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Budget deficit to become a record high this time

The federal budget deficit this time is all set to create a record high for all times. The treasury department projected a total deficit for this year at around $140 billion which is almost an all time high. The treasury on Tuesday said during the monthly review of the government’s finances said that the budget was running a bit high in the month of January. The total amount the budget has netted so far in the year is $87.7 billion which is almost double of what the amount was in the same period last year in 2007. The current budget year had started only as late as October 1st last year.

To top it all the Bush administration recently submitted its final budget request to the congress and this projected that the shortfall this time came to a total of $410 billion which is just very short of the all time high of $413 billion which was in the year 2004.

Till now the amount the Federal Reserve has spent has been 8.3 percent ahead of the previous year’s pace at around $949.1 billion. This is way ahead of this year’s increase in revenues which is just 3.2 percent and has totaled almost $861.4 billion in this year’s budget.

In 2007 however the budget deficit was just $162billion which was the lowest in the last five years. The economic stimulus plan that was passed last week is expected to increase the current budget to an even higher figure. But the ever slowing economy is predicted to put the brakes on the recent growth of the tax revenues. All this is definitely enough to create enough hassles about this year’s budget.

When it is widely believed that the economic stimulus plan would greatly help in keeping the economy out of the recession the impact it is going to create on the budget is going to be enormous. Even if the bill fails to keep a recession away, it is definitely going to help to keep the downturn shorter and milder than it would otherwise have been. The rebates on tax that would be available to the people as a result of the provisions that are there in the economic stimulus plan are going to tax the treasury a lot. The bill has been estimated to be around $168 billion by the end if it is implemented completely. The rebate cheques which are the most important part of this plan is supposed to reach the people by the end of May and it has been schemed in such a way that all the tax paying citizens of the country receive a reduction in the amount of the tax that they pay. The bill also has provisions which are there to help the people who are facing problems due to the turbulences in the housing market. How much the budget deficit is going to swell up has to be watched and seen.

Stimulus plan finally approved by the Congress

On Thursday February 7, the Congress finally approved the stimulus plan. This move has been aimed at trying to give the randomly deteriorating economy of the country a boost. Now with the plan being passed it would enable as many as 130 million plus houses to get a tax rebate cheque this summer as well as the spring.

The approval of the plan has come only three weeks since President Bush had first proposed the economic stimulus plan having a total budget of $150 billion. Naturally the plan has been approved only after it has received its fair deal of corrections and additions. The senate has this time added rebates for almost twenty millions of seniors and almost 250,000 disabled veterans. The latest plan which was adopted by the house on Thursday night is supposed to cost anywhere around $168 billion in the next two years. The plan will now go to the table of the president for his signature. According to the Deputy Press Secretary of the White House, the measure will reach the White House by next week. Even though the internal revenue service will start their work with immediate effect, the rebate cheques will not reach the houses for at least a few months. This is because the features and privileges mentioned in the plan are many and the implanting of these plans will take a lot of time as well as manpower.

President Bush in one of his statements after the approval of the plan said that the plan that he has come up with will be tough, broad-based, effectively as well as timely. He also mentioned in the statement that the plan was meant to stimulate spending from the part of consumers and to eventually provide the urgently needed investment for various businesses.

Once the plan comes into action the rebates it gives most people are many. For starters, almost all the single taxpayers will receive$600 and the couples will get a total of $1,200 as well as $300 for each child for those who have children under the age of seventeen. The plan also has the provision which enables all citizens who has a total yearly income of $3,000 to receive a $300 rebate. This is also the case for the seniors who have their name mentioned in the Social Security even if they have not paid any income tax. This move has been included in the plan to make sure that the adult citizens of the country are leading a comfortable life. Another feature of the plan is that the rebate phase out begins at an amazing figure of $75,000 for singles and $150,000 for couples. The phase out is applicable only on the adjusted gross income of the incomes. This is again to make sure that the citizens are receiving as many privileges as possible. It also allows the people to save a lot more and then eventually spend a bit more than what they are doing now.

