Business and Finance

Shares in French bank Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) slumped for a second day in a row on Tuesday, with traders citing a possible exposure to an unexpected share price surge at carmaker Volkswagen (VOWG.DE: Quote, Profile, Research, Stock Buzz).

The Volkswagen share price rise threatened to catch out banks and hedge funds that might have bet on a fall in the Volkswagen stock.

“All you would need would be to have shorted Volkswagen shares with too much leverage, and you’d be facing colossal losses,” said a fund manager in Paris.

SocGen shares were down 14 percent at 32.67 euros in late afternoon trade, the biggest loser on France’s benchmark CAC-40 index .FCHI. The stock fell 15.6 percent on Monday.

SocGen underperformed a 3.5 percent fall in the DJ Stoxx European bank index . Rival French banks also fell sharply, with BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz) down 11 percent and Credit Agricole (CAGR.PA: Quote, Profile, Research, Stock Buzz) down 12 percent.

SocGen’s share slump gave it a market capitalization of around 20 billion euros ($25.02 billion) — roughly the same level as Credit Agricole.

Volkswagen stock was up 31 percent as short sellers continued to pile into the shares following a move by rival Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) to buy up much of VW’s remaining free float.

Banks with large market trading operations were targeted as the most likely to have been hurt by the Volkswagen situation one hour cash advance loan. Wall Street investment banks Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) were down about 10 and 15 percent respectively.

Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) fell 7 percent.

SocGen could not be immediately reached for comment.

Earlier on Tuesday, it had earlier moved to reassure investors by saying it was sticking by its profit forecast and had no bad surprises in its market operations.

“Societe Generale reiterates the information communicated in its press release of October 13, 2008,” a spokeswoman said.

“(It) underlines the fact that should any events necessitate a communication to the market, Societe Generale would communicate the requisite information without delay, permitting a clear assessment of the situation,” she said by email.

It has predicted a third-quarter net attributable profit of 1 billion euros excluding non-recurring items.

“Societe Generale has nothing specific to communicate regarding its capital markets activities, in particular equity derivatives, despite the difficult market conditions in October,” the spokeswoman said earlier on Tuesday. 

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Overseas stock markets are continuing to tumble and Wall Street index futures point to an extension of the past two days' steep losses provoked by recession fears.

Canadian resource companies are reporting big third-quarter earnings, with Potash Corp. of Saskatchewan (TSX: POT) earning $1.24 billion in the July-September period – more than in all of 2007, which was its best full year to date. And EnCana Corp. (TSX: ECA) booked third-quarter net earnings of US$3.55 billion, up from $934 million a year ago. But that was largely thanks to a $2-billion unrealized hedging gain caused by declining natural gas prices.

But the resource-industry bonanza of recent years is widely seen as over, with commodity prices pulling back in the face of shaky worldwide demand and global financial turmoil.

Crude oil was up $1.35 at US$68.10 a barrel on the New York Mercantile Exchange, bouncing modestly from the previous day's sharp decline. The Organization of Petroleum Exporting Countries meets tomorrow to discuss what most observers expect will be a hefty production quota cut in an effort to prop up prices nevada payday loans.

Gold is continuing its steep fall, down $24.20 at US$711.00 an ounce on the Nymex, and copper is down 6.8 cents at US$1.7975 a pound.

The Canadian dollar opened at 78.80 cents, losing another 0.90 cent after plunging yesterday to under 80 cents US for the first time since the summer of 2005.

In global equity markets, mixed corporate earnings are stirring intense anxiety about the economy.

Japan's Nikkei stock average fell 2.5 per cent overnight, and the gloom continued in European trading.

London's FTSE 100 index is down 2.3 per cent, the German DAX by 3.9 per cent and the Paris CAC-40 by 3.2 per cent.

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OTTAWA–The financial turmoil in the United States will limit Canadian economic growth to 0.8 per cent this year but Canada will avoid a recession, says the Conference Board of Canada.

