My finance view

Goldman Sachs Group Inc and Deutsche Bank AG were issued subpoenas by a U.S. Senate panel looking for evidence of fraud in the 2008 mortgage-market meltdown, the Wall Street Journal said, citing people familiar with the matter.

The paper said the focus of the investigation is on whether internal communications show executives at the banks had private doubts on the soundness of the mortgage-related securities they were putting together.

The people told the paper Washington Mutual Inc, which is now mostly owned by JP Morgan Chase & Co, was also issued a subpoena by the U.S. Senate Permanent Subcommittee on Investigations

The paper said several other financial institutions may also have received subpoenas from the sub-committee that is headed by Senator Carl Levin business card templates.

A Goldman Sachs spokesman declined to comment on the subpoena to the paper, while Deutsche Bank did not immediately respond to a request for comment by the paper. Subcommittee investigators declined to comment to the paper.

A subcommittee subpoena raises factual questions and asks for various company correspondence, the paper said, citing a person who reviewed it.

The U.S. Senate and Goldman Sachs could not be reached for comment by Reuters after regular U.S. business hours, while a Deutsche Bank spokeswoman in Hong Kong declined immediate comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Anshuman Daga)

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Canadian and U.S. bankruptcy courts have jointly approved a controversial $1.13 billion (US) deal to sell Nortel’s wireless equipment business to Sweden’s Ericsson.

Simultaneous hearings held today in Toronto and Wilmington, DE approved the results of a bankruptcy court-supervised auction of the Nortel division that was held last week.

The ruling comes amid growing pressure on Ottawa to step in and block the sale of Nortel’s assets, which were developed over decades with the assistance of Canadian taxpayers.

Ericsson, a giant in the telecom equipment business, successfully outbid two other foreign companies for the Nortel assets. The division in question sells telecom equipment to wireless carriers, including key North American customers such as Verizon Wireless, Bell Canada Inc. and Telus Corp.

Once Canada’s top technology company, Nortel is now in the process of selling off its most lucrative assets after filing for bankruptcy protection in January.

The dismantling of Nortel, although widely lamented, initially drew relatively little interest — even when it was revealed in June that Finnish-German joint venture Nokia Siemens Networks had tabled an initial bid of $650 million for Nortel’s key wireless division.

But things quickly heated up last week when Research In Motion Ltd., the Waterloo company that makes the popular BlackBerry, accused Nortel of blocking it from the bidding process.

It’s believed RIM is after key Nortel patents pertaining to future wireless technologies that could benefit future BlackBerry models and services easy payday loans.

Nortel, by contrast, has accused RIM of failing to follow court-ordered rules surrounding the auction of its assets.

"No one was unfairly barred or refused from the process," said Derrick Tay, a lawyer for Nortel in Canada. "Those are the facts."

Tay said RIM failed to sign nondisclosure agreements necessary to participate in the auction.

As well, he noted that RIM has not attempted to bring its complaints before the courts.

"Instead they tried to interfere with a court-approved process by going to the media and the politicians."

He later told reporters outside the courtroom that any intervention by the government in the court process would damage the integrity of the legal system and send the wrong message to investors at a time when bankruptcies and their associated asset sales are on the rise because of the weak economy.

RIM has called on Ottawa to step in to block the sale using a section of the Investment Canada Act that requires foreign purchases to be a of net benefit to Canada.

Industry Minister Tony Clement has so far declined to intervene, but said on Monday that he isn’t ruling out taking action.

Any review by Ottawa would need to take place before the deal is scheduled to close later this year.

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MONTREAL – Via Rail Canada says it will resume full service across the country late tonight.

The company issued a statement early this morning announcing it had reached an agreement with the union representing its striking locomotive engineers to enter into binding arbitration.

Paul Cote, Via’s president and chief executive officer, says service will resume starting late tonight, with full service on most routes by Monday morning.

Layoffs of other unionized Via employees prompted by the engineer’s strike are also cancelled payday loans online.

The 343 engineers, members of the Teamsters Canada Rail Conference, walked out Friday, paralyzing passenger train service across Canada.

Via also announced on Saturday that the strike was forcing it to lay off hundreds of other workers who maintain its trains and stations.

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A private developer’s $38 million plan to transform a portion of Laclede Avenue with student housing for St. Louis University has been canceled.

