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Trust in business plummeted worldwide last year, as the global economic crisis sent financial institutions pleading for government support, leaving average people to question industry’s ability to bring prosperity, according to a survey released on Tuesday.

Some 62 percent of informed adults aged 25 to 64 told the Edelman Trust Barometer that they trusted businesses less than they had a year ago, with respondents in the United States and Western Europe more suspicious than those in emerging economies.

The biggest drops came in Ireland, where 83 percent of respondents said they had lost trust in business; in Japan, where 79 percent grew more wary; and in the United States, where 77 percent became more suspicious.

Trust evaporated as the world’s most severe economic crisis since the Great Depression caused millions to lose their jobs and wiped out billions of dollars of invested capital.

“This is not 2001-2003; this is not limited to the dot-com New Economy concept companies … This is General Motors; this is your big bank,” said Richard Edelman, president and chief executive of U.S. public relations firm Edelman, which commissioned the survey. “It’s affected you in the pocketbook and also it’s been the mainstays of the economy.”

Last year a downturn that started with investors losing confidence in obscure securities from the U.S. mortgage market snowballed, pushing Wall Street banks including Lehman Brothers Holdings Inc to their knees and even bringing the North Atlantic nation of Iceland to the brink of bankruptcy.

In the United States, just 38 percent of respondents aged 35 to 64 said they trusted business, down from 58 percent a year earlier and the lowest rating in the survey’s 10-year history. The reading is lower even than results in the wake of the dot-com bust and collapse of Enron Corp.

While the survey has been conducted for 10 years, this is the first time questioners have specifically asked whether their trust in business had declined over the past year fast payday loans. The survey has grown to include more countries and a wider age range of respondents over its history.

SUSPICIOUS EYE Toward BANKS, CARMAKERS

Americans were least trusting of the auto and banking industries — both of which last year turned to Washington for billions of dollars to tide them through financial crises.

The U.S. government has already paid out more than $270 billion through its Troubled Asset Relief Program to prop up financial institutions including Bank of America Corp, Citigroup and American International Group, and has made multibillion-dollar loans to automakers General Motors Corp and Chrysler LLC.

Respondents in emerging economies were the least likely to say they had their confidence in business shaken.

Just 21 percent of Brazilians said they had lost confidence in business last year, while 32 percent of Indonesians grew more doubtful and 49 percent of Indians and Russians reported a loss of faith in business.

“In the developing world the consensus would be: ‘Business has brought us prosperity,’ and I think America would be in that camp until this year, until Madoff and Lehman Brothers,” said Edelman, referring to the disgraced money manager who is accused of running a $50 billion fraud. “America has now moved into the realm of business skeptics.”

Still, unease with business could spread to the developing world as large corporate scandals begin to erupt there, he noted, saying: “I wonder if we did the study today in India how optimistic they would be after Satyam.” 

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As Bernard Madoff was telling his investors they were earning double-digit annual gains, it appears he wasn’t even investing their money, according to a CNN investigation of his reported trades.

Madoff, facing a criminal charge of securities fraud for allegedly cheating investors of tens of billions of dollars, sent monthly statements to clients detailing their supposed trades and the value of their accounts.

For decades, Madoff customers say, Bernard L. Madoff Investment Securities reported yearly returns of as much as 18%; in the past couple of years the reported gains were 10% to 12%.

But an analysis of statements obtained from Madoff clients finds the reported trades could not have yielded the profits Madoff claimed.

"These statements are probably fictional and pure imagination," said Michael Schwartz, Chief Options Strategist with Oppenheimer & Co., after reviewing Madoff’s supposed transactions.

In November, the last statement sent to investors, Madoff reported buying 35 well-known stocks, members of the Standard and Poor’s 100 Index.

At the same time he claimed to be locking in potential profit by selling Standard and Poor’s 100 Index Call Options (which give the right to buy the index at a certain ’strike price’), and protecting against downside risk by buying S&P 100 Put Options (which give the right to sell the index at a certain ’strike price’).

The Call and Put strike prices were close to each other, which would make the strategy a conservative one.

At best, veteran options experts calculate, it would have yielded returns of no more than a couple percentage points above Treasury-bills (the one-year T-bill currently yields 0.42%), rather than the double-digit returns Madoff reported.

"These strategies would have yielded 2% to 3%," said Greg McMurran, Chief Investment Officer of Analytics Investors.

