Finance & Business World

Much work remains to achieve maximum U.S. employment and stable prices, and the central bank will do its part, an influential Federal Reserve official said on Friday.

The pace of the U.S. economic recovery remains “sluggish” and is likely to slow somewhat this year, New York Fed President William Dudley said in prepared remarks. Unemployment is likely to remain “unacceptably high” for some time, he added, while inflation is likely to be below the Fed’s new 2-percent objective for several years.

“Clearly, much work remains to achieve the Fed’s dual mandate of maximum sustainable employment in the context of price stability,” Dudley said in a briefing to media.

The Fed, which has kept interest rates near zero for more than three years, “has done and will continue to do its part in supporting the recovery - but it is not all-powerful,” he added.

“Other complementary policy actions in housing, fiscal policy and structural adjustment or rebalancing of the economy will be essential if we are to achieve the best available recovery free business cards.”

Besides the low rates, the Fed has also bought $2.3 trillion in long-term securities in an unprecedented drive to spur growth and revive the economy after the worst recession in decades. Yet the recovery has been slow and the outlook issued by the Fed this week was bleak, leading the central bank to say it expects to keep rates “exceptionally low” at least through late 2014.

Dudley, a permanent voter on the Fed’s policy-setting committee, added that he expects “moderate” growth this year, and warned the risks are skewed to the downside in part because of Europe’s debt crisis. The economy continues to operate with “significant excess slack,” he said.

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World stock markets rose Friday, driven higher by a successful bond issue in Europe that eased worries over the continent’s sovereign debt crisis.

Benchmark oil rose to nearly $100 per barrel and the dollar fell against the euro and the yen.

European shares rose in early trading. Britain’s FTSE 100 advanced 0.6 percent to 5,694.38. Germany’s DAX gained 0.7 percent to 6,221.96 and the CAC-40 in Paris gained 0.9 percent 3,229.17. Wall Street, too, was set to open higher, with Dow Jones industrial futures up 0.1 percent to 12,424. S&P 500 futures rose 0.1 percent at 1,293.

Asian shares were mostly higher. Japan’s Nikkei 225 index rose 1.4 percent to close at 8,500.02 and South Korea’s Kospi index moved 0.6 percent at 1,875.68. Hong Kong’s Hang Seng index vacillated before closing in positive territory, up 0.6 percent to 19,204.42.

Australia’s S&P ASX 200 was 0.4 percent higher at 4,195.90. Benchmarks in Singapore, Indonesia, India and Malaysia also rose.

But mainland Chinese shares fell as investors continued to cash in on recent gains. The benchmark Shanghai Composite Index lost 1.3 percent to 2,244.58, while the Shenzhen Composite Index dropped 3.5 percent to 845.93.

“The market will be volatile for the next one or two weeks after this correction, since there is just no support for the market to rise in the long term,” said Xu Xiaoyu, an analyst at China Investment Securities, based in Beijing.

PetroChina, the country’s biggest oil and gas company and the Shanghai benchmark’s biggest component, gained 1.4 percent as oil prices rose to near $100 a barrel in Asia on Friday on worries over supply tightness.

Elsewhere, raw materials and industrial companies advanced, following their U.S. counterparts higher. Japanese heavy equipment maker Komatsu Ltd guaranteed payday loans. jumped 4.1 percent and Hitachi Construction Machinery gained 3.8 percent.

Energy Resources of Australia soared 6 percent and Paladin Energy Ltd., an Australian uranium miner, gained 3.1 percent. But shares in Australia’s QBE Insurance group dropped 3.1 percent, after the company warned its earnings could halve following a spate of natural disasters in 2011.

South Korean tech shares advanced, with Samsung Electronics Co., the country’s largest company, up 1.8 percent and Hynix Semiconductor, a global leader in chip-making, surging 4.1 percent. Its largest banking group, Woori Financial Holdings Co., jumped 3.9 percent.

Strong bond auctions in Italy and Spain on Thursday pushed stocks higher. Italy was able to sell one-year bonds at a rate of just 2.735 percent, less than half the 5.95 percent rate it had to pay last month. Spain was able to raise double the amount of money it had sought to raise in its own bond sale as demand for its debt was strong.

