Obama to shop market reforms to G-20

WASHINGTON (CNNMoney.com) -- Last week, Congress. This week, the world.

At the Group of 20 meeting on Thursday, President Obama is expected to push the new regulations that he and Treasury Secretary Tim Geithner pitched to Congress last week as a way to prevent another financial market collapse. He heads to London on Tuesday and will meet the next day with the leaders of Great Britain, Russia and China.

The president will emphasize the need to regulate hedge funds and derivatives markets, encourage better capitalization of financial companies and "forge coordination among regulators," said Michael Froman, a deputy Obama adviser on international economic affairs. The need to crack down on offshore tax havens is also on the agenda, Froman added.

A lot is at stake beyond the call for tougher regulations, experts say.

Last week, billionaire investor George Soros, while addressing a Senate panel on foreign relations, called it a "make or break event" for the global markets.

0:00/3:39Global glimpses of recovery

The United States has faced criticism for emphasizing the need for economic stimulus rather than strengthening its own regulatory system, which many blame for triggering the global crisis.

Global economists say they expect the proposed regulatory platform to blunt that criticism and help the United States push for broader global stimulus efforts and other shorter-term economic crisis reforms.

"The U.S. is on better grounds going into the summit now," said Morris Goldstein of the Peterson Institute for International Economics. "It's hard for other countries to say the U.S. is dragging its feet on regulatory reforms."

Many countries are, in particular, expected to applaud increased regulation on hedge funds and investment firms, experts say. In fact, some may consider the U.S. efforts in that area too weak and push for even more of a crack down.

"The Europeans believe the reason we got into this was shadow banks," said Nariman Behravesh, chief economist for IHS Global Insight, a global research firm. "Geithner's proposals don't go very far in that direction."

Brad Setser of the Council on Foreign Relations said he expects all countries to "rally behind" a push to move derivatives trading to clearinghouses or exchanges. He said that would reduce risk associated with hedge funds even more than direct regulation.

Some European countries may also push for the establishment of a risk regulator to oversee banks and investment firms globally -- an idea that will not sit well with the United States and emerging nations, said Eswar Prasad, a global economics expert at the Brookings Institution.

Generally, the proposed new regulations should help "dissipate tensions" between the United States and other countries who had been wanting to see a discussion of tighter rules, Prasad said.

However, some leaders, including those in India and Eastern Europe, are worried about how tougher rules would be implemented. Requiring more capital to back up financial deals could dampen lending and ability for some emerging markets to grow.

Prasad said he also expects some tension from countries that don't want to talk about new regulations while they're struggling with a crisis and trying to get their economies back on firm ground.

But that's exactly why they need to work on a global regulatory agenda, said Homi Kharas, another Brookings Institution economist.

"The danger is if you don't move on putting in place some processes, you're going to end up with a substantially different regulatory framework, as recovery starts to pick up," Kharas said. 


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Stocks' 2nd day in reverse

NEW YORK (CNNMoney.com) -- Stocks slumped Monday, falling for a second straight session, as worries about the auto and bank industries sent investors running after the recent rally.

The Dow Jones industrial average (INDU) fell 254 points, or 3.3%. It was the biggest one-day point loss since March 5. The S&P 500 (SPX) index lost 28 points, or 3.5%. The Nasdaq composite (COMP) lost 43 points, or 2.8%.

"I think we would have had a selloff anyway, and it was made worse by the autos," said Scott Armiger, portfolio manager at Christiana Bank & Trust Company

The three major gauges had surged over 20% in less than three weeks on optimism that the economy is closer to stabilizing. After such a run, a retreat was not unexpected, analysts said.

"We had a nice 23% rally, a classic bear market rally, and then we hit resistance," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams.

He said stocks are bound to continue retreating when the earnings reporting period gets underway.

"Everyone knows the earnings will be terrible, but they want to hear from companies things are starting to look less terrible going forward," Rovelli said. "The problem is I don't think they are going to hear it."

Tuesday brings reports on consumer confidence, home prices and manufacturing in the Midwest.

Investors were also gearing up for the G-20 meeting of the world's biggest economies Thursday in London. President Obama is expected to address worries about some of the United States' policies and also push for greater financial regulation.

Autos: The Obama administration rejected General Motors' and Chrysler's turnaround plans, saying that a massive overhaul is needed for the companies to become viable and get more taxpayer money.

As part of the directive, GM CEO Rick Wagoner stepped down at the behest of the White House.

Armiger said that the firing of Wagoner was probably unnerving investors more than anything else.

"I don't think the market is reacting to the administration rejecting the recovery plans, but rather to the intrusion of the government into the private sector," Armiger said. "The government firing CEOs is concerning."

GM was given 60 days to come up with a better turnaround plan if it wants to receive more taxpayer money.

Chrysler was given 30 days to finish a deal with Fiat in order for the government to lend the company another $6 billion. On Monday afternoon, the automaker said that it now has a "framework" for a global alliance with Fiat, with the help of the U.S. Treasury.

Speaking Monday, President Obama said both companies need a fresh start to put their restructuring plans into play. "That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," he said.

GM said it has a strong preference to completing restructuring out of bankruptcy, Reuters reported. But worries that one of the two might have to declare bankruptcy dragged on the auto sector and broader market.

GM (GM, Fortune 500) shares fell 25%, Ford Motor (F, Fortune 500) lost 2.8%, Toyota Motor (TM) lost 3%. Chrysler is privately held.

President Obama also announced that the federal government will honor new warranties on cars bought from GM or Chrysler.

0:00/02:39Life in the pits

Financials: Treasury Secretary Tim Geithner said Sunday that the government has about $135 billion left to bail out banks. He left the door open on whether he'll ask Congress for more money.

Shares of Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) were among decliners.

An exception was Fifth Third Bancorp (FITB, Fortune 500), which rallied 5% on news that it is selling its payments processing business to Advent International for $561 million. Shares gained 5%.

Market breadth was negative. On the New York Stock Exchange, losers topped winners by almost 8 to 1 on volume of 1.51 billion shares. On the Nasdaq, decliners topped advancers by over 3 to 1 on volume of 2.06 billion shares.

Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.71% from 2.76% Friday. Treasury prices and yields move in opposite directions.

Lending rates were little changed. The 3-month Libor rate fell to 1.21% from 1.22% Friday, according to Bloomberg.com. The overnight Libor rate rose to 0.29% from 0.28%. Libor is a bank-to-bank lending rate.

Other markets: In global trading, Asian markets ended lower and European markets tumbled in afternoon trading.

In currency trading, the dollar gained against the euro and fell against the yen.

U.S. light crude oil for May delivery settled down $3.97 to settle at $48.41 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery fell $7.60 to settle at $917.70 an ounce.

Talkback: Do you have health insurance? Are you satisfied with your coverage? If you do not have health insurance, how do you pay for health care? E-mail your story to realstories@cnnmoney.com and you could be part of an upcoming article. For the CNNMoney.com Comment Policy, click here.  


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Geithner: $135B left for bank bailouts

WASHINGTON (Reuters) -- U.S. Treasury Secretary Geithner said Sunday the government has about $135 billion left for bank bailouts and refused to say whether it will ask Congress for more this year.

"We have roughly $135 billion left of uncommitted resources. The rest is out the door," he said on ABC Television's "This Week with George Stephanopoulos."

Geithner said that figure included "a very conservative judgment about how much money is likely to come back from banks that are strong enough not to need this capital now to get through a recession."

Congress approved $700 billion last fall for rescuing banks that had gotten into trouble when the U.S. housing boom crashed, but lawmakers and ordinary Americans show signs of becoming increasingly unhappy over the program.

Geithner wouldn't specify whether he expects to ask Congress for more money this year, though he didn't rule it out. "The important thing is we are going to work with the Congress to make sure we have the resources needed to do this right," he said.

"We have substantial resources, we're going to use them quickly, as carefully as we can...to get credit flowing again and we'll cross that bridge when we come to it in terms of whether we'll need additional resources," Geithner added.

He conceded that banks likely will need "large amounts of assistance" before the credit crisis is resolved and said it would be "a mistake" to think that they can earn their way out of the current downturn.

"To get through this, governments need to act. There's a great obligation and responsibility for government to act to solve these things," Geithner said. "The market will not solve this and the great risk for us is that we do too little, not that we do too much." 


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Obama makes more Treasury picks

WASHINGTON (Reuters) -- President Barack Obama Saturday named three choices for senior posts in the U.S. Treasury Department as his administration seeks to fill the ranks of officials to help confront a deep economic downturn.

Michael Barr, a Treasury official under former President Bill Clinton, was selected to serve as assistant secretary for financial institutions, and George Madison, a financial industry attorney, was chosen to be general counsel.

