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Wall Street Ventures Into Positive Territory

September 23, 2011 by Leave a Comment

Some analysts attributed the recent losses in the financial markets, especially in the United States, to concerns about whether the governments of developed economies were doing enough to support growth.

Traders said the declines also reflected broad pessimism about the debt crisis in the euro zone and intensifying fears about the economic outlook,  despite the release of a joint statement late Thursday in Washington by the world’s major economies that reiterated their commitment to the stability of banks and financial markets.

The statement by the Group of 20 nations did not, however, include commitments to new action or any talk of additional support for Europe.

“All in all, there appeared to be nothing in the way of concrete new action and markets were generally underwhelmed,” said Sue Trinh,  senior currency strategist at RBC Capital Markets.

The three main indexes on Wall Street wavered on Friday. In afternoon trading, the Dow Jones industrial average was up 66.56 points, or 0.6 percent, to 10,800.39, after a steep decline of 3.5 percent on Thursday, its largest drop since Aug. 18. The broader Standard Poor’s 500-stock index was up 1 percent and the Nasdaq composite index gained 1.4 percent.

Europe trimmed sharp losses and turned positive late in the day. The FTSE 100 in London closed up 0.5 percent and the CAC 40 in Paris rose 1 percent. The DAX in Frankfurt added 0.6 percent.

The yield on the 10-year United States Treasury note rose to 1.808 percent after hitting a new low of 1.6865 percent.

The yields have declined in the wake of the Federal Reserve announcement on Wednesday that a complete economic recovery was still years away and that there were “significant downside risks to the economic outlook, including strains in global financial markets.”

The Fed also announced it would buy long-term Treasury bonds and sell short-term bonds to help stimulate lending and growth.

Some analysts attributed market declines to disappointment that the Fed did not act more forcefully and to little faith that policy tools like lower interest rates could encourage consumers to spend more when they are already worried about jobs.

“The Fed just moved the deck chairs,” said Steve Blitz, the senior economist for ITG Investment Research. “When you see a 10-year Treasury trading at 1.7 percent, the market is telling you that real growth over the next 10 years is going to be zero.

“So it is not so much deflation, but that no one sees the growth that is going to generate demand to borrow,” Mr. Blitz added. “You need confidence to borrow. If people had confidence, they would be falling all over themselves to borrow.”

Gold prices fell further. The spot gold price fell 5.4 percent to $1,645.60 an ounce. Benchmark light, sweet crude oil futures contracts was flat at $80.50 a barrel on the New York Mercantile Exchange.

The weakness in commodities prices suggested to some analysts that investors are starting to bet that the likelihood of a recession in major economies was increasing.

Andreas Hürkamp, chief equity analyst at Commerzbank in Frankfurt, said declines in commodity prices and fears about a possible near-term default by Greece offset an initial rally Friday.

“Until recently, commodity prices had been stable despite the weakness in equities,” Mr. Hürkamp said. “Now that seems to be changing.”

The rise in the dollar has sent crude prices lower, pushing down on stocks in the energy sector, which was down about 10 percent this week.

Brian M. Youngberg, energy analyst for Edward Jones, said concerns over the global economy throws into question future oil demand.

“It is kind of the calm after the storm today,” he said. “There was significant panic yesterday with some data out of China maybe signaling that the Chinese economy may be slowing its growth rate, and then on top of that concerns of a double-dip recession in the United States and ongoing concerns about Europe.

“All those factors caused investors to take risk off the table and avoid sectors that are viewed to be tied to the economy,” Mr. Youngberg said.

The backdrop remained new signs of political paralysis in Washington and Europe’s continued failure to resolve its debt crisis.

The Greek government denied on Friday newspaper reports that it was studying the possibility of an orderly default with 50 percent write-downs for bondholders, Reuters reported.      

Dominic Rossi, chief equity investment officer at Fidelity Worldwide Investment, said he expected economic news over the next few weeks to worsen.  

