Key consumer confidence index up for fourth straight month

This post has been corrected. See note at the bottom for details.

A leading consumer confidence index rose in December, the fourth straight monthly increase, but the stalemate in Washington over extending the payroll tax cut could cut into those gains.

Consumers were much more positive about the overall economic prospects this month compared to November, according to the latest Thomson Reuters/University of Michigan Survey of Consumers released Thursday. The percentage of respondents expecting good economic times ahead increased to 29% from 19% in November, though the figure was still historically low.

The boost in consumer confidence, combined with a continued drop in weekly jobless claims Thursday, helped investors overcome disappointment in a downward revision to third-quarter economic growth data. The Dow Jones industrial average was up about 34 points in early trading.

The survey's broader consumer confidence index was at 69.9 in December, up from 64.1 in November and a sharp increase from the 55.7 level in August. The index was at 74.5 last December.

Still, most consumers said 2011 was a bad year. A majority reported that their personal financial condition was worse this year, and only about a quarter anticipated things would improve in 2012. 

"Given the continued weakness in consumers’ assessments of their personal finances, the congressional stalemate on extending the payroll tax holiday could easily reverse the recent gains," Richard Curtin, the survey's chief economist, said of the tax break that will expire on Dec. 31 unless lawmakers pass an extension. "If the payroll tax holiday is not extended, it would be a significant drag on economic growth, and would increase the likelihood that weakness in consumer spending would again put the economy at risk of a renewed downturn."

"Even a month-long delay would heighten uncertainty and cause consumers to begin to take precautionary actions," Curtin warned.

[For the record, 10:06 a.m.: An earlier version of this post incorrectly said the consumer confidence survey and the jobless-claim data were released Friday.]

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Photo: Holiday shoppers in New York City on Wednesday. Credit: Bloomberg

1.1 million Californians could lose unemployment benefits soon

About 1.1 million out-of-work Californians will lose their state or federal unemployment insurance beginning in early January if the two houses of Congress can't cut a deal.

The state Employment Development Department reported Wednesday, the day after GOP House Speaker John Boehner sent his members home, that the first people to stop drawing biweekly benefits will be about 100,000 people on the so-called Fed-Ed program. Fed-Ed provides up to 99 weeks of support of up to $450 a week for the long-term unemployed in the Golden State.

Other people will be cut off more gradually. Those receiving state-financed support will stop getting insurance payments as soon as their initial 26 weeks of benefits ends.

The jobless who receive benefits under one of three federal extensions will lose support at the end of their current tier, the EDD said.

EDD Director Pam Harris said her agency is doing all it can to provide information to its clients about the congressional negotiations.

"We know unemployment is a stressful experience at any time, and we understand that the uncertainty surrounding the benefit extensions adds to that stress, especially during the holiday season," Harris said.

In all, about 585,000 unemployed workers in California exhausted all available benefits from either the state or federal government as of Dec. 19, the EDD said.

Last week, Democratic and Republican leaders in the U.S. Senate agreed to a compromise to extend a federal payroll tax cut and unemployment benefits during the first two months of 2012 to buy time to forge a yearlong deal. Republicans, who control the House of Representatives, rejected that agreement, setting the stage for the expiration of both the tax cut and the unemployment benefits Dec. 31.

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Photo: Unemployed people check listings at a Westminister job center. Credit: Jaec Hong / Associated Press

4 House members got Countrywide VIP loans, Rep. Darrell Issa says [Updated]

This post has been updated. See below for details.

Four current House members received special VIP loans from Countrywide Financial Corp., and their names have been forwarded to the Ethics Committee for possible action, Rep. Darell Issa (R-Vista) said.

Issa, who chairs the House Oversight and Government Reform Committee, said an ongoing  investigation by his panel discovered the information. He did not name the members in referring the matter to the Ethics Committee in a letter Friday.

"Testimony and documents show that Countrywide used the VIP program to build relationships with government officials and others positioned to advance Countrywide's business interests," Issa wrote to Ethics Committee Chairwoman Jo Bonner (R-Ala.) and top Democrat Linda T. Sanchez (D-Lakewood). The loans often came at lower interest rates and fees than were available to the public.

