Goldman agonized over pay cuts as profits suffered

(Reuters) - Top executives at Goldman Sachs have been considering deep cuts to staffing levels and pay for at least two years, but feared too many layoffs would leave the firm unprepared for an eventual pickup in business, people familiar with the bank said.
They instead chipped away at staff levels and focused on non-personnel expenses that are less painful to cut.
But investors pressured the bank to cut costs further, the sources said, and on Wednesday, Goldman gave in.
The largest standalone investment bank said in the fourth quarter it cut the percentage of revenues it pays to employees in half to 21 percent. That brings the ratio for the entire year to its second-lowest level since the bank went public in 1999.
With less money going to employees, more was available for shareholders. The bank's annualized return on equity - which measures how well the bank uses shareholder money to generate profit - jumped to 16.5 percent in the fourth quarter from 5.8 percent a year earlier.
"Arguably for the first time, Wall Street's shareholders are getting the lion's share of the profitability," said Brad Hintz, a former Morgan Stanley treasurer who is now an analyst at Bernstein Research.
The bank's quarterly profit tripled, helped by gains from investments and bond trading as well, and investors sent its shares up 4 percent to $141.09, their highest level since 2006.
Analysts said other banks are likely to feel pressure to keep their compensation expenses in check after Goldman's results. But for Morgan Stanley , the second-biggest stand-alone U.S. investment bank, paying out a lower percentage of its revenue to employees could be tough because analysts believe its revenue fell last year.
Goldman missed the worst pitfalls of the financial crisis but has suffered public relations embarrassments from trades it executed during the crisis and from executives' comments afterward. The bank, along with the rest of the industry, is struggling to figure out how to navigate the post-crisis world, in which clients trade less and regulations and capital rules crimp profits in many businesses.
Whether Goldman maintains its discipline on pay will be a test for Harvey Schwartz, who succeeds David Viniar as CFO at the end of this month.
On a conference call with investors, Schwartz declined to provide a target for compensation levels, but emphasized that shareholder returns would be one crucial factor in deciding how much revenue goes to employee pay.
"We don't look to overpay anybody," Schwartz said.
YEARS OF COST-CUTTING
Goldman first publicly signaled its intent to get serious about cost-cutting in July 2011, when Viniar outlined a plan to reduce costs by $1.2 billion a year, partly by laying off employees. Since then, Goldman expanded that cost-cutting plan by $500 million and has winnowed staff almost every quarter.
Staff reductions have targeted big earners, including dozens of partners, who have left since the start of 2011. Sources inside the bank expect that exodus to continue this year as Goldman makes way for younger employees to move up the ladder.
Analysts say that strategy is common.
"The polite way to characterize it is a ‘generational change' - where you promote the young guys and you don't pay them," said Hintz.
In 2008, as the bank's revenue dropped, average pay per employee fell as well. While the average Goldman worker brought home nearly $622,000 in pay in 2006, that figure dropped to $367,057 per person in 2011, with the biggest decline happening between 2007 and 2008. But the percentage of revenue that the bank paid to employees did not stop falling until now.
The fourth-quarter drop meant that for all of 2012, Goldman paid employees 37.9 percent of the bank's revenue, down from 42 percent in the previous year.
"Management appears to be doing a superb job at keeping all expenses down and, in particular, retaining quality people without giving all the revenue away in the form of compensation," said Joe Terril, president of St. Louis-based investment firm Terril & Co, who invests in bank stocks.
WALL STREET WOES
Many banks are facing the same long-term revenue pressure as Goldman, and analysts expect layoffs across Wall Street. Morgan Stanley plans 1,600 job cuts in 2013, while Goldman cut 900 jobs in 2012, equal to about 3 percent of its workforce.
But laying off staff may not be enough, and employee pay may have to fall too. Hintz, the Bernstein Research analyst, estimates that across Wall Street average pay in trading businesses could fall 20 percent.
"There's only one way to get returns up on Wall Street, and that's to cut the compensation of the employees," Hintz said.
Investors have been pressuring banks to pay less of their revenue to employees. In 2011, investors pressed Morgan Stanley executives to pay somewhere closer to 30 percent of the bank's revenue to employees, instead of around 50 percent, according to one person at those meetings.

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Consumer bureau issues rules to clean up mortgage servicing

WASHINGTON (Reuters) - The U.S. Consumer Financial Protection Bureau announced new rules for mortgage servicers on Thursday to help prevent the sloppy practices that aggravated the U.S. foreclosure crisis.
Mortgage servicers collect monthly payments from borrowers on behalf of the investors that own the loans. That often involves letting borrowers know about the status of loans, modifying the loans for those struggling to make payments on time, and handling foreclosures.
The CFPB rules will now require servicers to follow clear procedures to help troubled borrowers seeking alternatives to losing their homes. The rules also restrict what is known as dual-tracking, in which servicers simultaneously pursue a loan modification and the foreclosure process.
"For many borrowers, dealing with mortgage servicers has meant unwelcome surprises and constantly getting the runaround," CFPB Director Richard Cordray said in a statement.
"Our rules ensure fair treatment for all borrowers and establish strong protections for those struggling to save their homes," he said.
The consumer bureau was created by the 2010 Dodd-Frank financial oversight law and given responsibility for policing mortgage markets and other consumer products. The regulator first proposed rules for mortgage servicers in August.
Servicing problems -- including poor record-keeping, sparse customer service and "robo-signing" unread foreclosure documents -- came under intense scrutiny as foreclosures exploded after the 2007-2009 financial crisis.
Bank of America Corp, Citigroup Inc, JPMorgan Chase & Co, Wells Fargo & Co and Ally Financial Inc entered into a $25 billion settlement last year with state and federal authorities over abusive servicing and foreclosure actions.
The consumer watchdog said it looked at the changes stipulated in that agreement, as well as state and other federal rules for mortgage servicers, before deciding on its final rules.
The new rules would create a minimum national standard for mortgage servicers, bureau officials said. Servicers have until January 2014 to comply.
Under the new guidelines, servicers must alert mortgage borrowers who miss two consecutive payments and spell out options, such as changing the interest rate or extending the terms of the loan, that could help borrowers avoid foreclosure.
The rules preempt quick foreclosures by requiring servicers to wait until a loan is delinquent more than 120 days before beginning foreclosure proceedings, the bureau said.
Borrowers who apply for loss mitigation must be evaluated for all of the options allowed by the investor, who owns the loan, and servicers must have an appeals process for borrowers whose applications are denied.
Regulators stopped short of mandating that servicers offer specific options such as loan modifications, which consumer groups wanted in the final rules.
"The CFPB's final rules fail to implement the key lesson of the foreclosure crisis, that a loan modification requirement is essential to protect qualified homeowners from unnecessary foreclosures," Alys Cohen, an attorney with the National Consumer Law Center, said in a statement.
In addition, the rules require servicers to provide warnings before interest rates adjust, correct errors quickly, and help consumers avoid so-called force-placed insurance, or homeowners' insurance bought by the servicer that is often more expensive than what borrowers might find on their own.
Some small companies that service loans they own or make themselves will be exempt from many of the rules. Regulators expanded this group in the final rules to include servicers with 5,000 or fewer loans, after community banks argued they have more incentives to work with borrowers than larger servicers do.

