Business and Finance

The U.S. mortgage delinquency rate declined in the first quarter to the lowest level since 2008 as an improving job market and low interest rates helped more borrowers pay their bills.

The share of home loans at least 30 days late dropped to 7.4 percent from 7.58 percent in the previous three months, according to a report today from the Mortgage Bankers Association. The rate peaked at 10.1 percent in the first quarter of 2010 and was last lower in the third quarter of 2008, when it was 6.99 percent.

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Ally Financial’s ResCap mortgage unit filed for a prepackaged bankruptcy protection Monday, a move that the taxpayer-owned bank says will allow it to take another step to repay Treasury.

The ResCap unit, which operates under the GMAC Mortgage brand, was once one of the nation’s leading subprime lenders. Problems with those home loans for riskier borrowers and the sharp drop in the company’s core auto finance business forced Treasury to give it a $15.8 billion bailout in 2009, as part of its efforts to rescue the troubled auto industry and housing market.

The company, which started as the finance unit of automaker General Motors (, Fortune 500) under the GMAC name, changed its name to Ally following the bailout. Besides continuing its auto finance business, it now operates an online commercial bank.

Ally also said it is looking at a possible sale or other strategic alternatives for its international business.

The company said that it expects GMAC to continue to make and service mortgage loans while the bankruptcy process is completed. The portfolio of home loans it holds, now valued at less than half its original value, will be auctioned off as part of the bankruptcy process payday loan lenders.

GMAC said it will make a so-called "stalking horse" bid of $1.6 billion for those loans, but they are expected to draw a higher bid from investors.

"The action by ResCap will enable Ally to achieve a permanent solution to its legacy mortgage risks and put these issues behind us," said Ally Chief Executive Officer Michael A. Carpenter. "This action, along with pursuing alternatives for the international businesses, will allow Ally to focus 100 percent of its energies on further strengthening its already leading U.S. auto finance and direct banking franchises."

Treasury currently owns about 74% of its outstanding stock, and Ally has paid about $5.5 billion of the bailout back to Treasury through dividends and loan repayments. The company’s statement Monday said that upon successful completion of the bankruptcy auction and disposal of its international business, it should be able to have paid back about two-thirds of the government bailout. 

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Three high-ranking executives at JPMorgan Chase are expected to leave their jobs this week after a trading blunder cost the bank $2 billion, The Wall Street Journal reported Sunday.

The Journal, citing people familiar with the situation, reported that one of the executives is Ina Drew, who for seven years has run the risk-management division at the bank responsible for the loss.

The other two identified by the newspaper are an executive in charge of the London desk that placed the trades and a managing director on that team. The bank did not immediately return a message from The Associated Press.

The $2 billion loss, disclosed on Thursday by CEO Jamie Dimon, has been an embarrassment for the bank and led lawmakers and critics of the banking industry to call for tougher regulation of Wall Street.

Drew, one of the highest-ranking women on Wall Street, is the bank’s chief investment officer. She was paid $15.5 million last year and almost $16 million the year before, according to a regulatory filing.

The Journal reported that Bruno Iksil, the JPMorgan trader identified as the “London whale” because of the giant bets he placed, was also likely to leave, but the paper reported that it was not clear when that would happen.

On Friday, investors shaved almost 10 percent off JPMorgan’s stock price. Dimon said in a TV interview aired Sunday that he was “dead wrong” when he dismissed concerns about the bank’s trading last month.

“We made a terrible, egregious mistake,” Dimon said in an interview that was taped Friday and aired on NBC’s “Meet the Press.” “There’s almost no excuse for it.”

Dimon said he did not know the extent of the problem when he said in April that the concerns were a “tempest in a teapot.”

The loss came in the past six weeks. Dimon has said it came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.

Dimon said the bank is open to inquiries from regulators. He has also promised, in an email to the bank’s employees and in a conference call with stock analysts, to get to the bottom of what happened and learn from the mistake.

Dimon told NBC that he supported giving the government the authority to dismantle a failing big bank and wipe out shareholder equity. But he stressed that JPMorgan, the largest bank in the United States, is “very strong.”

A piece of financial regulation known as the Volcker rule would prevent banks from certain kinds of trading for their own profit. Dimon has said the trading involved in the $2 billion loss would not have fallen under the rule.

Rep. Barney Frank, D-Mass., told ABC’s “This Week” that he hopes the final version of the Volcker rule will prevent the type of trading that led to the massive loss at JPMorgan.

