May 20, 2024

You are here: Home / 2013 / Archives for August 2013

Archives for August 2013

Off the Charts: Some Big Banks Thrive Despite Chaos of 2008

August 30, 2013 by

Two weeks later, Lehman Brothers failed and a panic began. The crisis demonstrated how interconnected the world financial system had become and how vulnerable even apparently healthy banks were when their competitors began to crumble. In the weeks that followed, most large banks around the world had to be bailed out. Their share prices plummeted.

Since then, however, some big banks have performed much better than others — a difference based to a significant extent on just how well, or badly, each bank had been run in the months and years leading up to the crisis.

The accompanying charts show the performance of 25 large banks around the world. As the crisis began, each of them ranked in the top 20 in the world in at least one of three measurements — market capitalization, book value or total assets.

In the weeks and months that followed, all but one of them lost at least half of their market value, as measured in the local currency of the bank’s primary market. The exception was a Chinese bank, the Industrial and Commercial Bank of China, whose shares lost less than a third of their value.

The charts also show the performance of the Bloomberg World Bank Index, which comprises more than 140 banks and has done better than most of the large bank stocks. This was a crisis where bigger was not necessarily better, and where some of the largest banks proved to be far from adequately capitalized, notwithstanding what their books had indicated before Lehman collapsed.

This spring, the world bank index got back to within 3 percent of its level at the end of August 2008, although it has since slipped back and is now 11 percent lower. Few of the large banks shown have done as well.

But a handful of banks turned out to be profitable long-term investments that August. Shares of both JPMorgan Chase and Wells Fargo in the United States are now more than 40 percent higher than they were. Shares of two of the three Chinese banks shown — Bank of China and China Construction Bank — are higher now than they were five years ago, while the third is approximately unchanged. In Britain, HSBC is up about 13 percent, a much better performance than was shown by other large European banks. It did not hurt that HSBC had a significant presence in many developing countries, most of which rode out the recession reasonably well even though some have stumbled this year.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/08/31/business/economy/some-big-banks-thrive-despite-chaos-of-2008.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Rupee Drops, and Outlook Grows Darker for India

August 30, 2013 by

India’s economy slowed in early summer to its weakest pace since the bottom of the global economic downturn in 2009, government statistics released Friday evening showed.

The Central Statistics Office in New Delhi said that the economy grew 4.4 percent in the quarter ended June 30, well below economists’ expectations of 4.8 percent. The quarter was the weakest since output grew 3.5 percent in the quarter that ended March 31, 2009.

The accumulating signs of economic distress — slower growth, a widening current-account deficit, higher oil prices and rising inflation in general — suggest that the monthlong fall of the Indian rupee in currency markets may be a symptom of fundamental troubles in the Indian economy and not just part of the broader difficulties experienced by Asian emerging market currencies in recent weeks.

Hints that the Federal Reserve in the United States may soon shift to a tighter monetary policy have prompted global investors to shift billions of dollars out of financial markets from São Paulo to Jakarta to Mumbai, eroding the value of local currencies in developing economies. But the Indian rupee has fallen the fastest of any emerging market currency in the last month, down 8.1 percent. Broader investor disenchantment with emerging markets has been compounded here by worries about India’s economy, the third-largest in Asia after China’s and Japan’s.

Manufacturing and mining have been hit the hardest. A court-ordered halt to most iron ore mining across India for environmental reasons has hurt steel and other sectors; state governments have been raising taxes on the sector, and broader demand has begun to falter.

“The fact is, yes, the manufacturing sector has slowed down,” said Raj K. Singh, the chairman and managing director of the Bharat Petroleum Corporation, an oil refining and marketing company that is two-thirds owned by the Indian government and is one of the country’s largest businesses.

The data was released after stock market and currency trading had ended for the day, despite government promises to stay with the regular Friday morning release. After a week of considerable volatility, the rupee and the Mumbai stock market both had showed modest gains earlier Friday.

India enjoyed annual growth of 8 to 9 percent in the years leading up to the global financial crisis but has struggled to reach 6 percent since then, despite heavy government spending and large fiscal and trade deficits.

From corner stores to corporate boardrooms, the consensus in Mumbai these days is that stagnation may continue over the next few months, although almost no one expects a steep downturn.

Sitting in his office on Friday morning in front of an abstract Indian painting in blues and yellows, Mr. Singh voiced concern about a 7.2 percent drop in nationwide diesel consumption during the first three weeks of August from a year ago. Nationwide diesel consumption was also down 5.9 percent in July from a year ago.