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Feds finalize protections for mortgage borrowers

WASHINGTON (AP) — The government's consumer lending watchdog finalized new rules Thursday aimed at protecting homeowners from shoddy service and unexpected fees charged by companies that collect their monthly mortgage payments.
Mortgage servicing companies will be required to provide clear monthly billing statements, warn borrowers before interest rate hikes and actively help them avoid foreclosure, the Consumer Financial Protection Bureau said. The rules also require companies to credit people's payments promptly, swiftly correct errors and keep better internal records.
In a departure from proposed rules released in August, the agency said that mortgage companies will not be allowed to seek foreclosure on a person's home while that person is trying to arrange lower monthly payments or otherwise avoid losing the home. The change will end the practice of "dual-tracking" — pushing a borrower into foreclosure while discussing a loan modification with that borrower.
The rules "will provide a fairer and more effective process for troubled borrowers who face the potential loss of their homes," CFPB Director Richard Cordray said in remarks prepared for a public event in Atlanta Thursday.
The changes are part of a sweeping overhaul of mortgage rules by the CFPB, which was created by Congress in 2010 to police the kind of risky lending that contributed to the financial crisis. Congress charged the agency with rewriting the rules for how mortgage companies do business.
Mortgage servicers are central players in the nationwide housing crisis because they are responsible for foreclosing on homes when people fail to make payments. They have been criticized widely for practices like charging excessive fees, foreclosing without completing the required paperwork and failing to help people stay in their homes by changing their loan terms.
The new agency has focused on mortgage servicers in part because borrowers can't shop around and choose a mortgage servicer. Instead, servicers buy the right to collect payments from the original lenders. Servicing rights can be lucrative because they permit servicers to collect fees, for example on late payments. Without the threat of customers abandoning them, critics say, servicers have less incentive to serve customers well.
In the past, the companies "failed to provide a basic level of customer service that borrowers deserve, costing them money and dumping them into foreclosure," Cordray said. "Dealing with sloppy mortgage servicing became a frustrating nightmare."
Under the final rule, companies will be required to provide billing statements that explain how much of a payment is going to pay down principal, how much to interest and how much to fees. If an interest rate is set to adjust, the borrower will receive an early estimate of the new payment amount. That would allow people to consider refinancing if they don't like the new rates.
The rules also help guarantee that borrowers aren't forced to pay excessive premiums on homeowners' insurance that servicers require them to carry. In the past, servicers tacked on insurance when they believed someone's coverage had lapsed. The premiums could be several times bigger than on a typical policy.
The rules would require servicers to notify borrowers twice before charging them for insurance. They would have to cancel the insurance within 15 days if borrowers proved that they already had coverage.
Another change from the August proposal concerns an exemption for smaller mortgage companies. The agency had originally proposed an exemption from some rules for companies that service 1,000 or fewer loans. Under the final rules, the exemption would cover companies servicing up to 5,000 loans.
However, the exemption is limited to companies that originate the loans, such as community banks and credit unions. It would not cover small companies that exist solely to buy the rights to collect mortgage payments.
For borrowers who fall behind, servicers covered by the rules will have to begin a notification process after two missed payments. They will be required to outline foreclosure alternatives like reduced monthly payments. Borrowers will be able to apply for lower payments using a single form provided by the mortgage company.
Servicers also must provide information about housing counseling services. The rules are set to take effect in January 2014.

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New York governor wants casinos to spur upstate economy

(Reuters) - New York Governor Andrew Cuomo proposed on Wednesday dozens of new initiatives for the state, including new casinos and other measures aimed at helping upstate areas regain their financial footing after decades of economic decline.
Cuomo, in his annual State of the State address, proposed locating up to three casinos upstate to increase tourism and provide some local property tax relief and education funds for struggling cities.
New York legislators agreed last year to legalize public casinos, saying they would amend the state constitution to expand gambling outside Native American resorts. They must still finalize the legislation.
Cuomo also said the state, with a population of nearly 20 million, would launch new marketing plans that include duty-free stores for New York-made products and a national white-water rafting competition.
Cuomo floated several ideas for supporting fledgling businesses, including the creation of a $50 million venture capital fund. He also proposed 10 high-tech incubator "hot spots" in which start-up companies would not have to pay business, property or sales taxes.
The plans were just a few of the dozens put forward by Cuomo in what he said was the most aggressive agenda he has proposed since taking office in January 2011. But he did not indicate in his speech how any of the proposed programs would be funded.
Speaking for more than an hour, Cuomo said he would focus on upgrading the state's fuel delivery system, subways, and other infrastructure to prevent multibillion-dollar damage from severe weather events like Superstorm Sandy, which slammed into the region on October 29.
He also proposed specific new restrictions on firearms in the wake of deadly shooting rampages in late 2012 in Newtown, Connecticut, and Webster, New York.
And he said the state's minimum wage should rise to $8.75 an hour from the current $7.25.
"We have daunting challenges," he said. "But these challenges also pose exciting opportunities."
Several of New York's local governments have faced severe financial struggles after the recession, including Nassau and Suffolk counties, both on Long Island to the east of New York City.
But several cities in the northern and western parts of the state, including Syracuse, Rochester and Buffalo, have been losing jobs for many years.
On Wednesday, Moody's Investors Service downgraded Niagara Falls to Baa1 from A2, warning that it could cut the credit rating further if the city loses a legal dispute with the Seneca Nation over gambling revenue.
Cuomo proposed creating a program that would advise local governments on how to restructure their finances.
The program would be run jointly by private consultants, the state's budget division, the attorney general and New York State Comptroller Thomas DiNapoli, whose program to monitor municipal fiscal distress went into effect this year.
He also said the state should consider spending $1 billion to create or preserve 14,000 units of affordable housing over the next five years.

