My finance view

U.S. homebuilders are concerned that the struggling housing market won’t recover this year and some feel it may be getting worse.

Builders’ outlook for the industry in May was unchanged at 16, the National Association of Home Builders said Monday. It has been at that level for six of the past seven months.

Any reading below 50 indicates negative sentiment about the market. The index hasn’t been above that level since April 2006.

When asked about where they see sales of single-family home heading over the next six months, the builders offered their most pessimistic outlook since September.

Last year was the worst in more than a decade for sales of previously owned homes and the worst for new-home sales in nearly a half-century.

Fewer homes mean fewer jobs. Each new home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the builders’ trade group.

The trade group cited a handful of factors weighing on the housing market. Some were familiar _ tighter lending standards, high unemployment and an increase in the number of homes sold at foreclosure.

But the builders’ group also noted that higher gas prices were creating “consumer anxiety and reluctance to go forward with a home purchase,” said the group’s chairman, Reno, Nev., home builder Bob Nielsen.

About 90 percent of the builders surveyed said potential buyers are also holding back on purchases because they are concerned they won’t be able to sell their current home at a favorable price online cash advance.

Economists expect home prices will continue to struggle this year before a modest recovery takes hold. The hardest-hit states, including Arizona, California, Florida and Nevada, are inundated with foreclosures and short sales, when a lender allows a borrower to sell their property for less than what is owed on the mortgage.

Builders had been hopeful that a strong spring season, traditionally the best time for home construction, could help power a turnaround. But that has yet to happen.

Regionally, the West saw a two-point gain and the South received a one-point gain in their index of construction activity, both to 16. The Midwest held steady at 14. The Northeast fell five points, to 15.

The index gauging current conditions rose one point, to 16, while the recorded foot traffic of prospective buyers also rose by a point, to 14. But the outlook for the next six months fell two points, to 20. That was the lowest level in eight months.

The survey is analyzed by the builders’ trade group and Wells Fargo. This month’s survey was based on the responses of 339 builders.

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Federal Reserve Chairman Ben Bernanke said Wednesday that the Fed can’t take additional steps to try to ease high unemployment without escalating high inflation.

If inflation were to accelerate, the Fed would have to raise rates to slow borrowing and spending and blunt price increases. Hiring might then slow.

Speaking at a news conference with reporters, Bernanke sketched a picture of an economy growing steadily but still weighed down by a prolonged period of unemployment, now at 8.8 percent. He acknowledged the pain that is causing, noting that around 45 percent of the unemployed have been without a job for six months or longer.

“We know the consequences of that can be very distressing because people who are out of work for a long time, their skills tend to atrophy,” Bernanke said.

But he added:

“It’s not clear that we can get substantial improvements in payrolls without some additional inflation risks, and in my view we can’t achieve a sustainable recovery without keeping inflation under control.”

The news conference was the first time in the Fed’s 98-year history that a chairman has begun holding regular sessions with reporters.

Bernanke appeared relaxed with reporters, projecting a calming presence and saying nothing that might rattle investors.

The Fed chairman offered some clues about when and how the Fed would begin raising interest rates.

Bernanke said that as long as the Fed continues to say rates will remain at record lows for “an extended period,” rates won’t rise until the Fed has met at least twice more. The Fed, which ended a two-day meeting Wednesday, gathers about every six weeks.

Stocks rose after Bernanke said he expects the economy to continue growing through next year and 2013. The Dow Jones industrial average, which was up about 50 points when Bernanke began speaking, gained another 50 points half an hour before the market closed.

Bernanke acknowledged that higher gasoline prices are creating a financial hardship for many Americans. But he said the Fed doesn’t think gas prices will continue to rise at their recent pace.

The news conference offered Bernanke a chance to drive a debate about Fed policy. Critics have said the Fed’s efforts to boost growth raise the risk of high inflation. Investors are seeking clues about when the Fed will start raising interest rates to help slow price increases.

