residential property valuation firm said: U.S. home prices sank nearly 14 percent last year and show few signs of stabilizing

U.S. home prices sank nearly 14 percent last year and show few signs of stabilizing, even though much of the gains posted during the housing boom have been erased.

The recession and foreclosures battered house prices in 2008, dragging down values by 13.8 percent nationally and down 19.1 percent from their 2006 peak, according to the IAS360 House Price Index from Integrated Asset Services.
"We're seeing house prices returning to pre-bubble levels and there are no signs of leveling off just yet," Dave McCarthy, president and chief executive of Integrated Asset Services, said in a statement.
Home prices sagged by 5.9 percent in 2007, after rising 1.4 percent in 2006, according to IAS.
Location "is still everything," he added, with the markets that soared the most during the record five-year housing spree now faring the worst.
All of the 10 hardest-hit counties from peak to trough are in California or Florida, based on IAS data.
The three hardest hit counties are all in California, with prices down 51 percent from their high in San Joaquin County, down 49 percent in Monterey County, and down 45 percent in Kern County.
At the U.S. Census region level, home prices fell most in the West and the South. In the West prices dropped 18.4 percent last year and are down more than 24 percent from the 2006 peak. In the South, prices skidded by 12 percent in 2008 and are off about 18 percent from their high.
The hardest hit metropolitan areas last year were San Francisco, San Diego and Miami. Prices fell 23.9 percent in San Francisco, 22.7 percent in San Diego and 20.8 percent in Miami. Within the San Francisco metro area, Contra Costa County tumbled 35.5 percent last year, bringing prices 42.2 percent below the peak.
Denver-based Integrated Asset Services tracks the monthly change in the median sales price of single-family homes in the United States.

U.S. to lay out diagram to sop up bad mortgage property

U.S. Treasury Secretary Timothy Geithner will lay out a rescue plan on Tuesday that will rely on public and private funds to take $500 billion of bad assets off banks' books, sources said.
The plan would also extend a Federal Reserve program aimed at shoring up consumer lending to the troubled mortgage sector, allowing the U.S. central bank to extend up to $1 trillion in loans to holders of a wide variety of asset-backed securities, according to sources.
Details on Geithner's proposal for stabilizing a U.S. financial sector undermined by soaring losses on mortgage-related debts emerged following briefings Treasury officials provided for Capitol Hill lawmakers.
President Barack Obama told a news conference on Monday that cleaning up banks' balance sheets was a priority and didn't rule out the possibility that it will take more money than the $700 billion Congress already has approved to complete the job.
"We don't know yet whether we're going to need additional money or how much additional money we'll need until we see how successful we are at restoring a level of confidence in the marketplace," Obama said.
Clearly aware that shaky global financial markets are intently watching what steps Washington will take to right the world's largest economy, Obama called on Congress to speedily approve an economic stimulus package to complement the revamped bank-rescue proposals that Geithner was to unveil.
"If you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of," Obama said. "This is not your ordinary, run-of-the-mill recession, we are going through the worst economic crisis since the Great Depression."
Geithner will outline the Obama administration's plan to revamp a U.S. financial bailout program that his predecessor, Hank Paulson, persuaded Congress to approve last year. About half of that money has been committed to pump capital into banks and ailing U.S. automakers.
Before taking over Treasury, Geithner was president of the New York Federal Reserve Bank and worked closely with Paulson on the prior administration's rescue effort but acknowledged it was inadequate and unpopular.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said in remarks prepared for delivery when the new measures are released.
He pledged banks will go through "a carefully designed comprehensive stress test" in future to make sure their balance sheets are clean and they meet requirements for capital.
Banks will continue to receive capital injections but they will have to meet tough new rules that require them to disclose how the money they receive is leading to more lending.
Geithner will also expand a joint Treasury-Fed program currently aimed at stimulating consumer and small business loans by allowing use of mortgage-backed securities and private label mortgage securities as collateral, sources said.
The program currently allows the Fed to lend up to $200 billion dollars to holders of top-rated securities backed by credit car, education, auto and small business loans. That program would be expanded to $1 trillion, sources familiar with the plan said.
Treasury also is expected to announce $50 billion aimed at stemming home foreclosures, several sources said. On Monday the director of the White House National Economic Council, Lawrence Summers, said on CNN more measures to help the battered housing sector will be coming within about two weeks.
In recent days, as Treasury worked to finalize details of its rescue package, attention has shifted to how to draw in private-sector investment to help clean up balance sheets littered with growing numbers of non-performing assets.
Summers said the administration wants private investors to be more active in buying compromised mortgage assets that are clogging bank balance sheets.
RESTORING CREDIT
Soaring defaults on U.S. mortgages have led to deep losses at banks worldwide, leading them to cut off lending and undercutting the global economy. The United States has been stuck in a recession for more than a year, and appears on a steepening slope downward.
In effect, having a combination of public and private investment to take bad assets from banks would have the same impact as setting up a government-run "bad bank," an option that had been under consideration, and would be more cost-effective than a stand-alone bank.
"Government capital is a last resort, and wherever possible, we want to catalyze the private sector to take responsibility for a situation that in many ways was created in the private sector," Summers said on CNN.
An announcement on the bank plan had been set for Monday, but was pushed back so the administration could focus its efforts on pushing a huge economic stimulus bill through Congress. The Senate is set to vote on the stimulus proposals later on Tuesday.
Sources have said the administration is also working on a mortgage rescue program under which government-controlled mortgage enterprises Fannie Mae and Freddie Mac would ease payments for hundreds of thousands of borrowers and offer a model for Wall Street to do the same.