But heavy monsoon rains have limited the need for diesel in irrigation pumps, making the comparison less clear, Mr. Singh cautioned. Rohit Dawar, the top diesel demand expert at the Petroleum Ministry in New Delhi, said in a telephone interview that diesel consumption had been artificially inflated in July and August last year by a peculiarity in government fuel subsidies, since removed, that temporarily made it cheaper to burn diesel instead of other fuels in industrial boilers.

Even allowing for all of these factors, however, “there is a slight slowdown” in diesel demand recently, Mr. Dawar said.

Plentiful monsoon rains, a key indicator for the Indian economy for thousands of years, have produced lush fields that could yet help stabilize broader measures of the economy in the coming months and forestall a steeper slowdown. While World Bank data show that value added in agriculture is only one-sixth of the economy these days, a good harvest could still play an outsize role in limiting recent increases in food prices.

Inflation will probably remain a problem, however, given that India relies almost entirely on imported oil, which becomes more expensive with each drop of the rupee. So important is oil to India’s trade deficit that desperate bidding for scarce dollars by Indian refiners helped drive the rupee briefly to a record low on Wednesday, before the Reserve Bank of India stopped the rout that evening by arranging to transfer dollars from its reserves to oil importers.

“Prices are rising for everything — petrol is more expensive, vegetables are more expensive,” said Bharat Hirji Gada, a local shopkeeper.

India has some advantages compared with European and other Asian countries that have experienced steep economic downturns following currency declines over the last two decades. The biggest advantage may be that the Indian government has long prohibited borrowing in foreign currencies by poor or middle-class households and by small and medium-size businesses.

Foreign debt has been concentrated among blue-chip companies and wealthy individuals. Many of these loans are to borrowers whose revenue is largely denominated in dollars, limiting their currency exposure, said Haseeb A. Drabu, the chief economist for the Essar Group, one of India’s heavy industry giants.

“The bulk of it would be hedged,” he said.

Neha Thirani Bagri contributed reporting.

Article source: http://www.nytimes.com/2013/08/31/business/global/forecast-darkens-for-indian-economy.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

The TV Watch: ‘Spiral’ and 3 Other French Shows Worth Seeking Out

August 30, 2013 by

There is exotic and beguiling television all across the world, far away by plane but near enough by satellite, cable or Web to be tantalizingly just out of reach.

Television reveals the limits of globalization. In the era of Mumbai call centers, online offshore banking, Skype chats, drone attacks, satellite phones and avian flu pandemics, national borders seem almost quaint. Yet foreign shows that should be as easily found in Minnesota as Monte Carlo are not readily available.

Instead, Americans rely on trickle-down distribution. Audiences in the United States have been sampling the best of British television — and “Benny Hill” — since “The Forsyte Saga” reached PBS in 1969. They more recently discovered Nordic Noir police thrillers and other Scandinavian cult favorites, including the Danish series “The Crime” and “Borgen.”

It’s not just Denmark. There are really well made programs in every corner of the world, and Internet streaming has opened the door a crack. Whether it’s because of technological differences or copyright issues, American audiences today are a little like Italians in the era of Marco Polo: They have a few exotic spices and a faint sense that there may be a lot more somewhere out there.

“Spiral,” a French crime series originally called “Engrenages,” is a huge hit in France, as well as on BBC Four in Britain, and it has found a devout American following on Netflix, which offers the first three seasons. But beyond “Spiral,” there are excellent French series that are almost inaccessible to American viewers, and for no good reason.

“Un Village Français” is a period drama about a village under Nazi occupation. “Maison Close” is a drama set in a 19th-century Parisian bordello — Baudelaire meets the Playboy Channel. “Les Revenants” is a matter-of-fact ghost story about a handful of people who return from the dead and try to resume normal life in a small French town.

Those four series represent different genres and have nothing in common, really, except the shared context of history and a stylishly unhurried pace that is a legacy of French cinema in its heyday. Most important, they serve up the most common themes — crime, war, sex and the occult — in fresh and unexpected ways. All but “Un Village” are under consideration for adaptations in English.

“Spiral,” which just finished a fourth season, was the first to find an outside audience, probably because it belongs to the most familiar and exportable format, the police drama. But it’s a particularly rich and complicated version, weaving detectives hunting down drug traffickers and terrorists into a contemporary Parisian backdrop of political arrivistes, corrupt judges and criminals with friends in high places, including predators in the mold of Dominique Strauss-Kahn.