And in today’s market, pros point out, the approach would likely suffer losses. "They’re losing money right from the inception," said Schwartz.

Investment pros also point out the market where Madoff would have had to have executed his strategy of selling S&P 100 Calls and buying S&P 100 Puts - the Chicago Board Options Exchange - never had the volume of trading Madoff would have required for the billions he was supposedly managing.

"The market wasn’t big enough for the types of volumes he needed," said McMurran, a fact the CBOE confirms same day payday loans.

Such revelations have been devastating for Larry Leif - a Madoff customer for three decades, who said he read his statements every month and thought he was doing well.

"They’re all fakes and basically everything I own is gone," said Leif, holding his Madoff paperwork.

Leif could have known earlier because trades listed on his statements are inaccurate. Madoff reported buying Microsoft stock for Leif last Nov. 12 at $21.81. In fact, Microsoft never traded above $21 that day! There are similar inconsistencies for other stocks like Citigroup, Coca-Cola and Apple that Madoff claimed to have bought.

Madoff in November also reported putting cash into Fidelity Spartan U.S. Treasury Money Market Fund. Fidelity says it hasn’t had a fund by that name since 2005.

"We’re not aware of any investments by Madoff in our funds on behalf of his clients," said Fidelity spokesperson Adam Banker.

Bernard Madoff claimed in a 2001 article that his firm executed trades for investment clients. "We’re perfectly happy making the commissions," Madoff was quoted in the hedge fund industry publication MARHedge. But the Financial Industry Regulatory Authority, which examined the books of Madoff’s trading firm every two years, found no evidence of trading for retail clients.

"There was no indication of trades being executed on behalf of the investment advisory. There was no indication of customer accounts being generated," said Herb Perone, spokesman for FINRA.

The criminal complaint against Madoff says he admitted to two senior employees of his firm - identified by well-placed sources as his sons Mark and Andrew - that "’it’s all just one big lie.’ and that it was ‘basically, a giant Ponzi scheme.’" In such scams clients are paid with money received from new investors. Madoff estimated the losses from the fraud to be at least $50-billion, according to the criminal complaint. But that figure may include phantom profits.

Madoff’s attorney Ira L. Sorkin refused comment on CNN’s analysis of Madoff’s reported trading. With regard to the Madoff scandal, Sorkin said, "This is a tragedy. We are cooperating fully with the Government investigation to minimize losses." 

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Asian memory chip makers face the prospect of yet another disastrous earnings quarter as a near two-year downturn savages the industry, and the outlook is glum as consumer demand for personal computers and gadgets slumps.

“It looks like memory chip prices have reached a bottom, but whether they will improve consistently in the future is not clear yet,” said M.S. Song, an analyst at HI Investment and Securities in Seoul.

The downturn in the memory chip sector, which started in early 2007 with an oversupply and collided with the global recession, is now widely seen as the sector’s biggest test.

Over the past few months, cash-strapped manufacturers have cut output in the hope of stemming the steep price drops that have come with the oversupply, but the weakness in demand has prevented any meaningful price gains.

Even market leader Samsung Electronics (), which had until recently managed to eke out profits from its semiconductor business, will post a steep loss in what once was its bread-and-butter unit, analysts said.

“Samsung may look almighty, but it is not immune to the collapse in demand and price plunge,” said Peter Yu, an analyst at BNP Paribas.

Some makers of dynamic random access memory (DRAM), used mainly in personal computers, have teamed up to cut costs, while some of the smaller players are likely to exit the business.

Prices of NAND flash chips, used mainly in digital music players and cameras, have improved slightly, but the small market size and the weak gains are not enough to rescue the memory sector as a whole faxless payday advance.

South Korea’s Samsung is expected to post a net loss of about 256 billion won ($186.1 million) in October-December, according to a Reuters survey of 11 analysts, its first-ever loss since it started to unveil quarterly figures in 2000.

For a table of results forecasts, see table below.

Samsung’s semiconductor business is expected to post an operating loss margin in the high single digit percent, from a 5 percent profit margin a year ago and in sharp contrast with the 31 percent profit margin posted in the fourth quarter of 2006.

Samsung is widely expected to post even worse numbers in the current quarter, and analysts including BNP’s Yu do not forecast a return to profit before the second half of the year.

In part responding to the unprecedented crisis, Samsung reorganized into two major groups, joining together its chip and display units and combining the telecom and media businesses.