Service sector in US facing slow down

As per the reports that have come from New York on the sixth of February, the US economy is not at all in a position to avert a recession in its service sector. Even the smallest sliver of hope had diminished by the end of Tuesday that the country might avoid the slowdown. This is the first time that it is happening in the last five years. The news turned out to be a harsh one for many investors who were starting to believe that Federal Reserve would come with something to find a way out of the worst potential slowdown that has happened since 1991. The seriousness of the situation can be understood from the fact that Dow Jones industrial average lost 370 point in one day which was the biggest drop that took place since August. The result was a massive tumble of stocks and points.

What most people are concerned about is not whether or not there would be a recession, but about how bad the recession is going to be. What even the optimist find hard to digest is the fact that the numbers are almost terrible and beyond belief. The talk has been only about this says Scott Anderson a senior economist working at the Wells Fargo & Co; whether or not the recession is going to be a mild one or a severe one. The true nature of what is to be expected can be derived from the reading from the Institute of Supply Management which said “what is in store was going to be as big a shock as you can probably get”. According to Mr. Anderson, the month of January might be known in the future as the month which was the official start of one of the biggest recessions in the near past.

Many companies in the country are now filing for bankruptcy and are saying that they fell victims the recent slide in the housing market as well as their own debt load. Many other companies and shops are now cutting down on their employees and are not recruiting anymore. Other companies and commercial establishments are also employing such measures cut down on their loss. Some of the measures employed are slashing its 2007 earnings guidance. There are companies in the country which eliminated 28,000 jobs in the month of January alone and 269,000 jobs in the last 12 months. 17,000 was the total number of jobs the economy alone lost and this was the first country wide loss of jobs since the august of 2003. Another part of the service sector which has been hit badly is the financial services industry. It was very badly struck by the decreasing home prices, mortgage defaults, and the devaluation of other mortgage backed investments. The other people who find themselves in trouble are the banks, mortgage lenders, and the brokers.

The US Defense Budget creating shock waves

Recently, a very big argument has broken out based the issue of the size of the 2009 budget the pentagon has come up with. The hot tissue that got a lot or attention was the very large defense budget that was recommended. In retort, the defense secretary Robert Gates argued that the military budget of $515.4 billion which is 3.4 percent of the country’s gross domestic product is nothing compared to what the budget was in the previous years. He said that it was a bargain by the standards that have been set till now. As an explanation he said that during the times at which the country was at war the percentage of GDP that goes for defense was usually high. He laid out the statistics which said that the percentage of GDP that went for defense during the time US was at war with Korea was 14 percent and during the period of Vietnam war, it was 9 percent.

Anyhow, the critics did not feel the same way as Mr. Secretary and went on to measure the magnitude of this year’s defense budget with a completely different yardstick. What they found out was that this year’s defense budget formulated by the pentagon was an all time high. The New York Times editorial page even went on to say on the 2nd of February that the 2009 defense budget, even after adjusting to inflation, the maximum amount will be spent for military purposes since World War II.

So, the question that the people are trying to figure out now is whether the defense budget would turn out to be a bargain or a burden. The interesting thing about the defense secretary’s words is that he feels that the country is at war. However, the citizens of the country are certainly not feeling like that. Since not a single thing in the country is rationed, number of causalities are relatively few and the problem of waging wars is completely restricted to less than 2 percent of Americans that are part of the US military force there is nothing happening to suggest that the country is at war. So the statement made by the defense secretary becomes all the more intriguing. Are his words suggesting something?

It is only fair for the tax payers of the country to get a bit scratchy when they are asked to spend this much amount of money just for defense next year. The reason why they get more confused is because the defense budget, the pentagon has come up with recently does not include the various major issues like that of the wars in Iraq and Afghanistan. This is another funny part of the US defense budget. They have always omitted some items from the defense budget. Nuclear weapons can be taken for an example; they fall under a completely different section known as the Department of Energy. The pentagon also mentioned that it is not planning to cut down on the weapons this time and this is the other reason as to why the budget was a bit high this time.

US Senate going for the showdown

On February fourth, the US Senate made one step further to a showdown over the hot economic stimulus plan that has met with a lot of opinions in the past few days. With the democrats looking all set to give a much bigger package which provides more benefits to a lot many more people than the White house – backed legislation which is again backed by the house of representatives.