Investors have been worried that Italy and Spain might get dragged into the region’s debt crisis. Greece, Ireland and Portugal have been forced to get relief from their lenders after their borrowing costs spiked to levels the countries could no longer afford.

Benchmark oil for February delivery rose 78 cents to $99.88 per barrel in electronic trading on the New York Mercantile Exchange. The contract tumbled $2 to finish at $99.10 per barrel in New York on Thursday.

In currency trading, the euro rose to $1.2843 from $1.2827 late Thursday in New York. The dollar was slightly down at 76.73 yen from 76.76 yen.

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So the U.S. economy added hundreds of thousands of jobs last month and everything is fantastic, right?

Well, not exactly. More than 40,000 of those jobs were couriers and messengers, which were in demand during the holidays because of the increased focus on online shopping rather than retail. But these jobs tend to be temporary seasonal hires and not permanent additions.

"People are happy to get those jobs for the time they have them, but come January, they’re out looking for jobs again," said Dean Baker, co-director of the Center for Economic and Policy Research.

The U.S. Labor Department reported that the economy added 200,000 jobs, which was stronger than economists expected, and the unemployment rate dipped to 8.5%.

Obama proposes pay hike

But spokeswomen for FedEx (, Fortune 500) and UPS (, Fortune 500) confirmed that they increased temporary hiring during the 2011 holiday season even more than the year before. However, many of those jobs have already evaporated.

"The hiring boost this holiday season was greater than the prior holiday season," said Kara Ross of UPS, noting that her company hired 55,000 temporary workers for the 2011 holiday season, an increase of 5,000 from the year before credit reports free.

Ross said that many of those new hires were drivers, driver helpers, loaders and unloaders. Many of them won’t remain on the payrolls after the holiday season, she said, though the level of attrition is yet to be determined.

"It just depends on our volume loads," she said. "Some of them we might keep on; some of them we might not."

Carla Boyd of FedEx said her company hired 20,000 temporary seasonal workers from October to December, an increase of 17,000 from the prior holiday season.

Unemployment rate, state by state

"There’s an incredible holiday surge," said Boyd. "We had our busiest day in history on Dec. 12."

On that day, FedEx had 17 million shipments, compared to the year-ago holiday peak of 15.6 million. But the annual average is 8.5 million, so FedEx doesn’t need that many workers year-round.

"The problem is that you have a lot of reporters touting this as a really strong report, and if that creates a view among policy makers that the economy is on the mend, then that undermines the need to do anything," said Baker. 

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President Barack Obama is pushing his economic message in Ohio, brandishing his presidential megaphone in a politically important state to make certain his appeal to the middle class is heard amid the boisterous start of the Republican campaign for the White House.

Obama was traveling Wednesday to the most Democratic congressional district in Ohio, a Cleveland suburb, a day after Mitt Romney won Iowa’s Republican presidential caucuses by just eight votes. Obama’s trip signals the White House’s intent to keep the president in the public eye even as the political world focuses on the GOP’s selection process.

The White House’s choice of Ohio for Obama’s first presidential trip of 2012 underscores the state’s high-profile role in presidential politics. It is a swing state that went for George W. Bush in 2004 and for Obama in 2008. A top manufacturing state, Ohio has seen its jobless rate follow the national pattern; unemployment was 8.5 percent in November compared with 9.6 percent a year before.

Obama set the tone Tuesday for a White House strategy that aims to maintain pressure on congressional Republicans while promoting an economic plan that serves as much as a policy prescription as it does a political platform for the general election.

Addressing Iowa Democrats by teleconference as the GOP caucus counting was still under way, Obama described Republicans as embracing a “theory that says we’re going to cut taxes for the wealthiest among us and roll back regulations on things like clean air and health care reform, Wall Street reform, and somehow that automatically that assures that everybody is able to succeed.”

“I don’t believe that,” Obama declared.

Pressing his economic agenda, Obama has said expanding the middle class is “the defining issue of our time.” His spokesman, Jay Carney, on Tuesday called it “his No. 1 focus.”

As defined by the president and by his advisers, his economic argument is that the middle class is facing a “make or break moment.” On that score, Obama still has a few confrontations with Congress in the year ahead.

