Bernard Madoff sentenced to maximum 150 years in prison for vast fraud

Historic swindler Bernard Madoff was sentenced to 150 years in prison Monday for a fraud so extensive that the judge said he needed to send a symbolic message to potential imitators and to victims who demanded harsh punishment.

Scattered applause and whoops broke out in the crowded Manhattan courtroom after U.S. District Judge Denny Chin issued the maximum sentence to the 71-year-old defendant, who said he lives "in a tormented state now, knowing all the pain and suffering I've created."

Chin rejected a request by Madoff's lawyer for leniency and said he disagreed that victims of the fraud were seeking mob vengeance.

"Here the message must be sent that Mr. Madoff's crimes were extraordinarily evil and that this kind of manipulation of the system is not just a bloodless crime that takes place on paper, but one instead that takes a staggering toll," Chin said.

The judge said the estimate that Madoff has cost his victims more than $13 billion was conservative because it did not include money from feeder funds.

"Objectively speaking, the fraud here was staggering," he said.

Chin announced the sentence with Madoff standing at the defense table, wearing a dark suit, white shirt and a tie, and looking thinner than his last court appearance in March. He gave no noticeable reaction when the sentence was announced.

He also showed no emotion earlier in the hearing as he listened to nine victims spend nearly an hour describing their despair. Some openly wept. Others raised their voices in anger.

"Life has been a living hell. It feels like the nightmare we can't wake from," said Carla Hirshhorn.

"He stole from the rich. He stole from the poor. He stole from the in between. He had no values," said Tom Fitzmaurice. "He cheated his victims out of their money so he and his wife Ruth could live a life of luxury beyond belief."

Dominic Ambrosino called it an "indescribably heinous crime" and urged a long prison sentence so "will know he is imprisoned in much the same way he imprisoned us and others."

He added: "In a sense, I would like somebody in the court today to tell me how long is my sentence."

When asked by the judge whether he had anything to say, Madoff slowly stood, leaned forward on the defense table and spoke in a monotone for about 10 minutes. At various times, he referred to his historic fraud as a "problem," "an error of judgment" and "a tragic mistake."

He claimed he and his wife were tormented, saying she "cries herself to sleep every night, knowing all the pain and suffering I have caused," he said. "That's something I live with, as well."

He then finally looked at the victims lining the first row of the gallery.

"I will turn and face you," he said. "I'm sorry. I know that doesn't help you."

Afterward, Ruth Madoff -- often a target of victims' scorn since her husband's arrest -- broke her silence by issuing a statement through her lawyer. She said she, too, had been misled.

"I am embarrassed and ashamed," she said. "Like everyone else, I feel betrayed and confused. The man who committed this horrible fraud is not the man whom I have known for all these years."

Prosecutor Lisa Baroni said Madoff deserved a life sentence because he "stole ruthlessly and without remorse."

The jailed Madoff already has taken a severe financial hit: Last week, a judge issued a preliminary $171 billion forfeiture order stripping Madoff of all his personal property, including real estate, investments, and $80 million in assets Ruth Madoff had claimed were hers. The order left her with $2.5 million.

The terms require the Madoffs to sell a $7 million Manhattan apartment where Ruth Madoff still lives. An $11 million estate in Palm Beach, Florida, a $4 million home in Montauk on Long Island, and a $2.2 million boat will be put on the market as well.

Before Madoff became a symbol of Wall Street greed, he earned a reputation as a trusted money manager with a Midas touch. Even as the market fluctuated, clients of his secretive investment advisory business -- from Florida retirees to celebrities such as Steven Spielberg, actor Kevin Bacon and Hall of Fame pitcher Sandy Koufax -- for decades enjoyed steady double-digit returns.

But late last year, Madoff made a dramatic confession: Authorities say he pulled his sons aside and told them it was "all just one big lie."

Madoff pleaded guilty in March to securities fraud and other charges, saying he was "deeply sorry and ashamed." He insisted that he acted alone, describing a separate wholesale stock-trading firm run by his sons and brother as honest and legitimate.

Aside from an accountant accused of cooking Madoff's books, no one else has been criminally charged. But the family, including his wife, and brokerage firms who recruited investors have come under intense scrutiny by the FBI, regulators and a court-appointed trustee overseeing the liquidation of Madoff's assets.

The trustee and prosecutors have sought to go after assets to compensate thousands of burned victims who have filed claims against Madoff. How much is available to pay them remains unknown, though it's expected to be only a fraction of the astronomical losses associated with the fraud.

The $171 billion forfeiture figure used by prosecutors merely mirrors the amount they estimate that, over decades, "flowed into the principal account to perpetrate the Ponzi scheme." The statements sent to investors showing their accounts were worth as much as $65 billion were fiction.

The investigation has found that in reality, Madoff never made any investments, instead using the money from new investors to pay returns to existing clients -- and to finance a lavish lifestyle for his family.

In bankruptcy filings, Trustee Irving Picard say family members "used customers accounts as though they were their own," putting Madoff's maid, boat captain and house-sitter in Florida on the company payroll and paying nearly $1 million in fees at high-end golf clubs on Long Island and in Florida.

Picard has sought to reclaim ill-gotten gains by freezing Madoff's business bank accounts and selling legitimate portions of his firm. (Its season tickets for the Mets went for $38,100.) He's also sued big money managers and investors for billions of dollars, claiming they were Madoff cronies who also cashed in on the fraud.

The defendants include leading philanthropists Stanley Chais and Jeffry Picower -- from whom Picard is seeking at least $5.1 billion alleged to have come out of victims' pockets -- and hedge fund manager J. Ezra Merkin. All have denied any wrongdoing.

Stanford to Spend Weekend in Jail

By Laurel Brubaker Calkins and Andrew M. Harris

June 27 (Bloomberg) -- R. Allen Stanford, accused of swindling investors in a $7 billion fraud, will be held in jail through the weekend until a June 29 hearing on whether an order granting him bail should be reversed.

The request to delay the Texas financier’s release on bail was filed yesterday with U.S. District Judge David Hittner, who outranks U.S. Magistrate Judge Frances Stacy and to whom the Stanford criminal case is ultimately assigned. Stacy, at a June 25 hearing, set the bail at $500,000 and required Stanford to post a $100,000 cash deposit.

Hittner ordered the government to file a formal motion to revoke Stanford’s bail by 9 a.m. on June 29, and set oral arguments on the motion for 10:30 a.m. the same day.

“Allen Stanford has demonstrated his desire to stand and fight, and not run,” Dick DeGuerin, Stanford’s lawyer, said in a phone interview after yesterday’s ruling. “I haven’t talked to him, but of course he’s disappointed” he will remain in jail through the weekend, DeGuerin said.

Stanford pleaded not guilty on June 25 to accusations he swindled at least 30,000 investors in a scheme involving the sale of certificates of deposit through his Antiguan bank.

He faces 21 counts of conspiracy, fraud, obstruction and money laundering. Prosecutors accuse him and five other people of working to mislead investors about the nature and oversight of the certificates, which were sold through the financier’s Antigua-based Stanford International Bank Ltd.

SEC Lawsuit

A federal grand jury indicted Stanford on June 18 on charges mirroring allegations made by the U.S. Securities and Exchange Commission in a lawsuit filed in February against him, two colleagues and three of his businesses. Stanford was arrested that evening in Fredericksburg, Virginia, where he was staying while meeting with lawyers about the civil complaint.