US senators be in agreement economy bill

There have been a series of meetings to try to find a compromise position

The American people want us to work together - they don't want to see us dividing along partisan lines on the most serious crisis confronting our country

Senators in Washington say they have reached agreement on a huge economic stimulus package designed to revitalise the US economy.
Senior Democrats say they will back a plan worth $780bn (£534bn), instead of the $900bn sought by the president, in order to gain vital Republican support.
President Barack Obama denounced delays to the legislation, which mixes big spending plans and tax cuts.
The Senate is now due to hold a vote in the coming days.
President Obama has spoken of "an urgent and growing crisis" and said further Senate delays would be "inexcusable and irresponsible" and lead to "a catastrophe".
His comments came as the latest unemployment figures showed that the US had had its single worst month for job losses for 35 years.
Almost 600,000 people lost their jobs in January alone - figures Mr Obama described as devastating.

Rough water
President Obama is desperate to pass the package, the BBC's Adam Brookes in Washington says.

This is the president's first big legislative initiative since he took office, and it has hit some very rough water, our correspondent says.
The new $780bn plan is composed of 42% tax cuts and 58% new government spending, Democratic Senator John Kerry said, according to Reuters news agency.
Other details of the slimmed-down package are sketchy, but one Democrat told Reuters that the homebuyer tax credit and car tax credit were still in the bill.
The Democrats need to persuade two Republicans to vote in favour of the bill for it to gain the necessary 60 Senate votes.
Although Democrats hold a 58-41 majority, 60 votes are required to ensure the Republicans cannot block the bill with a filibuster.
Senate Finance Committee Chairman Max Baucus said that at least three or four Republicans would vote for the bill.
"The American people want us to work together," said Senator Susan Collins, a Republican who will vote in favour.
"They don't want to see us dividing along partisan lines on the most serious crisis confronting our country."
However, the Senate minority leader, Republican Senator Mitch McConnell, said that "most of us are deeply sceptical that this will work".
And his Republican colleague, John McCain, defeated by Mr Obama in last year's presidential election said: "You can call it a lot of things but bipartisan isn't one of them."
'Echo chamber'
Mr Obama described as "devastating" the news that nearly 600,000 Americans lost their jobs in January.
"The situation could not be more serious. These numbers demand action," he said.

'Echo chamber'
Mr Obama described as "devastating" the news that nearly 600,000 Americans lost their jobs in January.
"The situation could not be more serious. These numbers demand action," he said.

Mr Obama's remarks came as he unveiled a new board of economic advisers, chaired by Paul Volcker, former chairman of the Federal Reserve.
"I created this board to enlist voices that come from beyond the echo chamber of Washington DC," said Mr Obama, "and to ensure that no stone is unturned as we work to put people back to work and to get our economy moving."
Republicans and some centrist Democrats are keen to reduce the number of spending commitments in the bill, and without their support the bill may not have enough votes to pass in the Senate.
The House of Representatives approved its version of the package last week, worth $825bn, without any Republican support.
If the Senate gives its approval to the bill, the two different versions will then have to be reconciled in a joint House-Senate committee before facing a final vote.
President Obama has said he wants the passage of the bill to be completed by 16 February.