He still wants to extend a payroll tax cut for all of 2012. Republicans avoided being blamed for a tax increase last month when House GOP leaders agreed to a two-month extension personal loans for people with bad credit. A longer version will have to be decided by the end of February. Obama is also likely to point to elements of a jobs package he advanced last year that failed in the face of Republican opposition.

Obama is also at odds with Senate Republicans over his nomination of Richard Cordray as head of the Consumer Financial Protection Bureau, a central feature of new bank regulations that Congress approved and Obama signed in 2010. Republicans are blocking Cordray’s appointment, effectively hamstringing the bureau’s work. Battling Wall Street overreach has been a recurrent Obama theme as he advocates for the middle class.

Signaling that he would continue to draw sharp lines between the middle class and the wealthy, Obama told the Iowa Democrats in his videoconference Tuesday that he would insist on the rich paying more in taxes.

“If we’re going to make the investments that we need for our kids at the same time as we’re controlling our deficit, then there’s nothing wrong with saying to millionaires and billionaires that we’re going to let your tax cuts expire,” Obama said. “The other party has a fundamentally different philosophy.”

Administration officials say they were especially encouraged by the public’s response to Obama’s call for extending the payroll tax cut and indicate Obama will make such appeals repeatedly to gain leverage over Congress and Republicans, in particular.

“There are more things that need to be done,” Carney said Tuesday. “There are elements of the jobs act that we believe, as we did from the beginning, merit bipartisan consideration and support. This country is in crying need of work on its infrastructure.”

In speaking at Shaker Heights High School on Wednesday, Obama is returning to a Cleveland suburb that he visited in 2009 while pushing his health care overhaul plan. Obama also planned to meet with a family at their home, a tactic Obama has employed before to personalize his agenda.

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Eleventh-hour contract talks have started between two Saint Louis area hospitals and a leading insurer who had been locked in an impasse, according to officials on both sides.

Representatives of St. Louis University Hospital and Des Peres Hospital as well as Anthem Blue Cross and Blue Shield of Missouri and HealthLink Inc., confirmed Tuesday that limited talks occurred last week.

So far, negotiators have failed to reach an agreement that may avert an end-of-the-year contract deadline. And the impasse may result in thousands of patients fleeing to other medical providers.

Both sides offered widely different accounts Tuesday of their recent talks, which were apparently held via phone calls, conference calls and emails, but not in person. They accused each other of undermining or walking away from the negotiations. And they could not agree on which offer or counter-offer is currently on or off the table - or even if talks will likely move forward. 

A spokeswoman for Tenet Healthcare Corp. of Dallas, which owns the two hospitals, said that WellPoint Inc. of Indianapolis, which owns the two health insurance plans, had delivered an ultimatum in the form of a new, only slightly better contract proposal that the hospitals rejected last Friday.

“They’ve said, ‘Take it or leave it,’” said Laura Keller, a spokeswoman for SLU Hospital. “They offered an increase that is so low it doesn’t keep up with the increase in cost of taking care of patients.”

But a spokesman for Anthem insisted that the negotiations were still ongoing - and that the insurer is in fact examining an earlier offer from the hospitals.

“We are incredulous,” said Deb Wiethop, an Anthem spokeswoman. “We’re not aware that the negotiations are over. … We received a proposal from Tenet on Dec. 19. We’re going to look at it and get back to Tenet in January.”

Wiethop acknowledged that the hospitals had rejected an offer last Friday from the insurer. “It’s not a ‘take it or leave it’ proposal,” she said.

The two hospitals announced in early December that - because of a breakdown in talks - they would cancel their managed care contracts with Anthem as well as HealthLink as of Jan. 1. This termination does not apply to SLUCare physicians.

Without the contracts, Anthem and HealthLink customers would pay significantly higher rates next year for out-of-network care at both of the hospitals. And if that occurs, it would no doubt drive away many patients who would ordinarily visit Des Peres Hospital or SLU Hospital to other competing St. Louis-area hospitals that accept WellPoint’s health plans.

Under the existing contracts, the two hospitals’ agreements with HealthLink patients will end on Dec. 31. However, patients covered by the Anthem contract will continue to receive care at ‘in-network’ rates until Feb. 22.

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The millions that Jon Corzine amassed as head of Goldman Sachs have become an alluring target for investors who were crushed by the collapse of MF Global, the brokerage firm he led until earlier this month.

