Archive for May, 2011

Debt-limit hike fails in House in symbolic vote

Tuesday, May 31st, 2011 | Finance News

WASHINGTON (Reuters) – The House of Representatives on Tuesday defeated a bill to raise the debt limit in a vote staged by Republicans to strengthen their push for deep spending cuts in negotiations with the White House.

By a vote of 318-97, the chamber overwhelmingly rejected President Barack Obama's call to increase the $14.3 trillion debt limit without conditions. Even some Democrats supporting Obama's position voted against it.

"I'm going to advise my members that they not subject themselves to the demagoguery that is sure to follow" if they vote for the measure, chief Democratic vote-counter Steny Hoyer said before the vote.

Polls show the public does not support a further increase in borrowing authority even as the Treasury Department scrambles to avoid a default that could push the country back into recession and rattle markets across the globe.

The Treasury Department has been tapping alternate funding sources, such as federal employee pensions, to cover its obligations since the debt limit was reached on May 16, but has warned it will run out of options if Congress does not act by August 2.

For now, markets are little concerned by the possibility of default on what is viewed as one of the world's safest investments. Yields on the benchmark 10-year Treasury bond reached a new 2011 low earlier in the day and traders predicted even lower yields later in the week.

"If we were having this conversation at the end of July it would be a different story. If the vote fails tonight, I don't think it impacts prices," said Christian Cooper, head of U.S. dollar derivatives trading at Jeffries & Co. in New York.

House Republicans held the vote in the late afternoon, well after markets had closed.

WHITE HOUSE MEETING ON WEDNESDAY

Obama will press the case on why the debt limit should be raised when he meets with House Republicans at 10 a.m. on Wednesday, the White House said.

Republicans say they will not back an increase in the country's borrowing authority that does not include deep spending cuts to ensure that debt remains at a manageable level relative to the economy.

"This vote makes clear that deficit reduction will be part of any bill to increase the debt limit," said Republican Representative Dave Camp, who sponsored the bill even though he does not support it.

In talks led by Vice President Joe Biden, Republicans and Democrats have identified hundreds of billions of dollars in possible spending cuts, and both sides say they could ultimately find more than a trillion dollars in deficit savings.

But they must resolve a dispute over the biggest-ticket items. Democrats say they will not consider cuts to popular health benefits until Republicans consider tax increases.

Tuesday's vote came after the Senate defeated three separate Republican budget plans in largely symbolic votes last week. The Senate also voted down Obama's budget proposal, which was considered to be irrelevant after he unveiled a more aggressive plan.

Democrats were split on the House bill, with 97 voting for a "clean" increase and 82 voting against it. No Republicans voted for the measure.

The vote could clear the way for a compromise by allowing lawmakers to say they voted against an increase that did not reduce deficits, but one analyst warned it did not guarantee support from conservative Republicans affiliated with the Tea Party movement.

"Some representatives would vote against it just because it would increase the government's borrowing limit, others would oppose it because of the specific spending cuts and revenue increases, and others would vote 'no' because they want deeper deficit reduction," Stan Collender, a budget analyst with Qorvis Communications, wrote in Roll Call, a congressional newspaper.

(Additional reporting by Thomas Ferraro and Caren Bohan in Washington and Emily Flitter in New York; Editing by Peter Cooney)

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Energy prices cool off in time for summer

Tuesday, May 31st, 2011 | Finance News

NEW YORK – Oil and gasoline prices finally hit the brakes in May.

After surging to the highest levels since 2008, oil dropped 10 percent for the month, the biggest monthly decline in a year. Pump prices slipped nearly 4 percent.

The May decline gave consumers and businesses a bit of a breather from high fuel prices, though oil was climbing again as the month ended. Here's a look at how commodities fared in May, and where they may be headed.

_Oil: Crude futures dropped early in May as a growing number of industry and government reports showed plentiful supplies and falling demand. The dollar grew stronger against other currencies during the month, and that helped push oil lower as well. Oil is priced in dollars and becomes less attractive to buyers with foreign currency as the dollar gets stronger.

Last May oil dropped about 17 percent, from just under $83 a barrel to $68, for similar reasons: a stronger dollar and rising supplies of crude.

On Tuesday the dollar weakened and helped oil recover some lost ground. Benchmark West Texas Intermediate crude rose $2.11 to settle at $102.70 per barrel on the New York Mercantile Exchange. That's down from a high of $113.93 per barrel at the end of April. In London, Brent crude added $2.05 to settle at $116.73 on the ICE Futures exchange.

Oil prices may climb further soon. The world is consuming more oil than ever, and the thirst for oil in China and other emerging economies will mean growing demand, analysts say. Investment banks like Goldman Sachs are betting that global supplies can only grow tighter in coming months, and that will push oil prices higher.

Goldman predicted that West Texas Intermediate crude will hit $135 per barrel by the end of 2012. Morgan Stanley said Brent will average $120 per barrel this year, while J.P. Morgan thinks Brent will be at $130 per barrel in the third quarter.

_Retail gasoline: The national average for a gallon of regular gas peaked at $3.9845 in the first week of May before sliding 20.5 cents per gallon by the end of the month. Prices were down for the 19th day in a row on Tuesday, to $3.78 per gallon, according to AAA, Wright Express and Oil Price Information Service.

