1,000 N.C.mortgage payments lowered
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The Charlotte Observer charlotteobserver.com Wednesday, June 17, 2009 9A
Businesscharlotteobserver.com/business
DOW8,504.67
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NASDAQ1,796.18
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S&P 500911.97
-11.75
By Bruce Henderson
Duke Energy named Lynn Goodits chief financial officer on Tuesday,replacing David Hauser, who will be-come chairman and chief executiveof FairPoint Communications.
Good, who will become Dukes
first female CFO, had been groupexecutive and president of Dukescommercial businesses for the past18 months. She had served as execu-tive vice president and chief finan-
cial officer at Cinergybefore its 2006 merg-er with Duke.
Dukes CFO has broad financial re-sponsibilities, includ-ing accounting, bal-ance sheet manage-ment and overseeingrisk-control policies.The position is one ofeight direct reportsto chairman andchief executive Jim
Rogers.Rogers, in a state-ment, praised Goods work overseeing the
commercial units.
Despite Dukes 26 percent drop infirst-quarter profits, Good said she isinheriting an incredibly strong bal-ance sheet, and Job 1 will be preserv-ing that balance sheet and strongcredit ratings.
A former partner with the interna-tional accounting firm Deloitte &Touche, based in Cincinnati, shejoined Cinergy in 2003.
Hauser went to work for Duke in1973, rising to his current position in2006.
Rogers said Hauser has helped
lead Duke through some of its mostchallenging times, most notably thecollapse of the energy markets fol-lowing the Enron bankruptcy in late2001.
At Charlotte-based FairPoint,Hauser will replace chairman andchief executive Eugene Johnson, whowill retire July 1.
FairPoint, which provides localand long distance telephone and broadband services, owns local ex-change companies in 18 states. Haus-er acknowledged operational and fi-nancial concerns surrounding Fair-Point, which has been showered withcustomer complaints since it bought Verizon Communications landlineservice in northern New England last
year.My primary focus will be to ad-dress these concerns in quick succes-sion and empower our team to seekand implement solutions, he said.
New CFO at Duke Energy
Good
Hauser
Good, who will become
utilitys first female chief
financial officer, takes post
of new FairPoint CEO Hauser.
By Stephen Ohlemacher
Associated Press
WASHINGTON The Obama ad-ministration asked Congress onTuesday to repeal a widely ignoredtax on the personal use of compa-ny cell phones after sparking anoutcry last week when it soughtideas for enforcing the law.
The 1989 law says that personaluse of a company cell phoneshould be taxed like other fringebenefits. The law, however, can becumbersome for workers who in-creasingly use mobile devices fortexting, e-mailing and browsingthe Internet sometimes for work,sometimes for personal use.
The current law, which hasbeen on the books for many years,is burdensome, poorly understoodby taxpayers, and difficult for theIRS to administer consistently,IRS Commissioner Doug Shulmansaid in a statement. The passageof time, advances in technology,and the nature of communicationin the modern workplace have ren-dered this law obsolete.
Shulman said he and TreasuryCommissioner Timothy Geithnerwere asking Congress to repeal thetax, which has been widely criti-cized as outdated by the cell phoneindustry and lawmakers.
We just think that this law wasput into effect in a bygone era, saidJohn Walls, vice president of publicaffairs for CTIA-The Wireless As-sociation, a trade group.
In 1989, cell phones were con-sidered a luxury item that were ac-tually referred to as car phones,Walls said. Now, we have unlim-ited calling on our cell phones. Wehave free nights and weekends.The company is not even payingfor that. Why should I get taxed forthat?
Congressasked torepeal cell
phone tax89 law says personal use
of company cell phone
should be taxed; IRS chief
calls that notion obsolete.
By Adam Bell
As The Buttercup stationery andgift shop celebrates its 34th anniver-sary this month, its owners are tak-ing steps to ensure they can mark
many more milestones.In February, for instance, the storeended its Monday hours and remainsopen Tuesdays through Saturdays,said Stewart Watson, who owns thestore located on Providence Roadnear Charlottes Eastover neighbor-hood with Judy Woodard.