And Corzine isn’t the only one who may be financially vulnerable after the eighth-largest bankruptcy in U.S. history. Others include MF Global’s other top executives; its auditor, PricewaterhouseCoopers; and some big Wall Street banks.

Even MF Global itself, which can’t be sued while in bankruptcy protection, could sue its former executives.

Corzine and other senior executives likely share a liability insurance policy to cover potential lawsuits against them. But experts say potential damages sought could well exceed the limits of their policy.

Corporate bankruptcy is a “litigation nightmare: Everyone ends up suing everyone,” said Charles Elson, a professor and director of the Weinberg Center for Corporate Governance at the University of Delaware. “The officers and directors are in for a lot of litigation.”

Private litigation has already begun. At least two class-action lawsuits on behalf of MF Global shareholders have been filed against Corzine and three other top executives. They accuse the firm and its top executives of making false and misleading statements about MF Global’s financial strength, internal controls and cash balances.

MF Global filed for bankruptcy protection on Oct. 31 after a disastrous bet on European government debt. In just a week, stock investors lost about $585 million, the shareholders say.

More than $600 million in clients’ money is still missing. Regulators say MF Global moved the money out of client accounts within days as the firm’s cash dried up.

No one at MF Global has been charged with a crime or civil violation. But regulators and the FBI and other criminal investigators are investigating MF Global’s failure, and Corzine has hired a prominent white-collar defense attorney.

A public relations firm hired by Corzine declined to comment Monday. An MF Global spokeswoman had no immediate comment. And Corzine’s lawyer didn’t immediately a return call.

It isn’t clear just how much money Corzine is worth. He spent roughly $100 million of his fortune to win a U.S. Senate seat and the New Jersey governorship. In 2005, the last full year that he was a U.S. senator, he was estimated to be worth between $125 million and $175 million.

Corzine’s disclosure filings as governor, through 2009, provide less detail on his finances. They do show he held interests in real estate partnerships, investment companies, hedge funds and private equity funds.

After the MF Global bankruptcy, Corzine declined to take his $12 million severance pay.

Legal experts say Corzine could be held personally liable for misrepresenting to investors the risks that the firm had taken payday advance online.

MF Global didn’t list the European debt on its balance sheet for all to see. Instead, those holdings were shifted to the company’s “off-balance sheet,” deep in its financial statements. Some separate filings with regulators excluded the European debt entirely.

Under a 2002 anti-corporate fraud law _ which Corzine co-wrote as a U.S. senator _ CEOs of public companies must personally certify the accuracy of their company’s financial statements.

If client money was used by the firm for its own purposes, Corzine could be held responsible, said Thomas Ajamie, an attorney who specializes in financial fraud cases.

“That would be the house gambling with customers’ money,” Ajamie said.

Other top MF Global executives also could face legal jeopardy, experts say. And members of the board of directors could be accused of failing to properly oversee Corzine’s trading strategy and the firm’s risk management.

PricewaterhouseCoopers, MF Global’s auditors, could be targeted, too. So could the Wall Street banks that put up money for floating the firm’s own bonds.

With MF Global in bankruptcy, new potential litigants could step forward, in addition to civil and criminal authorities and shareholders. The trustee the bankruptcy court appointed will conduct an investigation and could sue top executives on behalf of the company to recover money for creditors.

“Anyone who has a deep pocket gets sucked in,” Elson said.

Major companies typically provide liability insurance for top executives and their directors. The insurance covers the legal costs in case they’re sued by shareholders or others and the damages they might have to pay.

The insurance provides a single pot of money for executives and board members, usually in the hundreds of millions of dollars. Companies offer the insurance as a perk to recruit executive talent, experts say. The insurance kicks in if executives or directors are accused of breaches of duty and “wrongful acts” that stop short of fraud, such as misstatements to investors.

Experts say the damages or penalties that could be sought in MF Global’s case could far outstrip executives’ insurance coverage. That’s because multiple parties could sue each executive or director for tens of millions. The payouts could exceed each official’s share of the coverage.

Craig Welin, a lawyer at Frandzel Robins Bloom & Csato, which specializes in bankruptcy and financial litigation, said he thinks Corzine could be tied up in litigation for five to 10 years.