Stanford has denied any wrongdoing in the civil lawsuit. “I’m not a damn swindler,” he told Bloomberg News in an interview on April 20.

When Stacy approved Stanford’s bail after a six-hour bond hearing, prosecutors asked for a delay to give them time to appeal.

“The stay is appropriate because there is a strong likelihood that the extraordinary flight risk indicators in this case will lead this court to order Stanford’s detention or, at a minimum, set a substantially higher bond,” prosecutors said in their request yesterday.

‘Government Over-Exaggerates’

“The government over-exaggerates any risk of flight,” DeGuerin said in a response opposing the government’s motion to put on hold the bail order. “Allen Stanford through his own conduct has affirmatively demonstrated his intention to appear for trial.”

DeGuerin said Stanford’s friends and family had gathered the $100,000 cash deposit required to bail the financier out of jail. Stacy ordered that the deposit be contributed by friends and family and not drawn from Stanford’s funds.

“I think he’ll be very motivated not to flee if he raises the money from friends and relatives,” Stacy told lawyers when setting Stanford’s bail.

Court records show the deposit was received yesterday.

Ian McCaleb, a Justice Department spokesman, declined to comment on Hittner’s decision.

The criminal case is U.S. v. Stanford, H-09-342, U.S. District Court, Southern District of Texas (Houston). The SEC case is SEC v. Stanford International Bank, 3:09-cv-00298-N, U.S. District Court, Northern District of Texas (Dallas).

To contact the reporters on this story: Andrew M. Harris in Chicago federal court at aharris16@bloomberg.net; Laurel Brubaker Calkins in Houston federal court at laurel@calkins.us.com.

GM to take on future product liability claims

General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for Tuesday.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, the new company will now assume responsibility for future claims involving vehicles made by the old company, according to documents filed in federal bankruptcy court in New York on Friday.

Under the automaker's previous plan, "New GM" would not have assumed any liability for future claims related to GM vehicles made before the sale and creation of the new company. That meant that consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM," a collection of mostly unprofitable assets left over after the sale, where there likely would be nothing left to pay their claims.

But under the new plan, "New GM" will not assume liability for already pending claims against the automaker and those people will still be forced to seek compensation from "Old GM."

"The fact that 'New GM' will protect consumers injured by defective 'Old GM' cars is a positive development for public safety," The Ad Hoc Committee of Consumer Victims of Chrysler and GM said in a statement released Saturday.

But the group said more needs to be done, noting that GM's concession doesn't help people that have already been hurt by its vehicles. It also said consumers hurt by fellow automaker Chrysler LLC still have little recourse.

As part of its plan to sell most of itself to a group led by Italy's Fiat Group SpA and emerge from Chapter 11, Auburn Hills, Mich.-based Chrysler also asked the judge overseeing its case for permission to leave behind its past and future product liability claims.

Consumer groups, as well as several individuals with pending claims against Chrysler, objected and some even took their arguments to the Supreme Court before the sale was ultimately approved and the automaker emerged from court oversight shortly thereafter.

GM, which filed for Chapter 11 on June 1, has said it wants to spend no more than 60 to 90 days under bankruptcy protection and that a key part of meeting that goal will be a quick sale of the company's assets.

Under the deal brokered with President Barack Obama's administration, the U.S. government will get a 60 percent ownership stake in the new GM. The Canadian government will get 12.5 percent, with the United Auto Workers union taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

But even with the resolution of the product liability issues, GM still faces numerous objections to the sale, including ones filed by a group of its unsecured bondholders, a handful of states and cities and individual retirees and shareholders.

Madoff's Wife Cedes Asset Claim

Ruth Madoff, the wife of one of the most reviled swindlers in history, has agreed to give up her potential claim to more than $80 million worth of assets, keeping just $2.5 million in cash in an agreement reached with federal prosecutors.

The settlement with the U.S. attorney's office in Manhattan was approved late Friday by U.S. District Court Judge Denny Chin, who is scheduled to sentence her husband, Bernard Madoff, on Monday in a final courtroom stand that will seal his legacy as one of the world's most successful thieves.

Mrs. Madoff won't attend her husband's sentencing in federal court ...

Investors back from the brink, but not far

Investors have basked for months in a powerful stock and corporate credit market rally, but the glow may fade as unprecedented measures to kick-start flagging economies mean near-zero inflation and benchmark interest rates won't last forever.

A surge in bond yields in the United States and elsewhere portends a sustained period of higher interest rates, boosting the cost of capital for corporate and consumer America.

Rising U.S. Treasury yields, with the yield on the 10-year note this week nearing 4.0 percent, have driven mortgage rates back up. That has threatened to kill a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them, at a time when credit losses show no sign of leveling off and the nation's unemployment rate races toward double-digits.

The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.

"What mistake can the U.S. economy afford to make? If you look at it that way, I suspect that we will see the Fed engage again in these markets," Mohamed El-Erian, chief executive of bond giant Pacific Investment Management Co., told Reuters Financial Television on Friday.

Between June 15 and June 18, fifteen leading analysts, economists and strategists including Goldman Sachs & Co's Abby Joseph Cohen, Citigroup's Tobias Levkovich, and Nouriel Roubini, a New York University professor who predicted much of the financial crisis, will discuss where the global economy goes from here at the annual Reuters Investment Outlook Summit in New York.

They are expected to discuss the surge in long-term Treasury yields that has commanded the attention of perhaps the most important U.S. economist of all, Fed Chairman Ben Bernanke. He has worried that the increase reflects "concerns about large federal deficits but also other causes."

BALANCE SHEET BLOAT

Debate is brewing within the Fed over whether to ramp up purchases of Treasuries, agency bonds and mortgage-backed securities, after the Fed began buying much of the debt in March.

Fed liquidity programs begun last year have doubled the size of its balance sheet to around $2 trillion, as the central bank flooded money into the economy to address the worst banking crisis since the Great Depression and the worst economic recession in more than a generation.

The Fed's efforts have succeeded in stabilizing a banking system that appeared set to collapse last September as credit markets seized up.

That month, the largest U.S. mortgage financiers, Fannie Mae (FNM.P: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.P: Quote, Profile, Research, Stock Buzz), became wards of the state, Lehman Brothers Holdings Inc (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) went bankrupt, Washington Mutual Inc (WAMUQ.PK: Quote, Profile, Research, Stock Buzz) failed, Merrill Lynch & Co was bought by Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz), and the insurer American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) had to be rescued. Soon after, more than 600 banks took federal bailout funds.

Now, though, close to three dozen banks have gotten the green light to pay back some of their bailout funds. On Tuesday, regulators authorized 10 big banks to repay $68 billion, led by JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) with $25 billion.

"That banks are repaying capital suggests more than mere stability, but actual balance sheet health and an ability to withstand another shock," said Timothy Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

NOT DONE

Jamie Dimon, JPMorgan's chief executive, has praised the Fed for having "acted extremely well and thoughtfully," but said it must tread carefully to remove quantitative easing.

"If that is not done exactly right you will have higher inflation on the other side," he said on May 27.

Indeed, leaders of the world's fastest-growing major economy are wringing their hands over the Fed balance sheet.

China is threatening to reduce its buying of U.S. Treasury debt if the U.S. dollar slides further, and has suggested that Special Drawing Rights of the International Monetary Fund replace the greenback as the world's main reserve currency.

A United Nations panel has seconded China's motion, but just in case it doesn't happen, China is buying gold.