On Monday, the second of February, the Senate voted to start the debate on the $146 billion House bill. Anyhow, the Senate majority leader had different plans. Harry Reid on Monday said that he planned to offer a substitute that can build a lot of business tax breaks as well as tax rebates for many individuals. This is also the case for many businesses that were approved by the Senate Finance Committee a week before. Reid even went on to say that the people of America had the right to know that their rebate checks will not be delayed, not even for a single minute because of the showdown debate. The debate which is considered to become one of the most fiercely fought debate in the Senate in the past few years have been planned in such a way that minimum number of people has any sort of difficulties associated with it. The vote is likely to happen on the day after the Super Tuesday earlier in the day. This is after the democratic contenders for presidency would have returned to Washington after their campaign in 24 states. This vote is also considered to be of very high importance to the final debate showdown.

The bill that is to be passed by the house would give individuals a one time payment of $600 dollars and the couples a payment of $1,200, along with $300 per child. The tax rebates that are gong to come into effect after the passing of the bill would start phasing out for singles, who are earning more than $75,000. For those people who are married and making more than $150,000, this would be applicable. Even though the Senate will have no problems with $500 and $1000 payments respectively, it would only be if the number of people is high and with a higher income cap.

Since the bill has no provisions which asks for more spending for number of unemployment insurance benefits or other such government programs, the White House is in favor of the bill. Therefore, it is pressuring the Senate to pass the bill without any changes. The bill is rumored to extend the unemployment benefits beyond the 26 weeks which were offered by most states. The bill would also make the laws a lot stringent to make sure that the immigrants did not get any of the tax rebates that are prescribed in the bill. With all the features that are to be there in the bill, the debate is promising enough to follow with keen interest.

Sub-Prime Losses Could Exceed ‘Pessimistic’ Forecasts, According To Bernanke

Losses arising from over exposure to the sub-prime sector will rise in excess of even “the most pessimistic” forecasts, according to a statement made today by the Chairman of the Federal Reserve.

Chairman Ben Bernanke made the announcement to a US finance committee meeting which suggested that the extent of the sub-prime crisis was further beyond previous analyst expectations, sending trading on global markets down significantly as a result.

The sub-prime sector has been the source of endless worry and heartache for lenders in the US and across the world. With banks becoming over-exposed to the risky sub-prime sector, many have felt the heat as foreclosures and repossessions from rising interest rates have tied up liquidity and prevented ordinary lending practices.

The announcement came just two days after Ben Bernanke announced a significant cut in interest rates in the US, taking the basic rate of lending down to 4.75% from 5.25% in a bid to bring more stability back to global financial markets.

The Federal Reserve also announced their intention to invest more funds directly into the finance sector to ease the credit worries plaguing the markets, a move which has won plaudits from industry analysts and experts across the world.

Recent quarters have seen an increase in foreclosures of around 50% on normal rates with high interest rates pushing knife-edge sub-prime mortgages beyond the realms of affordability, leaving many banks with significant liquidity shortages to continuing their lending operations.

Bernanke announced that the full extent of foreclosures and repossessions could be much more significant than analysts had previously suggested, which could still have an even more serious fallout for the wider US economy as lenders begin to feel the full effect of a higher cost of borrowing and lack of available liquidity.

The Federal Reserve’s movements in recent days have been well received by lenders and markets, as having the potential to help ease current market jitters over the medium term.

US Tax Proposal Rejected By Business

Proposals for wide ranging tax reform in the US, which would prevent businesses moving funds between countries has been dismissed by business this week.

The proposed reforms would stop companies with foreign subsidiaries from moving funds out of the US tax free through provisions of favourable international treaties.

However, business leaders have criticised the measures, claiming that to introduce any more rigorous provisions would be to the detriment of commerce both domestically and on an international level, whilst turning away potential corporate investors from the US.

The House of Representatives has already passed a measure to the Senate, which would tax this kind of movement of funds at 30%, generating substantial revenue for the US coffers as a legitimate anti-avoidance measure if it passes through the Senate.

The proposals will be debated in the Senate next month, where Senators will argue and discuss the merits of such a bill. However, many analysts are predicting that the bill could come under fire in the largely Republican Senate.

The measures have been criticised by business leaders, who have widely argued that should the proposals become law, they would undermine investor confidence in the US economy.