They have avoided layoffs for their25 full- and part-time employees, Watson said, although peopleshours have been cut.
Sales are off by 18 percent this year,said Watson, who called the drop-offnot great but not horrible.
One move that has helped is shar-ing ideas and resources with two
other stationery stores in Raleighand Winston-Salem.
A couple weeks ago, Watsonbought a new laser printer when the
Winston-Salem store did, and by us-ing the same salesperson got a dis-count that turned a $900 purchaseinto a $550 bill. Watson also is split-
ting orders with the other stores attimes when vendors require a highminimum purchase number.
Its great to have other shops andwomen to bounce ideas off of, Wat-son said.
The Buttercup also has kept aclose eye on cash flow and inventory.It has staggered its merchandise or-ders and has rotated its stock more,which Watson said gives the store afresher look and helps move more
products.And The Buttercup is being morediligent about notifying customersby e-mail when sales are happening.Watson is even keeping a closer eyeon air-conditioner usage.
The workers have been under-standing with all of the changes, shesaid, and customers have been sup-portive.
Its been very heartwarming andencouraging, because our customerslove to come to a small shop and buylocal, Watson said. Thats reallybeen a bright side.
Adam Bell: 704-358-5696
COPING IN THE DOWNTURNYOUR STORIES
Buttercup saves by sharing with similar storesThe stationery and gift shop
also has cut back hours but
has avoided layoffs for its 25
full- and part-time workers.
L.MUELLER [email protected]
Stewart Watson is one of the original owners of The Buttercup, which is
celebrating its 34th anniversary. The Myers Park neighborhood mainstay
began as a small consignment shop.
Observer Wire Services
WASHINGTON The Obama ad-ministration is proposing thebroadest changes in financial reg-ulation since the Great Depres-sion, calling for the elimination ofsome bank regulators and giving
the Treasury Department and Fed-eral Reserve vast new authority.On Tuesday night, administra-
tion officials detailed a series ofproposals that would involve thegovernment much more deeply inthe private markets, from helpingto steer consumers into affordablemortgage loans to imposing newlimits on the largest financial com-panies, in an effort to prevent thekinds of risk-taking that producedthe economic crisis.
Administration officials con-firmed that in a sweeping plan tobe announced today, Obama willpropose the elimination of themuch-maligned Office of ThriftSupervision, which regulates sav-
ings and loan institutions, and hadoversight of the financial productsdivision of failed insurer AmericanInternational Group. The compa-nys collapse has cost taxpayersmore than $180 billion, and AIG isnow almost 80 percent owned bythe Federal Reserve.
Under Obamas regulatory pro-posal, the OTS would be mergedwith the Office of the Comptrollerof the Currency, which regulates alarge number of big banks, and anew entity would be created. Therevamping would eliminate sepa-rate federal charters for banks and
Changesin financial
regulationproposed
Administrations plan
would involve the
government much more
deeply in private markets.
SEE REGULATION, 10A
By Cameron Steele
State officials announced Tuesdaythat a new state program has saved1,000 homeowners from foreclosure.
A loan modification under the pro-gram for Mecklenburg County resi-dent Linda Willis means her monthly
payment will be temporarily cut to$400 from $601. She said she hopes itsnot just a Band-Aid for her and her15-year-old son. Hes in 10th graderight now, but hopefully things will bebetter and we can look at college op-tions, she said.
The program, known as the StateHome Foreclosure Prevention Proj-ect, began as an emergency responseto the more than 6,000 North Carolin-ians with subprime home loans whowere facing foreclosure in October.
The program is part of a state law
passed last year that required lendersto give people with subprime loansnotice of foreclosure 45 days in ad- vance. The N.C. Commissioner ofBanks puts struggling homeowners incontact with loan counseling agenciesthat help them apply for mortgagemodifications.
During the programs seven-plusmonths, the commission has sent50,000 letters to homeowners acrossthe state, but just over 3,000 are cur-rently getting help. Thats only sixpercent.
Mark Pearce, the chief deputy com-missioner of banks, said the 1,000loans modified and the 2,000 cases inthe works are promising signs.
Were trying to help as many peo-ple as we can, Pearce said.