Bernanke said the first step in tightening interest-rate policy could occur when the Fed stops reinvesting the proceeds of its bond holdings. Bernanke would not be specific about when that might occur. He said it will depend on inflation and economic growth in coming months.

He said that step would be a relatively modest one. But it would constitute the Fed’s first tightening because it would allow interest rates to creep up.

The news conference, the first of three scheduled this year, is part of a long-standing Bernanke effort to make the Fed more transparent.

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Sharon Curtis, an Alberta resident, visited a Leon

A heavy turnout in Sunday’s election in Kazakhstan looks set to overwhelmingly reaffirm President Nursultan Nazarbayev’s domination of this oil-rich Central Asian nation.

Preliminary results will be announced early Monday, and some estimate that Nazarbayev may get over 90 percent of the vote. Early voters and 18-year-olds casting their ballot for the first time were rewarded with household goods, such as food blenders and electric kettles.

Nazarbayev, a 70-year-old former Communist party boss, has ruled Kazakhstan virtually unchallenged since the 1980s, when it was still part of the Soviet Union.

Opposition politicians refused to take part in the election, called for a boycott and described the vote as a sham. But with some 84 percent of the 9 million eligible voters casting their ballot with two hours of voting still to go, any concerns authorities may have had about a weak turnout have been quashed.

Local election monitoring activists have reported numerous violations. The Organization for Security and Cooperation in Europe’s election monitoring arm has complained about a lack of transparency and competition in the vote.

Several reports surfaced of university students being pressured into voting by threats of expulsion. Hundreds of students were seen at dawn outside polling stations at the Al-Farabi Kazakh National University in Almaty, which critics said showed that pressure was being applied.

“With this wretched weather, and early on a Sunday morning when you would expect students to lie in … to see such large crowds is quite unnatural,” said Vladimir Kozlov, leader of the unregistered opposition Alga party.

Nazarbayev’s term was to have ended in 2012, but in January he called the early election after a proposal to cancel the next two elections was ruled unconstitutional. Critics speculated he was trying to head off any popular uprising like those sweeping the Middle East and North Africa.

Relentless state propaganda and rising income levels have assured Nazarbayev’s popularity over the years. Western nations have had to balance their palpable distaste for the country’s slow pace of democratization with their desire to benefit from its burgeoning energy boom.

Anti-election videos proliferated online, but that grassroots approach proved little match for the slick “For Kazakhstan” get-the-vote-out campaign fronted by television personalities and pop singers.

In the freezing, wind-swept capital of Astana, voters backing Nazarbayev echoed familiar mantras of stability.

“I have performed my civic duty, I have voted for Kazakhstan,” said 30-year-old security guard Bolat Salykov, quoting a government slogan.

The high turnout figures appeared especially astonishing given the low-key nature of the election campaign.

There was little electioneering around the country, and Nazarbayev has as usual dominated the daily television news headlines. The three rival candidates, all of whom openly expressed their support for Nazarbayev, have made little impact.

In a small protest outside the election commission building in Almaty, demonstrators set up their own ballot box to vote “against all.” That option was last legally available in the 1999 presidential election.

Nazarbayev voted near the presidential palace in Astana, arriving with his wife and family, including billionaire son-in-law Timur Kulibayev. Members of Nazarbayev’s family have accumulated vast wealth during his time in power, raising questions over transparency in the country’s lucrative oil sector.

“The task of modernizing the state and society are still huge, so today’s vote will determine our unity and our desire to fulfill our plans,” Nazarbayev said after casting his vote.

Prime Minister Karim Masimov told The Associated Press that a strong presidential mandate would ensure the success of reforms needed to boost and diversify the oil-reliant economy.

Parliamentary elections are scheduled for 2012, but many believe they also may be brought forward to this year. Only one party, Nazarbayev’s Nur Otan, is now represented in parliament.

Janez Lenarcic, director of the OSCE’s Office for Democratic Institutions and Human Rights, said Kazakhstan will need to work before then to improve its election laws and strengthen media freedoms and the right to free assembly.