The shakeup is seen as a signal Samsung plans to focus on profits while keeping a tight rein on costs and investments.

ELUSIVE DEMAND 

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House Speaker Nancy Pelosi said Wednesday that Democrats are close to finalizing the details of an economic recovery package.

Pelosi declined to give reporters any details of the bill, but said she is more confident that Congress would reach the mid-February deadline for getting a bill to Obama’s desk.

"It’s about four words — jobs, jobs, jobs, jobs," she said.

The overall price tag for the package is $800 billion to $850 billion, with $300 billion to $325 billion designated for tax cuts and $500 billion to $525 billion dedicated to infrastructure spending and aid to the states, according to a senior House Democratic aide.

It’s possible an announcement will be made on Thursday, the aide said.

Democratic leaders are still deciding whether to include a "patch" of the alternative minimum tax, which would increase the cost of the tax-cut section.

After complaints from Democrats, a tax credit Obama proposed for employers was dropped no fax payday loans. But another tax cut aimed at broadening businesses’ ability to write off their losses, called "net operating loss carryback," is still in the package, although it’s unclear if it will remain in the final bill.

Republicans support the carryback provision, but some Democrats on the Hill want to drop it and shift more money to spending on infrastructure.

There was a flurry of meetings on Capitol Hill Wednesday.

Obama’s incoming chief of staff, Rahm Emanuel, met with House Democratic leaders. Jason Furman, a top economic aide to Obama, held a morning meeting with House Democratic freshmen. And Democratic leaders held an afternoon meeting to work through final decisions on which tax cuts will be included. 

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As lawmakers head into the second week of debate over President-elect Barack Obama’s proposed economic stimulus plan, new details continue to shed light on what promises to be a sprawling and complex piece of legislation in American history.

Though many details are still lacking, the aim of the American Recovery and Reinvestment Plan is clear: rejuvenate the economy and create jobs by spending hundreds of billions of dollars on infrastructure, state budget relief, safety nets for the needy and tax cuts.

A recent analysis by Obama economic advisers Christina Romer and Jared Bernstein suggested that the proposed plan could save or create 3 million to 4 million jobs by the end of 2010.

Obama has not publicly put a price tag on his overall stimulus plan, but his advisers and economists have said they expect it to cost somewhere between $775 billion and $800 billion. With an expected deficit of $1.2 trillion in 2009, another huge spending effort has scared some lawmakers. Many others say the country must spend its way out of its current economic recession.

To promote his ambitious initiative, Obama has appeared on talk shows, met with members of Congress and made speeches. He has asked for bipartisan support for the measure, and analysts say he may achieve it after mixing in a substantial tax cut plan.

The plan proposes four main categories of measures: Investment in infrastructure, funds to cash-strapped states, expansion of safety net programs to protect the vulnerable, and tax cuts.

A key aspect to the the stimulus plan is investment in the nation’s infrastructure, which Obama expects to help create between 3 million and 4 million jobs.

Construction projects: Fund the rebuilding of crumbling roads and bridges. Obama wants to rebuild schools and modernize classrooms, labs and libraries.

Renewable energy: Double production of alternative energy in the next three years by modernizing 75% of federal buildings, investing in solar panels and wind turbines and by making cars more fuel-efficient. Obama also wants to modernize the nation’s electrical grid with a new, cost-efficient "smart" grid that can deliver electricity from clean, alternative energy sources.

Broadband: Expand broadband Internet lines across rural and urban areas of America.

Health care records: Modernize the health care system by computerizing all of the nations’ medical records in the next five years payday loan online.

Science, research and technology: Invest in scientific innovation to create new industries, new jobs and medical breakthroughs.

As states face budget shortfalls, Obama’s plan seeks to help states pay for Medicaid and unemployment benefits.

State fiscal relief will be allocated to prevent increases in state and local taxes, provided they use the money to maintain essential services like police, fire, education, and health care.

Obama proposes temporary programs to protect those most vulnerable to the effects of the recession.

Federal aid will go to temporary increases in food stamp spending, extensions and expansions of unemployment insurance, as well as health care coverage for unemployed.

The president-elect will propose roughly $300 billion in tax cuts for individuals and businesses, adding up to about 40% of the total stimulus plan.