He estimates the program hassaved the state $86 million by helpingto prevent declining property values,therefore stabilizing property taxes insome local areas.
Foreclosure filings were cut in halflast November, when the project
DIEDRA LAIRD [email protected]
The State Home Foreclosure Prevention Project helped Linda Willis of Charlotte obtain a temporary cut in the monthly payment on her condo, from $601 to
$400 a month. Willis said she had been in danger of losing the condo she bought for $68,500 when she moved to Charlotte from Florida in 2006.
1,000 N.C. mortgage payments lowered
SEE MORTGAGE , 10A
Those getting help are small
portion of 50,000 people
facing foreclosure who have
received letters from state.
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8/14/2019 1,000 N.C.mortgage payments lowered
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10A Wednesday, June 17, 2009 charlotteobserver.com The Charlotte ObserverBUSINESS
AUTOMAKERS
Saab Automobile, General Motors Corp.s struggling Swedish unitknown for its family cars, was rescued Tuesday by a consortium led byKoenigsegg Automotive AB, a tiny company that produces only a doz-en custom-made super cars a year.
Having penned a memorandum of understanding, GM said the salewould include an expected $600 million funding commitment from theEuropean Investment Bank, guaranteed by the Swedish government.Additional funding for Saabs operations and investments would be pro-vided by GM and the Koenigsegg Group AB consortium, it said.
This is yet another significant step in the reinvention of GM and itsEuropean operations, GM Europe President, Carl-Peter Forster, said in astatement.
A person briefed on the deal said GM will get nothing initially for Saabbut would be paid $150 million capital Saab had left over from GMsownership on top of the value of Saabs assets if the new company turnsa profit. The person, who did not want to be identified because the dealhas not been closed, could not estimate the value of those assets.
GM bought a 50 percent stake in Saab for $600 million in 1990 andacquired the rest for $125 million in 2000. GM CEO Fritz Henderson saidGM could build another car for the Saab brand. ASSOCIATED PRESS
INTERNET
MySpace said Tuesday it is cutting nearly 30 percent of its workforce in a bid to become more efficient, bringing its staffing level morein line with its more popular rival, Facebook.
The move, the latest cost-cutting effort at the site, comes less than twomonths after the unit of Rupert Murdochs News Corp. hired former Face-book executive Owen Van Natta, 39, as its new chief executive.
It also comes a day after data from tracking firm comScore show Face-book has caught up with MySpace in monthly U.S. visitors for the firsttime.
The cuts amount to about 420 people, bringing the total number ofMySpaces U.S. staff to 1,000. As of May, Facebook had about 850 employ-ees worldwide, the vast majority in the United States. ASSOCIATED PRESS
ECONOMY
More signs of a weak economy gave investors a reason to sellstocks for a second day.
Stocks extended their pullback Tuesday after news of a seventh straightmonthly drop in industrial production overshadowed better than expect-
ed reports on home construction, building permits and inflation.The Dow Jones industrial average lost 107 points, bringing its two-day
drop to nearly 300 points. Investors are nervous that a three-month surgein stocks, based on optimism about a recovering economy, might havebeen premature.
The Commerce Department said home construction jumped in May bythe largest amount in three months after hitting a record low in April.Applications for building permits rose by 4 percent. ASSOCIATED PRESS
Business Digest
ERIC J. SHELTON ASSOCIATED PRESS PHOTO
GMs Saab brand was rescued Tuesday by a consortium led by
Koenigsegg Automotive AB, a tiny company that produces only a dozen
custom-made super cars a year.
House committee expects to grill Bernanke next week
The House committee that grilled Bank of America Corp. chief execu-tive Ken Lewis last week has asked Federal Reserve chairman Ben Ber-nanke to testify next week.
Bernanke has been asked to appear before the panel on June 25. He is
expected to comply.The Committee on Oversight and Government Reform is investigating
the events around Bank of Americas Jan. 1 purchase ofMerrill Lynch, including whether regulators oversteppedtheir bounds when they pressed Lewis to not abandon thedeal. Legislators also want to know why Lewis didnt alertshareholders to Merrills rising losses before the dealclosed.
