KeNo's Housing and Economic Portal: Monday August 3 Housing and Economic stories

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Drug companies to reap swine-flu billions - (www.ft.com) Some of the world’s leading pharmaceutical companies are reaping billions of dollars in extra revenue amid global concern about the spread of swine flu. Analysts expect to see a boost in sales from GlaxoSmithKline, Roche andSanofi-Aventis when the companies report first-half earnings lifted by government contracts for flu vaccines and antiviral medicines. The fresh sales – on top of strong results fromNovartis of Switzerland and Baxter of the US, which both also produce vaccines – come as the latest tallies show that more than 740 people have died from the H1N1 virus, and millions have been affected around the world. GlaxoSmithKline of the UK confirmed it had sold 150m doses of a pandemic flu vaccine – equivalent to its normal sales of seasonal flu vaccine – to countries including the UK, the US, France and Belgium, and was gearing up to boost production. GSK also produces Relenza, an antiviral medicine that reduces the length and severity of the infection, and is preparing to increase manufacturing towards 60m annual doses. The UK placed an order for 10m treatments this year. One beneficiary of the fears about the pandemic has been Roche of Switzerland, which sells Tamiflu, the leading antiviral drug, and has seen a sharp rise in orders from private companies as well as governments. A report last week from JPMorgan, the investment bank, estimated that governments had ordered nearly 600m doses of pandemic vaccine and adjuvant – a chemical that boosts its efficacy – worth $4.3bn (€3bn, £2.6bn) in sales, and there was potential for 342m more doses worth $2.6bn. It forecast that fresh antiviral sales could boost sales for GSK and Roche by another $1.8bn in the developed world, and potentially up to $1.2bn from the developing world.

Philadelphia is Out of Cash; Pension Spiking in California; Massive Tax Hikes in Oregon - (Mish at globaleconomicanalysis.blogspot.com) Pension plans are touching a nerve. Numerous people sent me links to Pension Calculus Draws New Scrutiny. A California dustup over large pension payments is shining a spotlight on the practice of spiking -- increasing a salary just before retirement and boosting the lifelong payout. Pete Nowicki had been making $186,000 shortly before he retired in January as chief for a fire department shared by the municipalities of Orinda and Moraga in Northern California. Three days before Mr. Nowicki announced he was hanging up his hat, department trustees agreed to increase his salary largely by enabling him to sell unused vacation days and holidays. That helped boost his annual pension to $241,000. Mr. Nowicki's situation isn't unique. Contracts that permit a jump in salary just before retirement -- boosting the pension payout -- have been around for years. But as tough times are putting more scrutiny on public pensions, Mr. Nowicki's case has sparked particular anger from colleagues and local residents. Some recently demanded an explanation from the department trustees and others have lobbied the Orinda council to divert funds away from the fire department. The practice is getting more attention amid growing concerns about the sustainability of guaranteed pension payouts for public employees after brutal market losses last year in public pension funds. In addition to drawing his pension, Mr. Nowicki currently is working for the fire department as a consultant at an annual salary of $176,400 while the department searches for his replacement. Huge Tax Hikes In Oregon: Oregon Governor Ted Kulongoski has not yet gotten the message that voters are fed up with taxes. It's time he learns a lesson. When he is up for re-relection vote the clown out of office. Inquiring minds are reading Kulongoski signs tax bills. By signing three new tax bills, Oregon Gov. Ted Kulongoski may have ensured that Oregon voters will face a January ballot measure that pits businesses against unions and consumers. Kulongoski signed measures that will raise the state’s corporate minimum tax, raise taxes on the state’s wealthiest individuals and raise income taxes on businesses. One bill increases the minimum tax businesses will pay annually from $10 to $150. About two-thirds of Oregon corporations currently pay the $10 minimum tax. Another measure raises tax rates on businesses making more than $250,000, from 6.6 percent to 7.9 percent. The rate will last for two years, drop to 7.6 percent, then return to 6.6 percent for most corporations. All money collected above the 6.6 percent rate will help fill Oregon’s reserves beginning in 2013. The third bill raises personal income tax rates on Oregon’s wealthiest individuals and joint tax-return filers for the next three years. The current 9 percent tax rate will jump to 10.8 percent for individuals earning more than $125,000 and joint filers earning between $250,000 and $500,000. Those earning more than $500,000 will pay 11 percent. “We are asking corporations and the wealthiest Oregonians to pay their fair share to help protect the vital services we all depend on: education, health care and public safety,” Kulongoski said. A group calling itself Oregonians Against Job-Killing Taxes has hired a signature-gathering firm led by former Oregon Republican Party Chairman Kevin Mannix and tax activists Russ Walker and Ross Day. The group wants to refer the measures to voters in January. The deadline for 57,000 valid signatures is Sept. 25. If you live in Oregon, please sign the Oregonians Against Job-Killing Taxes and vow to vote Ted Kulongoski out of office. Tax hikes are exactly the job-killing mechanisms no one needs.

