Archive for November, 2008

Regaining economic health to take time: Paulson (Reuters)

Monday, November 17th, 2008 | Finance News

WASHINGTON (Reuters) –
Treasury Secretary Henry Paulson said on Monday that solid progress has been made in stabilizing the U.S. financial system but it will take considerable time to restore it to health.

"In terms of where we need to be, in the first case we were dealing with systemic events. ... We've got a lot of work to do to restore the financial system, and I think restoring the financial system will go a long way toward helping the economy to recover," Paulson said at a conference organized by The Wall Street Journal.

At the same conference, former Treasury Secretary Lawrence Summers said he felt the economy will need "speedy, substantial, sustained" stimulus lasting for years in order to fully recover.

Paulson said there were signs that multiple efforts to get the financial system working better were paying off.

"If the issue was to stabilize the financial system and prevent a collapse and get by the point where the market is rattled, wondering which big institution will go down next, I think on a scale of 1 to 10 we're very close to 10 there." he said.

But he cautioned that a weakening housing sector means the recovery process will be prolonged.

"There's going to be stress in the capital markets for a number of months here because housing prices are still declining and now I think it's moved beyond housing," Paulson said.


Former Treasury Secretary Robert Rubin, on the same panel with Paulson and Summers, said that with the fiscal and monetary actions now taken, "there's a strong probability that the psychological crisis, the pervasive anxiety that we're in right now, will abate within a reasonable period of time."

He refused to specify what a reasonable period of time might be, but noted that in view of the serious damage that has occurred in markets it would be "certainly well into next year."

Summers, who is regularly listed as a possible pick by President-elect Barack Obama to become Treasury secretary again, has been calling for months for more economic stimulus and said he now feels it was more urgent than ever.

"I frankly think the situation has deteriorated very substantially...and so I would go for speedy, substantial and sustained (stimulus) over a several-year interval, he said.

"I think we're going to need some impetus to the economy for two to three years."

Summers said there was ample global demand for U.S. debt securities now because investors worldwide are in search of safety. But, he said, "That's a situation that could and will change on a dime when the situation improves," so it is essential to get the economy back on track and begin to exert fiscal control to get deficits down.

With Capitol Hill Democrats already trying to come up with new measures for aiding the auto industry, Paulson turned aside questions whether he felt U.S. carmakers deserved help.

He remarked jokingly: "We have a Prius," referring to Toyota's (7203.T) hybrid car, but said, "I don't think it would be good to see a failure of an auto company in this period, in this tough period that we're going through right now."

He added, however: "I, again, feel very strongly that anything we do has got to be a path to sustainability and viability."

Paulson said he hadn't studied the U.S. industry's problems in detail but noted that just giving out money was not necessarily a guarantee of viability.

The White House on Monday opposed a proposal by Senate Democrats for a $25 billion bailout for the auto industry that would use funds from the Treasury Department's Troubled Asset Relief Program. The Bush Administration favors amending a law approved in September that allocated $25 billion for technology loans to the industry.

(Editing by Leslie Adler)


White House opposes Senate Democrats’ auto bailout bid (Reuters)

Monday, November 17th, 2008 | Finance News

WASHINGTON (Reuters) –
The White House on Monday opposed Senate Democrats' proposal for a $25 billion bailout for the U.S. auto industry and urged instead that aid be provided through government loans already appropriated for the industry by Congress.

"We're surprised that Senate Democrats would propose a bailout that fails to require automakers to make the hard decisions needed to restructure and become viable," White House spokeswoman Dana Perino said, reaffirming the administration's position.

"It would add another $25 billion to the $25 billion already allocated for the auto industry, raiding the TARP of funds needed to stabilize our financial system and encourage new lending to help our economy grow," she said in a statement.

"Congress should instead accelerate the existing $25 billion already appropriated for the auto industry by amending the Energy Department's loan program, but only for those firms that make the difficult choices and do the restructuring necessary to become viable without additional taxpayer subsidies," Perino added.

(Editing by Carol Bishopric)


Putnam Investments to cut 47 jobs, merge funds (AP)

Monday, November 17th, 2008 | Finance News

BOSTON – Putnam Investments said Monday it will cut 47 jobs, including 12 portfolio managers, and merge six of its stock mutual funds into larger funds under a restructuring by the company's new top executive.

Robert Reynolds, a former Fidelity Investments executive named Putnam's president and chief executive in June, said he also will assign more responsibility to individual fund managers rather than putting small groups in charge of each fund. Reynolds also will revamp bonuses for fund managers and financial analysts to more closely align pay with performance at Putnam, which manages $116 billion in assets.

"This whole move is being made to get rid of complexity, simplify processes, and provide ownership and accountability," Reynolds said. "These are changes we would make whether markets were rising or falling."

In addition to cutting 12 portfolio managers, Putnam is immediately eliminating 35 staff positions out of a total work force of about 2,500. Most of the cuts are at Putnam's Boston headquarters, with some coming in London and Tokyo, Reynolds said.

The 70-year-old company is merging six smaller funds that collectively hold about $2 billion in assets into six larger funds that are similar in investment style.

"We had larger funds that were doing the same thing, which made no sense to me," Reynolds said.

A list of the affected smaller Putnam funds, and the funds they will be folded into: Capital Appreciation Fund into Putnam Investors Fund; Classic Equity Fund into Fund for Growth and Income; Discovery Growth Fund into New Opportunities Fund; New Value Fund into Equity Income Fund; OTC & Emerging Growth Fund into Vista Fund; and Tax Smart Equity Fund into Investors Fund.

Like other asset managers, Putnam has been hurt by the recent market downturn. Total assets managed at Putnam were $116 billion as of Oct. 31, down nearly one-third from the $172 billion that Putnam managed for mutual fund investors and institutional accounts when Reynolds was hired in June.

Putnam was sold for nearly $4 billion last year by parent Marsh & McLennan Cos. to Canada's Great-West Lifeco Inc.

Monday's cuts follow recently announced plans by Reynolds' former employer, Boston-based Fidelity Investments, to cut about 3,000 of its 44,400 employees. Reynolds spent 23 years at Fidelity, including seven as chief operating officer.