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ECB to hold fire as euro zone economy shows glimmers of hope

FRANKFURT (Reuters) - The European Central Bank is expected to keep interest rates at a record low of 0.75 percent on Thursday, refraining from a cut as the euro zone economy shows some signs of stabilising and inflation still tops its target.
The 17-country euro zone is in recession, but recent data points to some stabilisation, and ECB President Mario Draghi could strike a slightly more positive tone in the news conference that follows the rate decision.
"Rates are definitely on hold. Nothing has been spectacular enough in recent data to force the ECB to any action," Deutsche Bank economist Gilles Moec said.
"There is a recession, but no further deterioration. Lending is weak, but also not deteriorating further, so the ECB is not compelled to act."
The 23-man Governing Council will find some comfort from improving business morale as well as a survey of purchasing managers, which gave tentative signs that the worst of the downturn may have passed.
"Since the December meeting key figures have generally surprised on the upside," Nordea analyst Anders Svendsen said in a note to investors.
While the ECB had, in Draghi's words, "a wide discussion" on reducing rates last month, the grounds for such a move have not grown and Executive Board members have argued against a cut.
Yves Mersch said last month he did not see the logic of a debate about the ECB cutting its main rate and Peter Praet said there was little room to cut.
Another cut of the refinancing rate would raise the question of whether the ECB would also lower its deposit rate - currently at zero - by the same amount, which would push it into negative territory, essentially charging a fee, for the first time.
Even though Draghi has said the bank was "operationally ready" for such a step, it has grown increasingly wary of the idea over the past couple of months, a source with knowledge of the ECB's thinking said.
Negative deposit rates could deal a hefty blow to money market funds, which have already seen cash outflows since the ECB cut the deposit rate to zero in July. The rate is a peg for short-dated money market rates and at zero it is already almost impossible for funds to generate a return for their investors.
Executive Board member Joerg Asmussen said last month he would be "very reluctant" about the ECB cutting the deposit rate any further, adding that "our (monetary) policy is very accommodative".
INFLATION STUBBORN
ECB staff projections published last month saw inflation at about 1.4 percent in 2014, which would usually justify another interest rate cut.
The central bank also sees inflation falling below 2 percent this year with underlying price pressures remaining moderate.
But inflation has eased more slowly than the ECB initially expected and as long as it misses the target - it has been above 2 percent for more than 2 years - a cut could be difficult to justify.
Furthermore, in the euro zone's largest economy, Germany, prices rose faster in December than in the previous month.
In addition to gauging whether the ECB is entertaining another cut or not, Draghi will be pressed on what other options the ECB has, especially to improve lacklustre bank lending.
ECB data showed last week that bank lending to the private sector fell at an annual rate of 0.8 percent in November.
At his December news conference, Draghi attributed the drop mainly to demand factors, but added that in a number of countries, credit supply is restricted.
A move by global regulators to give banks more time and flexibility to build up cash reserves is expected to do little to support a recovery in Europe, where recession-hit firms and households have scant appetite for more debt.
"One thing the ECB needs to engineer is recovery in lending," Rabobank economist Elwin de Groot said.

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Asia stocks rise on positive start to US earnings

BANGKOK (AP) — A positive start to U.S. corporate earnings season helped boost Asian stock markets Thursday.
Major regional benchmarks rose on the heels of a handful of better-than-expected results that also lifted Wall Street.
Consumer products maker Helen of Troy, whose brands include Dr. Scholl's and Vidal Sassoon, reported a 15 percent profit increase. Electronic payments processor Global Payments said its fiscal second-quarter earnings rose nearly 15 percent, beating Wall Street expectations.
After markets closed Tuesday, Alcoa Inc. predicted rising demand for its aluminum this year and topped revenue expectations for the fourth quarter. Earlier in the day, agricultural products giant Monsanto said its profit tripled and raised its guidance for 2013.
Japan's Nikkei 225 index rose 0.9 percent to 10,677.74. Hong Kong's Hang Seng gained 1 percent to 23,439.46. South Korea's Kospi added 0.7 percent to 2,005.39 and Australia's S&P/ASX 200 advanced 0.4 percent to 4,725.80.
The European Central Bank will meet later Thursday to set monetary policy for the 17 countries that use the euro. It is expected to keep its benchmark interest rate unchanged at the record low of 0.75 percent even though the eurozone economy as a whole is back in recession. Investors are also awaiting the release in the U.S. of weekly jobless claims.
On Wall Street, the Dow Jones industrial average rose 0.5 percent to close at 13,390.51 on Wednesday. The Standard & Poor's 500 rose 0.3 percent to 1,461.02. The Nasdaq composite index rose 0.5 percent to 3,105.81.
Benchmark crude oil contract for February delivery was up 33 cents to $93.44 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 5 cents to close at $93.10 per barrel on the Nymex on Wednesday.
In currencies, the euro fell to $1.3047 from $1.3053 while the dollar rose to 88.05 yen from 87.75 yen.

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U.S. health cost growth slowed in 2011 but with signs of pickup

