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The global economy is likely to shrink for the first time since World War II, and trade will decline by the most in 80 years, the World Bank said.

The World Bank’s assessment is more pessimistic than an International Monetary Fund report in January predicting 0.5 percent global growth this year. The Washington-based World Bank didn’t provide a specific estimate in its report yesterday.

World growth will be 5 percent below its potential, the bank said. Developing nations will bear the brunt of the contraction. They will face a shortfall of between $270 billion and $700 billion to pay for imports and service debts, the bank said.

“We need to react in real time to a growing crisis that is hurting people in developing countries,” said World Bank President Robert Zoellick in a statement. Action is needed by governments and multilateral lenders “to avoid social and political unrest.”

East Asia will be hit the hardest by the decline in global commerce, the bank said. Global industrial production is expected to be as much as 15 percent lower than in 2008.

The World Bank said that a surge of debt issuance by rich nations risks “crowding out many developing country borrowers, both private and public.” Emerging nations that can access capital markets will be forced to pay higher rates of interest cheap payday loans.

The report said that 94 out of 116 developing countries had experienced a slowdown in economic growth, with poverty increasing in 43. The economic crisis will swell the ranks of the poor by 46 million this year, the report says. The result would be growing dependence on foreign aid.

‘Bigger Bang’

Justin Lin, the bank’s chief economist, said that developed nations should funnel part of their stimulus spending to poorer countries where it would be more effective at boosting demand. Channeling infrastructure investment to the developing world can have a “bigger bang for the buck,” he said.

Developing nations will be hurt by tighter credit, withdrawals of foreign direct investment, and a decline in the amount of money sent home by workers overseas, the report said. The decline in such remittances will have the biggest impact in countries including Honduras, Lebanon and Tajikistan.

Maturing debt is another major risk for many emerging nations, the report said, estimating that more than $1 trillion of corporate debt and as much as $3 trillion on government debt will come due this year.

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The U.S. Treasury has failed to take “decisive” action to address the bank crisis, pursuing an ad- hoc approach that leaves management in place and avoids necessary asset writedowns, a veteran Federal Reserve official said.

“We have been slow to face up to the fundamental problems in our financial system and reluctant to take decisive action with respect to failing institutions,” Kansas City Fed President Thomas Hoenig said in prepared remarks in Omaha, Nebraska. He called for a resolution process for firms deemed too big to fail, allowing their break-up if their complexity makes them unmanageable.

Hoenig’s comments are the most detailed criticism of the Treasury’s actions by a Fed official since the financial crisis began. He joins a growing number of observers, from ex-Treasury Secretary James Baker to former Fed chief Alan Greenspan, to favor temporary government takeovers of financial firms hobbled by distressed mortgage assets.

Fed Chairman Ben S. Bernanke has endorsed the approaches taken by Treasury Secretary Timothy Geithner and his predecessor. The Treasury has spent most of its $700 billion financial stability fund on buying stakes in banks without taking management control.

Geithner’s Plan

Geithner has ordered a so-called stress test for the largest 19 U.S. banks to determine whether they need more capital, and told lawmakers that more congressionally approved funds may be needed. He has stressed that nationalization isn’t the goal.

Hoenig said while policy makers “understandably” want to avoid nationalizing banks, “we nevertheless are drifting into a situation where institutions are being nationalized piecemeal with no resolution of the crisis.”

Hoenig, 62, is the second-longest serving of the Fed district bank presidents, after Minneapolis’s Gary Stern. He next votes on the Fed’s policy-setting Open Market Committee in 2010.

The Treasury’s $700 billion fund “began without a clear set of principles and has proceeded with what seems to be an ad-hoc and less-than-transparent approach,” said Hoenig.

The Standard & Poor’s 500 Financials Index has slumped 40 percent since Geithner announced his outline for bolstering the financial industry. Along with the stress tests, the main efforts include backing a $1 trillion Fed program to restart the market for securities backed by loans and a $1 trillion initiative to remove devalued mortgage debt from banks’ balance sheets equifax free credit report.