A spokesman for the Ethics Committee would not comment on the letter. The committee usually does not talk about specific allegations or referrals until it reaches a finding.

The oversight committee received about 100,000 pages of documents related to the VIP loan program after issuing a subpoena in February to Bank of America, which now owns Countrywide, the former Calabasas lender. The VIP program also was known as "Friends of Angelo," a reference to Countrywide's former Chief Executive Angelo R. Mozilo.

Under Mozilo, Countrywide helped fuel the subprime mortgage boom and cultivated relationships with Washington policymakers. Last year, Mozilo agreed to a $67.5-million settlement of civil fraud and insider-trading allegations by the Securities and Exchange Commission.

Although Issa's letter did not name the current House members, Rep. Edolphus Towns (D-N.Y.) publicly has acknowledged receiving two mortgages from Countrywide. Staffers for Towns have said he doesn't believe the loans came with any special benefits.

[Updated at 12:42 p.m., Dec. 19: Towns spokesman Charles Lewis said the lawmaker was not involved in a VIP program at Countrywide and received no benefits that were not available to everyone else.]

In 2009, the Senate Ethics committee cleared Sen. Kent Conrad (D-N.D.) and former Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.) of violating rules in receiving VIP mortgages from Countrywide.

The senators said they didn't think they were getting any special treatment. But the committee said they "should have exercised more vigilance" in their dealings with Countrywide to avoid the appearance of preferential treatment.

The House Oversight Committee has been investigating the Countrywide VIP program since 2008. The committee issued a report last year finding that Countrywide made 173 preferential mortgages over about a decade to employees of housing finance giants Fannie Mae and Freddie Mac, which purchased many of the company's loans.

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 -- Jim Puzzanghera

 Photo: House Oversight Committee Chairman Darrell Issa. Credit: Getty Images

GOP blocks vote on Richard Cordray to head consumer bureau [Updated]

 

Republicans on Thursday blocked the Senate from voting on the nomination of Richard Cordray to be the first director of the Consumer Financial Protection Bureau.

Supporters of Cordray's nomination came up seven votes short of the 60 needed to bring Cordray's nomination to the Senate floor for an up-or-down vote. The final tally was 53-45, with only one Republican, Scott Brown of Massachusetts, voting to cut off debate. Sen. Olympia Snow (R-Maine) voted present.

Snowe was one of several Republicans targeted this week by the White House in an extraordinary push to get Cordray's nomination confirmed. Nearly all Senate Republicans vowed in the spring they would not allow a vote on any nominee to head the controversial bureau unless Democrats and President Obama agreed to some key changes in its structure to weaken its authority.

The changes include replacing the single director with a bipartisan commission, subjecting the agency's budget to the congressional appropriation process and making it easier for other banking regulators to veto new consumer protection rules.

Sen. David Vitter (R-La.) said the changes were designed to limit what he called the agency's "unbridled, unprecedented authority."

"This notion that we're against consumer protection, that we're trying to gut the CFPB is just silly," Vitter said.

But that's exactly what Democrats charged Republicans with doing in continuing to block the nomination of Cordray, the former Ohio attorney general. Democrats noted that the agency cannot use many of its powers, including overseeing non-bank financial institutions such as mortgage brokers and payday lenders, without a Senate-confirmed director.

Sen. Sherrod Brown (D-Ohio) said the vote showed that "more than 40 of my colleagues chose Wall Street special interests over Main Street consumers. They should be ashamed of themselves."

[Updated at 9:40 a.m.: President Obama blasted Republicans for blocking Cordray's nomination and said he is considering installing him in the job if Congress goes out on a formal recess over the holidays.

"We are not giving up on this," Obama told reporters during an appearance in the White House briefing room shortly after the vote. "We are not going to allow politics as usual on Capitol Hill to stand in the way of American consumers being protected by unscrupulous financial operators. And we're going to keep on pushing on this issue."

Obama said he would look at all options, including a recess appointment, which would allow Cordray to serve for a year without the support of Congress. But all year Republicans have been blocking Congress from going on a formal recess.] 

