Finance topics

Government-owned mortgage financing firm Freddie Mac reported a larger loss in the fourth quarter, but the company did not need to draw down any additional tax dollars in the period.

The company, which along with rival Fannie Mae (FNM, Fortune 500) was put into a conservatorship under government control in September 2008, lost $6.5 billion in the quarter, up from a loss of $5.4 billion in the third quarter.

Including $1.3 billion in preferred dividend payments to the federal government, the loss came to $7.8 billion in the fourth quarter of 2009. But that’s still much better than the $23.9 billion it lost in the year-earlier period.

The company lost $21.6 billion for the year, an improvement from 2008 losses of $50.1 billion.

Freddie charged off $2.4 billion in bad loans during the quarter, nearly triple the $863 million from a year earlier. That brought full-year charge-offs to $7.6 billion in 2009.

And the worst is clearly not behind it, as Freddie raised its reserves for loan losses to $33.9 billion at the end of the quarter, up from $30.6 billion three months earlier.

About 3.9% of its $1.9 trillion in loans are now delinquent, well below the national average for late payments. But Freddie’s delinquency rate has been rising steadily for the past two years.

Freddie (FRE, Fortune 500) said it ended the quarter with a positive net worth of $4.4 billion, which means that for the third straight quarter it did not need another injection of government cash make quick cash. Net worth compares a company’s assets to the value of its liabilities.

A year ago Freddie needed $30.8 billion in federal cash as mounting foreclosures on the mortgages Freddie owns or guarantees hurt the company’s finances. Since the start of the conservatorship, Freddie has received $50.7 billion in taxpayer dollars, while Fannie has received $60.9 billion.

That injection of tax money to keep the companies afloat gave the Treasury Department an 80% stake in both companies. Fannie and Freddie both pay dividends to Treasury. Freddie has paid $4.2 billion so far.

But despite those dividends, future injections of taxpayer dollars are likely. At the end of the fourth quarter, Treasury lifted a $100 billion limit on the amount of money it could pour into each of the firms.

Fannie and Freddie are the primary source of mortgage funding in the nation. They bundle home loans that conform to certain standards into securities, attach a guarantee that they will be paid, and sell them to investors. The process gets money back to the banks and other lenders that originate the loans.

Freddie, which has about $1.9 trillion in its loan portfolio, purchased or guaranteed approximately one out of every four U.S. home loans originated during 2009. 

Source

Five former U.S. Treasury secretaries who have served both Republican and Democrat presidents have jointly called on Congress to implement the so- called Volcker Rule to limit the size and trading of banks.

Banks that benefit from public support via access to the Federal Reserve and the Federal Deposit Insurance Corp. shouldn’t “engage in essentially speculative activity unrelated to essential bank services,” John Snow, Paul O’Neill, Nicholas Brady, George Shultz and W. Michael Blumenthal wrote in a letter published by the Wall Street Journal.

Restricting proprietary trading by banks is a “key element in protecting our financial system and will assure that banks will give priority to their essential lending and depository responsibilities,” the former secretaries wrote.

The group also urged the U.S. government to take the lead at international meetings to win “broad agreement on this principle among the leading financial centers.”

U.S. President Barack Obama on Jan. 21 introduced a proposal he called the Volcker Rule to limit the size and trading activities of financial institutions and reduce risk- taking. The rule is named after former Fed Chairman Paul Volcker.

Source

New Zealand’s budget cash deficit was wider than the government forecast after departments made payments for services earlier than they expected.

The cash deficit was NZ$8.85 billion ($6.2 billion) in the six months ended Dec. 31, or NZ$934 million wider than forecast in December’s fiscal update, the Treasury Department said in a statement released in Wellington today.

New Zealand’s budget showed a cash deficit for the first time in nine years in the 12 months ended June 30, and Finance Minister Bill English has projected six years of deficits as debt increases. Tax receipts fell and government welfare spending increased last year as New Zealand faced its worst recession in three decades.

Payments of NZ$1.3 billion occurred in late December which had been forecast in January, the Treasury said. The variance from forecast is expected to reverse in January, it said.

Tax receipts broadly matched forecast in the six months to December, the Treasury said. Company tax exceeded estimates after inclusion of the government’s settlement with banks over tax on structured finance transactions.

Excluding these transactions, company tax receipts were lower than forecast as firms lowered their tax assessments, suggesting “current-year profitability was weaker than expected in the December forecast and it is possible this will persist until the end of the year,” the department said.

The government’s budget operating deficit was NZ$1.04 billion, which was NZ$1.45 billion narrower than forecast.

Source

Austin Water will begin this week a $31.8 million stimulus-funded treatment plant project that will create 150 jobs, increase energy efficiency and reduce operational costs.

On Wednesday, the group will break ground on upgrades to the Hornsby Bend Biosolids Management Plant, which processes biosolids from treated wastewater. The zero interest, 30-year loan came from the American Recovery and Reinvestment Act's Clean Water State Revolving Fund distributed through the Environmental Protection Agency and the Texas Water Development Board.

About $7 million will be used to construct a 15-acre composting pad for "Dillo Dirt," a popular soil conditioner produced from city yard waste and treated biosolids Business Card Holders. Chasco Constructors was awarded the contract for that project in December.

The rest of the funds will upgrade biosolid treatment infrastructure and improve energy efficiency. The changes will enhance odor control, increase sludge dewatering capacity and reduce operational costs.

Once completed, the plant will use less petroleum-based polymers and increase production and capture of digester gases, which can be used to generate electricity.

Matous Constructors was chosen to complete that project.

Source

The parent company of Hawaiian Electric Co. and American Savings Bank posted lower earnings for fiscal 2009 compared to 2008.

