Finance & Business World

The Senate on Thursday passed a bipartisan package of tax breaks and other steps designed to help businesses and homeowners weather the housing crisis.

The measure passed by an impressive 84-12 vote, but even supporters of it acknowledge it’s tilted too much in favor of businesses like homebuilders and does little to help borrowers at risk of losing their homes.

The plan combines large tax breaks for homebuilders and a $7,000 tax credit for people who buy foreclosed properties, as well as $4 billion in grants for communities to buy and fix up abandoned homes.

Despite the impressive vote, the bill will be significantly redrawn by critics in the House.

The White House opposes the plan but has not issued an explicit veto threat. It says parts of the legislation would make the problem worse by depressing some home values and the measure inappropriately uses taxpayer money to bail out lenders saddled with foreclosed houses.

The House is likely to reject key portions of the Senate measure, including $25 billion over three years in tax breaks for money-losing businesses such as homebuilders. A plan adopted Wednesday by a key House panel dropped that idea as well as the tax credit for purchasers of foreclosed homes.

Senate Majority Leader Harry Reid, D-Nev., acknowledged changes will be needed in upcoming talks with the House and the White House.

"This is just the beginning of the process," Reid said. "This bill will go to the House. With the House and the White House we can come up with a piece of legislation fairly quickly."

Before passing the measure, the Senate added $6 billion in unrelated tax breaks for renewable energy producers, despite Senate rules that say tax cuts need to be "paid for" with revenue increases elsewhere in the tax code.

The bill also offers $150 billion for pre-foreclosure counseling and stronger loan disclosure requirements.

The $25 billion tax break the plan offers to homebuilders and other businesses absorbing heavy losses and the energy tax package were both dropped from an economic rescue plan enacted in February payday loans. Critics of those proposals said they were overly expensive and would not stimulate the economy.

But deepening public worries about the housing crisis appear to have emboldened lawmakers to swell the $9 trillion deficit to pay for the measures.

The $7,000 tax credit for the purchase of foreclosed homes, opponents argue, would unfairly reward purchases that would have happened anyway while possibly devaluing other homes. It also could give banks an incentive to foreclose on homes by subsidizing purchases of such properties.

The measure calls for a long-awaited modernization of the Federal Housing Administration that would enable more homeowners to refinance into loans backed by the Depression-era agency.

It includes $10 billion in tax-free mortgage revenue bonds to help homeowners refinance subprime loans, a move endorsed by President Bush.

A House bill takes a far different tack, steering tax breaks toward first-time homebuyers and investors in low-income rental housing. The measure is likely to be paired with a broader housing rescue package being drafted by Rep. Barney Frank, D-Mass., the Financial Services Committee chairman, that would have the FHA step in to back $300 billion in refinanced loans for 1 million or more homeowners who otherwise might face foreclosure.

Under a similar plan by Sen. Chris Dodd, D-Conn., the Banking Committee chairman, the FHA would insure up to $400 billion in loans.

The Bush administration countered those plans Wednesday with its own, far narrower, proposal. It would expand an existing FHA program to allow more homeowners who are facing large rate hikes to refinance into more affordable government-insured loans. 

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More than 30,000 hospitalized patients acquired infections while admitted to a Pennsylvania medical center in 2006, according to a new report issued Thursday by the Pennsylvania Health Care Cost Containment Council.

The study marks the second time PHC4 issued a hospital-specific report on hospital acquired infections in the state.

In 2005, medical centers reported 19,154 patients with hospital-acquired infections.

The council said the increase was caused by an expansion of the hospital-acquired infection reporting categories along with "significant strides" made by hospitals in identifying and reporting infections.

PHC4 noted that when comparing data from the two most similar data collection time periods — the fourth quarter of 2005 and the fourth quarter of 2006 — the rate of infection dropped from 16.3 infections per 1,000 patients to 15.1 infections per 1,000 patients.