The Fed knows it has much to do.

"We are out of the end zone .... still marching down the field," Dallas Fed President Richard Fisher said on June 9, using an American football metaphor. "We have a ways to go."

Talk of bailout, bonuses barred from AIG trial

The government bailout of AIG and controversial bonuses paid by the insurer cannot be brought up during trial of the company's suit involving former CEO Maurice "Hank" Greenberg, a judge ruled on Monday.

As the trial opened before a jury in U.S. District Court in Manhattan, Judge Jed Rakoff set narrow parameters for what can be discussed.

Also precluded is any talk of an investigation by then-New York Attorney General Eliot Spitzer and a parallel probe by American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) that resulted in Greenberg's ouster as CEO in 2005.

AIG's suit against Greenberg-controlled Starr International centers on a large block of AIG shares held by Starr. The stock was once valued at $20 billion but is now worth far less since AIG shares have tumbled over the last year.

AIG, claiming breach of fiduciary duty, is seeking to wrest back shares held by Starr and the proceeds of any sales, at the same time as it tries to repay $85 billion in taxpayer bailout funds.

Rakoff said he would exclude any discussion of AIG's taxpayer bailout or bonuses because its relevance to the case was "dubious in the extreme and prejudice clear."

Bonuses paid to executives of an AIG financial products unit responsible for a significant portion of the company's $100 billion in losses over the past year caused nationwide outrage earlier this year.

The U.S. government stepped in to save AIG from collapse under bad mortgage bets last September, and has put up to $180 billion at the company's disposal since then.

AIG has promised to use any funds won at the trial to repay U.S. taxpayers. Before the government bailout, Starr was AIG's biggest shareholder.

Starr's ownership of AIG stock has been in contention since Greenberg left AIG. Starr held about 290 million shares at the time.

Starr had held a sizable stake in AIG since 1970, when Greenberg structured the firm as a vehicle to protect the insurer from hostile takeover.

After jury selection, Ted Wells of the law firm Paul, Weiss, Rifkind is expected to make opening statements for AIG, arguing that Starr, under Greenberg's direction, established a trust in 1970 for the purpose of holding the block of shares expressly to fund deferred compensation for AIG's top employees.

David Boies, of Boies, Schiller & Flexner, representing Starr, is expected to argue that Greenberg used the stock to fund deferred compensation for AIG employees on a voluntary basis, and never expressly committed to continue the program indefinitely.

Starr ceased to be a compensation vehicle for AIG executives in 2005. It is now run by Greenberg as a private investment vehicle and for charity.

Greenberg, 84, was in the courtroom on Monday morning but ducked out as proceedings got underway. He is expected to be called as a witness by AIG as early as Tuesday.

Boeing Executive Optimistic Amid Gloom at Paris Air Show

LE BOURGET, FRANCE — The head of Boeing’s commercial jet division sought Monday to dispel some of the palpable pessimism at this year’s Paris Air Show, arguing that the global economy was showing signs of a recovery and predicting a resumption of growth in airline traffic as early as 2010.

“At this point it appears to us that the economic conditions have bottomed,” said Scott Carson, chief executive of Boeing Commercial Airplanes. “If they have bottomed and a recovery comes next year, I think we have a shot at getting through.”

Boeing has eschewed any slowdown of its assembly lines this year, though it expects to cut production rates for its long-range, wide-body 777 jet by 28 percent in mid-2010. Planned ramp-ups of 767 and 747 production were shelved. Its European rival, Airbus, has reduced output of both its A320 single-aisle plane and its A380 “superjumbo” while abandoning earlier plans to increase production of its wide-body A330.

Mr. Carson said the company’s moves on wide-body production were a specific reaction to the decline in air freight traffic that began in the fall of 2008. World air cargo traffic fell about 6 percent in 2008 and is expected to plunge by a further 17 percent in 2009.

“There remains some risk to the freight side but also an opportunity,” Mr. Carson said. “The next six months are going to be incredibly important to us as we watch to see if inventory rebuilding begins — which I believe it will.”

“It feels to me like we can manage our way to a recovery,” he said.

Mr. Carson added that he believed the current credit squeeze affecting airlines would be “short-lived” and that a “more normal trend” in lending would emerge by the second half of 2010.

Mr. Carson’s optimism was not universally shared by other participants at the Paris air show, however, where a thick, grey mantel of clouds hung like an unwanted metaphor over the opening day’s proceedings.

“You’ve got to look at the post-recession environment,” said Sash Tusa, an independent aerospace industry consultant in London. “What will be the effect of a rising interest-rate environment?”

Referring to Mr. Carson, Mr. Tusa added, “Financing orders a year out from now is not going to be as rosy as he thinks.”

The global economic slowdown has hit the airline industry hard, with passenger traffic expected to fall by 8 percent this year and cargo volumes down 17 percent. Just this month, the International Air Transport Association nearly doubled its forecast for 2009 industry losses to $9 billion from an earlier prediction of $4.7 billion. The industry lost $10.4 billion in 2008.

“I think the winter is going to be horrible” for air travel, said Nick Cunningham, an aerospace and airline industry analyst with Evolution Securities in London. “Returning to growth again is still about another year out — in other words, you’re looking at another 12 months of traffic still declining.”

“This is not a recovery,” Mr. Cunningham said. “This is just the worst juncture for year-on-year decline.”

Airbus, for its part, remains decidedly more cautious than its competitor. Over the weekend, Louis Gallois, chief executive of EADS, the parent company of Airbus, said that it was still impossible to predict when an economic turnaround might come.

“We have no capacity now to see what will be the depth of the crisis,” Mr. Gallois said.

Boeing last week lowered its 20 year market forecast for the first time in ten years, albeit only slightly. The Chicago-based company said annual air traffic growth, which has averaged more than 5 percent over the past 30 years, would dip to 4.9 percent per year over the next two decades. Aircraft deliveries for the period would fall by just 400 planes to 29,000, Boeing predicted.

Randy Tinseth, Boeing’s vice president of marketing, acknowledged that the forecast was based on assumptions made earlier this year about air traffic trends, which at the time assumed only a 5 percent decline in passenger traffic. Boeing plans to publish a revised forecast after the summer, Mr. Tinseth said.

Mr. Carson said that he did not expect the credit crisis to have a significant impact on the company’s deliveries in the near term. Boeing has a total order book valued at around $265 billion, equivalent to around 7 years of production at current rates.

“We believe we have the most coveted backlog in this industry — perhaps in the history of this industry,” Mr. Carson said.

Included in that backlog are around 860 of the company’s newest flagship, the 787 “Dreamliner,” which is due to make its first flight later this month and see its first delivery to All Nippon Airways of Japan in the first quarter of 2010. Mr. Carson said he did not foresee any of the airline customers lined up to buy the first of these planes running into financing trouble.

“We are highly confident of the financing for those early deliveries,” Mr. Carson said, though he did not specify how many planes were already fully financed. The 787 backlog extends out into 2020, he added, “so that’s a very long time with lots of opportunity for economic recovery.”

Sun Life to Buy U.K. Business of Lincoln National

Sun Life Financial Inc. agreed to buy the U.K. insurance business of Lincoln National Corp. for about 195 million pounds ($319 million), increasing its U.K. assets under management by 60 percent.

The cash purchase will be completed in the third quarter, and will add 8 cents to 10 cents to earnings per share in 2010, according to a statement today from the Toronto-based company.

