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DAILY 03-02-10 MD SU A10 CMYK
A10 S KLMNO TUESDAY, MARCH 2, 2010
ECONOMY BUSINESS&
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Dodd wants Democratic support for
DIGEST
GREECE
consumer-protection regulator at Fed
Cabinet to ‘take decisions’ on budget cuts
The European Union pushed Hours after Rehn’s comments,
Greece to adopt additional the office of Greek Prime Min-
The Obama administration
spending cuts in the next days ister George Papandreou an-
ISSUES REMAIN
also has signaled its willingness
and promised to help Athens nounced a Wednesday cabinet
to abandon the idea of a free-
overcome its debt problems. meeting to “take decisions about
IN GOP PLAN
standing agency.
After a day of talks with Greek the economy.”
Treasury spokesman Andrew
leaders, Olli Rehn, the E.U. eco- No further details were provid-
Williams said Monday that the
nomic and monetary affairs com- ed, but the announcement ap-
missioner, said that financial peared to signal that Athens is
Accord could lead to
administration’s top priorities
“are ensuring the bill includes in-
markets would be reassured poised to take new savings meas-
financial reform bill
dependent appointment, an in-
about Greece once they saw pre- ures.
dependent budget, and an inde-
cise new measures. — Reuters
pendent ability to set and enforce
by Binyamin Appelbaum clear rules of road to protect
AUTOMOTIVE
and David Cho American families.”
The basic outlines of an agree-
GM to recall cars over steering problem
The chairman of the Senate ment have been in place for at
General Motors said it will re- “While greater steering effort
banking committee is seeking least a month, sources said.
call 1.3 million compact cars to under 15 mph may be required,
Democratic support for a Repub- Dodd started negotiating last
replace a motor in the power these vehicles are safe to drive be-
lican proposal to house a new year with Sen. Richard C. Shelby
steering system. cause the customer can still steer
consumer-protection regulator (Ala.), the ranking Republican on
The National Highway Traffic the vehicle,” Jamie Hresko, GM’s
inside the Federal Reserve, a the committee. Before talks
Safety Administration opened an vice president for quality, said in
compromise that could clear the broke down, the two men had
investigation into the issue in a statement.
way for bipartisan legislation on
WIN MCNAMEE/GETTY IMAGES
agreed on nearly all of the points
January after receiving more According to the company, the
financial reform, according to The Senate banking chairman, Christopher J. Dodd (D-Conn.), left, contained in the present propos-
than 1,130 complaints of loss of affected cars are the 2005-2010
sources familiar with the negoti- is embracing a proposal by Sen. Bob Corker (R-Tenn.). al, except the role of the Fed.
power steering assist, including Chevrolet Cobalt; the 2007-2010
ations. Dodd then began talks with
11 crashes and one injury. Pontiac G5; the 2005-2006 Ponti-
Embracing the proposal marks of banking regulators. Dodd and Administration officials ar- Corker in mid-February, and the
The problem, which the com- ac Pursuit, sold in Canada; and
a turnaround for Sen. Christo- Corker also are negotiating how gued explicitly that Congress two have advanced closer to an
pany said tends to happen in old- the 2005-2006 Pontiac G4, sold in
pher J. Dodd (D-Conn.), who has broadly the rules would apply to should strip the Fed of its con- accord on the remaining issues,
er cars, leaves the driver without Mexico.
lambasted the Fed repeatedly financial institutions other than sumer-protection responsibili- sources said.
power steering, which can make — Peter Whoriskey
over the past year for not protect- banks. The sources, who spoke ties rather than trying to get it to Dodd needs an agreement
a car difficult to control.
ing borrowers from lender abuse. on the condition of anonymity improve its performance. Con- with Republicans because Demo-
It is unclear whether other Fed because the negotiations are in sumer advocates continue to ar- crats control only 59 votes in the
critics, both Democrats and Re- progress, cautioned that the dif- gue that a clear separation is Senate, short of the 60 needed to
publicans, will follow suit. The ferences had frustrated negotia- needed between banking regula- avert a potential filibuster, and
Fed already is responsible for tors for several weeks, and that tion and consumer protection so because of pressure from the
LEGAL
writing consumer-protection the two sides might not reach an that the banks’ health is not giv- conservative wing of his own par-
rules, but it did not prohibit accord. en priority over customers’ ty.
