World financial news

The leaders of the Group of Eight world economic powers have taken the first steps toward a "broad consensus" on the need to balance growth with shrinking deficits, a senior White House official said Friday.

President Obama attended a luncheon at the G-8 summit in Toronto to discuss economic policies with the leaders of Canada, France, Germany, Italy, Japan, Russia and the United Kingdom, according to the official.

The official acknowledged that there were different "points of emphasis" among the leaders at the meeting, which is in its early stages. But he said there is a "convergence of views" and that the president is "confident" about the upcoming meetings of the Group of 20 nations, which includes China, India and other developing economic powers.

"There is broad consensus among G-8 leaders on how to maintain durable growth while reaffirming our shared commitment to fiscal consolidation going forward," the official said.

President Obama has stressed the need to keep economic stimulus measures in place to prevent a global slowdown. But European nations have been moving toward more conservative fiscal policies as the region grapples with an ongoing debt crisis.

In a letter to G-20 leaders sent earlier this week, the president wrote that safeguarding and strengthening the economic recovery should be "our highest priority in Toronto lowest fee payday loans."

"This means that we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong," he wrote. "In fact, should confidence in the strength of our recoveries diminish, we should be prepared to respond again as quickly and as forcefully as needed to avert a slowdown in economic activity."

Meanwhile, European nations have been cutting back on public spending and raising taxes to cope with massive budget deficits. The euro has been in a tailspin as investors bet against the proposed austerity measures and worry the European Union could slide back into recession.

On Tuesday, the United Kingdom unveiled one of its harshest budgets in decades. The five-year budget, widely anticipated by fiscal experts, may hold lessons for U.S. policymakers who will face similar quandaries about how to rein in debt.

"The president sees deficit reduction as part of a long-term growth strategy," the White House official said. 

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Guilford County School has applied for more than $17 million in federal grants to help it achieve goals contained in the district's strategic plan.

One application is to the Teacher Incentive Fund for $12.5 million to support individual and school-wide incentive programs. A separate grant of $5 million from "Investing in Innovation" or i3 would be directed toward plan goals in recruitment, retention and employee development.

“The Strategic Plan calls for staff to put strategies in place that will lead to increases in student achievement, and educators are the greatest factor impacting student success,” said Amy Holcombe, executive director of talent development. “At least 80 percent of our budget is devoted to people. An investment in educators is an investment in our students.”

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Estate planning attorneys may worry that their persistent headaches are a sign of something more serious. But once they remember what they do for a living, the headaches start to make perfect sense.

That’s because they are operating in a kind of weird estate tax limbo. The federal estate tax was here, now it’s gone for a year. It’s probably coming back soon, although no one can say exactly what it will look like.

Unless Congress acts, the estate tax will be back next year and no more than $1 million of a person’s estate would be exempt from it. That’s well below the $3.5 million exemption in place last year. And the top estate tax rate would be 55%, up from 45% in effect last year.

Oh, and just because there is no federal estate tax this year doesn’t mean heirs of someone who dies in 2010 have no federal tax liability on their inheritance. They very well may, but it can be hard to tell them in some instances what it will be because of ambiguities in the law.

So what’s an estate planner to do?

"You try to do as little as possible," [[for the estate of] someone who died in 2010," said Steve Hartnett, associate director of education at the American Academy of Estate Planning Attorneys.

And when you absolutely have to do something, he said, you make your best guess and hope it turns out to be the right one when Congress gets around to clarifying the estate tax rules of the road.

One potential minefield is how to deal with the change in "step up" rules for heirs.

Under the old regime, heirs who wanted to sell inherited assets had to pay the capital gains tax on the gains accrued since the day they inherited the asset. In other words, the "cost basis" of the asset was essentially stepped up to present day. Those rules go back into effect next year.

This year, however, when heirs sell appreciated assets they will owe capital gains tax on all the gains since the deceased bought the asset. But the first $1.3 million in gains is treated as tax free. And for surviving spouses, another $3 million is as well.

