China’s Dollar Trap

Back in the early stages of the financial crisis, wags joked that our trade with China had turned out to be fair and balanced after all: They sold us poison toys and tainted seafood; we sold them fraudulent securities.

But these days, both sides of that deal are breaking down. On one side, the world’s appetite for Chinese goods has fallen off sharply. China’s exports have plunged in recent months and are now down 26 percent from a year ago. On the other side, the Chinese are evidently getting anxious about those securities.

But China still seems to have unrealistic expectations. And that’s a problem for all of us.

The big news last week was a speech by Zhou Xiaochuan, the governor of China’s central bank, calling for a new “super-sovereign reserve currency.”

The paranoid wing of the Republican Party promptly warned of a dastardly plot to make America give up the dollar. But Mr. Zhou’s speech was actually an admission of weakness. In effect, he was saying that China had driven itself into a dollar trap, and that it can neither get itself out nor change the policies that put it in that trap in the first place.

Some background: In the early years of this decade, China began running large trade surpluses and also began attracting substantial inflows of foreign capital. If China had had a floating exchange rate — like, say, Canada — this would have led to a rise in the value of its currency, which, in turn, would have slowed the growth of China’s exports.

But China chose instead to keep the value of the yuan in terms of the dollar more or less fixed. To do this, it had to buy up dollars as they came flooding in. As the years went by, those trade surpluses just kept growing — and so did China’s hoard of foreign assets.

Now the joke about fraudulent securities was actually unfair. Aside from a late, ill-considered plunge into equities (at the very top of the market), the Chinese mainly accumulated very safe assets, with U.S. Treasury bills — T-bills, for short — making up a large part of the total. But while T-bills are as safe from default as anything on the planet, they yield a very low rate of return.

Was there a deep strategy behind this vast accumulation of low-yielding assets? Probably not. China acquired its $2 trillion stash — turning the People’s Republic into the T-bills Republic — the same way Britain acquired its empire: in a fit of absence of mind.

And just the other day, it seems, China’s leaders woke up and realized that they had a problem.

The low yield doesn’t seem to bother them much, even now. But they are, apparently, worried about the fact that around 70 percent of those assets are dollar-denominated, so any future fall in the dollar would mean a big capital loss for China. Hence Mr. Zhou’s proposal to move to a new reserve currency along the lines of the S.D.R.’s, or special drawing rights, in which the International Monetary Fund keeps its accounts.

But there’s both less and more here than meets the eye. S.D.R.’s aren’t real money. They’re accounting units whose value is set by a basket of dollars, euros, Japanese yen and British pounds. And there’s nothing to keep China from diversifying its reserves away from the dollar, indeed from holding a reserve basket matching the composition of the S.D.R.’s — nothing, that is, except for the fact that China now owns so many dollars that it can’t sell them off without driving the dollar down and triggering the very capital loss its leaders fear.

So what Mr. Zhou’s proposal actually amounts to is a plea that someone rescue China from the consequences of its own investment mistakes. That’s not going to happen.

And the call for some magical solution to the problem of China’s excess of dollars suggests something else: that China’s leaders haven’t come to grips with the fact that the rules of the game have changed in a fundamental way.

Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America. That world is gone.

Yet the day after his new-reserve-currency speech, Mr. Zhou gave another speech in which he seemed to assert that China’s extremely high savings rate is immutable, a result of Confucianism, which values “anti-extravagance.” Meanwhile, “it is not the right time” for the United States to save more. In other words, let’s go on as we were.

That’s also not going to happen.

The bottom line is that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis. The same could, of course, be said of the Japanese, the Europeans — and us.

And that failure to face up to new realities is the main reason that, despite some glimmers of good news — the G-20 summit accomplished more than I thought it would — this crisis probably still has years to run.

Financial Industry Paid Millions to Obama Aid

Lawrence H. Summers, the top economic adviser to President Obama, earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money, the White House disclosed Friday in releasing financial information about top officials.

Mr. Summers, the director of the National Economic Council, wields important influence over Mr. Obama’s policy decisions for the troubled financial industry, including firms from which he recently received payments.

Last year, he reported making 40 paid appearances, including a $135,000 speech to the investment firm Goldman Sachs, in addition to his earnings from the hedge fund, a sector the administration is trying to regulate.

The White House released hundreds of pages of financial disclosure forms, which are required of all West Wing officials. A White House spokesman, Ben LaBolt, said the compensation was not a conflict for Mr. Summers, adding it was not surprising because he was “widely recognized as one of the country’s most distinguished economists.”

Mr. Summers’s role at the White House includes advising Mr. Obama on whether — and how — to tighten regulation of hedge funds, which engage in highly sophisticated financial trading that many analysts have said contributed to the economic collapse.

Mr. Summers, a former president of Harvard University, was Treasury secretary in the Clinton administration. He appeared before large Wall Street companies like Citigroup ($45,000), J. P. Morgan ($67,500) and the now defunct Lehman Brothers ($67,500), according to his disclosure report. He reported being paid $10,000 for a speaking date at Yale and $90,000 to address an organization of Mexican banks.

While Mr. Obama campaigned on a pledge to restrict lobbyists from working in the White House, a step intended to reduce any influence between the administration and corporations, the ban did not apply to former executives like Mr. Summers, who was not a registered lobbyist. In 2006, he became a managing director of D. E. Shaw, a firm that manages about $30 billion in assets, making it one of the biggest hedge funds in the world.

“Dr. Summers was not an adviser to or an employee of the firms that paid him to speak,” Mr. LaBolt said.

He added, “Of course, since joining the White House, he has complied with the strictest ethics rules ever required of appointees and will not work on specific matters to which D. E. Shaw is a party for two years.”

A review of hundreds of pages of financial disclosure forms on Friday evening offered an extensive portrait of the wealth of top officials in the Obama administration. The forms detail the salaries, bonuses and investments of the president’s circle of advisers, many of whom took deep pay cuts from the private sector and sold their companies to work at the White House.

David Axelrod, who was the chief campaign strategist to Mr. Obama and now serves as a senior adviser to the president, reported a salary of $1 million last year from his two consulting firms. Over the next five years, according to his disclosure form, he will get $3 million from the sale of the two firms, which provide media and strategic advice to political clients. He listed assets of about $7 million to $10 million, and reported a long list of Democratic clients and a few corporate concerns, including AT&T and the Exelon Corporation, a nuclear energy company.

The disclosure forms also shed further light on the compensation received by a top Obama aide who previously worked for Citigroup, one of the largest recipients of taxpayer bailout money. The aide, Michael Froman, deputy national security adviser for international economic affairs, received more than $7.4 million from the company from January 2008 to when he joined the White House this year.

That money included a year-end bonus of $2.25 million for work in 2008, which Citigroup paid him in January. Such bonuses have prompted political controversy in recent months, including sharp criticism from Mr. Obama, who in January branded them as “shameful.”

The White House had previously acknowledged that Mr. Froman received such a year-end bonus and said he had decided to give it to charity, but would not say what it was.

The administration said Friday that Mr. Froman was working on giving the $2.25 million to a combination of charities related to homelessness and cancer, which took the life of his son this year.

The remainder of Mr. Froman’s earnings from Citigroup included deferred compensation and bonuses for work performed in prior years, as well as a $2 million payment for waiving his carried-interest stake in several private equity funds.

The White House said Mr. Froman decided to take the buyouts to avoid having to recuse himself from foreign-policy issues related to the funds’ investments, like India infrastructure, which means he would be taxed at ordinary income rates on the money.

Millionaires work in a variety of positions across the administration, and they include Desirée Rogers, the White House social secretary. Ms. Rogers, a close Chicago friend of the Obama family, reported income of $2.3 million last year. She earned a salary of $1.8 million from People’s Gas & North Shore Gas, along with three other sources of income from serving on insurance company boards.

Thomas E. Donilon, the deputy national security adviser, reported earning $3.9 million as a partner at the Washington law firm O’Melveny & Myers. His disclosure form says major clients included Citigroup, Goldman Sachs and Apollo Management, a private equity firm in New York that specializes in distressed assets and corporate restructuring.