In an op-ed piece published last week in The Washington Post, Nazarbayev argued that economic prosperity should come before democracy.

“Without such strength, as we have seen repeatedly around the world, stability is put at risk and democratic reform can founder,” he wrote.

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The Federal Reserve’s “highly accommodative” monetary policy is partly to blame for rapidly increasing global commodity prices, said Kansas City Fed President Thomas Hoenig, who called on colleagues to raise the benchmark interest rate toward 1 percent soon.

“Once again, there are signs that the world is building new economic imbalances and inflationary impulses,” Hoenig, the central bank’s longest-serving policy maker and lone dissenter at meetings last year, said in a speech today in London. “The longer policy remains as it is, the greater the likelihood these pressures will build and ultimately undermine world growth.”

Fed policy makers, who affirmed plans on March 15 to buy $600 billion in Treasury securities through June, disagreed this week over whether to curtail the purchases, end them early or keep the program in place. St. Louis Fed President James Bullard said the plan may need to be cut by about $100 billion. The Boston Fed’s Eric Rosengren said that high unemployment and low core inflation mean it’s still too soon to withdraw record monetary support for the economy.

The Federal Open Market Committee “should gradually allow its $3 trillion balance sheet to shrink toward its pre-crisis level of $1 trillion,” Hoenig, 64, said in his remarks at the London School of Economics and Political Science. “It should move the U.S. federal funds rate off of zero and toward 1 percent within a fairly short period of time.”

Improving Trends

“Policy should acknowledge the improving economic trends and begin to withdraw some degree of accommodation,” he said. “If this is not done, then the risk of introducing new imbalances and long-term inflationary pressures into an already fragile recovery increase significantly.”

Other Fed officials, including Chairman Ben S. Bernanke, have rejected the idea that their policies fueled gains in commodity prices, pointing instead to rising demand among emerging-market economies and disruptions in supplies.

Bernanke, in testimony to Congress on March 1, said commodity prices “have risen significantly in terms of all major currencies,” and not just the dollar.

As of yesterday, crude oil jumped 35 percent over six months as turmoil in the Middle East threatened to disrupt supplies. Corn rose 38 percent, and cotton climbed 89 percent.

In its March 15 statement, the FOMC said the economic recovery “is on a firmer footing.” It said the effects of higher fuel and commodity costs on inflation will be “transitory,” and officials “will pay close attention to the evolution of inflation and inflation expectations business card.”

Adding Workers

Companies in the U.S. added more workers in March, a sign the labor market may be strengthening, data from a private report based on payrolls showed today. Employment increased by 201,000 workers, according to figures from ADP Employer Services.

Other data released this week point to challenges for the recovery. Confidence among U.S. consumers dropped more than forecast this month as fuel costs surged to the highest level in more than two years, according to the Conference Board’s confidence index yesterday. Another report showed home prices in 20 cities fell in January by the most in more than a year, raising the risk that sales will keep slowing.

Fed officials have purchased $1.7 trillion of mortgage debt and Treasuries through March 2010 to pull the U.S. out of the recession. The Fed’s second round of purchases, announced in November, has come under fire from Republican leaders in Congress who say it risks inflating asset-price bubbles and stoking inflation.

Eight Dissents

As a voting member of the FOMC last year, Hoenig dissented against the Fed’s pledge to keep rates “exceptionally low” for “an extended period,” the decision to reinvest proceeds from maturing mortgage-backed securities, and the current round of bond purchases. His eight straight dissents tied former Governor Henry Wallich’s record in 1980 for most dissents in a single year.

“You have to remember I’m not advocating tight monetary policy,” the regional bank president said in response to audience questions after his speech. “I’m advocating a non- crisis policy. Zero is a crisis policy that by itself should be temporary.”

A neutral level for the fed funds rate in the long run is likely more than 2 percent, Hoenig said. Neutral refers to a level for the Fed’s interest-rate target for overnight loans between banks that neither over-stimulates nor unnecessarily slows the pace of the economy.