Say an estate’s assets with $5 million of gains are sold. Non-spousal heirs would only pay the capital gains tax on $3.7 million. A widow who is sole beneficiary would only owe tax on $700,000.

As a result of the new step-up rules, estate planners face an array of new complexities. One of them is advising clients when to sell an asset to minimize the tax bite. For instance, if the heirs of someone who dies this year don’t sell an appreciated asset until 2011 or beyond, which step-up rules will they be subject to? Hartnett says how the law will be applied isn’t clear.

Equally confusing is how best to cook up an estate plan for someone who is living now and plans on doing so at least until 2011.

The ‘who knows?’ factor

The only good news is that generally speaking relatively few taxpayers are affected by the federal estate tax itself.

At most, only an estimated 1.76% of estates would be affected in 2011 if the estate tax is resurrected with a $1 million exemption, according to a recent report by the Congressional Research Service.

Then again, every estate of someone who died this year, no matter how small, will be affected by changes to rules governing heirs’ step-up in cost basis.

Optimists still hold out hope Congress will offer clarity before 2011, but the smart money says it won’t come before the mid-term elections in November.

Then again, who knows?

Lawmakers shocked the death rattle out of people by actually letting the estate tax lapse this year. Soon after, there was talk that they would reinstate the estate tax retroactively. Wrong again. Now halfway through the year, few expect that will happen.

Next expectation? Lawmakers absolutely, positively will come up with a more lenient version of the federal estate tax for 2011 than the one slated for currently.

Several key senators have been trying to cut a deal for months. Negotiations have stalled on more than one occasion.

"We’re almost half a year away from a tax policy that a super majority of senators say they don’t support. Yet, we’re stuck," Sen. Charles Grassley, R-Iowa, said earlier this week. "This time-sensitive issue has taken a back seat to everything else."

Anne Mathias, director of research at Concept Capital’s Washington Research Group, thinks it’s a fair bet to assume the new exemption level will fall somewhere between $3.5 million to $5 million.

But she also said if Republicans sweep the mid-term elections, and win at least 60 seats in the Senate, they may push to extend the repeal of the tax.

When Hartnett was asked what he thinks will happen with the estate tax next year, he gave the only answer he and his colleagues can give for many estate tax questions these days: "I don’t know." 

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Seeking to appease deficit hawks, Senate Democrats scaled back unemployment benefits and Medicare physician reimbursement measures on Wednesday.

The revised jobs bill eliminates a $25 weekly supplement for the jobless that had been part of the last year’s stimulus act. Those currently receiving the supplement in their unemployment benefits check will continue to do so until they exhaust their extended benefits, or until the week of Dec. 7, whichever comes first. That cut will reduce the bill’s cost by $5.8 billion over the next decade.

The new version of the bill would also freeze a 21% cut to Medicare physician reimbursement rates only through November, instead of through 2011. This will reduce the bill’s size by $16.4 billion over 10 years.

The legislation, which has been stuck in the Senate for more than a week, originally came in at about $140 billion and would have added about $78.7 billion to the deficit. The revised bill would raise the deficit by $55.1 billion.

Lawmakers are hoping to vote on the bill as early as Thursday. But if Democratic leaders can’t rustle up enough support, the vote could be pushed back to next week.

The Senate’s actions mirror what happened in the House, which twice had to shrink its version of the jobs and tax extenders bill to secure enough votes among members wary of raising the federal deficit even further. Representatives ultimately passed a measure in late May that would increase the deficit by $54.3 billion.

The grab-bag legislation pushes back the deadline to file for federal unemployment benefits until the end of November, renews expired tax provisions, lengthens a small business lending program and adds to infrastructure investments.

It also increases the tax on money paid to managers of hedge funds and investment partnerships to ordinary income levels instead of the much-lower capital gains rate. Under the revised bill introduced Wednesday, investment fund managers would have to treat 75% of this money as ordinary income, beginning in 2011.

The revised bill further hiked a tax on oil that finances the Oil Spill Liability Trust Fund to 49 cents, up from the 34 cents in the House version. The current tax is 8 cents. This measures is now projected to raise $18.3 billion over 10 years.