Mr. Donilon is also entitled to future pension payments from Fannie Mae, where he worked from 1999 to 2005.

Agreement Gives Madoff Brother Spending Money

Bernard L. Madoff’s brother, Peter, gets access to $10,000 a month for living expenses under an agreement approved Friday in a lawsuit accusing him of swindling a law student.

Peter Madoff was in a Long Island courtroom to appeal a judge’s order last week freezing his assets. That order came in a civil lawsuit filed by Andrew Ross Samuels, 22, who claims Mr. Madoff took $478,000 of his trust fund and invested it in his brother Bernard’s Ponzi scheme.

Judge Stephen A. Bucaria of State Supreme Court approved giving Peter Madoff access to the money. The pact carries the same terms as a Justice Department document signed by Mr. Madoff on Dec. 24, in which he voluntarily agreed not to dispose of his substantial fortune and to curtail his personal spending until further notice.

He is permitted to spend $10,000 a month on living expenses, the judge said.

Peter Madoff arrived late to the courtroom, entering only after the final terms of the deal were negotiated in the judge’s chambers about an hour after the proceeding began.

He was briefly required to take the witness stand, where he answered “yes” in a hushed voice barely above a whisper to a series of questions from the judge.

Terms of the federal agreement were first revealed earlier this week in a separate court proceeding in Brooklyn. The extent of Peter Madoff’s holdings is not known; a lawyer for Mr. Samuels noted that Mr. Madoff owns a home in Old Westbury, an exclusive Long Island community, which is valued at $3 million to $5 million.

Bernard Madoff pleaded guilty on March 12 to defrauding investors of billions of dollars in perhaps the largest Ponzi scheme ever and will be sentenced in June. Peter Madoff was an executive at Bernard L. Madoff Investment Securities. He has not been charged with any crime.

“This is a very small step in trying to get a little bit of justice,” said Steven R. Schlesinger, who represents Mr. Samuels, a student at Brooklyn Law School, in the lawsuit.

Times Co. Said to Consider Closing Boston Globe

The New York Times Company has threatened to close The Boston Globe unless labor unions agree to concessions like pay cuts and the cessation of pension contributions, according to a person briefed on the talks.

The company is looking for $20 million in savings from The Globe, which has already gone through several rounds of deep cost-cutting and staff reductions. The company does not report figures by newspaper, but executives have acknowledged that the Globe lost tens of millions of dollars last year.

The threat to close The Globe was first reported by The Globe on Friday evening on its Web site, Boston.com. The site quoted the leaders of two of the unions describing a meeting Thursday at which the company delivered the ultimatum.

It quoted an unnamed person saying that in the meeting, management said that without the concessions, The Globe would lose $85 million in 2009.

The Times Company chairman, Arthur Sulzberger Jr., and Catherine J. Mathis, chief spokeswoman for the company, each declined to comment or confirm the article.

The company paid $1.1 billion for The Globe in 1993, the highest price ever paid for a single American newspaper, and it was highly profitable through that decade. But in recent years, the erosion of advertising and newspaper circulation has been more severe in the Boston area than in most of the country.

Advertising revenue for the industry fell 16.6 percent in 2008, according to the Newspaper Association of America.

The Times Company also wants to end a provision in The Globe’s contracts that gives certain employees lifetime job guarantees.

The company recently revealed that it was asking most of its employees, including the bulk of those at the flagship New York Times newspaper, to take a 5 percent pay cut for the remainder of this year. The company has recently scrambled to borrow money and sell assets to raise cash to weather the downturn.

The Globe last year reported weekday circulation of 324,000, the 14th highest in the country, and Sunday circulation of 504,000, the 11th highest.

When to Use a Mortgage Broker

It’s a bad time to be an honest mortgage broker.

In recent months, some of the biggest companies in real estate have decided to stop working with brokers. Chase won’t lend to brokers’ clients anymore. The PMI Group, one of the biggest companies in the mortgage insurance business, flat out refuses to underwrite any policies on loans that started with a broker.

Meanwhile, a bill is moving through Congress that would ban a common practice from a few years ago, where brokers earned more money by putting clients in loans that were potentially damaging. The legislators’ ire is tarring even those brokers who never engaged in such shenanigans.

All of this is happening just as borrowers need plenty of guidance. Mortgage rates are low, fueling demand for refinancing. But banks’ loan rules seem to change by the day, and many banks don’t have the staff to handle the volume.

So if you’re hoping to refinance or looking to snap up a bargain home in the next year or so, you’re faced with a tricky question. Given the number of institutions that want nothing to do with mortgage brokers, shouldn’t you stay far away from them as well?

The alternative, alas, may not be so great either. “If you want to get ripped off, go to a broker, and if you want incompetency, go to a bank,” said Mike Stoffer, a mortgage broker himself with Stoffer Mortgage in North Canton, Ohio, who admitted to occasional shame when he tells people what he does all day.

Mr. Stoffer tosses off that comment with a slight chuckle. But his brave and brutal honesty suggests the real possibility of getting a raw deal from brokers when you don’t understand where their loyalties lie.

Mortgage brokers work for themselves, not for you. They do not provide a personal shopping service and may compare only a handful of lenders on your behalf. If you want to be sure you’re getting the best rate and the lowest costs, the only way to come close to succeeding is to hunt extensively on your own.

We’ll get to that below, but first a brief interlude to explain why there is so much hate (and self-hate) in the industry. Take Chase, for instance. The bank is ostracizing mortgage brokers because it wants the most suitable loan applicants. In the past, the bank argues, more loans from brokers ended up troubled than other mortgages.

Nonsense, say the brokers, who say they believe that banks simply want to cut costs and reduce competition. “Over the last 12 to 15 years, we’ve held the majority of the market share in residential mortgages,” said Marc Savitt, president of The Mortgage Center, a mortgage broker in Martinsburg, W.Va., and the president of the National Association of Mortgage Brokers. “That happens because we give our customers good service and good rates. Otherwise, consumers wouldn’t be using us.”

But it’s also possible that consumers simply don’t know they could do better. A study for the Department of Housing and Urban Development published last year examined 7,560 30-year, fixed-rate Federal Housing Administration loans that closed in the middle of 2001. It found that when mortgage brokers were involved, borrowers paid about $300 to $425 more in fees than when consumers worked directly with lenders, other loan characteristics being equal.

“A lot of people went to a mortgage broker because they think the mortgage broker is out looking for the best deal for them,” Mr. Stoffer added. “My job is to offer very competitive rates and offer financial planning and competency.”

That, at least, is a start, but you shouldn’t limit your mortgage shopping to a single broker, and brokers don’t expect you to. Nor should you stop at just a couple of brokers. Here are three of the most important steps on your journey to home financing.

THE COMPARISON Shopping will be simpler if you pick a specific kind of loan and look only for that, say a 30-year fixed-rate mortgage with no points. Because rates (and terms) can change daily, take an entire weekday and make all your calls. This sounds severe, but there’s no other decent way to compare apples to apples.

Start with a credit union or two. Hit a few community banks. Then try a few big national banks nearby. Give your investment firm a shout and the bank that has your checking account, since they may offer you a deal. And if you’re refinancing, don’t forget your current lender.

Next, call a few mortgage brokers recommended by people you trust. Talking to more than one isn’t a breach of etiquette. “You’re making the largest financial decision of your life,” said Mr. Savitt of the mortgage brokers’ association. “Why not check out what everybody has got?”

THE COMPENSATION If you find mortgage brokers who can match or beat the best rate and deals you found elsewhere, see if you can get a straight answer to the question of precisely how they are getting paid. In general, they either make money directly from you via a fee of some sort or they get money from the lender (or some combination of the two).

Brokers may tell you not to worry, that their fee comes from the bank. Or they may say they merely mark up a wholesale interest rate (that a bank offers to the broker) to retail (which the brokers then offer to you).

This is fine as far as it goes, as long as the rate and costs are better than what you could get yourself (go ahead and check with the bank). The problems in recent years, however, came when banks offered more money to brokers who pushed certain loans or terms, say loans with interest rates that rose quickly and imposed penalties if the borrower refinanced within a few years.

