funds, since there’s no advantage to receiving distributions in the form of capital gains. But in a taxable account, you’re better off receiving capital gains, which are not taxed as heavily as interest.

As the Claymore ETF’s prospectus warns, there are risks associated with derivatives. These include the risk that the counterparty in the forward agreement may default on its obligations.

However, such risks are low, since the fund managers generally deal with very creditworthy institutions. The Claymore ETF’s counterparty, for instance, is Toronto-Dominion Bank.

Taxes are always an important consideration when investing in a nonregistered account paydayloans. But the investment in a virtual bond fund must stand on its own merits, the risks should be understood by the investor and the fees should be reasonable.

The pioneer of this genre is Mackenzie Financial Corp.’s Mackenzie Sentinel Managed Return Class, first offered in March 2002. It’s not a pure play on fixed income, since Mackenzie portfolio manager Chris Kresic maintains a 10 per cent weighting in stocks to give the fund a little more growth potential. He sells forward all the rest of his stocks, using the proceeds to obtain bond exposure.

The fund’s performance has generally lagged that of Mackenzie Sentinel Bond, the more conventional fixed-income fund that Kresic runs. Over the past five years, the gap in returns is about 80 basis points (0.8 per cent) on an annualized basis.

Both funds have roughly the same management expense ratio, so MERs don’t explain the performance disparity. What has made a difference is contrasting bond exposures and counterparty costs.

Mackenzie Sentinel Managed Return is mostly exposed to Government of Canada bonds, which are lower-yielding than the corporate bonds that normally make up a substantial portion of the holdings of Mackenzie Sentinel Bond.

Also exerting a drag on the performance of the virtual bond fund are the fees charged by the counterparties to the forward agreements. These fees are reflected in the prices the counterparties are willing to pay for their forward purchases.

Though forward agreements don’t get factored into MERs, their effective cost would typically be in the range of 25 to 50 basis points. Investors take heed: This alone will offset some of the tax advantages of holding a bond fund substitute rather than the real thing.

rudy.luukko@morningstar.com

Source

Nobel Prize-winning economist Joseph Stiglitz urged U.S. lawmakers to use “overwhelming force” to cut a 10 percent unemployment rate that is forecast to rise.

Stiglitz, a professor at Columbia University in New York and a former White House adviser under President Bill Clinton, told the Joint Economic Committee that more government spending and tax cuts are needed to put Americans back to work.

“There is, in economics, something akin to the Powell doctrine in the military: One needs to attack the problem with overwhelming force,” Stiglitz testified, referring to former chairman of the Joint Chiefs of Staff Colin Powell. “As we approach the looming jobs problem, we should not repeat the mistakes we have continually made in responding to this crisis: too little, too late.”

President Barack Obama this week proposed additional spending on the nation’s transportation system, tax credits to spur hiring by small businesses and incentives to make homes more energy efficient in a second round of initiatives aimed at cutting the jobless rate.

Employers have cut more than 7.2 million jobs since the recession began in December 2007. The unemployment rate last month fell to 10 percent from a 26-year high of 10.2 percent in October. The rate will exceed 10 percent through the first half of next year, according to a Bloomberg News survey of economists taken Dec. 1-8.

“We should not be fooled” by the decline in the jobless rate, Stiglitz said. “Growth in private demand” will probably be “insufficient to restore employment to normal levels any time soon.”

Too Small

Stiglitz said the $787 billion package of spending and tax cuts enacted in February “has been working” although it was too small.

“Unless action is taken, we risk facing a vicious cycle: unemployment contributing to a weak economy, more mortgage foreclosures, more bad debts, lower demand, and possibly more, but certainly not less, unemployment no faxing payday loan.”

Stiglitz said priorities for spending should include extending unemployment benefits, aiding states facing revenue shortfalls, giving tax credits for weatherizing homes, government jobs programs and research and technology initiatives.

The economist shared the Nobel Prize in 2001 for work on problems that may arise in markets when parties don’t have equal access to information.

Restructure Mortgage Debt

Stiglitz also said Congress should act to encourage mortgage debts be restructured to reflect lower home values.

He said banks and mortgage lenders have been discouraged from restructuring home loans because they are allowed to carry those loans at face value even though many of the mortgages are underwater and likely to result in a default.

“I call that marking to hope, not marking to market,” Stiglitz said.

He said Congress should pass a “homeowner’s Chapter 11” bankruptcy reorganization law to make it easier for people to force a restructuring of their mortgage debt.

“That would provide a legal backdrop to encourage restructuring,” Stiglitz said. “We need a homeowners Chapter 11 that treats homes at least as well as we treat corporations.”