Are you in the US? Are you in favour of the stimulus bill? Is President Obama right to urge swift action on the measures? You can send us your comments

Very important Signs: Economic increase Looks Even Weaker

The dramatic downturn gripping the global economy has breathed new life into old questions about how best to run our economic systems.
Politicians, business leaders and policymakers searched for solutions at this year's World Economic Forum in Davos.
Meanwhile, different debates were taking place at the "alternative" World Social Forum in Belem, Brazil.
There, an eclectic mix of some 100,000 campaigners, thinkers, and working people came to starkly different conclusions about the causes of the downturn, and how best to address it.
We asked four participants from around the globe to give us their opinions. Click on the links below to read their arguments.

New World Order

In recent weeks, the world has been politely standing by and watching how things play out with the fiscal stimulus and latest bank-bailout plans in Washington. Yes, there's been some grumbling overseas about "buy American" provisions in the stimulus bill, but for the most part, officials elsewhere don't want to step on the toes of a new President to whom they are favorably disposed. They also don't want to endanger legislation that they hope will help jump-start the global economy.

Just wait a couple of months, though. Politicians from Beijing to Berlin to Brasília see the current crisis as the product of a messed-up global financial infrastructure dominated by the U.S., and they will soon be pushing for big changes--whether Americans like them or not.
All this will begin to gel on April 2, when the newish international organization known as the G-20--the leaders of 19 of the world's biggest national economies, plus the European Union--meets in London. An unofficial meeting has already taken place, at the World Economic Forum in Davos, Switzerland, where G-20 officials (with the conspicuous exception of those from the U.S.) made speeches, conversed in the halls and gave a sense of the direction in which the world outside the U.S. wants to head. (Read TIME's special report on Davos 2009.)
The global discussion of the financial crisis is strikingly different from the one in the U.S. Here there's still something of a debate over whether the mess is the result of too much government interference in the housing market or too little government regulation of financial markets. In the rest of the world, that's no debate: inadequate and inconsistent financial regulation is uniformly blamed. What's more, a consensus seems to have emerged among the world's finance ministers and central-bank bosses that the chief underlying cause of the crisis was an unbalanced and out-of-control system of global capital flows in which some big-spender countries (namely the U.S.) ran up huge debts while big savers (China and India, for example) hoarded surpluses.
On the regulatory front, the path to a new global approach is pretty clear. Last spring the leaders of the G-7, a club of wealthy nations, agreed to create a "college of supervisors" to more closely coordinate regulation of multinational banks. The Group of Thirty, an influential organization of current and former central bankers and financial regulators, recommended in January that "systematically significant" financial institutions (those that are too big to fail) be identified in advance and subjected to higher capital requirements and tougher regulation. (See who's to blame for the financial crisis.)
Yet regulators around the world were already jointly setting bank-capital standards before the current crisis hit. A lot of good that did us. So there is also much talk about the need for a new architecture--"a new Bretton Woods" was a phrase that echoed around Davos--to rein in global financial flows.

Bretton Woods is the mountain resort in New Hampshire where in 1944 the Allied nations met--with the U.S. calling almost all the shots--to plan a postwar financial system. The Bretton Woods creations included the International Monetary Fund (IMF), the World Bank and a quarter-century of fixed exchange rates built around a U.S. dollar that was linked to gold. The fixed exchange rates and gold standard unraveled in the 1970s, and ever since we've had a system in which the IMF occasionally steps in to help countries in currency crises (usually imposing harsh terms in the process) but exercises no real control over the global financial system.

After the emerging-market currency collapses of the late 1990s, in which IMF aid wasn't much help, the lesson that emerging economies such as China and India took was that they needed to build up gigantic reserves of U.S. dollars to protect their currencies. To build those reserves, they ran big trade surpluses, which were in turn enabled mainly by record trade deficits in the U.S., which were in turn enabled by massive borrowing from around the world. It was an extremely unbalanced financial ballet, and it has now come crashing to the ground.

latest........On deck: foreign trade, federal budget, retail sales, business inventories, consumer sentiment, and some timely talk from key Fed officials

Last week’s smaller-than-expected 3.8% drop in real gross domestic product in the fourth quarter was hardly good news for economic growth in the first half of 2009. The reason is the split between very weak demand and an unexpected rise in business inventories. The upswing in inventories contributed 1.3 percentage points to economic growth, while economists had anticipated a subtraction.

