Money world

The Treasury Department said Wednesday it is selling $6 billion worth of the $41.8 billion in common stock it holds in insurance giant American International Group Inc., which received the biggest bailout of the financial crisis in 2008.

The stock sale is a step by the government toward disentangling itself from AIG. It still owns 77 percent of the company’s common shares. Treasury said AIG plans to buy as much as $3 billion of the stock being sold.

Treasury also said it has a deal with AIG for it to repay the government’s remaining $8.5 billion preferred-stock investment in the company.

A price for the common shares wasn’t specified. AIG shares closed at $29.45 in trading Wednesday. The share price at which taxpayers would break even on their AIG investment is about $28 or $29.

The government stepped in with $182 billion to rescue New York-based AIG from collapse in the depths of the financial crisis. Treasury has recouped $18 billion of the $68 billion it provided the company through its Troubled Asset Relief Program, or TARP. The remainder of the money came from the Federal Reserve Bank of New York. AIG has repaid all but $17.5 billion of those loans.

Treasury made an initial sale of AIG stock in May 2011. The sales were expected to resume after the value of AIG shares increased. Last year, the stock lost nearly half its value, partly fueled by government sales of the company’s stock and a volatile stock market.

Under the agreement for repaying the $8.5 billion preferred-stock investment plus interest, $5.6 billion will come from AIG’s newly announced sale of part of its stake in Hong Kong-based insurer AIA Group Ltd., $1.6 billion from a sale of securities by the New York Fed, and another $1.6 billion from AIG’s sale of its American Life Insurance Co. subsidiary.

“The people of AIG have achieved another significant milestone in our progress toward our goal that American taxpayers recoup their entire investment in AIG at a profit,” AIG President and CEO Robert Benmosche said in a statement.

AIG had a $19.8 billion profit in the fourth quarter of last year, nearly all of it due to a tax-related accounting gain. The company also earned $17.8 billion for 2011, its second straight year of profits.

Despite the two years of profitability, AIG’s recent financial results have been inconsistent. Over the past two years, only half of its quarterly reporting periods have been profitable.

Treasury said it has hired Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC as joint coordinators for the common stock sale.

Source

U.K. house prices fell in February for a third month in four, as economic uncertainty weighed on demand for housing, Halifax said.

Prices (UKHB3MYR) dropped 0.5 percent from January to an average 160,118 pounds ($253,400), the mortgage unit of Lloyds Banking Group Plc (LLOY) said in a statement in London today. From a year earlier, values were down 1.6 percent.

While inflation is cooling, a recovery in consumer confidence is being kept in check by rising unemployment and concern about the impact of Europe

The shopping carts at Ross Dress for Less have long, skinny poles on them so they don’t easily fit through the door — and don’t face the risk of never finding their way back inside.

It’s one of a number of ways that the California-based off-price retailer, which is making its St. Louis area debut, tries to shave off costs.

So when the company officials boast about “no frills” stores, they mean it. The stores, which are similar in concept to T.J. Maxx and Marshalls, also have centralized checkouts and simple displays.

Ross says it’s able to offer 20 to 60 percent off department store prices because of making those choices as well as by negotiating with manufacturers and buying opportunistically.

The retailer’s first stores in the St. Louis market have gone into the former Linens ‘n Things locations in Chesterfield and Fairview Heights. The stores had a soft opening on Friday.

Fred Shuey, the company’s vice president for the Midwest region, said Ross is very excited about coming to St. Louis and sees a lot of room for expansion here.

“This is two of many” for the St. Louis region, he said at a breakfast for fashion bloggers.

So how many?

“A lot,” he said vaguely, smiling.

Most Ross Dress stores are in the West and the South. But the company is now making inroads to the Midwest, starting with 12 stores that opened last fall in Chicago, one of its first new markets in about a decade, Shuey said.

“When you look at a map, we’re in the form a smiley face – from Seattle to Princeton, New Jersey,” he said. “Now we’re going to fill in the rest of that smiley face.”

Ross is one of a number of discount-oriented retailers that have been growing at a time when many other retailers have been in hibernation or closing stores.

It has added more than 200 stores in the last few years and is now up to more than 1,040 locations, making it the largest off-priced store in the country.

Here’s a couple of other interesting factoids I picked up at the breakfast and during a store tour:

– Ross stores get merchandise deliveries five days a week. So they have a “treasure hunt” feel to them.