In its latest outlook on the world economy, the Ottawa-based economic research group says weak growth will last through 2009 as Canada, Europe and Asia buckle under the weight of the worst financial crisis in half a century in the United States.

The Conference Board predicts global growth will fall to 2 absolutely free credit report.8 per cent this year and 2.4 per cent in 2009. The U.S., which avoided a recession earlier this year because of strong exports, is sinking into recession because of weak consumer spending.

The board survey backs up a Bank of Canada assessment this week that the Canadian economy will tread water this year and next before stronger growth in 2010.

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DETROIT — Chrysler LLC could be sold in pieces to other companies as its majority shareholder Cerberus Capital Management LP seeks to exit the auto business, according to a person briefed on the discussions.

Cerberus, the New York-based private equity firm, has been shopping Chrysler to General Motors Corp., the combined Nissan Motor Co. and Renault SA and other companies.

Many combinations are being discussed, said the person who has been briefed on the talks. The person asked not to be identified because the discussions are private.

Chrysler spokeswoman Shawn Morgan and Cerberus spokesman Peter Duda declined to comment.

Cerberus’s efforts to exit the automobile industry have been widely reported in recent weeks, though speculation has swirled over what shape the final deal might take.

One deal being discussed reportedly calls for Cerberus to hand over Chrysler to GM in exchange for GM’s 49 percent stake in GMAC Financial Services.

GM sold a 51 percent stake in its finance arm to Cerberus in 2006. Cerberus also would get an equity stake in GM, hoping to get a good return should GM recover when U.S. auto sales bounce back from a serious slump.

GM is said to be interested in Chrysler for its cash. Chrysler, whose sales have dropped 25 percent during the first nine months of the year, reportedly has about $11 billion available.

It also has debt, but the amount hasn’t been disclosed because Chrysler is a private company. Cerberus bought an 80.1 percent stake in Chrysler from Germany’s Daimler AG in a $7.4 billion deal last year.

Chrysler’s cash may not be enough for GM to take on its money-losing rival, though, and the federal government may be involved in an effort to inject cash to prop up the deal.

"All GM really wants out of this deal is the money that Chrysler is sitting on," said John Wolconowicz, auto analyst for the consulting firm Global Insight. "They really don’t want any of the rest of it."

Wolconowicz said breaking Chrysler into multiple pieces is a viable scenario, with Nissan-Renault possibly getting a piece of the company guaranteed approval cash advance loans. Such an arrangement would make sense, he said, because Chrysler and Nissan already are cooperating on several car-making ventures.

"Nissan has existing agreements with Chrysler that go both ways," he said, referring to a deal announced earlier this year in which Nissan would build small cars for Chrysler, while Chrysler will make a full-size pickup truck designed by Nissan.

Whatever the final outcome of the negotiations, analysts agree that it will have to involve widespread factory closures and layoffs for some of Chrysler’s 66,409 employees, resulting in a leaner, more efficient — and significantly downsized — auto

Investor confidence fell to its lowest level on record in October in a massive flight from risky assets, State Street said on Tuesday.

The U.S. financial services firm said its global State Street Investor Confidence Index fell to 58.2 in the month from an upwardly revised 75.7 in September, previously reported as 70.7.

It was the lowest level recorded in the more than 10 years for which State Street has compiled the index, falling below the previous trough of 65.9 set in December 2007.

The index is extrapolated from movements in more than $15 trillion of assets State Street holds as custodian for institutional investors.

“The combination of financial crisis along with truly global macroeconomic risk of deep recession has been causing a complete re-evaluation of risk across a wide investment community centered on U payday loan cash advance loan.S. institutional investors,” said Harvard University Professor Ken Froot, a co-developer of the index.

Froot noted that even the strongest, broad-based selling of risk seen in State Street data during the 1996 Asian crisis and the Russian crisis of 1998 “appears small compared with the current outflows.”