Repeated Bailouts

Since Geithner’s Feb. 10 speech, the U.S. has been forced to restructure its rescues of both Citigroup Inc. and American International Group Inc.

With Citigroup, the government moved to convert some of the preferred stock it owned in the bank to common shares, gaining a 36 percent stake in the company and boosting Citigroup’s buffer against future losses. While authorities pushed for changes to the makeup of Citigroup’s board, Chief Executive Officer Vikram Pandit remains at the helm. Citigroup shares hit $0.97 yesterday.

Hoenig blasted the practice of keeping managers of failing companies in place.

“If an institution’s management has failed the test of the marketplace, these managers should be replaced,” he said. “They should not be given public funds and then micro-managed, as we are now doing” with “a set of political strings attached.”

Banking regulators need to be willing to write down losses, bring in new managers and sell off businesses if institutions can’t survive on their own, “no matter what their size,” he said.

Temporary Takeovers

Hoenig said the process used in temporarily taking over failing banks can be applied for all financial institutions, citing the Federal Deposit Insurance Corp. takeover of Continental Illinois National Bank & Trust Co. in 1984.

A resolution process can be set up for systemically important banks, bank-holding companies and other financial institutions, using receivership, or “bridge bank” powers to continue to operate them under new management, he said.

Bernanke has repeatedly called on Congress to consider legislation to give U.S. financial regulators the ability to shut down a complex bank-holding company. He has said that while the FDIC has such power to take over and resolve failing deposit- taking institutions, there is no similar framework for firms that span banking to securities trading and insurance.

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Efforts to woo more airlines to Lambert-St. Louis International Airport are about to take off.

Lambert officials on Wednesday voted to hire consultant Sabre Airline Solutions to help market the St. Louis airport during these gloomy days in commercial aviation. Final approval of the three-year, $1.3 million contract now goes to the city Estimate Board.

"If we don’t get out there and tell the carriers and sell our product, we’re just going to be like any other business," said Airport Director Richard Hrabko. "We have to get out and sell the product — the product being St. Louis."

Passenger boardings at Lambert-St. Louis International Airport are down about 15 percent compared to the same time last year, and the airport anticipates overall passenger traffic will likely be down 10 percent to 15 percent for the remainder of 2009 compared to the previous year.
Sabre Airlines Solutions, whose parent company, Sabre Holdings Corp. of Southlake, Texas, also owns the online travel service Travelocity, will help produce data that the airport can use to show potential air carriers where there are gaps in service that could be filled with additional flights.

In addition to collecting data, Hrabko said the consultant will help develop marketing materials, improve the airport’s presence on the Internet, and brand airport marketing products. Sabre officials also will travel with airport marketing staff to meet with airline planners.

Michael Boyd, an airline analyst in Evergreen, Colo., said Lambert has no choice but to market itself, but St. Louis leaders shouldn’t hold out any unrealistic hopes. Demand for air travel isn’t just declining, it’s plunging, he said. And St. Louis’ problem isn’t that airline executives don’t know where it is.

"If they don’t hire somebody, they are going to be accused of being remiss," Boyd said of the marketing effort. "The results might not be what the public wants to hear."

Despite its struggles to restore some of the air service it lost earlier this decade, Lambert did not have a formal marketing plan before Hrabko took over nearly two years ago free online credit report. Civic Progress and the Regional Business Council have provided seed money toward Lambert’s latest marketing efforts.

"We worked for the last year and a half putting this program together," Hrabko said. "It’s not some sudden thing."

Troubles in the airline industry — which hit home last summer when American Airlines announced it was cutting 30 daily departures here — and the stagnant economy have already forced Lambert officials to scale back the ambitious makeover of the Main Terminal and major airport roads.

In December, the airport walled off a dozen gates along an empty stretch of the D Concourse and froze positions in an effort to save more than $2.7 million a year.

