A16

DOW 10,895.86

UP 45.50, 0.4%

NASDAQ 2404.36

UP 9.23, 0.4%

S

KLMNO

ECONOMY BUSINESS

&

S&P 500 1173.22

UP 6.63, 0.6%

GOLD $1,110.30

UP $6.00, 0.5%

CRUDE OIL $82.17

UP $2.17, 2.7%

Consumers remain in a buying mood

SPENDING ROSE

IN FEBRUARY

5 straight months of increases

by Ylan Q. Mui

Consumers kept their wallets open for the fifth month in a row in February even though their in- comes remained unchanged, ac- cording to government data re- leased Monday.

Spending on nondurable

goods, such as clothing, jumped 0.9 percent last month, while spending on services rose 0.3 per- cent. Those increases were par- tially offset by a 0.2 percent de- cline in purchases of durable goods such as autos. Total con- sumer spending increased 0.3 percent. “People are spending a little bit

more,” said Brian A. Bethune, chief U.S. economist for consult- ing firm IHS Global Insight, not- ing that retailers have continued their aggressive pricing. “When you give somebody a great deal, they will tend to move on it.” The steady gains in consumer spending are boosting confidence that the engine of the nation’s economy is starting to hum again. February’s increase was particularly notable because it came despite a freeze on wages following six months of growth. That sent the personal savings rate down to 3.1 percent, the low- est level since October 2008. “Consumers shrugged it off for the month and increased their spending anyway,” G. Hoffman, chief economist for PNC Finan- cial Services Group, wrote in a

note to clients. Stock markets seemed to wel- come the news, with the major U.S. indexes rising. The blue-chip Dow Jones in- dustrial average gained 0.4 per- cent, or 45.50 points, to close at 10,895.86, while the broader Standard & Poor’s 500-stock in- dex rose 0.6 percent, or 6.63 points, to 1173.22. The tech-heavy Nasdaq com- posite index rose 0.4 percent, or 9.23 points, to 2404.36. Stocks have been on the rise the past four weeks, their longest period of gains since August, amid growing consensus that the economy is in recovery. On Tues- day, the energy and commodities

sectors led the way with gains of more than 1.5 percent. But trad- ing was light and expected to re- main quiet throughout the week as investors celebrate religious holidays. Several key indicators are scheduled to be released this week. The Conference Board is expected to report on Tuesday that consumer confidence rose in March, another signal that con- sumers are gaining strength. Data on housing prices, factory orders and manufacturing are also scheduled to be released. But stock markets will be closed in observance of Good Friday this week when the highly anticipated monthly unemployment rate is

10-YEAR TREASURY

DOWN $1.40 PER $1,000, 3.87% YIELD

CURRENCIES

$1 = 92.47 YEN; 1 EURO = $1.348

DIGEST

GOVERNMENT

Treasury pick not on recess-appointment list

Over the weekend, the Obama administration threatened to cir- cumvent Republicans who are blocking 15 of the president’s nominees by appointing them during the Easter recess. A prominent name not on the

list: Lael Brainard, nominee for the Treasury Department’s undersecretary for international affairs, one of the highest-rank- ing posts in the agency. Her absence from the list, an administration official said, was

LEGAL

Guilty plea in IBM insider-trading case

A former senior executive at IBM pleaded guilty Monday to federal charges in what prosecu- tors call the largest insider-trad- ing case in the history of hedge funds.

Robert Moffat, 53, pleaded

JB REED/BLOOMBERG NEWS

Best Buy employee Eva Gonzalez, left, shows a digital camera to customers Arline Burgess, right, and Della Burgess in New York. Consumer spending rose in February even though incomes remained flat.

announced. “That’s the golden ticket,” said William Byrne, director of trad- ing for Conifer Securities. “It all hinges on that unemployment rate.”

Economists have asserted that a turnaround in the labor market is crucial to sustained consumer recovery. Bethune said heavy snow- storms in February cut into the hours employees worked and that job creation was weak, hold- ing down incomes. But he pre- dicted that incomes would rise in the coming months, particularly as the Census Bureau completes hiring for 1.2 million positions.

muiy@washpost.com

guilty to conspiracy to commit securities fraud and securities fraud, charges that carry a poten- tial penalty of 25 years in prison.

REGULATION

“The world needs an open America, a generous America, an America that shows the way,

an America that listens.”

— Nicolas Sarkozy, urging a U.S. leadership role on global financial regulation

French President Nicolas Sarkozy implored the United States to lead

the way in imposing new global financial regulations — and to pay more attention to the rest of the world — in a speech Monday. “The world does not stop at the East Coast; the world does not stop

Options for Freddie and Fannie

On April 15, the Treasury Department begins a public discussion on the future of mortgage finance giants Fannie Mae and Freddie Mac. Several different models exist for what the new form of housing finance could look like in the United States.

e

a

at the West Coast,” he said at Columbia University. “The world needs an open America, a generous America, an America that shows the way, an America that listens.” Sarkozy wants the United States to champion firm regulations of a variety of financial systems, including tax havens and hedge funds. “We should invent a new global monetary order,” he said, insisting that new regulations would “save capitalism.”