Last week, the oversight committee released Fed docu-ments related to the deal, including e-mails from Ber-nanke to other top Fed officials. In those documents, oneofficial said Bernanke thought Lewis threat to back out ofthe Merrill deal isnt credible.
The oversight committee has said it plans to ask Henry Paulson, theformer Treasury secretary, to testify as well. CHRISTINA REXRODE
Treasury to add $3.1 billion to mortgage programThe government will provide $3.1 billion more to a group of mortgage
servicing companies as an incentive to modify loans to combat recordlevels of foreclosures.The Treasury Department said Tuesday that the modifications, which
included reductions in projected payments for some companies, pushedthe total amount for the program to $18.3 billion, from $15.2 billion.
The department also added one company, Residential Credit Solutionsof Fort Worth, Texas, to the program. It is scheduled to receive up to $19.4million, and joins 15 other mortgage companies approved to participate inthe program.
The biggest adjustment was made for Countrywide Home Loans Ser-vicing LP, part of Bank of America Corp. It received an increase of $3.3billion, bringing its total to $5.2 billion. ASSOCIATED PRESS
Bank Notes
Bernanke
started. But just last month, the num-ber of foreclosures filings again hov-ered around 5,000, suggesting that theprogram may be only temporarilystalling foreclosure.
Willis said she was in danger of los-ing the Fox Ridge condo that she
bought for $68,500 when she movedto Charlotte from Florida in 2006.Then she was making $70,000 as areal estate agent. But the housingslump forced Willis, a single mom, totake a job in the mail department atWells Fargo at about a third of the in-come.
That meant she could no longer af-ford to pay the 7 percent f ixed intereston her government-backed FederalHousing Administration (FHA) loan, which her loan servicing companysubmitted to the commission as a sub-prime rate.
Alliance Credit Counseling helpedWillis to get her modification applica-tion approved by the servicer for herSunTrust mortgage, lowering her
mortgage payment in a three-yearstep plan. That means shell pay 3.24percent interest the first year, 4.25 per-cent the second and 4.65 percent thethird. In the fourth year, her interestrate will be raised back to its original 7percent.
My lifestyle will not really im-prove, but I will be able to afford amortgage, food, gas, and school sup-plies at the same time, she said.
Lenders are being spurred by state
and federal governments to modifyloans in an attempt to prevent foreclo-sures. The modification process isdaunting, and most people dont havethe time or are too intimidated by themortgage companies to negotiatethemselves, Pearce said. Thats wherethe foreclosure prevention projectcomes in.
We focus on reaching the home-owners because all too often, theygive up and ignore solicitations fromthe mortgage companies, Pearcesaid.
The law requires lenders to notifythe commission of borrowers whoface foreclosure in 45 days so the statecan alert the homeowners early abouttheir options. The state provides bor-
rowers with a toll-free number toConnectinc., a nonprofit that helpscallers get in touch with loan counsel-ing agencies.
Pearce said that he expects the proj-ect to produce 2,000 modifications byyears end.
This is the trusted environmentthat really gets the homeowner intothe situation where they can talkabout their problem, he said. Andwe stay with them. (Modification) it is
a complicated process.In addition to the subprime crisis,
Pearce said, the sour economy andrising unemployment have increasedproblems with fixed rate FHA loansand prime loans. The commission istoying with ideas to make the pro-gram more broad-based without jeop-ardizing its effectiveness.
We havent really made it broadlyavailable because we have to figure
out if we can handle the volume ofcalls, he said. Right now, we canreach people at the right time.
But reaching more people isnt theonly hitch in the system. Critics sayloan workouts are only a temporaryfix.
Thirty-nine percent of loans modi-fied in the second quarter were delin-quent 60 days afterward, according toan April federal government report.
Darneil Norwood of Charlotteworries the state program may not beenough to keep him afloat.
Im hoping it will allow me to sus-tain a little bit, said Norwood, an un-employed architect who is strugglingto support a 7-year-old son and a wife with cancer. But its a continuous
battle.Norwood said that Alliance CreditCounseling has worked with him tocreate a budget to meet a modifiedmortgage payment. If his lender ap-proves, his rate will fall to 7.5 percentfrom 15 percent. Overall, he said, thestate has put together a pretty goodprogram.