Dimon conceded to NBC that the bank “hurt ourselves and our credibility” and expects to “pay the price for that.” Asked what the price should be, Sen. Carl Levin, D-Mich., said that banks will lose their fight to weaken the rule.

“This was not a risk-reducing activity that they engaged in. This increased their risk,” Levin told NBC.

“So we’ve got to be very, very careful that the regulators here are not undermined by this huge effort to weaken the rule by putting in a huge loophole” that includes the trading involved in the JPMorgan loss, he said.

Addressing public anger toward Wall Street, Dimon said he wants a more equitable society and does not mind paying higher taxes. But he said attacking all of business is “very counterproductive.”

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Let Greece go: It’s a possibility that’s being considered more and more publicly in Europe.

There have been two and a half years of bailouts, on top of broken promises by Greece to reform. The result: a fifth year of recession and, this week, political chaos. Voters on Sunday favored parties that either oppose the terms of the country’s international bailout or want to renegotiate them. If it cannot get more rescue loans, Greece will go bankrupt and likely have to leave the eurozone, the currency union of 17 countries.

The question confronting leaders in Athens, Berlin and other eurozone capitals could soon be: What would happen if Greece left the euro? How much damage would that do?

Among the possible scenarios:

• GREEK CHAOS: Economists agree that Greece, where unemployment is 21.7 percent, would suffer even more if it left.

So Greeks would try to pull their euros out of their bank accounts — before they could be converted into a new currency worth far less. Owners of Greek stocks would sell. As markets plunged and deposits fled, banks would collapse.

To try to limit the drain, the government would probably have to close the banks while the new currency is introduced. It might also try to prevent people from moving euros out of the country.

Every Greek company that owes money in euros would see those debts grow much heavier. Many would go bankrupt.

• A BOUNCE-BACK: On the plus side, the weaker drachma would make Greek exports cheaper and more competitive and could help the economy start growing payday loans guaranteed no fax. Companies outside Greece might be attracted by the cheaper labor and real estate, encouraging them to move plants there.

Tourism would also get a boost: booking a room on a Greek island, for example, would become much cheaper for foreigners.

• CONTAGION: The great fear, some say, is that if Greece leaves, other troubled eurozone countries might do the same.

“The big danger is financial contagion,” said Dennis Snower, president of the Kiel Institute for the World Economy. “The question would be, what stops the Portuguese from doing something similar?” People might think “just in case, let me get my money out of the bank,” he said.

• MAYBE NOT: Not everyone agrees that a Greek exit would be a disaster. Greece is tiny, and it wouldn’t be a total surprise. The possibility of a euro exit has been hanging over markets since late 2009. Banks outside Greece have had time to write off their Greek investments — and not make any new ones.

“A year ago, I would have said it’s too risky, but the situation has changed,” said Commerzbank’s chief economist, Joerg Kraemer, citing the eurozone fund and ECB loans. “The combined fiscal and monetary shield is much higher than it was a year ago.”

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Who wouldn’t want to get paid to go shopping? That’s partly the allure behind “mystery shopper” scams.

While they aren’t new, these phony “we’ll-pay-you-to-shop”-type ads sprouted like online weeds during the recession as job-hungry Americans hunted for employment.

Law enforcement and some financial institutions say they’re spotting mystery shopping scam attempts — which involve phony checks deposited into a victim’s bank account — several times a week.

“We’ve been seeing it pretty frequently since 2005,” said Vanessa Oddo, finance loss prevention manager for SAFE Federal Credit Union in North Highlands, Calif. She said 200 to 300 suspect checks get brought in to SAFE branches every year.

Similarly, the Northeast California Better Business Bureau office said it gets two or three calls a day from consumers asking about mystery shopper checks they’ve received in the mail.

The losses can be anywhere from a few hundred to several thousand dollars, depending on how much was deposited into the unsuspecting shopper’s bank account.

There are plenty of legitimate mystery shopping companies, which hire individuals to drop in unannounced at retailers, hotels, fast food outlets, restaurants and other businesses to secretly evaluate customer service.

But the fraudulent kind typically operate as fake check scams.

Making contact by mail, email or phone, a fraudster posing as a mystery shopping company “hires” an unsuspecting consumer, who is promised payment after completing a “first assignment totally free credit score.” That assignment often involves sending a phony check to the consumer’s home, with instructions to deposit it in a bank account, keep a small amount as reimbursement, then wire the remainder to Western Union, ostensibly to report on the wire company’s “customer service.”

