Feb. 1 (Bloomberg) -- U.S. stock futures rose, Treasuries fell and the euro snapped a four-day decline versus the dollar on speculation manufacturing is recovering around the world.
Standard & Poor’s 500 Index futures expiring in March rose 0.5 percent at 9:02 a.m. in New York as Exxon Mobil Corp. advanced. The euro strengthened 0.5 percent against the dollar and 0.4 percent versus the yen. The zloty climbed as much as 1.5 percent to its highest in a year against the euro and the rand gained 0.7 percent against the dollar as factory production rose in Poland and South Africa.
U.S. manufacturing probably expanded in January for a sixth month, the Institute for Supply Management may say today, adding to evidence the recovery in the world’s biggest economy is gaining momentum. Indexes of manufacturing in the euro region and the U.K. rose more than economists forecast.
“We look for a further leg up in equities, which could be driven by positive economic and earnings news,” JPMorgan Asset Management strategists David Shairp and Rekha Sharma wrote in a report today. The prospect of central banks withdrawing stimulus may mean that “markets will be periodically challenged and volatility will be on the rise,” they wrote.
The MSCI World Index of 23 developed nations’ stocks slipped less than 0.1 percent as Asian stocks dropped on concern China will take more steps to prevent its economy from overheating. Toshiba Corp. declined 6 percent in Tokyo after cutting its revenue forecast. Honda Motor Co. slid 2.5 after saying it’s recalling some cars in North America and the U.K.
European Movers
Europe’s Dow Jones Stoxx 600 Index fell 0.2 percent, paring earlier losses of as much as 0.8 percent. Vivendi SA, the owner of the world’s largest music company, slid 3.3 percent in Paris after a U.S. jury ruled it misled investors. Ryanair Holdings Plc advanced 5.7 percent in Dublin after Europe’s biggest discount airline raised its profit forecast.
Northumbrian Water Group Plc led shares of utility companies higher, jumping as much as 13 percent in London, after the Sunday Times reported that Ontario Teachers’ Pension Plan may bid 1.7 billion pounds ($2.7 billion) for the company.
The gain in U.S. futures indicated the S&P 500 may rebound from a three-month low. The U.S. Institute for Supply Management’s factory index, due at 10 a.m. in New York, rose to 55.5 last month from 54.9 in December, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Commerce Department data showed Americans’ income rose more than estimated in December.
Earnings Rebound
A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show.
Exxon added 1.8 percent after posting a smaller decline in fourth-quarter profit than analysts estimated as gains in oil prices and output cushioned the impact of slumping demand for diesel and gasoline.
The Dubai Financial Market General Index climbed 2.2 percent after Aabar Investments PJSC, the Abu Dhabi fund that’s the biggest shareholder in Daimler AG, said full-year profit more than doubled. The MSCI Emerging Markets Index fell 0.6 percent, extending its drop since Jan. 11 to as much as 10 percent.
Lower Home Prices
The euro advanced against 12 of its 16 most-traded counterparts, rising most versus the South Korean won with a 1 percent gain. The pound fell after reports showing a decline in U.K. house prices and a drop in mortgage approvals. The U.K. currency lost 0.4 percent against the dollar and 0.8 percent versus the euro.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, ended a four-day advance, dropping 0.2 percent. Treasuries fell for the first time in three days, with the yield on the 10-year note rising 4 basis points to 3.63 percent.
Copper for delivery in three months fell as much as 2.2 percent to $6,600 a metric ton in London, the lowest compared with intraday prices since Nov. 16. Tin retreated 5.5 percent to $16,250 a ton. Gold for immediate delivery added 0.5 percent to $1,086.32 an ounce in London and crude oil added 0.6 percent to $73.34 a barrel in New York.
Monday, February 1, 2010
Obama Budget Said to Forecast $1.6 Trillion Deficit for 2010
Feb. 1 (Bloomberg) -- The budget plan President Barack Obama is set to release today forecasts the deficit will hit a record $1.6 trillion this year before beginning to decline in 2011, a congressional aide said.
Obama will send Congress a $3.8 trillion spending blueprint that includes a mix of tax cuts and spending to boost the economy as well as aid to states. It also takes steps to rein in the deficit, which has widened as the recession cut tax revenue and the government took measures to stimulate the economy.