The problem is that overall spending last quarter dropped at a 5.1% annual rate, led by declines of 3.5% in consumer spending and 19.1% in capital spending by businesses. That’s 80% of U.S. demand right there. That sudden dropoff in demand, in addition to a huge 19.8% plunge in exports, caught businesses by surprise. Companies had been trimming their inventories for four consecutive quarters, but last quarter they couldn't cut fast enough to prevent an unwanted buildup, and ratio of inventories to sales has spiked sharply higher across all business sectors. That portends a steep liquidation in the first quarter, which will likely extend into the second quarter.
The resulting cutbacks in output and employment will weigh heavily on GDP growth, especially in the first quarter. Economists are now shifting their views of the pattern of GDP declines this year, and most now expect the first quarter contraction to be even sharper than last quarter.
This week’s data will help to determine just how weak current-quarter growth will be. The Bureau of Economic Analysis, which assembles the GDP numbers, did not have December data on business inventories and foreign trade when it issued its initial estimate of fourth-quarter GDP. The week offers reports on both, which could result in a significant revision to last quarter’s top-line number. Plus, the impact of those two reports on the mix of fourth-quarter GDP could have implications for growth this quarter. In addition, the government will issue data on January retail sales, which will offer guidance on how much drag consumers are exerting on overall demand this quarter.
Also of key market interest this week, two top Federal Reserve officials will be speaking on Tuesday. Bill Dudley, in his first public appearance since taking over as President of the New York Fed from current Treasury Secretary Tim Geithner, will speak on Treasury Inflation Protected Securities (TIPS) at a conference in New York. His remarks will most likely include the subject of inflation. In addition, Fed Chairman Ben Bernanke will be testifying before Congress on the Federal Reserve’s program to stem the financial crisis.

World Leaders Wary of U.S. Economic actions

This was supposed to be the year the United States came in from the cold at the annual gathering of world leaders here. But instead of receiving a warm embrace, American policies were rebuked again and again in rhetoric that recalled the anger of the Bush years — mainly aimed at what the world views as the new threat of protectionism by the United States.

Certainly, there is a deep reservoir of good will for President Obama and the change in direction he represents. But despite the pledges to encourage international trade and economic cooperation that accompanied the closing sessions of the gathering, the World Economic Forum, on Sunday, there were clear signs that deep divisions between the United States and the rest of the world remained.
“There is such a level of concern, despair and anxiety that as welcome as the new president is, no one is inclined to cut the U.S. much slack,” said Richard Haass, president of the Council on Foreign Relations.
Or as Niall Ferguson, the Harvard historian, put it, “If G.M. got a new C.E.O., does that mean people would suddenly want to buy their cars?”