– Each store usually starts out the same in terms of the merchandise mix. But after about 60 days, they will begin altering the balance to cater to what has done well in that particular store.

– Only about 75 Ross stores have fine jewelry. Neither of the local stores do, but they do have costume jewelry.

– Women make up about 80 to 85 percent of its shoppers. So not surprisingly, the men’s section is fairly small.

CRESTWOOD COURT MAKEOVER

A bowling alley, a new movie theater, and restaurants could fill the space currently occupied by the mostly-vacant Crestwood Court.

The property’s owner, Centrum Properties, met with Crestwood city officials this week to chat about its redevelopment plans to turn the shopping center into an entertainment-based destination.

Petree Eastman, Crestwood’s city administrator, said the new tenants aren’t set in stone yet, but Centrum officials told the city that they are close to signing a couple of deals.

“It will not look or feel like the old Crestwood mall,” Eastman said. “I think parts of it will be razed to give it a fresh face-lift. I think they want to have more of a pedestrian outdoor component. But until they sign their various renters, we can’t know what it will look like definitively.”

She said Centrum folks indicated they hoped to bring a redevelopment plan with more details before the city at a board meeting the last week of March.

Of course, the mall already has an AMC movie theater. But it sounds like the movie theater being proposed as part of the redevelopment plans would be more upscale and modern.

DEALS SITE BACK UP

The St. Louis Daily Deals website – stlouisdailydeals.com – was indeed put back up on Thursday as its operators had promised.

“We are sad to close our website and thank you for your support of St. Louis Daily Deals,” the site says in bold letters.

It goes on to recommend that consumers print out any unused coupons in their account. But it doesn’t say anything about whether or not those vouchers will be redeemable since many vendors have said they will not honor them until St. Louis Daily Deals pays them what is owed to them.

The daily deal site recently shut down amid financial difficulties, leaving consumers and merchants in the lurch. The operators have pledged to settle up all of its accounts, but hasn’t given a timeline for doing so.

So we’ll have to wait and see if they follow through on their promise.

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Consumers earned a little more in January and spent most of the extra money. The gains should keep the economy growing at a modest pace.

The Commerce Department said Thursday that consumer spending increased 0.2 percent in January. That’s also better than December’s reading of no change.

Americans’ income rose 0.3 percent, the second straight monthly increase.

Income barely kept pace with inflation last year. So the increases are a positive sign that consumers will have more money to spend.

Stronger hiring in December and January, rather than pay raises, helped boost income. Still, that trend should fuel more consumer spending and support solid growth for the economy in coming months. Consumer spending accounts for 70 percent of economic activity.

Economists are worried that Americans might cut back on spending if their paychecks don’t increase this year.

Incomes were much higher in the second half of last year than previously thought, the Commerce Department said Wednesday. Still, even with the revision, after-tax incomes adjusted for inflation rose only 1.3 percent in 2011. Except for the recession year of 2009, when incomes fell, that’s the smallest annual growth in incomes since 1991.

Consumer spending rose 2.1 percent in the final three months of last year, and economists expect a similar increase in the current quarter. That should help the economy expand at about a 2 percent pace in the January-March period.

Most economists expect growth should rise to 2.5 percent this year. That would be healthy in most years but is modest coming after the worst recession since World War II.

The increase in income stems from more hiring, greater overtime and small pay gains. Employers added 243,000 jobs in January, the most in nine months. The unemployment rate has fallen for five straight months, to 8.3 percent.

Manufacturing workers worked more overtime in January. And average hourly earnings rose 4 cents to $23.29, the Labor Department said earlier this month.

Other changes may also boost incomes. About 55 million Social Security recipients will get a 3.6 percent increase in their benefit checks, intended to offset rising inflation last year.

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In the city of St. Louis, there is no bigger land-owner than the city of St. Louis.

Over the past four decades, the city has accumulated more than 11,000 parcels of real estate that no one else wants, long-empty houses and thousands of vacant lots, big downtown buildings and even a 30-acre cemetery. It sells some parcels every month and accumulates more after five annual tax sales. But most of the land just sits, waiting.

Last week’s deal to sell more than 1,200 parcels on the near north side to developer Paul McKee highlights the potential for this “land-banking.” McKee, who already owns 800 parcels in the area, will be able to market more and larger sites to potential tenants for his massive NorthSide Regeneration project under the deal. It’s progress, says the city.

But as land banks bloom from New York to Nebraska, St. Louis’ experience illustrates two simple facts: That this practice is no panacea for blight and that any real progress requires lots of patience.