I do think the loan modificationwill be enough, at least for a while, hesaid.
MORTGAGE from 9A
To learn moreState Home Foreclosure Preven-
tion Project: www.ncforeclosurehelp.org/StateForeclosurePreventionProject.aspx
To get in touch with AllianceCredit Counseling, call 704-943-5233.
By Jeannine AversaAssociated Press
The recession may not be waving awhite flag just yet, but the price of akey ingredient in white paint may sig-nal the economys downhill slide iseasing.
Titanium dioxide prices fell 5.1 per-cent in the 12 months ending in May,the Labor Department reported Tues-day. That followed a 5.7 percent drop
in the 12 months ending in April.It suggests that home construction
and renovation activity will be sub-dued in the months ahead.
Economists track titanium dioxide
as a barometer of the countrys overallfinancial health. When people arebuilding homes, remodeling, redeco-rating or even getting a house ready tosell, they buy paint. About 419 milliongallons of paint were sold last year,and more than a third of it was white.
The slower pace of decline in tita-nium dioxide prices could suggestthat the economy is a little less weak,said Richard Yamarone, economist at
Argus Research Corp.However, it underscores the de-
pressed market for manufacturedgoods because cars, washers, dryers,refrigerators use some form of white
paint, he added. Yamarone also predicts that de-
spite a burst in construction activityin May, the sector will continue tostruggle until the big glut of unsoldhomes is winnowed down.
White paint is used on a wide vari-ety of manufactured goods, includingcars and household appliances. Thesehad production declines in May, ac-cording to a separate report issued
Tuesday by the Federal Reserve.The price for titanium dioxide,
which is not seasonally adjusted,tends to be volatile and should beviewed with caution, economists say.
Paint ingredients price may have rosy tint
stop the mortgage crisis before itstarted. And what did they do withthat power? Nothing.
Warrens view was echoed by Rep.Barney Frank, D-Mass., the chairmanof the influential House FinancialServices Committee, which will writethe legislation to implement and per-haps build on Obamas proposals.
We definitely should take con-sumer protection away from the Fed,Frank said.
Although Fed Chairman Ben Ber-nanke has done a good job on con-sumer finance issues, Frank said, hispredecessor Alan Greenspans failureto enforce laws on deceptive mort-
gage practices led to weak lendingstandards and the proliferation ofmortgages issued with little or no re-view of borrowers ability to pay.
We find this idea (of a commis-sion) very intriguing, and we think itshows a lot of promise and can cer-tainly help put the country back onthe right track and make sure that theconsumer is present in the equation,said Evan Fuguet, senior policy coun-sel for the Center for ResponsibleLending, a consumer advocacy groupin Durham.
For people whove been saddledwith arbitrary rate increases on creditcards, predatory lending in subprimemortgages or onerous terms on tax-deferred annuities, the proposed newagency could be a breakthrough.
However, the commission could
end up limiting consumer credit op-tions and innovation just as the econ-omy is beginning to rebound, said BillHimpler, the executive vice presidentfor government affairs of the Ameri-can Financial Services Association,the trade association for the consum-er credit industry.
The last thing we want to do isscare the consumer. And were afraidthat creating an agency that wouldput government in control of personalfinances would undermine that confi-dence that seems to be being re-stored, he said.
American Financial Services Asso-ciation officials said they didnt be-lieve that the proposed new agency isa reflection of past regulatory failures.
We honestly believe that the reg-ulatory bodies in place now have ade-
quately addressed the situation, saidChris Stinebert, the associationspresident and CEO. The regulatorystructure as it exists now between thefederal (government) and the state(s)is working.
The regulation of consumer fi-nance now is spread across a numberof agencies that regulate not the prod-ucts themselves but the issuers.
The Office of Thrift Supervisionregulates savings and loan institu-tions that offer credit cards, while theFed or the Office of the Comptrollerof the Currency regulates federallyregulated banks that offer the sameproduct.