Ultimately, the phony check bounces, leaving the victim’s bank account dinged for the total amount, as well as wire transfer charges and potential bank fees.

“You see more of these during a recession, when people are searching for jobs or ways to (make) more money. Scammers plan on that,” said Dan Denston, executive director of the North America Mystery Shopping Providers Association, or MSPA, based in Louisville, Ky.

Even legitimate companies that hire mystery shoppers are not immune from scammers. National Shopping Service in Rocklin, Calif., one of at least 16 mystery shopper firms in California, said it, too, has been victimized by scammers who used the company’s name in fake-check scams.

“The majority of people getting these letters and falling for the scams were not even our shoppers. Unfortunately, they got scammed,” said Katy Gravatt, National’s operations manager.

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The Obama administration’s top environmental official in the oil-rich South and Southwest region has resigned after Republicans targeted him over remarks made two years ago when he used the word “crucify” to describe how he would go after companies violating environmental laws.

In a letter to Environmental Protection Agency Administrator Lisa Jackson sent Sunday, Al Armendariz says he regrets his words and stresses that they do not reflect his work as administrator of the five-state region including Texas, New Mexico, Oklahoma, Arkansas and Louisiana. Armendariz, who holds a doctorate in environmental engineering, apologized last week for his remarks. A senior administration official, speaking on condition of anonymity because of the sensitivity of the subject, told The Associated Press that Armendariz has since received death threats. His resignation was effective Monday, when he informed his senior staff. Sam Coleman, a career official who led the agency’s response to Hurricane Katrina and served as Armendariz’ deputy, took over as acting regional administrator.

“I have come to the conclusion that my continued service will distract you and the agency from its important work,” Armendariz wrote in the letter, which was obtained by the AP.

Republicans in Congress had called for Armendariz’ firing, after Oklahoma Sen. James Inhofe highlighted the May 2010 speech last week as proof of what he refers to as EPA’s assault on energy, particularly the technique of hydraulic fracturing, or fracking.

At a town hall meeting in Washington on Friday, Jackson had said only that she would continue to review the case, calling Armendariz’ words “inflammatory” and “wrong”. President Barack Obama appointed Armendariz in November 2009, at the urging of Texas-based environmental groups. He is one of the few Latinos in senior leadership at the EPA.

The regional administrator’s words “don’t comport with either this administration’s policy on energy, our policy at EPA on environmental enforcement, nor do they comport with our record as well,” Jackson said.

The EPA, perhaps more than any other agency, has found itself in the GOP’s crosshairs over its regulation of the gases blamed for global warming, steps it has taken to limit air pollution from coal-fired power plants, and its increased regulation of fracking, which is responsible for a gas drilling boom. Republicans, including presidential contender Mitt Romney _ who has called for Jackson herself to be fired _ have blamed the agency for high gasoline prices and clamping down on American energy.

Armendariz, who was based in Texas, frequently found himself at odds with the state government and the oil and gas industry, which are often aligned.

The scientist and environmental activist had long been frustrated by the government’s inability to clean up Texas’ notoriously polluted air, and he had called the EPA broken and testified on behalf of activist groups about just how badly the federal and state environmental agencies had botched things guaranteed fast personal loans.

Environmentalists said Monday that it was Armendariz getting crucified for doing his job _ enforcing the law.

“He took bold steps that have been needed for decades to move our state forward,” said Ken Kramer, director of the Lone Star Chapter of the Sierra Club. “The only people who will celebrate his resignation are the polluters who continue to foul Texas air and the politicians who serve those special interests.”

Several disputed contamination cases in Texas in which Armendariz was involved have helped stoke environmental concerns over fracking, a technique in which oil and gas producers inject water, chemicals and sand underground at high pressures to fracture rock so gas can come out.

In one case cited by Republicans, the EPA issued an emergency order in 2010 _ an unprecedented action in Texas _ accusing Range Resources of contaminating an aquifer and giving it 48 hours to provide clean drinking water to residents. Armendariz said he went around the state agency that oversees drilling because it wasn’t responding quickly enough. The order later was withdrawn after a state court ruled evidence that fracking had caused the contamination had been falsified.

“He was flat wrong,” wrote more than two dozen lawmakers in a letter to Jackson sent Friday, calling for Armendariz’ firing. “There was no contamination and his office failed to conduct appropriate or adequate science to support his claims.” The EPA has faced similar criticism for its analysis of potential drinking water contamination from fracking in Pennsylvania and Wyoming.