Hrabko said 90 percent of Lambert’s marketing expenses should be eligible for reimbursement through air-service development grants administered by the Missouri Department of Transportation.

Sabre has worked with Lambert in the past, Hrabko said, and the consultant has contracts with airports ranging in size from Peoria to Los Angeles. Its partners on the Lambert contract include Hicks-Carter-Hicks and the Vandiver Group, both local firms.

Michael Bown of Sabre Airline Solutions said the company has expertise and industry contacts that airports like St. Louis don’t have in-house. Sabre can help the Lambert marketing staff take a closer look at opportunities for new service, even at a time when demand is dropping.

"At the end of the day, we’re not magicians," Bown said. "Airlines are going to fly to places that make money."

Brian Kinsey, assistant airport director for marketing and business development, said most of the marketing work covered by the contract will occur in the next several months "to get us where we need to be."

As a result, most of the program’s budget, or roughly $950,000, will be spent between now and mid-2010.

kleiser@post-dispatch.com | 314-340-8215

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Offers of huge rebates and tempting low-interest loans weren’t enough to entice car buyers out of their bunkers in this economic crisis, causing U.S. auto sales in February to hover near historic lows.

General Motors’ sales tumbled 53 percent from a year earlier, while Ford’s U.S. sales fell 48 percent and Chrysler’s dropped 44 percent. The major Japanese automakers fared only slightly better.

Things are so bad that GM, which marked its worst February sales since 1967, is considering a program to let buyers keep their cars for a time without making payments if they lose their jobs.

The overall slide casts further doubt on the financial viability of GM and Chrysler, which need to sell cars and generate critical cash to supplement the $17.4 billion in government loans that are keeping them in business.

Overall, U.S. auto sales were down 41 percent from February 2008 but up 5 percent from January, according to Autodata Corp. and Ward’s AutoInfoBank.

The increase was a good sign, but it’s far less than the usual 14 percent sales bump from January to February, and it doesn’t necessarily mean sales have hit the bottom, said Jesse Toprak, executive director of industry analysis for the auto website Edmunds.com.

"It does mean that there’s some life out there," Toprak said.

Automakers and analysts have been predicting sales will rebound in the second half of this year, but they are becoming less certain. Massive layoffs, the stock market decline and sliding home values are prompting people to hold on to their vehicles, while those who are buying are more often buying a used one.

Emily Kolinski Morris, Ford’s top economist, said retail sales to individuals had been stable for four months but dropped in February. Ford’s forecast still calls for a modest second-half recovery as economic stimulus measures take hold, Morris said.

Analysts say that when all the numbers are tallied, February sales could be worse than January’s total of 656,976 light vehicles, the lowest monthly total since the industry sold 656,310 vehicles in December 1981, according to Autodata Corp new car loan rates. and Ward’s AutoInfoBank.

The trough is likely even though automakers spent more on rebates, low-interest financing and other incentives to lure buyers. "If it wasn’t for the generous level of incentives now, we probably would be seeing even lower sales, if you can believe it," Toprak said.

Industrywide, the average incentive per vehicle last month rose 8 percent from January to $2,914 per vehicle sold, according to Edmunds. Incentives climbed to an average of 20 percent of a new car’s sticker price, topping more than $10,000 on some vehicles.

Chrysler executives said its incentive last month of employee pricing plus cash discounts and zero-percent financing helped spur sales of some vehicles, and it will continue the program in March. Still, February sales for the Dodge Ram pickup, made at the Fenton plant, fell 36 percent from a year ago.

Meanwhile, Toyota Motor Corp.’s U.S. sales plunged 40 percent. Honda Motor Co.’s sales dropped 38 percent, and Nissan Motor Co.’s fell 37 percent.

Within GM’s decline, sales of its GMC Savana fell 47 percent from a year ago, and its Chevy Express dropped 67 percent. Workers in Wentzville make the full-size vans.