Sun Life Chief Executive Officer Donald Stewart said as recently as last month that Canada’s third-biggest insurer may buy books and lines of businesses, rather than entire companies. The insurer was in talks earlier this year to buy most of Hartford Financial Services Group Inc.’s life insurance unit, according to people with knowledge of the matter.

The transaction, which includes clients in life insurance, pensions and annuities, will double Sun Life’s U.K. policies to 1.1 million. The purchase increases its U.K. assets to 10.6 billion pounds.

Lincoln is rebuilding capital after posting losses on investment declines and costs to protect savers from dips in the equity markets. The insurer, which cut jobs and slashed the dividend, announced plans today to accept $950 million in U.S. rescue funds and sell debt and shares.

The acquisition “is not a game changer,” Michael Goldberg, an analyst at Desjardins Securities Inc., wrote in a note to clients. “It is instead a modest tuck-in that still leaves Sun with capacity if other opportunities arise.”

Sun Life fell 36 cents, or 1.2 percent, to C$31.04 in 9:50 a.m. trading on the Toronto Stock Exchange. Lincoln, based near Philadelphia, fell $1.40, or 7.9 percent, to $16.35 on the New York Stock Exchange.

Obama to present sweeping market overhaul

President Obama will release details this week of his proposed financial market regulatory overhaul, Treasury Secretary Timothy Geithner said Monday.

The regulatory system "was fundamentally too fragile and unstable and it did a bad job of protecting consumers and investors," said Geithner, who spoke at a Time Warner (TWX, Fortune 500) summit on the economy. Time Warner is the parent of CNNMoney.com.

Geithner addressed the main objectives of the new regulatory system, although he was not willing to discuss specific details of the proposal prior to the official unveiling by Obama on Wednesday.

The U.S. financial system is far less centralized than other mature economies, according to Geithner, pointing to the between 8,000 and 9,000 banks throughout the country. To hold a vast system accountable, he said that there has to be a more centralized regulation system.

"At the core of making the system stronger is to give one place clear accountability and responsibility," he said.

Focus on reform: In a commentary published in Monday's Washington Post, Geithner and the Director of the National Economic Council, Lawrence Summers, said the proposal would grant the Federal Reserve increased power in the oversight and management of the largest financial companies in the market.

It would also create an agency like the Federal Deposit Insurance Corp., to oversee consumer-oriented financial products.

The two men wrote that the plan would point to the need for deeper cash reserves at major financial institutions. Those firms -- whose operations affect other, smaller institutions -- will be moderated by a consortium of Federal Reserve leaders.

In addition, the proposal intends to impose stricter reporting standards for asset-backed securities in an attempt to prevent a housing boom and subsequent bust like the one that catalyzed the current downturn, the two men wrote.

The housing collapse, fueled by the popularization of subprime mortgages, was evidence of weak consumer protection, Geithner and Summers wrote, adding that the proposal Obama will unveil Wednesday works to continue to protect consumers.

Another component of the plan, which "will be available only in extraordinary circumstances," according to Geithner and Summers, creates an option to dissolve financial companies that are too big to fail.

"It will help ensure that the government is no longer forced to choose between bailouts and financial collapse," they wrote.

The proposal will also pledge to lead a global overhaul in regulation.

Proposal still has to face Congress: Obama's proposal would require congressional approval before any of the changes are adopted. Geithner is set to testify about the plan before Congress on Thursday.

The plan will meet with opposition from those opposed to giving the government a more heavy hand in the financial marketplace.

While Geithner acknowledged the importance of competition to create innovation in a market economy, he was also unwavering in the defense of increased regulation.

"We are not going to go back to where it was. We can't," he said Monday. "The damage of the crisis was just too acute."

Geithner said it is crucial to reform the regulatory system even before the economy is completely out of the current recession. "We are trying to move very, very quickly while the memory of the crisis is still in the forefront of people's memory," he said.

U.S. Stocks Extend Global Drop as Oil, Metal Prices Retreat

By Sarah Jones and Jeff Kearns

June 15 (Bloomberg) -- U.S. stocks extended a global slide, dragging the Standard & Poor’s 500 Index down from a seven-month high, as falling oil and metal prices weighed on commodity producers. Treasuries rose and the dollar strengthened.

Exxon Mobil Corp. lost 1.3 percent as oil dropped for a second day. Freeport-McMoRan Copper & Gold Inc. slid 3.3 percent after copper sank by the daily limit in Shanghai on speculation supply may outpace demand in China, the largest consumer of the metal. Regional benchmark indexes for Europe and Asia slid at least 1.4 percent, led by BP Plc and BHP Billiton Ltd.

The S&P 500, which had climbed 40 percent from a 12-year low on March 9, decreased 1.8 percent to 929.16 at 10:27 a.m. New York time as a worse-than-estimated report on New York manufacturing also dragged down stocks. The Dow Jones Industrial Average, which last week erased its 2009 loss, tumbled 155.23, or 1.8 percent, to 8,644.03. Eighteen stocks fell for each that rose on the New York Stock Exchange.

“There’s no clear trajectory for moving us out of a recessionary environment,” said Wayne Wicker, who oversees $33 billion as chief investment officer at Vantagepoint Funds in Washington. “Given the shellshock of the last year and a half, you have a lot of people who don’t think this market is sustainable.”

Europe’s Dow Jones Stoxx 600 Index lost 1.6 percent after Group of Eight finance ministers, who met in Italy over the weekend, began drawing up contingency plans for rolling back budget deficits and bank bailouts as the economy shows signs of recovery and investors start worrying about inflation.

Empire Manufacturing

The S&P 500 erased gains from a two-day winning streak as the Federal Reserve Bank of New York’s general economic index fell to minus 9.4 from in June from minus 4.6. Readings below zero signal manufacturing is shrinking. Economists in a survey predicted minus 4.6. Stocks fell even as the International Monetary Fund raised its outlook for the U.S. economy.

The S&P 500’s rally since March left the index valued at 14.9 times its companies’ earnings, near the highest level since October. Last week, the Dow average became the latest major U.S. stock gauge to give investors a profit for the year amid growing optimism the worst recession since World War II is ending after the government and Federal Reserve pledged $12.8 trillion to revive economic growth.

The MSCI World Index has rebounded from a 13-year low in March. The rally pushed the index’s value to 18.2 times the earnings of its 1,655 companies, the most expensive level since December 2004, weekly data compiled by Bloomberg show. The Stoxx 600 Index trades at 25.4 times the earnings of its companies, the most in five years.

‘Good Shape’

Russian Finance Minister Alexei Kudrin said the dollar is in “good shape,” further affirming that there’s no substitute for the world’s reserve currency. “It’s too early to speak of an alternative,” Kudrin said in an interview two days ago in Italy after meeting officials from the G-8 nations.

Kudrin’s comments helped U.S. Treasuries climb for a third day, the longest streak in a month, even after international holdings of long-term U.S. financial assets rose at a slower pace in April as China, Japan and Russia trimmed holdings of Treasuries. Purchases of long-term equities, notes and bonds rose a net $11.2 billion, compared with buying of $55.4 billion in March, the Treasury said today in Washington.

Exxon, the biggest U.S. oil company, lost 1.3 percent to $72.80, while rival ConocoPhillips retreated 3.1 percent to $42.98.