Additionally, rather than being seen as an underhand practice, experts site the movement of funds through other countries as a ‘legitimate practice’, taking advantage of international treaties to which the US has agreed in order to minimise tax liability and gain a competitive edge over other similar scale businesses.

While these companies are not breaking the law, Congress has argued that it would be a good way to clamp down on the apparent loophole, whilst raising more funds for the public treasury.

The bill has passed through Congress and is scheduled for attention in the Senate next month, before it can become law.

US Home Repossessions Up

The number of houses being repossessed in the US has dramatically increased over the course of July, according to figures released today.

The report today, released by property think tank RealtyTrac, reflected a significant jump in the number of homes repossessed by mortgage lenders in the US last month, thought to be as a result of the growing unrest in the sub-prime sector.

After poor housing market performance over the last few years, banks and mortgage lenders lightened lending policies in the risky sub-prime sector, focusing on mortgages to those with a poor credit history.

However, with rising defaults and now growing repossessions as the sub-prime sector collapses, many major national lenders have been left facing liquidation, prompting fears of a credit crunch of global proportions.

According to the figures, repossessions increased by 93% on the year in July, showing a significant 9% rise from even last month’s figures, which analysts have blamed almost entirely on the sub-prime sector and rising interest rates.

Amongst the most startling of indicators from today’s report came with the finding that roughly 1 in 693 households were associated with foreclosure filings over the course of last month.

Also released today in a separate report were figures showing a decline in employment within construction industries, reflecting the severity of the market in housing.

The news has come as no surprise to analysts, who have already felt the wrath of the sub-prime crisis through torrential sell-offs on stock exchanges around the world during the course of last week.

However, the fear now is that markets will falter from this weeks rebound to slide back into red, as investors settle to the reality of rising foreclosures and tighter credit policies worldwide.

Analysts are predicting after a day of mixed trading results across the globe, investors could begin to lose confidence as the week progresses.

NAFTA Summit Underway

The North American Free Trade Agreement (NAFTA) summit has today got underway, with leaders from all three sides to the agreement meeting in Montebello, Canada.

The trilateral agreement, encompassing the US, Canada and Mexico, was designed to allow free trade throughout the north American continent, and has seen growth in trade between the nations rise by roughly 10% year on year since its inception in 1994.

President Bush, President Felipe Calderon of Mexico and Prime Minister Stephen Harper of Canada, in attendance at the summit, are set to discuss the current economic climate, as well as ways to refine the NAFTA agreement.

The agenda is thought to include options for modernisation of the agreement, with stock market volatility and security also likely to feature in discussions between the three North American premiers.

However the NAFTA is not without its critics, and hundreds of thousands of protestors have gathered near the site of the summit, angry at the impact of the agreement on manufacturing jobs within the US and the environmental impact of increased trade. Additionally, anti-capitalist protestors are also thought to be in attendance.

Despite the overwhelming trade benefits generated over the years, critics claim the loss of around 1 million manufacturing jobs to Mexico have cost the US economy dearly. However, many analysts have attributed cheaper Mexican labour costs and free market economics to the perceived job cuts.

The Democrats have also heavily criticised the agreement, highlighting the difference in the degree of enforcement of labour laws within the three countries to the agreement paves the way for unfair market conditions.

The environment is also scheduled for discussion, with ways in which trade can be made more environmentally-friendly set to be considered.

While many critics site the environmental damage of such widespread trade agreements, the NAFTA signatories look set to continue to develop environmental policy for trade within the continent.

Federal Reserve Rumoured To Help Mortgage Lenders

The Federal Reserve are rumoured to be following in the footsteps of the European Central Bank in supporting US mortgage lenders, amidst fresh fears of a global credit crunch.

The Federal Reserve, responsible for US monetary policy, is thought to be considering financial aid for mortgage lenders, many of whom have been driven to bankruptcy over lax lending in the risky sub-prime market.

The sub-prime market, which lends to borrowers with poor credit histories, has been the focus of international scandal and worldwide economic crisis, after it was unveiled that spiralling bad debts and foreclosures had arisen as a result of lending too far beyond salary levels with impractical rates of interest.

The news comes after the European Central Bank today announced the most considerable aid package to the financial market since the terrorist attacks of 9/11 in 2001, where banks and insurance companies were badly hit, and worldwide growth tailed off significantly.