The latest reading was measured using data from September 17 to October 15, a period in which the MSCI all-country world stock index .MIWD00000PUS fell more than 22 percent. It has since recovered slightly.

It was also a period in which governments and central banks were forced to take extraordinary measures to inject liquidity into the battered world financial system. 

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European Central Bank President Jean- Claude Trichet urged banks to start lending again after policy makers put them “on the path'' to recovery by pumping record amounts of cash into money markets.

“I expect the banks to normalize their relationships, meaning that they start lending to each other and that they lend to their clients,'' Trichet said in an interview on French radio RTL late yesterday. The banking system is “on the path to normalization,'' he said.

The cost of borrowing dollars in London fell last week for the first week since July after the ECB offered lenders as many euros as they wanted and joined counterparts in promising unlimited dollars as well. Central bankers and governments have stepped up efforts to end the 14-month-old credit crunch that's threatening to tip the global economy into recession.

“We're facing a very important market correction which is lasting,'' Trichet said, declining to say the credit crunch is over. “We are facing a very serious systemic liquidity crisis.''

As well as offering unlimited amounts of dollars and euros to banks, the ECB this month cut interest rates for the first time since 2003 and loosened rules on the collateral it will accept from banks when making loans. European governments including those in France, Germany and Spain committed 1.3 trillion euros ($1.7 trillion) to guarantee bank loans and take stakes in lenders.

Still, in a sign the crisis continues to reverberate, the Netherlands yesterday put 10 billion euros into ING Groep NV after the biggest Dutch financial-services company said it expects its first quarterly loss.

Lehman Collapse

Trichet said policy makers are acting to give banks the ability to refinance and boost their capital after September's collapse of Lehman Brothers Holdings Inc. prompted lenders to hoard cash. That sent the cost of credit surging, hurting the economy by choking off money to consumers and companies.

ECB council member George Provopoulos said the central bank “remains vigilant and will do what is needed'' to both reduce inflation and ensure stability in markets, according to an interview with To Vima newspaper published yesterday. Colleague Ewald Nowotny told Austrian state broadcaster ORF-TV that, while the crisis should be “under control'' by the middle of next year, the economy will suffer for longer.

Trichet criticized investors for creating the crisis by behaving with too much “short-termism,'' which he blamed for amplifying the rise and the decline of markets. He said that having mis-priced risk, financial markets should now be subjected to greater transparency and regulation to curb their volatility.

Review Financial System

“We said there was an underestimation of the risks and of the price to be paid for these risks,'' he said cash advance loans. The crisis “must force us to review the entire international financial system.''

ECB council member Erkki Liikanen told Finnish state broadcaster YLE TV1 yesterday that regulation will be strengthened across borders. “All national regulators of banks operating across borders must join forces,'' he said. “It will be a part of EU legislation and I'm sure it will even be agreed on a multinational level beyond that.''

While the ECB this month cut its benchmark rate by a half- point to 3.75 percent, with inflation still almost double its 2 percent limit, Trichet said the bank's focus is “entirely oriented to ensure price stability.''

“We will always, at any moment, do what is necessary so that I can continue to say to our citizens `you can have confidence, you will have medium-term price stability','' Trichet said. That goal should lend confidence to financial markets as “there's now more than in the past the recognition of the fact that price stability'' helps expansion and hiring, he said.

`Important Slowdown'

The ECB president described his 15-nation euro-area economy as being in a “very, very important growth slowdown,'' driven by tighter credit and also by this year's record fuel and food costs.

Nowotny predicted the growth rate next year “will be significantly below what we have in 2008,'' while ECB Executive Board member Juergen Stark told German radio that inflation will slow faster than expected next year as the economy cools.

Investors expect the ECB to cut its benchmark rate to 3.25 percent by the end of this year, Eonia forward contracts show.