WASHINGTON (Reuters) - U.S. healthcare spending rose at a historically low rate of 3.9 percent for the third consecutive year in 2011, but showed underlying signs of acceleration as the economy recovered from recession, the Obama administration said on Monday.
The report, released by the U.S. Centers for Medicare and Medicaid Services and published in the journal Health Affairs, said the sprawling national healthcare system totaled $2.7 trillion, or $8,680 per person. It accounted for 17.9 percent of gross domestic product, a level that has been steady since 2009.
The findings showed a rebound in personal healthcare spending that benefited physicians, clinics and drugmakers. Rising job and income growth helped stabilize the private insurance market after years of enrollment losses.
Hospital spending growth slowed. The growth of the Medicaid program for the poor dropped by more than half to 2.5 percent, as job growth slowed the rate of enrollment and cash-strapped states moved to contain costs by reducing benefits and provider payments, tightening eligibility and increasing costs to beneficiaries.
Medicare, the widely used program for the elderly and disabled, grew 6.2 percent with a rise in doctor visits and a one-time change in payment rates for skilled nursing facilities. Overall, the federal government's share of healthcare spending swelled to 28 percent in 2011, from 23 percent in 2010.
The figures provide an official snapshot of the scale and pace of healthcare spending as the U.S. government prepares for a dramatic expansion in health coverage under President Barack Obama's healthcare reform law, which is expected to boost spending and costs beginning in 2014 as more than 30 million uninsured Americans enter the system.
Rising healthcare costs are blamed by some for undercutting U.S. economic competitiveness as well as job and wage growth, and have begun to attract new attention from the administration and outside experts. The 3.9 percent advance in 2011 healthcare spending outstripped the 2.1 percent GDP inflation rate, a broad measure that takes in price changes across the economy.
2011 is the most recent year for which figures are available.
THE FUTURE IS NOT THE PAST
"The more coverage you have, the more services you use ... when you get as many as 30 million more people with coverage, you would expect them to use many more services and you would expect a higher cost," said Richard Foster, chief actuary at CMS, part of the U.S. Department of Health and Human Services.
"There is a growing amount of evidence that healthcare providers are getting it - getting that the future can't be the same way as the past," he added.
According to official administration projections, healthcare spending will surge by 7.4 percent to represent 18.2 percent of GDP in 2014, as millions of people acquire coverage through new subsidized online marketplaces and an expansion of Medicaid under the Patient Protection and Affordable Care Act.
But CMS analysts also say the law is expected to put downward pressure on spending later in the decade.
The results for 2011 were generally in line with forecasts issued last year. But the authors of Monday's report cast a question mark over future expectations, noting that economic, income and job growth in 2011 were less than might have been expected during an economic recovery.
"This fact raises questions about whether the near future will hold the type of rebound in healthcare spending typically seen a few years after a downturn," they wrote.
Monday's report showed Obama's reform law having a minimal effect on healthcare spending in 2011, although a new rule allowing adult children to remain on their parents' insurance plans until they turn 26 helped the private insurance market rebound by adding 2.7 million new beneficiaries to the rolls.
The law, known to Republican critics as "Obamacare" - a nickname the White House has also come to embrace - slowed the rate of growth in prescription drug prices for Medicare and Medicaid beneficiaries through extended rebates, discounts for senior citizens.
Spending growth for physician and clinical services climbed to 4.3 percent to $541.4 billion, and hospital spending growth dipped to the same rate for a total of $850.6 billion.
Prescription drug spending in retail outlets climbed 2.9 percent to $263 billion, versus a historically low growth rate of 0.4 percent in 2010.
Private insurers saw premiums increase 3.8 percent, partly as a result of the spread of low-premium, high-deductible insurance plans.
Out-of-pocket spending for consumers climbed 2.8 percent, accelerating from 2.1 percent in 2010.

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UK stores suffer lacklustre Christmas sales - BRC

LONDON (Reuters) - British retailers suffered from lacklustre sales last month, as a tough economy limited consumer spending in the run-up to Christmas when many stores make most of their profits, a leading trade body said on Tuesday.
The British Retail Consortium said the total value of goods sold was up just 1.5 percent from December 2011, while on a like-for-like basis which excludes new floorspace sales were only 0.3 percent higher.
With annual consumer price inflation currently running at 2.7 percent, this suggests that stores sold less in real terms, increasing the chance that Britain's economy slipped back into contraction in the last three months of 2012.
"This rather underwhelming result brings a year of minimal sales growth to a close," said Helen Dickinson, the BRC's new director general.
So far, 2013 has showed few signs of being any better than 2012, and a greater number of stores were at risk of closure, she added.
"Retailers will be hoping that a continuing boost from post-Christmas sales events strengthens January's figures, but unfortunately there are few signs that their sense of 'running fast to stand still' is likely to ease off any time soon."
The BRC figures contrast with a more upbeat survey from the British Chambers of Commerce for the economy as a whole, also released on Tuesday, which showed a broad rise in sentiment across businesses in the last three months of 2012.
According to the BRC, online sales put in the strongest performance, showing annual growth of almost 18 percent, as one of the wettest Decembers on record kept shoppers at home.
Overall, December's figures marked a slowdown both from November, when sales grew 1.8 percent in total and 0.4 on a like-for-like basis, and from December 2011, when there was 4.1 percent total sales growth.
The rise in December 2011 in part represented a rebound from December 2010, when heavy snow depressed sales.
British retailers themselves have reported mixed fortunes so far, with upmarket department stores John Lewis and House of Fraser posting solid sales growth, while supermarket chain Wm Morrison - which lacks an online operation - reported a fall in underlying sales.

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Asia stocks down ahead of US corporate earnings

 Asian stock markets headed lower Tuesday as investors turned cautious before U.S. earnings season kicks off this week.
Investors will get a feel for corporate America's outlook as earnings reports start coming. Aluminum producer Alcoa Inc. will launch the reporting season for the fourth quarter of 2012 on Tuesday after U.S. markets close. Events during the quarter such as Superstorm Sandy, the presidential election, and worries about the narrowly avoided "fiscal cliff" could lead to some unexpected results.
Japan's Nikkei 225 index fell 0.5 percent to 10,548.56 as the yen crept upward against the U.S. dollar. The rebound in the yen led to some investors to sell export shares that had surged as the currency weakened in recent weeks. Isuzu Motors Co. fell 3 percent while Mazda Motor Corp. lost 3.9 percent.
Hong Kong's Hang Seng fell 0.4 percent to 23,239.64. South Korea's Kospi lost 0.4 percent to 2,003.35 and Australia's S&P/ASX 200 shed 0.1 percent to 4,712.70. Benchmarks in Singapore, Taiwan and Thailand fell, while Indonesia and the Philippines rose. Mainland Chinese shares were mixed.
Major indexes surged last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the fiscal cliff. The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts.
"The looming budget battle in the US has also prompted some hesitancy to buy risk assets," said analysts at Credit Agricole CIB in Hong Kong.
Benchmark crude oil contract for February delivery was up 9 cents to $93.27 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 10 cents to close at $93.19 a barrel on the Nymex on Monday.
In currencies, the euro rose to $1.3129 from $1.3112 in New York late Monday. The dollar fell to 87.65 yen from 87.84 yen.