Armendariz’ speech was made in Dish, a small town northwest of Dallas, where residents’ concerns over the environmental impacts of hydraulic fracturing helped put the issue on the national stage.

Testing, which was urged by the EPA, showed some groundwater contamination and elevated toxic air pollution after operators began using a new method _ a combination of hydraulic fracturing, or fracking, and horizontal drilling _ to extract once out-of-reach gas.

Referring to how the Romans once conquered villages in the Mediterranean, Armendariz said, “They’d go into a little Turkish town somewhere, they’d find the first five guys they saw and they’d crucify them.”

“And so you make examples out of people who are in this case not complying with the law,” he said.” Find people who are not complying with the law and you hit them as hard as you can and make examples of them.”

___

Associated Press correspondent Angela K. Brown contributed reporting from Fort Worth, Texas.

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Don’t panic yet. The government reported Friday that the economy got off to a tepid start this year, but that doesn’t foreshadow a repeat of the near-standstill that happened in 2011.

“The economy is firmly on a growth trajectory,” said Sung Won Sohn, an economics professor at California State University’s Smith School of Business. “The first-quarter slowdown will be temporary.”

Still, the January-March report was discouraging.

Economists had expected gross domestic product _ the broadest gauge of economic output _ to expand at a 2.5 percent annual rate for the first three months of the year. Instead, the Commerce Department said it was 2.2 percent, mainly because of government budget-cutting and a slowdown in business investment.

And some of the January-March growth, meager as it was, probably came at the expense of the current quarter. An unseasonably warm winter pulled car buyers into showrooms earlier than usual.

The same was true for housing construction. That’s one reason it jumped at a 19 percent pace from January through March.

Economists doubt consumers can keep spending as freely as they did in the first three months of this year: an annual pace that was 2.9 percent faster than in the previous quarter and the fastest in more than a year. They probably can’t afford to. Americans’ after-tax income rose just 0.6 percent in the first three months compared with a year earlier. That was the puniest pay increase in two years.

People spent more in part because they socked away less. The savings rate fell to 3.9 percent of after-tax income. That was down from 4.5 percent. Economists worry that people won’t keep spending more unless their income grows.

Stock prices rose Friday despite the report of weaker growth. David Rosenberg, chief economist at Gluskin Sheff, said investors might have bid up stocks because they think the Federal Reserve is more likely to pursue another round of bond buying to stimulate the economy.

Fed Chairman Ben Bernanke “has created the impression that if the economy stumbles, he’ll be there to hold your hand,” Rosenberg said.

The lackluster first-quarter growth follows government reports that hiring slowed sharply in March and the number of people seeking unemployment benefits reached a three-month high.

With 12.7 million people unemployed, today’s economy needs much faster growth to boost hiring. Growth would have to be roughly 4 percent for a full year to lower the unemployment rate, now 8.2 percent, by 1 percentage point.

In 2011, a series of setbacks struck the economy. Gas prices rose sharply. An earthquake in Japan shuttered factories there and cut off supplies to U.S. manufacturers. A standoff in Washington brought the federal government to the brink of default, rattling investors and consumer confidence. And Europe’s debt crisis threatened to diminish U.S. exports and further spook investors.

The economy slowed to an annual rate of just 0.4 percent in the first quarter of 2011. Unemployment, which had been falling, rose again last summer.

But most economists think the U.S. economy is more resilient this year.

The job market, household finances and businesses are all in better shape than they were a year ago. Supplies are flowing freely. Political bickering has eased. And the fears about Europe have subsided at least temporarily.

“People are less concerned that the eurozone crisis could engulf the whole world,” says Nigel Gault, an economist with IHS Global Insight.

A 55-cent run-up in gasoline prices (to an average $3.83 a gallon) isn’t hurting as much this year. In part, that’s because drivers are getting used to paying more. And families’ finances are sturdier after another year of paying down debts.

In addition, some factors that held back growth in the first quarter aren’t expected to last. Businesses splurged on software and equipment at the end of 2011 because of an expiring tax break. That stole economic activity, in effect, from the first quarter. Companies will probably resume spending again later this year.

And economists say government spending will probably rebound _ or at least stop falling _ because state and local governments are collecting more tax revenue as their economies slowly recover.

“Their budget holes are getting a lot smaller,” says Jay Bryson, global economist for Wells Fargo.

Most of all, the job market is stronger than it was last year. Unemployment has fallen from 9.1 percent in August to 8.2 percent in March. The economy has added nearly 1.9 million jobs over the past year. More hiring is creating more pay and more spending _ a cycle in which hiring and consumer spending reinforce each other and grow.