The aid package, totalling over 95 billion euros, will come in the form of a cash injection to avoid liquidity problems, and an impending credit crunch, which many experts fear will plunge us into a global recession.

Fears as to a lack of credit availability and a potential global recession have prompted speculation as to the imminence of the Federal Reserve’s intervention in the struggling US financial markets, particularly after the measures announced by the European Central Bank today.

Without assistance in US financial markets, many mortgage lenders and banks could be facing problems in liquidity terms, making it more difficult for lenders to lend money, and borrowers to obtain the funding they need.

As a result, it is feared that economic growth across the globe will slowdown, possibly leading to a recession, unless finance is readily available for business growth and personal funding.

US Unhappy With WTO Proposal

The US government has issued a warning to the World Trade Organisation, that it doesn’t support new plans for a world trade deal.

The World Trade Organisation (or WTO) is concerned largely with regulating the balance of international trade amongst countries worldwide, and is getting set to debate draft plans for a worldwide trade initiative in September.

But the US have said they are unhappy with the form in which the agreement has taken, particularly with regards to ambiguity in agriculture, services and non-agricultural manufacturing.

According to US ambassador Peter Allgeier, once more light can be shed on the precise details of the treatment of these three subcategories, it may be easier for the US to commit to a deal.

Despite the deadlock, government officials have said they would be willing to continue talks, which began in 2001, to thrash out a deal after all.

The Doha round of talks have been going on for 6 years so far, and although a great deal has been achieved in that time, there are still fundamental aspects affecting the reaching of a satisfactory conclusion in the form of a worldwide trade deal.

Nations worldwide have been at loggerheads debating the intricacies of an international free trade deal, in which developed and developing nations have come to blows over tariffs, and market access.

But the WTO believes that in order to find any deal, there will have to be compromise from all quarters if a deal is to be reached any time soon.

“It is important that everybody be fit and ready on the starting line at that time. We have already come a long way in this round, and the distance left to go is not so great. But it will require an extra effort”

Halliburton comes under scrutiny for announced move to Dubai

Halliburton (NYSE: HAL), the US oil services firm that was headed by US Vice President Dick Cheney for the last half of the 1990s, has announced that it will move its world headquarters from Houston, Texas, to the Persian Gulf state of Dubai.

The news of the move has touched off criticism from some politicians and speculation that the move has to do with official questions in the US about its no-bid contracts in Iraq. House of Representatives member Henry Waxman, chairman of the House Oversight and Government Reform Committee, could call hearings to look into the implications of the move, according to an aide to Mr. Waxman.

Halliburton says that the move is an effort to take better advantage of business opportunities in the Middle East. It said the company would retain its business registration in the United States, but it plans on listing on a Middle Eastern stock exchange once its move is made.

The company’s chief executive said that it sees greater opportunity in the eastern hemisphere, as opposed to the western hemisphere. But its KBR engineering and military services division, which Halliburton is currently in process of splitting off, has been the target of several investigations into its billing practices in Iraq, where it is the Pentagon’s biggest contractor. KBR has been paid over $20 billion dollars so far for its work in Iraq since the war there began.

SEC’s “Operation Spamalot” targets e-mail scams

The US Securities and Exchange Commission has temporarily suspended trading in 35 companies who were advertising their shares via e-mail spam. Between them, someone had been sending out as many as 100 million e-mails a week that carried subject lines intended to entice people to invest in the companies. Their aim, according to the SEC, was to pump up the share prices of the stocks by encouraging people to invest and then quickly dumping their own shares while the price was artificially inflated.

The SEC did not say whether the companies in question themselves were behind the spam campaigns, and while they said they know who sent the e-mails, their identities were not made public. The shares are not traded on stock exchanges, but appear on “Pink Sheets”, an electronic service that does not investigate the backgrounds of brokers listing the stocks.

The investigation, called “Operation Spamalot” after the Broadway musical based on material by the Monty Python comedy troupe, is ongoing and the SEC said that they will continue to track down and punish those who send the e-mails, which it called “illegal and destructive”.

Trading in the 35 companies whose stock was advertised in this way have been suspended from trading for 10 days, through March 21.