St. Louis has been banking land since 1971. Residents and businesses were fleeing for the suburbs, leaving behind crumbling buildings with unpaid taxes. The city wanted a central repository to hold that property, clear the title, maintain it, and sell it to someone to redevelop. The Land Reutilization Authority — the nation’s first city-run land bank — was born.

LRA started taking properties that went unsold at St. Louis sheriff’s office tax sales, and its inventory quickly ballooned into the thousands. Despite a constant churn of sales, inventory has stayed high ever since. Today, the LRA and two smaller land banks own 11,136 parcels, more than two square miles of ground; they’ll still own 9,900 after the NorthSide sale closes. Mowing and maintaining all this costs $2.7 million a year.

The authority has some success stories, such as the old City Hospital — now high-end condos — and large-scale rebuilding in the Gate District and Gaslight Square. But it still has vast holdings, especially in battered sections of north St. Louis, neighborhoods such as The Ville, Hyde Park and Wells Goodfellow, where as much as one-fifth of all real estate is owned by LRA. Much of the land is vacant lots, but there are also plenty of empty buildings, with crumbling roofs, patchy walls and the LRA’s trademark dark red boards over the doors.

The trouble, said Otis Williams, who oversees the authority for St. Louis Development Corp., is that there just isn’t much interest in these properties, even at a price tag of just a few thousand dollars.

“The goal is to get each of them back on the tax rolls,” Williams said. “The problem we have is the market. There’s a real lack of demand.”

But some say the LRA holds on to too much property for too long.

Every month, at a meeting in a downtown office building, the LRA considers offers. Typically it receives dozens. Some are from people who want to buy the plot next to their house for a sideyard. Some come from rehabbers who want to turn a shell into apartments, or people looking for an affordable way to purchase a home.

In a report last year, free-market thinktank the Show-Me Institute combed through eight years of LRA records, and found that the agency rejected more than 40 percent of purchase offers, often saying the land was being held for “future development.” In some cases, LRA turned down offers for the same property several times.

That seems to run counter to the goal of putting property back on the tax rolls and getting it redeveloped, said Audrey Spalding, the Show-Me policy analyst who led the study.

“When you turn down an offer to purchase property today in the hopes of a future, better development tomorrow, you are turning down a certain offer, and property tax revenue, in the hopes that a future offer will materialize,” Spalding said. “In this economy, such a bet is ill-advised.”

Williams said the LRA weighs a number of factors, including the potential for future development and whether the buyer’s plan for the site fits the city’s plan for the area no fax pay day loan. But, he said, a major reason why sales get turned down is because the buyer doesn’t have the resources to redevelop the property.

“We’re not going to sell to just anybody,” he said. “They’ve got to be able to do something with it.

If not, he said, it’s quite possible that the land will just wind up back with LRA a few years down the road, maybe in worse shape than it is now. The LRA has changed policies in one regard, though. Williams said it has tried to sell more land as side yards, and to neighborhood groups that want to create community gardens and parks.

‘BANKING’ TREND

In the meantime, new land banks — often with more powers than the LRA — are sprouting up across the country.

Michigan now has 41 land banks, and Ohio has expanded its land-banking programs. New York is readying to launch them in five cities this year, proposals are before state lawmakers now in Pennsylvania, Georgia and Nebraska, and Kansas City officials are asking the Missouri General Assembly to create one there.

“More states are really recognizing that vacant and abandoned properties impose tremendous costs on their cities and their neighborhoods,” said Frank Alexander, a law professor at Emory University in Atlanta who works on land bank legislation. “(Land banks) can step in where there’s no market.”

Most of these new banks would be more powerful than the LRA, with access to more funds to rehab or demolish buildings and clean up sites for reuse. New York law gives land banks the right to all land that is seized for unpaid property taxes, not just the sites left over after investors have picked over sheriff auctions — which is how St. Louis’ LRA accumulates most of its land.

That’s huge, said Dan Kildee, who developed the land bank in Genesee County, Mich. — home of Flint — because it means land banks get some good properties to work with, too.

“The land bank gets to be the smartest and luckiest speculator,” Kildee said. Then they can market the properties or partner with nonprofit groups or developers to rebuild them. And more sales means more money for demolition of properties that can’t be rebuilt.