The revised Senate bill retained $24 billion in Medicaid funding to states, a provision the House had to jettison. President Obama and governors pressed lawmakers to keep the money, which many state officials have already included in their fiscal 2011 budgets, which begin July 1.

Senate lawmakers also voted Wednesday to include a measure in the bill that would push back the deadline to close on home purchases and still qualify for a federal tax credit of up to $8,000. Homebuyers would have until September 30, instead of June 30, to complete the transaction. The provision will cost $140 million over 10 years. 

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Hawaii Biotech, a company that has been struggling to reorganize in bankruptcy court, will go up for auction next month.

A request to convert the company’s Chapter 11 filing to a Chapter 11 363(b) asset sale provision, which is what GM and Chrysler used for their recent reorganizations, was accepted by bankruptcy court Judge Robert Faris on Monday.

The auction is scheduled for July 19, and bidding interest and notification is due to the company by July 12.

“We currently have a stalking horse bid in for the company,” said CEO Elliot Parks. “Our goal is to keep the company intact and keep trials going easy payday loans.”

Hawaii Biotech filed for bankruptcy protection on Dec. 11, at which time it claimed between $1 million and $10 million in assets and liabilities. The company listed nearly 400 unsecured creditors, with its largest being its landlord, Redico. Its claim was for $500,929 in unpaid rent, according to PBN research.

Hawaii Biotech, which has 23 full-time employees, entered into human clinical trials for West Nile and dengue fever vaccines within the past two years.

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Goldman Sachs’ legal troubles just keep piling up — and it’s becoming a bigger headache for the investment bank and its shareholders.

Shares of Goldman Sachs sat out Thursday’s market rally. The stock tumbled nearly 3% in mid-afternoon trading and hit a new 52-week low after reports surfaced late Wednesday that the Securities and Exchange Commission is investigating a mortgage investment Goldman bundled and sold in 2006 called Hudson Mezzanine.

The SEC is already investigating possible fraud involved with an investment Goldman created called Abacus. A spokesman for the SEC declined to comment on whether the agency was indeed conducting an investigation into Hudson Mezzanine.

The reports follow news that Wall Street’s top firm was hit with a lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, another mortgage-backed security that Goldman sold in 2007. Basis is seeking more than $1 billion in damages in its civil suit.

A representative from Goldman Sachs (GS, Fortune 500) declined comment on the reported government investigation, but issued a sharp rebuke to the Timberwolf suit, calling it "a misguided attempt by Basis…to shift its investment losses to Goldman Sachs."

The latest developments are another setback for the once-impervious investment bank. A number of shareholder suits have been filed against Goldman in recent months. There have also been reports it is facing a criminal investigation by federal prosecutors.

At the center of it all however, is the SEC’s civil suit against Goldman, in which it charged the firm with defrauding clients on the sale of Abacus, a collateralized debt obligation, or CDO.

So far, there have been few signs of progress on the case. But that may soon be changing.

According to documents filed with the U.S. District Court for the Southern District of New York, Goldman currently has until June 22 to file a formal response to the SEC’s suit.

Experts suggest that Goldman will most likely call the government’s bluff and demand it drop the case as opposed to reaching a settlement by the deadline.

Such a move could help Goldman save face after it has repeatedly denied any wrongdoing. It would also potentially give the firm more insight into the SEC’s case as well as additional time to negotiate a possible settlement.

The spokesmen for the SEC and Goldman Sachs declined to comment on the status of the Abacus case.

But legal observers are confident that neither party has the stomach for an ugly courtroom battle cash till payday advance. Some have suggested the SEC does not want to risk an embarrassing courtroom loss given how anxious it has been to shore up its reputation in the wake of the Bernard Madoff Ponzi scheme.

Goldman, on the other hand, doesn’t want to tangle with one of its biggest regulators and bringing any more negative attention to the company.

"Both parties are in very deep water," said Thomas Gorman, a former attorney in the SEC’s division of enforcement who now works in private practice at the law firm Porter Wright.

