QUOTE OF THE DAY “All told … pending home sales held up fantastically well.” Dan Greenhaus,
chief global strategist at institutional brokerage BTIG Article, 1D
GDP getting biggest tweak since ’99
WASHINGTON - In its most significant reclassification since 1999, the nations’ gross domestic product will now include spending on research and development and some forms of entertainment, transfer fees related to home sales and a new treatment of pensions.
While the Wednesday update will inflate the world’s largest economy by around $400 billion, equivalent to adding another Virginia or New Jersey, it probably won’t alter the recent trend in growth.
“If you measure something in pounds or in kilos, you haven’t changed the weight,” said Neal Soss, chief economist at Credit Suisse in New York. “It’s the same economy, we’re just applying a different accounting convention to measure it.”
Spending on films and long-running television shows will be classified as investment, rather than an expense.
That would have added about $70 billion to GDP as of 2007, according to estimates from the Commerce Department’s Bureau of Economic Analysis.
The biggest impact will be from including research and development costs, which would have added about $314 billion to GDP in 2007, according to Bureau of Economic Analysis estimates. In the 1999 rejiggering, the government first counted spending on computer software as an investment.
Testimony ends in ex-exec’s fraud trial
The U.S. Securities and Exchange Commission on Monday rested its case against Fabrice Tourre, the former Goldman Sachs Group Inc. vice president charged with civil fraud for his role in a failed $1 billion investment related to the housing market crash.
Tourre did not call witnesses and also rested his case Monday. The jurors in the case were sent home, and closing arguments in the trial are scheduled for today.
The SEC claims Tourre intentionally misled participants in a 2007 deal known as Abacus about the role played by Paulson & Co., the hedge fund run by John Paulson. The SEC claims Tourre hid the fact that Paulson helped choose the portfolio of subprime mortgage-backed securities underlying Abacus, then made a billion-dollar bet it would fail.
SEC lawyers questioned Tourre about emails in which he sent Abacus marketing materials to clients and members of Goldman Sachs’ sales staff. The SEC claims he broke the law by offering investments in Abacus without disclosing Paulson’s role in selecting the portfolio.
Paulson didn’t testify at the trial.
- Bloomberg NewsFedEx to pay $21 million in overbill suit
FedEx Corp., the world’s largest cargo airline, will pay $21.5 million to settle a lawsuit over claims that it overcharged customers by billing for deliveries to businesses and governments at higher residential rates.
The settlement was filed Friday in federal court in Memphis. A hearing on preliminary court approval is set for Thursday. The settlement covers a class of 200,000 customers, according to the filing.
FedEx was accused in the 2011 complaint of overcharging commercial and government customers as much as $3 each for tens of thousands of packages delivered. FedEx denied the overcharging allegations and said customers could avail themselves of a procedure for challenging the charges.
Under the settlement, FedEx “has agreed to no longer rely solely on a third-party database or customer designations to make business/residential classifications,” in addition to paying refunds, according to the filing.
“One of the significant benefits of the settlement is that FedEx has agreed to end many of the practices we believe resulted in improper delivery charges,” said Steven Rosenwasser, an attorney for the plaintiffs.
- Bloomberg News
Bernanke stays in AIG suit, court rules
Federal Reserve Chairman Ben Bernanke will have to give testimony in a lawsuit against the U.S. brought by Maurice “Hank” Greenberg over the government’s bailout of American International Group Inc.
Greenberg’s Starr International Co. sued the U.S. for $25 billion in 2011, claiming the assumption of 80 percent of AIG’s stock by the Federal Reserve Bank of New York in September 2008 was a seizure of property that violated shareholders’ constitutional rights to due process and equal protection of the law. Switzerland-based Starr contended Bernanke’s role in the transaction made his testimony critical to its suit.
“The court is persuaded that Mr. Bernanke is a key witness in this case and that his testimony will be highly relevant to the issues presented,” Judge Thomas Wheeler of the U.S. Court of Federal Claims wrote in the ruling filed Monday. “Because of Mr. Bernanke’s personal involvement in the decision-making process to bail out AIG, it is improbable that the plaintiff would be able to obtain the same testimony or evidence from other persons or sources.”
The government argued that whatever Bernanke has to say is available from other sources, according to a July 16 Justice Department filing.
- Bloomberg News
Hail in Burgundy cuts ’13 wine vintage
The damage to Burgundy’s wine region from hail storms that pounded vineyards in villages including Pommard and Volnay last week cut the 2013 vintage by as many as 4 million bottles, regional council estimates show.
Hail, floods and high winds damaged 3,336 acres of vineyard in the Cote de Beaune area that produces some of Burgundy’s most prized wine, council spokesman Benoit Chaumont said Monday. Potential losses amount to about 15 percent of the 27 million bottles produced in Cote de Beaune in 2011, data from the Burgundy Wine Board show.
In Cote de Beaune, vineyards from Meursault in the south to Savigny-les-Beaune in the north were damaged by thunderstorms and hail on Wednesday, according to the board. The potential production loss is as much as 792,520 gallons, Chaumont said.
“The premier crus were hit, that’s for sure,” Chaumont said. “As far as I know, no grand crus were affected.”
In the north of Pommard, 70 percent to 90 percent of vines were damaged, while 30 percent to 70 percent suffered in southern Pommard and neighboring Volnay.
Burgundy production fell last year on a combination of late frost, hail, disease and poor fruit set. The region has France’s most expensive wine real estate, with some grand cru properties fetching as much as $5 million for about 2.5 acres, according to the Agriculture Ministry.
- Bloomberg News
Business, Pages 22 on 07/30/2013