The ECB, which next releases economic forecasts in December, in September predicted growth of 1.4 percent this year and 1.2 percent in 2009. With the crisis worsening, the International Monetary Fund this month said it expects the euro-area economy to grow 0.2 percent next year, the weakest since the single currency began trading in 1999, after 1.3 percent growth in 2008.

Trichet acknowledged his own central bank had taken on risk by boosting liquidity and accepting lower-rated securities as collateral for loans.

“We're taking risks and we've made decisions that increased our risks, because we were facing a systemic liquidity crisis of first importance,'' he said. The ECB is an “inspirer of confidence,'' Trichet said.

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WASHINGTON–World leaders took urgent steps on a number of fronts yesterday to calm the crisis gripping the international financial system.

• In Washington, the World Bank pledged to protect poor and vulnerable countries and nations with rapidly developing economies. Mexican Finance Minister Agustin Carstens, who heads the bank’s policy-setting committee, said the bank and the International Monetary Fund will draw on the full range of their resources to help these countries.

• In Paris, leaders of the 15 countries using the euro and Britain agreed to guarantee bank borrowing and keep large lenders afloat. While the five-point plan was too vague to tranquillize shaky market nerves, it gave new hope that the worst of the crisis could pass.

The summit, chaired by French President Nicolas Sarkozy, hammered out a detailed distress plan which, he said, achieved "concrete measures" as well as unity.

"This is not a gift to banks but to help them function," Sarkozy said, mindful of the public opinion backlash in the United States when Washington pushed through a $700 billion taxpayer-funded rescue plan for U.S. banks stuck with unsellable debt tied to the housing slump.

• U.S. Treasury Secretary Henry Paulson warned against isolationism and protectionism that could aggravate the financial crisis. And he assured world leaders that America is not "pursuing policies that would limit the flow of goods, services or capital" to further grind the gears of the economic system.

With a new trading week dawning, U.S. legislators urged quick action by the government on measures to make direct purchases of bank stock to help unlock lending.

Yesterday, the U.S. Federal Reserve said it approved the takeover of Wachovia Corp and its banking subsidiaries by Wells Fargo & Co. of San Francisco. The deal could be completed in five days, the Fed said.

• Australia and New Zealand said they were working together to offer blanket bank deposit guarantees.

• Gulf Arab states also took steps to boost confidence in the financial system, including a cut by Saudi Arabia of its benchmark repo rate and a vow by the United Arab Emirates to protect national banks and guarantee deposits.

Most Asian stock markets rose slightly in early trading today after policymakers took bold steps to rescue the financial system. Australia’s index was up 3.2 per cent.The MSCI index of Asia-Pacific stocks outside Japan climbed 1.6 per cent after slumping by more than a fifth last week. Japan’s Nikkei was closed today.The TSX finished last week down 16 per cent, closing at 9,065.16. It has fallen by 33 per cent since its peak in mid-June. The exchange is closed today for Thanksgiving.

The U.S. Standard & Poor’s 500 index plunged more than 18 per cent last week, its worst-ever weekly fall. European stocks fell 22 per cent.

As the global economy’s mighty fallen gathered in the final hours of an International Monetary Fund crisis meeting, they struggled to keep a rising sense of panic from galloping out of control direct lender payday advance online. The meeting yesterday was one of a series of IMF-World Bank seminars.

IMF chief Dominique Strauss-Kahn told reporters that after two days of intense talks on two continents, most nations have taken a major step toward recovery by co-ordinating plans to shore up their financial sectors.

The IMF – a guarantor of stability in the global financial system – emphasized its emergency financing fund was open for business to rescue developing countries hard hit by spiralling food and fuel prices as well as the financial shock waves rippling out from wealthy nations.

"We are ready to answer any demand by a country facing problems," Strauss-Kahn said, referring to its $200 billion fund.

Meanwhile, U.S. Senator Chuck Schumer, chair of the Joint Economic Committee, said that a radical proposal to pump huge federal sums into ailing banks – a form of nationalization – was "gaining steam" among American lawmakers, adding that he was hopeful the Treasury would shortly announce the plan would go into effect.