In fact, Frank said, the comptrol-lers office brought successful legalchallenges earlier this decade againstefforts by states to protect consumers,
working against the interests of con-sumers in an effort to ensure that fed-eral powers take precedence overstate laws.
Under Obamas plan, the new agen-cy would regulate the financial prod-ucts themselves.
The commission fills in the last bigregulatory gap at the consumer level.Food is safe. Physical products aresafe. And with this agency, creditproducts will be safe, said Warren, anationally recognized consumer ad- vocate who has long called for im-proving the way consumer financialproducts are regulated.
The new agencys mission wouldbe to put the consumer front and cen-ter, as the Food and Drug Administra-tion is tasked with doing with groceryproducts and pharmaceuticals.
REGULATION from 9A
By Dave Gramand Frank Bass
Associated Press
VERNON, Vt. The companies thatown almost half the nations nuclearreactors are not setting aside enoughmoney to dismantle them, and manymay sit idle for decades and pose safe-ty and security risks as a result, an As-sociated Press investigation hasfound.
The shortfalls are caused not byfluctuating appetites for nuclear pow-er but by the stock market and otherinvestments, which have sufferedhuge losses over the past year anddamaged the plants savings, and bythe soaring decommissioning costs.
At 19 nuclear plants, owners havewon approval to idle reactors for aslong as 60 years presumably enoughtime to allow investments to recoverand eventually pay for dismantlingthe plants and removing radioactivematerial.
But mothballing reactors or shut-ting them down inadequately couldpose dangerous health, environmen-tal or security problems. In the worstcases, generally considered unlikely,risks include radioactive waste leak-ing from idled plants into groundwa-ter, airborne releases or a terrorist at-tack.
During the past two years, esti-mates of dismantling costs havesoared by more than $4.6 billion be-cause of rising energy and labor costs,while the investment funds that aresupposed to pay for shutting plantsdown have lost $4.4 billion in the bat-tered stock market.
The power companies have beenhammered by the same decliningmarket returns as colleges, companiesand private investors. Industry criticssay reactor owners werent savingenough even before the financial col-lapse and that federal regulators havenot held the industry to a high enoughstandard.
Federal regulators are expected torelease letters later this week that willdescribe shortfalls at 30 of the nations104 nuclear plants and ask operatorsfor details about how they plan to re-solve the problem.
The amount of money set aside fordismantling the plants has decreasedat nearly four of every five reactors,according to an AP analysis of finan-cial records provided every other yearto the Nuclear Regulatory Commis-sion. The government could forceplant operators to set aside moremoney.
Plant owners say they have severalways to close the gap. In addition toidling the plants, the government canextend licenses to operate them. Andinvestments could recover in theyears to come.
Most nuclear plants will operate forseveral more decades and will be ableto recoup their fund losses, said SteveKerekes, a spokesman for the NuclearEnergy Institute, a trade group.
Nuclear power critics say thoseplans are not enough.
No one at the NRC wants to ac-knowledge what is absolutely obviousto us, that the funds are inadequateand that the industry has bare assets,said Arnold Gundersen, a former nu-
clear industry executive and decom-missioning expert.Those critics say the industry is
making assumptions about their in-vestments that do not account for an-other market collapse, political obsta-cles to getting licenses renewed andunforeseen safety problems thatcould make nuclear power less palat-able.
The operators of 54 nuclear plants,or more than half in the U.S., alreadyhave received 20-year license exten-sions. Sixteen more are being re-viewed, and the commission expectsto receive 21 more applications in thenext several years.
To date, the NRC hasnt turneddown any extensions.
While companies ask for exten-sions for other reasons primarily tokeep producing power and makingmoney some companies have ex-plicitly told shareholders they will uselicense extensions to meet their de-commissioning obligations.
The Vermont Yankee plant, insoutheastern Vermont along thebanks of the Connecticut River, washailed as the future of power produc-tion for New England when it openedin 1972. Its license is set to expire in2012, and its decommissioning fundhas less than half the money expectedto be needed.
As recently as December 2007, thefund held $416 million. Now it standsat about $384 million a reboundfrom where it stood a few months ago but not even close to the estimated$932 million it will eventually cost todismantle the plant.
Money to shut nukeplants running short