The administration forecasts the shortfall will decline from $1.6 trillion in the fiscal year ending Sept. 30 to $1.3 trillion in fiscal 2011, said the aide, who spoke on condition of anonymity because the figures haven’t been officially released.
Obama is putting emphasis on boosting the U.S. economy, which hasn’t recovered the more than 7 million jobs lost since the recession began in December 2007. Following up the stimulus legislation enacted last year, the president is seeking more spending on infrastructure projects and $33 billion in tax breaks and incentives to encourage small businesses to hire more workers and raise wages.
The measures to add jobs will be “probably somewhere in the $100 billion range,” spokesman Robert Gibbs said yesterday on CNN’s “State of the Union” program. Last year’s stimulus amounted to $862 billion, the Congressional Budget Office says. The House in December passed job legislation of more that $150 billion.
Economy and Deficit
The budget reflects the administration’s struggle to confront voter anxiety about a 10 percent jobless rate and the national debt surging toward $13 trillion. The result is a plan that tries to step up spending in some areas for an economic boost while slowing it over a longer period.
“To many people, they think it’s double-talk but it’s perfectly logical and consistent with economic theory,” said James Horney, a former Senate Budget Committee analyst now at the Center on Budget Policy and Priorities, a research organization in Washington.
The White House deficit projection exceeds other forecasts. The CBO has forecast this year’s shortfall at $1.35 trillion. The median of 39 analysts survey by Bloomberg News is for $1.37 trillion this year and $1.10 trillion next year.
Obama has promised to cut the deficit in half from $1.3 trillion by the end of his first term and “the president is committed to keeping that goal,” Gibbs said.
Increased Outlays
Defense and education are set to get increased funding in Obama’s 2011 budget plan while spending on some domestic programs will be frozen over three years, according to congressional and administration officials and previous announcements from the White House. The budget is subject to approval -- and modification -- by Congress.
On taxes, Obama said in his State of the Union address last week that some of the tax cuts passed under former President George W. Bush in 2001 and 2003 would be extended. “We will not continue tax cuts for oil companies, investment fund managers and for those making over $250,000 a year,” he said.
The White House wants lawmakers to give small businesses tax credits of up to $5,000 for each new worker hired as part of a $33 billion package of incentives. This would be folded into a stimulus program that would “add infrastructure spending,” Gibbs said.
In an extension of last year’s stimulus, the administration proposes making permanent the Build America Bonds program. The federal government would pick up the tab for 28 percent of the interest costs from taxable bonds issued by state and local governments, according to a Treasury Department official.
Aid to States
The budget also will call for spending $25 billion to provide states with an additional six months worth of funding to help pay for the government’s Medicaid health insurance program for the poor.
On energy, the administration supports expanding nuclear power by tripling loan guarantees for new reactors to more than $54 billion, an administration official said. The 2011 budget will add $36 billion to the $18.5 billion already approved for nuclear-power plant loan guarantees.
Obama will propose a defense budget of about $708 billion that includes $159 billion for the wars in Iraq and Afghanistan, four officials said on Jan. 22. The administration has said it plans to spend $161 billion on the wars this year.
While spending would rise in many areas of the federal catalog, the administration has announced it would seek a three- year freeze on most spending for domestic programs that Congress enacts each year, for a savings of as much as $15 billion in the first year and an estimated $250 billion over 10 years.
Non-defense discretionary spending, about 17 percent of the budget last year, is projected to grow this year by 7 percent, excluding the costs of last year’s stimulus package, according to the CBO.
In 2009, those expenditures grew by 5 percent, according to the agency. The increases are much higher if the stimulus package is included, with this year’s hike totaling 17 percent and last year’s increase, 11 percent.
Obama will send Congress a $3.8 trillion spending blueprint that includes a mix of tax cuts and spending to boost the economy as well as aid to states. It also takes steps to rein in the deficit, which has widened as the recession cut tax revenue and the government took measures to stimulate the economy.
The administration forecasts the shortfall will decline from $1.6 trillion in the fiscal year ending Sept. 30 to $1.3 trillion in fiscal 2011, said the aide, who spoke on condition of anonymity because the figures haven’t been officially released.
Obama is putting emphasis on boosting the U.S. economy, which hasn’t recovered the more than 7 million jobs lost since the recession began in December 2007. Following up the stimulus legislation enacted last year, the president is seeking more spending on infrastructure projects and $33 billion in tax breaks and incentives to encourage small businesses to hire more workers and raise wages.