“The ways brokers were paid created a conflict of interest and really meant that the broker to a very large extent was financially rewarded by betraying the trust of the borrower,” said Representative Brad Miller, a Democrat from North Carolina who co-sponsored the legislation in the House of Representatives.

Though many of the worst loans don’t exist anymore, it’s still worth asking mortgage brokers point blank whether their yield-spread premium — the industry term for the money they earn from lenders — could be lower if you were in a different type of loan. And if you don’t understand the answer, run it by an accountant or a more sophisticated friend whose compensation does not depend on the answer.

Working with a member of the Upfront Mortgage Brokers Association may help, since they’ve agreed to outline the sources and size of their compensation at the beginning of the process.

THE GUARANTEES If you’re comfortable with the answers so far, you’ve probably found a good match. There are plenty of mortgage brokers out there who earn their keep, and the best of them know much more about home loans than a bank officer will ever forget. Still, I’d test them with two more questions.

First, ask if they’ll guarantee the rate and costs in the good faith estimate they give you when you apply with a lender. “Good faith estimates are nothing but a sham,” said Mr. Stoffer, who has tried to fix what he sees as an industrywide problem by sticking to his own projections on the costs of the loan. “If I’m wrong on my good faith estimate, then I pay you. We should all have something binding upfront so people can shop.”

Second, ask if they’ll sign a piece of paper agreeing to work solely in your best interest. The legal word for this is “fiduciary, and Senator Charles E. Schumer has been trying to force this standard upon mortgage brokers for a couple of years. Representative Miller agreed that this would be ideal but that it was probably not politically realistic.

Maybe it isn’t. But that shouldn’t stop you from trying to hold your own broker to a higher standard.

Big Bonuses at Fannie and Freddie Draw Fire

Fannie Mae and Freddie Mac, the two troubled companies at the heart of the nation’s mortgage market, are set to pay their employees “retention bonuses” totaling $210 million, despite calls from lawmakers to cancel the payments.

The bonuses, which were made public on Friday, were defended by the companies’ federal regulator, James B. Lockhart, who said he intended to let them proceed.

In a letter sent last week to Senator Charles E. Grassley, an Iowa Republican, Mr. Lockhart disclosed that 7,600 Fannie and Freddie workers were scheduled to receive payouts aimed at retaining those “employees most critical to keep and difficult to replace.” Under the plan, 213 employees will receive retention bonuses worth more than $100,000 this year, and one Freddie Mac executive will receive $1.3 million.

Those figures drew sharp rebukes from Mr. Grassley and other lawmakers, who noted that Fannie and Freddie had received pledges of $400 billion from taxpayers to offset huge losses since they were seized by the government in September. Similar bonuses paid by the American International Group, which was also bailed out by taxpayers, incited fiery attacks from the White House and legislators when they were revealed last month.

“It’s hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year,” Mr. Grassley said in a statement. “It’s an insult that the bonuses were made with an infusion of cash from taxpayers.”

Fannie Mae and Freddie Mac own or guarantee more than half of the nation’s mortgages, and are essentially the only firms currently lubricating the nation’s mortgage marketplace.

Last month, Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, demanded that the companies rescind $4.4 million in retention bonuses paid to Fannie’s four top executives last year. Such bonuses are often offered to keep executives from leaving a company.

“I’m skeptical that these people have job offers to go elsewhere,” Mr. Frank said in an interview. “And in this economy, I don’t think it would be hard to find talented replacements for anyone who leaves.”

Mr. Lockhart, the companies’ regulator, rebuffed Mr. Frank’s suggestion.

“These payments send a signal that we think people are important and we want to keep them,” said Mr. Lockhart, adding that employees’ holdings of company stock became nearly worthless when the government seized the firms. “If the bonuses are rescinded, it sends the exact opposite signal, and it would be extremely dangerous for the American economy to lose these workers at this point.”

Representatives for both Fannie and Freddie declined to comment or detail how many employees had left the company, or had threatened to leave if their bonuses were rescinded. In an interview, Mr. Lockhart said he had heard that Fannie and Freddie workers were getting other offers, but did not have specific figures.

He added that there was no way to know if the companies could have retained workers with smaller bonuses.

The government has become increasingly reliant on Fannie Mae and Freddie Mac to put into effect federal programs seeking to improve the housing market and the economy. The companies have recently been ordered to oversee a vast new mortgage modification program, to buy greater numbers of loans, to refinance millions of at-risk homeowners and to loosen internal policies so they can work with more questionable borrowers. The company has increased its staff and has asked employees to work longer hours to make sure those new and expanded programs are operating.

Mr. Lockhart’s defense of Fannie and Freddie’s bonuses has made him a lightning rod for legislative criticisms. It is also beginning to draw questions about why President Obama has not replaced the regulator, who was appointed by President Bush. The law creating Mr. Lockhart’s office, the Federal Housing Finance Agency, established him as the lead regulator until his successor is named by the president and confirmed by Congress.

By failing to name a successor, say observers, the White House is implicitly backing Mr. Lockhart’s stance on the Fannie Mae and Freddie Mac bonuses, which stands in stark contrast to President Obama’s criticisms of the A.I.G. payments.

Mr. Lockhart declined to discuss his conversations with the White House, which declined to comment on Friday.

“This is a de facto White House endorsement of these payments, which is a little odd considering that everyone spent days talking about how they were shocked by the bonuses given to A.I.G.,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a consulting firm in Washington and a longtime observer of the companies. “It’s also a tempest in a teapot. We should worry less about $210 million in bonuses, and more about the fact that these companies are sitting atop $5 trillion of risks, and if they stumble, the American economy could disappear.”

Downturn Pushes More Toward Bankruptcy

The ailing economy continues to pull more Americans into bankruptcy court, where the number of troubled consumers filing for protection soared in March to its highest level since October 2005, when a new law made it more arduous and expensive to file.

And as job losses continue to climb, they may well drag bankruptcy filings along with them.

An average of 5,945 bankruptcy petitions were filed each day in March, up 9 percent from February and up 38 percent compared with a year earlier, according to Mike Bickford, president of Automated Access to Court Electronic Records, a bankruptcy data and management company. In all, 130,793 people filed for bankruptcy in March.

The weak economy and its repercussions — rising unemployment, lower pay, fewer people with health insurance, and the mortgage and foreclosure crises — are all playing a role in the big increase in bankruptcies. And some of the most common factors that tend to lead to bankruptcy filings — divorce and disruptive health problems — have not gone away.

But the biggest factor in the current spate of filings may be the tightening of credit.

“We have a lot of people out of work, but that alone is not driving the spike in bankruptcy filings,” said Robert M. Lawless, a professor at the University of Illinois College of Law. “Along with job loss is the tightening of consumer credit. Compared to 18 months ago, the American consumer does not have the same ability to borrow in an attempt to stave off the day of reckoning. With no income and no credit, it is not surprising that the middle class is looking to the bankruptcy courts for relief.”

Professor Lawless said he expected total bankruptcy filings to reach 1.45 million to 1.5 million by the end of the year, compared with nearly 1.1 million filings in 2008, an increase of 31 percent to 36 percent. It also means that filings are fast approaching the average number of annual filings of about 1.4 million before the new bankruptcy law took effect in October 2005.

“It shows you that a lot more people are hurting,” Mr. Bickford said. “Even with the more restrictive law in place, the filings are back up to the prelaw level.”

The law, the Bankruptcy Abuse Prevention and Consumer Protection Act, made it more difficult for consumers to erase their debts through Chapter 7 bankruptcies. Those who earn more than their state’s median income are now required to first pass a means test — based on income, living expenses and other factors. If they are deemed able to repay some debts, they are then forced to pursue a Chapter 13 bankruptcy, which sets up a three- or five-year repayment plan and makes it more difficult to get a fresh start.

“In a nutshell, bankruptcies happen because financial distress happens,” said Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at the Georgia State University College of Law. “It is hubris to think that we can manage such a complex system by inserting a means test here, a credit counseling requirement there.”