“Markets have reacted badly to the Fed’s policy statement, and European sovereign debt issues continue to rumble on,” said Mr. Rossi. In Asia, South Korea’s Kospi registered a 5.7 percent drop, followed by Taiwan’s Taiex index, which fell 3.6 percent.

Analysts also said the Kospi drop was partially due to investor concern of a slowdown in the rate of growth in China,  South Korea’s largest trading partner. Markets in Hong Kong, Australia, Singapore, Taiwan, Thailand, the Philippines and New Zealand also were lower on Friday, but registered smaller losses than on Thursday.

Matthew Saltmarsh reported from London. Kevin Drew contributed reporting from Hong Kong.

Article source: http://www.nytimes.com/2011/09/24/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Wealth Matters: A Trust Surges, Heirs and Taxes in Mind, but Mind the Details

July 23, 2011 by Leave a Comment

A feature of it that is coming back into vogue is the charitable lead trust. After parceling out specific gifts, Mrs. Onassis put the rest of her estate into one of these trusts. It was set up to last 24 years, distributing money to charity annually. Whatever is left in 2018 goes to her heirs, in this case her grandchildren.

But the resurgent interest in charitable lead trusts is as much for financial advantage as for altruism.

Since the Republicans and President Obama allowed the gift- and estate-tax exemptions to rise to $5 million per person for this year and next, there has been a rush to pass far more money than that on to heirs, free of tax. In the case of charitable lead trusts, record low interest rates are driving the trend further.

The Internal Revenue Service sets what is called a hurdle or discount rate for these trusts, which is tied to United States Treasury rates. A lower rate means the payment to charity each year can be lower, and if the assets are invested to beat that rate, the amount left over for heirs should be higher.

The confluence of these factors comes as advisers are already bombarding their wealthiest clients with ways to pass money onto heirs, with good reason: the super-rich may be living through the greatest time for avoiding estate and gift taxes in recent memory.

“What’s the biggest bang for the buck?” asked Kirk A. Hoopingarner, a partner at the law firm Quarles Brady in Chicago. “Everyone’s searching for that now. That’s why the charitable lead trust has gotten so much play.”

Banks and lawyers who reap fees from setting up these trusts are not the only ones pushing them. University development departments know the value of a steady annuity payment.

A page on Harvard University’s Web site for giving offers a primer on how these trusts benefit the university and the alumni’s heirs. Harvard also offers to handle the administration of the trust and invest the assets for the donor.

Here are some of the fundamentals of a trust that helps charities and minimizes taxes.

HOW THEY WORK Over the years, charitable lead trusts have been a way to give money to charity with the possible benefit of passing what was left to children without paying estate taxes.

What has kept people from setting these trusts up in the past — and is still causing people to hesitate — is that they are hard for someone who is not a tax lawyer to understand. “It’s too complicated for most people,” said John D. Dadakis, a partner at Holland Knight. “They’re sitting there saying, ‘I want my life simpler.’ ”

The best candidates for these trusts are people who give annually to charity and have an income large enough to take advantage of the charitable tax deduction for the entire amount put into the trust. (The federal deduction for charitable donations is capped at 50 percent of a person’s income, though it can be carried forward for five years.)

Gregory D. Singer, a wealth strategist at Bernstein Global Wealth Management in New York, said such trusts could be worthwhile for those able to put at least $1 million into them. “The downside is that money is tied up and committed,” he said. “In normal times, I’d rather remain flexible, but these aren’t normal times.”

For the super-rich, one fear is that the charitable gift deduction could go away.

THE NEW TWIST During the last period when charitable lead trusts were talked up, after Mrs. Onassis’s death in 1994, many were deemed failures. They either did not have enough money left over for heirs or, in the worst cases, they did not have enough to make all the payments to charity.

Part of the problem was the high hurdle rate — 8.4 percent in August 1994 compared with 2.2 percent for this August. (The other, of course, was the dot-com bubble burst.) A higher rate meant a larger payout and decreased the chances that there would be anything left over in the end.