The measures to add jobs will be “probably somewhere in the $100 billion range,” spokesman Robert Gibbs said yesterday on CNN’s “State of the Union” program. Last year’s stimulus amounted to $862 billion, the Congressional Budget Office says. The House in December passed job legislation of more that $150 billion.
Economy and Deficit
The budget reflects the administration’s struggle to confront voter anxiety about a 10 percent jobless rate and the national debt surging toward $13 trillion. The result is a plan that tries to step up spending in some areas for an economic boost while slowing it over a longer period.
“To many people, they think it’s double-talk but it’s perfectly logical and consistent with economic theory,” said James Horney, a former Senate Budget Committee analyst now at the Center on Budget Policy and Priorities, a research organization in Washington.
The White House deficit projection exceeds other forecasts. The CBO has forecast this year’s shortfall at $1.35 trillion. The median of 39 analysts survey by Bloomberg News is for $1.37 trillion this year and $1.10 trillion next year.
Obama has promised to cut the deficit in half from $1.3 trillion by the end of his first term and “the president is committed to keeping that goal,” Gibbs said.
Increased Outlays
Defense and education are set to get increased funding in Obama’s 2011 budget plan while spending on some domestic programs will be frozen over three years, according to congressional and administration officials and previous announcements from the White House. The budget is subject to approval -- and modification -- by Congress.
On taxes, Obama said in his State of the Union address last week that some of the tax cuts passed under former President George W. Bush in 2001 and 2003 would be extended. “We will not continue tax cuts for oil companies, investment fund managers and for those making over $250,000 a year,” he said.
The White House wants lawmakers to give small businesses tax credits of up to $5,000 for each new worker hired as part of a $33 billion package of incentives. This would be folded into a stimulus program that would “add infrastructure spending,” Gibbs said.
In an extension of last year’s stimulus, the administration proposes making permanent the Build America Bonds program. The federal government would pick up the tab for 28 percent of the interest costs from taxable bonds issued by state and local governments, according to a Treasury Department official.
Aid to States
The budget also will call for spending $25 billion to provide states with an additional six months worth of funding to help pay for the government’s Medicaid health insurance program for the poor.
On energy, the administration supports expanding nuclear power by tripling loan guarantees for new reactors to more than $54 billion, an administration official said. The 2011 budget will add $36 billion to the $18.5 billion already approved for nuclear-power plant loan guarantees.
Obama will propose a defense budget of about $708 billion that includes $159 billion for the wars in Iraq and Afghanistan, four officials said on Jan. 22. The administration has said it plans to spend $161 billion on the wars this year.
While spending would rise in many areas of the federal catalog, the administration has announced it would seek a three- year freeze on most spending for domestic programs that Congress enacts each year, for a savings of as much as $15 billion in the first year and an estimated $250 billion over 10 years.
Non-defense discretionary spending, about 17 percent of the budget last year, is projected to grow this year by 7 percent, excluding the costs of last year’s stimulus package, according to the CBO.
In 2009, those expenditures grew by 5 percent, according to the agency. The increases are much higher if the stimulus package is included, with this year’s hike totaling 17 percent and last year’s increase, 11 percent.
U.S. Stocks Advance, Treasuries Decline on Economy; Euro Gains
Feb. 1 (Bloomberg) -- U.S. stocks rose, Treasuries fell and the euro snapped a four-day decline versus the dollar on speculation manufacturing is recovering around the world.
The Standard & Poor’s 500 Index added 0.7 percent at 9:33 a.m. in New York as Exxon Mobil Corp. advanced. The euro strengthened 0.5 percent against the dollar and the yen. The zloty climbed as much as 1.5 percent to its highest in a year against the euro and the rand gained 0.7 percent against the dollar as factory production rose in Poland and South Africa.
U.S. manufacturing probably expanded in January for a sixth month, the Institute for Supply Management may say today, adding to evidence the recovery in the world’s biggest economy is gaining momentum. Indexes of manufacturing in the euro region and the U.K. rose more than economists forecast.
“We look for a further leg up in equities, which could be driven by positive economic and earnings news,” JPMorgan Asset Management strategists David Shairp and Rekha Sharma wrote in a report today. The prospect of central banks withdrawing stimulus may mean that “markets will be periodically challenged and volatility will be on the rise,” they wrote.