“You can’t measure precisely neutral any more than you can precisely measure the long-term sustainable unemployment level, but you can estimate it over a long period,” he said. “I don’t know exactly what that is. Probably above 2 percent.”

Hoenig is retiring on Oct. 1 after a 20-year career as leader of the Kansas City Fed, one of the Fed’s 12 regional banks. The Kansas City Fed has begun a search for his successor.

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QUOTE OF THE WEEK

“The penalties imposed as a result of these violations should serve as a wake-up call to movie theater owners and other employers. Businesses that employ minors are legally and ethically obligated to abide by child labor standards and ensure youth are protected on the job.”

Job openings fell for the second straight month in December, a sign that hiring is still weak even as the economy is gaining strength.

The Labor Department says employers advertised nearly 3.1 million jobs that month, a drop of almost 140,000 from November. That’s the lowest total since September.

Openings have risen by more than 700,000 since they bottomed out in July 2009, one month after the recession ended. That’s an increase of 31 percent.

But they are still far below the 4.4 million available jobs that were advertised in December 2007, when the recession began.

Job openings dropped sharply in professional and business services, a category that includes temporary help agencies. They also fell in construction, manufacturing, and in education and health services.

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Since 1995, the St. Louis Equal Housing Opportunity Council has focused its efforts on investigating fair housing compliance, such as fielding discrimination complaints involving landlord and tenant disputes.

But two years ago, the council suddenly found itself facing a new problem: the inability of many African-Americans to tap local financial institutions.

As the recession deepened, access to credit evaporated for many people, but low-income communities were hit particularly hard. Subprime lenders, which had heavily targeted poor neighborhoods, and informal safety nets, such as short-term loans from relatives, disappeared.

“A lot of subprime and predatory lenders had entered markets where there wasn’t a lot of competition from banks, and there was a vacuum” when those lenders left, said EHOC’s assistant director, Mira Tanna, describing the inability of people who contacted the group to get mortgages and other loans from banks.

So the nonprofit council began prodding local banks to open more branches and provide increased financial services in low-income neighborhoods, a move it believes will help “unbanked” households - those without a checking or savings account.

With the help of federal regulators, EHOC has had some success opening the dialogue with bankers about expanding services. It has also been successful in getting banks to commit to expand loan programs to minorities and in low-income areas.

“They’ve had to push me along a little bit, but I’ve learned a lot from them, and I hope they’ve learned a little about the banking industry from me,” said Rick Bagy, president of First National Bank of St. Louis.

SCRUTINIZING LOANS

The lack of access to banking services in low-income neighborhoods has been a problem plaguing St. Louis and the rest of the country for decades, said Edward Lawrence, professor of finance at the University of Missouri-St. Louis.

“It’s hard to have economic development without access to financial services,” he said. “In some of these areas, there’s a lot of money not being put anywhere. They keep it at home, and that’s a waste.”

The EHOC began to tackle this problem in 2009, when it began looking closely at local banks’ loans to minorities and in low-income areas. The EHOC also brought together more than a dozen other nonprofits, creating the St. Louis Equal Housing and Community Reinvestment Alliance, to begin analyzing banks’ lending histories.

In their analysis, the alliance looked at banks’ lending history through the Home Mortgage Disclosure Act, which requires lending institutions to report public loan data. The EHOC’s four-member staff and the alliance members focused on the lending practices of banks up for review by federal regulators - either the Federal Reserve or the Federal Deposit Insurance Corp., depending on the type of bank - for compliance with the Community Reinvestment Act. The CRA was passed by Congress in 1977 to prohibit red-lining, a practice in which banks once drew lines on a map where they would open branches and offer services, often leaving out low-income areas. Banks with assets of at least $275 million are reviewed for CRA compliance every two years.

The analysis found that in many cases, the number of mortgages and other loans to minorities or in low-income areas was nonexistent or woefully low, prompting the group to file more than a dozen public comment letters with the Fed or the FDIC about banks’ lending practices.