Hawaiian Electric Industries (NYSE: HEI) reported a profit of $102.3 million for fiscal 2009, an 18.7 percent decrease from the $125.9 million it earned in fiscal 2008.

That figure, however, includes $19.3 million in after-tax charges related to a previous sale of the bank’s mortgage-related securities portfolio.

Total revenue was down for the year to $2.3 billion, compared to $3.2 billion the previous year.

HEI attributed the decrease to lower kilowatt-hour sales at its electric utilities, increases in utility operations and bank credit expenses.

“It was a challenging year and we made difficult decisions to curb spending and reduce risk, while continuing to progress forward with long-term strategic initiatives to move Hawaii toward a clean-energy future and improved performance and profitability at both our utility and bank,” said Constance Lau, HEI president and CEO, in a prepared statement payday advance.

Electric utility earnings were $79.4 million for the year, compared to $92 million the previous year. Kilowatt-hour sales were off 2.5 percent while operating expenses increased by $5.3 million.

Income from American Savings Bank was up 22 percent for the year to $21.8 million. But, the company said adjusted net income from the bank was $41.1 million and $53.4 million in 2009 and 2008, respectively, a 23 percent decrease for the year. The non-adjusted figures include the after-tax charge in 2009 and a balance sheet restructuring charge in 2008.

“Like many banks across the country, our bank was affected by the economic pressures in 2009,” Lau said. “However, as we have done throughout the economic crisis, we kept capital healthy and depositors’ money safe.”

Shares of Hawaiian Electric Industries stock were up 1.4 percent to $42.78 on Thursday.

Source

Shopping Web site Groupon, which offers a daily deal on the local goods, services and cultural events, launched in Memphis today.

Using the principles of collective buying, Groupon negotiates deals with local businesses and sends free daily e-mails to subscribers notifying them of the deals.

“With its vibrant Mid-South culture, Memphis offers food, music and activities you won't find anywhere else,” Groupon’s founder Andrew Mason said in a statement. “We look forward to introducing local residents to the best businesses in Memphis and saving them money on their favorite things to do.”

The deals are only activated if a minimum number of people agree to buy, encouraging subscribers to share the promotion with family and friends via social media tools such as Facebook and Twitter. Guaranteeing a large number of customers provides an incentive for companies to offer good deals, the company says, and has helped more than 2 million subscribers save nearly $80 million.

Memphis is the 35th city entered by Groupon, which was launched in November 2008 in Chicago. The company plans to be in 80 cities by the end of 2010.

“Groupon brings buyers and sellers together in a fun and collaborative way,” Mason said. “We offer the consumer a great deal they can’t get anywhere else and deliver the sales directly to the merchant.”

Groupon is a project of The Point, an online community launched in 2007 for organizing group action.

Consumers interested in its service can visit www.groupon.com. Businesses wanting their goods or services featured can visit www.grouponworks.com.

Source

The top transit official for President Barack Obama’s administration will be in Denver Friday announcing major funding for the FasTracks project.

Peter Rogoff, head of the Federal Transit Administration, is to join U.S. Senator Michael Bennet, Denver Mayor John Hickenlooper and Phil Washington, the head of the Regional Transportation District, at Denver Union Station on Friday afternoon.

He may be here to talk about a $300 million federal loan to help cover the cost of redeveloping Denver Union Station, the hub of the FasTracks project. The Denver City Council last week gave its approval to using city money to repay a portion of the loan if tax revenues couldn’t.

This week, three lines that are part of FasTracks received word of federal money, through Obama’s budget proposal for fiscal year 2011, to help pay for construction. Obama’s proposal included:

• $40 million for the West corridor from downtown to Golden, part of an existing $308 million commitment by the federal government to help pay for the line.

• $40 million for the Gold line from downtown to Wheat Ridge, and $40 million for the East line from downtown to Denver International Airport — via a line item listed as “New Full Funding Grant Agreement Funding Recommendations,” which Rogoff said Tuesday, during a conference call with reporters, signaled the government’s intention to help pay for the line.

The Gold and the East line are on a list of “projects that we’re including in the budget, and we’re signaling our intention to sign a full funding grant agreement on these projects before Sept. 30, 2011,” Rogoff said Tuesday during the call.

Still outstanding is the status of the $300 million loan for Denver Union Station.

Paul Griffo, spokesman for the Federal Transit Administration, wouldn’t confirm or deny that Rogoff would discuss the loan in Denver on Friday.

Source

John Zumwalt said he plans to give up the chief executive officer’s role at The PBSJ Corp.

Zumwalt, who also is chairman of the engineering and consulting firm, said in a Jan. 25 letter to shareholders that the company expects a new CEO to be in place by the end of September. Zumwalt said he would continue to serve as CEO until his replacement is found.

Korn/Ferry, an executive search firm, will perform both an internal and external search for candidates under the oversight of the nominating committee of the company’s board, Zumwalt said in his letter, which was first reported by the nonprofit news organization, Broward Bulldog.

PBSJ, an employee-owned firm headquartered in Tampa, has been under scrutiny following a series of what Zumwalt described in his letter as “management crisis,” including a $36 million embezzlement scheme and accusations of violating federal campaign finance laws. Most recently, the company said early results of an internal probe suggested that violations of the Foreign Corrupt Practices Act might have occurred in connection with certain projects undertaken by its PBS&J International Inc. subsidiary.

Zumwalt, who served as president of the international subsidiary until July, said he would focus his attention in the coming months on the strategy growth of the corporation and the strengthening and expansion of its core North American businesses.

Bob Paulsen, vice chairman, will provide day-to-day oversight of the current businesses at the corporate level, as it moves ahead with a streamlined business organization, the letter said.

Source