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Players in a Greek Drama

July 23, 2011 by Leave a Comment

Not only does he have the power to effectively put a “sell” on Uncle Sam, but on Friday he roiled global markets after he said the Greek rescue package would constitute a limited default on the country’s debt.

The analyst, who is based in London, oversees the 30-person government bonds team inside Fitch Ratings, which could soon downgrade the debt of the United States government from its historical, gold-plated, triple-A rating if politicians in Washington cannot agree to raise the debt limit.

And after two days of whirlwind conference calls with colleagues in London and New York to weigh what the Greek restructuring proposals might look like and how Fitch would respond, Mr. Riley and his team stamped a “restricted default” on Greece Friday morning. The details of the $157 billion bailout plan were announced Thursday by European leaders.

The reverberations of a downgrade by Fitch or its competitors, Standard Poor’s and Moody’s Investors Service, often send borrowing costs soaring for the affected governments while typically putting equity and debt markets into a tailspin as investors run for cover.

That power and responsibility has made Mr. Riley and his team figures — and often targets for critics — in the debt drama sweeping the globe this year.

“People don’t know who is selling Italian bonds or who is going short Spanish securities or who is betting on a Greek default,” Mr. Riley said in an interview. “But a headline that says ‘Greece downgraded’ is a simple one to understand and you can point the finger at who did it very easily.”

His team recently received hostile e-mails labeling them “idiots” or blaming them for the harsh austerity measures many European countries have adopted. He is on the speed dial of European policy makers and United States Treasury Department officials who are eager to convince him that their belt-tightening plans are sufficient to avoid a negative report. His days are filled with calls from managers of pension funds, sovereign wealth funds, insurance companies and other asset managers trying to gauge what might spur a downgrade or a default and how that would affect their holdings of that country’s bonds.

All the while, Mr. Riley and his staff are running internal “war games,” exploring what might happen to money market funds, financial institutions and even individual state finances if the United States were to default on its debt.

Some of the agencies’ harshest critics, however, wonder why the rating agencies still wield so much power. Are they acting like disinterested parties in the American debt-ceiling talks or driving the discussions and their own agendas through their demands, they ask. Standard Poor’s, for instance, has said that if any debt-ceiling deal did not include an agreement to reduce the nation’s deficit by $4 trillion over the next decade, the United States was still at risk of losing its triple-A rating.

“No nation, agency or organization has the authority to dictate terms to the United States government,” Representative Dennis J. Kucinich, Democrat of Ohio, said in mid-July after Moody’s placed the United States on review for possible downgrade. “Moody’s and its compatriot S. P. were the direct cause of the near-collapse of the economy of the United States.”

Mr. Kucinich and others place significant blame on the rating agencies and their conflict-ridden business models — they are paid by the issuers they rate — for much of the financial crisis around mortgage-related securities. The agencies put gold-standard ratings on mortgage-related securities that held increasingly risky home loans while raking in fees from Wall Street banks. Investors bought those securities on the belief that the triple-A rating made them as safe as United States Treasuries.

Others, however, say the agencies may simply be forcing governments, including the United States, to take some strong medicine.

“They do see their job as looking down the road” in asking that whatever debt deal is struck that it addresses the huge United States deficit, said Cornelius Hurley, director of the Boston University Center for Finance, Law and Policy.

Mr. Riley, a 45-year-old Briton and father of two, has spent the last decade inside Fitch evaluating governments around the world. He worked as a senior economist at UBS Warburg and, before that was an adviser inside Britain’s Treasury department.

To relieve some of the pressure, Mr. Riley says he tries to play with Fitch’s soccer team at lunchtime on Tuesdays and that he occasionally plays PlayStation games with his 17-year-old son.

He says he and his team at Fitch have developed thick skins to deal with the pressure.

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Panel Hears Complaints on Pensions at Delphi

June 23, 2011 by Leave a Comment

“It is frightening to even think about allowing this precedent to stand,” said Bruce Gump, a retiree of Delphi who lost part of his benefit when the federal government took over Delphi’s pension plan in bankruptcy — even though other Delphi retirees got special payments to shield them from such losses.