Summers Urges Banks to Lend More, Says Recovery Pace ‘in Doubt’ - (www.bloomberg.com) White House National Economic Council DirectorLawrence Summers chastised some banks that received government aid for not doing enough to reduce foreclosures, while declaring that next year’s economic growth pace is “in doubt.” “Prudent financial institutions will recognize that the profits they’re enjoying are in part a reflection of the commitment government and the broader society have made to the financial system that has enabled them to enjoy those profits,” Summers said in an interview with Bloomberg News yesterday in Washington. While Summers, President Barack Obama’s chief economic adviser, didn’t identify any firms, he said the government will disclose names as part of reports on loans and foreclosures. Last week, Goldman Sachs Group Inc.reported record quarterly earnings, while JPMorgan Chase & Co. said it had second-quarter profit of $2.7 billion. Separately, Summers, 54, said Obama hadn’t consulted him on the potential reappointment of Federal Reserve Chairman Ben S. Bernanke, 55. “The president will consult with whoever he wishes,” Summers said when asked whether he would recuse himself from conversations about the Fed post, for which he’s regarded by Fed watchers as a potential candidate. Summers said the U.S. economy is “no longer in freefall,” and poised for recovery starting this year. The former Treasury secretary and Harvard University president cited recent increases in exports, and said fiscal-stimulus and foreclosure- relief programs will create a “gathering force” in the coming months.

BofA May Face $12 Billion Credit Cards Charge: KBW - (www.cnbc.com) Bank of America may incur a $12 billion pretax charge in the first quarter of 2010 to comply with an accounting rule governing how it records credit card losses, an analyst said on Monday. Jefferson Harralson, an analyst at Keefe, Bruyette & Woods, wrote that the charge relates to $150 billion of credit card receivables, home equity securitizations and asset-backed conduits that will move onto the largest U.S. bank's balance sheet. "When these assets move on the balance sheet, Bank of America will most likely have to build a substantial amount of reserves for losses on these assets," Harralson wrote. The analyst called the charge an "accounting adjustment" that is "one-time in nature." He said a majority of the assets at issue have been included in the bank's regulatory capital ratios since the first quarter of 2008. "When the structures come back on (balance sheet) is when you need to put your reserves on," Chief Financial Officer Joe Price said on a Friday conference call. Bank of America's credit card unit lost $1.62 billion in the second quarter, limiting overall net income for the three-month period to $3.22 billion. Chief Executive Kenneth Lewis said new credit card rules in 2010 could reduce card revenue that year by $700 million. JPMorgan Chase Chief Executive Jamie Dimon made a similar forecast for his bank, the nation's second-largest. Harralson lowered his 2009 and 2010 earnings forecast for Bank of America, yet maintained his "outperform" rating and 12-month price target of $16.50. He said the Charlotte, North Carolina-based bank could "have a fairly strong rebound" once it is able to stop adding reserves for bad loans, and said its Jan. 1 purchase of Merrill Lynch should be beneficial over time.

Lawmakers Eye Tax Exemption To Save NUMMI Plant - cbs5.com - (www.cbs5.com) California lawmakers are considering a sales tax exemption for auto manufacturing to save the state's last car factory, the NUMMI plant in Fremont. Toyota is considering pulling out of the New United Motor Manufacturing plant that it has operated for 25 years with General Motors. The plant employs 4,700 workers directly and is a vital source of business for more parts and service manufacturers in the state. Toyota Corolla cars and Tacoma trucks are the only models manufactured at the plant since GM announced it would stop making the Pontiac Vibe there. Politicians and factory workers hope the extremely popular hybrid Prius comes to the factory. That would involve changes in equipment that could cost millions of dollars. The bills co-authored by Fremont Assemblyman Alberto Torrico would eliminate the sales tax on those equipment upgrades. "We're all very, very hopeful," said Veronica Morgan at the United Auto Workers union hall. "In California everybody would love to have a Prius, we drive so much. So we're really excited and hopeful that something will happen over at NUMMI and that we do get the car." Toyota is expected to make a decision by the end of July, according to Fremont city officials. Toyota's contract with the UAW expires on August 8.