Finance & Business World

Foreign direct investment in China fell for the second straight month in December as global financial turmoil dimmed companies

Three Federal Reserve policy makers called on the U.S. government to try new programs to revive the housing market while differing over whether the central bank should take more steps to cut borrowing costs.

New York Fed President William C. Dudley said in New Jersey today that

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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India

Boeing Co. beat Lockheed Martin Corp. to win a $3.48 billion, seven-year contract that lets it keep its role as the primary developer of the U.S. shield against intercontinental ballistic missiles.

The Missile Defense Agency announced the contract in a statement Friday. The agency oversees the Ground-based Midcourse Missile Defense, which includes interceptors in Alaska and California, ground- and sea-based radar, satellites and a command and control system.

The Boeing team, which included Northrop Grumman Corp. of Falls Church, Va., delivered “a cost-effective approach to program management and execution,” Dennis Muilenburg, chief executive of Boeing’s defense unit, said in a statement.

Lockheed, the world’s largest defense contractor, was seeking to dislodge Boeing from the contract it has held since 1998. Boeing has said the program totaled as much as $18 billion during the 10 years ending 2011.

Lt. Gen. Patrick O’Reilly, head of the Missile Defense Agency, said in August 2010, when the agency was preparing to call for bids, that it needed to contain costs.

“But before we get to cost, bidders have got to demonstrate they’ve the capacity and capability, and also an ability to do upgrades,” he said high risk personal loans.

Lockheed’s team included Raytheon, which makes the non-exploding warhead that is designed to seek and destroy enemy missiles. Raytheon was on both teams.

The news for Boeing officials came just one day after they and St. Louis leaders lauded a $30 billion deal for the company to provide Saudi Arabia with 84 new F-15 fighters. The deal will prolong production of the F-15, which is largely built at Boeing’s plant in north St. Louis County, by about five years, through 2020.

The Regional Chamber and Growth Association on Friday estimated that the F-15 work supports 1,000 manufacturing jobs at Boeing and contributes to nearly 4,000 more through local suppliers and spinoff activity.

The Boeing jobs generate $1.1 billion a year in wages and other economic activity, and the indirect impact is another roughly $1.8 billion, according to RCGA economist Ruth Sergenian.

Tim Logan of the Post-Dispatch contributed to this report.

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Companies cranked out more goods in December and pending sales of existing homes jumped in November for a second month, pointing to a pickup in U.S. economic growth as 2011 comes to a close.

The Institute for Supply Management-Chicago Inc. said today its business barometer (CHPMINDX) was little changed at 62.5 from a seven- month high of 62.6 in November. The index of signed contracts (USPHTMOM) to buy previously owned houses rose 7.3 percent after climbing 10.4 percent the prior month, the National Association of Realtors said. Both figures surpassed the median estimate of economists surveyed by Bloomberg News.

OTTAWA

The Obama administration will ask Congress to increase federal borrowing authority by $1.2 trillion as the nation approaches the debt limit set by law, according to a Treasury Department official.

The White House will send the request to Congress on Dec. 30, the day the debt is projected to rise to within $100 billion of the $15.194 trillion limit, the Treasury official told reporters today on condition of anonymity.

Congress will be notified under the terms of a deal to raise the limit worked out on Aug. 2 after months of wrangling between the administration and Republican lawmakers. Three days later, Standard & Poor

If you take a trip outside Canada, it

Jon Corzine’s three days of testimony on MF Global’s collapse offered little to satisfy lawmakers or clients who lost millions when the securities firm failed. Yet legal experts say Corzine helped himself by choosing words with care and articulating an explanation that’s hard to disprove.

Corzine, a Democratic former senator and governor of New Jersey, told three congressional panels that he never intended to “misuse” client money or order anyone else to do so. He said no reasonable person who worked with him could have concluded otherwise.

He also rebuffed an assertion that he knew about customer money that might have been transferred to a European affiliate just before MF Global collapsed. It could be hard to build a persuasive case that he did know, experts say.

“It’s remarkable how he really has narrowly walked that line _ to be able to communicate effectively while preserving his defenses,” said Jacob Frenkel, a former enforcement attorney with the Securities and Exchange Commission, one of the regulators investigating MF Global. “He could have hurt himself by testifying. That has not happened.”

About $1.2 billion was found to be missing from client accounts when MF Global failed on Oct. 31, becoming the eighth-largest bankruptcy in U.S. history. Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from the fluctuating prices of commodities such as corn and wheat.

Brokers such as MF Global generally are required to keep customer money in separate accounts to protect it in case the company fails. MF Global apparently failed to do so. Congress, regulators and criminal investigators are looking into the case.

Those investigations, still in their early stages, will likely yield clearer answers about how client money came to be misused. For now, it remains a mystery.