Helen Elizabeth Garrett, a vice president for academic planning and budget of the University of Southern California, was nominated to be assistant secretary for tax policy. All three nominations must be confirmed by the Senate.

"The Treasury Department will be well-served by the expertise and commitment of these fine individuals," Obama said in a statement. "Under the leadership of Secretary (Timothy) Geithner, I have great confidence that they will be valuable and effective additions to our team as we tackle our nation's economic challenges."

0:00/1:58Geithner: Doing all we can

Since his Jan. 20 inauguration, Obama has filled only a handful of top Treasury posts as his administration seeks to restore confidence in financial markets and forge a new system of regulatory oversight.

Early this month, former Securities and Exchange Commissioner Annette Nazareth withdrew from consideration to become a deputy secretary. Geithner's choice for international affairs undersecretary, Caroline Atkinson, also pulled her name from consideration.

If Barr is confirmed, he will play a significant role in confronting the economic downturn as his post is chiefly responsible for helping to maintain healthy markets.

A former Rhodes Scholar, Barr graduated from Yale University and Yale Law School before spending more than six years in the Clinton administration.

Madison is general counsel of TIAA-CREF, a nonprofit financial services company and was formerly general counsel and corporate secretary at Comerica Inc. (CMA)

Garrett served on former President George W. Bush's nine-member bipartisan Advisory Panel on Federal Tax Reform, which issued its report in November 2005. 


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Nevermind! States accept jobless help

NEW YORK (CNNMoney.com) -- It's not that easy to turn down federal funds.

Several governors who initially voiced concerns about expanding state unemployment benefits to qualify for federal stimulus funds have decided to accept the money. Some were feeling the heat from jobless constituents, while others took comfort in learning recently from the federal Department of Labor that they could curtail eligibility later on.

The benefits expansion is among the most controversial components of the stimulus package, and it comes at a time when millions of people across the nation are losing their jobs. The nation's unemployment rate stood at 8.1% in February and is expected to climb to 8.5% when the March figures are released next Friday.

The American Recovery and Reinvestment Act requires state legislatures to broaden the unemployment guidelines to allow more women, part-timers and low-wage workers to qualify.

In return, the states will get to partake in a $7 billion federal grant aimed at helping the unemployed. At least 19 states automatically qualify for the funds since they already had widened eligibility.

Some state officials, however, are concerned they will have to fund the expanded program by hiking taxes on employers once the federal money runs out. But they were soon hit by a backlash of anger from state lawmakers, unions and jobless residents.

"All the states need the money," said Andrew Stettner, deputy director of the National Employment Law Project, an advocacy group. "There's public pressure and sympathy for the unemployed."

Governors change course

In Nevada, for instance, Gov. Jim Gibbons found himself confronted by state legislators who introduced bills to accept the funds after Gibbons indicated he wouldn't. They chastised him for even considering turning down the $77 million in funds at a time when one in 10 state residents are out of work.

This week, Gibbons became one of the latest governors to sign up for the extended benefits funding as unemployment soars nationwide.

"As our economic crisis deepens, Nevadans are suffering because of layoffs, business closings and other cutbacks," said Gibbons, a Republican. "We have the responsibility to do everything we can to help our unemployed workers get through these difficult times, even if that means passing legislation that we would not necessarily approve during prosperous times."

In Tennessee, Gov. Phil Bredesen made headlines last month when he became one of the few Democratic state executives to question the wisdom of broadening unemployment benefits. His stance prompted local legislators and union leaders to hold press conferences and readers to write letters to state newspapers.

"Absolutely appalling," wrote one Germantown resident to the Commercial Appeal . "I hope the unemployed of Tennessee will write or call the governor to voice their displeasure with his possible refusal of these extended benefits."

The governor ultimately decided to accept the $141 million in stimulus funds.Tennessee's unemployment rate was 8.4% in February. He said it should cover the expanded unemployment benefits for up to six years.

"I took a few days to look at this, to determine just what the long term costs of these benefit improvements would be," Bredesen said in his budget address earlier this week. "You may recall the criticism I took, some of it national, for taking the time to read the fine print. This seems like a good trade off at a time like this, and I recommend that we accept these funds."

Not budging

Certain governors, however, haven't shifted from their position, despite the public outcry. The Republican governors of Texas, South Carolina, Mississippi and Louisiana are taking a hard line and saying they will not accept the funds because of the potential impact it will have on employers once the federal money runs out.

And in Florida, lawmakers are the ones balking at expanding the rolls, though Republican Gov. Charlie Crist supports accepting the federal funds.

The Florida House leadership this week sent an email to members advising them how to respond if constituents complain about the state's not accepting $444 million in federal funds. Representatives should tell residents that the federal money will only last two months and then businesses will have to cover the costs, potentially prompting them to lay off more workers, the email said.

"This isn't about not being compassionate," said Adam Hasner, House Majority Leader in Florida, where unemployment is at 9.4%. "It's about not making a problem worse." 


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Leading Indicators

NEW YORK (CNNMoney.com) -- A index forecasting economic activity fell in February, ending two months of surprise increases, after the government took action to inject money into the ailing financial system.

The index of leading economic indicators fell 0.4%, according to the Conference Board. The reading is intended to predict economic activity in the next 3-6 months.

Analysts were expecting a drop of 0.6%, according to a consensus of economists surveyed by Briefing.com.

The index rose unexpectedly in the prior two months. A revised uptick of 0.1% in January (correct) followed a jump of 0.2% in December.

The measure is based on 10 components, six of which increased in February: interest rate spread; index of supplier deliveries; building permits; real money supply; manufacturers' new orders for consumer goods and materials; and manufacturers' new orders for nondefense capital goods.

Some of those six indicators enjoyed surprising upticks in recent economic data.

Housing starts unexpectedly surged 22% February, after falling for eight months. It was the first time housing starts increased since June.

Declines: The remaining four components declined: average weekly initial claims for unemployment insurance; stock prices; index of consumer expectations, and average weekly manufacturing hours.

The components in decline aren't surprising after a slew of negative reports.

The number of people filing initial claims for unemployment benefits fell slightly last week, but continuing claims hit a fresh record high of more than 5.47 million.

The unemployment rate is up to 8.1%, the highest level in 25 years.

Stock prices rallied last week, but the Dow Jones industrial average is still down almost 50% from its peak in October 2007. Consumer confidence fell to a three-month low in February.

Fed takes action: The Federal Reserve in recent months has taken several steps to boost the financial system.

The Fed said Wednesday said it would spend up to $300 billion over the next six months to buy long-term Treasurys, a move designed to free up credit.

The Fed also announced plans to buy an additional $750 billion in mortgage-backed securities in an attempt to lower mortgage rates. The benchmark lending rate remained unchanged, as it was already at a record-low range of 0-0.25%.

It's hoped that these actions will inject liquidity into the credit markets and spark lending.

-- An earlier version of this story did not note the January revision. CNNMoney.com regrets the error.  


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Obama tax panel on treasure hunt

NEW YORK (CNNMoney.com) -- President Obama has now added tax reform to his to-do list.

The administration said this week it will form a task force to propose ways to simplify the tax code, reduce evasion, close loopholes and make changes in corporate breaks.

One overarching end-goal: Raise revenue.

Obama isn't setting a revenue target but is placing two constraints on the task force's efforts: Members may not propose tax increases for 2009 and 2010; and beyond 2010, they may not propose tax increases on families making less than $250,000.

A major focus for the task force will be to reduce the estimated $300 billion-a-year tax gap -- the difference between what individual and corporate taxpayers owe and what they actually pay.

"Three hundred billion a year or more is a lot of money, and we are interested in being as aggressive as possible in trying to reduce that number," White House budget director Peter Orszag said.

Closing the gap

Reducing the tax gap is far easier said than done.

"Managing to make headway to reduce that gap often means difficult reforms," said James Poterba, president of the National Bureau of Economic Research and a member of President Bush's tax reform panel created in 2005.

The biggest reason for the gap is underreporting of income. There's a high rate of compliance when it comes to income reported by third parties, such as employers reporting workers' incomes on W-2s.

But the compliance is much lower in cases when there's no third-party reporting, such as with small business owners who do mostly cash transactions. The cash economy may account for over $100 billion of the annual tax gap, according to testimony from Nina Olson, the National Taxpayer Advocate.

The IRS is already working to improve compliance. For instance, starting in 2011, brokerages will be required to report taxpayers' cost basis when they sell a publicly traded security. That will make it easier for the IRS to verify capital gains income.