Funding demolition has been a challenge in St. Louis. It costs about $8,000 for LRA to knock down a structure, and it owns roughly 2,000. In recent years, the agency has demolished 200 to 240 buildings a year, though that number plunged to 142 in 2010 because of budget cuts. Other cities — most notably Detroit — have used federal money designed for foreclosure relief to knock down thousands of houses. St. Louis used most of that money on rehab work. The LRA does, though, plan to spend much of the $3.2 million its getting from McKee on much-needed demolition.

Take the 3300 block of Blair Avenue in Hyde Park, where the shells of three LRA-owned brick four-families sit crumbling in a row, their roofs gone and brick walls caving in. Across the street, another LRA house, this one of blue shingles, sits empty, its roof rotting. On a recent afternoon, a boy played in a fort built of mattresses in the yard. Otherwise the street was dead.

Just a few blocks away, construction crews are working, rehabbing 27 buildings scattered across several blocks in a project called Hyde Park South. When they’re done, there will be 50 affordable apartments.

Most of the buildings were bought from the LRA, said Michele Duffe, a development consultant who is working on the project, and the former LRA director herself. Duffe’s firm and the development arm of nearby Bethlehem Lutheran Church have built 206 units of housing in the neighborhood, with 40 more in the pipeline.

Buying all those parcels from individual owners, instead of a land bank, said Duffe, would have been impossible.

Source

As any driver knows, rising gas prices can put a dent in a household budget. For small business owners, it can hurt _ or even wipe out _ profits.

The recent rise in the price of gas is pressuring business owners to find ways to protect their earnings. Some of their strategies are simple, such as using GPS devices to track fuel usage. Others are drastic _ like moving manufacturing operations to the U.S. from Asia.

Small business owners have navigated this road before _ most recently in 2008 when the price of gas rose to a national average of $4.11 a gallon. But gas is expected to surpass that record and reach $4.25 by late April. And even if the price follows its usual pattern of gradually falling back from a high reached in the spring, it will still be expensive for the rest of the year.

Here’s a look at how some companies are coping:

A DIRECT HIT

Chris Hundley runs Limousine Connection, a 31-car limousine service in Los Angeles. He likens the surge in gas prices to “being run into by someone without insurance” _ there’s no way to avoid having to pay.

In 2007 Limousine Connection began adding a 3 percent fuel surcharge to its bills to offset the cost of gas. Since then, the rate has crept up to 10 percent. Hundley says customers have come to understand the necessity for a fuel surcharge, and prefer it to a rate increase.

But the company doesn’t start charging extra on its base hourly rate the minute gas prices rise. For customers that have contracts with Limousine Connection, he’ll wait 30 days, and until prices have gone up 10 percent, before raising the surcharge. If prices rise, say, only 7 percent, he won’t raise it. “We are eating it _ it’s the cost of doing business,” he says.

Hundley also tracks fuel usage. Speeding or idling for extended periods wastes gas, so Hundley monitors driver behavior using the GPS systems installed in his fleet. When the company detects wasteful patterns a manager sits down with the employee to explain how he can help the company keep down fuel expenses. Limousine Connection is so serious about saving gas that, in some cases, it has issued verbal warnings to some drivers.

Hundley also has added more fuel-efficient vehicles to its fleet. The company has some hybrids, and all except a few Mercedes use regular, rather than premium, gas.

CHEAPER TO MAKE IT IN THE U.S.

The rising cost of jet fuel has convinced Seesmart Inc. to make the commercial and household lights that it sells in U.S. factories instead of Asia. Ray Sjolseth, president of the Simi Valley, Calif.-based company, says that the savings he used to get from manufacturing overseas is being wiped out by higher air freight rates.

Sjolseth says his customers tend to have last-minute deadlines. “We don’t have a choice but to air freight the products,” he says He estimates that 80 percent of his goods are shipped by air and that rising rates are raising his manufacturing costs between 5 percent and 8 percent.

So Sjolseth’s solution is to move his manufacturing to the U.S. He currently has one factory in California and expects to have one in Chicago operating by the end of the year. He estimates that a year from now, he’ll save between 5 percent and 10 percent because he won’t be getting shipments by air.

SHIFTING RESOURCES

Higher gas prices are cutting into travel budgets and that’s hurting Towne Park Systems’ revenue. The Annapolis, Md., company runs valet parking services for hotels across the country. These days, fewer guests are parking cars in hotel lots so the hotels don’t need as many attendants.

Town Park responded by shifting some staffers to different jobs, says Kirk Pozadzides, the company’s general manager. The company also provides concierge and other services for hotel guests. Now, the employee who parks cars may shift to working as a concierge.

