Stocks Rise after Bold Fed Move

(page 2 of 2)

AIG's (AIG) Chairman Edward Liddy told Congress he's asked executives to give back some of their bonuses. Liddy acknowledged the company's multimillion-dollar bonuses were "distasteful" to many and had provoked a firestorm of wrath. "I share that anger," Liddy, in his written remarks, said, "Mistakes were made at AIG on a scale few could have every imagined possible." But, he also said that the roughly $165 million in bonuses paid out over the weekend should be honored as a legal commitment of the United States government, which now owns 80% of the battered insurer."When you owe someone money, you pay that money back," Liddy maintained. "We at AIG want to believe that we are all in this together," said the man named six months ago to take over the company as part of the government rescue.

AIG shares gained 43% Wednesday.

The White House and Treasury have been besieged by questions about why Treasury Secretary Timothy F. Geithner did not know sooner about the bonus payments due this month, and whether he could have done more to stop them, prompting White House officials to assert President Obama's continued confidence in Geithner.

Larry Summers, National Economic Council director, said the Obama administration will be "creative" in dealing with the issue of bonuses paid to American International Group employees but said the law must be respected. Summers, interviewed on CNBC television, also said the White House is seeking a method for dealing with failed institutions that has been missing in the current financial crisis. "We are going to be pushing very hard for a so-called resolution regime, a system that will enable the government to intervene when a big financial company gets in trouble in the future like the FDIC (Federal Deposit Insurance Corp.) does with banks and ....make the people who should bear the responsibility bear the responsibility," he said.

China's government rejected Coca-Cola's (KO) $2.4 billion bid to acquire one of China's largest juice makers, saying the deal -- which would have been the largest-ever foreign takeover of a Chinese company -- would unduly restrict competition. The decision by the Ministry of Commerce was the first major test of the country's strengthened anti-monopoly law and could have a chilling effect on merger-and-acquisition activity in China, as well as on foreign investment in the country generally. It could also complicate efforts by China's own companies to make overseas acquisitions.

Former U.S. Treasury Secretary Henry Paulson called for an overhaul of financial regulation in an article in the Financial Times, largely reiterating a plan he proposed in March 2008. Reuters said the Paulson's article comes amid expectations his successor, Treasury Secretary Timothy Geithner, will reveal within days a plan to set up a so-called systemic risk regulator to monitor and manage risk in the financial sector. No single agency now has this role.

In economic news Wednesday, U.S. CPI rose 0.4% in February, while the core rate rose 0.2%, following increases of 0.3% and 0.2%, respectively, in January. Energy prices were up 3.3%, a second straight monthly increase (1.7% in January), after having been sliding lower since August. Gas prices rose 8.3%. The housing index was flat for a third consecutive month, while the owner's equivalent rent measure edged up 0.1%. Food and beverage prices declined 0.1%. Apparel prices rose 1.3%. Medical care costs edged up 0.3% and recreation rose 0.4%. Tobacco prices climbed another 0.7%, after a 0.8% increase in January, keeping pressure on the core rate. The data are about as expected and shouldn't have much impact on the markets.

The U.S. current account deficit narrowed sharply to -$132.8 billion in the fourth quarter, vs. a downwardly revised -$181.3 billion in the third (from -$174.1 billion) and -$182.2 billion in the second quarter (revised from -$180.9 billion) last year. The balance on goods and services was -$140.4 billion, vs. -$180.9 billion (revised from -$176.5 billion). The balance on income rose to $36.5 billion from a revised $29.6 billion (was $30.8 billion). Unilateral transfers rose to -$28.9 billion from a revised -$30.0 billion (was -$28.4 billion).

"The steep narrowing in the deficit is a function of the collapse in trade due to the recession, as well as the firmer dollar," says Action Economics.

France's economy could shrink by 1% in the first quarter, putting into question the government's forecasts for 2009, a French newspaper said on Wednesday, quoting a source close to Economy Minister Christine Lagarde.

The U.K. Office for National Statistics said initial jobless claims rose by 138,400 in February, after an upwardly revised increase of 93,500 in January. That was well above analysts' forecasts for a rise of 85,000 and the biggest increase since comparable records began in 1971. The claimant count rate hit 4.3%, the highest since 1999. Meanwhile, Britain's financial regulator will publish a blueprint for a shake-up of global banking regulation aimed at preventing a recurrence of the crisis that has wounded banks and deepened economic recession.