“Un Village Français,” which began in 2009, was also a sensation, possibly because it was the first major French television series seriously to address collaboration during the Nazi occupation in World War II. Vichy is not a taboo subject by any means. There have been scores of history books, novels, movies, documentaries and even graphic novels about the occupation. (Though it is a measure of how quickly postwar amnesia and myth making took hold that in the 1970s, one of the first scholars to point out that the Pétain regime willingly went along with Hitler was an American historian, Robert O. Paxton.)

But France is not as much of a television culture as are Britain and other European countries. The French film industry, internationally respected and state subsidized, has thrived better than most, and, accordingly, producers and stars tended to favor movies over television. Films, commercial and art house, were a better reflection of the national mood and cultural mainstream; most of the top-rated series on French television are made in the United States.

“Un Village Francais,” which is about to start its fifth season, is evidence that the tide has shifted. The drama begins in June 1940 in Villeneuve, a fictional village in the Jura Mountains, when the Germans are at the door, and the illusion of invulnerability is crumbling. The byword of the series is “To live is to choose,” and in each episode, and each season, the war intensifies, options narrow and collaboration thickens.

This series was not a shock or an awakening for French viewers in the way that the 1978 NBC mini-series “Holocaust” was to many Germans — half the country watched that drama about the plight of German Jews. “Un Village” goes over very familiar territory, only it is neither an indictment nor an exoneration. It’s a subtle, historically accurate but not unsympathetic look at ordinary people suddenly tested by war, defeat and enemy invasion.

Some of the most well-meaning people collaborate — faute de mieux — and some of the bravest resisters are downright unpleasant.

This article has been revised to reflect the following correction:

Correction: August 30, 2013

An earlier version of this article misstated the English translation of a Danish series title, “Forbrydelsen.” It would be “The Crime” in English, not “The Killing,” the title of the American remake of the series.

Article source: http://www.nytimes.com/2013/08/30/arts/television/spiral-and-3-other-french-shows-worth-seeking-out.html?partner=rss&emc=rss

Filed Under: Media Business Tagged With: , ,

Markets Lower as Worries Over Syria Ease

August 30, 2013 by

American stocks fell in a thinly traded session on Friday as investors avoided making large bets before a long weekend with the situation about Syria still uncertain.

Afternoon trading was volatile, with indexes swinging between break-even levels and solid losses as Secretary of State John Kerry said in televised remarks that Syria’s government used poison gas against civilians and made the case for a limited military response.

“People are uneasy not knowing what’s going on,” said John Carey, portfolio manager at Pioneer Investment Management in Boston. “With that uncertainty and going into the Labor Day holiday, we’re seeing people step back.”

The Dow Jones industrial average was down 30.64 points, or 0.21 percent, at 14,810.31. The Standard Poor’s 500-stock index fell 5.20 points, or 0.32 percent, at 1,632.97. The Nasdaq composite index was down 30.44 points, or 0.84 percent, at 3,589.87.

Trading was light ahead of the market holiday on Monday for Labor Day. About 3.99 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.31 billion shares.

“I tend to view the weakness as a buying opportunity, barring some global crisis,” said Mr. Carey, who helps oversee about $200 billion in assets. “Syria isn’t the crisis in and of itself, but if we do take military action, there could be repercussions.”

It has been a tough month over all for stocks. The S. P. 500 fell 3.1 percent in August and lost 1.8 percent for the week in a third decline in the last four weeks.

The Nasdaq fell 1.9 percent for the week while the Dow slid 1.3 percent in its fourth consecutive weekly loss. For the month, the Dow fell 4.4 percent and the Nasdaq lost 1 percent. Only one of the 30 Dow components, Microsoft, ended higher in August.

Almost 70 percent of stocks traded on the New York Stock Exchange closed lower on Friday, while 73 percent of Nasdaq-listed shares ended in negative territory.

Video game companies were among the Nasdaq’s biggest decliners on Friday. Electronic Arts fell 3.37 percent, to $26.64, while Activision Blizzard fell 2.57 percent, to $16.32.

The chip maker OmniVision Technologies tumbled 16.08 percent on earnings weakness. It forecast current-quarter adjusted profit largely below expectations as rising competition and a slowdown of smartphone sales in the United States led to an inventory pileup.

Salesforce.com, the best performer in the S. P. 500, jumped 12.55 percent, to $49.13, after the company raised its fiscal 2014 sales outlook and reported better-than-expected revenue and earnings. The Apache Corporation, the oil and gas producer, climbed 8.95 percent, to $85.68. The company said it was selling a 33 percent stake in its Egypt oil and gas business for $3.1 billion to the state-owned Chinese oil giant Sinopec Group.