Carolyn Scanlan, president of the Hospital & Healthsystem Association of Pennsylvania, an industry trade group, said the report "demonstrates that hospital reporting of data on health-care-associated infections is improving, and improving data collection can contribute to hospitals' ongoing efforts to identify and reduce those infections."

Scanlan also noted "PHC4 has not yet been able to establish a real trend in the reporting of infection data because the collection and reporting processes are still evolving."

Reducing hospital-acquired infections is one of the goals of the Healthcare Improvement Foundation's Partnership for Patient Care, an initiative created by a group of Philadelphia area-hospitals with funding support from Independence Blue Cross payday advances.

Kate Flynn, the foundation's president, said the PHC4 data helps hospitals evaluate and improve their infection prevention and control efforts.

"Although the data collected in 2006 was broader than that collected in 2005, the initial pattern for infection rates is trending downward in southeast Pennsylvania and across the state," said Flynn. "For example, in southeast Pennsylvania hospitals, the overall number of surgical site infections fell about 30 percent, with 60 percent of hospitals' infection rates decreasing or remaining zero."

The full report, include hospital-specific data, is available on PHC4's Web site: www.PHC4.org.

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Starbucks Corp. will start serving up a new "everyday" brew Tuesday, hoping the signature blend will help revive slumping sales in its crucial U.S. market.

To celebrate the launch, it will host a half-hour nationwide coffee-tasting, giving away free 8 oz. cups of Pike Place Roast - named after its first store in Seattle’s famed public market - at more than 7,000 U.S. stores beginning at noon EDT.

Chairman and Chief Executive Howard Schultz said the new blend will have a bold, robust flavor profile that customers have come to expect of Starbucks coffee, but with a smoother, buttery finish.

"It’s the best of Starbucks," Schultz said in a conference call Monday.

It will be freshly roasted and shipped directly to stores, hand-scooped, freshly ground and brewed in small batches. Baristas have been told to throw out any brew that hasn’t been served within 30 minutes.

"We’ll be pouring out more coffee than most people serve," Schultz said.

It will be brewed, both regular and decaf, alongside rotating coffees of the week, and sold by the whole bean for $9.95 per pound.

Chain tested various roasts, blends. Starbucks developed Pike Place Roast - testing some 30 roasts and 30 blends - after consulting with nearly 1,000 customers who clamored for a line of drip coffee that wouldn’t switch from, say, an earthy Sumatra one week to a bright, citrusy Ethiopia Sidamo the next.

Consistently, customers kept saying: "Give us a coffee we can count on every day, all day, all week," Andrew Linnemann, Starbucks master coffee blender said Monday in a conference call with reporters.

Starbucks has spent the last few months sharpening its focus on the basics - a strategy Schultz is pushing as part of the company’s efforts to reinvigorate its U.S. business, which has suffered amid a soft economy and growing competition from rivals ranging from McDonald’s Corp. (MCD, Fortune 500) and Dunkin’ Donuts to Peet’s Coffee & Tea (PEET), Caribou Coffee (CBOU) and small, independent coffee shops.

Yet Schultz bristles at any suggestion that the company’s turnaround efforts are aimed at the competition.

‘Not about competition.’ "This is not about competition. This is about Starbucks," Schultz said bad credit payday loan. "We believe that we control our own destiny, and our customers expect a quality from Starbucks that is unparalleled."

One night in late February, the company shut down most of its U.S. stores for three hours to retrain baristas on espresso basics.

The company has also promised to start grinding all its brewed coffee in stores, which will bring back the pungent aroma many customers have missed since the company started using flavor-locked bags of pre-ground coffee years ago.

Schultz has acknowledged that declining U.S. home prices, a widespread credit crunch and rising gasoline and energy costs have undoubtedly made many consumers pare back on affordable luxuries like $4 lattes.

But he has repeatedly insisted he believes Starbucks’ bigger problem was that it focused too much on growth in recent years and not enough on customers and its core product.