Campus Apartments, a Philadelphia company that specializes in student housing, had proposed building a four-story, 135-unit dwelling for about 500 students. The plan for the 3800 block of Laclede also included a 400-car parking garage. In December, company officials said they hoped to have the project done in time for the start of SLU’s fall semester next year. But those plans fizzled.

Alderman Joe Roddy, whose 17th Ward includes the area, said he believed the university was never fully committed to the project.

"We were getting mixed signals from SLU all along," he said. "I think any student housing project down there that doesn’t have the support of SLU is probably ill-conceived. They’re going to know their student housing needs better than anyone else."

Roddy pointed out that several apartment developments catering to students have recently been built or are under construction near the university. He added that building too many student-oriented housing units would be bad for the area. "It doesn’t do anybody any good to have apartments targeted at students if the university isn’t going to be growing in enrollment life insurance rates." A university spokesman referred questions about the project to Campus Apartments. The company’s only comment this week was to confirm that the project is dead.

Before the plan was abandoned this year, Campus Apartments had sought a 10-year tax abatement from the city and a mixed-use rezoning for the property. The building would have gone up on a parking lot owned by SLU, plus several adjoining properties, including one occupied by Laclede Street Bar & Grill. Campus Apartments had planned to transfer the entire project’s site to SLU, then take it back through a long-term ground lease.

Clayton Berry, a SLU spokesman, wouldn’t comment on the student housing proposal. He said university enrollment continued to grow slowly and that last fall the university had 12,733 students, 7,814 of them undergraduates. SLU provides housing for about 3,500 students in four complexes.

Campus Apartments’ website says the company has developed off-campus student housing with 21,000 beds for more than 50 colleges in 17 states.

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Commercial lender CIT Group Inc. confirmed late Monday that it has secured a $3 billion bailout from its bondholders, saving the company from filing for bankruptcy.

It’s a new twist in the financial crisis: A major bank on the verge of a last-minute rescue — only this time the bailout isn’t coming from the government. The deal marks the first time since the banking crisis erupted that private investors are stepping in to save a big firm without federal help or oversight.

CIT said the rescue includes a $3 billion secured term loan with a 2.5-year maturity, which will ensure that its customers continue to have access to credit. Term loan proceeds of $2 billion are committed and available immediately, with an additional $1 billion to be committed and available within 10 days.

The deal suggests the appetite for risk in the private sector is increasing, analysts said. It also could provide a framework for other financial rescues if Washington turns off the bailout spigot.

"You’ve got private money coming in and essentially giving a vote of confidence" in banks’ future profitability, said Vincent Reinhart, former director of the Federal Reserve’s monetary affairs division. "It’s encouraging."

By not getting involved, the Obama administration gambled CIT was not so enmeshed with the financial system as companies like Citigroup, Bank of America and others banks that accepted federal bailout money, analysts said personal loans.

CIT had been in talks with regulators to reach a deal for funding. Once talks with government officials fell apart, CIT turned to some of its major bondholders for help. They struck a deal late Sunday.

The government’s hands-off approach marks a major shift in the crisis. In the past 16 months, the government has poured billions into stumbling mega-banks. But the nation’s biggest banks still enjoy federal support through borrowing or debt guarantees. So how far the government is willing to go with its hands-off policy is unclear.

Scott Talbott, top lobbyist with the Financial Services Roundtable, which represents CIT and other big financial firms, said the government’s seeming pullback from the banking sector was a welcome sign.

"When the government steps in, you disrupt the market," he said. "That was necessary to restore liquidity but distorted the free-market system. Now the exit strategy is becoming clear."

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ST. LOUIS — The public’s embrace of the Citygarden sculpture park is helping push more work on the Gateway Mall, the 16-block strip between the Old Courthouse and Union Station.

Citygarden has been open for a little more than two weeks and remains a hit with visitors drawn to the nearly three-acre park of sculptures, tree-lined paths and fountains.

Tricia Roland-Hamilton, director of the Gateway Mall Project, said Citygarden was prompting skeptics to re-evaluate their opinion of the Gateway Mall as an endeavor whose time would never come.

"There’s so much excitement around Citygarden," Roland-Hamilton said. "It has given us some momentum."
For the moment, mall developers are thinking small. They plan to build by late summer a beach volleyball court and Frisbee golf area across Market Street from the downtown post office.