Boosting third-party reporting in areas where it is lacking means more work and expense for someone and almost certainly "will bump into [resistance] from those required to do the reporting," Poterba said.

Of course, the gap isn't all due to intentional tax avoidance. Some of it comes from honest mistakes byfilersconfused by a tax code that is almost universally acknowledged to be maddeningly complex.

Simplifying the code may actually help narrow the tax gap since currently "people don't perceive the tax code to be fair and that encourages non-compliance," said Len Burman, co-director of the Tax Policy Center.

The perception is that the code now allows too many people to escape paying their fair share. And where there are popular tax breaks to be had, they often come with Twister-like eligibility requirements that can qualify or disqualify tax filers seemingly arbitrarily. And where different credits or deductions target similar groups -- such as retirement savers or low-income workers with kids -- the rules for each are different.

The task force will be charged with suggesting ways to streamline those types of credits.

But what the task force may find is that behind every Byzantine requirement is a rationale and a group that lobbied for it.

"What looks like simplification to one person looks like a tax increase to another," Poterba said.

So, how much of the $300 billion-a-year tax gap can be recouped realistically?

Poterba says he's not sure. "There's not one magic bullet," he said, noting that it takes serious time and effort to change individual provisions in ways that make sense in the broader scheme of things.

Targeted changes more likely than overhaul

The members of the task force will come from the Presidential Economic Recovery Board, which is headed by former Federal Reserve Chairman Paul Volcker. It will present its proposals to Obama on Dec. 4.

Given the president's mandates and the many urgent priorities facing lawmakers, the task force's recommendations are likely to be less far-reaching than those of President Bush's tax reform panel. The Bush panel proposed ways to change and simplify not only individual tax measures but also considered alternative structures for the tax system.

"To get fundamental tax reform you really need the political stars to line up in just the right way. ... It also requires concentrated attention from the political process. It requires a fair amount of heavy lifting," Poterba said.

Those stars were not aligned when Poterba's panel put forth their proposals in November 2005. Nothing came of their report and Bush made little or no mention of it after the day it was presented. But tax experts praised the group's efforts, and Burman thinks there are a lot of ideas in their work that could serve as good starting-off points for Obama's task force.

Even if the Obama task force recommends only targeted changes to the tax code, the administration will still need to get the House and Senate on board in many cases.

It hasn't gotten off to the most auspicious start. The announcement of the task force appears to have come as a surprise to leading lawmakers, according to Congress Daily .

The top Senate Democratic tax writer indicated that the panel could be constructive, but he would prefer they offer a broad set of principles rather than specific tax changes.

"We'll certainly look at it, but we're the Congress, we'll do what we think makes sense," Senate Finance Chairman Max Baucus, D-Mont., told reporters.

"Springing a tax reform panel without talking to [leading tax writers on the Hill] is not politically astute," said Anne Matthias, director of research at Concept Capital. "But it doesn't mean [the panel's work] won't end up being important." 


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Bankers: Take your TARP money back

NEW YORK (CNN) -- There's a growing sense among some bankers that Troubled Asset Relief Program known as "TARP" has become toxic. As a result, they want to bail out of the bank bailout program.

"It should be called 'TRAP,' not TARP," said Brian Garrett, chief executive of Bank of the Bay in San Francisco, who is trying to return bailout funding. "Giving it back is harder than getting it."

0:00/1:43Take back the TARP money

Garrett and other bank executives complain the Treasury's program to stabilize banks during these turbulent times is actually weighing down their potential for growth.

They're especially concerned the limits on executive compensation - imposed in February, four months after Treasury starting sending out checks - could make it difficult to hold on to star talent who may jump to financial institutions that are not receiving any Government assistance.

That concern is now magnified after the public whipping insurance giant AIG received for granting executive bonuses. No one wants to be the next AIG (AIG, Fortune 500).

"Things have changed since TARP was announced. The rules have changed," said Michael McMullan, CEO of the Bank of Florida, who withdrew his application for TARP funds Thursday. "We're going to need to attract and retain key revenue drivers and great bankers."

"The more restrictions that we are placed under from the Government, the less value we can deliver to our shareholders in the long run," said McMullan.

Iberiabank in Louisiana, California's Bank of Marin, and TCF Financial in Minnesota confirm to CNN Money that they are asking Treasury to take back their TARP funds.

"What these bank managers are saying is - listen, I want the Government out of my backyard, and I just want to give back the TARP, and I want to run my company by myself," said Paul Miller, Financial Services Analyst at FBR Capital.

Goldman Sachs (GS, Fortune 500), Bank of New York/Mellon (BK, Fortune 500), Wells Fargo (WFC, Fortune 500), JP Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) - all 'mega-banks' that the government forced to take bailout money - say they want to return taxpayer funds "as soon as practical."

But, they're well aware no one will be permitted to return funds before completion of regulatory "stress-tests" of the major banks to determine how they would withstand a severe recession.

"We want to return the TARP money as soon as possible. We feel more bullish about economic prospects broadly, but we recognize we can't repay the money without the approval of the regulators," said Goldman Sachs spokesman Lucas Van Praag.

The "stress-tests" are supposed to be finished next month. But it's likely the Treasury will not permit bankers to return taxpayer money for many more months.

The main purpose of TARP is to stabilize the banking system, to prevent a run on any bank that appears to be in trouble. It has done that much.

If Treasury starts taking money back from healthy banks while the economy is still in trouble the weaker banks may appear to be even weaker and the confidence that TARP brought may suddenly disappear.

"The Government has to maintain confidence throughout the banking sector. These banks are all interconnected," said Miller.

Bankers may not like the Government interfering in their business. But, right now, those who have taken TARP funds have little choice. 


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Job market for techies to get healthier?

NEW YORK (Fortune) -- Dear Annie: As I understand it, President Obama's economic stimulus package contains incentives for hospitals and medical offices to get all their old paper medical records computerized, which is supposed to produce huge cost savings in the health-care system (and I think it's pretty obvious that it would do so). This caught my attention a few weeks ago when the stimulus package was first unveiled, since I have some experience in the health-care field and several IT certifications, but I haven't heard any mention of it lately. Do you think that, assuming it gets through Congress, this plan to wire the medical world could create many IT jobs? - Tacoma Techie for Hire

Dear Tacoma Techie: Possibly. The Obama Administration certainly thinks so. A White House report called "The Job Impact of the American Recovery and Reinvestment Plan" (a.k.a. the stimulus package) forecasts 50,000 new IT jobs by the end of 2010, thanks in large part to incentives to digitize health records.

But that figure might be a bit high. "We don't have many details yet on exactly how the $17 billion [in government incentive money] will flow to doctors and hospitals," notes Pat Cline, president of NextGen Healthcare Information Systems , one player in a specialized consulting industry aimed at helping health-care professionals use technology to run their operations more efficiently. NextGen has been growing at a pretty good clip lately, hiring about 30 people in the past two months, after increasing its workforce by 12% (about 70 people) in 2008.

"I hope the stimulus plan creates enough new demand that we'll be hiring 100 more people a year," Cline says. Over the next three years, Cline estimates that companies like his could add a total of up to 5,000 new IT jobs.

"Hospitals and doctors' offices would also be hiring IT people on their side to work on this," he says, estimating that "altogether, we could see up to 20,000 new jobs." That isn't anywhere near 50,000, but it's still not too shabby.

And while your medical experience is a plus, according to Cline, it isn't really necessary given your background in IT. "Most health-care infotech companies will hire tech people without any health care background and do intensive on-the-job training," he says. Hospitals, clinics, and medical groups often do likewise, he says.

How do you find health-care infotech companies? You might try the Health Care Information Technology Yellow Pages. Some of these firms will likely soon be hiring, if they're not already.

In combination with another part of the Obama stimulus plan that is intended to upgrade technology in public schools, the health-care push could increase IT jobs by 29% over the next 10 years, according to an analysis by occupational expert Laurence Shatkin, Ph.D. He's the author of several books about the job market, including, most recently, Great Jobs in the President's Stimulus Plan (Jist, $12.95). Says Shatkin: "There's little doubt that switching the medical profession over to computers will create tens of thousands of new high-tech jobs."

For a mini-case history of how that might happen, consider CareGroup Health System (www.caregroup.org), a coalition of four hospitals and several medical groups in the Boston area. John D. Halamka, M.D., M.S., is CareGroup's chief information officer, as well as the CIO and dean for technology at Harvard Medical School.