Fewer new stores in the cards. The company has scaled back the number of new U.S. stores it plans to open this year, while ramping up growth overseas, and remains committed to a long-term goal of having 40,000 stores worldwide. It has about 16,000 stores worldwide today, more than two-thirds of them in the United States.

To promote the new brew, Starbucks will spend at least two months serving all its coffee and espresso drinks in white cups with a version of its original brown mermaid logo. It’s been touched up to make the her long, wavy hair cover her bare breasts - a move aimed at pre-empting complaints it’s received in the past from people who find it too racy.

Pike Place Roast will also be the first Starbucks coffee bearing a new symbol the company created with Conservation International, showing that all beans are purchased from suppliers that meet high workplace and environmental standards, such as paying pickers well and requiring coffee to be grown in the shade without use of pesticides.

Schultz has two cameos planned for Tuesday: first at a replica of the Pike Place store Starbucks (SBUX, Fortune 500) is putting up in Manhattan’s Bryant Park, then back in Seattle Tuesday evening at the actual Pike Place cafe. 

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First-quarter fund-raising by U.S. venture capital firms increased 29 percent compared with the same period last year, according to a newly released report.

Thirty-two VC funds raised $4.97 billion during the quarter — up from 22 funds worth a total of $3.84 billion in first-quarter 2007.

The increase occurred as fundraising by the nation’s large leverage buyout funds decreased by 22 percent, the Dow Jones & Co report shows.

Venture and mezzanine funds gained ground because larger buyout funds took up less private equity investor attention, other, according to Jennifer Rosa, managing editor of Dow Jones Private Equity Analyst.

Thirty-three leveraged buyout funds raised $27.6 billion during the quarter compared with 34 funds raising $35.2 billion during the same period last year same day payday loans.

In total, U.S. private equity firms raised $58.5 billion in 81 funds, up nearly 32 percent over the $44.3 billion raised in 68 funds during the first quarter of 2007, the report shows.

The quarter’s largest VC fund was raised by Essex Woodlands Health Ventures, with operations in California, New York, Houston and London. The firm raised $800 million for its Essex Woodlands Health Ventures VIII LP fund, according to the report.

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Big Wall Street investment companies are stepping up their borrowing a bit from the Federal Reserve’s unprecedented emergency lending program.

The Federal Reserve reported Thursday that those firms averaged $38.1 billion in daily borrowing over the past week from the new lending program. That compared with $32.9 billion in the previous week and $13.4 billion in the first week the lending facility opened.

The program, which began on March 17, is part of the Fed’s effort to aid the financial system.

The Fed, for the first time, agreed to let big investment houses temporarily get emergency loans directly from the central bank. This mechanism, similar to one available for commercial banks for years, will continue for at least six months. It was the broadest use of the Fed’s lending authority since the 1930s.

Fed Chairman Ben Bernanke and his colleagues opened the facility as it raced to deal with the sudden crash of the venerable Wall Street firm Bear Stearns (BSC, Fortune 500), which was on the brink of bankruptcy. Fearful that other investment firms could be in jeopardy given the intense fear that gripped the markets at that time, the Fed moved to give investment firms a place to go for overnight cash loans.

Doing this was "a very substantial step," Bernanke told lawmakers at a Senate Banking Committee hearing on Thursday. "We didn’t take it lightly."

The lending facility is seen as similar to the Fed’s "discount window" for commercial banks, where the Fed acts as a lender of last resort. Commercial banks and investment companies pay 2.5 percent in interest for overnight loans from the Fed.

Banks also stepped up their borrowing from the Fed’s discount window. Banks averaged $7 billion in daily borrowing for the week ending April 2. That compared with $550 million in average daily borrowing for the previous week.

The identities of commercial banks and investment houses borrowing from the Fed’s emergency lending facilities are not released.