Keith and Leola Gladney of St. Charles, Mo., filed for Chapter 13 bankruptcy last summer. Their problems began to unfold in September 2007, when Mrs. Gladney, who was pregnant, was put on bed rest and could no longer work as a marketing assistant. They lost her income, though she did receive short-term disability payments. In January 2008, Mr. Gladney, 38, lost his job as a manager of an auto parts store. Within months, the couple had fallen behind on the mortgage payments on their home, which they bought for $130,000 in 2004.

They lost the house around the time their son was born in March 2008, and the couple had to move into a hotel with their newborn. Though they eventually found an apartment to rent, the Gladneys decided to file for bankruptcy. Adding to their troubles, Mrs. Gladney, 37, found out last November that she did not have a job to return to.

“It is really stressful for me because I thought I would find another job,” she said.

Mr. Gladney said he was hopeful that he was close to receiving a job offer on one of the 30 or so résumés he sends out daily. “We are trying to keep our heads up and keep a positive attitude and hope things will get better,” he said. “We go to church every Sunday. We haven’t changed our routine.”

If history is any guide, the number of bankruptcy filings will increase through this year, but will not jump as much as they did from February to March because that tends to be a popular time for filing, Professor Lawless said. But if legislation is passed that would allow bankruptcy judges to modify some primary mortgages, filings could rise significantly.

The House has approved a version of that so-called cramdown legislation, but the Senate did not have enough votes to overcome a filibuster by Republicans, who want the modifications to apply to a much smaller pool of loans. The Senate Democrats are working on a compromise, and say they hope they can bring the bill to the floor after Congress returns from recess on April 20.

The power to modify home mortgages would probably lead many more people to pursue bankruptcy to save their homes. If the legislation were to pass, Mr. Lawless said, 1.6 million would be a conservative estimate of the number of bankruptcy filings this year.

“We have to remember that prebankruptcy negotiations take place in the shadow of the bankruptcy law,” he added. “We would expect that banks would be more likely to come to the negotiation table.”

Regardless of what happens, the number of consumers filing for bankruptcy is expected to continue to climb even after the economy begins to recover.

“What is sobering about these numbers is that bankruptcy is generally a lagging economic indicator,” Professor Williams said. “So even as the economy starts to turn around down the road, we will still continue to see bankruptcy filings increase even past that turning point, and that trend will continue anywhere from three to five quarters.”

Google’s Plan for Out-of-Print Books Is Challenged

The dusty stacks of the nation’s great university and research libraries are full of orphans — books that the author and publisher have essentially abandoned. They are out of print, and while they remain under copyright, the rights holders are unknown or cannot be found.

Now millions of orphan books may get a new legal guardian. Google has been scanning the pages of those books and others as part of its plan to bring a digital library and bookstore, unprecedented in scope, to computer screens across the United States.

But a growing chorus is complaining that a far-reaching settlement of a suit brought against Google by publishers and authors is about to grant the company too much power over orphan works.

These critics say the settlement, which is subject to court approval, will give Google virtually exclusive rights to publish the books online and to profit from them. Some academics and public interest groups plan to file legal briefs objecting to this and other parts of the settlement in coming weeks, before a review by a federal judge in June.

While most orphan books are obscure, in aggregate they are a valuable, broad swath of 20th-century literature and scholarship.

Determining which books are orphans is difficult, but specialists say orphan works could make up the bulk of the collections of some major libraries.

Critics say that without the orphan books, no competitor will ever be able to compile the comprehensive online library Google aims to create, giving the company more control than ever over the realm of digital information. And without competition, they say, Google will be able to charge universities and others high prices for access to its database.

The settlement, “takes the vast bulk of books that are in research libraries and makes them into a single database that is the property of Google,” said Robert Darnton, head of the Harvard University library system. “Google will be a monopoly.”

Google, which has scanned more than seven million books from the collections of major libraries at its own expense, vigorously defends the settlement, saying it will bring great benefits to the broader public. And it says others could make similar deals.

“This agreement expands access to many of these hard-to-find books in a way that is great for Google, great for authors, great for publishers and great for readers,” said Alexander Macgillivray, the Google lawyer who led the settlement negotiations with the Association of American Publishers and the Authors Guild.

Most of the critics, which include copyright specialists, antitrust scholars and some librarians, agree that the public will benefit. But they say others should also have rights to orphan works. And they oppose what they say amounts to the rewriting, through a private deal rather than through legislation, of the copyright rules for millions of texts.

“They are doing an end run around the legislative process,” said Brewster Kahle, founder of the Open Content Alliance, which is working to build a digital library with few restrictions.

Opposition to the 134-page agreement, which the parties announced in October, has been building slowly as its implications have become clearer. Groups that plan to raise concerns with the court include the American Library Association, the Institute for Information Law and Policy at New York Law School and a group of lawyers led by Prof. Charles R. Nesson of Harvard Law School. It is not clear that any group will oppose the settlement outright.

The groups representing publishers and authors, which filed a class-action lawsuit against Google in 2005 in the Federal District Court for the Southern District of New York on behalf of their members, are defending the settlement, as are some librarians at major universities.

“What we were establishing was a renewed access to a huge corpus of material that was essentially lost in the bowels of a few great libraries,” said Richard Sarnoff, former chairman of the Association of American Publishers and co-chairman of the American unit of Bertelsmann, the parent company of Random House.

The lawsuit claimed that Google’s practice of showing snippets of copyrighted books in search results was copyright infringement. Google insisted that it was protected by fair use provisions of copyright law.

The settlement, which covers all books protected by copyright in the United States, allows Google to vastly expand what it can do with digital copies of books, whether they are orphans or not.

Google will be allowed to show readers in the United States as much as 20 percent of most copyrighted books, and will sell access to the entire collection to universities and other institutions. Public libraries will get free access to the full texts for their patrons at one computer, and individuals will be able to buy online access to particular books.

Proceeds from the program, including advertising revenue from Google’s book search service, will be split; Google will take 37 percent, and authors and publishers will share the rest. Google will also help set up a Book Rights Registry, run by authors and publishers, to administer rights and distribute payments.

Authors are permitted to opt out of the settlement or remove individual books from Google’s database. Google says it expects the pool of orphan books to shrink as authors learn about the registry and claim their books.

While the registry’s agreement with Google is not exclusive, the registry will be allowed to license to others only the books whose authors and publishers have explicitly authorized it. Since no such authorization is possible for orphan works, only Google would have access to them, so only Google could assemble a truly comprehensive book database.

“No other company can realistically get an equivalent license,” said Pamela Samuelson, a professor at the University of California, Berkeley, and co-director of the Berkeley Center for Law and Technology.

Mr. Macgillivray said Google shared with many of its critics the goal of making orphan works more widely accessible. He said Google would continue to lobby for legislation to that effect. And he said that nothing prevented a potential rival from following in its footsteps — namely, by scanning books without explicit permission, waiting to be sued and working to secure a similar settlement.

Yet even Michael J. Boni, the lead lawyer representing the Authors Guild, conceded that “Google will always have the advantage of having access to 100 percent of the orphan works.”

Mr. Darnton of Harvard said he feared that without competition Google would be free to “raise the price to unbearable levels.”

But Mr. Macgillivray and Mr. Boni said prices would be kept in check, in part by the goal, spelled out in the agreement, to reach as many customers as possible.

Some of Google’s rivals are clearly interested in the settlement’s fate. Microsoft is helping to finance the research on the settlement at the New York Law School institute. James Grimmelmann, an associate professor at the institute, said its work was not influenced by Microsoft. Microsoft confirmed this but declined to comment further.

Amazon also declined to comment. An unmatchable back catalog could eventually make Google a primary source for digital versions of books, old and new, threatening other e-book stores.

New Deal Revisionism: Theories Collide

For more than half a century, America’s political leaders — Republican and Democrat — have sought to wrap themselves in the legacy of Franklin Delano Roosevelt, the man credited with replacing fear with hope and ending the Great Depression. But in recent years some writers and economists have been telling a version of this story that is quite different from the one generally taught in school or seen on the History Channel.

In this interpretation Roosevelt is a well-meaning but misguided dupe who not only prolonged the Depression but also exacerbated it. For many people, it’s like hearing that Little Red Riding Hood’s grandmother and not the wolf is the rapacious killer.

