Second-Quarter GDP: Not So Bad

The U.S. economy contracted at a slower place than expected in the second quarter. The Commerce Dept says the annual rate of decline was 1%, whereas economists had predicted a 1.5% rate of fall. “The small contraction in the economy in the second quarter is another indication that the recession will soon end,” said the statement. Commerce also reported a steeper rate of contraction, 6.4%, in the first quarter, up from the 5.5% it had previously estimated.

There are still plenty of indications that the upcoming recession will be sluggish. Consumer spending, which accounts for 70% of the economy, slid at a 1.2% annual pace in the second quarter, compared with a growth rate of 0.6% in the first quarter. Economists had expected a drop of just 0.5%.

Source: Bloomberg

UBS and the IRS Make Peace

The big Swiss bank, on the eve of a trial in a civil suit brought by U.S. regulators who charge the bank aided Americans in evading taxes, has reached agreement with the IRS, meaning the messy legal spat may be near an end. The Swiss justice department then said the two sides would spend the next week ironing out the details. Washington has been pressuring UBS to turn over a list of its American clients as part of a campaign against wealthy scofflaws. Even a tentative boost should give the bank a boost, since it has seen a massive outflow of funds as the IRS has pursued its campaign. UBS settled criminal charges six months ago by paying a fine of $780 million and agreeing to turn over 250 sets of client data.

Source: Wall Street Journal

Lavish Bonuses Despite Bailouts

Thousands of Wall Street bankers and traders at firms that received federal bailouts were given bonuses of $1 million or more in 2008, according to a new report by New York State Attorney General Andrew Cuomo. At Goldman Sachs, for example, 953 people got bonuses of more than $1 million. The report is sure to fuel public outrage over rich compensation at Wall Street houses that were rescued by Washington.

Source: New York Times

Cash for Clunkers: Sold Out

The U.S. government’s $1 billion “cash for clunkers” car sales incentive program has unexpectedly reached its funding limit after an avalanche of business exhausted the funds, according to the federal government. Now, the Transportation Dept. must find further cash as rebates for nearly 250,000 vehicles nationwide are still working their way through the system.The controversial program gives vehicle buyers either $3,500 or $4,500 depending on the vehicle being traded in and the vehicle purchased. Dealers began making sales based on the extra rebates earlier this month, weeks before the government began processing transactions. The House has begun debating an emergency $2 billion measure to keep the program going.

Source: Reuters, BusinessWeek, Bloomberg

U.S. Regulators Clamp Down on Banks

Federal regulators have increased the number of banks that they have put on probation. The move has been criticized by some, who say the steps are too harsh. The Federal Reserve and the Office of the Comptroller of the Currency — two of the primary U.S. banking regulators — have issued more probation notices so far this year than they did for all of 2008.

Source: Wall Street Journal

Congressional Committee Approves Healthcare Bill

The U.S. House of Representative’s Energy and Commerce Committee on July 30 voted to establish a government-run health insurance plan. Politicians also backed healthcare schemes that may cover abortion, but stipulated insurers must use money from private sources to pay for any abortions. Republicans, though, have stepped up their criticism of the plan.

Source: New York Times

U.S. Stocks Hit 2009 High

U.S. stocks climbed to their highest levels this year on July 30 after investors cheered favorable earnings reports and signs the economy could be stabilizing. The Dow Jones industrial average rose 0.9% to close at 9154.46. That is the highest figure for the Dow since November, 2008. The broader S&P 500-stock index climbed 1.2% to 986.75.

Source: Washington Post

Yahoo’s Future: Less Engineering & Innovation

Surrendering search responsibilities to Microsoft will likely take a toll on Yahoo’s engineering and innovation prowess. That will lead to a wave of top-tier engineers heading for the exit — taking with them the inner geekiness that’s fueled much of Yahoo’s success over the years.

Source: BusinessWeek

Obama: I’m Not Antibusiness

In a July 27 interview with BusinessWeek in the Oval Office, President Barack Obama reflected on his first six months in office and discussed his evolving relationship with business leaders. The President clearly had a lot he wanted to say to the business community, with which he has gotten off to a shaky start. He addressed the criticisms of some CEOs that his policies are antibusiness, defended his proposed tax increases on the wealthy, and drew management lessons from his executive experience thus far. The President was cautious at times but always precise. He looked ahead to growth in a deleveraged economy driven by a more productive health-care system, energy innovation, educational improvements, and a more effective government. He added that many Americans are as cynical about business as business leaders are about government and that his goal is to channel this wave of populism in a constructive direction.

Source: BusinessWeek

What Next for Microsoft and Yahoo?

The bumpy, marathon mating dance between Microsoft and Yahoo finally concluded on July 29, when the two companies announced a partnership in Internet search and advertising to take on the industry powerhouse Google. But there was plenty of skepticism about whether the new partners could make a serious dent in Google’s dominance. The tie-up may help Steve Ballmer end the worst slump in his career at the helm of Microsoft, but it’s also likely to face antitrust scrutiny.

Sources: New York Times, Wall Street Journal, BusinessWeek

Healthier Housing, Gloomier Consumers

U.S. housing prices in May posted their first monthly gain in three years, with the S&P/Case-Shiller home-price index rising 0.5% from April. The index was down 17.1% from May of last year, but that’s less than analysts expected and the smallest year-over-year drop in nine months. Coming after yesterday’s surprising report on stronger new-home sales, the numbers afforded more hope that the housing slump may be ending, though virtually no one expects a rapid turnaround. Part of the problem, of course, is that joblessness in the U.S. remains high and is still rising, and that boosts families’ anxieties. The Conference Board reports that its July consumer confidence index dropped to 46.6, a second consecutive fall, down from 49.3 in June. That’s still a large gain from the 25.3 bottom in February, but sagging confidence could lead consumers to scrimp on spending, hindering economic recovery.

Sources: Bloomberg

New Rules on Short-Selling

The Securities & Exchange Commission announced a pair of measures on July 27 intended to quell concerns that speculators are driving down share prices through improper short selling. The new measures will lead to greater disclosures but don’t impose any significant new restrictions on short selling, other than an extension of the existing ban on “naked” short selling. High-profile Wall Street executives have complained that speculators played an outsized role in crashing the stock values of several major financial services companies last year. Lawmakers have hammered the SEC to take more dramatic steps to fight short selling.

Sources: Washington Post, Financial Times

Silverman Leaving NBC

Ben Silverman, co-chair of NBC Entertainment, will depart after the fall TV season to head a new media-content company funded by Barry Diller’s IAC/InterActiveCorp. NBC Universal, owned by General Electric, also named Jeff Gaspin, COO of Universal Television, to become chair of NBC Universal Television Entertainment, effective immediately. NBC, which has suffered poor ratings for years, has been shaking up its executive ranks. Silverman is executive producer of award-winning shows The Office and Ugly Betty.

Source: Wall Street Journal