This year, CareGroup plans to wire 150 doctors in 75 separate practices. For the Beth Israel Deaconess Community Clinician practice, a medical group with four offices, getting all the medical records online in a way that doctors can easily transfer and update them will require 19 new employees, plus three more at Beth Israel Deaconess Medical Center in Needham, Mass., to coordinate the whole project. "We've created 22 jobs for the rollout and support of this project alone," says Halamka. Multiply that by the number of physicians and medical groups needing to computerize nationwide, and you can see that Obama's plan could create large numbers of new high-tech jobs.

0:00/2:40Health care 2.0

Still, I'd be remiss not to mention that not everybody is quite so optimistic. Curious about the view from the trenches, I asked Dice.com, a major IT job board, to survey techies visiting its site. Of the roughly 500 IT professionals polled, 60% said they think the Obama plan will indeed create significant numbers of new jobs for techies. About 80% said they personally would take a health-care infotech job and almost 90% said they'd be willing to get special training to do so.

Quite a few, however, agreed with Melynda Bailey, 43, who does curriculum design for a Dallas software maker. "It's a great idea, but I don't think it's going to be a question of medical practitioners hiring highly-skilled IT people into permanent positions," she says. "It's a lot cheaper to bring someone in short term to train nurses and office assistants to input the data and run the systems." She adds: "I'm also skeptical of anything that is run by the federal government. So much bureaucracy is going to be piled on top of it." Noted.

Readers, what do you think? How do you think the tech job market is doing now? Is the economic stimulus plan likely to create - or preserve - jobs in your field? Tell us on the Ask Annie blog. 


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Obama Week 10: Rescue gains steam

NEW YORK (CNNMoney.com) -- The Obama administration's tenth week in office was a busy one. Treasury Secretary Tim Geithner unveiled the next phase of the bank bailout. Congress took up the president's budget. And the government outlined a plan to overhaul regulation of the financial system.

The administration's efforts, along with some faint signs that economic conditions are stabilizing, helped improve the sentiment on Wall Street. Stocks posted strong gains for the week despite a selloff on Friday.

It was also a busy week on Capitol Hill.

Committees in the House and Senate largely supported Obama's priorities for the 2010 budget, with certain caveats, in the early stages of what is expected to be a months-long debate.

Lawmakers also heard testimony from Geithner on how the administration hopes to prevent future meltdowns by increasing oversight of the financial markets and preventing companies from growing too big to fail.

Meanwhile, the president continued to promote his long-term economic agenda, stressing the need to invest in health care, education and energy.

In a new rhetorical tack, Obama sought to draw a direct connection between his budget proposal and the broader themes of economic recovery and future growth.

"This budget is inseparable from this recovery," Obama told reporters Wednesday night. "It is what lays the foundation for a secure and lasting prosperity."

To promote his message, the president took a number of unconventional steps. He published an op-ed in more than 30 newspapers around the world, held his second prime time news conference, and broke technological ground with an online town hall meeting at the White House.

The flurry of activity comes as the president prepares to meet with world leaders at the G20 gathering of major economies next week in London. Obama is expected to address concerns over his economic policies with the leaders of China, Russia and India, among others.

Also next week, General Motors (GM, Fortune 500) and Chrysler LLC. will give Congress an update on their plans to become economically viable. Obama has signaled his willingness to give the automakers more aid, on top of the billions of dollars in federal loans they've already received, if they are willing to make the concessions required by the government.

100-day scorecard: Week 10. CNNMoney.com will continue to track Obama's first 100 days in office and keep score of the government's unprecedented efforts to fix the ailing economy. (Last week's article is available here.)

Bad assets: On Monday, Treasury Secretary Tim Geithner officially unveiled the administration's long-awaited plan to tackle the financial crisis by absorbing troubled bank assets.

Under the new so-called "Public-Private Investment Program," tax dollars will be used to seed partnerships with private investors to buy toxic assets, such as subprime mortgages and other loans.

Banks have reported massive losses on these assets and the government hopes its new program will take some of the pressure of the financial system and encourage lending to consumers and businesses.

The program aims to buy $500 billion of existing assets and loans, but could be expanded to $1 trillion, the Treasury Department said.

Wall Street cheered the plan, with the major indexes on Monday posting their biggest gains of the year. It was something of a vindication of Geithner, who had struggled to gain Wall Street's respect after his initial bailout plan was criticized for being too short on detail.

Obama touted the program in Wednesday's press conference, reiterating his belief that stabilizing the financial system is a crucial part of his three-part plan to restore economic prosperity.

"We will continue to do whatever is necessary in the weeks ahead to ensure the banks Americans depend on have the money they need to lend, even if the economy gets worse," he said.

Budget: The debate over Obama's $3.6 trillion budget outline got under way this week on Capitol Hill.

Budget committees in both the House and the Senate passed leaner versions of the plan this week, but the proposal will undergo several more votes before a final version is approved.

While Democratic lawmakers supported the spirit of Obama's ambitious fiscal agenda, members of Congress from both sides of the isle expressed concern about expanding the national debt.

Among the potential sticking points: the president's proposal to make permanent tax credits for low and middle-income earners, new funding for health care and an energy initiative known as cap-and-trade.

Obama has repeatedly called for increased investment in health care, education and energy. Making these areas a priority now will lead to future economic prosperity, he says.

"At the end of the day, the best way to bring our deficit down in the long run is not with a budget that continues the very same policies that have led us to a narrow prosperity and massive debt," Obama said. "It's with a budget that leads to broad economic growth by moving from an era of borrow and spend to one where we save and invest."

Financial oversight: The administration also spent the week arguing for sweeping new powers to oversee the financial markets in order to prevent a repeat of the current crisis.

Obama and Treasury Secretary Tim Geithner both called for new legislation that would give regulators the power to "resolve" big financial firms the way the Federal Deposit Insurance Corporation liquidates failed banks.

The authority is necessary to deal with non-bank financial companies like insurance giant American International Group (AIG, Fortune 500) that pose a "systemic risk" to the overall economy, they said.

Geithner went before Congress Thursday to argue for tough new rules aimed at previously unregulated corners of the financial markets, such as hedge funds and derivatives trading. He also said the nation needs a single risk auditor to oversee big financial firms.

But some Republican lawmakers said the plan goes too far and questioned how effective the new regulations would be at cracking down on Wall Street shenanigans.  


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Obama, bank CEOs discuss economic plan

WASHINGTON (Reuters) -- Top U.S. bankers supported President Barack Obama's plan to rid financial institutions of bad debts on Friday, but said there was not agreement on all issues.

"The basic message is we're all in this thing together," Wells Fargo (WFC, Fortune 500) Chief Executive John Stumpf told reporters after the meeting, with other bank executives at his side.

The bankers' comments about the meeting were overshadowed by their statements about business conditions in March.

JPMorgan (JPM, Fortune 500) Chase Chief Executive Jamie Dimon said "March was a little rough" and Bank of America's Ken Lewis said "trading book for March was not as good" as it was the first two months of the year, pushing bank stocks and the overall market lower.

The White House meeting came ahead of next week's G20 summit, at which Obama is expected to pitch his plans to rescue the recession-hit U.S. economy to fellow world leaders.

Obama stressed the importance of dealing with toxic assets, White House spokesman Robert Gibbs said.

"The president opened up by talking about the importance of dealing with toxic assets and getting banks lending again," Gibbs told a briefing. "It's fair to say that they agreed on the need to update the framework of regulations."

Top bankers - whom Obama has chastised for taking big bonuses while urging them to get credit flowing - said not everything had been agreed.

0:00/5:12Risks of new bank plan

Dimon said Obama asked a lot of questions but did not ask them to stop discussing an early return of government bailout funds.

Dimon told CNBC after the meeting "we know mistakes were made" around executive compensation - an issue which has spurred a wave of public fury across the United States, and Bank of America's (BAC, Fortune 500) Lewis said everyone understood the "golden age" of bank compensation was over.

Long-term goals

Senior administration officials had said Obama's message going into the meeting would be to tell the institutions largely blamed for sparking the U.S. economic crisis to focus on long-term goals to help the country.

"Our future is inextricably linked to these financial institutions and theirs is to ours, and so it makes all the sense in the world that they come together and have this conversation," said Valerie Jarrett, a senior adviser to the president.

The meeting comes just days after the U.S. Treasury Department provided details on a government plan to cleanse banks' balance sheets of up to $1 trillion in distressed loans and securities - a plan that the banks will have to support in order for it to work.

0:00/4:47Regulators ask for more power

The Obama administration also announced on Thursday its plan to rewrite financial rules, including creating a single regulator to monitor any firm whose failure could threaten the financial system.

About 15 chief executives attended, according to the White House, including Lloyd Blankfein of Goldman Sachs (GS, Fortune 500) and Vikram Pandit of Citigroup (C, Fortune 500).