The MSCI World Index of 23 developed nations’ stocks added 0.5 percent, erasing an earlier slide of as much as 0.4 percent. Asian stocks dropped on concern China will take more steps to prevent its economy from overheating. Toshiba Corp. declined 6 percent in Tokyo after cutting its revenue forecast. Honda Motor Co. slid 2.5 after saying it’s recalling some cars in North America and the U.K.
European Movers
Europe’s Dow Jones Stoxx 600 Index added 0.1 percent, reversing earlier losses of as much as 0.8 percent. Vivendi SA, the owner of the world’s largest music company, slid 2.4 percent in Paris after a U.S. jury ruled it misled investors. Ryanair Holdings Plc advanced 5.7 percent in Dublin after Europe’s biggest discount airline raised its profit forecast.
Northumbrian Water Group Plc led shares of utility companies higher, jumping as much as 13 percent in London, after the Sunday Times reported that Ontario Teachers’ Pension Plan may bid 1.7 billion pounds ($2.7 billion) for the company.
The U.S. Institute for Supply Management’s factory index, due at 10 a.m. in New York, rose to 55.5 last month from 54.9 in December, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Commerce Department data showed Americans’ income rose more than estimated in December.
Earnings Rebound
A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show.
Exxon added 1.6 percent to $65.45 after posting a smaller decline in fourth-quarter profit than analysts estimated as gains in oil prices and output cushioned the impact of slumping demand for diesel and gasoline.
The Dubai Financial Market General Index climbed 2.2 percent after Aabar Investments PJSC, the Abu Dhabi fund that’s the biggest shareholder in Daimler AG, said full-year profit more than doubled. The MSCI Emerging Markets Index fell 0.4 percent, extending its drop since Jan. 11 to as much as 10 percent.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, ended a four-day advance, dropping 0.3 percent. Treasuries fell for the first time in three days, with the yield on the 10-year note rising 4 basis points to 3.63 percent.
Copper for delivery in three months fell as much as 2.2 percent to $6,600 a metric ton in London, the lowest compared with intraday prices since Nov. 16. Tin retreated 5.8 percent to $16,200 a ton. Gold for immediate delivery added 0.5 percent to $1,086.32 an ounce in London and crude oil added 0.4 percent to $73.18 a barrel in New York.
The Standard & Poor’s 500 Index added 0.7 percent at 9:33 a.m. in New York as Exxon Mobil Corp. advanced. The euro strengthened 0.5 percent against the dollar and the yen. The zloty climbed as much as 1.5 percent to its highest in a year against the euro and the rand gained 0.7 percent against the dollar as factory production rose in Poland and South Africa.
U.S. manufacturing probably expanded in January for a sixth month, the Institute for Supply Management may say today, adding to evidence the recovery in the world’s biggest economy is gaining momentum. Indexes of manufacturing in the euro region and the U.K. rose more than economists forecast.
“We look for a further leg up in equities, which could be driven by positive economic and earnings news,” JPMorgan Asset Management strategists David Shairp and Rekha Sharma wrote in a report today. The prospect of central banks withdrawing stimulus may mean that “markets will be periodically challenged and volatility will be on the rise,” they wrote.
The MSCI World Index of 23 developed nations’ stocks added 0.5 percent, erasing an earlier slide of as much as 0.4 percent. Asian stocks dropped on concern China will take more steps to prevent its economy from overheating. Toshiba Corp. declined 6 percent in Tokyo after cutting its revenue forecast. Honda Motor Co. slid 2.5 after saying it’s recalling some cars in North America and the U.K.
European Movers
Europe’s Dow Jones Stoxx 600 Index added 0.1 percent, reversing earlier losses of as much as 0.8 percent. Vivendi SA, the owner of the world’s largest music company, slid 2.4 percent in Paris after a U.S. jury ruled it misled investors. Ryanair Holdings Plc advanced 5.7 percent in Dublin after Europe’s biggest discount airline raised its profit forecast.
Northumbrian Water Group Plc led shares of utility companies higher, jumping as much as 13 percent in London, after the Sunday Times reported that Ontario Teachers’ Pension Plan may bid 1.7 billion pounds ($2.7 billion) for the company.
The U.S. Institute for Supply Management’s factory index, due at 10 a.m. in New York, rose to 55.5 last month from 54.9 in December, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Commerce Department data showed Americans’ income rose more than estimated in December.