Since the financial crash this fall, the revisionist look at the Great Depression has attracted new attention; it even recently made its way onto Stephen Colbert’s television show. But more than that, it has become an intellectual banner for Republican opponents of the Obama administration’s ambitious bailout and stimulus proposals.

Amity Shlaes, a syndicated columnist who works at the Council on Foreign Relations, helped ignite this latest revisionist spurt with her 2007 book, “The Forgotten Man: A New History of the Great Depression.”

“The deepest problem was the intervention, the lack of faith in the marketplace,” she wrote, lumping Herbert Hoover and Roosevelt together as overzealous government meddlers.

The current financial crisis, as well as continuing praise from conservatives, helped propel the book back onto the Times best-seller list in November. Jonathan Alter, an editor at Newsweek and the author of “The Defining Moment: FDR’s Hundred Days and the Triumph of Hope” — which has also benefited from the renewed fascination with the 1930s — calls Ms. Shlaes’s book a “taste badge,” flaunted by Republicans looking for a way to oppose the administration.

This week competing theories about the Depression and the New Deal were once again on display at a conference at the Council on Foreign Relations’ New York headquarters, co-hosted by the Leonard N. Stern School of Business at New York University, and partly organized by Ms. Shlaes.

She and other critics of the New Deal credit Roosevelt with some important innovations, like restoring confidence in banks and establishing social insurance. Nonetheless, they argue that most of his mucking about in the economy crowded out private investment and antagonized the business world, and thus delayed recovery.

Unemployment remained high throughout the decade until World War II, Ms. Shlaes told conference attendees, because the uncertainty created by Roosevelt’s continual tinkering paralyzed private investors.

When the federal government keeps changing the rules, it’s like having Darth Vader in control, John H. Cochrane, a professor of finance at the University of Chicago Booth School of Business, said during a panel. “I have changed the deal,” he intoned like Vader, the “Star Wars” villain. “Pray I don’t change it any further.”

Many of the economists who were invited to speak were similarly skeptical of the New Deal, even if they disagreed on the Depression’s causes. “No episode in American history has been so misinterpreted as the Great Depression,” declared Richard K. Vedder, an economist at Ohio University. By artificially keeping prices and wages high, he argued, both Hoover and Roosevelt prevented the economy from adjusting, which is why unemployment remained in double digits until the United States entered the war.

Anna Schwartz, who collaborated with Milton Friedman on a classic study of the Depression, and the Nobel Prize winner Robert E. Lucas Jr. argued that the idea of stimulating the economy with federal spending is a fairy tale. Government spending just crowds out private investment, they asserted; the money supply is the only thing that matters.

To Roosevelt’s defenders, the speaker list seemed stacked with attackers.

“I’m wound up here,” said Jeff Madrick, as he tried to cram in a wide-ranging defense of the New Deal during his brief remarks. Mr. Madrick, who directs policy research at the Schwartz Center for Economic Policy Analysis at the New School, pointed out that considering the deep pit the economy had fallen into during the Depression (when production fell by nearly one-third), the government’s deficit spending (just 5 percent of the gross domestic product) was actually quite modest. Even so, he said, it managed to reduce the official unemployment rate from a high of 25 percent in 1933 to just under 10 percent by 1936.

Nick Taylor, the author of “American-Made,” a history of the Works Progress Administration, said Roosevelt’s flurry of activity restored confidence. Not only did his administration rapidly create jobs for legions of jobless Americans, Mr. Taylor said, it also simultaneously built bridges, roads and dams, and brought light, electrical power and water to large swaths of the country. That 20th-century infrastructure laid the groundwork for the country’s phenomenal growth in the 1950s and ’60s.

Yes, unemployment bumped up in 1937, but it was caused by Roosevelt’s ill-advised attempt to balance the budget, he said. When Roosevelt reversed that policy, unemployment began to inch down again.

By the day’s end, Robert E. Rubin, who was secretary of the Treasury during the Clinton administration, mentioned that he was struck by “how vivid the discussion over the causes of the Depression is 80 years after it occurred,” though he also noted that “a lot of it is seen through ideological and political eyes — on both sides.”

At the final panel, a questioner asked at what point on the 1930s timeline is the United States right now. Economically we’re at 1930, Mr. Alter said, referring to the very start of the downturn, but politically we’re at 1933. Mr. Obama, he explained, “is following in F.D.R.’s footsteps,” moving quickly with significant government action to restore confidence and get the economy moving.

To Ms. Shlaes, the best analogy is 1937 — “the depression within the Depression” — when the unemployment rate shot back up to the middle and high teens after falling. “The economy wanted to recover,” she said, but the government’s interventions ended up paralyzing the business world.

Yet despite the abundance of analogies and lessons thrown out, some were cautious about drawing too close a link between then and now. The Depression was about 10 times as severe as what the nation is currently experiencing, with only 25 percent of the population working full time, they pointed out. In addition, there was no Social Security or unemployment insurance, and no federal deposit insurance.

To ask at what point on the 1930s timeline the United States is right now, Harold L. Cole, an economics professor at the University of Pennsylvania and a consultant to the Federal Reserve Bank of Philadelphia, said with some exasperation, “really shows a misunderstanding of the severity of what went on there and the depths of the crisis.”

Mr. Vedder playfully offered another analogy: the recession of 1920. Why was that slump, over and done with by 1922, so much shorter than the following decade’s? Well, for starters, he said, President Woodrow Wilson suffered an incapacitating stroke at the end of 1919, while his successor, Warren G. Harding, universally considered one of the worst presidents in American history, preferred drinking, playing poker and golf, and womanizing, to governing. “So nothing happened,” Mr. Vedder said.

Of course Mr. Vedder does not wish ill health — or obliviousness — on any chief executive. Still, in his view, when you’re talking about government intervention in the economy, doing nothing is about the best you can hope for from any president.

Empty Tables Threaten Some Restaurant Chains

During a decade of easy credit and loose spending, American businesses built too many cars, houses, stores and factories. It turns out the country built too many restaurants, too.

Now consumers are cutting back, and dining out is among the casualties. Finer restaurant chains have been hit hard, and so have the casual sit-down places that flooded suburban shopping centers and tourist districts across the country, aimed straight at middle American tastes.

A few chains have boarded up already. Many others are going into survival mode, trying to renegotiate their loans, cutting staff, offering bargains to customers and closing less profitable restaurants. Analysts predict thousands more restaurants could close in the next year or two.

The pain is evident even amid the neon glitz of Times Square, which draws big crowds of tourists used to eating at places like Red Lobster and Applebee’s.

Zane Tankel opened an Applebee’s franchise there eight years ago. At the time, he said his nearest real competition, an Olive Garden, was about six blocks away.

Now, Mr. Tankel could sit in his restaurant and throw rocks through the windows of a half-dozen competitors, including ESPN Zone, Dave & Buster’s, Chevys and Dallas BBQ.

“We’ll see some weeding out,” he said one recent lunch hour, sitting in a near-empty Applebee’s dining room overlooking 42nd Street. Noting a restaurant above him and another across the street, he said, “One of the three of us is not going to be here.”

Mr. Tankel’s fears are shared by many analysts and consultants, who say that a decades-long expansion produced too many restaurants even for a good economy, let alone the worst malaise since the Great Depression.

Since 1990, the number of restaurants and bars has grown to 537,000 from 361,000, a 49 percent increase, according to the National Restaurant Association. Population in the United States grew 23 percent in that period.

Amid the seeming prosperity of a credit-fueled era, people got in the habit of eating more and more of their meals out. The association’s statistics show that 48 cents of every food dollar is now spent at restaurants, compared with 40.5 cents per dollar in 1985.

In a recent note to investors, John Glass, an analyst for JPMorgan, said the casual dining industry — midrange restaurants like Applebee’s — needed to shutter about 1,200 of its roughly 18,000 locations to regain financial health.

“The chain casual dining industry has been overbuilt since 2005,” Mr. Glass wrote, noting that was the last year the industry posted positive numbers for customer traffic. “It may take two or more years to reach equilibrium.”