The difference between Mr. Gump and his luckier neighbors was their union status. Retirees who belonged to the United Automobile Workers and two other unions while at Delphi got their full benefits after the bankruptcy, because of an unusual side agreement with General Motors, which was honored even as G.M. also went into Chapter 11 that year. Retirees like Mr. Gump who were not union members, or who belonged to smaller unions, did not get such help.

Mr. Gump and others who testified argued that this two-tiered outcome had undermined the rule of law in bankruptcy, where retirees with underfunded pensions were normally considered unsecured creditors, whether they belonged to unions or not.

The hearing, by a subcommittee of the House Committee on Oversight and Government Reform, came at a time of mounting public frustration over pension rules that cushion some retirees, while others see their benefits shredded.

The federal government offers pension insurance for workers at companies that go bankrupt, but workers at a few companies — like contractors to the Energy Department and NASA — are turning out to have better pension coverage. Meanwhile, states and municipalities have stayed out of the federal pension program, leaving their workers at the mercy of increasingly hostile taxpayers.

The question of pension guarantees, and who pays for them, came up shortly after G.M. went into Chapter 11 two years ago with financing from the United States Treasury. E-mail messages were introduced to help explain the process.

In the messages, officials from the Obama administration’s Auto Task Force asked G.M. executives how they intended to handle the pensions at Delphi.

Delphi had once been a division of G.M., and was still a major supplier in 2009. Ten years earlier, when it was spinning off Delphi, G.M. promised the autoworkers’ union that if its pension fund ever failed at Delphi, they could come back to G.M. to be made whole, through special payments called “top-ups.”

There was no precedent for any company making such payments.

Matthew Feldman of the Auto Task Force warned G.M. that honoring the 10-year-old promise “could get messy,” and expressed uncertainty about whether the Pension Benefit Guaranty Corporation would permit it.

But Walter Borst, G.M.’s treasurer at the time, replied that the pension agency could not throw such a wrench into G.M.’s plans. “Our reading of the benefit guarantee is clear, that it’s for the benefit of retirees, and not the P.B.G.C.,” he wrote.

Some lawmakers said it appeared that G.M. had been calling the shots, even though it was bankrupt and dependent on federal life support.

Ron Bloom, who testified for the Treasury’s Auto Task Force, said G.M. had complied with all relevant laws while in Chapter 11, adding that he was also troubled by the losses some parties suffered.

The controversy over Delphi’s two-tiered pension outcome may foreshadow a similar policy decision that Congress must make in the coming months, over whether to appropriate money to NASA to cover the cost of a promise it made in 1996, to top up the pensions of its primary space shuttle contractor, United Space Alliance of Houston, if its pension fund was ever terminated. Mr. Obama’s budget proposal for fiscal 2012 asks Congress to appropriate about $550 million for that purpose.

The promise is coming due now because the space shuttle program is ending and United Space Alliance will no longer have the revenue needed to cover the cost of the plan. If NASA fulfills its promise, the company’s retirees will not be subjected to the pension agency’s insurance limits.

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Delphi Pension Plan Is Called Unfair to Nonunion Workers

June 22, 2011 by Leave a Comment

“It is frightening to even think about allowing this precedent to stand,” said Bruce Gump, a retiree of Delphi who lost part of his benefit when the federal government took over Delphi’s pension plan in bankruptcy. Delphi retirees from the United Auto Workers and two other unions, by contrast, got their full benefits, thanks to an unusual side agreement with General Motors, which was honored even as G.M. restructured in bankruptcy that year.

“The United States government chose winners and losers,” Mr. Gump added.

The hearing, by a subcommittee of the House Committee on Oversight and Government Reform, comes at a time of mounting public frustration over pension rules that cushion some retirees, while others see their benefits shredded. The federal government offers limited pension insurance, but workers at some companies — like contractors to the Department of Energy and N.A.S.A. — turn out to have better pension coverage. Meanwhile, states and municipalities have stayed out of the federal program, leaving their workers at the mercy of increasingly hostile taxpayers.