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Egypt's Mursi to meet IMF aide on $4.8bln loan request: newspaper

CAIRO (Reuters) - A senior official in the International Monetary Fund (IMF) will meet Egyptian President and other top officials on Monday to discuss Cairo's request for a $4.8 billion loan, a major state-run Egyptian newspaper reported on Saturday.
The IMF loan is seen as crucial to easing Egypt's budget deficit and an economic slump caused by the turmoil that followed the popular uprising that ousted autocratic president Hosni Mubarak in February 2011.
"Egyptian President Mohamed Mursi will receive on the day after tomorrow Masood Ahmed, the IMF director for the Middle East and Central Asia... and it is expected that the meeting will include talks about the IMF's loan to Egypt," the Akhbar Al-Youm daily reported.
It said Masood would also meet Prime Minister Hisham Kandil, some ministers and the central bank governor. Officials from the cabinet, presidency and IMF were not immediately available to comment on the report.
Egypt's currency has lost about 10 percent against the dollar since the start of 2011. But about a third of that plunge has come in the last week alone, since the central bank began auctioning $75 million a day out of its reserves on December 30.
The pound slid further on Thursday at the central bank's fourth auction of foreign currency, with $74.9 million sold to banks at a cut-off price of 6.386 pounds, weaker than Wednesday's 6.351 to the dollar.
The cabinet spokesman said on Thursday that an IMF mission would visit in January to discuss the loan deal, which was postponed last month at Cairo's behest because of violent anti-Mursi protests raging at the time.
The IMF said last week that it welcomed steps Egypt had taken to stop a drain on its international reserves, which had driven the Egyptian pound down to record lows.
Egypt's budget deficit in the year to end-June 2013 could widen by 50 percent from the original forecast made in July, according to a figure released by the planning minister last Monday.

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Merkel highlights economy in German election year

BERLIN (AP) — Chancellor Angela Merkel highlighted Germany's economic strength as she kicked off campaigning Saturday for an important state vote that comes months before national elections, and she brushed aside worries about the weakness of her party's coalition partner.
Merkel's center-right party faces a tough battle to extend its 10-year hold on Lower Saxony state, a northwestern region of 8 million people, in the Jan. 20 election there. Polls suggest the center-left opposition has a good chance of winning, which would give it a significant boost ahead of September national elections in which Merkel will seek a third term.
Merkel made clear that her Christian Democrats will make "economic competence, together with jobs — and jobs that are well-qualified and fairly paid," along with economic strength, a keystone of this year's campaigns. She identified opposition plans for tax increases as one battleground.
"We believe that we do, of course, need income for the state, so we are not talking about tax cuts at this point," Merkel said at a televised news conference after her party's leadership met in Wilhelmshaven, a port city in Lower Saxony.
"But we believe that tax increases ... are not good for current economic developments, for medium-sized companies in particular but also for big companies," she added.
The number of Germans out of work averaged just under 2.9 million last year, the lowest since 1991. Germany's jobless rate of less than 7 percent contrasts with figures well over 20 percent in troubled eurozone partners Greece and Spain.
The strong German economy, and Merkel's hard-nosed management of Europe's debt crisis, have helped keep her popularity high and her party ahead in polls.
But the weakness of the pro-market Free Democratic Party, her junior coalition partner, means that her center-right alliance lacks a majority in surveys. The party, which campaigned at Germany's last election for tax cuts that it failed to obtain, has taken much of the blame for frequent coalition squabbling.
In Lower Saxony, polls show the FDP short of the 5 percent support needed to stay in the state legislature, which endangers popular conservative governor David McAllister's chances of keeping his job.
However, Merkel said she is "very optimistic that the (Free Democrats) will, on their own strength, with their ideas and their share in the success of the work of both the Lower Saxony state government and the federal government, be able to convince people."
The Lower Saxony election follows a rough start for Merkel's center-left challenger in the national elections, former Finance Minister Peer Steinbrueck.
He drew criticism this week for saying the chancellor earns too little and that Merkel has an advantage because she's a woman — adding to earlier controversy over his high earnings from public speaking. Merkel coolly dismissed a question about her challenger's performance.
"To be honest, I take care of my own performance and I'm very satisfied with that," she said. "The rest is for others to comment on.

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Obama says U.S. can't afford more showdowns over debt, deficits

HONOLULU (Reuters) - Fresh from the long legislative fight to prevent a "fiscal cliff" of tax hikes and spending cuts, President Barack Obama warned on Saturday that the United States could not afford further budget showdowns this year or in the future.
Obama, who returned to Hawaii for a family vacation shortly after the House of Representatives passed a compromise bill on Tuesday, said in his weekly radio and Internet address that the new law was just one step toward fixing the country's fiscal and economic problems.
"We still need to do more to put Americans back to work while also putting this country on a path to pay down its debt, and our economy can't afford more protracted showdowns or manufactured crises along the way," he said in the address, broadcast on Saturday.
"Because even as our businesses created 2 million new jobs last year - including 168,000 new jobs last month - the messy brinkmanship in Congress made business owners more uncertain and consumers less confident."
Government data released on Friday showed the U.S. unemployment rate remained at 7.8 percent in December.
Lawmakers in the Senate and the House passed legislation this week that raised tax rates for the wealthiest Americans while making Bush-era tax cuts for the middle class permanent.
It was a victory for Obama, who campaigned for re-election largely on a promise to achieve that goal.
Republicans have indicated that they are ready for another fight over the U.S. debt ceiling. Representative Dave Camp, delivering his party's weekly address, warned, at least indirectly, that they would expect spending cuts in return for raising the ceiling again.
"Many of our Democrat colleagues just don't seem to get it. Throughout the fiscal cliff discussions, the president and the Democrats who control Washington repeatedly refused to take any meaningful steps to make Washington live within its means," Camp said.
"As we turn our attention toward future discussions on the debt limit and the budget, we must identify responsible ways to tackle Washington's wasteful spending."
Obama repeated that he would not negotiate on the debt ceiling, hoping to avoid the 2011 conflict that led to a credit rating downgrade and pushed the country close to default.
"If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic," he said. "Our families and our businesses cannot afford that dangerous game again."
Obama said he was willing to do more on deficit reduction and suggested that the hike in tax rates for wealthy Americans was not the last tax change he expected to make.
"Spending cuts must be balanced with more reforms to our tax code," he said. "The wealthiest individuals and the biggest corporations shouldn't be able to take advantage of loopholes and deductions that aren't available to most Americans.