The criticism came from the usual sources, like Prime Minister Vladimir V. Putin of Russia and Premier Wen Jiabao of China, who both criticized a long pattern of excessive consumption, risky borrowing and inadequate regulation in the United States.
But more significant, the brickbats also came from economic and political leaders of European allies like Germany and France.
Whether the issue was the recent bailout for the American auto industry or proposals favoring American steel producers in the stimulus package now being debated on Capitol Hill, foreign officials warned that any move toward protectionism would have serious consequences for Washington and the rest of the world.
“We must not allow market forces to be completely distorted,” Angela Merkel, the German chancellor, warned in a speech on Wednesday. “For instance, I am very wary of seeing subsidies injected into the U.S. auto industry. That could lead to distortion and protectionism.”
By the weekend, as word of the “Buy American” provision in the stimulus package to help the United States steel industry spread through Davos, the tone had become sharper.
“It’s extremely preoccupying that one of the first acts of the new Obama administration could be a measure that is clearly protectionist and a distortion of competition,” said Anne-Marie Idrac, the French trade minister, who tried to draw Pascal Lamy, director general of the World Trade Organization, into the battle.
Mr. Lamy, however, said the organization would only act if there has been a “breach of the rules.” “I am not that big cop,” he added.
For all the global affection for Mr. Obama, Washington sent a relatively low-profile contingent to Davos, with Valerie Jarrett, a White House adviser, serving as the administration’s headliner here.
Ms. Jarrett did not address the issue of protectionism directly in her brief speech on Thursday, preferring to stick with the big picture as well as Mr. Obama’s connection to Chicago, her hometown.
Instead, the task of defending American economic policy fell to attendees like Representative Brian Baird, a Democrat from Washington State, who has served in Congress for the last decade.
“The steel issue is vastly overplayed here,” he said. “Even Adam Smith himself said certain key industries deserved to have protection.”
Noting that his district is home to two steel plants — down from three a few years ago — he added, “Steel is one of those industries.”
He suggested that this was not the time to push free-trade dogma on American taxpayers already worried about surging levels of unemployment.
“If you want to kill the W.T.O., that would be the way to do it,” he said.
Davos has always stood for globalization, and the benefits of free trade are an article of faith here. But even Davos die-hards concede that national economic interests have come to the fore amid the global downturn, and voter support for easing trade barriers is at low ebb.
To be sure, for all the foreign criticism over the help for the Detroit automakers, European countries including France, Britain and Sweden have offered up billions in aid for local auto manufacturers. What’s more, France has long protected the French companies it calls “national champions” from the threat of foreign takeover while providing huge subsidies for its farmers.
But beyond the public sparring, many foreign officials are also concerned about how the United States government will pay for Mr. Obama’s proposed stimulus package, which could ultimately cost $1 trillion.
A binge of new borrowing by Washington could effectively crowd out other borrowers by pushing interest rates higher over the long term, and would be especially painful for developing countries that rely on foreign capital. Or, it could stoke inflation when the global economy eventually begins to recover.
Ernesto Zedillo, the former president of Mexico who helped steer his country through a financial crisis in 1994, said developing countries were already having a hard time finding the capital they needed without competing with increased borrowing by the United States. And his country does not have the option of printing money, he said, because the Mexican peso is not a reserve currency like the dollar.
Even the praise for Mr. Obama from other leaders was balanced by criticism of Mr. Bush and past United States policies. “He seems to be very keen to interact with other nations as equals, rather than talking down,” said Kgalema Motlanthe, the president of South Africa. “It is a breath of fresh air.”
But for all the complaining from abroad, no other economic power — not Europe, not Japan and not China — seems ready to step up and fill the role traditionally played by the United States.
“The irony of the situation,” said Mr. Haass, of the Council on Foreign Relations, “is that everyone is still looking to the U.S. for leadership to fix things or at least make things better.”

How is this a great investment plan?

Diversifying won't totally protect you from losses, but it can boost your returns by limited your risk.