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Photo: Richard Cordray, the nominee to head the Consumer Financial Protection Bureau. Credit: Getty Images

Consumer Confidential: Ticketmaster refund, Lipitor probe

Here's your fool-to-cry Friday roundup of consumer news from around the Web:

--If you bought a ticket through Ticketmaster between October 1999 and October of this year, you're due for some cash -- $1.50, to be precise. Because of a proposed class action settlement, Ticketmaster is being forced to credit that much per ticket order (up to 17 orders) to customers because the company profited from "processing fees" without declaring that it was doing so. According to court documents, the original claim, filed Oct. 21, 2003, also implicates UPS' delivery price for expedited delivery of tickets as deceptive. This could end up costing Ticketmaster a hefty amount of money. If, in any given year over the four-year redemption period, less than $11.25 million is redeemed by customers, Ticketmaster is going to donate the remainder to charity. (Business Insider)

--For a while, it looked like the wireless market could get more competitive as cable companies tried to launch their own service. But that's not going to happen. Comcast, Time Warner Cable and Bright House Networks are giving up on their dreams of creating their own wireless network, opting instead to resell Verizon Wireless service. The companies say they have agreed to sell their wireless licenses -- which they haven't been using -- to Verizon for $3.6 billion. The cable companies paid $2.2 billion for the spectrum in 2006, so they're getting a 64% gain on a five-year investment. For Verizon, the deal offers millions of potential new customers and maintains the status quo in the wireless space. (Associated Press)

--First drug maker Pfizer had to contend with its blockbuster drug Lipitor going generic this week. Now some lawmakers are asking the company and other health businesses to detail agreements to block prescriptions of generic versions of the cholesterol drug Lipitor and sell only the Pfizer brand-name version. Pfizer is offering discounts to companies that will reject generic prescriptions and favor Lipitor. The senators say they're concerned about longer term impacts on employers, Medicare and healthcare costs. They include Sen. Max Baucus, a Montana Democrat; Charles E. Grassley, an Iowa Republican; and Herb Kohl, the Wisconsin Democrat who is chairman of the Special Committee on Aging. (New York Times)

-- David Lazarus

Photo: Questionable fees will result in refunds for Ticketmaster customers. Credit: Paul Sakuma/AP

 

Timothy Geithner urges Senate to confirm consumer bureau nominee

After meeting with top officials at the Consumer Financial Protection Bureau on Thursday, Treasury Secretary Timothy F. Geithner urged Senate Republicans to stop blocking the nomination of the agency's first director.

"I guess I'd ask the question, 'Who are they protecting?' " Geithner said of Senate Republicans. "They're not protecting consumers."

Geithner appeared before reporters with the officials, including Richard Cordray, the agency's enforcement director and President Obama's nominee to be its director. Nearly all Senate Republicans are blocking Cordray from receiving a confirmation vote because they want the Obama administration to agree to changes that would weaken the agency's authority.

Without a director, the bureau cannot exercise any of the new consumer protection powers granted to it in the financial reform legislation enacted last year. The agency has taken over from other regulators the consumer protection responsibility for banks, but cannot enforce new rules for non-bank financial institutions, such as mortgage brokers and payday lenders.

"It makes no sense for us to run a country where in effect there's two Americas for consumer protection," Geithner said. "There's a much higher standard for consumer protection for people who do business with banks, but much weaker standards of protection and enforcement for people who do business with entities that are not banks."

The Obama administration has been trying to pressure Republicans to stop their filibuster of Cordray, a former Ohio attorney general who would be confirmed by the Senate's Democratic majority if a vote were allowed. But Republicans have shown no signs of budging on their blockade, which will probably leave the agency without a confirmed director until after next year's presidential election.

The consumer bureau -- the controversial centerpiece of the sweeping overhaul of financial rules -- began operations in July. It is being headed by Raj Date, a special advisor to Geithner, until a permanent director is confirmed.

Geithner met with Date, Cordray and Holly Petraeus, the head of the agency's Office of Servicemember Affairs, on Thursday to discuss their early efforts, such as streamlining mortgage disclosure forms.

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Photo: Treasury Secretary Timothy F. Geithner, center, meets with Richard Cordray, right, President Obama's nominee to head the Consumer Financial Protection Bureau, and interim director Raj Date. Credit: Getty Images

Fitch reaffirms U.S. AAA credit rating, but outlook now negative

Fitch Ratings on Monday reaffirmed its AAA rating for U.S. government debt, but revised its long-term outlook to negative because of the failure of the congressional "super committee" to agree to deficit cutting measures.

