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An omnibus housing rescue package, some elements of which have been debated in Congress for years, had been on track Wednesday to finally move toward enactment but hit a speed bump that puts in question when lawmakers will vote.

In a press conference Wednesday morning, Senate minority leader Mitch McConnell, R-Ky., said he and the Senate majority leader, Harry Reid, D-Nev., have reached a general agreement on "the most pressing amendments" and that the bill "is likely to pass this week."

But the Senate got bogged down by a procedural maneuver by one senator who insists the body include a series of energy tax breaks in the housing bill.

Banking Committee Chairman Christopher Dodd, D-Conn., said lawmakers were close to getting passage on the bill "if only we can get it to the floor."

The package would create a new government-backed program to help at-risk borrowers. It also would change how two of the biggest players in the mortgage market are regulated and alter key rules in how they may operate. Furthermore, it proposes measures intended to spur activity in the housing market.

Dodd said he and other leading senators were engaged in talks with House Financial Services Chairman Barney Frank, D-Mass., and House Speaker Nancy Pelosi, D-Calif., to iron out differences between the Senate version of the housing package and the foreclosure-prevention bill that the House passed in May.

Once those differences are worked out, the bill the Senate votes on would likely pass the House as well. What remains unclear is whether lawmakers can get a bill to President Bush on July 4, the deadline Dodd and Shelby have pushed for.

The White House has signaled that President Bush would veto the Senate bill in its current form. As a result, one element lawmakers are likely to discard is a provision that would give $4 billion in aid to states to buy up foreclosed properties - a measure the White House contends would do more to aid lenders than homeowners.

Even with amendments, the key measures likely to appear in the final bill are intended to prevent foreclosures, spur the housing market and increase oversight of Fannie Mae and Freddie Mac.

The provision that has garnered the most attention is one that would allow the Federal Housing Administration to insure up to $300 billion in new loans for at-risk borrowers if lenders agree to write down loan balances below the appraised value of borrowers’ homes.

The program, which would be voluntary for both lenders and borrowers, would be paid for in the Senate bill by the premiums borrowers pay and by fees from Fannie (FNM, Fortune 500) and Freddie (FRE, Fortune 500), the two government-sponsored enterprises that guarantee the purchase and trade of mortgages.

Critics of the plan say lenders are more likely to saddle the program with their worst loans - those most likely to foreclose. The Congressional Budget Office estimates that the program would end up guaranteeing 400,000 loans worth $68 billion, and of those, about a third would result in default. The CBO estimates the net loss from those defaults would be $680 million, or 1% of the total loan amounts guaranteed.

Another provision would raise the cap on the size of mortgages guaranteed by Fannie and Freddie to $625,000 from $417,000. The House version raises the limit to nearly $730,000.

The bill also calls for an independent regulator to oversee Fannie and Freddie, but Democrats are trying to amend the bill so that the regulator would not be put in place until the next president takes office.

Among the tax breaks in the legislation is a one-year tax credit for first-time buyers that would be worth up to $8,000. But in effect, the credit would work as an interest-free loan that the home buyer would eventually need to repay.

– CNN producer Ted Barrett contributed to this article. 

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Citigroup Inc. is about halfway through cutting 10% of the 65,000 employees in its investment banking unit, a person familiar with the job cuts said Monday.

The unit, as previously reported, plans to lay off about 6,500 workers in the division, according to the person, who spoke on condition of anonymity because the job cuts are still under way.

"More than half of those have already been eliminated," the person told The Associated Press.

A major portion of the remaining job cuts are happening this week, The Wall Street Journal reported Sunday, citing people familiar with the matter.

In total, Citigroup (C, Fortune 500) has announced 13,200 job cuts this year as it tries to recover from bad investments on mortgages and leveraged loans that cut billions of dollars from its portfolio.

Citigroup, which is the nation’s largest bank by assets and employs more than 300,000 people worldwide, posted a $5.1 billion loss in the first quarter and a nearly $10 billion loss in the fourth quarter of last year.

Many bank analysts expect the company to report another loss for the current quarter. Chief Financial Officer Gary Crittenden last week warned that Citigroup would sustain more substantial write-downs on debt investments known as collateralized debt obligations, or CDOs, in the second quarter.

Crittenden also said there will likely be more write-downs related to leveraged loans and bond insurers, and that total credit costs would be higher in the second quarter than in the first due mainly to increased reserves in the mortgage portfolio. 