Also scheduled for this year is $200,000 in new lighting at Aloe Plaza, where the bronze nudes of the Milles Fountain reside across Market from Union Station.

DOG RUN, PLAYGROUNDS

The mall’s master plan, primarily by Urban Strategies Inc. of Toronto, calls for a dog run, playgrounds and a small sports field. Nelson Byrd Woltz landscape architects of Charlottesville, Va., designed Citygarden.

Bruce Lindsey, dean of architecture at Washington University’s Sam Fox School of Design, said Citygarden’s Market Street side was a model of accessibility for the entire mall. Newly planted mature trees are impressive, and the spray fountain is "fantastic," he said. But the limestone wall near Citygarden’s Chestnut Street side is a barrier, he said.

"Visual accessibility into the park is extremely important," Lindsey said. "It’s what makes a city a city."

He added that Citygarden was too crowded with sculptures.

"I would just take all the art that is here and string it all the way to the Arch," he said.

Lindsey praised Citygarden as a civic asset and said street-level activity should be encouraged all along the mall.

The Gateway Foundation, formed in St. Louis in 1986 by Aaron and Teresa Fischer, spent $25 million to $30 million for the design and construction of Citygarden, plus an undisclosed sum for the sculptures. The foundation will pay Citygarden’s continuing costs except water and electricity but will not develop any more spaces along the mall, said Paul Wagman, the foundation’s spokesman.

EIGHT-YEAR PROJECT

Completing the mall may take eight years and cost $116 million, Roland-Hamilton said. Aldermen have authorized a 24-member advisory board to administer the master plan. Roland-Hamilton said a conservancy group similar to Forest Park Forever would be established soon to raise money for further development.

For now, development efforts will be focused on the mall area west of Tucker Boulevard. Roland-Hamilton said her group wanted to beautify the area to better stimulate work on the numerous projects planned or under way along the mall affordable car insurance. They include restoration of Kiel Opera House, redevelopment of the former municipal courts building, renovation of the Central Library and conversion of the former Missouri Pacific Railroad headquarters into offices and apartments.

David Ohlemeyer, a principal at the Lawrence Group, said the mall’s presence was a factor in his company’s decision to convert the 1920s railroad headquarters. Interior demolition is done, but the project, called Park Pacific, at 1226 Olive Street, is stalled while the company awaits approval of a HUD-backed loan to resume work.

Across the mall from Park Pacific, work is under way on P.D. George Downtown, formerly the Ford Apartments. The first of the building’s 36 apartments should be ready in December, said Peter George, whose Blue Shutters Development is doing the project.

PERMANENT PAVILION

"Things are looking very positive, compared to December ‘08, when there was no mention of any of this going on," George said. "Anything that brings more people downtown bodes well for landlords."

A large permanent pavilion at Tucker and Pine Street is to be that part of the mall’s main feature. Roland-Hamilton said the public’s new interest in the mall was boosting fundraising for the pavilion, which could be open within a year to accommodate events that already draw a million visitors annually.

Another permanent feature will be a tree-lined sidewalk and bikeway to run along the entire mall’s southern edge. The portion within Citygarden is completed. Roland-Hamilton said she hoped to get $17 million in federal stimulus money to build the rest of the feature.

The far western end of the mall is within developer Paul McKee’s proposed NorthSide project of offices, businesses and homes. Roland-Hamilton said the mall plan would remain vague there with the anticipation that McKee would begin work on his plan, which calls for a 40-story office tower as a bookend of sorts for the Gateway Arch more than a mile to the east.

As Citygarden provides a glimpse into the mall’s potential, Kiener Plaza demonstrates its current shortcomings. Lindsey, the architecture dean, said Kiener’s sunken amphitheater disconnected the plaza from the surrounding streets. Mall developers plan to build a street-level performance area there, but the money, as much as $35 million, is not in sight.

On a pleasant summer afternoon last week, dozens of children climbed on Citygarden’s sculptures and splashed in its fountains as adults strolled among the trees. Dee Pollaci, 67, and her husband, John, 73, of Pasadena Hills, sat on a low wall to watch their granddaughter, Claire, 4, play in the spray fountain nearby.

"We’ve been here for 45 minutes and we aren’t bored yet," she said.

At the same time a block away, Kiener Plaza had a total of 22 visitors.

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A task force, named last month, will give recommendations on how to make Canadians more capable with their money.