“If we think there are deficiencies, we as a coalition will write a public comment letter to their regulators,” Tanna said.

The alliance’s efforts drew increased attention from regulators and banks after a 2009 FDIC study named St. Louis as the metro area with the highest percentage of unbanked black households in the country, at 31 percent. In contrast, only 1.1 percent of white households locally were unbanked.

Nationwide, 21 percent of black households were unbanked, while 3 percent of white households didn’t have a checking or savings account.

“The (FDIC’s) unbanked study took a lot of us by surprise,” Bagy said. “Frankly, I’m ashamed St. Louis has such a high level of unbanked people.”

OPENING TALKS

Since the study was released, the EHOC’s staff has held dozens of meetings with bank executives to persuade them to increase their investments in low-income and minority communities.

“Banks are not really going to do a lot unless you say something,” said Will Jordan, president of the EHOC. “What our hope is that once the banking community sees not just that we’re going to shine a light on them, but that they’re actually turning a profit.”

Regulators take the letters seriously. Todd Hendrickson, assistant regional director of compliance for the FDIC’s Kansas City region, which includes St. Louis, said as examiners are doing their pre-examination work, they use the information from public comment letters as a springboard for discussion with the bank about compliance with CRA.

And the U.S. Department of Housing and Urban Development relies on groups like EHOC, which HUD provides funding for, in assessing fair housing complaints, said Myrtle Wilson, regional fair housing director for HUD.

The alliance’s work is beginning to pay dividends. Two banks, Midwest BankCentre and First National Bank of St. Louis, each announced in recent weeks that they’ll open new branches in low-income areas.

Midwest BankCentre will open a branch this year in Pagedale in north St. Louis County, and First National Bank of St. Louis will open a branch in a yet-to-be-determined low-income area by mid-2012.

Both banks’ new branch announcements came after EHOC filed complaints with federal agencies in 2009.

Bagy met with Jordan and EHOC’s staff over the past year to try to figure out the root reasons why some people don’t use banks. First National, which has 14 branches, plans to offer $2 million in community development loans and investments in minority areas and $500,000 in discounted mortgage loans. Bagy said he has talked to several other bankers in St. Louis about the possibility of co-locating branches in a single location in a low-income area.

One other complaint EHOC filed with HUD, against Clayton-based Enterprise Bank, is pending. EHOC and Enterprise declined to comment as talks are ongoing.

Removing barriers

The Federal Reserve Bank of St. Louis also is focusing its attention on the unbanked and underbanked in the region. Underbanked individuals are those who have a bank account but also use alternative banking services, such as payday lenders with high interest rates.

The Fed sponsored a study by Washington University in the fall to determine why some people don’t use banks and barriers to accessing bank services. The study’s results were released Friday.

Allen North, the St. Louis Fed’s vice president of Consumer Affairs, said addressing the unbanked issue involves much more than just putting branches in certain places.

The Washington U. study surveyed residents of low-income areas who don’t use banks and found that distrust in traditional banks’ fees can be a deterrent.

The study found that with payday lenders, many thought that they knew what the fees were going to be but were less certain about bank fees, North said.

Also, some banks contend the branch model is an outdated one. As more people turn to online banking, the addition of bricks and mortar locations is less of a focus for some banks.

Meanwhile, the FDIC won’t issue an update on unbanked households until 2012.

Rance Thomas, president of the North County Churches Uniting for Racial Harmony and Justice, one of the alliance’s member organizations, said it’s too early to see a marked change in unbanked households from the group’s efforts. “We hope to see some improvement in the future,” he said. “It’s a slow process.”

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China’s December exports rose by double digits, likely fueling tensions with Washington ahead of Chinese President Hu Jintao’s visit to the United States next week.

Exports rose 17.9 percent, down from November’s 34.9 percent surge but still producing a $13.1 billion surplus, customs data showed Monday. Imports gained 25.6 percent, down from the previous month’s 37.7 percent, amid relatively strong Chinese economic growth.