The question of pension guarantees, and who pays for them, came up shortly after General Motors went into Chapter 11 two years ago with financing from the United States Treasury. Officials from the Obama administration’s Auto Task Force asked G.M. executives how they planned to handle the pensions of a second company, Delphi.

Delphi, once a division of G.M., was still a major supplier in 2009, and was bankrupt itself that summer after struggling to avoid liquidation.

“Have you guys begun a dialogue with the U.A.W. over your desire to see the hourly plan terminated?” Matthew A. Feldman, of the Treasury’s Auto Task Force , asked senior G.M. executives in a message referring to a pension plan at Delphi. G.M. had a role because 10 years earlier, when it was spinning off Delphi, it had promised the auto workers’ union that if their pension fund ever went belly-up at Delphi, they could come back to G.M. to be made whole, through special payments called “top-ups.”

The top-ups would cover the difference between the federal government’s limited pension insurance and each retiree’s full benefit. There is no precedent for any company making such payments until G.M. did.

With G.M. itself bankrupt in 2009 and relying on billions of taxpayer dollars to restructure, honoring the 10-year-old promise “could get messy,” Mr. Feldman warned.

He also expressed uncertainty about whether the Pension Benefit Guaranty Corporation would permit it. (Pension-related e-mails between Auto Task Force members and G.M. were provided to The New York Times by a person who requested anonymity.)

The pension guaranty corporation, the federal agency that takes over company pension funds in bankruptcy, is supposed to be self-sustaining, but it usually operates with a deficit, and some predict it will one day need a taxpayer bailout. Its officials are wary of companies offering pensions, then sticking the government with the bills. During Delphi’s bankruptcy the agency had been trying to lay claim to some of Delphi’s profitable offshore subsidiaries to cover its cost in taking over Delphi’s pension obligations, estimated at about $6.2 billion.

If G.M. had enough money in bankruptcy to pay top-ups to Delphi’s U.A.W. retirees, then the pension agency could have demanded that G.M. cover some of its costs.

Walter Borst, G.M.’s treasurer at the time, said in a message back to Mr. Feldman of the Treasury that he did not see how the pension agency could throw such a wrench into G.M.’s restructuring. “Our reading of the benefit guarantee is clear, that it’s for the benefit of retirees, and not the P.B.G.C.,” he wrote.

He proved correct. Delphi terminated all of its workers’ pension plans, the pension agency’s provided its limited coverage, and G.M. began paying top-ups to Delphi’s retirees from the U.A.W. and two other unions, much to the anger of nonunion retirees like Mr. Gump. They are receiving money only from the pension agency and not G.M.

Many of them are now struggling, Mr. Gump said in his testimony, adding that the nonunion retirees had also lost their health benefits and were in many cases too young for Medicare, yet too old to find new jobs.

The dispute may foreshadow a similar policy decision that Congress must make in the coming months, over whether to appropriate money to N.A.S.A. to cover the cost of a promise it made in 1996, to top up the pensions of its primary Space Shuttle contractor, United Space Alliance of Houston, if its pension fund ever terminated. Mr. Obama’s budget proposal for fiscal 2012 asks Congress to appropriate about $550 million for that purpose.

The promise is coming due now because the space shuttle program is ending and United Space Alliance will no longer have the revenue needed to cover the cost of the plan. If N.A.S.A. fulfills its promise, the company’s retirees will not be subjected to the pension agency’s insurance limits.

Article source: http://feeds.nytimes.com/click.phdo?i=20dc8d5ec1aa99a945d6065ec5400a79

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European Leaders Propose a Sweeter Deal for Greece

June 22, 2011 by Leave a Comment

At a meeting of European leaders on Thursday and Friday, Mr. Barroso is expected to propose to make it easier for the debt-laden country to use the money, the equivalent of $1.4 billion, to encourage economic growth.