Spread your money around

Answer: There have always been a lot of misconceptions and erroneous expectations when it comes to the benefits of diversification.Back in the go-go '90s I remember having lunch with a financial planner who sarcastically referred to diversification as "di-worse-ification." His contention was that it made no sense to diversify into different asset classes. Stocks clearly offered the highest returns over long periods, so it was foolhardy for anyone investing for the long-term to put their money in anything but stocks. You were just lowering your potential return. Funny thing is, back then, this "hooray, hooray, stocks all the way" approach wasn't that uncommon.Today, many people are having second thoughts about diversification because they feel that diversifying didn't offer their portfolio the protection they thought it should. For example, all but a handful of Morningstar's 69 fund categories were down in 2008. So even if you spread your money around quite liberally, you still might have eked out only a paltry return or suffered significant losses last year.Looked at from these two vantage points, it's easy to see why you and others would question the value of diversifying. If it holds you back in bull markets and doesn't offer much shelter during bears, what's the point?In fact, there is a real benefit to diversifying. But in order to make reasonable investing choices and set a coherent investment strategy, it's important to understand what its advantages are, as opposed to what we might think they are or wish they were. Otherwise, you may be investing on the basis of false hopes, which is a good recipe for disappointment.What diversification can do for youThe first thing you should know is that it can't guarantee you the highest possible return. In fact, it guarantees you won't earn the highest possible return. By spreading your money around you assure that you will have at least some of your money in lagging investments, which will reduce your portfolio's potential return.By the same token, diversification can't totally immunize you from losses. To do that, you would have to do the opposite of diversifying -- i.e., plow all your money into the most secure investments, such as Treasury bills or short-term bank CDs.What diversification can do for you, though, is give you a shot at higher returns than you will get in the most secure investments while limiting your risk somewhat.Notice I said "somewhat." Fact is, if you want the value of your money to grow more than it will in T-bills and the like, you've got to invest in asset classes that have the potential for higher long-term returns, such as stocks and bonds. But those higher returns come with more risk. In the investment world, that risk can take several forms, but generally the riskier an investment, the more volatile it is, the more its value will jump around from year to year.You can't eliminate that risk. But by investing your money in a mix of secure and more volatile assets, you can reduce the potential downside in a given year. For example, if you'd had all your money in a diversified portfolio of U.S. stocks last year, you'd have lost just under 40%. If, on the other hand, you'd had 60% of your money in stocks, 30% in a broad bond index fund and 10% in cash last year, you would have lost roughly half that amount, or around 20%.(See'>http://www.blogger.com/post-create.g?blogID=7564789355139535583#Note">See editor's note.)That kind of cushion is important for a couple of reasons. For one thing, it makes you less likely to panic in a bad year and sell off riskier investments with higher long-term return potential at what may be the worst possible time. A less volatile portfolio is also less likely to take a devastating hit that may be difficult to recover from. That's an especially important consideration when you're dealing with 401(k)s or other retirement accounts and you're nearing retirement age or are already retired and withdrawing money from such accounts.So the key to getting the benefit of diversification is settling on a mix that's right for you.Ideally, your mix should consist of assets that don't all move in sync with each other or, to put it in investing terms, that aren't too highly correlated with each other.It's okay for gains in some investments to offset losses in others in some years. But on balance your gains should outweigh losses most years. And, while down years are inevitable with growth-oriented investments, whatever assets you're investing in should have a positive long-term return. Diversification isn't a magic formula that can turn recurring sizeable losses in your investments or your portfolio overall into long-term wealth.What diversification can't do for youBut as big an advocate as I am of diversifying among a variety of asset classes, I also feel that the concept has been stretched out of shape over the years, in some cases even beyond recognition.Specifically, I think the benefits of diversifying have been oversold by some advisers who seem intent on making themselves come off like investment wizards capable of creating all-upside-no-downside portfolios. But I'm wary of these supposedly more sophisticated portfolios.So I suggest keeping things simple. Start with a realistic sense of how much risk you can handle and then build a diversified portfolio of stocks, bonds and cash. If you want to get more fancy, you can throw in some foreign stock funds and maybe some REITs or real estate-related mutual funds. But don't go overboard. The more complicated your portfolio is and the more wide-flung your holdings, the more attention and care it will need.Finally, remember that to get the full benefit of diversifying you ought to rebalance periodically to restore your portfolio to its proper proportions.For guidance on how to divvy up your money given your goals and risk tolerance, you can use our asset allocator tool. And if you want to see how different combos of assets might perform, check out the asset allocator tool on T. Rowe Price's site.Of course, you can always take the other route you suggest and just buy CDs. But unless you have so much money that you can accumulate a large enough nest egg despite their low yields, I'm not sure that you can do this and also not worry.Editor's note: An earlier version of this story incorrectly stated that a theoretical portfolio of 60% stocks, 10% broad bond index fund and 10% cash would have lost around 20% last year. The correct example is 60% stocks, 30% broad bond index fund and 10% cash.

US President Barack Obama's $825bn (£576bn) economic stimulus package

US House passes economic package

Passed by 244 votes to 188, no Republicans backed the plan, saying it was too expensive and would not work.
The Senate debates the plan next week, and it could face stiff opposition as the Democrats have a slimmer majority.
After the vote, Mr Obama urged members of Congress not to "drag our feet or allow the same partisan differences to get in our way".
The president has said his package, which he hopes to sign into law next month, would help create a favourable climate for American business to thrive.
The bill would cut taxes for people and businesses by $275bn, while pumping more than $540bn into a range of initiatives including road and bridge repair, increased unemployment benefits, investment in new technology and renovations to 10,000 schools.
Heated debate
Mr Obama has pledged to try to end partisan division in Washington, but the debate on how best to kick start the US economy has devolved into a bitter squabble along party lines, says the BBC's Richard Lister in Washington.

In a heated debate, a succession of Republicans in Congress have condemned the stimulus package as a wasteful government spending exercise that will do little to create jobs.
They promoted their own bill, focussing more on tax cuts, which they said would create more jobs for half the investment.
"Fast-acting tax relief will create more jobs in America than a lot of slow-moving government programmes," said the Republicans' House minority leader John Boehner.
But this was a battle they could not win in the House, where Democrats have a large majority.
It is slimmer in the Senate where Republicans could slow the bill's progress, but Democrats are confident they can get the measure through there, and they have set a target for mid-February to have the bill on Mr Obama's desk to be signed into law.
Failing to attract significant Republican support for the bill, our correspondent says, is a blow to Mr Obama's hopes of forging a new consensus in Washington, at this time of economic crisis.
Greater accountability
Mr Obama said earlier workers were looking for "bold and swift" action from leaders, and called on businesses to play their part in economic recovery by creating jobs in a "favourable climate" started by government.

