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May 27, 2010

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CNBC : Evening Brief .- Latest Stories. May 27th, 2010


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Stop Trading, Listen to Cramer!
Mad Money host Jim Cramer shares his stock picks with CNBC's Simon Hobbs.
» Watch Video

Obama Holds News Conference
President Obama shares remarks on the BP spill and more.
» Watch Video

Head of Mineral Mgmt. Service Out
Elizabeth Birnbaum is out as head of Mineral Management Services, the agency that oversees offshore drilling. CNBC's Scott Cohn has the details.
» Watch Video

Dinan on Recovery, Rates & More
Hedge fund manager Jamie Dinan, of York Capital Management, discusses the economic recovery and more with CNBC.
» Watch Video


MarketWatch: Personal Finance Daily : Personal Finance Daily. May 27th. 2010

Personal Finance Daily
MAY 27, 2010

Thursday's Personal Finance stories

By MarketWatch

Don't miss these top stories:

I'll admit it: I've been slow to the coupon craze. While I'm a big fan of for its deals on music and theater shows, I'm not one to walk into a grocery or department store with coupons in hand. I'm simply not that good at planning ahead for those shopping trips; plus, most of the coupons I come across don't work at the small boutique and second-hand stores where I tend to shop.

But Groupon and similar sites that tap into a group-buying idea -- if enough people sign up for a deal, they all get it, otherwise it's canceled -- are appealing, mainly due to the types of coupons and deals they offer. Similar to Goldstar, the offers are for fun events and evenings out -- just the type of thing where I'm always eager -- not to mention anxious -- to save some money. Read Jennifer Waters's Consumer Confidential column today for more on these collective-buying sites.

As Waters notes in her column, some people find these sites addictive. That probably is at least partially because of the group mentality of it -- even if you never meet them, you are actively participating with others to reach a common goal. Just don't let your enthusiasm for the game cause you to forget you're playing with real money.

-- Andrea Coombes , Personal Finance editor

Save money by tapping into crowd's clout

The recession has transformed more consumers into discount shoppers, and now websites that harness the power of group purchasing are helping them get even better deals.
See Jennifer Waters's Consumer Confidential.


Ready for retirement? Here's your checklist

What does it take to make the move from a working life to retirement, and to make that move successfully? Not unlike the planning involved in any trip, you need a checklist to make sure you have everything you need to get from one place to another.
See Robert Powell.


Keep kids safe this summer

Summer brings fun and sun but it's also prime injury season for children. MarketWatch's Kristen Gerencher reports on ways parents can help prevent some of the most lethal threats related to water, cars and sports.
 Watch Health Minute.


Fixed-rate mortgages fall further

Continued instability in financial markets overseas drove U.S. fixed-rate mortgage rates lower this week, and Freddie Mac's chief economist on Thursday said the low rates could soften effects of the home-buyer tax credit's expiration.
See Mortgages.


Recent market turmoil is not a repeat of 2008

The current financial-market turmoil is leading to worries about a 2008 redux and a double-dip recession. Economists are discounting the scenario in part because of government actions and stronger economic fundamentals.
See Kathleen Madigan.

Advice leaves investors hungry

Say you're nearing retirement age, and you want to improve your portfolio to make sure it lasts a lifetime and helps meet your personal goal of putting the grandkids through college someday.
See Chuck Jaffe.

Why I don't trust gold

This is a very sad day for me. In Part One of this series , when I argued that gold might be about to go vertical, I made a whole bunch of new friends among the gold bugs. And now I'm going to lose them all.
See Brett Arends.

Bearish sentiment reaches November high, AAII says

Investor pessimism about stocks is at its worst since at least November, according to recent polls on investor sentiment. Nearly 51% of investors surveyed by the American Association of Individual Investors said they feel bearish about the market over the next six months, the association reported Thursday.
See story on bearish sentiment reaches November high.

How much of a stock bounce from fear spike?

Markets might be moved by fear and greed, but they're still far from being reflections of human mechanisms. Needless to say, markets are also far from being perfect discount mechanisms.
See Nick Godt's Market Medics.


Jobless claims decline

The number of people submitting first-time claims for unemployment benefits fell 14,000 to a seasonally adjusted 460,000 in the week ended May 22, a level that still indicates a weak labor market, government data showed Thursday.
See Economic Report.

First-quarter growth revised down to 3%

The U.S. economy grew at a 3.0% pace in the first quarter -- lower than previously estimated -- owing to slightly smaller increases in consumer spending and purchases of business software.
See Economic Report.

Energy regulator quits, Obama says Gulf is top priority

The head of the controversial agency responsible for regulating drilling in the Gulf of Mexico -- criticized as overly cozy with the energy industry -- quit hours before she was set to testify before Congress on the BP blowout.
See story on energy regulator quits, Obama says Gulf is top priority.