“Greece has the potential to access a significant amount of E.U. money,” Mr. Barroso said in Brussels, adding that the money should be concentrated where it can create jobs. The idea, he said, was to “front-load and accelerate them, so that Greece gets the benefit now.”

Fitch Ratings said Tuesday that it would consider even a voluntary rollover of Greece’s sovereign debt as a default, which would lead it to cut the country’s credit rating. And Timothy F. Geithner, the United States Treasury secretary, criticized Europe for failing to speak with one voice on the Greek crisis.

Speaking in Washington, Mr. Geithner called on Europe to “speak with a clearer, more unified voice on the strategy” for Greece, according to Bloomberg News. “I think it’s very hard for people to invest in Europe, within Europe and outside Europe, to understand what the strategy is when you have so many people talking.”

Mr. Geithner said he told leaders of the Group of 7 industrialized countries last weekend that the European Union had “a very substantial financial arsenal” at its disposal and that it needed to ensure that they were “available to be deployed to do the kind of things they need to do to make this process work.”

“That means make it available so banks can be recapitalized where they need capital, to make sure there is a funding available to the banking system,” he said. He added that there was “no reason why Europe cannot manage these problems.”

European leaders have been desperately trying to prevent a Greek default, which would hurt global markets and could fatally undermine the euro monetary union. Some analysts have said it could have an effect on credit and debt markets comparable to the one that followed the collapse of Lehman Brothers in 2008.

The warning by Fitch kept pressure on Prime Minister George A. Papandreou of Greece and his newly shuffled government, which survived a vote of confidence early Wednesday. It also kept the heat on European policy makers as they worked on a second bailout for the country.

Parliament will be asked to endorse further spending cuts, which are a condition of receiving a fresh disbursement of 12 billion euros, or $17.1 billion, from last year’s 110-billion-euro bailout from the European Union and the International Monetary Fund.

“The assumption must be that if these two critical votes are passed, the short-term pressure on Greece will ease,” said Adam Cole, head of foreign exchange strategy at RBC Capital Markets in London.

The Barroso plan is intended to help tackle one of the main obstacles facing the Greek economy, which risks a downward economic spiral of low growth that depresses government tax revenue.

A large pot of money has been allocated to Greece for job creation projects, but of a total of 20 billion euros for 2007-13, only about a quarter has been disbursed. One of the obstacles is that most of the grants require matching money from the country receiving aid, something that Greece is now unable to afford. Changing that rule, however, would be time-consuming, so officials think that accelerating payments would be a quicker way of helping the Greek economy.

Mr. Barroso also reinforced calls for Greek politicians to endorse the austerity measures. “My message today is that if Athens acts, Europe will deliver,” he said. “If anyone thinks that without the program agreed with the E.U. and the I.M.F. we can still get by somehow, there’s an alternative program, that’s not true. There is no alternative. The E.U. and the I.M.F. won’t support any other program.”

Euro zone finance ministers have said that a second Greek bailout would include a contribution by private holders of government bonds. Ministers have asked that the contribution be voluntary but “substantial,” but its nature remains uncertain.

That uncertainty has raised concerns at ratings agencies. Andrew Colquhoun, a senior director for Asia-Pacific sovereign ratings at Fitch, said at a conference Tuesday in Singapore that Fitch would regard a debt exchange or voluntary debt rollover “as a default event and would lead to the assignment of a default rating to Greece.”

But Cristina Torrella, a senior director in Fitch’s financial institutions group, said in a statement that a restructuring or rollover of Greek government debt “would not automatically trigger a default by the major Greek banks.”

“The precise rating actions on the banks will depend on the full terms of the sovereign event and the extent to which this considers maintaining solvency and, vitally, liquidity in the Greek banking system,” Ms. Torrella said.

Article source: http://www.nytimes.com/2011/06/22/business/global/22euro.html?partner=rss&emc=rss

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Chrysler Pays Back Rescue Loan

May 25, 2011 by Leave a Comment

The repayment of loans and interest owed to the United States Treasury and Export Development Canada is a significant milestone in Chrysler’s methodical comeback from bankruptcy in 2009.