The Fed’s decision to extend emergency lending to investment houses — along with another controversial move — backing a multibillion lifeline as part of JP Morgan’s (JPM, Fortune 500) deal to take over the troubled Bear Stearns — were under scrutiny by the Senate Banking Committee on Thursday cash advance flexible payments. Some Democrats and others worry that the moves could put billions of taxpayer dollars at potential risk.

Bernanke, however, defended the actions, saying they were necessary to avert a meltdown of the entire financial system, which would have dire consequences for the economy and for millions of Americans.

"Our ultimate concern is the health of the American economy and the average person," he said.

Also Thursday, the Fed, in the second operation of its kind, auctioned another $25 billion of much-in-demand Treasury securities to investment firms. Bidders paid an interest rate of 0.160 percent. The Fed received bids of $46.9 billion worth of the securities. Bidders, who are not identified, can put up risky home loan packages as collateral.

That program is intended to help financial institutions and the troubled mortgage market. The Fed said it would make as much as $200 billion worth of Treasuries available through weekly auctions that started last Thursday.

The goal is to make investment houses more inclined to lend to each other. It also is aimed at providing relief to the distressed market for mortgage-linked securities. Questions about their value and dumping of these securities have driven up mortgage rates, aggravating the housing crisis. 

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Rates on 30-year and 15-year mortgages rose this week, delivering another dose of unwelcome news to the troubled housing industry.

Freddie Mac (FRE, Fortune 500), the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 5.88% for the week ending April 3. That was up from last week’s 5.85% and was the highest since the middle of March, when 30-year rates stood at 6.13%.

The increase in mortgage rates also isn’t welcome news to prospective home buyers in an environment where obtaining financing to buy a home or other big-ticket items has become more difficult.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose this week to 5.42%, up from 5.34% last week.

"Housing …. continues to be a drag on the economy," said Frank Nothaft, Freddie Mac’s chief economist.

However, rates on shorter term mortgages dipped this week

For five-year adjustable-rate mortgages, rates dropped to 5.59% this week, from 5.67% last week. And, rates on one-year, adjustable-rate mortgages averaged 5.19% this week, down from 5.24% in the prior week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages as well as one-year adjustable-rate mortgages the nationwide average fee was 0.5 point guaranteed cash advance loan. Five-year mortgages carried a 0.6 point average fee.

A year ago: A year ago, rates on 30-year mortgages stood at 6.17%, 15-year mortgage rates averaged 5.87%, five-year adjustable-rate mortgages were 5.92% and one-year adjustable-rate mortgages were at 5.44%.

Housing has been suffering through a severe slump that has dragged down house prices in many parts of the country. The fallout is afflicting both homeowners and the economy at large.

For the first time, Federal Reserve Chairman Ben Bernanke acknowledged on Wednesday the possibility that the country could fall into recession, something that hasn’t happened since 2001. The economy is being clobbered by a trio of crises - housing, credit and financial. That’s taking its toll on the willingness people to make big financial investments like buying a home.

Foreclosures, meanwhile, have swelled to record highs, aggravating housing’s problems by dumping more empty homes on an already depressed market. 

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Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.

“We had a good bottom,'' Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. “This will probably not prove to be the final bottom,'' he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.

Last summer, worried about market disruptions that started with rising subprime-mortgage defaults, Soros, 77, returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects. Quantum returned an average of 30 percent a year before Soros started using outside managers in 2000 for much of his money.

He also decided to write a book, his 10th, “The New Paradigm for Financial Markets'' (Public Affairs, 2008). Released today online, the book explains the causes of the current meltdown, a crisis he says has been in the making since 1980, and the trades he put in place this year to protect his wealth, much of it in Quantum.

Soros has bet on declines in the dollar, 10-year Treasuries and U.S. and European stocks. He expected foreign currencies to rise, as well as Chinese and Indian equities. The latter bet helped Quantum return 32 percent in 2007. Quantum's returns this year have ranged from up 3 percent to down 3 percent.

