Thursday, December 6, 2012

Republican Defectors Ready to Back Tax-Rate Compromise

A few dozen Republicans have joined a bipartisan call to break the impasse between PresidentBarack Obama and House Speaker John Boehner over taxes for the highest- earning Americans.

Obama and Boehner spoke by telephone this afternoon, Boehner spokesman Michael Steel said without giving details. A White House aide also confirmed the call, speaking on condition of anonymity.

The Republicans signed a letter calling for exploration of “all options” on taxes and entitlement programs, a signal that some rank-and-file members are ready to bargain.
One of the petition leaders, Representative Mike Simpson of Idaho, says he could accept higher rates for married couples earning more than $500,000 a year, in exchange for an overhaul of spending on entitlements such as Medicare.
Separately, Representative Kay Granger of Texas is endorsing Oklahoma Republican Tom Cole’s call to extend all tax cuts for middle-class earners as “just the right thing to do.”
What unifies these lawmakers is a recognition that Obama’s re-election has strengthened his hand in negotiations aimed at averting more than $600 billion in automatic tax increases and spending cuts set to take effect in January. The letter’s approximately 80 signers are half-Republican, half-Democratic, according to Simpson spokeswoman Nikki Watts.

‘Pretty Obvious’

“It’s pretty obvious Obama won the election, and he promised he was going to raise taxes on the wealthiest,” Simpson said in an interview. “What Republicans said is, ‘We’ve got to have entitlement reform.’”
While it may be an unpalatable trade for both sides, he said, “There’s enough sane people left to get it done.”
The White House budget office sent a letter to federal agencies this week to collect last-minute information and to prepare for possible automatic spending cuts in January if they aren’t modified or canceled by Congress, Obama press secretaryJay Carney said.
He said the Office of Management and Budget was making contingency plans and sought the information to “finalize calculations on the spending reductions that would be required.”

Stocks Rise

Stocks rose after a two-day drop in the Standard & Poor’s 500 Index. The S&P 500 rose 0.2 percent to 1,409.27 at 4 p.m. New York time, after falling as much as 0.6 percent earlier. Treasury 10-year note yields fell one basis point to 1.59 percent at 2:59 p.m. New York time, according to Bloomberg Bond Trader data.
A trade-off of higher taxes for entitlement spending cuts would require Boehner, an Ohio Republican, to persuade more than 100 of his majority party members to join House Democrats in approving a deal.
Representative Steve LaTourette of Ohio said Boehner could get the 218 votes needed to send a tax increase to the Democratic-run Senate if about 120 House Democrats “buy in” to entitlement cuts, such as raising the eligibility age for Medicare or adjusting the annual Social Security cost-of-living adjustment.

Over the Line

Report Bolsters the Case for Large U.S. Natural Gas Exports

Banks gird for new world as Citi cuts 11K jobs

9:59PM EST December 5. 2012 - Citigroup's plan to cut 11,000 jobs is far from the first big downsizing Wall Street firms have executed since the 2008 financial crisis. And it won't be the last.
The nation's third-biggest bank is the latest in a series of financial institutions to cut large numbers of jobs. Behind the cuts is new CEO Michael Corbat's push to improve Citi's performance — and free up cash flow so it can boost its paltry stock dividend, currently just a penny a share. But Citi, like its rivals, also faces pressures from new international regulations that will require banks to boost their capital to protect against future crises and new U.S. regulations flowing from the Dodd-Frank Act that are designed to limit banks' risk-taking.
Indeed, while Citi's news Wednesday isn't likely to set off a short-term wave of layoffs, it's part of a broader trend toward an economy that depends much less on the finance industry for jobs and growth than it did before 2008, analysts say. Since the job market bottomed out in 2010, finance has added only 94,000 of the 5 million net new private-sector jobs, according to government data. Before the recession, finance accounted for nearly 6% of private-sector jobs and 22% of the value of the Standard & Poor's 500-stock index.
"We're moving from an economy where we package financial products to one where we build more things, like products and roads,'' said Nancy Bush, a banking analyst at SNL Financial. "Consumers have reduced their debt, governments will reduce their borrowing, As that happens, everything driven by the financial economy will shrink. Whether people like it or not doesn't matter.''
In Citi's case, the moves were overdue, said Michael Mayo, an analyst at Credit Agricole, a persistent Citi critic who this week recommended its shares for the first time in years.
Citi's specific problem is it is under-profitable even by the standards of post-crisis banks, Mayo said. It has been less than half as profitable as rival JPMorgan Chase in the last 12 months. Corbat, who took over when Citi dismissed his predecessor, Vikram Pandit, in October, is the first Citi CEO in years to deal aggressively with the bank's high overhead, Mayo said.
"CEOs 1 through 4 couldn't get it right,'' Mayo said, cracking wise about Citi's executive turnover since Sandy Weill left the top job in 2003. "I didn't think CEO No. 5 would be any better.''
Citi's cuts had little directly to do with the changing rules. The bank has made progress toward meeting future capital standards that will phase in next year through 2019. Its capital base has grown 20% so far this year, leaving a cushion of cash and securities worth 8.6% of its risk-adjusted assets (mostly outstanding loans and trading positions) to guard against future losses, Chief Financial Officer John Gerspach said at an investor conference sponsored by Goldman Sachs Wednesday.
More than half of the jobs Citi will cut are in information technology and other support areas, Citi said. Other cuts included selling or shrinking the bank's consumer businesses in offshore markets, including Pakistan, Paraguay, Romania and Turkey. Sticking with its strategy to focus on 150 cities globally where it sees the greatest potential growth in consumer banking, Citi also will close 84 branches worldwide, including 44 in the U.S.


  1. mammoth, Boeing777-300 ER is an amamzing plane! Those 2 engines are stringer than the 4 engines on a 747, which is being phased out now. One engine on a 777 is moe poserful than all the 747 engines! I hope there are no catastrphic events on 777, but there will be, just hope my son is safe! Those ER planes can fly 18 hours non stop now. My son flying HKg to Ohare non stop is a HUGE flight!

  2. 16 hour flight from HK to Chicago! OUCh as it is non stop!

    I told my son to NOT buy shares in any airline! Not even his own! LOL

  3. I hope i didn't leave the wrong impression on Boeing as I did state last night I would rather fly Boeing than anything else after our conversations. Shaza are you coming to Chicago?

  4. I was thinking the article poorly impacted Boeing's bottom line and may cause a drop in stock prices. Not that they would all fall out of the sky.

  5. Also if Citi got all that bailout money why are they laying off 11k workers. They should just lay off all the executives who lost all the money in the derivative department and MBS loans.

  6. The human mind cannot comprehend the exposure of derivatives without a visual.
    Derivatives: The Unregulated Global Casino for Banks