What seems certain is that the two sides will eventually reach a settlement. How quickly that happens remains anyone’s guess. According to several recent reports, Goldman attorneys have met with SEC officials. But the two parties are apparently no closer to an agreement.

Jay Brown, a professor at the University of Denver Sturm College of Law, who focuses on corporate and securities law, said the possibility of a settlement by June 22 was "a very unlikely prospect."

Brown added that even if they were getting nearer to a deal, the parties would probably need more time just to hammer out the details.

Experts have said that one of biggest potential stumbling blocks in any negotiation is the terms of the settlement, versus any fine Goldman might be assessed.

Many believe that Goldman will attempt to seek a deal in which it agrees to lesser charges to avoid any impact on its client base and limit its exposure to the various shareholder suits the company faces. That may be a tough compromise however for the SEC, which is betting its reputation on this case.

"Goldman will want to get rid of that fraud charge and there is no reason for the SEC to drop it now," said Gorman.

One former high-ranking official in the SEC’s enforcement division said dragging out the settlement talks, however, won’t help either party. While the SEC has plenty of other cases to prosecute, Goldman is just as anxious to get out of the spotlight and get back to the business of making money.

"It doesn’t help Goldman or the SEC to have it go on for a long period of time," said the attorney, who requested anonymity out of fear of the impact it could have on business at his current law firm. "If you are going to settle, do it sooner and get it over with." 

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With mortgage delinquencies at an all-time high, there are lots of desperate homeowners seeking to avoid foreclosure — and tons of scam artists trying to take advantage of that.

The fraudsters promise the moon but rarely deliver any help.

In Times Square on Friday, the non-profit community development organization NeighborWorks launched a campaign to heighten awareness of foreclosure prevention scams.

"[For scam artists,] the all time high foreclosure rate is an opportunity in the same way that pushing toxic subprime loans was during the housing boom," said Bernell Grier, CEO of Neighborhood Housing Services of New York (NHS), a NeighborWorks affiliate.

From October through the end of April, community development groups handled more than 10,000 reports of foreclosure-prevention scams, according to Susan Jouard, a spokeswoman for NHS.

Grier said alert consumers can identify fraud from legitimate help if they’re aware of these three tell-tale signs.

Avoid anyone who:

Asks for a fee in advance. If you pay them these fees, which can range from $1,000 to as much as $5,000, that’s probably the last you’ll ever hear from them. Most never even go through the motions of talking to lenders and trying to work out modifications.

Tells you they can guarantee foreclosure will stop. Nobody can do that, especially before they find out more about your individual circumstances.

Urges you to stop paying your mortgage and pay them instead. They’re trying to add to the money they already bilked you out of by keeping up the pretense of trying for a modification.

Many community groups, including those affiliated with NeighborWorks, offer expert, free help for homeowners, but they often don’t have the funds to advertise their services. It’s easier for the scammers to invest in fliers, mailers, even Internet and TV advertising to get their message out.

"Call us if you’re having a problem with your property," said Grier. "You shouldn’t have to pay for these services." 

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Decades of booming personal computer sales helped Intel become a chipmaking behemoth, but consumers’ rapid shift away from PCs may leave the tech giant out in the cold.

As Intel’s old marketing campaign proclaimed, the company’s chips are "inside" practically every kind of computer, from PCs to Macintoshes to netbooks. But PCs are yesterday’s news. Mobile Internet devices like smart phones and tablets are where all of the growth is but Intel (INTC, Fortune 500) hasn’t been able to gain much traction.

Where Intel has so far failed, a little-known British company called ARM has had roaring success. ARM is to mobile devices what Intel is to computers — the company develops and licenses the basic chip designs for practically all of the world’s cell phones, smart phones and Apple’s (AAPL, Fortune 500) iPad.

Tech analysts left and right are proclaiming that the mobile device market will outpace or perhaps even replace the PC market in the next five years. In fact, the market grew 56.7% during the first quarter, according to IDC.

Could a tiny British company that took in just less than $500 million in sales last year really be in a better position to take advantage of that forecasted growth than Intel, which had over $35 billion in revenue during the same period?