— Associated Press

and Freddie Mac

The two corporations were owned by private shareholders

Fannie Mae

He admitted to providing inside information in 2008 to a friend who worked at a hedge fund. Moffat, once considered a can-

didate for chief executive at IBM, was considered the highest-level executive in a case that resulted in 21 arrests. His lawyers said he was not cooperating with the gov- ernment’s probe.

— Associated Press

no accident. Senate Democrats are planning to invoke cloture, which allows the majority party in Congress to overcome proce- dural hurdles from the minority and force a vote. Cloture requires 60 votes and takes several days to implement.

Such a procedure would put

Brainard permanently in her po- sition. The recess appointments, by contrast, would expire in Jan- uary 2011.

— David Cho

TUESDAY, MARCH 30, 2010

FANNIE

FREDDIE

LUCAS JACKSON/REUTERS

French President Nicolas Sarkozy addresses the World Leaders Forum at Columbia University in New York on Monday.

ALSO IN BUSINESS

OLD MODEL

(Before the government seized the firms and became their 80 percent shareholder)

Structure: Debt:

Two corporations owned by private shareholders

Implicit government guarantee

Mortgage- backed

securities:

Implicit government guarantee

OPTION 1

Privatize completely

Corporations owned by private shareholders

No government guarantee

No government guarantee

OPTION 2

Nationalize completely

Government agency or agencies

Treasury bonds

OPTION 3

Privatize partially

Corporations or public utilities owned by private shareholders

No government guarantee

Full government guarantee

Explicit government guarantee in exchange for fee

for $

Functions:

Affordable housing; guarantee mortgage-backed securities; retained portfolio of loans

Regulator: Advantages:

“Weak” regulation until summer 2008

Provided liquidity and kept interest rates low; harnessed private capital; embraced market competition

Disadvantages:

Posed enormous risks to taxpayers and financial system

Guarantee and/or buy mortgages and mortgage-backed securities

Unknown

Little-to-no risk for taxpayers; housing prices and mortgage rates guided by the free market

Private system might not raise enough capital to keep interest rates low enough to support housing market; highly volatile; no support for affordable housing

SOURCE: Staff reports

Affordable housing; guarantee and/or buy mortgage-backed securities

Self-regulated

Would ensure a steady, low-cost supply of funds for home loans at all times and support affordable housing

Government absorbs all risk; distorts market

Affordable housing; guarantee mortgage-backed securities

Heavily regulated

Reduce systemic risk; ensure continued flow of funding for home loans

No way to ensure that funding is available for mortgages in times of economic stress; continued taxpayer risk

ZACHARY A. GOLDFARB AND LAURA STANTON/THE WASHINGTON POST

 Geithner says commercial real estate losses are manageable:

Mounting losses from commer- cial real estate loans will contin- ue to be a problem for the United States and especially smaller banks, but it can be managed, Treasury Secretary Timothy F. Geithner said.

“Commercial real estate’s still

going to be a problem for the country,” Geithner said in an in- terview with CNBC. “But we can manage through this process.”

Geithner also said the finan- cial system “is in a much, much stronger position today” than it was three years ago in the run-up to the financial crisis and that the U.S. economy has recovered from the crisis faster than those of other countries. Major U.S. fi- nancial institutions have far stronger capital positions than they did three years ago, though many of them still face daunting challenges, he said.

— Associated Press

Post Tech

CECILIA KANG

Excerpt from voices.washingtonpost.com/posttech

Google’s China move leads few to change course

Google’s announcement last week that it was shutting down its search site in China has largely been followed by silence from the U.S. high-tech industry. Two domain name registrars — companies that host Web sites in

China — announced similar moves. GoDaddy said it would stop taking new accounts on its .cn domain business. Well before Google’s announcement, Network Solutions said it would reroute traffic to Hong Kong, effectively shutting down its China-based site. Apart from those firms, most American businesses have said that, while they are committed to freedom of expression online, they plan to stay the course. Intel said it isn’t changing business plans in China. Microsoft, which

competes in the search market in China with Bing, is staying, too. “As we continue to offer a global search service, we regularly communicate with governments, including the Chinese, to advocate for free expression, transparency and the rule of law,” said spokeswoman Christina Pearson. “ We will continue to do so.” Yahoo said that after it sold its China business in 2005 to Alibaba, it

gave up operational control over the search business there. It still retains 39 percent stake in Alibaba. AOL also said that it no longer has operations in China and that it shut down its Hong Kong business in January as part of its overall corporate restructuring. Facebook doesn’t have employees in China, nor does it run servers there. Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58