Most automakers posted significant declines, but Subaru of America Inc.’s U.S. sales edged up 1 percent in February as sales of its top-selling Forester model doubled. Kia Motors Corp.’s sales were about flat from a year earlier.

Angela Tablac of the Post-Dispatch contributed to this report.

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Sprott Resource Corp. has reported net earnings of $134.2 million for 2008 as it "benefited from the rise in the resource market and then preserved capital after the market and economy deteriorated."

Sprott Resource, which invests directly and indirectly in natural resources through acquisitions, joint ventures and other investments, said Tuesday the profit increase – from $2 million in 2007 – was powered by the sale of securities, in particular its holding in PBS Coals Ltd.

Earnings per share for the year increased to $1.94 from nine cents, and Sprott Resource said it ended 2008 with $203.5 million in cash and short-term investments, along with gold and silver valued at $68 million. Its portfolio investments were worth $28.6 million at year-end.

"Our strategy focuses on managing risk by adjusting our invested capital to reflect market conditions," stated CEO Kevin Bambrough used auto loans.

"Last year demonstrated our ability to execute on this strategy, as we benefited from the rise in the resource market and then preserved capital after the market and economy deteriorated. The undeniable strength and quality of our balance sheet leaves us well positioned to take advantage of investment opportunities that will undoubtedly arise at the bottom of this cycle."

The year's general and administrative expenses increased to $43.3 million from $2 million, due to $39.6 million in management and incentive fees for the Sprott Consulting Limited Partnership.

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U.S. private equity firm TPG TPG.UL is offering to provide bankruptcy financing for Aleris International Inc, a company that it owns, in a strategy that could put it in the position of being paid before some other creditors, the Financial Times said.

Aleris, a maker of aluminum products, filed for Chapter 11 bankruptcy protection last month.

Distressed-debt investors, led by Oaktree Capital and Apollo, offered to provide Aleris with $500 million in new money for debtor-in-possession (DIP) financing, the paper said.

TPG asked the judge in the bankruptcy case to allow it to join the group offering the DIP facility, according to the paper.

TPG also instructed its investors to write cheques for a total of $28.5 million “to allow us the flexibility to potentially purchase the DIP term loan as it begins to trade in the secondary market,” the paper said.

DIP financing is senior to other claims, meaning it gets paid first, even before lenders who financed the original buyout deal, the paper said direct payday loans.

The other DIP lenders are opposing TPG’s participation in the financing round and the judge is expected to rule on TPG’s request this month, the paper said.

Wall Street executives are concerned that the TPG action could herald attempts by buyout firms to offer DIP financing as a way of salvaging their investments, according to the paper.

TPG could not be immediately reached for comment by Reuters.

TPG, through affiliate Aurora Acquisition Holdings, bought Aleris in December 2006, for about $1.7 billion, plus the assumption of about $1.6 billion in debt.

(Reporting by Ajay Kamalakaran in Bangalore, Editing by Muralikumar Anantharaman)

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When you mix beer with information technology, you get BarCamp Buffalo, an informal networking event for IT pros.

The first such get-together takes place at 7:30 p.m. on March 3 at Pearl Street Grill & Brewery.

The idea for the event came from Steve Poland, a Kenmore native who’s had tech industry jobs all over the country. That’s where he first heard of BarCamps: workshops where participants provide the content. When he returned home, the 29-year-old said he found few opportunities to meet others like him in the tech world.

“I thought this would be a great way to do networking in an informal way,” said Poland, who’d like to oversee monthly events, where those involved in new technology and web-related development can connect and learn from one another poor credit personal loans. Poland expects up to 50 on March 3.

There, attendees can plug into big-screen TVs to present about their projects. In addition to short presentations, people can share what they’re working on.

His goal over the next five years is to get the Buffalo tech community to better know each other, and ensure opportunities in the area are visible to University at Buffalo Computer Science students, as well as other engineers working in the area.

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