Bill to require shareholder vote on executive compensation introduced

Barney Frank, a member of the United States House of Representatives and chairman of the House financial services committee, has introduced a bill that would make require public companies to let shareholders vote on pay for company executives. The votes, which would be non-binding and advisory only, would be included with annual proxies sent to shareholders.

The bill comes as companies are getting ready for their annual meetings and at a time when executive compensation has become an issue with the public and likely will be on shareholders’ minds. Pensions funds and unions have been advocating for such advisory votes as a way of allowing shareholders to express their opinions about whether pay for top executives is appropriate to performance of their duties.

Critics of Mr. Frank’s bill say that an attempt to give shareholders any kind of say over executive compensation should wait until some indication of how new rules issued last year by the Securities and Exchange Commission affect executive pay packages. The rules require companies to disclose a single figure summary of executives’ compensation as well as a “narrative” that explains how compensation committees decided what to pay the executives. Mr. Frank has called the SEC rules a step in the right direction, but that he thinks the required disclosure is not enough.

US Supreme Court limits punitive damage awards in tobacco case

The United States Supreme Court has handed down a ruling that puts new constitutional limits on some damage awards. The 5 to 4 ruling set aside a punitive damages award in an Oregon case against tobacco company Philip Morris, a division of Altria (NYSE: MO) that awarded $79.5 million in punitive damages to the widow of a man who died of lung cancer after many years as a smoker.

The court ruled that the Oregon Supreme Court was wrong to let the jury in that case punish the tobacco company for harm to all smokers in Oregon. The decision said that jurors may only award punitive damages for harm to the person filing the lawsuit, but not for the harm to other victims not party to the suit.

Robin Conrad, senior vice president of the US Chamber of Commerce’s litigation unit in Washington, said that the ruling is a “big win” for business. However, the court did not extend its ruling to the issue of the size of punitive damage awards. According to one punitive damages expert, business would have liked more specific guidelines from the court as to acceptable amounts of punitive damages that may be awarded in similar cases. However, it is traditional for the Supreme Court to limit its rulings to the case at hand.

Still, the ruling will benefit the tobacco companies as well as pharmaceuticals companies such as Merck (NYSE: MRK), which is currently looking at over 27,000 suits involving its Vioxx painkiller, which was withdrawn from the market after being implicated in an increased risk of heart damage.

Ebay resists proposed reporting rules

Ebay (NASDAQ: EBAY) says that the administration of US President George W. Bush is trying to force it to inform on sellers who use its online auction site. The company said that they are willing to co-operate in individual Internal Revenue Service (IRS) investigations, but that it is not their place to report on seller’s income from the site. That, they say, is the individual seller’s responsibility. Ebay has more than 200 million registered users, and says that around 4.3 million of those users rely on the site for a significant part of their yearly income.

The plan reportedly would force Ebay and other online auctioneers to report American sellers who complete more than 100 transactions worth at least $5,000 each year to the IRS. The new rules are planned to be implemented from 1 January 2008. Besides putting it in the position of go-between for the government, Ebay says that the plan is unfair because it does not target online classified advertisement sites like Craiglist.

The online auctioneer is actively lobbying in Washington and will not only challenge the Treasury Department’s authority to require reporting of some of its users activity but will also challenge the legality of the proposed rules, saying that while they offer “auction-like” transactions, they are not in reality auctions because they have a fixed ending time. At least one member of the US House of Representatives has said he would work with Ebay to oppose the proposed rules.

Declining smoking rates mean less tax money for states

Those who believe that smoking is just a health problem are probably not politicians who have to worry about things like budgets.

More and more US states are putting restrictions on where and when people can smoke. Beginning with banning smoking in the workplace, some states have followed up with the elimination of smoking in bars and restaurants. Many of these states have also raised taxes on cigarettes and other tobacco products as a way of encouraging people to stop smoking. In a few states the tax has approached or exceeded $2 per pack.

But in states where people are actually smoking less, tax revenues on tobacco products have dropped. While the effect on state budgets might not be immediate or severe, officials of those states are thinking about the decline in tax dollars coming into state coffers. With tobacco taxes being one of the few kinds of taxes that many people feel that it is acceptable to raise, that money has often been seen as a way to quickly solve budget problems that crop up.

