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Archive for April, 2009

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Big Three Automaker Retiree Pensions at Serious Risk

General Motors Corp. and Chrysler LLC retirees and employees could lose $23 billion in pension benefits if the companies terminate their retirement plans in bankruptcy, the government’s pension insurance agency warned Tuesday.

Neither GM nor Chrysler plans to file for bankruptcy, but both are taking steps to prepare in case they are forced to do so in the coming weeks. While neither has said it plans to terminate its pension program, struggling steel companies and airlines have used bankruptcy to get out from under large pension obligations and turn them over to the government.

GM and Chrysler combined provide pension benefits to about 630,000 retirees and dependents, and cover another 300,000 who haven’t begun drawing benefits.

The Obama auto task force has warned that GM’s future pension costs — which include $6 billion payments due in 2013 and 2014 — are “unsustainable.”

If either GM or Chrysler terminates its pension plan, it would be the largest assumed by the government, in terms of number of employees.

The PGBC was created by Congress in 1974 after the failure of the automaker Studebaker in 1963, which left 11,000 retirees with just 15 cents on the dollar on their pensions.

More Americans Wary of Tax Man This Year

By Jasmin Melvin

WASHINGTON (Reuters) – As a deep recession strips Americans of their jobs, homes and investments, the 2009 U.S. tax season promises to see a large uptick in first-time delinquent income taxpayers.

“Our calls are up 280 percent,” said Richard Boggs, founder and chief executive of Los Angeles-based Nationwide Tax Relief, a firm that helps delinquent taxpayers resolve tax issues.

With household balance sheets under pressure, more U.S. households are having trouble keeping up with their day-to-day bills and struggling to pay their taxes.

“Folks are not paying their taxes because they are spending it on necessary living expenses,” said Kristin Lavieri, an accountant with Weinstein & Anastasio, PC in Hamden, Connecticut.

She added that more of the self-employed, who are required to pay taxes each quarter, are likely to end up with back taxes. “When there is not enough money for general operating expenses, there most definitely isn’t going to be enough for quarterly estimates,” Lavieri said.

FEAR, SECRECY CAUSE MORE PROBLEMS

“If we are seeing a nearly threefold increase in people who have tax problems who have never had tax issues, it shows that things are worse than people think right now,” Boggs said.

But tax woes are such a taboo issue that over 40 percent of Boggs’ clients have told him nobody knows about their problems, and that often includes their spouses.

The Internal Revenue Service, which collects taxes in the United States, vowed to show its gentler side this year.

“We recognize the economic realities that are out there,” IRS Commissioner Doug Shulman told reporters. “We’re available to work with people.”

Critics are skeptical this will happen. The agency collects much of the $3 trillion that funds the government.

IRS agents were given more flexibility in their collection actions, including the ability to reduce or suspend monthly payments on back taxes so those hit hard by the financial downturn are not forced to default on their tax payments.

But Boggs said IRS policies are adding to the fear Americans feel for the traditionally secretive agency while outdated guidelines make the prospect of collection action scary.

Better Times Are Coming?

By Eric Martin and Lynn Thomasson

April 10 (Bloomberg) — U.S. stocks rose for a fifth week, capping the steepest rally since 1933, as Wells Fargo & Co.’s higher-than-estimated earnings and speculation banks will pass government stress tests spurred optimism that the industry’s slump is ending.

Bank of America Corp., American Express Co. and JPMorgan Chase & Co. helped drive a gauge of 80 financial companies in the Standard & Poor’s 500 Index to a 9.4 percent advance. Wells Fargo surged 20 percent after reporting record first-quarter profit. Lincoln National Corp. and Principal Financial Group Inc. jumped at least 37 percent as the Treasury considered bailouts for life insurers.

“This was a really, really positive start to the earnings season,” Hugh Johnson, who oversees $750 million as chairman of Johnson Illington Advisors in Albany, New York, told Bloomberg Television. “Banks are not going to be forced to take the kind of write-offs they had to take in prior quarters.”

The S&P 500 gained 1.7 percent to 856.56. It has soared 27 percent since March 9, the most in 23 days since the Great Depression, according to Howard Silverblatt, an analyst at S&P. The Dow Jones Industrial Average added 0.8 percent to 8,083.38 this week. U.S. exchanges are closed today for Good Friday.

The highest U.S. unemployment since 1983 has forced consumers to restrain spending. The number of Americans filing first-time claims for unemployment insurance exceeded 600,000 for a 10th straight week. The total collecting benefits rose to a record in a sign that the labor market remains weak.

Hackers Have Already Embedded Code in U.S. Electrical Grid

WASHINGTON (CNN) — Computer hackers have embedded software in the United States’ electricity grid and other infrastructure that could potentially disrupt service or damage equipment, two former federal officials told CNN.

The code in the power grid was discovered in 2006 or 2007, according to one of the officials, who called it “the 21st century version of Cold War spying.”

The U.S. power grid isn’t the only system at risk. The former officials said malicious code has been found in the computer systems of oil and gas distributors, telecommunications companies and financial services industries.

Napolitano said the vulnerability of the nation’s power grid to cyberattacks “has been something that the Department of Homeland Security and the energy sector have known about for years,” and that the department has programs in place to fight such attacks.

Security experts say such computer hacking could be the work of a foreign government — possibly Russia or China — seeking to compromise U.S. security in the event of a future military conflict.