Others said the pruning of restaurants would extend beyond casual dining to all types of restaurants. Bob Goldin, executive vice president at Technomic, a Chicago consultancy for the restaurant industry, predicted that more than 20,000 restaurants would close over the next three years.

“I think 20,000 is a minimum,” he said. “We probably need more than that. There are a lot of marginal players out there.”

Mr. Goldin said the rapid expansion was driven by chains that added 300 or more new stores a year, following a “you build it and they shall come philosophy.”

“There isn’t a sector in the retail market that isn’t overbuilt,” he said.

The result is that after 16 years of sales growth, inflation-adjusted sales declined 1.2 percent last year, an already tough year for restaurateurs as ingredient costs hit record highs. Sales are expected to decrease another 1 percent in 2009, according to the National Restaurant Association.

“There’s not a day that goes by that I don’t get a heads-up about somebody closing their doors,” said Amy Greene, who tracks the industry for Avondale Partners in Nashville.

So far, many of the companies going out of business are small enterprises with one to three locations; they are struggling because of slower sales and limited access to credit, she said. The NPD Group, a market research firm, reported in January that unit growth of small chains and independents declined by 1 percent in 2008.

But larger chains have struggled too, particularly those with a more expensive menu than competitors, or onerous levels of debt. Outback Steakhouse is one example.

Known for its fried appetizer the Bloomin’ Onion and its ostensibly Australian décor, Outback was taken private in 2007 at the peak of the private equity buying binge, even as the casual dining sector was struggling with sluggish sales. Outback’s owner, OSI Restaurant Partners, now finds itself saddled with debt and declining customer counts.

“Because of all the debt they took on, there’s limited cash available to fix the stores,” said Howard W. Penney, an analyst at Research Edge, in New Haven. “The structure for the company is disastrous right now.”

In early March, the rating agency Moody’s included OSI Restaurant Partners on its list of “bottom-rung” companies that are most likely to default on debt payments. A company spokesman, Michael Fox, said the company had recently significantly improved its financial position by retiring $300 million of debt at a discounted cost of $85 million.

The company also is trying to lure customers with values and created a new menu with 15 meals for $15.99 each.

Other restaurant chains on that ignoble bottom-rung list included Krispy Kreme Doughnuts, Sbarro and Arby’s.

Of course, there are some exceptions to the industry’s malaise, even in the casual dining sector. Darden Restaurants, which owns Olive Garden and Red Lobster, recently announced a better-than-expected outlook for the coming year. In the most recent quarter, same-store sales dropped 3 percent, compared with a 6 percent decline for the rest of the casual dining industry.

“You are not in an environment where a rising tide will raise all boats,” said Clarence Otis, Darden’s chief executive, noting that strong brands and mature and efficient operations were crucial. “We have a lot of strengths. We are gaining share.”

In addition, fast-food restaurants with a value menu like McDonald’s, Taco Bell and Subway have thrived by offering full meals for less than $5.

“The guys that are succeeding are the ones that have ingrained in the customer that it is less expensive to eat there than to buy groceries and prepare it at home,” Ms. Greene said.

Mr. Tankel, whose company owns 30 Applebee’s franchises in and around New York, has had a first-row seat to the restaurant industry’s woes. In 2007, Applebee’s was acquired by Dine Equity, the owner of IHOP, and some analysts have worried about its ability to pay off its debt.

He is also on the board of Morton’s Restaurant Group, which has struggled as expense accounts have dried up, and Perkins & Marie Callender’s Inc., which is on Moody’s “bottom rung” chart.

Still, Mr. Tankel, an adventurer who has climbed Mount Everest and visited both poles, said his 30 stores were beating the odds by being up 2 percent so far this year, which he attributes to a relentless focus on service. He plans to continue expanding during the downturn.

“Dine Equity’s problems are not our problem,” he said. “They gave us a brand, and the brand has weight, the brand has firepower.”

Even so, several passers-by in Times Square said Friday that they had cut back on dining out. Scott Wood, 37, said economic uncertainty and a 20 percent pay cut had forced him and wife to cut their restaurant visits in half.

“We go to the same places, but just not as much,” said Mr. Wood, who was visiting from Utah.

Renita Dickens, a 42-year-old from Connecticut, said she too had cut back on restaurant visits, curbing a once-a-week habit to once a month, because of worries about the future. But she made an exception to her informal rule on Friday, eating lunch at Red Lobster with a friend.

“We’re going to treat ourselves,” she said. “But we’ll pay for it later.”

NY judge extends freeze on Peter Madoff's assets

A judge extended a temporary freeze on the assets of Peter Madoff, brother of jailed swindler Bernard Madoff, on Friday, but agreed that he could have $10,000 a month in expenses.

New York State Supreme Court Justice Stephen Bucaria, ruling in a civil lawsuit against Peter Madoff on suburban Long Island, said he must also preserve all records and pay attorney fees. He extended his previous order of March 25 until May 8.

The lawsuit in Mineola, New York, over $478,000 in inheritance money lost to the Madoff fraud, charged that Peter Madoff as chief compliance officer of Bernard L. Madoff Investment Securities LLC had full knowledge of the Ponzi scheme.

On March 12, Bernard Madoff pleaded guilty to running the biggest investment fraud in Wall Street history, which prosecutors have said drew in as much as $65 billion over at least 20 years. The only other person charged is the firm's outside accountant.

Another judge on Tuesday rejected an appeal against the freeze. During that hearing, it was disclosed that Peter Madoff had voluntarily agreed with the U.S. government to an asset freeze with $10,000 for monthly expenses on Dec. 24, about two weeks after his brother's arrest.

"My client is absolutely happy with the ruling keeping the temporary order in place," said Steven Schlesinger, the lawyer for Andrew Ross Samuels, 22, a student who sued Peter Madoff over inheritance money his grandfather entrusted to Madoff. "This is a court order that he cannot break, unlike the agreement with the U.S. government, which was voluntary."

A lawyer for Peter Madoff did not return calls for comment.

The case is Andrew Ross Samuels v Peter B. Madoff 09-5534 the Supreme Court of the State of New York, County of Nassau.

Trademark Lawsuit Over Google Ads Can Proceed

Google must defend itself against claims that its sponsored links on search results violated the trademark rights of the Rescuecom Corporation, an appeals court said. Rescuecom, a computer services company, sued in 2004 over the use of its company name as a “keyword” in the AdWords program used by Google. Advertisers can buy placement on a search-results page based on the use of such keywords, and in some cases the “sponsored links” are shown at the top of the results.

The United States Court of Appeals for the Second Circuit in New York said a judge was wrong to dismiss the case and sent it back for further review. The court said Rescuecom had the right to claim that Google’s ad program confused consumers. “If the searcher sees a different brand name as the top entry in response to the search for ‘Rescuecom,’ the searcher is likely to believe mistakenly that the different name which appears is affiliated with the brand name sought in the search,” the three-judge panel ruled.

Catherine Lacavera, a lawyer for Google, said, “These claims are without merit, and we will continue to defend vigorously against them.”

Disney eliminates about 1,900 jobs at its domestic theme parks

In a sign that the recession is cutting into Walt Disney Co.'s parks and resorts business, the company said Friday that it eliminated about 1,900 jobs at its domestic theme parks.

The bulk of the cuts occurred at Walt Disney World in Orlando, Fla., where about 1,400 jobs were eliminated. About 300 jobs will be cut from the Disneyland Resort in Anaheim, with the remainder coming from corporate headquarters in Burbank.

Disney, which employs about 80,000 people in its parks and resorts unit, said 1,200 people were laid off and about 700 positions were left unfilled.

The entertainment giant set the stage for the job reductions in February, when it announced a reorganization of its parks and resorts operation. The company didn't say at the time how many positions would be eliminated.

The cuts signal that Disney is bracing for an extended downturn as consumers continue to keep their wallets closed.

"The recession, and the recent decline, has really hit the theme park industry, but it has hit the destination parks more than the regional parks," said Edward Shaw, an associate with Economics Research Associates, a consultant to the travel industry. "People are staying closer to home."

Other Southern California amusement parks say they have avoided major layoffs.