Oil Slides

Crude oil for July delivery dropped as much as 2.1 percent to $70.55 a barrel in New York Mercantile Exchange trading as the dollar rose the most in a week against the euro, limiting investors’ need to use commodities as a hedge against inflation.

Freeport-McMoRan, the world’s biggest publicly traded copper producer, slid 3.3 percent to $56.58 as gold declined to a three-week low.

Inventories of copper in Shanghai warehouses grew for a second week to 60,647 metric tons last week, the highest since the week of March 20, 2008, the exchange said after the market closed June 12. China’s imports of the metal and its products increased 6 percent in May from April to 422,666 tons.

Wal-Mart Stores Inc. lost 2.4 percent to $48.63 after Goldman Sachs Group Inc. cut the largest retailer to “neutral” from “buy,” saying it sees “little near-term positive catalysts to drive shares higher.”

The S&P 500 may struggle to reach a so-called golden cross as trading volume decreases, according to a technical analyst at RBC Capital Markets.

‘Increasingly Tempting’

A golden cross, considered a buy signal by analysts who make predictions based on patterns in price charts, occurs when the 50-day moving average, which is currently at 889.24 for the S&P 500, rises above the 200-day moving average, which is at 911.65, according to Bloomberg data. The U.S. benchmark index closed at 946.21 last week.

The major stock indexes “are back above their 200-day averages, and it’s increasingly tempting to conclude that a new bull market is underway,” Toronto-based Ray Hanson wrote in a report dated June 12. However, the S&P 500 “has not yet achieved a golden cross” and “the steadily declining volume since early May suggests caution,” he said. since early May suggests caution,” he said.

To contact the reporters on this story: Sarah Jones in London at sjones35@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net.

Nokia 5530 XpressMusic smartphone

Nokia, the world's largest mobile phone maker, rolled out three new devices at its Nokia Connection event in Singapore. The new smartphones are designed with connectivity and cost-consciousness in mind. Nokia is looking to deliver connectivity to users without breaking the bank.

The mobile device maker rolled out the Nokia 5530 XpressMusic smartphone. The 5530 has a touchscreen interface that is designed to allow users to interact with social networks, watch homemade videos or content uploaded to YouTube and stay in touch with friends through a rotating picture carousel of contacts.

The Nokia XpressMusic smartphone has a 2.9-inch screen and a 4 GB memory card to store downloaded content. However, the Nokia 5530 XpressMusic device doesn't feature 3G connectivity. Instead, the mobile device functions on the GSM/EDGE network, meaning the device won't have the speed of some of the other smartphones on the market.

The Nokia 5530 XpressMusic will be available in the third quarter of this year and start at the unsubsidized price of about $275, Nokia said in a statement.

The new Nokia E72 is an upgrade to the E71. The new smartphone is aimed at integrating the work and personal life of users, with new features including a refreshed optical navigation ball and better integration of desktop e-mail. The camera on the mobile device also gets an upgrade to 5 megapixels.

In addition to adding new hardware to the smartphone, Nokia also included service upgrades that the company hopes will make the phone more appealing to customers.

The E72 is equipped with an A-GPS (assisted GPS) and integrated maps. Noise cancellation was improved on this iteration of the phone, making audio crisper. Finally, Nokia included Quickoffice for business users, which provides enables users to view, edit and create Microsoft Office 2007 documents, with free upgrades in the future.

The Nokia E72 is expected to be released later this fall and will start around $485 before subsidies.

Finally, the debut included a new flip phone from Nokia, the 3710 Fold. The flip phone is designed to be feature-rich but at affordable price. Images taken on the 3.2 megapixel camera can be stored on an optional micro SD card. Like the Nokia E72, the 3710 Fold has internal GPS capabilities that can be turned on or off by users.

The Nokia 3710 Fold will be available in the third quarter and start without subsidies at about $190.

100th Paris Air Show Opens

The Paris Air Show marks its 100th anniversary Monday amid rain, a gloomy economic forecast and lingering uncertainty over Airbus aircraft, following the still unexplained Air France crash over the Atlantic Ocean, two weeks ago.

The mood should have been celebratory, to fete the Paris Air Show's first century of existence, but the week-long industry event instead opened Monday with the doldrums. Airline, passenger and freight traffic has dropped in 2009 for the first time since 2001.

And, airline companies are cutting staff to weather the global economic and financial crisis. Overall, the International Air Transport Association has warned airlines will lose about nine billion dollars this year.

The crisis has also forced airlines to scrap or delay plans to buy new planes. Analyst Pierre Condom says tight credit is only making matters worse.

Condom told French radio there are few new orders for planes this year because airlines are having a hard time borrowing money from banks to finance new airplane purchases. And, airlines do not know when the economic crisis will be over, which also makes them reluctant to purchase.

The Air France crash over the Atlantic Ocean has also cast a shadow over the air show. The investigation into the crash is focusing on chances that faulty speed sensors may have helped cause the crash. The A330 aircraft in question is made by European aeronautics giant Airbus, which announced it would replace old speed sensors on all its A330 and A340 models.

Still, the news is not completely gloomy. There is sunny weather forecast for the Paris Air Show later this week and about 300,000 visitors are expected to attend this year's event. Boeing executive Scott Carson told reporters on Monday that he expected the aviation sector would start to recover next year.

Sprint to sell part of network on court ruling

Sprint Nextel Corp (S.N: Quote, Profile, Research, Stock Buzz) said on Friday it was looking to sell parts of its network assets to comply with an Illinois court ruling requiring it to sell or shut down its iDEN network.

The news sent shares of affiliate company iPCS Inc (IPCS.O: Quote, Profile, Research, Stock Buzz) down more than 20 percent, as the move dashed hopes that it could be acquired by Sprint as a way to resolve their iDEN legal battle.

Sprint took on the iDEN network when it acquired Nextel Communications in 2005.

But an Illinois court ruled earlier this year that the Nextel deal violated Sprint's exclusivity agreement with iPCS, and ordered the company to cease owning or operating the iDEN network in parts of Illinois, Iowa, Michigan and Nebraska, where iPCS operates.

Sprint's shares rose 4.13 percent to $5.29 as investors saw the move as a step towards resolving its troubles with iPCS. Shares of iPCS, however, tumbled 21.6 percent to $14.93 as Sprint's move disappointed some investors who had bet on Sprint acquiring iPCS as one way to resolve the matter.

"If Sprint is able to find a buyer, this is obviously bad for iPCS shareholders," said Hudson Square Research analyst Todd Rethemeier.

A source with knowledge of the situation said there were already interested parties, although analysts --including Rethemeier-- said any bid was unlikely to be very high as Sprint was losing iDEN customers.

Sprint last year looked into selling its iDEN network but gave up that plan amid a tightening credit market, and instead has outlined plans to rejuvenate that business with new calling plans.

The company said on Friday that it would hold onto the rest of its iDEN network assets and that the sale in parts of the Midwest will have "a de minimis impact" on its financial results.

The sale is expected to be fully completed ahead of a court-ordered deadline of Jan. 25, 2010, it said.

U.S. Treasury revises amount of loan to Chrysler

The U.S. Treasury Department said on Friday that a loan it is making to a reorganized Chrysler Group LLC totals $6.642 billion instead of $6.943 billion that it had estimated on May 27.

A department official said the initial figure was simply an estimate made last month and that the figure announced on Friday was a final one.

The Obama administration directed a fast-track reorganization of the automaker, which entered bankruptcy on April 30. Italian automaker Fiat bought most of Chrysler's assets, but the U.S. and Canadian governments each will end up with small equity stakes in the new company.