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Wall Street sinks after election as "fiscal cliff" eyed

NEW YORK (Reuters) - The Dow industrials lost more than 300 points in a sell-off on Wednesday that drove all major stock indexes down over 2 percent in the wake of the presidential election as investors' focus shifted to the looming "fiscal cliff" debate and Europe's economic troubles.
The Standard & Poor's 500 Index posted its biggest daily percentage drop since June, with all 10 S&P sectors solidly lower and about 80 percent of stocks on both the New York Stock Exchange and the Nasdaq ending in negative territory. Both the Dow and the S&P 500 closed at their lowest levels since early August.
Financial stocks and energy shares, two sectors that could face increased regulation after President Barack Obama's re-election, were the weakest on the day. The S&P financial index (.GSPF) lost 3.5 percent, while the S&P energy index (REU:^GSPEI) fell 3.1 percent. An S&P index of technology shares (.GSPT) slid 2.8 percent as the stock of Apple Inc (AAPL) entered bear market territory.
Obama's victory had been anticipated, though many polls indicated a close race between the president and Mitt Romney, his Republican challenger, going into election day.
The election was considered a major source of uncertainty for the market, but now the focus turns to the fiscal cliff, with investors worrying that if no deal is reached over some $600 billion in spending cuts and tax increases due to kick in early next year, it could derail the economic recovery.
The Republican Party retained control of the U.S. House of Representatives, while the Senate remained under Democratic control.
David Joy, chief market strategist at Ameriprise Financial in Boston, said this kind of divided government was disappointing "since that configuration has resulted in gridlock and there's no clear path towards unlocking that.
"It holds implications for how quickly we resolve the fiscal cliff issue, or whether it gets resolved at all," said Joy, who helps oversee $571 billion in assets.
The market's losses were broad, with pessimism exacerbated by overseas concerns after the European Commission said the region would barely grow next year, dashing hopes for improvement in the short term.
Still, some viewed the day's slide as a buying opportunity, saying it was unlikely that no deal would be reached on the fiscal cliff and arguing that Europe's troubles were already priced into markets.
"There's no question that Europe is lagging the rest of the developed and emerging world, but stocks will find a base soon, when investors start seeing through some of the smoke over the region and cliff," said Richard Weiss, who helps oversee about $120 billion in assets as a senior money manager at American Century Investments in Mountain View, California.
The Dow Jones industrial average (^DJI) slid 312.95 points, or 2.36 percent, to close at 12,932.73. The Standard & Poor's 500 Index (^GSPC) fell 33.86 points, or 2.37 percent, to 1,394.53. The Nasdaq Composite Index (^IXIC) lost 74.64 points, or 2.48 percent, to close at 2,937.29.
The S&P 500 closed below the key 1,400 level for the first time since August 30, while the Dow ended under 13,000 for the first time since August 2.
About 7.81 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, slightly below last year's daily average of 7.84 billion, though Wednesday's volume did surpass that of many recent sessions.
Contributing to the Nasdaq's decline, Apple shares fell 3.8 percent to $558, off 20.8 percent from an all-time intraday high of $705.07 set on September 21. That slump puts the stock of the world's most valuable publicly traded company in bear market territory.
Despite Wednesday's sell-off, all three major U.S. stock indexes were still up for the year. At Wednesday's close, the Dow was up 5.9 percent for 2012 so far, while the S&P 500 was up 10.9 percent and the Nasdaq was up 12.8 percent.
Wednesday's plunge was a reversal from Tuesday's rally when voting was under way. Defense and energy shares were among the market leaders that day, causing speculation that some investors were betting on a Romney win.
On Wednesday, an index of defense shares (.DFX) fell 2.9 percent, its biggest one-day drop in a year. Shares of United Technologies (UTX) dropped 2.9 percent to $77.68 while Lockheed Martin (LMT) sank 3.9 percent to $91.15.
Energy shares fell as investors bet that the industry may see increased regulation in Obama's second term, with less access to federal lands and water. Crude oil shed more than 4 percent while an index of coal companies (.DJUSCL) plunged 8.8 percent. Coal firms Peabody Energy (BTU) lost 9.6 percent to $26.24 and Arch Coal (ACI) sank 12.5 percent to $7.58.
Among financials, JPMorgan Chase & Co (JPM) fell 5.6 percent to $40.46 and Goldman Sachs (GS) dropped 6.6 percent to $117.98.
"The notion that you may have gotten a respite on the financial services side (with regulation) if Romney had been elected is obviously being unwound," said Mike Ryan, chief investment strategist at UBS Wealth Management Americas in New York.
Healthcare stocks were mixed as President Obama's re-election rules out the possibility of a wholesale repeal of his healthcare reform law, though questions remain as to what parts of the domestic policy will be implemented. The S&P health care index (REU:^GSPAI) shed 1.9 percent. In contrast, Tenet Healthcare (THC) was the S&P 500's biggest percentage gainer, up 9.6 percent at $27.34.
In 2008, stocks also rallied on election day, but then fell by the largest margin on record for a day following the vote, with each of the three major U.S. stock indexes posting losses ranging from 5 percent to 5.5 percent.
After the bell, both Qualcomm Inc (QCOM) and Whole Foods Market Inc (WFM) reported results. Qualcom's revenue beat expectations, sending shares up 8 percent to $62.75 in extended trading, while Whole Foods dropped 3.3 percent to $92.75 after the bell. In the regular session, Qualcomm slid 3.7 percent to close at $58.12, while Whole Foods dropped 2.1 percent to $95.93.