"I am confident that we are going to get it passed," Mr Obama said.
The US "cannot afford inaction or delay", he said after meeting business leaders at the White House.
Laying the blame for the economic crisis partially on a "sense of irresponsibility" on Wall Street and the government in Washington DC, he said corporate America had to take responsibility for its workers, but that Washington needed to provide leadership with the stimulus plan.
The president has said most of the money in his package would be used "immediately", creating as many as 4m jobs - the vast majority in the private sector - and that there would be a greater measure of accountability.
Treasury Secretary Timothy Geithner, who was sworn in on Monday, has the task of trying to get the US economy back in shape.
Meanwhile, Mr Obama attended his first Pentagon session with the joint chiefs of staff on Wednesday, telling them the military had carried out its missions under enormous pressure, and pledging his support to the troops.
Mr Obama, who campaigned on a promise to end the war in Iraq responsibly and withdraw troops next year, said his administration faces tough decisions on Iraq and Afghanistan.

dear readers

Are you in the United States? Do you agree with President Obama's proposals? leave your comments and experiences ..

Where to secrete your cash now

You're not going to find eye-popping interest rates, but there are lots of ways to earn modest returns -- with the priceless assurance that your balance won't drop.

You (and your savings) may have been bruised and bloodied by the stock market, but that's no reason to seek comfort by tucking your money under a mattress. Although Treasury bills are paying next to nothing, banks and brokerages are still offering safe alternatives that pay at least a little bit more -- nearly 4% -- are insured by the Federal Deposit Insurance Corp., and are backed by the full faith and credit of Uncle Sam.
Banks are particularly eager to cut you a deal. "They need deposits to boost capital and to have funds available to lend when markets loosen up," says Tom Brogan, director of retail banking practices at TowerGroup, a consulting firm.
You'll generally find the best terms at online banks, many of which are offshoots of traditional institutions. And take a good look at interest rates at community banks, which often offer incentives designed to retain current depositors as well as entice new ones. Your bank may have tiered rates -- the higher your balance, the more you earn -- which is a boon if you're moving a chunk of cash from the sale of stocks or mutual funds.
Certificates of deposit CD fans, rejoice. Interest rates are guaranteed, and the feds have temporarily increased insurance protection on bank deposits.
The FDIC raised its ceiling on deposits from $100,000 to $250,000 per depositor per bank in October. (The ceiling reverts to $100,000 on Jan. 1, 2010, so if you're thinking about depositing more than $100,000 in a CD that matures after Dec. 31, 2009, consider dividing the money among two or more banks instead.) CD maturities range from six months to five years. Some have no minimum-deposit requirement, and others require as much as $10,000 (a higher minimum does not ensure a better rate).

Despite the many recent mergers, there are still thousands of banks, so you want to be comfortable as a customer. Aaron Fine, a partner at Oliver Wyman, a financial-services strategy consulting firm, says you should find out how customer-friendly the bank's procedures are -- and, of course, make sure it is FDIC-insured. "If the Web site is cumbersome and it's difficult to make deposits, I wonder how hard it will be to take money out," says Fine. "If the process is fluid, transparent and easy to use, then I'm comfortable with it."
That said, the rate's the thing, and it pays to shop around. Yields on the highest-paying CDs range from 3.21% to 3.88%, depending on maturity (from one year to five years).

Parcel out your savings. Let's say you bailed out of the stock market, and now you're sitting on a pile of cash that exceeds the FDIC's expanded limits. To be fully covered, you could divide your money among a number of banks, but it takes a lot of time and effort to research banks and open accounts.
As an alternative, you could place as much as $50 million (honest!) through the Certificate of Deposit Account Registry Service program, and all of it would be FDIC-insured. This is how it works: You deposit your cash in one of 2,700 participating banks. The bank then parcels out the money to other banks in $100,000 chunks. The FDIC has issued an opinion that CDARS is a deposit-placement service, which means that all the money in the program is eligible for insurance. The original bank sets the interest rate and takes care of the paperwork, so you receive one consolidated statement. If you're investing $1 million or more, you should be able to negotiate a slightly higher rate than the ones that are advertised.