Now the company’s revival will enter a new phase that depends heavily on its alliance with Fiat, which on Tuesday increased its stake in Chrysler to 46 percent, from 30 percent.

Fiat will most likely increase its ownership to 51 percent by the end of the year. Terms of Chrysler’s federal bailout allow the Italian company to gain an additional 5 percent interest when a prototype of a new fuel-efficient compact car is ready for production in the United States.

Sergio Marchionne, who is chief executive of both auto companies, said the new car should be completed by December and would be produced beginning next year at a Chrysler plant in Illinois.

“It’s my intention for us to have the car ready by the fourth quarter,” Mr. Marchionne said at a ceremony marking the loan repayments.

Mr. Marchionne was joined at the event by Ron A. Bloom and Brian Deese, two members of the auto task force that was assembled by President Obama to shepherd Chrysler and General Motors through bankruptcy reorganization with taxpayer aid.

Many people in the auto industry were skeptical that Chrysler could survive even after its financial bailout.

But at the ceremony held at a Chrysler plant outside Detroit, Mr. Marchionne said the company had defied the odds by turning out new, improved products that are being sold at a profit.

“We have collectively found the strength to fight against this death sentence placed on our company from the very beginning,” Mr. Marchionne said to the cheers of hundreds of workers at the plant in Sterling Heights, Mich.

Mr. Marchionne made his remarks in front of a red, white and blue sign that said “PAID” in huge letters. Retiring its government loans will not only save Chrysler an estimated $350 million a year in interest payments, but it should also bolster its image in the eyes of American consumers.

“The loans are no longer a negative in the marketplace,” said Rebecca Lindland, an analyst with the research firm IHS Automotive. “It also frees up more cash for them to build a better product.”

Chrysler was able to repay the loans because it had negotiated new financing with a consortium of investment banks that includes a term loan of $3 billion, debt securities totaling $3.2 billion and a revolving credit facility of $1.3 billion.

The loan repayment was also helped by funds from Fiat, which paid Chrysler $1.3 billion to increase its stake to 46 percent.

Chrysler was not obligated to pay back its United States loans until 2017. In a statement, President Obama said that the early repayment was further proof that government intervention in Detroit’s troubles was a prudent decision.

“While there is more work to be done, we are starting to see stronger sales, additional shifts at plants and signs of strength in the auto industry and our economy,” the president said.

Mr. Bloom, who is now the president’s special assistant on manufacturing policy, said Chrysler’s comeback had happened “more quickly than we had hoped.”

The Treasury Department still holds a 6.6 percent stake in Chrysler, which it could begin selling when Chrysler holds a public stock offering.

Mr. Marchionne said he was committed to the stock offering, but had not yet set a timetable.

Mr. Bloom said the government would be “opportunistic” in divesting itself of its shares but declined to predict a time frame.

With the loan repayments behind it, Chrysler can now concentrate on maintaining its slow but steady resurgence in the marketplace.

Sales at Chrysler rose 22.5 percent through the first four months of this year, compared with a 19.6 percent increase for the overall American market. Much of the gains have resulted from new models like revamped versions of the Jeep Grand Cherokee sport utility vehicle and Chrysler 300 sedan.

But for the longer term, Chrysler needs more competitive small and midsize cars based on Fiat technology to broaden its product mix.

“Chrysler’s alliance with Fiat is crucial to its survival,” said Bruce Clark, a senior vice president at Moody’s Investors Service. “The union is vital to rebuilding Chrysler’s product portfolio and sustaining its business model.”

One worker at Tuesday’s ceremony said Chrysler’s Italian partner was so far doing a much better job integrating with the company than one of its previous owners, the German carmaker Daimler.

“There’s just a whole different feeling to it,” said Russell Bell, an electrician who has worked for Chrysler since 1973. “Fiat coming in was probably the lifeline that we needed.”

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