Fiat Chief Executive Sergio Marchionne is to become Chrysler's chief executive officer. The automaker's former CEO, Bob Nardelli, had previously said he would leave the company once the sale is completed.

Icahn Group Buys Tropicana Casino

A bankruptcy judge Friday approved the sale of Tropicana Casino & Resort in Atlantic City, N.J., to a group of lenders that includes billionaire Carl Icahn.

Judge Judith Wizmur of the U.S. Bankruptcy Court in Camden, N.J., signed off on the sale, according to David Scanlan of the New Jersey Casino Control Commission.

The deal calls for the lenders to cancel $200 million of the more than $1 billion in debt the company owes them.

Efforts to find a buyer for the Tropicana Atlantic City began more than a year ago after New Jersey gaming regulators took control of it from Tropicana Entertainment LLC, then run by William J. Yung.

The sale marks the return of Mr. Icahn, the former owner of the Sands hotel and casino in Atlantic City, to the city's boardwalk and its gaming tables. Mr. Icahn sold the Sands for about $250 million to Pinnacle Entertainment in 2006.

Employees May Be Taxed for Texting If IRS Updates Work Cellphone Rules

The Internal Revenue Service's proposals to evaluate whether to tax company-issued cellphones could cut deep for work-obsessed Washingtonians. The taxes may also apply to text messages on mobile devices, e-mails on company-issued laptops and wireless cards.

Under several proposals put forth this week, the IRS would more strictly enforce an existing law that classifies company-issued cellphones as a taxable benefit -- an idea decried by employers and wireless companies who argue that mobile phones are now essential tools in the workplace that shouldn't be considered income.

The debate stems from a 1989 law that requires workers who use company cellphones for personal calls to count the value of those calls as income and pay federal income taxes for the minutes used. Employees are supposed to keep detailed records of their calls. Now that sending e-mails on mobile devices is more prevalent, data charges could also be subject to scrutiny.

The law was passed at a time when cellphones were considered a luxury, such as a corporate car or jet, and only used by the wealthiest professionals. Brick-sized phones typically cost $2,000 and $3 per minute. But BlackBerrys, iPhones, PDAs, cellphones and laptops are now common fixtures for workers, and few companies have enforced the tedious record-keeping rule.

Wireless companies, including Sprint Nextel and Verizon Wireless, have lobbied Congress to repeal altogether the law that lists cellphones as a taxable benefit. They say the cost of cellphone services has declined dramatically in the past 20 years, so it does not make sense to tax it as an employee benefit.

"Do we really want employees to, instead of being productive, spend their day logging every e-mail they send, every Web site they browse and every time they use GPS?" asked Howard Woolley, senior vice president of Verizon Wireless.

The law was designed to prevent employees from using company phones for personal calls and then writing them off as a work-related tax deduction. It was also intended to prevent employers from hiding forms of compensation to employees.

Last year, Reps. Sam Johnson (R-Tex.) and Earl Pomeroy (D-N.D.) sponsored legislation to repeal the statute. It passed the House but not the Senate. Those lawmakers, as well as Sens. John F. Kerry (D-Mass.) and John Ensign (R-Nev.), have introduced similar bills this year.

"Cellphones are no longer executive perks or luxury items, and an antiquated tax code shouldn't treat them that way anymore," Kerry said yesterday.

Meanwhile, the IRS said it is trying to simplify the record-keeping requirement of the law to make it easier for employers to comply without spending exorbitant amounts of time and money. After receiving numerous questions about the documentation requirement, the IRS is seeking feedback on how to handle the newer features of cellphones and other devices that didn't exist 20 years ago.

It will take public comment on its proposals until Sept. 4, and said it welcomes alternative ideas from employers and workers.

The agency has suggested three options. One is to deem 75 percent of work cellphone use as related to work and the remaining 25 percent as personal. Employees would be taxed on the value of the personal minutes.

Under the second option, employees would provide proof that they have a personal cellphone to use during work hours. The third option would let employers use a statistical sampling to determine the average workers' personal use of the cellphones.

At the University of Texas at Dallas, several hundred employees carry cellphones so that they can be reached after hours. To get around the need to document every minute of workers' calls, the university instead decided to pay employees a stipend for using their own cellphones. The stipend is added to their income, and is therefore taxable.

"We don't want to penalize an employee we're now asking to be available 24-7," said Calvin Jamison, the university's vice president for business affairs. "And we don't want people to have to carry two phones around."

Amazon settles long-standing legal dispute with Toys R Us

Their failed partnership ended three years ago, and now their legal dispute has, too.

Amazon.com said Friday it will pay Toys R Us $51 million to settle a 5-year-old lawsuit over an agreement once touted as a way to strengthen both of their positions online.

The settlement will be paid in the third quarter, and then all claims and counterclaims will be dismissed, Amazon disclosed in a regulatory filing.

In 2000, Seattle-based Amazon and Toysrus.com, a division of Wayne, N.J.-based Toys R Us, entered into an agreement that was supposed to last through 2010, giving Toys R Us exclusive rights to sell some products on Amazon's Web site.

For Amazon, the deal was seen as the cornerstone of a new strategy to expand through partnerships rather than trying to sell everything itself. For Toys R Us, it provided access to a major online-sales channel.

Four years later, Toys R Us sued Amazon in New Jersey Superior Court, accusing Amazon of violating their agreement by letting other third-party merchants sell toys, games and baby products on its site. Amazon countersued, citing a "chronic failure" by Toys R Us to keep items in stock.

In a strongly worded 133-page judgment, New Jersey Chancery Court Judge Margaret Mary McVeigh ruled in 2006 that Amazon had breached the agreement and damaged Toys R Us' unique position and ability to plan or craft strategies.

The two companies ended their online partnership, but the legal dispute continued.

This past March, a three-judge state Appeals Court panel directed the lower court to reconsider Toys R Us' damage claims, while denying Amazon's claims.

Amazon disclosed in April that Toys R Us was seeking damages of about $93 million, which it called "grossly overstated," and expressed interest in appealing to the New Jersey Supreme Court.

Neither Amazon nor Toys R Us would comment about the settlement.

For the first quarter ended March 31, Amazon made a profit of $177 million, up 24 percent from a year ago, on sales of $4.9 billion. As of March 31, the company had $1.7 billion in cash and equivalents.

Privately held Toys R Us was acquired by three buyout firms in 2005.

BofA-Merrill cuts estimates on three big U.S. banks

Bank of America Securities-Merrill Lynch Research said repayment of federal funds by Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) and Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) will force a reversal of value for the remaining warrants, and cut its second-quarter profit estimates for the big U.S. banks.

Valuation for the warrants at those banks remains uncertain and is likely to hurt common equity in the third quarter, analysts led by Guy Moszkowski said in a note to clients.

The U.S. Treasury said banks repaying bailout funds also can repurchase warrants that the government holds in their firms "at fair market value," and many of the approved banks said they intended to do so.

The warrants give the government the right to buy common stock at a predetermined price for up to 10 years and were intended to give taxpayers a chance to share in the profits of healthy banks.

"While the firms should generate more than ample income to absorb the adjustment related to the main TARP payback, the warrant-related hit to capital is unavoidable," Moszkowski said.