Gas prices almost always level off in summer as refineries crank up production and replenish supplies around the country. Refineries began to produce more gasoline toward the end of May after some were sidelined by unexpected problems caused by power outages and flooding. Pump prices were already falling by then because of lower oil prices. In addition people were driving less and demand was down with the price of gas around $4 a gallon in most of the country.

The slump in oil helped gasoline fall sooner this year than previously. Gas prices in 2009 peaked in June and were the highest ever in July 2008, when the average was $4.11 per gallon. In 2010 gas dipped at almost the same time as this year. Pump prices were a little more than a dollar less on average a year ago.

Once they peak, retail gasoline prices usually go into a summer swoon. Tom Kloza, chief oil analyst at the Oil Prices Information Service, said pump prices should drop to between $3.50 and $3.60 per gallon in June.

_Gasoline futures: Gasoline for future delivery dropped 11.4 percent in May as supplies started growing again. Futures peaked in April at $3.465 per gallon after random refining problems cut U.S. gasoline supplies for nearly three months. On Tuesday the contract for June delivery added 1.9 cents to settle at $3.0503 per gallon.

_Natural gas: Natural gas prices have hovered around the same level since the beginning of 2009 with plenty of gas available to meet demand. Prices have risen recently as U.S. supplies dropped below the five-year average. The July contract gained 14.8 cents to $4.666 per 1,000 cubic feet on Tuesday.

Raymond James analyst J. Marshall Adkins said natural gas supplies declined as increased scrutiny of nuclear plants following the disaster in Japan forced utilities to rely more on natural gas-burning generators. Adkins doesn't expect that to last. He says natural gas is headed for a late summer collapse back to about $3.75 per 1,000 cubic feet.

_Heating oil: Futures contracts followed the trend of other petroleum products in May, falling about 7 percent since the beginning of the month. On Tuesday it rose 5.16 cents to settle at $3.05 a gallon.

Like oil, that price is likely to rise again. The Energy Department estimates that consumers will pay an average $3.76 a gallon for heating oil this year. That's a 26 percent increase from 2010.

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Chris Kahn can be reached at http://www.twitter.com/ChrisKahnAP

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First Person: 5 Ways to Bring Your Credit Back From Bankruptcy

Tuesday, May 31st, 2011 | Finance News

*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.

Bankruptcy can wipe the proverbial credit slate clean and stop harassing phone calls and letters, but filing a Chapter 13 bankruptcy or a Chapter 7 bankruptcy sends credit scores plummeting while harming chances for offers of credit in the future. The good news is that bankruptcy is not a permanent financial death sentence. In fact, credit is a cyclical beast. Any consumer can rebuilt and restore his credit after bankruptcy discharge using these 5 basic strategies.

Get a Secured Card

At first, most bankruptcy filers will need to rely on a cash only system for living and routine expenses. After a bankruptcy discharge, it may be difficult to open up a bank account, and it will be impossible to use any other piece of plastic beyond a debit card.

Save $300 to $500 and open up a secured credit card. Secured cards require an up front deposit—hence their name, a card secured by your deposit. That deposit then becomes your credit limit. For example, if you open up a secured Visa card with a $300 deposit, your credit limit is $300. The security deposit protects the bank, if you default. The bank holds on to the deposit, until you prove your creditworthiness once more. While secured cards usually come with unattractive interest rates and features, they are by far, the best way to rebuilt credit after bankruptcy.

Use it Responsibility

For the next six months, use your secured credit card to pay for recurring expenses like gas or groceries. At the end of each month, pay the card off in full. Repeat this strategy for six months and you will see an increase in your credit score as you reestablish a satisfactory payment history. The primary rule to remember here is not to keep a balance. Credit rebuilds much faster if you pay off the balance on a credit card to $0 each cycle.

Ask for Credit Line Increases

Most secured cards will reward users by offering an unsecured credit line increase after six months of on time payments. The denominations for the increase are typically between $50 and $100, but the more of an increase in your credit limit, the faster your rating rebuilds. The key here, is not to increase your spending to eclipse your ceiling. Keep a handle on all credit expenditures, and do not exceed what you are able to pay off each month. In other words, if you know you can only afford to pay $300 per month to see your credit card balance zeroed out, don't charge $400.

Apply for Unsecured Credit

After six months to a year of timely payment history with your secured card, you can move up in the world and apply for an unsecured line of credit. You need to establish a credit mix. In other words, you need to have one credit card, one auto loan and one unsecured line of credit like a personal loan or appliance purchase to achieve the best credit building results. While credit takes time to restore, knowing the recipe for success makes an enormous difference in the timing.

Pay Everything Off Each Month

Pay off loans and credit cards immediately. Keep only one credit card on hand, and use it sparingly. For example, once you have an unsecured card with better terms, stop using your secured card; but do not close it. Refrain from closing newly opened credit lines, as this will hurt your credit. The key is to have a variety of open, untapped credit sources.

For most people, filing bankruptcy was a result of overspending and poor money management. After having taken the time and effort to rebuild your credit, don't throw that time and effort away by repeating the same financial mistakes.

More from this Contributor:

Home Buying After Bankruptcy

Come Up with a Bankruptcy Plan Before Filing Chapter 7

How a FICO Score is Determined

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