Fitch said the U.S. retained its top rating because of "still strong economic and credit fundamentals," including the dollar's status as the world's reserve currency. But the ratings company downgraded its long-term outlook from stable because of "declining confidence" that policymakers will enact "timely fiscal measures necessary to place U.S. public finances on a sustainable path."

The outlook downgrade means there is a slightly greater than 50% chance that Fitch will downgrade the U.S. credit rating over the next two years.

Fitch's announcement came after the other two leading credit rating companies, Standard & Poor's and Moody's Investor Service, said last week that the failure of the super committee would not lead to a cut in their ratings on U.S. debt.

Moody's continued to give U.S. debt its highest AAA rating, but had downgraded its outlook to negative in August following the contentious debate over raising the nation's debt ceiling. S&P roiled financial markets a few days later by downgrading its U.S. credit rating to AA+ because the company said the deal to raise the debt ceiling fell short of what was needed to stabilize the country's long-term finances.

Later in August, Fitch reaffirmed its AAA rating but warned that the failure of the super committee to strike a deal this fall would affect the company's long-term outlook for U.S. debt.

Fitch said Monday that an agreement on a major deficit reduction package after the 2012 elections would "relieve downward pressure" on the U.S. credit rating. But the company noted that the size of such a package would have to be greater than it would be this year because of the delay in enacting cost-cutting measures.

Fitch warned that "failure to reach agreement in 2013 on a credible deficit reduction plan and a worsening of the economic and fiscal outlook would likely result in a downgrade" of the U.S. credit rating.

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Photo: Fitch Ratings offices in New York. Credit: Associated Press.

Rep. Barney Frank will not seek reelection in 2012

This post has been corrected. See note at the bottom for details.

Rep. Barney Frank, one of the most influential lawmakers on financial industry issues and an outspoken critic of Wall Street, will not seek reelection next fall, ending more than three decades in Congress, a spokesman said Monday.

Frank, 71, a Massachusetts Democrat, scheduled a news conference for 1 p.m. Eastern time in Newton, Mass., to make a formal announcement and answer questions, said spokesman Harry Gural.

Frank, who in 1987 became the first member of Congress to voluntarily announce he was gay, was a major force behind the sweeping overhaul of financial regulations enacted last year when he served as chairman of the House Financial Services Committee. The law, the Dodd Frank Wall Street Reform and Consumer Protection Act, is named after him and former Senate Banking Committee Chairman Chris Dodd (D-Conn.)

Dodd did not seek reelection in 2010 and now heads the Motion Picture Assn. of America. Frank survived one of his toughest campaigns in 2010 amid huge Republican gains in Congress. With the GOP taking control of the House after that election, Frank was forced to give up chairmanship of the Financial Services Committee, which he headed from 2007 through 2010.

After his last reelection fight, Frank vowed to stay on in Congress to protect the financial reform legislation from Republican attacks.

[For the record, 10:48 a.m., Nov. 28: An earlier version of this post said Rep. Barney Frank was the first openly gay member of Congress. He was the first member of Congress to voluntary announce he was gay, in 1987. Former Rep. Gerry Studds (D-Mass.) was the first openly gay member of Congress. His homosexuality was revealed in 1983 after a scandal over an earlier relationship with a congressional page.]

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Photo: Rep. Barney Frank (D-Mass.). Credit: Associated Press

Bank debit card fee plans face Justice Dept. antitrust review

The Justice Department said Tuesday it is reviewing banks for possible antitrust violations in decisions to charge fees for debit card use.

The department is "reviewing the statements and actions by banks and their trade associations regarding possible increases in consumer fees for using debit cards," Assistant Atty. Gen. Ronald Weich wrote to Rep. Peter Welch (D-Vt.).

"Please be assured that if it finds that individuals, banks or other parties may have violated the antitrust laws, the Department will take appropriate action," Weich said in the letter, which was released by Welch.