Others on the list included chiefs from Freddie Mac (FRE, Fortune 500), Bank of New York Mellon (BK, Fortune 500), Northern Trust (NTRS, Fortune 500), PNC Financial (PNC, Fortune 500), State Street (STT, Fortune 500), Morgan Stanley (MS, Fortune 500), American Bankers Association and Independent Community Bankers. 


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Consumer sentiment rises

NEW YORK (Reuters) -- Consumers' mood brightened a bit in March, nudged up by increased confidence in government economic policy, but overall sentiment remained near an all-time low, a survey showed Friday.

The Reuters/University of Michigan Surveys of Consumers said its final index of sentiment rose to 57.3 in March from 56.3 in February. This was a touch above economists' median expectation of a 56.6 reading, according to a Reuters poll.

The survey hit a record low of 51.7 in May, 1980.

The index of consumer expectations rose to 53.5 from 50.5. Survey director Richard Curtin said confidence in the Obama administration's economic policies improved consumers' mood, with 22% of those surveyed rating policy favorably in March, compared with 7% in January.

Americans' view of their present situation remained dim, with the index of economic conditions slipping to 63.3 in March from 65.5 in February.

"Although the data indicate that the downward momentum in confidence ended in the closing months of 2008, there is no evidence that consumers expect their finances to improve any time soon," Curtin said.

While the survey showed 44% of consumers expected government policy to improve their personal finances, an all-time record number of consumers said incomes had declined compared with a year ago.

They also anticipated the smallest annual income gains ever recorded - 0.2% compared to 2.5% a year ago.

Stocks pared losses after the sentiment data, while the dollar held its gains against the euro.

Inflation signals were mixed. The report's reading on one-year inflation expectations rose to 2% from from 1.9% in February, but five-year inflation expectations fell to 2.6% from 3.1%.

"Overall, there has not been another period in the past quarter century that deflation was more widely anticipated," Curtin said. 


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Consumer Confidence

Economy: Worst in 26 years

NEW YORK (CNNMoney.com) -- The government confirmed Thursday that the U.S. economy suffered its largest drop in 26 years during the fourth quarter.

The nation's gross domestic product, the broadest measure of economic activity, fell at an annual rate of 6.3% during the final three months of 2008. That's slightly worse than the government's previous estimate of a 6.2% drop in the period.

Economists surveyed by Briefing.com had forecast that GDP would fall at a 6.6% rate in the latest reading.

The drop is the biggest one-quarter decline in this key measure since the first three months of 1982.

The report showed broad based declines across various measures of economic activity. Spending by consumers fell at a 4.3% rate, with purchases of large ticket items plunging 22%. Investment in housing fell 23% from already depressed levels, completing three straight years of declines in that sector.

Investment in equipment and software, taken as a measure of business spending, plunged at a 28% rate. Exports tumbled at a 24% rate.

0:00/5:35Housing's upside surprise

The economic problems have obviously not ended with the fourth quarter report. Economists surveyed by the National Association for Business Economics forecast a 5% rate of decline in the first quarter, which ends Tuesday, followed by a 1.7% drop in the second quarter.

Still, Bernard Baumohl, executive director of The Economic Outlook Group, said that some recent economic readings on housing and retail sales that have come in better than expected in the last couple of weeks suggest that the recession may be approaching a bottom.

"I'm much more encouraged than I was at the end of 2008," he said. "I think it's winding down."

Baumohl added there could be a slight improvement in GDP the second half of this year, but the economy is likely to stay sluggish well into 2010.

But other economists say it's too soon to say the worst is over. Brian Bethune, chief U.S. financial economist at Global Insight, said there needs to be signs of a more widespread economic recovery in the auto and retailing sectors before banks start lending again. He doesn't expect even a modest pick-up in GDP until the fourth quarter of this year.

"The underlying economy is still very precarious," said Bethune. "Even if housing is showing signs of a turnaround, there are several more boxes to check before we get to the point where the overall economy starts to revive." 


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Mortgage rates at 52-year low

NEW YORK (CNNMoney.com) -- Home mortgage rates dropped to a 52-year low this week, according to a report released Thursday, in the wake of the government's announcement that it will buy more than $1 trillion in debt.

The average 30-year fixed mortgage rate fell to 5.19% this week, down from 5.29% in the week prior, according to Bankrate.com's weekly national survey.

The previous low was 5.28%, hit this January and in June 2003; the last time rates dipped lower than 5.19% was in 1956, according to Bankrate.com.

To put the plunge in mortgage rates into perspective, 30-year fixed home mortgage rates averaged 6.77% in late October. At that time, a $200,000 home loan would have meant a monthly payment of $1,299.86. Now, with the mortgage rates down at 5.19%, the monthly payment for the same loan would be $1,096.99. That works out to a savings of more than $200 per month.

0:00/5:35Housing's upside surprise

Meanwhile, the average 15-year fixed mortgage rate fell to 4.80% from 4.86% in the the prior week. The 15-year fixed mortgage rate carried an average of 0.49 points.

The government announced last week that it would be buying more than $1 trillion in debt in order to increase liquidity and improve credit conditions. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.

The Federal Reserve said that it would buy an additional $750 billion in mortgage-backed securities and $300 billion of long-term Treasurys. The so called "quantitative easing" policy essentially increases the money supply and is designed to push interest rates down, making borrowing cheaper.

0:00/02:30Fed's trillion dollar gamble

Not much further to drop: Analysts say that while mortgage rates could edge a smidgen lower, they won't make any more dramatic plunges.

"At this point, what we are going to see is mortgage rates fluctuate at these levels," said Brian Bethune, chief financial analyst at IHS Global Insight. "I don't see them dropping significantly from where they are now."

Mortgage rates move in relation to the yield on the 10-year government bond. While there is not a direct correlation, they do move in the same direction. Bethune said that there are two factors that will prevent Treasury yields, and by extension mortgage rates, from dropping much further.

"One is the huge Treasury borrowing requirements," he said. As the government looks to fund its massive stimulus spending programs, it has had to issue a record amount of debt. The increased supply keeps a lid on the price of bonds and stabilizes yields.

"In addition, as we get closer to perceptions of a trough in the economy, the yields will tend to see upward pressure," said Bethune. Uncle Sam's debt is considered one of the safest places for investors to keep their cash. During times of market uncertainty, demand surges, the prices increase, and yields fall. But as market sentiment begins to believe the economy could be headed for recovery, demand for Treasurys will lessen, lifting yields.

Surge in refinance: The dramatic drop in mortgage rates has motivated home owners to refinance in great numbers, but the drop in mortgage rates has not spurred as large an increase in new home purchases, said Mike Larson, real estate analyst at Weiss Research.

"We are still not seeing a huge impact on home buying," he said. "All else being equal, it will help the market," said Larson. "But it is not the huge impact you are seeing on the refinance side."

Bankrate.com compiles national averages every Wednesday by surveying the top 10 banks and thrifts in the top 10 housing markets. For historical data, Bankrate.com cites the National Bureau of Economic Research. 


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Does Wall Street need bonuses now?

NEW YORK (Fortune) -- The idea that anyone on Wall Street deserves anything but 40 lashes in the way of pay is a not-uncommon view these days. Speaking about some $165 million in bonuses AIG (AIG, Fortune 500) awarded to employees after the company received $170 billion in federal funding, Rep. Barney Frank, D-Mass., said it was "almost extortion, where they said, 'We know what you need to know and we will quit if you don't bribe us.' " The Street is in such dismal shape, why would anyone who still works there need a bonus to stay on board?

To those who actually work in the business, though, the debate over pay is more about equity than inequity: People should be paid according to what the market needs. And since Wall Street needs big brains more than ever, it may simply have to pay up for them, much as the outside world would rather stick a pitchfork to them instead.

0:00/1:56Obama's AIG moment

Politics aside, what is the job market in the financial sector really like now? Will Wall Streeters and commercial bankers jump at the chance for any job, even at a fraction of what they once made? Or do they actually have options -- and even stock options -- in this environment? To find out, Fortune spoke to financial services recruiters and pay experts about where the jobs and paychecks are -- and where they aren't.

Goodbye, average Joe. Time was, any "B" or "C" player could pull down a mid-six figure salary. Not any more. "It's probably the worst hiring [environment] I have seen in 15 years," says Michael Karp, CEO of Options Group, a recruiting firm that specializes in financial services. Sectors such as capital markets and proprietary trading are dead, and anyone who isn't a star is going to have a horrible time landing a job, let alone drawing down 500 grand. Even in areas that are growing, such as financial advisory services, the schmoes are competing with the studs. Those who do get a job can expect pay packages about 40% lower than they would have earned in their last jobs.