The analyst said the accounting treatment of the charges that these companies would have to take is also uncertain, adding that there was "likely to be a charge to equity without a profit and loss effect, but will do some more work to verify this." Goldman shares were down 2 cents at $145.13 Friday on the New York Stock Exchange, while those of Morgan Stanley were up 16 cents at $29.67. JPMorgan shares were up 33 cents at $35.27.

Following are the second-quarter estimate changes on the three banks -

COMPANY NAME NEW ESTIMATE OLD ESTIMATE

Goldman Sachs $2.92 $3.59

Morgan Stanley -$0.23 $0.70

JPMorgan $0.01 $0.30

Koenigsegg ready to take over GM's Saab -paper

Tiny carmaker Koenigsegg is ready to take over General Motor's (GMGMQ.PK: Quote, Profile, Research, Stock Buzz) loss-making Saab unit, and says it has numerous good solutions to help get the company back on its feet, its major shareholder told daily Dagbladet. A source familiar with the talks told Reuters this week that General Motors is close to selling its Saab unit to Koenigsegg, and that it was backed by Norwegian investors. [ID:nLB799437]

"We think it is possible (to rescue Saab) and we have several good solutions to bring into Saab," Baard Eker, who holds 49 percent of Koenigsegg, told the newspaper.

"Let me make one thing clear -- we are not buying Saab only to chop it up," Eker said, referring to what he calls "poisonous comments" in Swedish media.

Eker said "reefs in the sea" may still emerge which could potentially stop the sale, but he did not reply negatively when asked about Saab's comments that a deal could be in place next week, according to the paper.

Eker confirmed several investors are willing to finance the acquisition, but declined to name them or how much money they would contribute with.

When asked what the most important thing Koenigsegg and himself could bring in as new owners, Eker said: "Culture and technology. Saab need to be more innovative."

Eker also said it was not their intention to let "many people go", but declined to be more specific.

Koenigsegg's supercars rank in Forbes magazine's list of the world's 10 most beautiful cars.

This deal would put a company that has less than 50 employees and turns out only a handful of $1 million supercars in charge of Saab, which produces that many family cars every hour. (Reporting by Aasa Christine Stoltz; editing by Chris Pizzey)

NYMEX-Crude ends lower on dollar, profit-taking

U.S. crude oil futures ended
lower on Friday as the dollar's rebound directed investment
flow away from commodities, at least for the moment, and as
traders took pre-weekend profits, snapping a three-day rally.

 "The petroleum markets are seeing at least a light round of
Friday profit-taking, encouraged by an upturn in the U.S.
dollar," said Tim Evans, energy analyst at Citi Futures
Perspective in New York.

 Oil traders also took a cue from Wall Street, where the
Dow, the S&P and the Nasdaq indexes were down most of the day,
with losses in the energy and materials sector. [.N]

 Technical analysts noted that front-month July crude had
become extremely overbought, but the current bull trend would
not be damaged unless prices closed below $70 a barrel.

 Crude oil futures hit $73 on Thursday, reaching the highest
intraday price since late October, on a weak dollar, supportive
U.S. economic data and an improved 2009 demand forecast from
the International Energy Agency in Paris.

 Earlier this week, the U.S. Energy Information
Administration also raised its demand forecast for this year.

 "The crude market took a breather from the frantic rally
we've just seen (but) losses were trimmed near the close on
some (pre-weekend) short-covering," said Mike Fitzpatrick, vice
president at MF Global in New York.

 The Organization of the Petroleum Exporting Countries, in a
monthly report on Friday, cut its forecast for world oil demand
further, but said the worst appeared to be over for the market.
[ID:nLC440564]

 OPEC said demand this year would contract by 1.62 million
barrels per day. It previously expected a decline of 1.57
million bpd.

 TECHNICALS

 NYMEX crude 10-day/20-day moving average: $69.02/$65.14

 Technical support/resistance:

 NYMEX crude: $70.00/$73.00

 NYMEX heating oil: $1.8050/$1.8700

 NYMEX RBOB: $2.0000/$2.2000

 For a report on technicals click [ID:nLC632870]

 PRICES

 * On the New York Mercantile Exchange, July crude CLN9
settled down 64 cents, or 0.88 percent, at $72.04 a barrel,
trading from $70.80 to $72.63. It settled on Thursday at
$72.68, the highest close since Oct. 20's $74.25, after hitting
an intraday high of $73.23, highest since Oct. 21's $75.69.

 * For the week, July crude rose $3.60, or 5.26 percent.

 * In London, July Brent crude LCON9 ended down 87 cents,
or 1.21 percent, at $70.92 a barrel, trading from $69.99 to
$71.64. It settled on Thursday at $71.79, the highest
settlement since Oct. 20's $72.03, after climbing to an
intraday high of $72.27, the highest since Oct. 21's $73.29.

 * NYMEX July RBOB RBN9 settled down 2.18 cents, or 1.06
percent, at $2.0431 a gallon, trading from $2.0192 to $2.0636.
It settled on Thursday at $2.0649, the highest close since Oct.
3's $2.2283, after surging to an intraday high of $2.0763, the
the highest since Oct. 7's $2.1399.

 * NYMEX July heating oil HON9 finished down 1.59 cents,
or 0.86 percent, at $1.8375 a gallon, trading from $1.8125 to
$1.8517. On Thursday, it settled at $1.8534, the highest since
Nov. 13's $1.8750, after rising to an intraday high of $1.8706,
the highest since Nov. 17's $1.8906.

 * The July/July RBOB crack spread <0#rb-cl=r> ended at
$13.77, dropping from $14.05 on Thursday. The July/July heating
oil crack spread <0#cl-ho=r> ended at $5.14, edging down from
$5.16 close on Thursday.

 * The spread between the current front month and the
five-year forward crude contract CLc61 ended at $14.18,
widening from $14.02 on Thursday. The July 2014 contract
settled on Friday at $86.22, down 47 cents, or 0.54 percent.

 MARKET NEWS

 * The Reuters/University of Michigan Surveys of Consumers'
preliminary June consumer sentiment index rose to 69.0, a
nine-month high, from May's final reading of 68.7, according to
a report released on Friday. [ID:nN12149350]

 * The dollar rose, rebounding from vicious selling earlier
this week, while data showing a plunge in euro-zone industrial
production highlighted economic weakness in the region and
pushed the euro lower. [USD/]

 * China's refinery output jumped to a record high in May as
refiners, encouraged by higher fuel prices and decent margins,
stepped up supplies to meet rising demand.

BlackRock shells out lots of green for Barclays unit

Several years ago, I heard a presentation from Laurence Fink, the mastermind behind the asset management giant, BlackRock (NYSE: BLK). At the time, he gave some frank advice; that is, he warned that investors needed to be very cautious.

Of course, it was spot-on (and saved me lots of money). And, I'm sure Fink's investors also appreciated the counsel.

Well, this week BlackRock became the king of asset management because of its $13.5 billion acquisition of Barclays Global Investors (NYSE: BCS). In all, the assets under management will now amount to $2.8 trillion.

It's really stunning, actually. Keep in mind that BlackRock got its start back in the late 1980s, with about $1 billion under management.

By and large, there are two critical factors for a successful asset manager: good advice and scale. The former has always been the case for BlackRock. And now, with the BGI deal, BlackRock will have enormous scale.

What's more, BGI also brings an important asset class: the exchange traded fund (ETF). This vehicle has exploded in popularity because of the inherent flexibility and low costs. Oh, and BGI has about half of the market for ETFs.