“They’ll be looking under every rock,” Welin said. “And if that rock has deep pockets, they’ll look even closer.”

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Stock indexes are edging higher in early trading ahead of a key confidence vote in Italy that is the next step in Europe’s unfolding debt crisis.

Italian bond yields have spiked this week, a sign that markets are questioning the country’s ability to pay its debts. Italian Premier Silvio Berlusconi’s main coalition ally urged him to step aside Tuesday ahead of a vote that could force his resignation. Many investors believe a new government would enact additional austerity measures that could help Italy cut its massive debt burden payday loans lenders.

The Dow Jones industrial average was up 30 points, or 0.2 percent, to 12,097 five minutes after the market opened. The S&P 500 rose 4, or 0.3 percent, to 1,265. The Nasdaq composite gained 16, or 0.6 percent, to 2,712.

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A ballot battle in Ohio that pits the union rights of public workers against Republican efforts to shrink government and limit organized labor’s reach culminates Tuesday in a vote with political consequences from statehouses to Pennsylvania Avenue.

A question called Issue 2 asks voters to accept or reject a voluminous rewrite of Ohio’s collective bargaining law that GOP Gov. John Kasich signed in March, less than three months after his party regained power in the closely divided swing state.

Thousands descended the Statehouse in protest of the legislation known as Senate Bill 5, prompting state officials at one point to lock the doors out of concern for lawmakers’ safety.

The legislation affects more than 350,000 police, firefighters, teachers, nurses and other government workers. It sets mandatory health care and pension minimums for unionized government employees, bans public worker strikes, scraps binding arbitration and prohibits basing promotions solely on seniority.

By including police and firefighters, Ohio’s bill went further than Wisconsin’s, which was the first in a series of union-limiting measures plugged by Republican governors this year as they faced deep budget holes and a tea party movement fed up with government excess. Democratic governors, including New York’s Andrew Cuomo and Connecticut’s Dannel Malloy, have also faced down their public employee unions in attempts to rein in costs.

That’s why labor badly needs a win in Ohio, said Lee Adler, who teaches labor issues at Cornell University’s New York State School of Industrial and Labor Relations.

“If the governor of Ohio is able to hold the line on the legislation that was passed, then it would be a very significant setback for public sector workers and public sector unions in the U.S.,” he said. “Likewise, if the other result happens, then it would certainly provide a considerable amount of hope that, with the proper kind of mobilization and the proper kind of targeting, some of the retrenchment that has been directed at public sector workers can be combated.”

Victory could also galvanize support and build energy within the Democratic-leaning labor movement ahead of the 2012 presidential election, a potential boon for President Barack Obama’s re-election effort.

We Are Ohio, the labor-backed coalition fighting the law, had raised more than $24 million as of mid-October _ more than Obama, John McCain and 18 other presidential contenders raised in combined Ohio contributions during the 2008 presidential election, according to Federal Election Commission data.

Building a Better Ohio, the business-fueled proponent campaign, has raised $8 million. Outside groups including FreedomWorks, Americans for Prosperity and the Virginia-based Alliance for America’s Future are also rallying support for the law. Their spending hasn’t been documented.

“This will eclipse any statewide candidate election in the history of the state, in terms of spending,” said Jason Mauk, a spokesman for Building a Better Ohio. “It’s an unprecedented campaign.”

Ohio voters favored repeal 57 percent to 32 percent, an Oct. 25 Quinnipiac University poll showed. But Mauk said the law’s backers are still cautiously optimistic they can win, and will continue through the weekend to carry the bill’s tea party-friendly message to voters.

“People are tired of government spending more than it makes, more than it collects, and they’re frustrated by the debt and deficit problem in Washington,” he said. “Voters clearly sent a message of concern (in 2010) and they’re demanding that government get its house in order, and that’s the platform John Kasich ran on. This is an effort to try to eliminate government excess and get spending under control.”

Kasich is ranked among America’s least popular governors, thanks in part to his fight against the unions. The former congressman, investment banker and Fox News commentator has traveled the state to rally voters to keep the law and appeared in pro-Issue 2 commercials paid for by Make Ohio Great, a project of the Republican Governors Association.

Voters are eager to help defeat the law because they felt disenfranchised by the process, said Melissa Fazekas, a spokeswoman for the opposition.