The price of the benchmark 10-year Treasury note fell 8/32, to 97 16/32, and its yield rose to 2.79 percent, from 2.76 percent late Thursday.

Article source: http://www.nytimes.com/2013/08/31/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Optimism on European Economy Continues to Rise

August 30, 2013 by

BRUSSELS — Optimism about the euro zone’s economy improved sharply in August, but stubbornly high unemployment, in particular in the bloc’s weaker countries, highlighted the fissure separating the recovering north from the struggling south, according to official data released Friday.

The confidence of business managers polled by the European Commission rose for its fourth successive month in the euro zone, the commission, the executive agency of the European Union, said. The positive trend was particularly strong in Germany and the Netherlands but was also evident in Italy, France and Spain.

The measure of sentiment across the bloc in August, based on business orders, industrial confidence and other factors such as companies’ hiring plans, increased by 2.7 points to 95.2.

Signs of rising confidence have inspired some analysts to predict that the 17 countries using the euro have overcome a crisis that was triggered by banks’ investment in risky mortgage debt and later drove some nations to the brink of bankruptcy.

“The most acute phase of the crisis and the toughest period of belt-tightening is behind us,” said Dirk Schumacher, an economist with Goldman Sachs.

In a separate release, Eurostat, the European Union’s statistics agency, said annual consumer price inflation in August would be 1.3 percent, down from 1.6 percent in the previous month mainly because of a drop in energy prices.

A lack of price pressures is a potential boon to the economy because households have a little more spending power and the European Central Bank can stick to its low-interest-rate policy.

But while morale improved, unemployment in the euro zone in July remained at a record high of 12.1 percent, with a sharp contrast between countries such as Germany — — just over 5 percent and Spain, more than 26 percent, showing that the improvement is not being felt everywhere.

Although there were 15,000 fewer people in the euro zone without a job compared with the previous month, , according to Eurostat3.5 million people under 25 remain unemployed.

“We haven’t broken the negative dynamic in the south of Europe,” said Guntram B. Wolff of Bruegel, a research concern. “Banking fragility, weak growth and high unemployment still present a threat.”

Article source: http://www.nytimes.com/2013/08/31/business/global/optimism-on-european-economy-continues-to-rise.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

In Thailand, Rubber Price Plunge Has Political Cost

August 29, 2013 by

After two years of falling rubber prices had driven many farmers into debt, hundreds of them blockaded the region’s main north-south road and railroad to protest.

“This was our last resort, our only option,” said Thaworn Ruengkling, a rubber farmer who says he can no longer earn enough from farming to cover the cost of fuel and fertilizer, never mind feeding his family.

“We can’t take it anymore,” Mr. Thaworn said Thursday at one of the intersections that the farmers had blocked with commandeered trucks and buses.

For years, breathless economic growth in Asia, especially in China and India, helped send the prices of commodities like rubber, palm oil and coffee soaring. But as Asia began to cool off and the West remained sluggish, the prices of many commodities have crashed, threatening the incomes of millions of farmers, especially in Southeast Asia.

The rubber farmers’ blockade has caused a political storm in Thailand, and analysts say it will not be the last. The Thai police tried and failed to remove the farmers here by force, a clash that has helped embolden the political opposition led by the Democrat Party, which is strongest in southern Thailand.

Bridget Welsh, a researcher based in Singapore and an expert on Southeast Asian politics, said that falling commodity prices were likely to have political implications in Malaysia, Indonesia and Vietnam as well, all countries where the government relies to varying degrees on rural support. In Indonesia, five million people work on palm oil plantations; in Malaysia, farmworkers and holders of small tracts of land are part of the core of the governing party’s support.

If prices continue to slide, governments in Asia may soon be faced with deciding which farmers to support, as Thailand has on a large scale by providing billions of dollars in subsidies to rice farmers, and which ones they cannot afford to help.

Ms. Welsh predicted that the price declines would “lead to instability and strengthen the opposition” in Malaysia and Thailand, and “expose regional governments to more scrutiny” of how they manage their economies.

The sharp decline in rubber prices — more than 45 percent in two years — appears traceable to a classic boom-and-bust cycle: farms that expanded when demand was high now produce too much rubber when demand is slack.

Thailand has long been the world’s leading producer of rubber, but over the past decade China, India, Indonesia, Myanmar and Vietnam have contributed to an increase in output of millions of tons, according to the United Nations Food and Agriculture Organization.

“We are in real trouble,” said Banlue Chankaew, a third-generation rubber farmer standing at a barricade on the main north-south road on Thursday. After splurging on cars, motorcycles, furniture and smartphones during the good years, many farmers have now had to borrow money, often at usurious rates from loan sharks. Those who cannot pay their debts have fled to other parts of the country, Mr. Banlue said.