Middle-class tax cut: An estimated 95% of low-income and middle-class families will receive a refundable tax cut equal to $500 a year for individuals and $1,000 for couples. The credit would essentially be a payroll tax credit, with companies able to reduce the tax they withhold from employees’ paychecks.

Small business write-offs: Obama would increase the amount of expenses small businesses can write off to $250,000 in 2009 and 2010 from the current $125,000 level.

Tax cuts for companies suffering losses: He would extend the so-called net-operating loss carryback to five years from two years. For businesses that book losses in 2008 and 2009, the provision allows companies to apply their losses to past and future tax bills so that they can get money back on taxes they’ve already paid or would otherwise have to pay.

How do you think Barack Obama’s presidency will affect you and your wallet? What can he do to help you - and others - in these trying economic times? E-mail us at realstories@cnnmoney.com, and your thoughts could be part of an upcoming story.  

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Seed giant Monsanto Co. on Wednesday said it more than doubled its fiscal first-quarter profit even with the global economy in a funk and tumbling prices for corn, soybeans and other agricultural commodities.

The Creve Coeur-based company reported earnings for the three months ended Nov. 30 that easily surpassed Wall Street estimates and lifted its earnings forecast for the year. The bullish report sent shares to their biggest one-day gain since October.

Monsanto has pledged to double gross profits from 2007 to 2012 and said its first-quarter results are proof that it can stay on track to meet those goals despite an economic slump.

Chief Executive Hugh Grant said higher yields from the company’s biotech seeds continue to win favor with farmers, even in the face of weaker commodity prices, and deep discounts and giveaways offered by rivals.

"Even in these uncertain times, farmers buy the best," Grant said during a conference call with analysts and investors.

Monsanto’s net income increased to $556 million, or $1 a share, from $256 million, or 46 cents, in the same quarter a year ago. Sales rose 29 percent to $2.65 billion on higher sales of the company’s Roundup weed-killer and corn seeds.

Excluding discontinued operations, Monsanto earned 98 cents a share. That figure includes a tax gain of 8 cents a share and far exceeds the average estimate of analysts polled by Thomson Reuters, who expected earnings 59 cents a share on sales of $2.44 billion.

The strong first quarter numbers led Monsanto to raise its full-year earnings forecast to a range of $4.40 to $4.50 a share. The previous range had been $4.20 to $4.40.

"However you look at it, it’s a blowout quarter," said Mark Gulley, an analyst at New York-based Soleil Securities. "Who else is going to have blowout numbers in this economic environment?"

The first quarter mostly reflect the company’s business in Latin America, where the planting season and seed sales start earlier personal loans. Monsanto’s much larger U.S. seed business is typically reflected in the second and third quarters.

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The company said it continues to gain market share in Latin America, where regulators have become more accepting of biotech crops and farmers are increasingly shifting to seeds that deliver bigger yields.

Separately, Monsanto announced Wednesday during an annual review of its research and development initiatives that it has submitted an application to the U.S. Food and Drug Administration for approval of drought-tolerant corn expected to hit the market in 2012.

Steve Padgette, the company’s biotechnology lead, said the first-of-its-kind corn, developed with Germany’s BASF AG, will give an edge to farmers in areas where water is scarce.

Monsanto said it’s also making advances on other new crop technologies, including SmartStax corn, which is designed to more effectively resist insects and weeds and will be introduced in 2010. New projects added to the company’s research pipeline include Roundup Ready sugarcane.

Bloomberg News contributed to this report.

jtomich@post-dispatch.com | 314-340-8320

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Federal Reserve officials, after taking the historic step of cutting the benchmark interest rate to as low as zero, are calling for greater government spending to help revive the U.S. economy.

San Francisco Fed President Janet Yellen said yesterday at an economics conference in San Francisco that “it’s worth pulling out all the stops” with an economic recovery package. Charles Evans, president of the Chicago Fed, told the same gathering he believes a “big stimulus is appropriate.”

The remarks underscore the view of many economists that unprecedented fiscal measures are needed to combat the yearlong recession, and come ahead of meetings this week between President-elect Barack Obama and congressional leaders. They also reflect the failure of Fed efforts so far, including record rate cuts, emergency lending programs and backstops for debt markets, to halt the crisis.

“There seems to be a consensus push to make it larger and larger,” Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut, said in an interview with Bloomberg Television, referring to the coming stimulus package. While “it certainly helps” and will “create some jobs,” the economy may not turn around until 2010, he said.