The White House says President Barack Obama plans to push Hu over currency controls that Washington and other trading partners say are swelling China’s trade surplus and wiping out jobs abroad. Some American lawmakers want sanctions on Chinese goods if Beijing fails to ease controls that they say keep its yuan undervalued.

December exports rose to $154.1 billion while imports were $141 billion, data showed.

China’s trade growth rebounded sharply in November, suggesting global demand might be strengthening. But economists said part of the gain was due to Christmas-related spending in Western economies and growth was likely to weaken.

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Germany halted sales of poultry, pork and eggs from more than 4,700 farms Friday after animal feed was contaminated with cancer-causing dioxin, while authorities elsewhere rushed to figure out how far the tainted food had spread.

South Korea and Slovakia on Friday banned the sale of some animal products imported from Germany, while authorities in Britain and the Netherlands were investigating whether food containing German eggs _ like mayonnaise or liquid egg products _ was safe to eat.

Prosecutors in the northern state of Schleswig-Holstein have launched an investigation into the German firm Harles & Jentzsch GmbH, suspecting the company knew but failed to tell authorities that fat it had produced for use in feed pellets was tainted with dioxin.

Test results released Friday on the fat showed that some of it contained more than 77 times the approved amount of dioxin, the state’s agriculture minister said. Out of 30 samples tested so far, 18 contained more dioxin than legally allowed.

Dioxins are contaminants that typically result from industrial combustion and other chemical processes. Exposure to dioxins at high levels is linked to an increased incidence of cancer.

Authorities believe 150,000 tons of feed pellets for poultry and swine may contain the contaminated industrial fat produced by Harles & Jentzsch. They are trying to determine how widespread the contamination may be and how long the tainted feed has been in circulation.

The scandal broke after regular random testing revealed excessive dioxin levels in eggs from chickens in the west of the country earlier this week. More than 8,000 chickens were ordered slaughtered and tainted food fears spread to Germany’s famous pork industry.

Germany’s Agriculture Ministry said Friday it had no immediate reports of health problems connected to the contaminated food, but it was stopping the sale of products from certain farms as a precaution until more tests could be carried out. About 1 percent of the country’s farms have been affected so far.

“This strategy is resulting in a high number of closed farms, which in the course of testing and clarification in the coming days will be reduced,” Agriculture Minister Ilse Aigner said.

Test results are expected shortly on whether traces of dioxin have been found in milk or meat in two of the German states where the contaminated feed was delivered, Agriculture Ministry spokesman Holger Eichele said.

According to the most recent tests on eggs from farms where chickens consumed the contaminated feed, “two-thirds have been clean and about one-third have been right on the border of what is considered dangerous,” he said.

Chris Elliott, an expert in food safety at Queens University, Belfast, said so far the danger to consumers appeared to be limited.

“The concentrations detected in this case are above the legal tolerance limits, but only just. That tells you that the potential risk of harm from these eggs is very low,” Elliott said.

In Brussels, the European Commission said it was “closely monitoring the situation with the German authorities.”

In 1999, dioxin from motor oil was mixed into animal feed in Belgium, leading to widespread import bans and food being pulled from the market. The scandal prompted the European Union to establish maximum levels for dioxins in livestock feed in 2001.

Geert De Poorter, lab director general at the Belgian food safety agency, told The Associated Press he didn’t believe the German feed scandal would be damaging to public health.

“If we assess the figures we’ve got from Germany regarding tainted products and we extrapolate that to compare with the Belgian crisis, then we have a rough estimate of 50 to 100 times (less),” De Poorter said.

He further noted that measures to prevent such scandals have been considerably strengthened since Belgium’s dioxin scare, when Europe had virtually no controls and tracing tainted products took weeks, not days.

German farmers are demanding compensation for losses they are estimating at up to euro60 million ($79 million) a week, but Eichele said it was still too early to determine the overall damage.

“We first need to find out what led to this,” Eichele said. “It needs to be cleared, then we need to see how severe the damage is and then how we can best help those farmers.”

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