In 2005, the latest year for which data is available, about one-fifth of adults in the US were smokers. That is down 25 percent from ten years ago. As a consequence, states were able to tax 2.8 billion fewer packs of cigarettes in 2005 than they had in 2000. While the states took in $13 billion in tobacco taxes in 2005, 15 states collected less taxes on cigarettes than they had in 2004. Federal taxes collected on cigarettes was also down, from $8.1 million in 2002 to $7.7 percent in 2005.

While the states could realize some savings in reduced costs for treating medical conditions related to smoking, it isn’t clear whether these savings will offset the losses from lower cigarette tax revenues. And so the politicians, who don’t want to encourage smoking, still worry about how their legislation limiting smoking will affect their states’ bottom line.

SEC in insider trading investigation with a twist

The US Securities and Exchange Commission is looking into whether big banks have leaked trade information to favorite clients in a bid for favor with those clients. The investigation is said to have as its object discovering just how common insider trading is in the New York markets.

Brokerages that act ahead of client orders for their own benefit has long been an issue on Wall Street, but the current investigation is more focused on whether banks are tipping off their best customers, including hedge funds, with inside information that allows them to make trades with other banks with the purpose of hiding the source of the information that allowed them to make advantageous trades.

The SEC sent out letters last month to major banks asking for a wide variety of information, including all stock and option trading data for the banks and their customers for the final two weeks in September, the end of the third quarter. Recipients of the letters included Deutsche Bank, Merrill Lynch, Morgan Stanley, and UBS.

The SEC will use the information to determine whether it looks like banks are tipping off customers in ways that allow the customers to make trades that they would not have made without the information. If any evidence of such inside trading is turned up, a formal investigation that could lead to civil charges against the institutions and/or individuals involved.

The SEC has confirmed that the investigation is being conducted but would not offer any details, while none of the banks included would comment.

SEC in insider trading investigation with a twist

The US Securities and Exchange Commission is looking into whether big banks have leaked trade information to favorite clients in a bid for favor with those clients. The investigation is said to have as its object discovering just how common insider trading is in the New York markets.

Brokerages that act ahead of client orders for their own benefit has long been an issue on Wall Street, but the current investigation is more focused on whether banks are tipping off their best customers, including hedge funds, with inside information that allows them to make trades with other banks with the purpose of hiding the source of the information that allowed them to make advantageous trades.

The SEC sent out letters last month to major banks asking for a wide variety of information, including all stock and option trading data for the banks and their customers for the final two weeks in September, the end of the third quarter. Recipients of the letters included Deutsche Bank, Merrill Lynch, Morgan Stanley, and UBS.

The SEC will use the information to determine whether it looks like banks are tipping off customers in ways that allow the customers to make trades that they would not have made without the information. If any evidence of such inside trading is turned up, a formal investigation that could lead to civil charges against the institutions and/or individuals involved.

The SEC has confirmed that the investigation is being conducted but would not offer any details, while none of the banks included would comment.

Bush submits 2008 budget to Congress

The new budget submitted by US President George W. Bush to Congress on Monday, calling for $2.9 trillion in total spending, includes nearly $700 billion in military spending. Most of that $700 billion will go to military operations in Iraq and Afghanistan. The budget, for the fiscal year beginning 1 October 2008, will result in a budget surplus by the year 2012, according to the Bush administration.

The new budget calls for extension of the tax cuts first introduced in Mr. Bush’s first term, which will reduce revenues by an estimated $1.6 trillion over 10 years. It also either cuts or eliminates 141 programs, according to a report from CNN. Some of those cuts will come in the form of $78 billion of savings in Medicare and Medicaid. Medicare provides insurance to retirees and the disabled, while Medicaid is a health program for children and the disadvantaged. $168 million will be spent to increase strategic oil inventories.

This is the first budget that Mr. Bush has had to submit to a Democratic-controlled Congress, and there is little chance that the budget will stand as submitted. Both Democrats and Republicans were quoted as saying that it will be difficult for the budget to gain support in its present form. The chairman of the Senate Budget committee, Kent Conrad, a Democrat, said that the budget was “disconnected from reality”. Conrad did say that this budget does better at accounting for near-term costs of the war in Iraq, although he criticized its accounting of the full costs of the war and that while it assumes cuts in domestic programs past 2008 it does not say where the cuts will come from after that year.

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