Yellen, Evans and other officials at the conference didn’t specify their recommendations for the size of the stimulus. Obama is asking that tax cuts make up 40 percent of a package that may be worth as much as $775 billion, a Democratic aide said yesterday. Yellen said she favors a “diversified package of policies” that includes government spending.

$500 Billion Question

“Fiscal stimulus has got to be an important part of the package” implemented by the federal government, Frederic Mishkin, a former Fed governor, said yesterday at the conference in San Francisco. The "$500 billion-plus question” is, “can they get it right?” he said.

The “financial shock” that caused the current crisis is “worse than the one that happened during the Great Depression,” he said. Mishkin left the central bank in August and returned to his post as a professor of economics at Columbia University.

The stimulus that emerges from talks between Obama’s aides and Congress will be much larger than the $150 billion proposal from lawmakers in October, when Chairman Ben S. Bernanke endorsed the concept of such a program. He noted then that the impact of the $168 billion stimulus a year ago had waned.

Tax Cuts, Spending

Obama, who has picked New York Fed President Timothy Geithner as his Treasury secretary, is honing a combination of tax cuts and spending on roads, bridges and other infrastructure to create or save 3 million jobs. Economists and a group of Democratic governors led by New Jersey’s Jon Corzine have called for a $1 trillion program. Obama takes office Jan. 20.

Bernanke, who took office in February 2006, shunned recommendations on specific tax and spending policies during his first two years as chairman, telling congressional members it was up to them to decide on fiscal matters. As the economic and financial turmoil worsened last year, the former Princeton University economist and Great Depression scholar advocated an increasing role for fiscal policy.

“The current downturn is likely to be far longer and deeper than the ‘garden-variety’ recession,” Yellen, who became chief of the San Francisco Fed in 2004, said in a speech no fax cash loans. “If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now.”

Clinton’s Adviser

Yellen was an adviser to the last Democratic president, Bill Clinton, serving as chairman of his Council of Economic Advisers from 1997 to 1999 after a stint as a Fed governor in Washington.

Last month, Fed policy makers reduced their target for the federal funds rate, or the rate banks charge one another for overnight loans, to as low as zero for the first time in an attempt to end the longest economic slump in a quarter-century.

The central bank is also shifting its focus to the amount and type of debt it buys, with announcements of new lending programs or asset purchases serving as the principal signals of policy.

Economic data released last week show U.S. consumer confidence sinking to the lowest level in at least 41 years and home prices in 20 major cities declining at the fastest rate on record. Another report showed that the decline in U.S. manufacturing deepened in December.

“The current downturn is likely to last much longer than previous ones,” said Harvard University economics professor Martin Feldstein, former president of the National Bureau of Economic Research. “So, fiscal policy is likely to be useful.”

Budget Burden

Still, such stimulus would increase the long-term burden on taxpayers, Evans said in his Jan. 3 speech.

“Federal debt held by the public is 38 percent of GDP, states have large unfunded liabilities and growing numbers of retiring baby-boomers will further pressure the unfunded liabilities for Social Security and Medicare,” Evans said.

University of Chicago professor Raghuram Rajan, former chief economist at the International Monetary Fund, said in an interview at the conference that he’s “in the crowd that is a little more skeptical” about a federal effort to rejuvenate the economy, especially a proposal to provide federal funds to states.

“The U.S. is of course central to the world economy, and so getting the U.S. back on track I think is very important,” Rajan said. “The real issue is cleaning up the financial sector,” he said, adding he wants to see from the Obama administration a “clear plan” of how to handle “weak” companies.

Auto Industry

The outgoing Bush administration has thrown a lifeline to the troubled automobile industry, granting loans worth $13.4 billion to keep General Motors Corp. and Chrysler LLC from bankruptcy for now. The U.S. Treasury also threw the door open to taxpayer financing for a widening array of companies and industries last week, drafting broad guidelines on aid to the auto industry.

Treasury guidelines would let officials provide funds to any company they deem important to making or financing cars. That left room for the government to provide money from the $700 billion Troubled Asset Relief Program beyond loans already committed to GM, Chrysler and GMAC LLC.

Mishkin said working as a Fed policy maker during the credit crisis is similar to serving in a wartime Pentagon.

The central bank is “fighting a war,” he said. Instead of deploying “tanks and guns,” it’s “monetary policy, credit policy and liquidity policy.”

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