Mohamed El-Erian, co-chief executive officer of the PIMCO global investment management firm, said there was a set of weaknesses that people knew about. "Short term behaviour was encouraged … there was a level of self-regulation (with) no oversight. And a multilateral system with no one at the centre."

He said financial innovation "led to a massive failure of risk management in the context of a mindset that nothing can go wrong."

After chastising the 21st-century financial system to which many belonged, the economists turned largely to the 20th-century solutions of regulation and intervention. "It’s not up to the monetary system to control asset problems," chided mega-mogul George Soros, head of Soros Fund Management. "It is regulation. The lesson for the longer term is it is not enough to control the money supply, you also have to control credit and leverage … markets have moods, and the regulators have to counterbalance those moods."

Soros praised Paulsen’s plan for recapitalization of the banks. But he added, a new mortgage system was also needed to prevent massive foreclosures that could further shake the financial landscape.

"There’s a real danger that unless there is intervention, the housing market will overshoot on the down-side as it did on the up-side. Then re-capitalization would not be enough." But he warned, action had to be taken now: "We are right now teetering on the verge of panic."

With files from the Star’s wire services

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SPRINGFIELD, Ill. — A downstate Illinois electricity cooperative today will announce plans to offer power statewide, with an eye toward signing up Ameren Corp.’s Illinois customers infuriated by rate hikes.

In a news conference today in Springfield, Greenville-based Southwestern Electric Cooperative will unveil plan to create a subsidiary, New Illinois Cooperative Energy, or NICE. Company officials describe it as a statewide nonprofit power co-op, buying electricity from a third-party producer and returning excess profits to members.

"We’re going to aggregate all those customers in Illinois that would like an option," said Kerry Sloan, CEO of Southwestern Electric Cooperative and president of the new statewide entity.

Sloan said the idea for NICE arose in part from public anger early last year over Illinois rate hikes by Ameren and ComEd, which together serve most of the state. The sharp increases at that time came after the lifting of a decade-long rate-freeze.

That public and political anger came on the heels of controversy over storm-related power failures in 2006, and it resurfaced with this month’s $162 million increase in electric and natural gas delivery rates for Ameren customers.

The proposed new entity would begin operation early next year, if at least 7,000 customers statewide sign up. For a monthly co-op fee ($4 for residential service, $8 for small businesses), customers would join together to buy their power through Chicago-based Integrys Energy Services.

The potential savings for customers will occur if NICE can buy its power cheaper than Ameren’s utilities.

Ameren’s utilities buy, sell and deliver power, but the delivery is the only place the utilities’ profit. Under Illinois law, utilities’ buying and selling is done on a pass-through basis between providers and customers.

"We think customers should investigate any and every option that’s available to them," said Ameren spokesman Leigh Morris.

"This is an encouraging development, but there are not any guarantees," said Dave Kolata, executive director of the Citizens’ Utility Board, a consumer advocacy group for Illinois power consumers. "The jury is still out on whether there are going to be real savings for consumers."

kmcdermott@post-dispatch.com

217-782-4912

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Wells Fargo has emerged victorious in its weeklong tug-of-war with Citigroup over Wachovia and will proceed with its $15 billion purchase of the troubled bank.

The Wells-Wachovia combination creates the nation’s third banking powerhouse, with about 10,700 branches and 12,200 ATMs stretching from coast-to-coast. Wells Fargo and its ubiquitous stagecoach will now roll from New York City to Miami in the East, through Texas and into the West with branches from San Diego to Seattle.

The combined company, to be called Wells Fargo and based in San Francisco, will have $1.42 trillion in assets, $787 billion in deposits and 280,000 employees.

Wells Chairman Dick Kovacevich, CEO John Stumpf and their team will have their hands full in the days and weeks ahead, handling triage among Wachovia employees who became increasingly nervous about their futures as Wells and Citigroup fought over the Charlotte bank.