"The task force will draw on global best practices and build on the strengths of successful initiatives already in place in Canada," says its website, www.financialliteracyinCanada.com.

Other countries are already working to strengthen citizens’ ability to manage their personal finances.

Let’s start with the United Kingdom, which set up the Financial Services Authority in 2000 with a mandate to regulate industry and educate consumers.

Its website, www.moneymadeclear.fsa.gov.uk, has a slogan: "No selling. No jargon. Just the facts."

Information is organized by topics and life stages – starting a job, having a baby, separation and divorce – and managing in retirement.

You can reach more people using a life cycle approach, says a report done in 2007 for the Financial Consumer Agency of Canada.

"The major points in people’s lives constitute an ancient and powerful organizing model that societies use consciously and unconsciously," said author Larry Orton in Financial Literacy: Lessons from International Experience.

"And there is little doubt that, as individuals approach and enter a new phase, they have a heightened willingness to take on the learning needed for new responsibilities."

Britain also helps parents save for their children’s future by giving them seed capital.

All newborns receive a voucher for £250 (worth about $455 Canadian) and double that amount for the poorest families.

Parents can invest the money tax-free and add spare cash to the account, which later becomes their children’s property.

The Child Trust Fund, launched by then-chancellor Gordon Brown in 2005, is a way to help families build sums for toddlers that will reach four figures by the time they reach their 18th birthday.

In New Zealand, the job of improving financial literacy was handed to an independent crown body, the Retirement Commission no fax payday loans.

It had a brainwave of using a simple, one-word brand to promote its activities.

"Think of Sorted as your financial personal trainer," says the website, www.sorted.org.nz.

The Retirement Commission offers education tools for ages 5 to 95.

It also uses TV ads to create a demand to get financially "sorted."

New Zealanders were tested for their financial knowledge and attitudes in 2005.

The survey sets a benchmark to be used for future tests every four years.

In the United States, the President’s Advisory Council on Financial Literacy was created in January 2008 by George W. Bush.

A baseline survey of 25,000 Americans, administered in English and Spanish, is being done to help decide how to set up education initiatives.

Meanwhile, the Financial Industry Regulatory Authority has excellent resources at its website, www.saveandinvest.org.

In April of this year, the U.S. government sponsored a financial literacy month.

"It is more important than ever to understand how to balance a cheque book, budget wisely, plan for retirement and avoid accumulating debts that could harm your financial future," said President Barack Obama in support of the event.

"We must pass along such fundamental knowledge to our family and friends, because financial literacy empowers all of us."

But how can we ensure that knowledge is passed along?

Many people never learn the basics of personal finance from parents or teachers.

They pick up information only by trial and error – by making expensive and often tragic mistakes.

Next week, we’ll look at the limitations of financial literacy in a complex economy.

Ellen Roseman’s columns appear Wednesday, Saturday and Sunday. She can be reached at eroseman@thestar.ca

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PROVIDENCE, R.I. — Some Americans put out of work by the latest recession are driving past billboards with messages like: "Interesting fact about recessions … they end."

Another reads: "Self worth is greater than net worth."

"This will end long before those who caused it are paroled," says a third.

Those are a few of the messages drivers in Rhode Island and across America are seeing as part of a billboard campaign dubbed "Recession 101" and funded by an anonymous East Coast donor who was depressed about how the country was reacting to the economy’s tailspin.
The campaign began last month and is now appearing on more than 1,000 billboards across America, including New York’s Times Square. The client wanted people to realize America has undergone recessions before and made it through, said designer Charlie Robb.

"One of the lines is, ‘Stop obsessing about economy, you’re scaring the children.’ That’s the overriding concept of the thing," said Robb, director of Florida-based Charchin Creative.

Members of the Outdoor Advertising Agency of America have donated the space, printing materials and labor needed for the campaign, said agency spokesman Jeff Golimowski.

Some say it’s hard to put a lighthearted spin on the downturn when people are worried about losing their jobs and homes, while others share the billboards’ sentiments.

"History has proven that we get into recessions and we get out of them," said Paul Sullivan, who works at the Greater Providence Chamber of Commerce. "Whether it’s perception or reality, we have to think this too shall pass."

Leonard Lardaro, an economist with the University of Rhode Island, said people shouldn’t lose hope and should instead look for opportunity, preparing themselves for other jobs or the economy’s eventual turnaround instant payday loans.