BP sees some success, spill ranks as U.S.'s worst

The Coast Guard said Thursday that BP was having some luck shutting off the flow from is damaged Gulf well, but not before fresh research showed the disaster to be the worst oil spill in U.S. history.
See story on BP sees some success, spill ranks as U.S.'s worst.

Obama calls 'unprecedented' oil spill top priority

Calling the disastrous oil spill in the Gulf of Mexico his administration's top priority, President Barack Obama on Thursday defended the federal response to the catastrophe and ordered an extended suspension of oil exploration off U.S. shores.
See story on Obama calls oil spill top priority.

REUTERS: Daily Investor Update. May 27th., 2010


Wall Street flies on China comment, Microsoft upgrad
Money manager to stars ran fraud: prosecutors
Economic growth lowered in first quarter
Treasury vows fight for strong financial reforms
Costco, Big Lots profits up as shoppers move past basics
Senate Democrats try to soften fund manager tax
AT&T: 40 percent of iPhone sales are to business users
"Systemic" manufacturing lapses at J&J unit: FDA
Cost concerns threaten jobs bill in Congress
Morgan Stanley hires advisers from UBS, Barclays

NYT: Business Afternoon Update.- A Reassuring Day on Wall Street. May 27th., 2010

Business Afternoon Update

A Reassuring Day on Wall Street

Chinese officials assured traders that Europe would remain an important market for investment.

Pequot and Its Chief Settle Insider Complaint

The Securities and Exchange Commission, in a civil suit, accused the hedge fund of insider trading involving Microsoft shares.

First-Quarter U.S. Growth Revised Slightly Lower

In a second report, first-time jobless filings fell last week but not as much as expected.

Spain Clears Budget Cuts, Just Barely

The plan to cut an additional ‚15 billion scraped through a parliamentary vote, setting the stage for tough budgetary talks.

Geithner Sees Consensus on Finance Reform

In Berlin, the Treasury secretary said, however, that approaches to financial overhaul may vary by country.

RTTNews: Evening Market Wrap: Stocks Rally As China Reaffirms Confidence In Europe.May 27th., 2010

Evening Market Wrap Thu May 27 17:01 2010 


May 27, 2010 Stocks Rally As China Reaffirms Confidence In Europe - U.S. Commentary Stocks moved sharply higher on Thursday after China reaffirmed its confidence in debt-embattled Europe, sparking a relief rally on Wall Street. The major averages all finished firmly in positive territory, bouncing off of the three month lows set in the previous session. Full Article

Economic News

May 27, 2010 Fed's Bullard: European Crisis Unlikely To Cause Worldwide Shock St. Louis federal Reserve President James Bullard said Thursday that Europe's soverign debt crisis is unlikely to cause another worldwide economic recession. Speaking at the Swedbank Economic Outlook Conference in Stockholm, Bullard said that economic recoveries in the U.S. and Asia are likely to keep the crisis contained and added that the global economic recovery is on track. Full Article
May 27, 2010 China Denies Report It Is Reviewing Euro Zone Bond HoldingsThe Chinese central bank on Thursday denied a report that it is reviewing its holdings of Euro zone debt, insisting that Europe remains a key market for investing the nation's exchange reserves. Full Article
May 27, 2010 Weekly Jobless Claims Show Modest Drop To 460,000First-time claims for unemployment benefits saw a modest decrease in the week ended May 22nd, according to a report released by the Labor Department on Thursday, although economists had expected a somewhat steeper decline. Full Article
May 27, 2010 First Quarter GDP Rose By Less Than Previously Estimated While the Commerce Department's second estimate on gross domestic product in the first quarter continued to indicate the third consecutive quarter of economic growth, the revised estimate showed that the pace of growth was slower than previously estimated. Full Article