Earnings Rebound
A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show.
Exxon added 1.6 percent to $65.45 after posting a smaller decline in fourth-quarter profit than analysts estimated as gains in oil prices and output cushioned the impact of slumping demand for diesel and gasoline.
The Dubai Financial Market General Index climbed 2.2 percent after Aabar Investments PJSC, the Abu Dhabi fund that’s the biggest shareholder in Daimler AG, said full-year profit more than doubled. The MSCI Emerging Markets Index fell 0.4 percent, extending its drop since Jan. 11 to as much as 10 percent.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, ended a four-day advance, dropping 0.3 percent. Treasuries fell for the first time in three days, with the yield on the 10-year note rising 4 basis points to 3.63 percent.
Copper for delivery in three months fell as much as 2.2 percent to $6,600 a metric ton in London, the lowest compared with intraday prices since Nov. 16. Tin retreated 5.8 percent to $16,200 a ton. Gold for immediate delivery added 0.5 percent to $1,086.32 an ounce in London and crude oil added 0.4 percent to $73.18 a barrel in New York.
Citigroup Said to Plan Sale of $10 Billion Private-Equity Unit
Feb. 1 (Bloomberg) -- Citigroup Inc. plans to sell or split off its $10 billion Citi Private Equity unit, expanding the list of money-management businesses the U.S. bank is disposing of to reduce debt, people familiar with the matter said.
Citi Private Equity, which takes minority stakes in companies and invests in other buyout funds, oversees about $2 billion of Citigroup’s money, said the people, who declined to be identified because the sale talks are private. The rest is from outside investors. Managers of the decade-old unit, led by Todd Benson and Darren Friedman, have discussed buying it for themselves alongside new partners or with other financing, one person said.
Citigroup, 27 percent owned by the government following a bailout in 2008, is selling almost a third of its $1.86 trillion of assets under regulatory pressure to shrink. Chief Executive Officer Vikram Pandit plans to keep a smaller buyout unit the bank bought in late 2007, a few months after he joined, the people said.
“Citi has been going in and out of these different investing vehicles, both private equity and hedge funds,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business who studies the private-equity industry. “It’s been a game of musical chairs.”
Benson and Friedman stepped in as co-heads of Citi Private Equity after the January 2009 departure of John Barber, who had led the unit for nine years. Neither of the co-heads returned calls for comment, and Citigroup spokeswoman Shannon Bell declined to comment.
Metalmark to Stay
Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said.
Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007. Headed by former Morgan Stanley executive Howard Hoffen, Metalmark oversees almost $3.8 billion in several funds, one person said. It invests in energy, health care, financial and industrial companies, according to Metalmark’s Web site.
Pandit, 53, decided to keep Metalmark because he preferred its management and strategy to those of Citi Private Equity, three people said. Both Pandit and John Havens, who heads Citigroup’s trading- and investment-banking division, worked with Hoffen at Morgan Stanley from the late 1980s through the early 2000s.
Dorfman, O’Brien
The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.
Citigroup’s hedge-fund and buyout division, Citi Capital Advisors, is run by Jonathan Dorfman and James O’Brien, another pair of former Morgan Stanley executives who joined Citigroup when it bought their hedge fund in October 2007. Four of Citigroup’s most senior executives previously took turns leading the division, including Pandit, Havens and Vice Chairmen Lewis Kaden and Edward “Ned” Kelly.
Citi Capital Advisors has about $14 billion under management, a figure that excludes the funds earmarked for disposal, people familiar with the matter said. At the end of 2007, the division oversaw $73 billion. More than a dozen funds were shuttered or frozen, including Pandit’s Old Lane Partners fund, which Citigroup bought in 2007 for $800 million. The bank stopped reporting the alternative-investing division’s results after the first quarter of 2008, when it had a net loss of $509 million.
Decision in 2009
The decision to sell Citi Private Equity was made last year, before President Barack Obama on Jan. 21 proposed banks be forced to divest their private-equity firms and hedge funds, the people familiar with the matter said. Ownership of such businesses can expose taxpayers to the risk of further bank bailouts, according to the White House.
A person close to Citigroup said its private-equity business doesn’t conflict with the proposal, since most investing is done on behalf of customers and little of the bank’s own capital is put at risk. Citigroup counts its remaining buyout and hedge funds among “core” operations that also include banking, trading, securities underwriting and credit cards.