Responding to the farmers’ calls to guarantee them prices well above current market rates, government officials have held negotiations and appear to be haggling over how much assistance they will provide. But the government has also sought to portray the protesters as troublemakers. The provincial police chief warned reporters and government officials on Thursday that it would be dangerous to visit the protests.

“Don’t risk your life,” said Maj. Gen. Ronnapong Saikaew, the chief of police in the province of Nakhon Si Thammarat.

Mr. Banlue does not elicit fear. Soft-spoken and courteous, he seemed out of place at the barricade. “I’m 45 years old, and this is my first time taking part in a protest,” he said.

Other protesters, especially younger ones, were armed with wooden sticks and slingshots. At night, they burn tires near the barricades.

Opposition leaders accuse Thailand’s prime minister, Yingluck Shinawatra, of botching the government’s response to the protests. Responding to reporters’ questions earlier this month, Ms. Yingluck said Thailand would not be able to influence the global rubber price because “with regards to the quantity of rubber, we have a small amount compared with other countries.” Thailand has been the world’s largest rubber producer since 1990, when it overtook neighboring Malaysia and today produces just under one-third of the world total.

The rubber crisis is one of a number of problems facing Ms. Yingluck, who had not held political office before becoming prime minister in 2011, and the opposition often faults her for being inexperienced and for lacking detailed knowledge of the economy. Beyond that, rubber farmers say she favors rice farmers, who are concentrated in areas where Ms. Yingluck’s political party, Pheu Thai, has strong support.

“We feel we are the forgotten child in the family,” said Mr. Banlue, who was also the deputy headman of his village.

The rubber farmers say they only resorted to blockades after repeatedly writing to government officials asking for help but never receiving a response.

“We had to think of a way,” said Wichan Raksapon, whose neat rows of rubber trees grow beside the blocked road, “that would make people understand that we have severe problems.”

Poypiti Amatatham contributed reporting from Nakhon Si Thammarat, Thailand.

Article source: http://www.nytimes.com/2013/08/30/world/asia/thai-rubber-farmers-block-road-to-protest-prices.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Taylor Farms, Big Food Supplier, Grapples With Frequent Recalls

August 29, 2013 by

The recent recall of greens used at Olive Garden, Red Lobster and possibly other restaurant chains is Taylor Farm’s fourth this year. The company initiated three others in 2012 and three in 2011, according to the Food and Drug Administration.

Bruce Taylor, chief executive of Taylor Farms, attributed the number of recalls to the sheer size of his company — it sells as much salad as its next three largest competitors combined. “Just if you do the sheer math, our recalls relative to our size are fewer than anybody else,” Mr. Taylor said.

Only the most recent was prompted by an outbreak of illnesses, he added. Since June of this year, more than 600 cases of cyclosporiasis, an intestinal disease caused by Cyclospora cayetanensis, a bacteria that is transmitted through feces, have been reported. Although not all reported cases were tied to Taylor Farms produce, this is the largest outbreak of cyclosporiasis since 1997.

Food safety experts said the number was somewhat higher than they would expect, even given Taylor’s size. “While produce companies have by far the most recalls among food companies in general, I’d say one every 12 to 18 months is more the standard,” said Gene Grabowski, a consultant who assists companies in dealing with the public and the media over food recalls.

Taylor competitors Dole and Fresh Express, a unit of Chiquita Brands, each had four recalls in 2012 and one in 2011. Neither company has conducted a recall so far this year, according to F.D.A. records.

Bill Marler, a lawyer who specializes in food safety litigation, also said that even for a company of its size, the rate of recalls by Taylor seemed a bit high. “That’s quite a number of recalls over that time period,” Mr. Marler said.

But several of those recalls could have been prompted by random inspections by state health agencies under a federal program that is now defunct, he said.

Taylor and other large produce companies had successfully lobbied to get rid of it, arguing that by the time the program identified a pathogen, the tainted product had already long since been consumed, making it hard to recall.

Shelly Burgess, a spokeswoman for the F.D.A., which is responsible for the safety of fruits and vegetables, among other foods, said there was no specific number of recalls that would require greater scrutiny by the agency.

“In assessing whether a firm should be subject to increased F.D.A. scrutiny, the agency takes many risk factors into account beyond the number of recalls the firm has initiated,” Ms. Burgess wrote in an e-mail.

Mr. Taylor said many of the recalls were prompted by the company’s own food safety regimen. For example, preliminary company tests drove the decision to issue a 39-state recall of organic baby spinach that was potentially contaminated with E. coli, he said.