Wells (NYSE: WFC) is expected to avoid layoffs, if possible, in the largest acquisition in the company’s 156-year history. Even in making last year’s in-market, Bay Area acquisition of Greater Bay Bancorp, Wells kept the vast majority of the acquired bank’s employees http://no-fax-payday-loans-4u.com.

“We know this has been a time of great uncertainty for Wachovia (NYSE: WB) team members and many of its customers as their company has gone through a very painful and challenging time of unprecedented change in our industry,” Wells Fargo’s Stumpf said. “We want to assure them we’ll do everything we can to make the integration of our operations as smooth as possible. An important measure of success for this integration will be our ability to retain as many of the talented Wachovia team members as possible.”

Although Wells is acquiring Wachovia, the San Francisco bank is likely to find a few gems at the Charlotte bank to extend into Wells Fargo territory beyond Wachovia’s huge presence in the East. Wells Chairman Dick Kovacevich told analysts about a year ago that Wells Fargo’s customer service in retail banking had room for improvement. Wachovia has consistently won high marks in that department. Wachovia’s Way2Save program is also a candidate for going national under the Wells Fargo banner.

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State regulators should aggressively investigate AmerenUE’s pursuit of a second nuclear power plant even though a decision whether to build is three years away, Missouri’s public counsel said.

Public Counsel Lewis Mills Jr., who represents utility customers, asked the Missouri Public Service Commission to open a case to examine AmerenUE’s planning process and the cost of another nuclear plant, including financing costs.

"The commission should hire consultants, beef up its engineering staff and do everything within its power to be able to fully and responsibly address AmerenUE’s decision-making process as well as AmerenUE’s ultimate decision," he said in a PSC filing late Monday.

An early analysis by Mills’ office indicates another nuclear plant, including interest, could cost AmerenUE customers $19 billion to $41 billion over its 60-year life.

AmerenUE said it’s planning a response to the filing, and is only exploring the possibility of another nuclear plant.

"The Office of Public Counsel appears to want to limit those options before a decision to build is ever made," spokeswoman Susan Gallagher said in a statement. "This would severely jeopardize Missouri’s energy independence and the economic impact of what would be the largest construction project in Missouri history."

AmerenUE. a unit of St. Louis-based Ameren Corp., would need PSC approval to build another nuclear plant but won’t seek authority unless it decides to go forward with the project.

AmerenUE has taken visible steps to develop another nuclear plant in central Missouri. They include filing a construction and operating license application with the U.S. Nuclear Regulatory Commission in July.

However, the utility won’t commit to the project until at least 2011, and the decision will depend on factors such as energy prices, regulations on greenhouse gas emissions and construction and financing costs (paydayloans).

AmerenUE’s decision also will hinge on whether the state Legislature reverses a law that prevents electric utilities from charging customers for power plants before they are operational.

The so-called construction works in progress law (CWIP) was approved by Missouri voters in 1976 as part of a grass-roots campaign to halt AmerenUE, then Union Electric Co., from building a second nuclear plant.

AmerenUE has said a large new coal or nuclear power plant will be required by 2020 to help meet growing electricity demand, and that nuclear technology is preferable right now because of the likelihood of climate change legislation. Executives have said they won’t seek to build another nuclear plant unless it can charge customers during construction.

Utility officials have estimated the plant’s upfront construction cost at $6 billion, or as much as $9 billion with financing costs. However, those figures are only industry estimates and not specific to a second Callaway plant.

The analysis by the public counsel indicates the actual revenue needed to support another nuclear plant over its 60-year life ranges from $19.59 billion to $41.67 billion, depending on the regulatory structure.

Given what’s at stake for AmerenUE and its customers, its imperative for the PSC to be proactive in its examination of the utility’s plans, Mills said.

"We don’t know the cost yet," he said. "And it’s hard to weigh the options if we don’t know what the cost is."

jtomich@post-dispatch.com | 314-340-8320

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