`Heightened Uncertainty'

The euro has climbed 7.5 percent against the dollar this year and the Japanese yen has gained 9.1 percent. These and other currencies may continue to strengthen, he said.

“There is an increasing unwillingness to hold dollars, though there's a lack of suitable alternatives,'' he said. “It's a period of heightened uncertainty.''

Federal Reserve officials dropped their benchmark interest rate 2 percentage points this year to 2.25 percent, and Soros doesn't see that they can lower the rate much further, given the weak dollar.

“We are close to the limit,'' he said cash advance.

As for his wagers on developing markets, Soros hasn't abandoned his holdings in India, even with the 22 percent drop in the benchmark Indian index this year.

“The fundamentals remain good,'' he said. He is less certain about what will happen to Chinese H shares, which trade in Hong Kong.

Credit-Default Swaps

Credit default swaps — a way to bet on the creditworthiness of a company — may be the next crisis area because the market is unregulated, and it's impossible to know whether counterparties can meet their obligations in the event of a bond default. The market has a notional value of about $45 trillion — or about half the total wealth of U.S. households.

Soros recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.

The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power, Soros said. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent. These leaders, Soros said, believed that markets are self-correcting, meaning that if prices get out of whack, they will eventually revert to historical norms. Instead, this laissez-faire attitude created the current housing bubble, which in turn led to the seizing up of credit markets and the demise of Bear Stearns, Soros said.

To avoid a super-bubble in the future, Soros said banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.

Asked if such moves would make it impossible to achieve returns like those of his pre-2000 days, Soros laughed.

“Since I'm designing these regulations, they would not hurt me,'' he said. “We made direction bets but we haven't used leverage'' like the $25-to-$1 borrowing that brought down John Meriwether's Long-Term Capital Management LLC in 1998.

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A whistleblower lawsuit accusing Christ Hospital, the Health Alliance and the Ohio Heart Health Center of defrauding federal health care programs is being pursued by the federal government.

The suit, unsealed Tuesday, alleges that Christ Hospital and Ohio Heart, the largest cardiology group in Greater Cincinnati, "devised a scheme that provided cardiologists improper financial incentives in exchange for generating revenue for the hospital," according to a press release from the U.S. Department of Justice.

Potential liability was reported to be as high as $424 million across the Health Alliance and its former members in an October 2007 document from VMG Health, a consultant hired as part of the separation of Christ Hospital from the Health Alliance.

The focus of the suit is an outpatient cardiology testing unit within Christ Hospital known as the Heart Station, where patients receive non-invasive heart procedures such as electrocardiograms, echocardiograms and stress tests.

"The government’s intervention in this case demonstrates the Justice Department’s continued commitment to ensuring that medical decisions are based on the medical needs of the patients and not on unlawful financial incentives paid to physicians," Acting Assistant Attorney General Jeffrey Bucholtz, of the Justice Department’s Civil Division, said in the release.

Ohio Heart and Christ Hospital representatives were not immediately available for comment Tuesday evening pay day loans.

The suit was originally filed in the U.S. District Court in Cincinnati under the whistleblower provisions of the False Claims Act by a cardiologist who had provided services to Christ Hospital and Ohio Heart. Under the act, a private party can file an action on behalf of the federal government and receive a portion of the recovery.

The lawsuit alleges that, between at least 1999 and 2004, cardiologists were allocated time at the Heart Station based on the number of coronary arterial bypass graph procedures and catheter lab revenues they or their group generated for Christ the previous year.

Many of the procedures were billed to federal benefit programs, including Medicare and Medicaid, according to the press release. It’s against federal law to exchange financial incentives for patient referrals.

The cardiologists could bill for patients they treated at the Heart Station and for follow-up procedures the patients required.

The government’s investigation was conducted by the U.S. Attorney’s Office in Columbus, the Justice Department’s Civil Division, the Office of Inspector General of the Department of Health and Human Services, and the Federal Bureau of Investigation.

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