Following a flurry of announcements last month of possible debit card fees, Welch asked Atty. Gen. Eric Holder to investigate whether banks and trade associations engaged in price signaling or collusion in reaction to new federal limits on the amount that large financial institutions can charge retailers for processing debit card transactions.

Because of the limits, which took effect Oct. 1, Wells Fargo & Co. and JPMorgan Chase & Co. began testing debit card fees for their customers in some states. And Bank of America said it would begin charging some customers a $5 monthly fee for debit card use.

All have since abandoned those plans amid outrage from consumers and politicians.

“While big banks like Bank of America beat a hasty retreat on their debit card fee strategies, I have no doubt that they will continue their quest to dig deeper into the pockets of struggling consumers," said Welch, who helped lead the push to include the debit fee limits in last year's overhaul of financial regulations. "As they consider their next move, they should be aware that there is a cop actively on the beat.”

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Photo: The Bank of America building in downtown Los Angeles: Credit: Reuters.

No cut in U.S. debt rating despite deficit-deal failure, S&P says

Standard & Poor's signaled Monday that it has no plans to further cut its rating on U.S. debt, despite the inability of the congressional "super committee" to reach a deficit-cutting deal.

S&P, which in August triggered a global market meltdown with its initial downgrade of U.S. debt to AA+ from AAA, said the super committee’s failure was “consistent” with the August rating cut.

In other words, it was already baked into the lower rating.

Stocks had fallen sharply worldwide on Monday, in part on fears that the U.S. could be facing another debt downgrade without a deficit deal. S&P made its announcement after markets had closed.

Later in the day, Moody's Investors Service affirmed its Aaa rating on U.S. debt, although it kept its “negative” outlook on the rating.  Moody’s had previously said that a failure by the super committee would not be a “decisive” factor in its rating assessment.

Although S&P kept its rating unchanged, it warned that it expected Congress to abide by the automatic caps on discretionary spending that are supposed to fall into place without a super committee agreement.

“If these [spending] limits are eased, downward pressure on the ratings could build,” S&P said.

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Dow falls to five-week low as global gloom deepens

Investors signaled a lack of faith in markets nearly across the board on Monday as stocks and commodities fell on unrelenting fears about the global economy and financial system.

The Dow Jones industrial average closed with a loss of 248.85 points, or 2.1%, at 11,547.31, nearly a five-week low. The Dow now is back in the red year to date, off 0.3%.

The tone was set at the outset after it appeared that the congressional “super committee” on deficit reduction would fail to reach an agreement by Congress’ Wednesday deadline.

Given Europe’s financial crisis, the super committee’s stalemate was viewed as another sign of governments’ inability or unwillingness to deal with their spiraling debt loads.

“There is just no good news,” said Dave Rovelli, head of equity trading at brokerage Canaccord Adams in New York.

He said some of the selling in stocks stemmed from fear that the U.S. could soon face another downgrade of its bond rating. Shares worldwide plunged in early August after Standard & Poor’s cut the U.S. rating to AA+ from AAA.

Stocks fell sharply in Europe overnight as Spanish government bond yields jumped to new euro-era highs. Voters' decision to throw out the Socialist government failed to make investors feel more confident about holding Spanish debt. The 10-year Spanish bond yield rose to 6.55% from 6.38% on Friday.

Spain's stock market lost 3.5% and French stocks slid 3.4%. The Italian market dropped 4.7% to a seven-week low.

Investors also were unnerved by the German Bundesbank’s new forecast of a sharp slowdown in the German economy in 2012.

Prices of most commodities fell on economic jitters, and as some investors and traders sold what they could to raise cash. Near-term oil futures in New York fell for a third straight day, down 75 cents to $96.92 a barrel. Gold futures slid $46.40 to $1,678.30 an ounce, a four-week low.

Unlike the stock market, oil and gold still are up for the year.

The day’s only real winner: Treasury securities, as some investors stashed cash in something they still believe will repay them in full, despite the lack of a deal to pare the deficit. Treasury bond yields were lower across the board.

“Clients are telling us that preservation of capital is their primary concern,” said Bruce Bittles, chief investment strategist at brokerage Robert W. Baird & Co.

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'Super-committee' is all but admitting defeat

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Photo: On the New York Stock Exchange floor on Monday. Credit: Spencer Platt / Getty Images