Depending on how the new laws or regulations are written, Citigroup may have to overhaul its private-equity business again, said Calyon Securities USA analyst Michael Mayo, who rates Citigroup shares “underperform.”
Dollar General, GMAC
“None of this is set in stone,” Mayo said in an interview.
Citi Private Equity was formed in 2000. Early in the decade, the unit was used partly to consolidate investments inherited from the 1998 merger of Citicorp and Travelers Group Inc., people familiar with the matter said. In February 2007, Citi Private Equity raised about $3.3 billion of new funding.
Citigroup doesn’t publicly disclose the performance of Citi Private Equity. Managers of such funds typically charge fees for overseeing investors’ money and take a fixed cut of any capital gains.
The unit was a secondary investor on New York-based buyout firm KKR & Co.’s $7.3 billion takeover of discount retailer Dollar General Corp. in July 2007. Goodlettsville, Tennessee- based Dollar General went public through an initial stock offering last November, and now has a market value of about $8 billion.
Not as profitable was a supporting equity investment in New York-based Cerberus Capital Management LP’s takeover of auto- finance company GMAC LLC, people familiar with the matter say. Like Citigroup, GMAC had to get a series of infusions from the U.S. government as surging unemployment drove up consumer-loan defaults. In November, Michael Carpenter, who ran Citigroup’s hedge fund and buyout unit before he quit in 2006, was tapped as GMAC’s new CEO.
Citi Private Equity, which takes minority stakes in companies and invests in other buyout funds, oversees about $2 billion of Citigroup’s money, said the people, who declined to be identified because the sale talks are private. The rest is from outside investors. Managers of the decade-old unit, led by Todd Benson and Darren Friedman, have discussed buying it for themselves alongside new partners or with other financing, one person said.
Citigroup, 27 percent owned by the government following a bailout in 2008, is selling almost a third of its $1.86 trillion of assets under regulatory pressure to shrink. Chief Executive Officer Vikram Pandit plans to keep a smaller buyout unit the bank bought in late 2007, a few months after he joined, the people said.
“Citi has been going in and out of these different investing vehicles, both private equity and hedge funds,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business who studies the private-equity industry. “It’s been a game of musical chairs.”
Benson and Friedman stepped in as co-heads of Citi Private Equity after the January 2009 departure of John Barber, who had led the unit for nine years. Neither of the co-heads returned calls for comment, and Citigroup spokeswoman Shannon Bell declined to comment.
Metalmark to Stay
Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said.
Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007. Headed by former Morgan Stanley executive Howard Hoffen, Metalmark oversees almost $3.8 billion in several funds, one person said. It invests in energy, health care, financial and industrial companies, according to Metalmark’s Web site.
Pandit, 53, decided to keep Metalmark because he preferred its management and strategy to those of Citi Private Equity, three people said. Both Pandit and John Havens, who heads Citigroup’s trading- and investment-banking division, worked with Hoffen at Morgan Stanley from the late 1980s through the early 2000s.
Dorfman, O’Brien
The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.
Citigroup’s hedge-fund and buyout division, Citi Capital Advisors, is run by Jonathan Dorfman and James O’Brien, another pair of former Morgan Stanley executives who joined Citigroup when it bought their hedge fund in October 2007. Four of Citigroup’s most senior executives previously took turns leading the division, including Pandit, Havens and Vice Chairmen Lewis Kaden and Edward “Ned” Kelly.
Citi Capital Advisors has about $14 billion under management, a figure that excludes the funds earmarked for disposal, people familiar with the matter said. At the end of 2007, the division oversaw $73 billion. More than a dozen funds were shuttered or frozen, including Pandit’s Old Lane Partners fund, which Citigroup bought in 2007 for $800 million. The bank stopped reporting the alternative-investing division’s results after the first quarter of 2008, when it had a net loss of $509 million.
Decision in 2009
The decision to sell Citi Private Equity was made last year, before President Barack Obama on Jan. 21 proposed banks be forced to divest their private-equity firms and hedge funds, the people familiar with the matter said. Ownership of such businesses can expose taxpayers to the risk of further bank bailouts, according to the White House.
A person close to Citigroup said its private-equity business doesn’t conflict with the proposal, since most investing is done on behalf of customers and little of the bank’s own capital is put at risk. Citigroup counts its remaining buyout and hedge funds among “core” operations that also include banking, trading, securities underwriting and credit cards.