“We have a protocol where we do an initial test and get an initial positive or negative and then follow that with a confirmation test that gives a positive or negative,” he said. “I violated that protocol, though, out of an abundance of caution, acting to recall the product before we got the final result.”

Mr. Taylor said the final testing found no contamination, turning the company’s recall into a withdrawal of any remaining products from the market. “It was a fire drill we didn’t need to do,” he said.

And two of Taylor’s recalls this year — almost 700 cases of its BBQ Flavored Ranch Salad with Chicken and a Black Forest ham and Swiss cheese sandwich sold under the Wawa stores’ name — involved undeclared allergens like peanuts, not pathogens. “We make 700 items with over 2,000 components,” Mr. Taylor said. “If an employee picks up the wrong item, we have a recall.”

This week, Taylor Farms resumed operations at its Mexican processing facilities, which were the source of the greens tainted with Cyclospora, after an inspection by the Food and Drug Administration found conditions met known safety protocols.

The Centers for Disease Control, which is working with the F.D.A. on the matter, said this week that while investigations in Nebraska and Iowa had linked the outbreaks there to products from Taylor Farms of Mexico, preliminary analysis of more recent cases in Texas suggested the greens involved did not come from there.

“Although the investigation of cases in 2013 is ongoing, available evidence suggests that not all of the cases of cyclosporiasis in the various states are directly related to each other,” the C.D.C. said.

Mr. Marler said he had not yet filed a lawsuit in the case for that reason. “Something else is going on, and I think it’s probably environmental,” he said.

Mr. Taylor wondered whether flooding earlier this summer in the areas where the problem surfaced provided the conditions for bacterial infections. He said notices posted in Nebraska, Iowa and Texas had warned residents in flooded regions to boil their water. “It’s pure speculation on my part,” he said, “Iowa and Nebraska represent somewhere around 4 percent of the salad sold from our plant in Mexico in any given week.”

Article source: http://www.nytimes.com/2013/08/30/business/taylor-farms-big-food-supplier-grapples-with-frequent-recalls.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Gay Marriages Get Recognition From the I.R.S.

August 29, 2013 by

It is the broadest federal rule change to come out of the landmark Supreme Court decision in June that struck down the 1996 Defense of Marriage Act, and a sign of how quickly the government is moving to treat gay couples in the same way that it does straight couples.

The June decision found that same-sex couples were entitled to federal benefits, but left open the question of how Washington would actually administer them. The Treasury Department answered some of those questions on Thursday. As of the 2013 tax year, same-sex spouses who are legally married will not be able to file federal tax returns as if either were single. Instead, they must file together as “married filing jointly” or individually as “married filing separately.”

Their address or the location of their wedding does not matter, as long as the marriage is legal: a same-sex couple who marry in Albany, N.Y., and move to Alabama are treated the same as a same-sex couple who marry and live in Massachusetts.

“Today’s ruling provides certainty and clear, coherent tax-filing guidance for all legally married same-sex couples nationwide,” Treasury Secretary Jacob J. Lew said. “This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”

Gay and civil rights groups praised the ruling. “Committed and loving gay and lesbian married couples will now be treated equally under our nation’s federal tax laws, regardless of what state they call home,” said Chad Griffin, the president of the Human Rights Campaign. “These families finally have access to crucial tax benefits and protections previously denied to them under the discriminatory Defense of Marriage Act.”  

But the Treasury decision could have ramifications for many gay couples’ tax liabilities, said Roberton Williams of the nonpartisan Tax Policy Center in Washington. Couples with similar incomes often pay the “marriage penalty,” with their tax liability as a couple being much higher than it would be if they were single.  

At the same time, same-sex couples will also be able to file amended returns for certain prior tax years, meaning that many couples might be eligible for refunds. Couples do not have to file amended returns if they do not want to, a senior Treasury official said, meaning that couples who might pay the marriage penalty would not owe back taxes.

But the ruling creates complications for same-sex couples who live in any of the 37 states that do not recognize their marriages. Previously, such couples filed federal and state tax returns as individuals. Now, they will have to file their federal returns as other married couples do, but may be required to file their state returns as individuals.

“There’s going to be a cumbersome workaround,” said Nanette Lee Miller of Marcum L.L.P., a public accounting firm. She sees it as a paperwork bother more than a financial issue.

