Money Matters - Simplified

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Finance

Treasury program to prompt short-selling

Washington -- The Treasury Department said some homeowners could receive a cash incentive to sell their homes to steer them away from a foreclosure.

The government's $75 billion program to provide incentives for banks to refinance mortgages with better terms has produced far fewer loan modifications than anticipated, The New York Times reported Monday.

The new strategy involves the government paying the bank serving the loan $1,000, and paying $1,500 to the consumer for "relocation assistance."

Canadian bankruptcies declined in December

Ottawa-- The Bankruptcy Canada agency in Ottawa reported an 8.6 percent monthly decline in bankruptcy filings in December.

Combined insolvencies, which include bankruptcy and refinancing proposals, were down 11.1 percent overall, the agency said.

On an annual basis, consumer insolvencies were up by 8.5 percent. However, business insolvencies were down by 15.7 percent for the 12 months ending December.

"A significant reduction in insolvencies in the agriculture, forestry, fishing and hunting; construction, and transportation and warehousing sectors contributed to this decrease," Bankruptcy Canada said.

Copyright 2010 United Press International

Quicken Loans shifts more jobs to Detroit

Washington -- U.S. mortgage lender Quicken Loans said it was considering moving 700 more employees to Detroit within a year after posting a banner year in 2009.

The lender has already said 1,700 employees would be shifted to downtown Detroit from its headquarters in Livonia, Mich.

The online lender wrote $25 billion in loans in 2009, more than twice the $12 billion it wrote in 2008, the Detroit Free Press reported Tuesday.

Before the financial crisis hit, the lender was talking of building a new headquarters in Detroit. Those plans changed with the economic downturn. The firm is now looking for more space to rent.

Chinese bank moves to slow inflation

Beijing -- The People's Bank of China increased reserve requirements among most banks in a move widely interpreted as a step to slow inflation.

The bank said small, rural banks would be exempt from the order to increase the reserve ratio requirement half a percentage point to 16.5 percent, meaning a greater share of deposits would need to be kept in reserve at the central bank, where the funds earn little interest, The New York Times reported Friday.

More to the point, the funds become unavailable to lend to consumers and businesses. Less money in circulation tends to put downward pressure on prices.

Fed planning for economic recovery

Washington -- The U.S. Federal Reserve bank is likely to use a variety of options to slow the economy when the recovery is stronger, bank officials said.

New York Fed President William Dudely said the bank could "raise the interest rates paid on excess reserves," which are now set at 0.25 percent, The Wall Street Journal reported Monday.

By doing so, the central bank would be encouraging banks to leave money in their reserve accounts, which would take that much more money out of circulation. In turn, this would reduce money available for borrowing and ward off inflation, which can occur when there is too much money available.

Survey: Interest rates fueled the meltdown

Washington -- A majority of U.S. economists indicated in a survey low interest rates contributed to the housing bubble that sent the financial system into a tailspin

The Wall Street Journal reported Wednesday 42 business economists indicated low interest rates established by the Fed and passed to customers through banks contributed to the building boom. In contrast, 12 business economists indicated the low rates were not part of the problem.

Academic economists were split with 13 indicating low rates were a factor and 14 indicating they were not.

"The 'bubble' didn't really get going until 2005-06, by which time the Fed had raised rates to more or less normal levels," said Kenneth Kuttner of Williams College.

Wash. bank, Calif. credit union shuttered

Washington-- A Washington state bank and a California credit union have become the first two financial institution failures of the year, officials say.

The Washington State Department of Financial Institutions announced Friday it had closed Horizon Bank of Bellingham, Wash., which saw its $1.1 billion of deposits and nearly all of its $1.3 billion in assets assumed by Seattle-based Washington Federal Savings and Loan Association, The Wall Street Journal reported.

The Federal Deposit Insurance Corp. said Horizon's collapse will constitute a $539 million hit to its insurance fund. The newspaper said Horizon was hit hard by bad real estate loans.

EIB loans SATA Group $53 million

Luxemburg -- The European Investment Bank said Friday it would loan SATA Air Acores airline $53 million to upgrade its fleet with four turboprop aircraft.

The airline, which serves the Azores, Madeira and Canary islands, as well as the European continent, the United States and Canada, is often the more attractive method of travel within, to and from the islands, given long distances and rough waters.

The new aircraft will be based at Ponta Delgada, Azores.

"We're delighted by the EIB's decision to grant SATA Air Acores a loan on favorable terms," SATA Group Chairman Antonio Menezes said in a statement.

The bank's Vice President Carlos Da Silva Costa said airline was "essential" to the islands' "social cohesion at a regional level."

Savings concern British economists

London-- Economists in Britain said an increase in personal savings was an important step for consumers, but one that could put a "drag" on the economic recovery.

In Britain, the Office for National Statistics said the gap between personal incomes and spending has risen to its highest level in 11 years, reaching 8.6 percent in the third quarter.

In the same three months, consumers lowered their debt by $8 billion, a sharp decline from the same stretch in 2008, when borrowing outpaced debt payments by $68.6 billion, The Times of London reported Wednesday.

Treasury to extend TARP for 10 months

Washington -- U.S. Treasury Secretary Timothy Geithner says he has extended the $700 billion Troubled Asset Relief Program until October with a new focus.

Geithner notified Congress of the extension Wednesday, the only step necessary for renewing the program for a second year, The New York Times reported.

The extension was expected. The TARP program, set up by former Treasury Secretary Henry Paulson Jr., has funded a variety of bailouts, although it has been criticized as skirting its mission of buying frozen assets from the nation's banks.

In his notification to Congress, Geithner wrote, "we want to see the capital base of our financial system return to private hands as quickly as possible."