Go small or go international. Still, opportunities are out there for the top players, such as M&A bankers with great relationships or anyone with restructuring experience. Boutique firms such as Evercore, Greenhill, Perella Weinberg and the like are using the crisis to steal away top talent from TARP banks and other public companies where their brand value has dropped significantly while job pressures have increased. Private equity firms that focus on restructuring troubled companies, too, are staffing up. "It's a selective hiring of brand-name individuals," says Vanessa Bailey, founder of search firm Cressida Partners.

At the same time, large international banks such as Deutsche Bank (DB) that are not subject to TARP restrictions are offering very aggressive packages to, in some cases, whole teams of bankers. Case in point: DB's hiring away of 12 members of Bank of America (BAC, Fortune 500)/Merrill's financial investment banking team in February -- an audacious move that has generated a lawsuit from B of A, claiming a "raid." These folks are obviously perceived to be very valuable, even in this environment.

It's not just about the "make-whole number" anymore. Time was, any firm that couldn't cover the value of a Wall Streeter's accumulated stock and then some wouldn't be able to pry him or her away. Today, that "make-whole number" is typically much lower, as losses in the markets mean accumulated options and restricted stock once valued at $20 million may now be worth $2 million or $3 million. This means smaller, less prestigious firms that aren't subject to regulation and can offer a straight commission in most cases -- without retention bonuses -- are selectively upgrading their staffs.

"We are just getting flooded with calls from people that you would think are not moveable because the environment at the big banks is brutal," says one managing director at a boutique firm.

"The Street in general has returned to a pay-for-performance culture," adds Burke St. John, vice chairman and global head of the financial services practice at search firm CTPartners. As opposed to pay for non-performance, that is.

The places that need the smartest people are losing them. This is where things really get tricky. Sure, the firms in the most trouble got that way because of decisions their executives made. But it's also true that those firms need experienced hands to stay on and help them work their way out of the mess they're in.

"These are the people who know where the bodes are buried," says Karp. "You need to encourage them to work through this. To build up a new management team will take that much longer."

At TARP firms, many employees may actually see an increase in their salaries (if not their more-important bonuses), as the $250,000 salary cap is seen by many as a floor instead, says Jim Reda of James F. Reda & Associates, an executive pay firm. Nevertheless, many are looking to jump ship as fast as possible, hoping to escape an atmosphere of regulatory confusion, political outrage and lack of clarity. One managing director at Merrill says practically everyone he knows on his desk is looking to leave, in part because of the restrictions on pay and in part because of the uncertainty of what their jobs are supposed to be, with all of the potential new regulation.

"It's an escape from the omnipresent, morale-sapping, black cloud of TARP-dom, even if the money's less of a wow factor," explains recruiter Bailey. This is why Goldman Sachs (GS, Fortune 500) hinted that it would be paying off its loan as soon as it can -- and why many other banks may move to do the same.

If Wall Streeters are still being overpaid in this environment, at least we can take comfort that our taxpayer dollars will likely be going to pay smart, motivated people. It's better than going to bored, unqualified ones -- isn't it? 


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Durable goods jump 3.4%

WASHINGTON (Reuters) -- New orders for long-lasting manufactured goods unexpectedly rebounded in February, rising for the first time in seven months, according to a government report on Wednesday that could bring some cheer to an economy mired in recession.

The Commerce Department said durable goods orders rose 3.4% to $165.6 billion in February, the biggest increase since December 2007, after a revised 7.3% plunge the prior month, previously reported as a 4.5% decline.

New orders excluding transportation rose 3.9% in February, the largest gain since August 2005, while civilian aircraft and parts dropped 28.9% after Boeing reported only four new aircraft orders in the month after 18 orders in January.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, expanded 6.6% in February. The prior month was revised to an 11.3% drop, previously reported as a 5.7% decline.

Analysts polled by Reuters had expected overall new orders to fall 2% in February, and orders excluding transportation to drop 2%. 


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Treasury pushes for more power

WASHINGTON (CNNMoney.com) -- The Obama administration on Wednesday released more details of its plan to give the government more power to take over and wind down troubled financial deemed too big to fail.

Treasury Secretary Tim Geithner proposed that the Treasury be the one to make the first call of when a nonbanking firm, such as AIG or Lehman Brothers, is in deep trouble and needs government intervention. Treasury would do so after talking with the Federal Reserve and the president, according to Treasury plans.

But the Treasury would work with the Federal Deposit Insurance Corp. to determine the crucial question of which nonbanking firms should be kept alive with loans or other funding and which need to die.

For days, Geithner has been saying that he needs more power to step in to prevent the kind of collapse of the financial sector that threatens to deepen the recession.

"One of the key lessons from this crisis, of course, is the destabilizing danger that can come from institutions outside the banking system that are vulnerable to some of the same basic pressures that led the United States a century ago to put in place a full range of protections around banks," Geithner said Wednesday in New York.

Treasury says the new "resolution authority" would either make loans, purchase shares or put the non-banks into receivership, according to new details.

Under the proposal, the Treasury would assess these nonbanking financial firms in the same way that banks are assessed by the FDIC to fund takeover efforts when banks go bad. The size of such assessments is unclear.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said Tuesday that he supported expanding federal powers to regulate non-banking financial firms.

However, lawmakers said they were concerned about giving so much power with a political appointee, and they preferred to tap the Federal Reserve to administer such a program.

Rep. Mel Watt, D-N.C, said on Tuesday that he was concerned about such broadened power going to a "political appointee as opposed to somebody who is not subject to political pressures -- theoretically, at least, Chairman Bernanke and the Fed is not subject to those -- the politics of the day." 


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Treasury set to reveal top reforms

WASHINGTON (CNNMoney.com) -- Treasury Secretary Tim Geithner returns to Capitol Hill on Thursday and is expected to reveal a much anticipated list of Obama administration priorities for preventing future financial collapses.

Among the likely proposals: establishment of a regulator to monitor system-wide financial risk and stricter rules on so-called credit default swaps and other financial instruments that helped throw the markets in turmoil, financial experts say.

Geithner has so far kept mum about what he plans to detail. But he and Federal Reserve Chairman Ben Bernanke have recently dropped some big hints. In fact, every day this week Geithner has spoken publicly about the need for increased financial sector regulation.

Many experts believe the administration wants to announce a new regulatory framework before President Obama travels to London next week for a meeting of G-20 leaders. Many of those leaders have indicated they want to see the United States strengthen its regulatory system.

0:00/4:47Regulators ask for more power

On Wednesday, the administration said it plans to ask Congress to give the Treasury and the Federal Deposit Insurance Corp. broader power to deal with companies deemed to big to fail, either by propping them up or winding them down.

Treasury officials declined to confirm what Geithner would talk about at Thursday's hearing before the House Financial Services Committee.

Consolidated regulator

Another key part of the Treasury plan will be the establishment of a "consolidated regulator," Geithner and Federal Reserve Chairman Ben Bernanke said during a House hearing on Tuesday.

This person or agency would be charged with detecting risk throughout the financial system as opposed to looking at each individual company, Bernanke said.

Bernanke suggested the regulator would "look for weaknesses in regulation" and "try to provide an overview of problems in the financial system as a whole."

Brookings Institution economist Douglas Elliott said the job of systemic regulator could be another duty for the Federal Reserve, or it could be split among a combination of top financial regulators. Either way, Elliott called it key to preventing the kinds of things that got the U.S. financial system in trouble.

"I do think it's important, and there's consensus, a lot of people who follow this are supportive of having a regulator role," Elliott said.

The idea already has supporters in Congress. Among them is House Financial Services Chairman Barney Frank, D-Mass. Senate Banking chief Chris Dodd, D-Conn., has been more circumspect about the idea. But Dodd showed some support on Tuesday when he mentioned the need to "consider creating a single coordinated prudential regulator."

Credit default swaps

Another piece of the regulatory reform Geithner is expected to detail involves credit default swaps.

Swaps work like insurance policies. Banks and investment firms buy them from companies, like American International Group, to back up the risk that a company might default on bonds or securities.

In the case of bailed-out insurer AIG, when the value of mortgage-backed securities fell, companies that had bought swaps demanded that AIG make good on contracts that required the insurer to cough up billions of dollars when the securities' value dropped.

That's one reason why credit default swaps are accused of playing a central role in the financial market collapse.

Bernanke and Geithner both made clear they believe stronger rules are needed to govern credit default swaps. They said credit default swaps need to be more transparent and better capitalized.

One solution: make sure they're sold via central clearinghouses or exchanges.