However, there are certainly risks. If history is any guide, the complexities of mega deals can be extremely problematic. And, this is especially the case in the financial services industry, which relies heavily on key people.

Then again, Fink has demonstrated a fairly good track record with M&A. He structured a deal for SSRM Holdings in 2005 and purchased the asset management business of Merrill Lynch in 2006. Besides, Fink has weathered the financial crisis incredibly well.

So, if there is anyone who can pull off the BGI transaction, it would definitely be Fink.

Six Flags Seeks Bankruptcy to Cut Debt $1.8 Billion

Six Flags Inc., the owner of 20 theme parks, sought bankruptcy protection 3 1/2 years after Washington Redskins owner Daniel Snyder become chairman and hired new managers in an attempt to return it to profitability.

The Chapter 11 petition filed in U.S. Bankruptcy Court in Wilmington, Delaware, listed assets of $3 billion and debt of $2.4 billion as of Dec. 31. Thirty-six affiliates also sought protection.

Snyder began a shakeup of Six Flags in late 2005 after winning three seats on the board. The 48-year-old company hasn’t posted an annual profit since 1998 and had losses of $558.8 million in the two years after Snyder became chairman.

Six Flags shares have fallen 86 percent in the past 12 months as investors have grown skeptical about the company’s ability to refinance preferred income equity redeemable shares, or PIERS, before their August redemption date. On Aug. 15, $287.5 million in preferred stock matures and $131 million of 8.875 percent senior notes come due next year.

The company said in today’s statement it’s seeking court approval of a prearranged reorganization plan that will cut its debt by about $1.8 billion and eliminate more than $300 million worth of preferred stock obligations. The reorganization plan has yet to be filed with the court.

$1.3 Billion

The 20 largest creditors without collateral backing their claims are owed about $1.3 billion, according to court papers. HSBC Bank USA, National Association as Trustee for holders of the company’s 12.25 percent notes due 2016, is listed as the largest unsecured creditor. The principal amount due under the bonds is $400 million.

Any debt-for-equity exchange offers by the company have ended due to the bankruptcy filing, Six Flags said in the statement.

Six Flags, which has theme parks in the U.S., Canada and Mexico, had $79.4 million in cash and $2.31 billion in long-term debt as of March 31, according to its first-quarter financial statement.

Spokeswoman Sandra Daniels didn’t respond to a voice mail left by Bloomberg News seeking comment.

The lead case is: Premier International Holdings Inc., 09- 12019, U.S. Bankruptcy Court, District of Delaware (Wilmington).

G-8 Starts Plan to Exit Stimulus on Recovery Signs

The Group of Eight nations began considering how to reverse the emergency steps they took to rescue the world economy as it shows signs of recovery.

As they delivered their most upbeat outlook since Lehman Brothers Holdings Inc. collapsed, G-8 finance ministers said they will start planning exit strategies for when sustainable growth returns. It’s still too soon to roll back budget deficits and bank bailouts, they said after a meeting in Lecce, Italy.

“We discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured,” the ministers said in a statement today after two days of talks. There are “signs of stabilization,” though “the situation remains uncertain.”

Governments are under pressure to turn their attention from fighting recession to smoothing a recovery as investors worry more than $2 trillion in stimulus programs will spark inflation if left unchecked. The officials bickered over whether Europe is endangering a rebound by refusing to impose stricter health checks on individual banks.

“Early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges,” U.S. Treasury Secretary Timothy Geithner told reporters.

Inflation

Signs the worst slump since World War II is moderating are prompting central bankers and investors to warn that inflation will accelerate if governments don’t cut back. U.S. Treasury 10- year note yields this week reached 4 percent for the first time since October.

“There is a distinct shift in tone” from the G-8, said Eswar Prasad, an economist at the Brookings Institution in Washington. Still, “rising interest rates due to concerns about fiscal deficits and prospects of inflation could choke off a nascent recovery.”

The governments didn’t outline how they will tighten policy once they deem their economies to be strong enough to take it and tasked the International Monetary Fund with studying ways to do so. They pledged to coordinate so as not to distort markets and economies as happened during the rush to save banks.

While German Finance Minister Peer Steinbrueck sought a “credible exit strategy” to avoid inflation, Geithner and U.K. Chancellor of the Exchequer Alistair Darling warned against hurting the global economy by acting prematurely.

Policy Restraint

“It is too early to shift toward policy restraint,” Geithner said. Darling said “no one is talking about exiting yet.”

Euro-area governments are reluctant to follow the U.S. by examining the capital needs of particular banks, arguing they are too diverse to evaluate by a single standard and that publishing results could rekindle the crisis. They have instead conducted a test of their whole financial system, although still refuse to reveal the details.

By contrast, U.S. financial firms unveiled plans to raise more than $100 billion since government tests of the 19 largest banks found that 10 needed $74.6 billion of additional capital to weather a more severe recession.

Concern Europe isn’t doing enough is starting to undermine the euro and the IMF predicts the region’s banks will need to write down $750 billion through next year. The euro has fallen 11 percent against the pound since the start of the year.

Stress Tests

“We want stress tests, but stress tests of the system not related to individual banks,” Steinbrueck told reporters in Lecce. “The European banking sector, and the German one in particular, is a lot more heterogeneous than the North American one.”

French Finance Minister Christine Lagarde said European leaders are not yet ready to commit to deeper probes of their banks though she backs greater transparency. The Financial Stability Board was charged with comparing the various tests, she said.

European resistance drew criticism ahead of the talks from Canadian Finance Minister Jim Flaherty, who said it could impede a revival of the world’s financial markets and economy. The G- 8’s statement made no mention of the topic.

“There is more work to be done in some other European countries with respect to their banking systems,” Flaherty said in Lecce. “Around the world one needs that assurance between economies that the system is reliable and trustworthy.”

Flaherty said after the meeting that he was “much less frustrated” by Europe’s position after all G-8 officials agreed the importance of studying the banks.

Dollar Support

The dollar got some support from Russian Finance Minister Alexei Kudrin, whose central bank on June 10 sparked a drop in Treasuries after saying some of its reserves may be shifted out of U.S. bonds. Kudrin said in an interview with Bloomberg Television in Lecce that he has confidence in the dollar and there are no immediate plans to switch to a new reserve currency.

While the absence of central bankers limited discussion of exchange rates, Steinbrueck said he wasn’t concerned by the euro’s value against the dollar. IMF Managing Director Dominique Strauss-Kahn said he didn’t see a “weak dollar.”

The G-8 met a day after data showed consumer confidence rose for a fourth month in the U.S. in June, and climbed to a 14-month high in May in Japan. U.S. stocks advanced this week, erasing the Dow Jones Industrial Average’s 2009 loss.

Stabilization

Home Depot Inc., the world’s largest home-improvement chain, said June 10 that fiscal 2009 profit may decline less than it had projected, or not at all. Virgin America Inc., an airline partly owned by U.K. billionaire Richard Branson, said yesterday that its first-quarter net loss narrowed to $40.3 million as the carrier filled more seats on its planes.

“There are increased signs of stabilization in our economies,” the G-8 said. Still, it cited rising unemployment as a challenge and pledged to keep taking “all necessary steps to put the global economy on a strong, stable and sustainable growth path.”

The G-8 is composed of the U.S., Japan, Germany, France, U.K., Canada, Italy and Russia. Its ministers met to shape an agenda for when their leaders convene July 8-10 in L’Acquila, Italy.