Six Flags Magic Mountain, Legoland and Knott's Berry Farm say they have had no job cuts in recent months, and Universal Studios spokesman Eliot Sekuler said the company laid off a few dozen workers at the theme park in December as part of an overall belt-tightening at NBC Universal. There are no plans for further layoffs, he said.

Travel experts say the vacation industry is reeling from the effects of the weak economy. Consumers are worried about job security as the nation's jobless rate reached its highest level in more than a quarter century. Businesses also are curtailing trips.

All of these things are taking a toll on hotel bookings and air travel -- two bellwethers of the health of the travel business.

"The downturn that has occurred in the hotel industry since September is much worse than anybody anticipated," said Bruce Baltin, senior vice president of PKF Consulting, a hospitality industry consulting firm in Los Angeles. "We'll come out of this downturn as we have all others, but it may not be until 2010."

Orlando, home to Disney's sprawling 25,000-acre Walt Disney World resort, has been particularly hard-hit. The number of passengers traveling to Orlando International Airport declined 14% in February compared with a year earlier, the Greater Orlando Aviation Authority said. Hotel bookings are off by double digits, according to Smith Travel Research, which tracks the lodging industry but does not have access to bookings in Disney hotels.

Hotel occupancy rates in Orlando fell more than 10% in January and February compared with the same time a year earlier. Last month, bookings through March 28 plummeted 20% from a year earlier, Smith Travel said.

Disneyland's home base of Anaheim experienced a similar drop in hotel occupancy rates.

Bookings fell nearly 12% for January and February compared with a year ago, and dropped in March by nearly 15%, according to Smith Travel. The number of passengers flying into Los Angeles International Airport is off by 4.6 million in January, a decrease of 11.2% from 2008, according to the Los Angeles Convention and Visitors Bureau.

Orange County's John Wayne Airport experienced an even more dramatic 17% drop in the number of passengers in February.

These grim economic indicators don't bode well for Disney's parks and resort business, which accounts for more than a quarter of its operating income and revenue. The company declined to provide information about park attendance before its second-quarter results are released May 5.

Attendance at Disney's domestic parks fell 5% in the three-month period that ended Dec. 27. Disney started this year with promotions aimed at increasing attendance, such as free admission for people on their birthdays and a deal that offered a week's stay at a Disney hotel for the price of four nights.

Ritz to close three Triangle Wolf Camera stores

Ritz Camera Centers Inc., the bankrupt parent company of Wolf Camera, will close 300 stores nationwide – three in the Raleigh-Durham area – and will sell all of those locations’ merchandise in liquidation sales that started Saturday.

The three Triangle stores that are shutting down operate under the Wolf Camera brand. They are at Cary Towne Center mall, Durham’s The Streets at Soutpoint mall and Raleigh’s North Hills mixed-use center.

The closings will leave Ritz Camera with eight Wolf Camera and two Ritz Camera locations in the Triangle.

Beltsville, Md.-based Ritz will have about 400 stores left after the sales.

Ritz was the nation’s largest camera-store chain when it filed for Chapter 11 bankruptcy protection in February. A drop in consumer spending and slumping sales at Ritz's Boater’s World chain prompted the bankruptcy filing.

A Delaware bankruptcy court judge gave Ritz permission on March 19 to hire Gordon Bros. to shut down the company's 130-store Boater’s World chain. In 1987, Ritz launched Boater’s World, a boating-and-fishing supply retailer with 137 stores now operating.

Ritz doubled its Triangle presence in 2001 when it agreed to pay $84.7 million to buy Wolf Camera out of bankrutcy. Ritz began with a single store in Atlantic City in 1918. Its retail brands today include Wolf Camera, Kits Cameras, Inkley’s and The Camera Shop.

The world economy is suspended between the lofty rhetoric of last week's G20 summit and the gritty realities of domestic politics

We are in a race between economic recovery and economic nationalism. At last week's G20 summit, leading nations agreed to roughly $1 trillion of additional lending, mostly through the International Monetary Fund, to end the worldwide slump. But beneath the veil of consensus, countries are maneuvering to protect their economies and blame someone else for the crisis. Will the world economic order overcome these stresses or give way to a global free-for-all, characterized by rampant protectionism, nationalistic subsidies and preferences?

Emblematic of the tension is a recent proposal by Zhou Xiaochuan, governor of the People's Bank of China (PBOC), to replace the dollar as the world's major international currency. In a paper posted on the PBOC's Web site, Zhou argued that the present crisis reflects "the inherent vulnerabilities and systemic risks" of the dollar-based global economy. The PBOC is China's Federal Reserve, meaning that Zhou is no obscure bureaucrat or renegade academic. His critique is a significant event.

It may surprise Americans that, up to a point, his analysis is correct. The dollarized world economy developed huge potential instabilities—vast trade imbalances (American deficits, Asian surpluses) and massive, offsetting international money flows. But what Zhou omits from his analysis is revealing. To wit: China and others are implicated in the dollar system's failings. By keeping their currencies artificially depressed—a way to aid exports—they abetted the very imbalances that they now criticize.

The Chinese denounce American profligacy after promoting it and profiting from it. Low prices of imported consumer goods (shoes, computers, TVs) encouraged overconsumption. From 2000 to 2008, the U.S. trade deficit with China ballooned from $84 billion to $266 billion. China's foreign-exchange reserves are now an astounding $2 trillion. The reserves are not an accident; they are the consequence of conscious policies.

It's not just that exchange rates were (and are) misaligned. American economists have argued that a flood tide of Chinese money, earned from those bulging trade surpluses, depressed interest rates on U.S. Treasury securities and sent investors searching for higher yields elsewhere. That expanded the demand for riskier securities, including subprime mortgages, and pumped up the real-estate bubble. So China's policies contributed to the original financial crisis (though they were not the only cause) as well as to Americans' excess spending.

For decades, dollars have lubricated global prosperity. They're used to price major commodities—oil, wheat, copper—and to conduct most trade. Countries such as Thailand and South Korea deal in dollars for more than 80 percent of their exports, notes economist Linda Goldberg of the Federal Reserve Bank of New York. The dollar also serves as the major currency for cross-border investments by governments and the private sector. Indeed, governments hold almost two thirds of their $6.7 trillion in foreign-exchange reserves in dollars.

Ticketmaster's Letter to Ticket Brokers

As you are aware, recent events have resulted in a heightened level of interest in Ticketmaster's and TicketsNow's businesses. One by-product of this heightened interest is that we have received a number of subpoenas and demands for sworn information about TicketsNow and its broker clients. These include formal requests for information and/or subpoenas from, among others, the United States Department of Justice, the New Jersey Attorney General's office, the Federal Trade Commission and the Canadian Competition Bureau.

The purpose of this letter is to inform you that we are now required to hand over certain information about TicketsNow's broker clients and their sales activities. In particular, we are required to identify: (i) information regarding any seller of tickets on TicketsNow for the May 21 and May 23, 2009 Bruce Springsteen concerts at the IZOD Center in New Jersey; (ii) the names and contact information of all ticket brokers with whom TicketsNow does business; and (iii) copies of TicketsNow broker contracts.

We are taking steps to protect the confidentiality of these materials once produced but feel we are required to provide these materials in response to lawful demands. Therefore, please be advised that we will respond to these subpoenas and demands for information one week from today.

Bernanke, Kohn Pledge Fed to Withdraw Credit When Crisis Ends

The Federal Reserve’s top two officials assured that they will pull back their emergency- credit programs once the crisis fades, even as they prepare to flood the system further with an excess of $1 trillion.

Chairman Ben S. Bernanke said yesterday in Charlotte, North Carolina that the Fed must retain the flexibility to withdraw its record cash injections to restrain prices. Vice Chairman Donald Kohn said in Wooster, Ohio, “the trick will be unwinding this balance sheet in a timely way to avoid inflation.”

The remarks followed calls by current and former officials for an exit strategy from the central bank’s record accumulation of assets, from corporate debt to mortgage bonds. Concern that political pressure may delay the start of an anti-inflation fight drove the Fed to forge an accord with the Treasury Department last month.