"For people who are very capable and talented who lost their jobs, it wears away at you. It takes away your sense of worth, which it shouldn’t do," he said. "Don’t think in a recession that nothing good can or does happen."

Lardaro said he likes the posters but they aren’t enough to fix people’s spirits — and the recession — by themselves.

Gail Robnett wonders about the campaign’s effectiveness. "You’re not paying attention to stuff like that when you’re trying to put groceries on the table," she said.

Robb — who also designed a "God Speaks" billboards from 1999 that featured such insights as "Keep using my name in vain and I’ll make rush hour longer" — said he understands that perspective.

"If you just lost your job and your house, this campaign is not going to do a thing for you. That’s a whole different set of parameters," he said. "If you’re like most of America, you’ve still got a job and you’re making your mortgage payment. You may not be spending what you normally spend because you’re afraid of what’s going on."

Mostly, Robb said, the messages are to remind people of the country’s resiliency and optimism. For example, the billboard that Ryan Korsak saw said, "Bill Gates started Microsoft in a recession."

"I appreciate the sentiment," said Korsak, who works for a software company. "But I’m kind of not Bill Gates."

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U.S. home foreclosure activity galloped to a record in the first half of the year, overwhelming broad efforts to remedy failing loans while job losses escalated.

Foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties in the first six months of the year, RealtyTrac said on Thursday.

The number of properties drawing filings, which include notices of default and auctions, jumped 9.0 percent from the second half of 2008 and almost 15 percent from the first half of last year.

“Despite everybody’s best efforts to date we’re not really making any headway against the problem,” Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.

Loans that were temporarily frozen by various state and federal programs, which mostly ended in March, started pushing through the process in the past three months.

One in every 84 households with loans got at least one foreclosure filing in the first half of this year.

“I don’t think this suggests the economy is any worse than anyone expected but I certainly don’t think it shows by itself any signs of improvement,” Sharga said.

President Obama’s housing rescue is gaining momentum in refinancing troubled borrowers with higher-rate loans and modifying untenable terms for others.

But the programs have been off to a slow start and in some cases will be too late or not enough to help severely struggling homeowners, industry analysts agree affordable health insurance.

Private sector efforts to alter loans terms have made headway but are facing an uphill battle as the unemployment rate heads to double digits.

Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.

“Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk,” James J. Saccacio, RealtyTrac chief executive, in a statement.

In June, as home prices continued to fall, albeit more slowly, foreclosure filings rose 5.0 percent from May and 33 percent from a year earlier.

June’s foreclosure activity was the third highest on record, and the fourth straight month of filings on more than 300,000 properties.

“If we’re really going to slow down the inflow of new foreclosure activity we are probably going to need to see more aggressive and more integrated activity between the lending community and the government,” Sharga said. 

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NEW YORK — In a sign the financial crisis isn’t over, CIT Group Inc., the No. 1 lender to small and mid-sized U.S. businesses, is scrambling to get additional help from the federal government. CIT got $2.3 billion in bailout cash in December.

A collapse of CIT, whose 1 million clients include big names from the franchisee of Dunkin’ Donuts to retailer Dillard’s Inc., could deal a devastating blow to the economy by cutting off financing just as businesses need it most, analysts warned. That in turn could force thousands of small and medium-sized companies to drastically cut costs or shut down — driving up unemployment and dashing hopes for a swift economic recovery.

"They’d have to lay people off, downsize and maybe shut their doors," independent banking analyst Bert Ely said of CIT’s clients.

"It would hardly be positive for the economic recovery."

Apparel industry insiders say it would be very difficult for rivals to absorb CIT’s clients because other lenders are already under financial strain, leaving many orphaned suppliers potentially without any access to financing online cash advance.

CIT, which in April posted a bigger-than-expected first-quarter loss, has been hit hard by the ongoing credit crisis as investors have shied away from purchasing all but the safest forms of debt, leading to a near disappearance of funding options.

CIT said it has retained the law firm Skadden Arps, a bankruptcy specialist. CIT spokesman Curt Ritter declined to say if Skadden Arps was advising CIT on a bankruptcy filing.

Some analysts think the hiring of the bankruptcy law firm was designed to pressure the government to step in with help. But by rescuing CIT, the Obama administration may have to rethink whether to commit more taxpayer money to other firms that get into trouble or simply let them fail.

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