Right now firms that sell credit default swaps do so without anyone looking over their shoulder. They're just contracts between whoever is selling it and whoever is buying. With a clearinghouse, firms looking for backup insurance would buy a credit default swap from a regulated pool.

"I think comprehensive reform, bringing these [credit default swaps] under oversight, should be a critical part of the reform agenda we hope to work with the Congress on," Geithner said on Tuesday. 


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How to spend $700 billion in 6 months

NEW YORK (CNNMoney.com) -- Remember that $700 billion financial sector rescue plan from October? It's all but spoken for.

After Treasury Secretary Tim Geithner promised to spend up to $100 billion on a toxic asset purchase plan Monday, only $35.2 billion remains unallocated in the Troubled Asset Relief Program. (See correction)

After former Treasury Secretary Hank Paulson determined how Treasury would spend up to $380 billion of the funds in his tenure, the new administration has committedanother $315 billion in just two months. But with the government's rescue programs still incomplete, Geithner may need to ask for more.

(For a look at how Treasury and other government agencies have used taxpayer dollars to rescue the economy, click here.)

"Secretary Geithner is going to need to go to Congress and ask for more money sooner rather than later," said Anne Vorce, policy director at the New America Foundation, a public policy think tank. "He's done everything possible not to go back to Congress, but now the amount left is a worry."

0:00/1:58Geithner: Doing all we can

Treasury thus far has been able to step in when systemically significant financial institutions threatened to fail, sending an additional $20 billion to Citigroup (C, Fortune 500) in November, $20 billion to Bank of America (BAC, Fortune 500) in January, $40 billion to American International Group (AIG, Fortune 500) in November and another $30 billion to AIG in early March.

But if Treasury needs to step in and send emergency funds to another bank, it will only be able to give half what it gave to AIG unless it gets more money from Congress or uses money that had been allocated to other TARP programs.

It's not that the Treasury Department has spent all the money -- it still has about $342 billion left to spend. But the Treasury has designated $307 billion of that in various programs and guarantees. For instance, it has guaranteed up to $5 billion in Citigroup loans, and allocated $100 billion to pay for losses the government expects to suffer from its new consumer lending initiative. The money isn't gone, but it's accounted for.

Still, if a large bank were to fail, Treasury would likely intercede. As President Obama explained in an interview on the CBS program "60 Minutes," a large bank failure poses a threat to drag down the financial system.

"There are certain institutions that are so big that if they fail, they bring a lot of other financial institutions down with them," Obama said the interview, which aired Sunday night. "I think that systemic risks are still out there."

The Treasury Department downplayed concerns that its planned initiatives outstrip its funds.

A Treasury official said the department has substantial resources granted by Congress and will continue to work with lawmakers to make sure they have the necessary resources in its financial sector rescue efforts. He did not say whether Geithner would ask Congress for more funding but noted that its TARP programs have been designed to maximize the value of every taxpayer dollar spent.

Geithner may face up-hill battle for funds

Despite some sentiment that the Treasury's coordinated rescue effort will help the economy and financial markets rebound sooner than if the government had taken no action, policy experts still believe that Geithner would face a difficult challenge if he asks for more money. Geithner took political hits last week when he was blamed by some for failing to react swiftly enough to the hundreds of millions of dollars of bonuses paid out by bailed out insurer AIG.

"Last week was not a good week for the administration and Tim Geithner, but this new plan seems to be well-received," said Vorce. "Still, it will be difficult for Geithner to get money for what needs to be done next."

Geithner has avoided asking for more funds during his two-month tenure. When he appeared before the Senate Budget Committee on Feb. 11, he was questioned by several committee members if the then $320 billion of funds left unallocated in the Troubled Asset Relief Program would be enough. The Treasury secretary responded that the money was sufficient for Treasury's near-term purposes, and a request for more money -- if needed -- will be done "with as much care and consultation and design as possible."

Since then, Treasury has committed another $285 billion to various programs, including $5 billion to auto parts suppliers and $30 billion more to AIG.

In addition to propping up banks and other businesses, Treasury has used TARP for several other financial rescue initiatives, including $50 billion for a foreclosure mitigation program, $20 billion for a consumer lending initiative and the $100 billion effort to rid banks of toxic assets announced on Monday.

Correction: In an earlier version of this story, we reported that Treasury allocated all but $10.2 billion. In fact, the Treasury is only spending $50 billion on the foreclosure mitigation program. The other $25 billion is coming from other government agencies. CNNMoney regrets the error.  


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Internships are not just for kids

NEW YORK (CNNMoney.com) -- Looking for a job? Consider an internship instead.

With hiring slowed to a near-standstill, job seekers are finding that internship programs are one of the best ways to land a full-time job down the road.

The majority - 59% - of employers who plan to hire interns said they are likely to hire their interns as full-time, permanent employees, according to a recent CareerBuilder.com survey.

That's what worked for Robert Ball. In the semester before graduating from Middle Tennessee State University, Ball, 24, pleaded with his professors to let him participate in an internship program at Frontier Airlines in Denver in lieu of the few remaining credits he needed to graduate.

The internship didn't guarantee a job with the airline and didn't pay a dime, but Ball was determined to get in the door - even if it meant getting a waiver from school, moving to Denver and asking his parents for financial assistance.

"I always wanted to work for an airline," Ball said. "I knew that an internship would make me more appealing to employers after graduation."

When the internship ended in December without an offer, Ball went back to Tennessee to graduate and begin applying for jobs. "It was really tough," he says.

Ball still had his sights set on Frontier, and thanks to a good report from his internship coordinator, he was eventually hired in February as a revenue management analyst.

Now, Ball is responsible for analyzing booking data to help determine fares.

But it's not just college kids clamoring for internships. Midlevel executives are also finding that scoring a spot in an internship program can lead them to a job.

Marketing professional Michelle Patterson, 40, has been out of work since the beginning of January. Struggling to transition from book publishing to digital media, Patterson says she will gladly intern to help convince employers to give her a chance.

"I would be flexible for their schedule and even work for free, if it leads to full-time work," she said.

Intern Bridge's Internship Best Practices survey found that 70% of respondents would accept less pay, or even no pay, if it meant a promising work experience.

"For me, the 'in' that I got with the internship was payment enough," Ball said of his internship with Frontier.

And companies are now far more open to hiring executives, in addition to students, as interns, according to Rosemary Haefner of CareerBuilder.com.

"It's like an extended job interview," Haefner said. Job hopefuls can learn about the job and acquire new skills, while gauging whether the position is a good fit for them, she said.

For employers, internships help keep costs and staff levels down, while still maintaining a pool of talent on reserve for when the economy picks up again.

Going forward, the use of internships will rise as organizations recognize the advantages of cheaper labor, Intern Bridge founder Richard Bottner forecasts.  


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N.Y. governor fires 8,900 state workers

NEW YORK (CNNMoney.com) -- New York Governor David Paterson ordered 8,900 state layoffs after employee unions refused concessions.

In a time of "unprecedented fiscal emergency," New York state was "left with no other option" than a state workforce reduction of about 8,900 employees to achieve the savings it needed, according to a memo from the governor's office.

In October, Paterson reached out to state employee unions to reach cost-cutting concessions together, according to the memo from director of state operations Dennis Whalen.

The state looked into a number of ways to deal with the "record budget deficits" and called upon the unions to partner with the state to reduce costs in order to avoid large-scale layoffs, Whalen's memo said.

But the labor organizations representing the state employees rejected all of Paterson's options, the memo said.

"This is not a decision that has been reached lightly," the memo said. "Governor Paterson was forced to make this difficult decision for the good of the entire state."

But the state's second-largest state-employee union disagreed.

"We take exception...that the public employees have offered no counter proposals to address the state's budget crisis," said Ken Brynien, president of the state's Public Employees Federation AFL-CIO. "We have been offering alternatives to raising revenue and cutting costs for months."

In a press release, Brynien said "there is absolutely no need to do layoffs," and the move will not save the money that the governor assumes.

"PEF's position is clear and unchanged," Brynien said. "We will not agree to any changes in our contract that reduce compensation."

The release outlined PEF's proposals for alternative ways to cut costs.

"Until the governor has implemented these savings and revenue-raising proposals, it is unconscionable to call for concessions from, or layoffs of, the state work force," the release said. "The policy of New York State should be to respect people who work hard for the public and to honor its commitments to those workers."

The office's budget division is finalizing a timetable for the reduction, which will be completed within the next week.

"The Governor has stressed that we all share the responsibility to be accountable to the taxpayers of New York, and this includes closing an historic budget gap through shared sacrifice," the memo said. 


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Global trade to fall 9% in 2009

GENEVA (Reuters) -- Trade volumes will fall 9% this year, the strongest contraction since World War Two, as demand collapses in the biggest economic downturn in decades, the World Trade Organization (WTO) said in a report.