Economists note that Friday’s report isn’t the final word on first-quarter growth. It is just an initial estimate. The government will revise the figures in May and again in June.

Then in July, the growth figures will be tweaked yet again. That’s when the government will revise its estimates of growth from 2009 through the first quarter of this year.

The picture could look brighter after the revisions. Two months ago, the government revised income and savings for the second half of last year. It showed Americans had earned and saved more than previously thought. That meant they had more money to spend.

Some economists expect a similar revision this year because job gains suggest that incomes might be higher.

This was the 11th quarter since the Great Recession officially ended in June 2009. The fastest rate of economic growth has been 3.9 percent in the first quarter of 2010. Normally, a much bigger bounce would follow a deep recession like the one the United States sank into in December 2007.

When the economy emerged from the recession of 1981-1982, for instance, growth hit an 8 percent annual pace for four straight quarters in 1983 and 1984.

The gross domestic product measures the output of all goods and services produced in the United States, from cars to electricity to manicures. GDP growth drives job creation, pay, corporate profits and stock prices.

As disappointing as the first-quarter numbers were, the U.S. economy still looks a lot stronger than most of the rest of the developed world. It’s expected to grow perhaps 2.5 percent for the full year.

By contrast, Britain’s economy will only grow 0.8 percent and Japan’s about 2 percent, according to forecasts from the International Monetary Fund. Things are even worse in Europe. The 17 countries that use the euro as their currency are expected to see growth shrink 0.3 percent.

“Growth is an increasingly rare commodity in the global economy,” says Jason Conibear of Cambridge Mercantile, which specializes in trading currencies. “But the US has got it.”

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SHANGHAI

Lamborghini could have made a four door sedan instead of an SUV, but that wouldn’t have been cool enough, said the Italian automaker’s chief executive in a telephone interview from Beijing, where the Urus SUV concept vehicle was being unveiled.

Sedans are "less emotional" than SUV’s, Stephan Winkelmann said and, therefore not as good a fit for the maker of extreme performance vehicles. "What we want to build is a real Lamborghini in any market segment we enter," he said.

Still, Lamborghini also wants to create a vehicle that can be used for more than just occasional high-speed drives.

"Today, we are not building cars which are meant to driven on a daily basis from ‘point a’ to ‘point b,’" Winkelmann said, "and this car is exactly that."

Lamborghini’s current line-up consists of two models, the V-12 powered Aventador, available at prices starting at about $375,000, and the V-10 powered Gallardo, which starts at about $180,000 and is available in numerous hard-top and convertible variations.

Gallery: Lamborghini Urus SUV

The Italian automaker has been considering something with broader appeal for years, Winkelmann said. In 2008, Lamborghini showed off a four-door sedan concept vehicle called the Estoque. But he said the global economic crisis put a stop to any further consideration of that vehicle.

Meanwhile, the SUV market has continued to expand, despite higher gas prices, as more sizes and variations of the high-riding vehicles have come to market.

Today, SUVs range from the traditional large truck-based vehicles to very small, sporty models personal loan for poor credit. According to a recent analysis by Ford Motor Co. (, Fortune 500), one in three vehicles sold in the United States last year was some sort of SUV.

"Even outside the U.S., the segment is growing," Winkelmann said.

Should Lamborghini decide to make the Urus available for sale — something Winkelmann said hadn’t been decided yet — it would cost roughly the same as the Gallardo.

Cool cars from the N.Y. auto show

Producing a vehicle like the Urus is "over 95% feasible," Winkelmann said.

Much of the concept SUV is made from expensive, but very lightweight, carbon fiber, and instead of actual side mirrors, it has video cameras.

Currently, Lamborghini sells only about 2,000 cars but is prepared to produce as many of the 3,000 of the Urus SUV alone.

That would still leave the supercar maker selling just 5,000 vehicles a year, a number that wouldn’t endanger the brand’s valued exclusivity, Winkelmann said.

Lamborghini is part of Germany’s Volkswagen Group () which also owns Audi, Bentley and Bugatti. Bentley also unveiled an SUV concept vehicle at an auto show earlier this year.

The 600 horsepower Urus would primarily be intended for on-road use, said Winkelmann, where it would offer strong acceleration and cornering without, perhaps, the top speed of a Lamborghini sports car.

Off road, it would perform about as well as other high-performance luxury crossovers. In other words, it will be able to drive in the mud and on rocks but not all that well. 

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