Stiglitz, 66, also said the Federal Reserve contributed to the financial crisis by failing to supervise banks or stem the housing bubble. He questioned proposals to give the central bank more authority to supervise firms whose failure might threaten the financial system.

“Giving more power to an institution which has failed so miserably, with results that have imposed such costs on all of us, cannot be the right solution unless there are deep and fundamental reforms in the institution, of a kind that are beyond those currently being discussed,” he said.

Source

The Bank of Canada is widely expected to keep its hands off interest rates Tuesday, holding them at near zero and committing to do so until at least July, despite growing evidence the economy is kicking back to life.

Fears of prolonged economic stagnation eased Friday with a report showing employers hired five times as many workers as expected. The data supported the Bank of Canada's view that economic growth will speed up in the fourth quarter after a disappointing third quarter, when it barely crept out of recession with tepid 0.4 per cent annualized growth.

All 12 of Canada's primary securities dealers forecast the central bank would hold its overnight target rate unchanged at 0.25 per cent at its final policy-setting meeting of the year. The bank releases its rate decision and accompanying statement at 9 a.m. ET.

Two-thirds of the traders think the bank will follow through on its pledge to hold rates at that level through mid-2010, conditional on inflation staying on track.

Reuters News Agency

Source

Uncle Sam is getting picky.

Despite two wars, President Obama’s 30,000 troop surge in Afghanistan and the Army’s goal to swell its ranks by 15,000 this fiscal year, potential recruits are finding that it’s a lot tougher to sign up.

"Military recruiting is through the roof," said Mackenzie Eaglen, a research fellow at the Heritage Foundation, a conservative think tank in Washington, D.C. "In fact, they’re turning people away."

The dismal job market has put the armed forces in an enviable position. Unemployment is at a 26-year high of 10.2%, and the U.S. economy has lost 7.3 million jobs since the start of 2008. This has prompted many Americans to consider the military for work, despite the prospect of armed combat in Afghanistan or Iraq.

"It’s just like any industry, when there’s a glut of employees vying for a certain number of jobs, the employer can be a little bit more choosey," said Army spokesman Wayne Hall, a civilian at the Pentagon. "That’s just the nature of supply and demand."

The Department of Defense said that all branches of the armed services — the Army, Navy, Air Force and Marine Corps - met or exceeded recruitment goals in fiscal year 2009, which ended Sept. 30. That’s the first time that’s happened since 1973, when the draft ended and U.S. forces withdrew from Vietnam.

Raising the bar

"We have tightened up our standards," said Army recruiting spokesman Douglas Smith, a civilian at Fort Knox, Ky. "There are types of waivers that we are currently not considering that we have considered in the past."

The Army is no longer giving second chances to recruits who fail the alcohol and drug tests, as it did during the height of the Iraq war several years ago, said Smith, nor is it providing waivers to overweight recruits or high school dropouts. The Army also no longer overlooks criminal infractions for even relatively minor offenses, like excessive parking tickets, he said.

"We’ve had such a dramatic increase in the unemployment rate in the last couple of years, it’s clear that’s had a dramatic effect," said Beth Asch, military recruiting expert for the Rand Corporation, a non-profit think tank based in Santa Monica, Calif payday loans for self employed. "It’s clear that they’re being picky. People who would have been marginal before are not being considered."

A more educated recruit

Applicants in 2009 were of an unusually high academic quality, according to the Army, which recruited 13,337 enlisted men and women with higher education, more than double the 2001 tally.

That included 523 recruits with master’s degrees and 19 with post-doctorate degrees, compared with 2001, when the Army attracted 117 recruits with masters’ degrees and none in the post-doctorate category.

The highly educated recruits probably entered the military as corporals or specialists making less than $22,000 a year, said Smith. Most enlisted personnel can expect to earn $1,568.70 a month by the end of their first year, which means an annual salary of $18,824.40, according to the DOD.

Asch said that workers at the top end of the educational scale are often involved in research, but a dearth in funding is prompting them to find work elsewhere, including the military.

"It’s really breathtaking, to get someone with a doctorate degree," she said. "That’s really unusual."

In it for the long haul

Sgt. 1st Class Marcus Pinkey, an Army recruiter in Carlisle, Penn. since 2002, said that some of the more seasoned recruits have an easier time adjusting to military life, because they’ve already experienced hardship.

"They know that it’s something that they have to do for the survival for their family," he said.

He added that the vetting has gotten tougher, to ensure that recruits are committed to a military life.

"The screening process is a little more stringent, to make sure that people want to stay in for a longer period of time, instead of just waiting for the economy to get better," he said. 

Source