Depending on how the new laws or regulations are written, Citigroup may have to overhaul its private-equity business again, said Calyon Securities USA analyst Michael Mayo, who rates Citigroup shares “underperform.”
Dollar General, GMAC
“None of this is set in stone,” Mayo said in an interview.
Citi Private Equity was formed in 2000. Early in the decade, the unit was used partly to consolidate investments inherited from the 1998 merger of Citicorp and Travelers Group Inc., people familiar with the matter said. In February 2007, Citi Private Equity raised about $3.3 billion of new funding.
Citigroup doesn’t publicly disclose the performance of Citi Private Equity. Managers of such funds typically charge fees for overseeing investors’ money and take a fixed cut of any capital gains.
The unit was a secondary investor on New York-based buyout firm KKR & Co.’s $7.3 billion takeover of discount retailer Dollar General Corp. in July 2007. Goodlettsville, Tennessee- based Dollar General went public through an initial stock offering last November, and now has a market value of about $8 billion.
Not as profitable was a supporting equity investment in New York-based Cerberus Capital Management LP’s takeover of auto- finance company GMAC LLC, people familiar with the matter say. Like Citigroup, GMAC had to get a series of infusions from the U.S. government as surging unemployment drove up consumer-loan defaults. In November, Michael Carpenter, who ran Citigroup’s hedge fund and buyout unit before he quit in 2006, was tapped as GMAC’s new CEO.
Sunday, January 24, 2010
White House confident Bernanke to be confirmed
01/24/2010
WASHINGTON (Reuters) - White House senior advisers voiced confidence on Sunday that Federal Reserve Chairman Ben Bernanke would be confirmed by the Senate for a second term.
"The president is very confident that the chairman will be confirmed," David Axelrod said on CNN's "State of the Union" program. "The readings he's getting from his conversations are that Chairman Bernanke will be confirmed."
In a sign of concern about a surge of opposition to Bernanke's renomination, President Barack Obama contacted the Democratic Senate leadership on Saturday to make sure there were enough votes.
Uncertainty about the Senate's confirmation of Bernanke rattled investors last week, contributing to the worst three-day slide for U.S. stocks in 10 months.
Bernanke's second term appeared at risk on Friday after two Senate Democrats announced their opposition.
Bernanke's critics say the Fed failed to prevent the recent financial crisis, the worst since the Great Depression, and fought the meltdown in a way that favored the financial industry at the expense of ordinary citizens.
With congressional elections in November, many lawmakers are unwilling to take any stand that appears to benefit Wall Street, particularly after Tuesday's Republican upset for the Massachusetts Senate seat that had been a Democratic stronghold for decades.
But Obama heard from Senate Democratic leader Harry Reid that there was a lot of support for Bernanke, another senior Obama adviser, Valerie Jarrett, told NBC's "Meet the Press."
The Senate's top Republican, Mitch McConnell, also told "Meet the Press" he believed Bernanke would win bipartisan support, but would not say whether he would vote for the central banker.
MORE REPUBLICANS WEIGH IN
Some Republicans have moved to block Bernanke's confirmation, forcing Senate leaders to secure a super-majority of 60 votes in the 100-member chamber to advance the nomination.
"I think we need a fresh start," Republican Senator John Cornyn told "Fox News Sunday," saying he would oppose Bernanke.
Senator John McCain, the Republican presidential candidate who lost to Obama, said on CBS' "Face the Nation" program he was "both skeptical and leaning against" Bernanke's confirmation.
But Republican Senator Orrin Hatch told CNN he would vote for Bernanke partly out of worry of the nominee the administration would choose in his place.
"There are some things I don't agree with that have been done, but I think he basically has -- has all of the ability to do it," Hatch said. "I'd be terrified of having him replaced by this administration. You never know what you're going to get."
Bernanke, who was first named as chairman by former Republican President George W. Bush, was nominated to a second term by Obama in August.
Axelrod on CNN defended Bernanke's handling of the financial crisis.
"We're still in a fragile state here, even though the economy is growing, and we need his leadership," Axelrod said.
"He has been a very steady hand in this crisis. He's taken initiatives that have been important in terms of stabilizing the economy."
The unemployment rate currently stands at 10 percent, with more than 15 million Americans out of work.
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