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Countrywide Financial Corp shareholders vote on Wednesday to approve the largest U.S. mortgage lender’s purchase by Bank of America Corp, marking the demise of the company perhaps most closely associated with the nation’s housing bubble and subsequent collapse.

The vote will be held at Countrywide (CFC.N: Quote, Profile, Research, Stock Buzz) headquarters in Calabasas, California. A Countrywide spokesman said the meeting is closed to the press and is not being webcast.

While the outcome is not in doubt, the proceedings lend an aura of secrecy to the final days of Countrywide, which in 2007 made one in six U.S. mortgage loans — many of which would not get made today.

They also provide a contrast to last year, when Chief Executive Angelo Mozilo would spend three hours on earnings conference calls, proclaiming the company he co-founded in 1969 had a “much better chance of success” than any rival to survive the shakeout in housing and credit markets.

It won’t.

“Countrywide joined the crowd in participating in untested lending standards,” said Gary Gordon, an analyst at Portales Partners in New York. “It was also Countrywide’s mistake to retain substantial amounts of credit risk. It should have stayed a mortgage banker rather than become a mortgage investor.”

The merger may close by July 1. Mozilo, the son of a Bronx, New York butcher, faces a U.S. Securities and Exchange Commission probe into his sales of Countrywide stock before it cratered. He now also faces allegations that politically connected “Friends of Angelo” got favorable loan terms from Countrywide.

Countrywide investors got their own final kick in the stomach as the credit crunch began hurting Bank of America’s own shares. 

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Morgan Stanley remains wary of volatile markets, reducing trading risk as it waits for opportunities for a rebound from recent mortgage and leverage lending losses, Chief Financial Officer Colm Kelleher told Reuters on Wednesday.

“This has been an unusually stressed quarter. You only have to see how other people performed to realize you can swing the bat or retreat into your shell. I think we have done the prudent thing here,” Kelleher said, shortly after the firm announced a 57 percent drop in second-quarter earnings.

Fixed-income sales and trading revenue plunged 85 percent to $414 million, driven by declines from its interest rate, credit and currency businesses. Kelleher attributed much of the decline to lower client activity, although losses from wrong-way bets on mortgages and energy commodities further dragged on results.

“We took contrarian bets in the energy sector. We felt it was the right trade. It didn’t work. Sometimes that happens,” Kelleher said.

Morgan Stanley has been hard-hit by the breakdown across a number of financial markets, notably massive losses on mortgage securities. Since the end of last year, the second-largest U.S. investment bank has told investors it would “stay close to shore” until the market environment improved.

Average daily value-at-risk from trading rose to $99 million from $97 billion, but that rise mostly reflects the extreme volatility in a period that drove Bear Stearns out of business in March.

“We just did not think this was a quarter to take risk bets,” Kelleher said. “The opportunities have not been there on a risk-adjusted basis.”

Morgan Stanley instead has been shoring up its balance sheet and boosting cash balances. Total liquidity rose to $135 billion, while the firm issued $22.9 billion of debt this year. During the quarter, Morgan realized $1.43 billion of pretax gains from asset and stake sales. 

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JEFFERSON CITY, Mo.–Missouri’s governor and economic development officials headed to Montreal yesterday to persuade Bombardier Inc. to build an airplane assembly plant for its new regional jets in Kansas City, Mo.

Governor Matt Blunt has signed legislation authorizing up to $240 million (U.S.) in tax credits for Bombardier Aerospace to locate in the state. But the Montreal-based company also is considering putting the plant near its hometown.

Bombardier, the world’s third-largest civilian plane manufacturer, is looking for a place to build its new CSeries of 110- and 130-seat regional passenger jets.

The potential $400 million assembly plant and flight testing site at Kansas City International Airport could employ up to 2,100 with an average wage of $63,000.

Under Missouri’s proposal, Bombardier could receive up to $240 million in tax credits over eight years, beginning in 2013, based on the number of employees it hires at the plant.

Bombardier would repay the tax credits, plus a 5.1 per cent rate of return, by giving Missouri a fixed amount of money for each plane it sells from the plant.

The company has also been offered financial incentives by Ottawa and Quebec to put the assembly in the Montreal area. The company has said it’s considering its options, including building in the U.S.

Bombardier spokesman Marc Duchesne confirmed the Missouri delegation met with company officials, but declined to specify who was involved in the discussions.

"The only thing I can confirm is that Governor Blunt is meeting with Bombardier officials today in Montreal," he said in an interview from an air show in Istanbul.

The meeting follows a trip a few weeks ago to Kansas City by Bombardier chief executive Pierre Beaudoin.