some of the most abusive mort- “We do not have an agreement health. But he now faces the challenge
gage and credit card lending yet,” said Kirstin Brost, a spokes- But Dodd has been forced of selling his compromise to lib-
practices during the housing woman for Dodd. “He hopes to away from more substantial re- eral senators, some of whom
boom. have a consensus bill in the com- forms by the opposition of Re- have warned that they will fight
The proposal by Sen. Bob Cork- ing days.” publicans and moderate Demo- for a stronger version of a con-
er (R-Tenn.) would place a presi- The Corker plan would require crats. He previously floated the sumer regulator.
dential appointee inside the Fed major concessions by Democrats. idea of placing the new regulator Said one Democratic aide:
with an independent budget and Dodd and others on the banking within the Treasury Department, “Democrats should go to the floor
a mandate to write rules protect- committee initially favored a pro- where it would have been some- with a strong bill that attacks the
ing consumers. Those rules, how- posal by President Obama to cre- what insulated from banking reg- root causes of the financial crisis
ever, would be enforced by exist- ate an independent agency with ulators. and ensures that Wall Street can
ing banking regulators. the power to write and enforce Sources said he is now open to never do it again, and then dare
Key issues remain, including consumer-protection rules. The Corker’s plan because he consid- Republicans to oppose it.”
whether the new regulator could House has passed legislation in- ers the location of the new reg- appelbaumb@washpost.com
impose rules over the objections cluding such an agency. ulator a secondary issue. chod@washpost.com
Spending
DANIEL ACKER/BLOOMBERG NEWS
Judge backs ‘money in, money out’ for Madoff investors: A judge
sided with a trustee’s formula to determine claims for people swindled
by Bernard Madoff. Trustee Irving Picard, above, says investors’ claims
up, saving
should be based on how much money they put into the firm minus how
much they took out over the years.
— Reuters
down in ALSO IN BUSINESS
January
a71 Goldman declines to investi- the pay and force the bank to
gate pay: Goldman Sachs Group adopt reforms. Goldman said
said it has rejected demands by shareholders have made similar
shareholders to investigate its demands in letters to its board.
Some economists say
compensation practices. Lawmakers and shareholders
Shareholder lawsuits filed re- criticized Wall Street pay after
data reflect emerging
cently in New York and Delaware banks lost billions of dollars on
consumer optimism
charge that Goldman’s pay levels bad mortgage bets, helped cause
in 2009 were too high, Goldman the recession and then were
said in a regulatory filing. The bailed out by the government.
by Ylan Q. Mui lawsuits seek to recover some of — From news services
Perhaps the lessons of the
Great Recession are not so deep-
seated after all.
Consumers spent more and
saved less in January, according
to government data released
White House extends aid
Monday, a sign that Americans
feel increasingly secure about
JAHI CHIKWENDIU/THE WASHINGTON POST
their financial situation, econo-
for troubled homeowners
Personal spending jumped 0.5 percent and the savings rate dropped to 3.3 percent in January.
mists said. The growth in spend-
balances were slightly higher
ing and the decline in savings
“The big question really is whether
very long,” said Mark Zandi, chief
Refinancing program than their property values. The
were, respectively, more and less economist for Moody’s Econo-
than analysts had predicted —
this Great Recession that we’ve
my.com. “Incomes are still very
slow to reach borrowers
program was later expanded to
include those who owe up to 25
adding weight to a growing con- soft, and there isn’t enough in-
sensus that consumers’ new-
come through has been traumatic
will run till June 2011 percent more than their homes
come to maintain the expansion.”
are worth.
found frugality was just a fling.
enough to really change people’s
Eventually, the economy must
These underwater borrowers
“The big question really is create jobs in order to sustain the
by Renae Merle are at greater risk of foreclosure,
whether this Great Recession
underlying behavior patterns.”
engine of consumer spending.
and the administration hoped
that we’ve come through has The manufacturing sector has
The Obama administration an- that lowering their payments
been traumatic enough to really — William Cheney, John Hancock Financial Services been one of a handful of in-
nounced Monday that borrowers would decrease their chances of
change people’s underlying be- dustries to hire new workers, and
with little or no equity in their falling behind.