The bill was introduced, debated in the Legislature, passed and signed by Kasich in two months. GOP legislative leaders say they heard dozens of hours of testimony and Democrats proposed no amendments to the bill during deliberations.

After it passed, the law’s opponents easily gathered 1.3 million signatures for their ballot effort and now boast a legion of more than 17,000 volunteers of all political stripes.

“I’ve never been involved in something quite like this,” Fazekas said. “I’ve just never seen people so engaged and enthusiastic. I’ve seen situations before where people were willing to sign petitions, but on this issue people were literally grabbing petition booklets out of our hands and taking them out and circulating them.”

Adler said public schools and the post office are the last two big government entities not controlled by corporations, and so are primary targets of union-limiting efforts.

He said “everybody A to Z” will be watching the vote’s outcome because of the state’s long history as a political bellwether: “Ohio tells a story about America every time it votes.”

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MADISON COUNTY

Dear Jeanne & Leonard:

My sister is stiffing our elderly father. Six years ago, “Madeline” and her husband borrowed $50,000 from Dad for a down payment on a house, the deal being that they’d pay him back when they sold it. Well, they did sell the house a few years later. But instead of repaying our father, they bought a larger one. Long story short, when the housing market collapsed, they decided to stop making payments, and the bank foreclosed on them. So Madeline and her husband moved out, and they’re making no attempt to repay Dad, though they both have jobs. Dad’s asked me to help him get his money back, and I’d like to know where to start. - Jill M.

Dear Jill:

The first thing your father needs to do is change his will so that it takes into account the amount of money Madeline owes him. That’s at the very least. In our book, Madeline’s dishonorable behavior puts disinheriting her on the table.

Next, you and your father should talk to a lawyer and find out what legal options exist for collecting from your sister and her husband. Given the way they’ve treated him, your father shouldn’t hesitate to be as tough as the law allows.

Finally, if you haven’t already done so, it’s time for you to get tough with your sister—very tough. By this we mean letting her know that if she doesn’t start repaying the loan, you’re prepared to cut her off from the family and are prepared to tell everyone—your extended family, your family’s friends, her friends and anyone else she knows—that she’s blown off a large debt to her elderly father. Then cross your fingers and hope it sinks in: That walking away from her obligation will not be cost-free.

* * *

Dear Jeanne & Leonard:

When a guy starts bragging about money, what can you do? Last weekend our neighbors had my wife and me over for dinner to meet the husband’s brother and sister-in-law, “Eric” and “Allison.” At one point during the evening, Eric began telling me about a wonderful meal he and Allison had had on a recent vacation guaranteed payday loans. When Eric said the dinner cost $900, my jaw must have dropped, because he quickly added “But there was real value there, especially in the wine.” I was dumbstruck. I’m sure our neighbors can’t afford dinners that cost one-third that much, and, as Eric could surely tell, neither can we. What’s the appropriate response in a situation like that? - Flabbergasted

Dear Flabbergasted:

So, what do you think? Were you caught in the crossfire of some insane sibling rivalry, or is this guy always this boorish?

Not that it matters. There’s nothing you can say to people like Eric, and there’s no point in trying. All you can do is laugh about him later, while enjoying a much less expensive meal with much more civilized friends.

* * *

Dear Jeanne & Leonard:

I’m wondering if I need to give some money back to my insurance company. Here’s the story: A leaking pipe under my house caused extensive mold damage—damage that the company’s claims adjuster estimated would cost $5,500 to repair. But once I filed a claim, the insurance company decided the damage wasn’t covered by my policy. So I had to file a complaint with the Insurance Commission, which ultimately forced the insurance company to pay me the $5,500. This took a long time, though, and meanwhile I found someone who fixed the damage for $2,000. Now I’m wondering, is it wrong for me to keep the $3,500 difference between what I paid for the repair and what the insurance company paid me? - W.G.

Dear W.G.:

We don’t know what your policy states, but in the moral arena, you’re entitled to the entire $5,500 - $2,000 to pay for the repair and $3,500 for the trouble the insurance company made you go to collect what it owed you.

Please e-mail your questions about money and relationships to Questions@MoneyManners.net. © 2011 by Jeanne Fleming and Leonard Schwarz

Distributed by King Features Syndicate

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