States might also respond to the federal ruling with changes of their own. “Most state income tax regimes begin with federal taxable income as the starting point,” Marvin Kirsner, a tax lawyer at Greenberg Traurig, said in an e-mail. “These state taxing authorities will have to figure out how to deal with a same-sex married couple who file a joint income tax return for federal tax purposes.” He added,

“We will need to see guidance from each nonrecognition state to see how this will be handled.”

The rule change is likely to provide a small increase for federal revenue, as more same-sex couples pay the marriage penalty, Mr. Williams said, describing it as a “rounding error.” But it would be partly offset by new federal spending on benefits for same-sex spouses.

The ruling applies to all legal marriages made in the United States or foreign countries. But it does not extend to civil unions, registered domestic partnerships or other legal relationships, the Treasury said.

The Treasury ruling is one of many that are starting to emerge from all corners of the federal government as Washington changes regulations to conform with the Supreme Court decision.

Separately, the Health and Human Services Department said Thursday that Medicare would extend certain key benefits to same-sex spouses, “clarifying that all beneficiaries in private Medicare plans have access to equal coverage when it comes to care in a nursing home where their spouse lives.” 

But federal agencies are not moving in lock step. Instead, they are creating a patchwork of regulations affecting gay and lesbian couples — and may be raising questions about discrimination and fairness in the way that federal benefits are distributed.

Medicare and Treasury officials have said they would use a “place of celebration” standard for determining whether gay couples are eligible for benefits. That means same-sex couples would receive benefits as long as they are legally married, regardless of where they live.

But the Social Security Administration is now using a “place of residence” standard in determining spousal benefits, and a gay couple in Alabama might not receive the same benefits as a gay couple in New York until final determinations are made or Congress acts. The Obama administration has pushed federal agencies to ensure the Supreme Court’s ruling is carried out quickly and smoothly.

“It would be nice if they were consistent,” Ms. Miller said. Creating federal regulations is a process and could change, she said.

Tara Siegel Bernard contributed reporting from New York.

Article source: http://www.nytimes.com/2013/08/30/us/politics/irs-to-recognize-all-gay-marriages-regardless-of-state.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

United States’ 2nd-Quarter Growth Is Revised Up to 2.5%, From 1.7%

August 29, 2013 by

Gross domestic product, a broad measure of goods and services produced across the economy, grew in the second quarter at an annualized rate of 2.5 percent in April through June of this year, the Commerce Department reported on Thursday. The government initially estimated G.D.P. at 1.7 percent.

The growth rate is still far lower than what the country needs to recover the ground lost during the recent recession anytime soon. The long-term average growth rate for the economy is more than 3 percent, and the economy needs above-trend growth to make up for sharp losses from the downturn.

Even so, the upward revision was welcome news, particularly alongside another report on Thursday showing that jobless claims were falling. The improving economy is also likely to factor into the Federal Reserve’s decision to pull back from its stimulus efforts, which some analysts expect as soon as September.

Expansion in the second quarter — faster than the annualized growth rate in the first quarter of 1.1 percent — was driven by gains in consumer spending, exports, private inventory investment, nonresidential fixed investment and residential fixed investment. Residential fixed investment, which reflects the sharp rebound in housing construction, has been one of the brightest spots in the economy so far this year, growing at an annualized rate of 12.9 percent in the second quarter and 12.5 percent in the first.

The shrinking government continues to drag on the economy. State and local government spending has declined almost every quarter for the last four years, and federal government spending fell during about half of those quarters. The upward revision to gross domestic product last quarter primarily reflected the fact that exports turned out to be higher than initially estimated and imports were actually slightly lower.

“The good news is that the economy accelerated in the second quarter to a degree that was even better than expected,” said James M. Baird, chief investment officer for Plante Moran Financial Advisors. “However, it’s also clear that wary consumers and businesses haven’t fully bought in to an imminent return to more robust growth and will not go ‘all in’ on spending and investment.”

The revisions seemed to further convince economists that the Federal Reserve will begin tapering its large-scale asset purchases at its September meeting. The Fed chairman, Ben S. Bernanke, has said that the central bank would slow these stimulus measures later this year, but did not specify when.

The output revisions “should give Fed officials more confidence that the recovery is gathering steam,” Paul Ashworth, chief United States economist for Capital Economics, wrote in a client note. Still, he said, “it’s no certainty, and August’s nonfarm payroll figures will be watched closely,” referring to the next jobs snapshot, due out on Sept. 6.

Economists noted that the upward revision for second-quarter G.D.P. addressed one of the puzzles in the data this year, about why hiring seemed to be picking up when output growth remained extraordinarily slow. The divergence between the two indicators did not seem sustainable, and some worried that a major slowdown in employment growth might be on the horizon.