havior patterns,” said William year. Rising unemployment, fall- Consumers have cut back for so a monthly report by the Institute
homes will have another year to But the program ran into sev-
Cheney, chief economist at John ing home prices and a roller- long that some say they simply for Supply Management released
take advantage of a refinancing eral problems. Many borrowers
Hancock Financial Services. “My coaster stock market scared need to replace worn-out items. on Monday showed the group’s
program that so far has made lit- were too deep in debt to qualify,
guess is that it hasn’t.” shoppers into holding on to their Jean Gunby, who is in her 60s, manufacturing employment in-
tle progress. and the program was limited to
According to the Commerce wallets — and economists feared gave away her old living-room dex rising 2.8 percentage points,
The Home Affordable Refi- loans backed by Fannie Mae or
Department, personal spending the nation could not recover and dining-room sets when she to 56.1 percent, in February, the
nance Program was set to expire Freddie Mac, the federal mort-
jumped 0.5 percent, outpacing without them. moved from an apartment in the highest reading in five years.
in June, but so far it has reached gage financing companies. The
growth in income for the fourth But the new government data District to Hyattsville. Overall, the group’s index of
fewer than 200,000 of the up to 5 initiative was also dogged by de-
consecutive monthly increase. suggest that consumers have just “I just wanted something business activity showed the sev-
million borrowers federal reg- lays as lenders struggled to up-
Meanwhile, the savings rate been on a spending diet. Infla- fresh,” she said, while eating at enth consecutive month of
ulators hoped it would help. date their computer systems to
dipped to 3.3 percent, the lowest tion-adjusted purchases of dura- the food court at the Fashion Cen- growth for the industry, albeit at
Market conditions have not accommodate the program. An-
level since October 2008. ble goods such as cars and appli- tre at Pentagon City on Monday. a slower rate. The index dipped
changed significantly since the other obstacle was that many
The sometimes precarious bal- ances jumped 0.7 percent in Jan- Two weeks ago, Gunby was 1.9 percentage points, to 56.5 per-
program was launched last year, homeowners have second mort-
ance between spending and sav- uary, indicating that shoppers are shopping at Jennifer Convert- cent. A reading above 50 typically
Edward DeMarco, acting director gages or private mortgage insur-
ing is known as the paradox of once again willing to take on ibles when an ottoman caught indicates expansion.
of the Federal Housing Finance ance, which can get in the way of
thrift. Consumers are the pri- some big-ticket items. The her eye. Even though it cost near- Consumers remain fragile,
Agency, said in a statement. So to refinancing a primary loan.
mary driver of the nation’s econo- growth in spending overall was ly $600, she decided to splurge. A however, and they are not likely
give lenders more time to imple- And for some borrowers, clos-
my, accounting for roughly 70 also higher than the rise in wages year ago, Gunby said, she might to renounce their new frugality
ment the plan and to “support ing costs and other refinancing
percent of the gross domestic and income. In fact, disposable have made a different decision. just yet. Consumer confidence
and promote market stability,” expenses were not worth the low-
product. Before the recession, income fell in January by 0.4 per- Baumohl said the jump in fell sharply in February after sev-
the initiative will be extended to er interest rates, especially for
they raided their savings ac- cent, in part because of higher spending came as consumers eral months of increases, accord-
June 2011, he said. homeowners worried that they
counts and maxed out credit taxes. dipped into savings, rather than ing to the Conference Board. And
The program is aimed at the might lose their jobs or might hit
cards to finance a spending spree "That’s a sign of consumer op- from credit. Outstanding loans severe snowstorms across the
millions of borrowers whose another financial crunch later.
that propelled the country’s ro- timism,” said Bernard Baumohl, dropped by roughly $100 billion country last month could hurt
home values have been dimin- “The overall volume last year
bust growth — but ultimately executive director of the Eco- in 2009 compared with the previ- sales results.
ished by a weak housing market, was an embarrassingly small
proved unsustainable. nomic Outlook Group, a consult- ous year, according to data from “Now we have to see some job
or who owe more than their amount. I don’t think it will make
The recession sparked the op- ing firm. “I’m actually very en- the Federal Reserve. But econo- growth,” Zandi said. “If it doesn’t
houses are worth, making it im- a big difference” to have the pro-
posite reaction: After dipping couraged by what I saw in the mists cautioned that spending come in the next few months,
possible for them to take advan- gram extended, said Thomas
into negative territory over the January numbers.” could not outstrip income growth consumers will get more nervous
tage of historically low mortgage Lawler, a housing consultant in
past decade, the personal savings Pent-up demand is also fueling indefinitely. and start pulling back again.”
rates. Originally, the program Vienna.
rate rebounded to 4.3 percent last some of the increased spending. “Consumers can’t do that for muiy@washpost.com
targeted borrowers whose loan merler@washpost.com
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