The aircraft manufacturer is also in confidential discussions with other potential sites.

Bombardier hopes to announce plans for the aircraft in the coming months, possibly at next month’s Farnborough air show, after securing firm orders for 50 to 100 planes.

Associated Press

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VIENNA—Oil prices rebounded Tuesday amid supply concerns, growing global demand and tensions in the Middle East.

The Paris-based International Energy Agency lowered its forecast for global oil demand this year citing recent price surges, and predicted that oil product demand in 2008 would grow by 0.9 percent, or 800,000 barrels a day. That is down from the 1.2 percent, or 1 million barrels, the IEA forecast earlier, but investors had expected an even bigger cut, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

“I think the market was looking for a bigger amount of demand destruction in that report,” Flynn said.

The IEA, in a monthly report, also had “disturbing” things to say about Chinese demand, Flynn said. The IEA, an energy advisor to Western industrialized nations, raised estimates for Chinese oil demand, citing reconstruction work in the aftermath of May’s earthquake. The IEA also suggested non-OPEC oil producing nations are having a tough time meeting demand.

Light, sweet crude for July delivery rose $3 to $137.35 a barrel by in electronic trading on the New York Mercantile Exchange.

Also supporting prices was a Tuesday attack on oil-industry security vessel, the second this week, in southern Nigeria. At least one person was killed. Nigeria is a major U.S. oil supplier. Militant attacks have cut into that nation’s oil output.

On Monday, crude futures pulled back from last week’s record highs, falling $4.19 to $134.35 a barrel on the New York Mercantile Exchange, after the dollar strengthened and Saudi Arabia voiced willingness to meet any increase in demand.

While prices were down or steady for much of the electronic trading day, analysts had forecast that the breather would be short-lived.

“The market is taking a breather after the very sharp gain last week but it’s undeniable we have a strong uptrend in the oil markets. The market is still prone to further price spike,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Shum said supplies could be hit if the current Atlantic hurricane season hurts production in the Gulf of Mexico. There are also still jitters over an Israeli cabinet minister’s warning of an attack on Iran if it didn’t halt its nuclear program, which sent oil prices sharply up Friday, he said.

That prospect appeared to dissipate over the weekend as Israeli officials distanced themselves from those comments.

Still, “given the sharp gains we have seen, a further spike to the $150 level is possible,” Shum said.

The jump began Thursday after European Central Bank President Jean-Claude Trichet suggested the bank could increase interest rates in July to counter rising inflation. That sent the dollar falling against the euro. Some investors buy commodities such as oil as a hedge against a weakening dollar.

Crude futures surged 8 percent Friday, touching an all-time high of $139.12 a barrel in after-hours trading.

Prices retreated Monday after Treasury Secretary Henry Paulson said he would not rule out intervention to stabilize the U.S. currency. In London, the euro traded at $1.5506, down from $1.5652 late Monday in New York.

In other Nymex trading, heating oil futures jumped by more than 9 cents to $3.968 a gallon (3.8 liters.) Gasoline prices were up by close to 7 cents at $3.4605 a gallon while natural gas futures rose by nearly 12 cents to $12.72 per 1,000 cubic feet.

July Brent crude moved up $2.75 to $136.6763 cents on London’s ICE Futures Exchange.

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NEW YORK – Oil prices extended their drop from record highs today, falling to the US$122 level after the U.S. Energy Department said gasoline demand fell sharply last week.

Retail gas prices in the United States, meanwhile, rose to a new record above $3.98 a gallon and are likely to hit $4 in coming days, although oil prices have retreated nearly $13 from last month's record levels.

In its weekly inventory report, the department's Energy Information Administration said demand for gasoline fell by 1.4 per cent over the last four weeks. Meanwhile, gasoline inventories rose by 2.9 million barrels last week, more than three times the increase analysts polled by energy research firm Platts had expected.

Concerns about demand have helped pull oil down from its May 22 high of $135.09. Those concerns were exacerbated today by the EIA report and by moves by India and Malaysia to cut fuel subsidies, effectively raising prices. Many investors believe subsidy cuts will choke off demand for fuel in the developing world.

"There's definitively smaller demand, (and) you have subsidies that are going to fall in energy consuming nations," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com. "The psychology is just changing."

Light, sweet crude for July delivery fell $2.01 to settle at $122.30 barrel on the New York Mercantile Exchange after earlier falling as low as $121.84. It was oil's lowest settlement since May 6. July gasoline futures plummeted 15.74 cents to settle at $3.1951 a gallon.