“They have two significant challenges -- one is figuring out when to unwind,” said Christopher Low, chief economist at FTN Financial in New York, referring to U.S. central bankers. The second challenge is how, and that’s made tougher by “so many unwieldy positions. Nothing is as liquid as it used to be” on the Fed’s balance sheet, he said.

The U.S. central bank has effectively printed money to buy or lend against a range of assets to alleviate the credit crunch and revive the economy. Bernanke’s speech yesterday detailed steps that the Fed can take to remove that liquidity, including soaking up cash by the issuance of special bills.

Harder to Sell

The Fed normally raises interest rates by selling Treasuries on its balance sheet, draining reserves from the banking system. That task is tougher with the Fed’s commitment last month to buy more than $1 trillion in mortgage-backed securities, which are harder to sell quickly without roiling markets or potentially attracting political scrutiny.

Bernanke, 55, speaking at a conference hosted by the Richmond Fed bank, hailed last month’s joint statement with the Treasury that spelled out the principles underlying the central bank’s work with the Treasury to revive credit.

While the Fed has implemented “unconventional” measures and taken some “extremely uncomfortable” steps, it’s critical that the efforts “do not interfere with the independent conduct of monetary policy,” Bernanke said.

The joint statement was the culmination of a behind-the- scenes, two-month long debate involving the Fed’s Open Market Committee, as well as the Treasury.

Unemployment Concern

Fueling the debate is the concern that policy makers will have a tough time if they try to end their emergency-lending programs as soon as next year while the unemployment rate, now at quarter-century high 8.5 percent, remains elevated.

A Labor Department report yesterday showed the U.S. lost 663,000 jobs in March, bringing to 5.1 million the drop in payrolls since the start of the recession in December 2007.

The central bank has expanded its balance sheet by $1.2 trillion over the past year, taking on assets including mortgage securities, corporate debt and now long-term Treasuries under the Fed’s latest policy decision last month. The Fed’s total assets stood at $2.08 trillion as of April 1.

The FOMC’s March 18 decision commits the Fed to buy as much as $750 billion of additional mortgage debt, $100 billion of federal agency debt and $300 billion of Treasuries. Separately, the Fed last month began a lending program to restart markets for consumer and business lending. That plan, the Term Asset- Backed Securities Loan Facility, may reach $1 trillion, though the Fed is struggling to persuade investors to participate.

How to ‘Get Out’

“We can’t go into this without knowing how we are going to get out again,” Kohn, 66, who’s worked for the Fed almost four decades, said in response to a question after a speech at the College of Wooster, where he received a bachelor’s degree in economics.

The Fed’s tools for raising short-term rates once the crisis wanes include unwinding the emergency-loan programs, conducting reverse repurchase agreements against long-term securities holdings and increasing the rate the Fed pays on bank reserves, Bernanke said. The emergency facilities were designed to be “unwound as markets and the economy revive,” he said.

Kohn said the Fed and Treasury are seeking “other tools” from Congress to help mop up excess cash. One possibility is that the Fed issue its own securities, or “Fed bills,” or the Treasury could issue special bills, and put the cash on deposit at the Fed.

“It is important to get either of those tools exempt from the debt ceiling so that the Fed could have the power to absorb all the reserves it wanted to,” Kohn said in response to a question.

Bernanke said that “the large volume of reserve balances outstanding must be monitored carefully, as -- if not carefully managed -- they could complicate the Fed’s task of raising short-term interest rates when the economy begins to recover or if inflation expectations were to begin to move higher.”

Google Seen As Being Likely To Partner With, Not Buy, Twitter

Google Inc. (GOOG) is interested in striking a partnership with micro-blogging phenomenon Twitter Inc. but the two are not talking about specific initiatives, a person familiar with the situation said Friday.

The Internet search giant is most likely eyeing an AdSense partnership with Twitter, which would enable it to display and earn revenue from Google ads, industry observers said.

Such a partnership would be a good defensive move for Mountain View, Calif.-based Google because it would minimize the chance of Twitter emerging as a standalone competitor or being bought by a rival, such as Microsoft Corp. (MSFT.

U.S. May Keep Losing Jobs After Unemployment Hit 25-Year High

The U.S. may suffer further job losses in the coming months after employers cut payrolls by 633,000 in March and the unemployment rate jumped to a 25-year high of 8.5 percent.

A host of companies -- from manufacturers such as Johnson Controls Inc. and Dana Holding Corp. to service providers like International Business Machines Corp. and even the U.S. Postal Service -- have announced plans to eliminate jobs in the face of depressed demand from their customers.

“We expect labor-market conditions to remain appalling for many months to come,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, wrote in a client note following yesterday’s report from the Labor Department.

The risk is that a continued hemorrhaging of jobs triggers another round of spending cuts by consumers, pushing the economy deeper into a recession just as it is showing signs of steadying after plunging in the fourth quarter.

“We are not out of the woods yet,” Federal Reserve Vice Chairman Donald Kohn said in a speech in Wooster, Ohio, yesterday. He added that the central bank and administration of President Barack Obama must remain “flexible and open” to taking further measures to help the economy.

Stocks rose yesterday for a fourth day as Fed Chairman Ben S. Bernanke said measures to unfreeze credit markets were working. The Standard & Poor’s 500 index climbed 8.1 points, or 1 percent, to close at 842.5. Treasuries fell on growing concern over the amount of borrowing needed to finance the budget deficit, pushing the yield on the 10-year note to 2.90 percent at yesterday’s close, up from 2.77 percent the previous day.

Total Losses

Since the recession began in December 2007, the economy has lost about 5.1 million jobs, the worst in the postwar era, Labor Department figures released yesterday in Washington showed. Some 3.3 million have been cut in the last five months, including 651,000 in February, when the jobless rate was 8.1 percent.

The job losses have been widespread, though they have been particularly large in manufacturing, construction and temporary- help services. Those three industries have accounted for nearly two-thirds of the jobs eliminated during the recession.

“In the past, businesses seemed to show a bit of caution in their payroll reductions,” said Joel Naroff, president of Naroff Economics in Holland, Pennsylvania, and Bloomberg’s best economic forecaster for 2008. “Now, the philosophy seems to be cut massively now and ask questions about whether too much has been done later.”

Protracted Slump

Companies in such industries as automobiles and home building may be more aggressive in paring payrolls because they don’t expect demand to recover anytime soon, said Vincent Reinhart, a former Fed official now at the American Enterprise Institute in Washington.

Yesterday’s report showed factory payrolls fell by 161,000 in March after dropping 169,000 in February. The decrease included a loss of 17,500 jobs in auto manufacturing and parts industries.

There were signs last week that the worst of the recession may have passed for some areas of the economy, as reports showed improvements in manufacturing and housing, the industries in steepest decline.

The Institute for Supply Management’s factory index climbed to 36.3 in March, a third consecutive increase that brought it closer to the breakeven point of 50. The number of contracts to buy existing homes in February rose 2.1 percent, according to the National Association of Realtors. Also, consumer purchases advanced for a second straight month in February, the Commerce Department said March 27.

Auto Industry

Still, the manufacturing slump that began more than a year ago may intensify should General Motors Corp. be forced into bankruptcy, economists said. As many as 1 million additional auto-industry jobs may be lost and unemployment would climb to 11 percent, said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

The auto slump has already rippled through the industry. Johnson Controls, a maker of car interiors and batteries, said last month it will shut 10 factories and cut about 4,000 jobs. Dana, the truck-axle manufacturer that exited bankruptcy in 2008, said it will boost its payroll reduction to 5,800 this year, 800 more than previously announced.

“We are taking the difficult actions necessary to survive,” Dana’s Chief Executive Officer John Devine said in a March 16 statement.

Service industries, which include banks, insurance companies, restaurants and retailers, cut 358,000 workers after a 366,000 decline in February. Financial firms cut payrolls by 43,000, after a 44,000 decrease the prior month. Retail payrolls decreased by 47,800 after a 50,800 drop.

In addition to cutting jobs, companies also reduced hours for those still on payrolls. The average number of hours worked fell to 33.2 per week, down six minutes from February and the lowest since records began in 1964.