"Few companies have championed and invested in the shift to wireless computers and PC-like devices like Intel has," said Intel spokesman Bill Kircoss.

Analysts also say it’s premature to dismiss Intel. "ARM is ahead right now, but I’ve become smart enough to know that Intel can’t be counted out," said John Bruggeman, CMO of Cadence Design Systems. "Intel will figure it out, or it’ll spend its way out."

How we got here

Next to Microsoft (MSFT, Fortune 500), Intel has perhaps been the greatest benefactor of the PC boom of the past three decades. Intel’s patent on the x86 processor, which is required to run Windows, helped it become the biggest chipmaker in the world. Intel designed its chips for performance and power, making PCs lightning-fast and able to perform multiple complex tasks simultaneously.

ARM, meanwhile targeted a different, smaller market. By designing chips that use as little power as possible, ARM made its way into practically every cell phone on the market (about 20 billion mobile devices over the past 19 years, according to the company). Unlike Intel, ARM doesn’t actually make chips, but licenses designs to 220 companies around the world, including giants like Qualcomm (QCOM, Fortune 500), Texas Instruments (TXN, Fortune 500), Nvidia (NVDA), Samsung and Apple.

Both companies were humming along until Apple introduced the iPhone in the summer of 2007. The iPhone was years ahead of any other phone on the market at the time, allowing users to carry a device in their pockets that performed PC tasks.

"There was a huge technological disruption that took place at the launch of the iPhone," said Bruggeman. "Now, mobile is the high volume category and it’s the only one that matters. The only question is will it be Intel-based or ARM-based?"

Because of its vast experience in the mobile sector, ARM won the contract to design the iPhone’s processor and has since appeared in a large number of smart phones. Apple’s iPad also uses an ARM-licensed chip.

Atom bomb

The Intel vs. ARM battle is far from over. Mobile devices are rapidly improving, but none yet offer the same deep, rich Internet experience of a PC or run all of the complex tasks of a computer.

Next year, Intel plans to unveil a new "Atom" mobile device processor (code named "Moorestown"), which Intel thinks can outperform competitors and help it give ARM a run for its money.

First-generation Atom chips can be found in just about every netbook on the market. Though Intel offers the chips for smart phones, most devices with Intel inside only run the unsuccessful MeeGo platform. Intel so far has not been able to tap into the rampant success of Apple’s iPhone OS or Google’s (GOOG, Fortune 500) Android platform.

But the Atom 2 might change that. Though experts say Atom chips won’t soon be found in an iPhone, Intel recently demonstrated its Moorestown chip seamlessly running Android 2.1 at the Computex technology expo in Taipei.

"In just the past 30 days alone, we’ve expanded this chip line to cars, TVs, tablets and smartphones and plan to keep bringing new, and even more power-sipping Atoms to market," said Intel’s Kircoss.

Even ARM admits that its market dominance doesn’t mean that it has won.

"People don’t care what’s underneath, they just want to buy stuff that they think is cool," said Bob Morris, director of mobile computing at ARM. "Intel eventually will be successful in this area, though they’ll be one of many."

But there’s one potential hang up for Intel: Compared to its traditional PC chips, the profit margins for the Atom chip are atrocious. A small number of analysts even suggested that Intel would like the mobile market to go away.

"Maybe Intel doesn’t care who wins the mobile space," said Phani Saripella, analyst at Primary Global Research and a former Intel manager. "It might be better off defending its turf [on the higher end devices]."

Stay tuned. 

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The Latin Business Association is among the latest groups adding its support to those boycotting Arizona as thousands of people marched in protest of the state’s new immigration laws Saturday at Steele Indian School Park in Phoenix.

The group on Friday praised the National Minority Supplier Development Council in moving its location for the 2010 conference from Phoenix to Miami Beach.

“The Latin Business Association board and members continue to stand against Arizona’s SB1070 and applaud the efforts of numerous organizations who stood in solidarity to encourage the NMSDC to move its October conference payday advance lenders. I am certain it was not an easy step for the NMSDC to take, but it was the appropriate action in support of all minority business owners,” said Ruben Guerra, chairman of the Latin Business Association

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