The EIA also said inventories of distillates, which include diesel and heating oil, rose by 2.3 million barrels. Investors shrugged off an unexpected decrease in crude oil inventories.

At the pump, meanwhile, the national average price of a gallon of regular gas in the United States rose half a cent overnight to $3.983, according to a survey of stations by AAA and the Oil Price Information Service. Prices are likely to reach $4 for the first time regardless of what happens with oil prices, said Fred Rozell, retail pricing director at the OPIS, which is based in Wall, N.J.

"I think there's enough momentum that we'll hit it," Rozell said.

Prices are already higher than $4 in many parts of the country, and average more than that in 13 states and the District of Columbia.

In Canada, the average pump price was C$1.33684 per litre, according to price-watching website Gasbuddy.com.

While the cost of oil accounts for the vast majority of the price of a gallon of gas, other factors – including gasoline supplies and refining margins – can also affect the price. Refining margins are slim because oil prices have nearly doubled over the past year, while gas prices have risen only 27 per cent.

While oil prices have retreated, refiners, gasoline wholesalers and retailers remain under pressure to raise prices to improve their margins, analysts say. That pressure is why gas prices are likely to go higher.

Still, Rozell said, if gas prices get to $4 nationally, they aren't likely to stay there for long: "I think we've pretty much petered out unless there's an event that affects supply."

Even if oil prices remain where they are, gas prices will likely fall five cents to seven cents over the next week, though they may first briefly hit $4, Cordier said.

Diesel prices are already falling; the average national price of a gallon of diesel in the United States slipped 0.2 cent overnight to $4.778, according to AAA and OPIS. Diesel prices peaked at a record $4.792 on May 30, and are averaging more than $5 in some areas.

While they may be falling now, sky-high diesel prices have boosted the price of food and other goods carried via truck, train and ship. Prices of other types of fuel, including jet fuel, also have spiked this year. Today, United Airlines said it would cut 1,100 jobs and cut 100 airplanes from its fleet due to high fuel prices.

In other Nymex trading, July heating oil futures fell 9.38 cents to settle at $3.5458 a gallon, while July natural gas futures rose 15.8 cents to settle at $12.379. Natural gas futures were again boosted by forecasts for hot temperatures in parts of the U.S. this weekend, which could boost demand from utilities for electricity generation.

In London, July Brent crude futures fell $2.48 to settle at $122.10 a barrel on the ICE Futures exchange.

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CHARLOTTE, N.C.–Wachovia Corp. chief executive Ken Thompson was pushed out yesterday as head of America’s fourth-largest bank, becoming the latest financial services executive to be ousted amid turmoil in the U.S. housing market.

Thompson joins Stanley O’Neal, late of Merrill Lynch & Co., and Charles Prince, of Citigroup Inc., who both presided over huge losses from exposure to bad mortgages, and subsequently were forced from their perches at the top of Wall Street institutions.

Also yesterday, Seattle-based Washington Mutual Inc. stripped Kerry Killinger of his chair title, although he remains chief executive officer at the largest U.S. savings and loan.

Thompson’s dismissal comes after several withering months of criticism from shareholders.

Wachovia, based in Charlotte, N.C., said last month it lost $707 million (U.S.) in the first quarter, nearly doubling losses it reported earlier. When the bank announced it would cut dividends, it was Thompson, having promised earlier that that would not happen, who became the target of shareholder anger.

Thompson will not receive any incentive pay for fiscal 2008 but, according to a Securities and Exchange Commission filing, he will get severance of $1.45 million and accelerated vesting of $7.25 million in restricted stock.

"A lot of that is in place before these announcements come," said Sandler O’Neill & Partners LP analyst Kevin Fitzsimmons. “Unfortunately, it’s standard fare."

Wachovia shares closed in New York yesterday down 40 cents to $23.40, recovering from a tumble to near 13-year lows at $22.72 in early trading, after a broad descent in the European banking sector.

The board said it asked Thompson, 58, to retire and replaced him, on an interim basis, with chair Lanty Smith last month.

"It has been an honour to serve this great company for 32 years and to lead it for the past eight years," Thompson said in a statement issued by the bank. Smith said yesterday this was a step precipitated by no single event but rather a "series of previously disclosed setbacks."

"It’s been our hope and expectation that Ken would serve for several more years," Smith said in a conference call with reporters. "We certainly wanted Ken to succeed."

Smith said no other senior management changes were planned. A search for the next CEO began right after the board met Sunday, he said.

Wachovia was forced to set aside $2.8 billion to cover losses from problem loans.

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