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Coal company announces layoffs in response to Obama win

A coal company headed by a prominent Mitt Romney donor has laid off more than 160 workers in response to President Obama's election victory.
Murray Energy said Friday that it had been "forced" to make the layoffs in response to the bleak prospects for the coal industry during Obama's second term. In a prayer circulated by the company, CEO Robert Murray said Americans had voted "in favor of redistribution, national weakness and reduced standard of living and lower and lower levels of personal freedom."
"The American people have made their choice. They have decided that America must change its course, away from the principals of our Founders," Murray said in the prayer, which was delivered in a meeting with staff members earlier this week.
"Lord, please forgive me and anyone with me in Murray Energy Corporation for the decisions that we are now forced to make to preserve the very existence of any of the enterprises that you have helped us build."
Murray cited pending regulations from the Environmental Protection Agency and the possibility of a carbon tax as factors that could lead to the "total destruction of the coal industry by as early as 2030."
In August, Murray shuttered an operation in Ohio, again blaming the Obama Administration and its alleged "war on coal."
Mitt Romney echoed this line on the campaign trail, accusing Obama of undermining the country's energy security.
Administration officials responded to these attacks by affirming that Obama supports "clean coal." They also pointed out that more coal miners were on the job in the U.S. this year than at any time since 1997, and that U.S. coal exports have risen 31%.
Domestically, however, coal production has dropped sharply, falling roughly 15% in 2011 versus years prior, according to the National Mining Association.
But the industry's woes go way beyond Obama's policies.
Utility companies are increasingly ditching coal in favor of cheaper, cleaner natural gas. In addition, the recession and improved energy efficiency have crimped demand for power.
Looking ahead, the coal industry faces a rule going into effect in 2015 that tightens the amount of mercury coal plants can emit, as well as regulations on mountain-top mining. Both will make coal production and coal-fired power plants more expensive.
The rules themselves are not Obama's doing, although he has implemented them fairly quickly. Most stem from the Clean Air Act, which was signed by Richard Nixon and strengthened during the first Bush presidency.
CNNMoney's Steve Hargreaves contributed reporting.

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U.S. to Pass Saudi Arabia in Energy Production, IEA Says: Huge Foreign Policy, Economic Implications

A new report by the International Energy Association says the U.S. will become the world's largest oil producer by 2017, overtaking current leaders Saudi Arabia and Russia. U.S. energy policies initiated by the George W. Bush administration and implemented by President Barack Obama have moved the U.S. toward energy independence and away from Middle East energy sources. U.S. oil production has risen rapidly since 2008 and oil imports are at their lowest level in two decades.
"North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency," says IEA Executive Director Marian von der Hoeven in a statement.
The IEA also says the U.S. could become self-sufficient in energy by 2035 and a net exporter of natural gas by 2020. The Obama administration's push to develop and grow domestic natural gas capabilities has led to a natural gas drilling boom. Production has jumped 15% in four years but the glut in natural gas supplies have also caused the price of natural gas to plummet. According to the White House, the U.S. holds a 100-year supply of natural gas and domestic production is at an all-time high. The Daily Ticker's Aaron Task and Henry Blodget both agree that the explosion in domestic energy production could alter the geopolitical landscape and U.S. labor market.
"The foreign policy implications are maybe even bigger than the economic ones," says Task.
"For 50 years or more we have been just addicted and coupled to a region of the world where so many people hate us," Blodget adds.
Oil and petroleum imports have fallen an average of more than 1.5 million barrels per day and domestic crude oil production has increased by an average of more than 720,000 barrels per day since 2008. As domestic drilling has expanded so has the number of oil and gas production jobs. According to the Federal Reserve Bank of St. Louis, job growth in these industries has risen 25% since January 2010.
Related: The Fracking Revolution: More Jobs and Cheaper Energy Are Worth the "Manageable" Risks, Yergin Says
President Obama says natural gas production could support 600,000 jobs by the end of the decade. Most of these positions are highly desirable from a financial standpoint. Drilling and support jobs pay about $34.50 an hour, 50% more than the national average according to The New York Times.
Cheap natural gas and the administration's eagerness to expand U.S. energy production has shifted resources away from green energy technologies like solar and wind.
Related: Robert F. Kennedy Jr.: Renewable Energy Is Key to U.S. Growth
The method of extracting natural gas from shale rock formations has come under intense scrutiny. Many local cities and communities have already banned the practice. Hydraulic fracturing, more commonly referred to as hydrofracking or fracking, involves injecting large amounts of sand, water and chemicals into the ground at high pressures. Critics of fracking say this process produces millions of gallons of wastewater that contain highly corrosive salts and carcinogens. These radioactive elements could pollute water sources such as rivers and underground aquifers and pose serious dangers to the environment and individuals.

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Eurozone back in recession in Q3

LONDON (AP) -- The 17-country eurozone has bowed to the inevitable and fallen back into recession for the first time in three years as a sprawling debt crisis took its toll on the region's stronger economies.
And with surveys pointing to increasingly depressed conditions across the eurozone at a time of high unemployment in many countries, there are fears that the recession will deepen, and make the debt crisis even more difficult to handle.
Official figures Thursday showed that the eurozone contracted by 0.1 percent in the July to September period from the quarter before as economies including Germany and the Netherlands suffer from falling demand.
The decline reported by Eurostat, the EU's statistics office, was in line with market expectations and follows on from the 0.2 percent fall recorded in the second quarter. As a result, the eurozone is officially in recession, commonly defined as two straight quarters of falling output.
"We can dispense with the euphemisms and equivocation, and openly proclaim that the euro area economy is indeed in technical recession," said James Ashley, senior European economist at RBC Capital Markets.
Because of the eurozone's grueling three-year debt crisis, the region has the focus of concern for the world economy. The eurozone's economy is worth around €9.5 trillion, or $12.1 trillion, which puts it on a par with the U.S. economy. The region, with its 332 million population, is the U.S.'s largest export customer, and any fall-off in demand will hit order books.
While the U.S has managed to bounce back from its own savage recession in 2008-09, albeit inconsistently, and China continues to post still-strong growth, Europe's economies have been on a downward spiral — and there is little sign of any improvement in the near-term.
The eurozone has managed to avoid returning to recession for the first time since the financial crisis following the collapse of U.S. investment bank Lehman Brothers, mainly thanks to the strength of its largest single economy, Germany.
But even that country is struggling now as confidence wanes and exports drain in light of the debt problems afflicting large chunks of the eurozone.
Germany's economy grew a muted 0.2 percent in the third quarter, down from a 0.3 percent increase in the previous quarter. Over the past year, Germany's annual growth rate has more than halved to 0.9 percent from 1.9 percent.
Perhaps the most dramatic decline among the eurozone's members was seen in the Netherlands, whose economy shrank 1.1 percent on the previous quarter.
Five eurozone countries are in recession — Greece, Spain, Italy, Portugal and Cyprus. Those five are also at the center of Europe's debt crisis and are imposing austerity measures, such as cuts to pensions and increases to taxes, in an attempt to stay afloat.
As well as hitting workers' incomes and living standards, these measures have also led to a decline in economic output and a sharp increase in unemployment.
Spain and Greece have unemployment rates of over 25 percent. Their young people are faring even worse with every other person out of work. As well as being a cost to governments who have to pay out more for benefits, it carries a huge social and human cost.
Protests across Europe on Wednesday highlighted the scale of discontent and with economic surveys pointing to the downturn getting worse, the voices of anger may well get louder still.
"The likelihood is that this anger will continue to grow unless European leaders and policymakers start to act as if they have a clue as to how to resolve the crisis starting to unravel before their eyes," said Michael Hewson, markets analyst at CMC Markets.
The wider 27-nation EU, which includes non-euro countries, avoided the same fate. It saw output rise 0.1 percent during the quarter, largely on the back of an Olympics-related boost in Britain.
The EU's output as a whole is greater than the U.S. It is also a major source of sales for the world's leading companies. Forty percent of McDonald's global revenue comes from Europe - more than it generates in the U.S. General Motors, meanwhile, sold 1.7 million vehicles in Europe last year, a fifth of its worldwide sales.