Build a CD ladder. Interest rates are generally low because the economy is weak and because people are flocking to safe investments, pushing down yields. But rates are likely to rise when the economy recovers. Two or three years from now, 3.88% might seem like an even-less-than-adequate return.
You can protect yourself by building a CD ladder -- that is, staggering the maturities of your CDs. If rates fall, you've locked in today's higher yields for some time; if short-term rates start to rise, you can take advantage of higher yields as your CDs mature.

Laddering your emergency fund

FYI: Banks with the highest rates in one category -- say, six-month CDs -- often show up as leaders in other CD maturities as well. Just be sure not to exceed the insurance limit at any one institution. (See "What if your bank fails?)
Or, as with the CDARS program, you could get help in selecting top-paying certificates. Some investment firms, such as T. Rowe Price and TD Ameritrade, will invest your money for you, although you may sacrifice some yield in return for the convenience.
To enroll in T. Rowe Price's Smart Ladder CDs, you fill out one application and deposit a minimum of $25,000, which is equally distributed among five CDs, with maturities from one to five years. Current rates are 1.35% to 2.7%; higher rates are available for larger deposits. When a CD matures, it is automatically reinvested in a five-year CD to rebuild the ladder.
One big advantage: CDs bought from brokerages may be redeemed without penalty before the term expires, although their values may fluctuate.

Economists: slump getting inferior

Analysis at private-sector companies forecasts greater job losses and deterioration economic conditions in the months to come.

Economists expect an already deep recession to get even worse in 2009, according to a survey released Monday.
Companies will lay off more workers and hoard more cash during the next 12 months, according to the National Association for Business Economics survey, a quarterly take from a panel of economists at private-sector companies in various industries. A vast majority of the 105 economists polled believe the country's gross domestic product will continue to sink in 2009.
If business conditions indeed worsen during the year, they will be sinking from already historic lows. The survey's measures of consumer demand, profit margins and capital expenditures all hit their lowest-ever levels in January's edition of the 27-year old survey.
"NABE's January 2009 Industry Survey depicts the worst business conditions since the survey began in 1982, confirming that the U.S. recession deepened in the fourth quarter of 2008," said Sara Johnson, a NABE economist.
Nearly half - 47% - of surveyed economists said overall industry demand was falling, compared with 35% who said so in the October survey. Just 10% of respondents said profit margins were rising, compared with 52% who believe they are falling. And 38% of economists said capital expenses are falling, up from just 15% in October.
Credit conditions hurt businesses, according to the economists, as customers had less leverage to buy discretionary products. 78% of respondents said tightening credit conditions affected customers, and 52% said the credit crunch directly hurt businesses in their industries.
Pessimistic outlook on weak environment
With business conditions souring, the outlook for jobs has grown increasingly negative. 39% of economists believe their industries will lay off employees in the next six months, compared with 32% in October.
The forecast was particularly poor for the goods-producing sector, in which 69% of economists saw layoffs in the future, and no one believed the industry would be adding jobs. Service-sector economists were the most optimistic, with only 9% seeing layoffs and 29% saying their industry would be hiring in the next six months.
Companies will likely curtail spending in the coming months as well, according to the survey. 44% of the economists believed capital spending in their industries would fall off in the coming year, compared with just 16% who believed their businesses would increase spending.
Rising unemployment, tightening credit conditions and a difficult lending environment led economists to give a more pessimistic outlook on growth for 2009.
Just 22% believed the U.S. economy would expand this year, down from 62% who thought so in October. Although 26% now believe the economy will shrink less than 1% this year, 52% now think the economy will shrink by more than 1%, which no one predicted in October.

more....

Global outlook to be slashed - again

The International Monetary Fund (IMF) will cut its 2009 global growth forecast again, this time to between 1% and 1.5%, as economic conditions deteriorate further, an IMF official said on Sunday.
The IMF's latest forecast, made in November, was for growth of 2.2%.
"It will be revised to 1 to 1.5% in 2009, which is huge," Axel Bertuch-Samuels, deputy director of IMF's monetary and capital markets department, told Reuters on the sidelines of a conference in the United Arab Emirates.
"Global economic prospects have deteriorated in recent months, consumer and business confidence have dropped to levels that we have not seen in decades and activity too has dropped sharply," he said.
The 2009 year will be enormously challenging for the world's economy, he said.
In November, the IMF cut projections sharply for world growth in 2009 to 2.2%, down 0.8 percentage points from an October forecast, noting industrialised economies were headed for the first full-year contraction since World War Two.
An official release of updated IMF economic forecasts is expected on Wednesday, he said, and even forecasts for emerging markets like China and India will see downward revisions.