The company also added “park and fly” services. Towne Park finds unused spaces in garages near airports, and shuttles passengers to airline terminals. It costs a traveler less to use the service than it does to park in an airport lot, Pozadzides says.

“You have to find creative ways to artificially drive revenue,” he says.

WORKING WITH VENDORS

The surge in gas prices in 2008 was a shock for Capriotti’s, a chain of sandwich shops based in Las Vegas. CEO Ashley Morris says the company didn’t pay much attention to a clause in his company’s contracts with distributors that said Capriotti’s would pay more for deliveries if the price of gas went up. So when gas soared that spring and summer, the company was paying far more than it expected for food, paper products and other supplies.

“It hit our business fairly hard,” Morris says.

Now, the surcharge rises and falls based on the price of diesel gas. This time around, he says, Capriotti’s won’t suffer. “We heavily negotiated a sliding scale.”

DELIVERY DILEMMA

Companies that make deliveries are also hurting. Ricky Eisen’s catering business in New York has two trucks and a van. She used to pay $40 to $60 a day for gas for each truck. Now it costs her $72 to $76. And she pays more to vendors for deliveries.

“I’m getting squeezed at both ends,” says Eisen, owner of Between the Bread. “It’s enough to cut a dent in the profit.”

Eisen held out for a long time _ until March 2011 _ before she began tacking on fuel surcharges for her deliveries. She has charged 5 percent extra. Now, she says, “I’m thinking as fuel prices rise, I’m going to have to increase the percentage. Right now, I want to keep it where it is.”

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A few members of the Federal Open Market Committee meeting said the central bank may soon have to consider more asset purchases, while others said the economic outlook would have to deteriorate first.

A few members said economic conditions

A number of top Federal Reserve officials likely saw a need for additional monetary easing at the central bank’s meeting last month, although there are few signals the central bank will move soon.

Minutes from the Fed’s January meeting, which will be released on Wednesday, should offer more insight than usual into where officials stand on the question of whether more bond purchases are warranted to help a still-frail economy.

While the minutes always give a flavor of the policy debate, the central bank for the first time will provide “qualitative” details on officials’ views on the Fed’s near-record $2.9 trillion balance sheet.

This new information — a counterpart to the first-ever interest rate projections released last month — could suggest a greater willingness to ease further than was evidenced following the meeting. Last month, the Fed said it would likely leave rates near zero until at least late 2014, but offered no details on how it should handle its asset holdings.

The prospects for further easing appeared to be dampened by the latest employment figures, which showed a healthier job market than economists had expected. Still, many feel the economy is unlikely to gain enough vigor this year to satisfy the Fed, and they look for a third round of quantitative easing, probably through purchases of mortgage bonds.

“I doubt the qualitative information from participants on the balance sheet would sway decisively on the near-term prospect of QE3,” said Thomas Lam, an economist at OSK-DMG. “While the hurdle for QE3 seems lower, I don’t view this policy option as imminent at this time.”

Speaking before a group of home builders on Friday, Fed Chairman Ben Bernanke stayed away from any explicit references to monetary policy, but made clear he still does not see the pace of economic growth as sufficient or satisfactory.

“The state of housing has been an impediment to a faster recovery,” he said. “We need to continue to develop and implement policies that will help the housing sector get back on its feet.”

The projections from Fed officials on when interest rates should rise off the floor were all over the place, ranging from this year to 2016. Given varying appetites within the Fed’s policy committee for expanding or shrinking the central bank’s portfolio, the minutes will likely put even more daylight between inflation hawks and doves.

Analysts are not expecting any hard data on balance sheet expectations but rather broad-brush descriptions of policymakers’ leanings. The minutes could say, for instance, that some members favor additional stimulus now, while others would rather take a wait-and-see approach.

There is also a risk that the markets could get a hawkish surprise, for instance, if some officials appear to be making the case for near-term asset sales.

“It will be an interesting trading day when this ‘qualitative information’ begins to include ruminations about when to start shrinking the nearly $3 trillion balance sheet and whether such shrinkage will happen through passive asset run-off or active asset sales,” said Dana Saporta, an economist at Credit Suisse.

Bernanke has said that when the Fed chooses to tighten policy it will first raise the interest it pays on bank reserves, currently at 0.25 percent, only later resorting to selling some of the assets it accumulated in response to the financial crisis.

But not all officials may agree.

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