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Are We Regulating Ourselves Back Into Recession?

Let us put an end to self-inflicted wounds," President Gerald Ford told Congress in 1975. "And let us remember that our national unity is a most priceless asset." While Ford was talking about the scars from the Vietnam War, his words seem relevant today. Our nation grapples with not one divisive issue, but a basket of them, each pulling and undermining our already battered confidence, while testing our resolve and straining the limits of logic.
What are we doing to ourselves, America?
In just two short weeks, instead of closing the books after a bruising election, we've not only kept the rancor alive but have doubled down on it. In this morning's papers alone, I easily counted a dozen different areas of discourse before growing tired of it all. As my colleague Mike Santoli and I discuss in the attached video, with so much going on — and with so much wrong — is it any wonder stocks are moving in reverse at a fast clip since the second quarter correction.
"It feels like a particularly heavy round of one of these anti-business — or at least calling business to task — moments," Santoli says in the face of my long and growing list of negatives, which include higher taxes, the fiscal cliff, the Benghazi aftermath, turnover at the CIA, federal probes of FedEx and UPS over mail-order medicine, BP's record fine, further investigation into banks for money laundering, as well as another round of mandatory stress testing.
Before you go off and call me some kind of zero-regulation advocate or pessimist, all I am saying is that it strikes me as slightly counterproductive to be building up and and tearing down the banks at the same time. And Santoli seems to agree, saying that it is alarming to see how much banks have to spend on compliance, legal and regulatory issues, calling it a "massive weight."
As much as we had recently been gaining some degree of comfort over the economy, housing and jobs, it suddenly seems as if we're doing everything wrong.
''Is it ever going to be a good time to cinch up tax rates?" Santoli questions. Obviously the answer is no, and yet the markets cling to the belief that our elected officials will break ranks and reach some sort of last-minute grand bargain solution.
Maybe I am just being cynical, but I am of the mind that no major changes will emerge without first going through a period of calamity. Santoli is a smidge more optimistic, however, clinging to a ''residual hope'' that the President has a ''Nixon-to-China moment" and that his second term is not about fighting individual, ideological fight. "That is the distant hope you have to hold," he says.
How about you? Have you given up hope in the face of so much negativity

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Rate on 30-year mortgage ticks up to 4 percent

WASHINGTON (AP) — The average rate on the 30-year mortgage hovered above the record low for a third straight week. But cheap mortgage rates have done little to boost home sales or refinancing.
Freddie Mac said Thursday that the rate on the 30-year loan ticked up to 4 percent from 3.99 percent. Six weeks ago, it dropped to a record low of 3.94 percent, according to the National Bureau of Economic Research.
The average rate on the 15-year fixed mortgage rose to 3.31 percent from 3.30 percent. Six weeks ago, it hit a record low of 3.26 percent.
Rates have been below 5 percent for all but two weeks this year. Yet this year could be the worst for home sales in 14 years.
Mortgage applications fell 10 percent this week from the previous week, according to the Mortgage Bankers Association.
High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many Americans don't want to sink money into a home that could lose value over the next three to four years. And most homeowners who can afford to refinance already have.
The low rates have caused a modest boom in refinancing, but that benefit might be wearing off. Most people who can afford to refinance have already locked in rates below 5 percent. Refinancing fell 12.2 percent last week, according to the mortgage bankers group.
The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fees for the 30-year and 15-year fixed mortgages were unchanged at 0.7.
The average rate on the five-year adjustable loan fell to 2.97 percent from 2.98 percent. The average rate on the one-year adjustable loan increased to 2.98 percent from 2.95 percent.
The average fees on the five-year and one-year adjustable loans were both unchanged at 0.6.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

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Rate on 30-year fixed mortgage falls to 3.98 pct.

WASHINGTON (AP) — The average rate on the 30-year fixed mortgage hovered above its record low for a fourth straight week. But cheap mortgage rates have done little to boost home sales or refinancing.
Freddie Mac says the rate on the 30-year fixed loan fell to 3.98 percent from 4 percent the previous week. Seven weeks ago, it dropped to a record low of 3.94 percent, according to the National Bureau of Economic Research.
The average rate on the 15-year fixed mortgage edged down to 3.3 percent from 3.31 percent. Seven weeks ago, it too hit a record low of 3.26 percent.
Rates have been below 5 percent for all but two weeks this year. Yet this year could be the worst for home sales in 14 years.

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U.S. Housing Market Still On Life Support

With each passing year, the former Oracle of the Fed, Alan Greenspan, is reminded that there really was a housing bubble and lowering interest rates to record lows just matters worse.  Nearly four years after the housing market peak in 2007, record low mortgage rates are no match for falling incomes and 9% unemployment.
The Case-Shiller Home Price Index, released on Tuesday, showed that nation wide home prices did not register a significant change in the third quarter of 2011, with the U.S. National Home Price Index up by only 0.1% from its second quarter level. Home prices are down 3.9% across the board and are now back to their first quarter of 2003 levels.
From August to September, housing prices have fallen the most in Atlanta, with a 5.9% decline, followed by Tampa Bay and San Francisco, both with a 1.5% drop in housing prices.
Boston, New York, Washington and Los Angeles remain the most expensive cities in the lower 48 states.
"The plunging collapse of prices seen in 2007-2009 seems to be behind us," says David M. Blitzer, Chairman of the Index Committee at S&P Indices. "Any chance for a sustained recovery will probably need a stronger economy."

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