Thursday’s report “adds to the likelihood that the apparent disconnect between employment and G.D.P. will be closed with G.D.P. moving up rather than employment down,” said Jim O’Sullivan, chief United States economist at High Frequency Economics. “Some, but not all, of the disconnect was revised away today.”

Private forecasters seem to be expecting third-quarter growth in the 2 percent range, and did not seem to think that the upwardly revised second quarter brightened the growth picture.

“We continue to judge that a significant ramp up in growth is unlikely, particularly given the ongoing effects of fiscal tightening,” said Peter Newland, an economist at Barclays. Congress’s across-the-board automatic spending cuts have been weighing on the economy, and further cuts may come when the Senate and House convene in September. A fight over the debt ceiling also looms.

Article source: http://www.nytimes.com/2013/08/30/business/economy/second-quarter-gdp-revised-sharply-higher.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

High & Low Finance: Not Crying for Argentina but Fearful of a Ruling

August 29, 2013 by

After a second offer — on the same terms — in 2010, all but 7 percent of the bonds have been exchanged. But some of the remaining ones were owned by hedge funds that went to court. Last week they won a decision from the United States Court of Appeals for the Second Circuit in New York that has caused considerable concern at institutions like the Treasury Department and the International Monetary Fund.

The decision essentially says that Argentina cannot pay any creditors if it does not pay all of them, and says banks — in the United States and perhaps around the world — could face contempt charges if they allow Argentina to make payments to only those lenders it wishes to pay.

“While we strongly disagree with Argentina’s actions in the international financial arena,” a senior Treasury official, who spoke on the condition of anonymity, said this week, “we have serious concerns that the Second Circuit’s decision will undermine the orderliness and predictability of sovereign debt restructuring and could roll back years of progress.”

The United States government, in a brief filed with the appeals court before it made its decision, urged that it not take the course it ultimately took, warning that the decision could damage the status of New York as a chief world financial center and cause “a detrimental effect on the systemic role of the U.S. dollar” by encouraging countries to denominate their debt in other currencies and put them outside the jurisdiction of United States courts.

The International Monetary Fund, in a paper issued earlier this year, warned that the decision could “risk undermining the sovereign debt restructuring process.”

Such fears were brushed aside in the appeals court decision.

“We do not believe the outcome of this case threatens to steer bond issuers away from the New York marketplace,” said the opinion, written by Judge Barrington D. Parker. “On the contrary, our decision affirms a proposition essential to the integrity of the capital markets: borrowers and lenders may, under New York law, negotiate mutually agreeable terms for their transactions, but they will be held to those terms. We believe that the interest — one widely shared in the financial community — in maintaining New York’s status as one of the foremost commercial centers is advanced by requiring debtors, including foreign debtors, to pay their debts.”

Most international bonds are issued under either New York law or English law. The I.M.F., in its paper, states that under English law bondholders have no rights to file suits. Only the bond’s trustee can do that, and the trustee can be compelled to act only if a large number of bondholders demand it. It was concern that countries would flock to English law that led to the United States government warning that New York’s status as a world financial center could be damaged.

In the past, as the I.M.F. paper noted, it has been easy to get an American court to render a judgment against a country that defaulted on its bonds, but “it has been far more difficult to find assets that can be used to satisfy the judgment.”

That is because a federal law severely limits the assets that bondholders can seek to attach. Diplomatic missions are off limits, as are many other assets. And it is obvious that the courts of the nation that defaulted are not going to help the unfortunate creditors. So having the judgment has in the past proved to be worth very little.

But the appeals court has turned that around, at least in the case of Argentina. It concluded that Argentina is required by the “pari passu” clause that, in one form or another, is standard in bond contracts, to treat all its bondholders alike. So if it pays the interest payments owed on its restructured bonds, it must also pay the money owed on the bonds whose holders refused to restructure. And because those bonds are in default, that means the entire amount of principal and interest is owed and must be paid.

The United States brief says that interpretation of “pari passu” is simply wrong. “The settled understanding of pari passu clauses is that selective repayment does not violate the clause, even if it is the result of sovereign policy,” the brief stated. “This view has been expressed not only by the United States, but by academics, governmental bodies, and market participants.” It noted that similar clauses had not been impediments to debt restructurings in the 1980s and 1990s.

That, in and of itself, would have little effect. Argentina could simply ignore the ruling and continue to make payments on the restructured bonds while ignoring the other ones.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://www.nytimes.com/2013/08/30/business/fears-of-a-precedent-in-argentine-debt-ruling.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,
« Previous Page
Next Page »