“I think it was unrealistic for Congress to expect substantive answers to these questions, because no one is that naive,” Frenkel said. “That’s why these investigations are ongoing _ to figure out what happened to the money and who is responsible.”

Some of the lawmakers who questioned Corzine appeared to agree.

“If you did anything wrong, the criminal investigators will find that; I won’t,” said Massachusetts Rep. Michael Capuano, the top Democrat on the panel Corzine faced Thursday.

Corzine was careful to testify that he never “intended” for client money to be misused. That’s because intent is a key requirement of criminal prosecution, Frenkel said.

“If someone intended to violate (rules requiring the separation of client accounts), then the conduct is criminal,” he said. “If it was unintentional, we are only in the zone of civil enforcement, if that.”

If Corzine or others at MF Global are found guilty of civil violations, they might have to pay financial penalties.

One regulator raised the possibility Thursday that crimes were committed. As a primary dealer, MF Global made trades with the Federal Reserve Bank of New York. As the firm’s finances worsened in its final weeks, the New York Fed required MF Global to put aside more money to cover the Fed’s losses in case the firm failed.

New York Fed General Counsel Thomas Baxter testified that MF Global gave “express representation in writing” that the money it put up was not from client accounts.

“If that representation turns out to be false, a federal criminal offense has been committed,” Baxter said.

Michael Greenberger, a professor at the University of Maryland School of Law and a former regulator, said the hearings resolved none of the questions surrounding MF Global’s failure.

“Regulators’ enforcement divisions and the Justice Department will work together because if the money is missing, somebody did something wrong,” Greenberger said.

And given the damage done by MF Global’s failure, there’s little Corzine can do to revive his public image, said Michael Robinson, a former SEC official who now works in crisis communications.

“Unless Jon Corzine can look under the mattress in his house and find $1.2 billion to give back to customers, his reputation is beyond repair,” Robinson said.

He noted that Corzine spent a career branding himself as an effective manager. Corzine rose from the trading floor of Goldman Sachs to become the investment bank’s co-chairman. He then ran successfully for the U.S. senate and one term as governor of New Jersey. Corzine joined MF Global shortly after losing his bid for a second term.

Now, to protect himself legally, Corzine must avoid being precise about what occurred at the firm he led until last month. That’s why many legal experts had expected Corzine to invoke his Fifth Amendment right against self-incrimination. He never did.

Much of Corzine’s testimony Thursday involved an allegation that he knew about customer money that may have been transferred to a European affiliate just before MF Global collapsed.

“I did not instruct anyone to lend customer funds to MF Global or any of its affiliates,” Corzine told a House panel. He also said he didn’t know about “the use of customer funds on any loan or transfer.”

It was his first public appearance since Terrence Duffy, CME Group Inc.’s executive chairman, alleged Tuesday that he might have known about the $175 million transfer. MF Global traded on exchanges managed by CME Group.

According to Duffy, an MF Global employee told a CME auditor that “Mr. Corzine was aware” of the earlier transfer. Duffy said he referred the matter to the Justice Department and the Commodity Futures Trading Commission.

The transaction Duffy described wasn’t necessarily illegal. Brokers such as MF Global are allowed to borrow from customer accounts temporarily in some circumstances _ to reduce their own risk, for example.

But such cases are a narrow exception. A firm couldn’t use customer money to pay trading partners if its speculative trades lost value. Even in cases where borrowing clients’ money was legal, the firm would have to replace it with a safe, cash-like investment such as a U.S. Treasury security.

Corzine also was questioned about whether he used his relationships with regulators to gain advantages for MF Global.

Corzine has been a major fundraiser for Democrats. He was co-chairman of Goldman Sachs Group Inc. In that role, he worked with two other Goldman executives at the time: Gary Gensler, now chairman of the CFTC, and William Dudley, now president of the Federal Reserve Bank of New York.

Gensler has recused himself from the investigation because of his long history with Corzine. Along with other Wall Street executives, Corzine lobbied Gensler and his staff last summer against a possible CFTC rule that would limited how their firms can invest clients’ money. Afterward, the CFTC delayed adopting the rule until earlier this month.

Early this year, the Federal Reserve allowed MF Global to join an elite group of 22 dealers that help the government sell Treasury securities. The Fed did not assess MF Global to see if it was taking on too much risk. Instead, Fed officials relied on oversight by the CFTC, the SEC and others.

The role of primary dealer conferred on MF Global a seal of financial strength. It gave the firm a competitive edge and likely lowered the interest it was charged to borrow, experts said.

Asked whether he received privileged treatment from the regulators because of his connections, Corzine said, “We didn’t ask for special treatment” from the Fed.

And he said, “I do not believe we were given special treatment” from the CFTC regarding the rule to limit firms’ investments of customer funds.

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