The forecast - much steeper than the 2.8% fall forecast by the International Monetary Fund in January - underlines the scale and rapid deterioration of the economic crisis faced by leaders of G20 nations when they meet next week.

The report was originally scheduled to be released on Wednesday, but several media organizations published it on Monday.

The volume of developed country exports will fall 10% this year, while trade-dependent developing countries will see export volumes shrink 2-3%, the WTO said.

World trade tapered off sharply in the last half of 2008 to show growth of 2% over the whole year, after rising 6% in 2007, it said.

Just as trade typically grows faster than output expands, so now it is shrinking faster than the economy is contracting.

WTO Director-General Pascal Lamy noted that production of many goods is sourced all over the world, so there is a multiplier effect, with trade falling even faster as demand drops.

"Governments must avoid making this bad situation worse by reverting to protectionist measures which in reality protect no nation and threaten the loss of more jobs," Lamy said.

Protectionism fears

He said the use of protectionist measures, now being monitored by the WTO, was on the rise and risked choking off trade as an engine of recovery.

Since the recession began to take hold in the last quarter of 2008 there has been little cause for optimism about the trade outlook in 2009, the WTO said.

The banking crisis has contributed to a shortage of trade finance and deprived firms and businesses of credit, falling asset prices have made households unwilling to buy durable goods such as automobiles and falling commodities prices have hit many developing countries, it said.

Not even China with its dynamic economy has been able to insulate itself from the downturn, the WTO said, with its top trading partners in recession or suffering a slowdown.

While most major traders showed big drops in exports and imports of goods in January and February, some Asian economies such as China, Singapore, Taiwan and Vietnam were still recording import growth.

Slowing decline?

The WTO said data for one month must be interpreted cautiously but this could be evidence of a slowing decline or even a bottoming out of the negative trend.

Countries are also unlikely to repeat the double-digit declines in exports indefinitely otherwise China's exports, for example, would hit zero within 10 months, it said.

"This is obviously a highly implausible scenario and emphasizes the reality that such steep declines as those we have witnessed recently will not persist," it said.

In dollar terms world merchandise goods exports rose 15% in 2008 to $15.8 trillion, while exports of services rose 11% to $3.7 trillion. Germany was again the world's biggest exporter in 2008, with merchandise exports of $1.47 trillion, just ahead of China at $1.43 trillion. 


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Bonus tax: On second thought ...

NEW YORK (CNNMoney.com) -- Last week's angry-mob-with-pitchforks approach to bonusespaid by AIG is giving way to a more pragmatic approach this week as lawmakers and investors weigh the potential risks of the proposals before them.

The issue is likely to be a key one on Tuesday morning at a congressional hearing when Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner will testify before lawmakers on oversight of the government's intervention at American International Group.

AIG has been given access to $182 billion in taxpayer funds in the past 6 months. Recently it paid out $165 million in retention bonuses to employees in the company's financial products division. Those bonuses were written into employee contracts written in early 2008.

In a breathless run to smite those who took government funds and used them to enrich their own players, the House last week passed legislation that would have taxed the bonuses such that the recipients would in essence get to keep none of them.

Senate Finance Committee Chairman Max Baucus, D-Mont., co-sponsored a similar measure, but its passage in the Senate seems unlikely, at least in its current form. Over the weekend, the White House and some key senators expressed doubts about the bonus-tax measures. And on Monday, Baucus said he's been talking to them about making changes.

"I want to hear what senators have to say. A lot are weighing in now with different ideas," Baucus told CNN. "Some are tax. Some are regulatory. But they're still all addressing bonuses."

No one disputes that paying out those bonuses given the country's current predicament -- which was exacerbated in great part by AIG's reckless behavior -- was inappropriate and distasteful, contract or no. But the legislative proposals on the table to rectify the situation may end up doing more harm than good in the broader scheme of things.

One objection to the bills: They use the tax code as a punishment for a select group of people and they do so retroactively, meaning they apply to money already paid out. Another concern: Companies in the private sector won't feel comfortable doing business with Uncle Sam if they think he'll change the rules on them after a deal is done.

"I think there are certain constitutional questions about the imposition of a tax on a limited group of people," said Sen. Kent Conrad, D-N.D., a conservative Democrat who chairs the Senate Budget Committee, on ABC's "This Week" on Sunday.

A moderate Republican agreed that Congress' approach needed to be rethought. "We need to look for an alternative means of recouping this money that doesn't cause further harm to our economy as we're trying to get banks lending," said Sen. Susan Collins, R-Maine, who was also a guest on the show.

So what's next?

Not that lawmakers will drop the idea altogether. But it's increasingly likely that any final legislation that lands on the president's desk will look a lot different than the House and Senate proposals to use the tax code to reclaim the bonuses.

"A lot of people on Capitol Hill are nervous about using the tax code for this purpose," said Brian Gardner, the Washington analyst for investment firm KBW, who doesn't see lawmakers having anything ready before mid-April.

On Monday, Geithner called for a measured response.

0:00/2:31Geithner's fix for undue bonuses

"We need to balance that basic objective that we not reward failure against the hugely important imperative that we get the financial system doing what it needs to do for recovery," Geithner told reporters. "We're going to look carefully at how this [bonus tax proposal] works through the Congress and try to make sure that we get this balance right."

One option: Legislative aides say lawmakers may try to find a face-saving way out of this -- perhaps by passing something that beefs up rules concerning future bonuses while dropping the language about bonuses already paid.

Investor concerns

But the actions of Congress last week may have raised concerns well beyond the bonus question.

"There's a great deal of uncertainty beyond executive pay," said Dan Clifton, the head of policy research at Strategas Research Partners.

For example, Clifton said, investors mulling over Treasury's proposal to form public-private partnerships to get toxic assets off banks' books have some concern that lawmakers could legislate a profit clawback provision if they decide in hindsight that private investors stand to benefit unduly from the toxic asset program.

One possible negative implication of a bonus tax imposed on money already paid is that it could "not just drive private capital away but out of the country," Gardner said.

By that he means, it's easier for investors to size up economic risk than it is to size up political risk. Said Gardner, "We're increasing political risk at a time we need to be increasing stability."

- CNN's Ted Barrett and Dana Bash contributed to this report  


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Dollar weak against rivals

NEW YORK (CNNMoney.com) -- The dollar was mixed against rival currencies Monday after the U.S. government officially announced plans to buy troubled assets in an effort to stabilize the banking system.

Under the new "Public-Private Investment Program," taxpayer funds will be used to seed partnerships with private investors that will buy up toxic assets backed by mortgages and other loans.

The program aims to buy at least $500 billion of existing assets and loans, such as subprime mortgages that are now in danger of default. Over time, it could potentially expand to $1 trillion.

The goal is to cleanse the balance sheets of many of the nation's largest banks, which continue to suffer billions of dollars in losses, and to get credit flowing again. The government will oversee auctions of the assets, hoping to effectively create a market for these assets.

Stocks soared, with the major indexes gaining nearly 4%, as investors cheered the long-awaited announcement. Asian and European markets also advanced.

But the reaction in the currency market was muted, said Gareth Sylvester, senior currency strategist at currency brokerage HiFx in San Francisco.

"We're seeing limited price action on the FX markets," Sylvester said. "Analysts and economists are still trying to digest the implications of the plan."

The dollar was down 0.2% against the euro at $1.3614, after trading higher versus 15-nation currency earlier in the session. The dollar fell 0.5% versus the pound to $1.4541. Against the yen, the dollar rose 0.9% to ¥96.98.

Meanwhile, the currency market is also responding the Federal Reserve's plan to purchase more than $1 trillion in debt-related assets to help increase liquidity in the credit markets.

The plan, announced last week, boosted stock and bond prices but weighed heavily on the greenback since the purchases would increase the money supply and undermine the value of the dollar.

At the same time, the market was responding to a better-than-expected report on U.S. existing home sales.

The National Association of Realtors said that existing home sales rose last month to a seasonally adjusted annual rate of 4.72 million million units, up 5.1% from a rate of 4.49 million in January.

While analysts warned that February's rebound does not signal a long-term recovery in home sales, the report helped bolster guarded optimism about the overall economy.

The housing data came after better-than-expected reports on retail sales, initial jobless claims and housing starts were released over the last few weeks.

"People are cautiously optimistic," said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto. "The currency market is reflecting that in the form of increased tolerance for risk."

The dollar often falls when stock prices rise as investors favor more risky assets. Many investors view the greenback as a safe-haven, while the euro and the pound are considered higher yielding.  


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