Corporate News

May 27, 2010 Monsanto Slashes 2010 Profit Outlook As It Repositions Roundup UnitAgricultural products developer Monsanto Co. (MON) announced Thursday that it has dropped prices on its popular herbacide Roundup in order to compete with generic products flooding the weed killer market. Full Article
May 27, 2010 TD Bank Q2 Profit More Than Doubles, But Misses Street ViewTD Bank (TD, TD.TO) on Thursday reported a profit for the second quarter that more than doubled from last year, reflecting higher earnings across all the business segments and the lowest level of loan losses in six quarters. Full Article
May 27, 2010 Wal-Mart's Asda Group In UK To Buy Netto Foodstores For $1.1 Bln CashAsda Group, the U.K. supermarket chain owned by Wal-Mart Stores Inc (WMT), Thursday said it signed an agreement with Danish Supermarket A/S to buy its fully owned subsidiary, Netto Foodstores Ltd. for GBP 778 million or $1.1 billion in cash and debt free basis. Full Article
May 27, 2010 BP's "top Kill" Operation Slows Oil Spill In Gulf Of MexicoThe dramatic operation "top kill" by British Petroleum to try and block the five week-old major oil spill from a damaged underwater rig in the Gulf of Mexico appears to have met with success on Thursday. Full Article
May 27, 2010 Western Union To Simplify Business Process, Cut 175 JobsMoney transfer and bill payment services provider Western Union Co. (WU) Thursday revealed a global multi-phased initiative to simplify business processes and streamline its management. Full Article
May 27, 2010 Heinz Q4 Profit Rises On Growth In Emerging MarketsPackaged food maker H.J. Heinz Co. (HNZ) reported Thursday a 9.8% growth in fourth-quarter profit, which topped Street estimates, helped by higher sales and double-digit organic sales growth in Emerging Markets. Full Article
May 27, 2010 CIBC Posts Profit In Q2Canadian Imperial Bank of Commerce or CIBC (CM, CM.TO) Thursday reported a profit for the second quarter, compared with a loss last year, driven by increases in net interest income and non-interest income, lower provision for credit losses and a favorable impact from one-time items. Full Article
May 27, 2010 Tiffany Q1 Profit Climbs On 22% Sales Growth; Boosts 2010 ViewLuxury-jewelry retailer Tiffany & Co. (TIF) reported Thursday a profit for the first quarter that climbed from last year, boosted by margin expansion and 22% sales growth. Adjusted earnings per share form continuing operations came in above analysts' expectations by eleven cents. Full Article
May 27, 2010 Big Lots Q1 Profit Up, Beats View; Lifts FY10 ViewBroadline closeout retailer Big Lots, Inc. (BIG) reported higher first-quarter profit that beat Wall Street consensus. Quarterly revenues were in line with estimates. Big Lots initiated second quarter outlook and raised full-year 2010 view. Full Article


May 27, 2010 Oil Climbs For Second Day, Tops $74 As Dollar Slides Oil futures followed up the previous session's upsurge with an equally sharp advance Thursday to settle at a near-two week high. The dollar retreated and a US government agency issued forecast for an active Atlantic hurricane season this year, boosting crude prices. Full Article

Forex Top Story

May 27, 2010 Dollar Pulls Back From 4-Year Peak Versus Euro The dollar once again failed in its push to advance beyond last week's 4-year high against the euro, derailed by a Chinese denial that Beijing may trim its holdings of European debt. US gross domestic product figures suggesting the economy did not grow as fast as initially predicted in the first quarter failed to make much of an impact on the currency markets. Full Article

Political News

May 27, 2010 Blumenthal Still Leads Connecticut Senate Race Despite Vietnam Service FlapA new Quinnipiac University poll released Thursday found that Connecticut Attorney General Richard Blumenthal is holding onto a big lead in Connecticut's U.S. Senate race despite revelations that he "misspoke" about serving in Vietnam. Full Article
May 27, 2010 Republican Efforts To Boost Border Security Defeated By Democrats Senate Democrats defeated Republican measures Thursday that would have allocated additional funding and National Guard troops to secure the U.S./Mexico border. One of the measures defeated Thursday was from Senator John McCain, R-Ariz., whose amendment would have sent an additional 6,000 National Guard troops. Full Article
May 27, 2010 Begich "Frustrated" With Administration's Plans To Suspend Exploratory DrillingSenator Mark Begich, D-Alaska, stated Thursday that he is "frustrated" to learn that the Obama administration plans to announce that it will suspend consideration of applications for exploratory drilling in the Arctic until 2011. Full Article
May 27, 2010 New Poll Finds Americans Critical Of Response To Oil SpillA new USA Today/Gallup poll released Thursday showed that Americans are unhappy with the way the government and BP (BP) have responded to the massive oil spill in the Gulf of Mexico. Full Article
May 27, 2010 Obama Orders Halt To Deepwater Drilling, Calls For Scrub Of Safety ProceduresPresident Barack Obama Thursday ordered a six month halt to all deepwater drilling in the Gulf of Mexico in response to the ongoing Deepwater Horizon spill that began in late April. Full Article

THE WALL STREET JOURNAL: : The Dow surged 284.54 points to 10258.99


Major stock averages rallied to reclaim their perch above key milestones, and the dollar fell as investors' concerns about euro-zone debt eased.
Participants welcomed remarks from China, which said it isn't planning to sell its European bond holdings. Separately, Spain approved additional budget cuts, easing concerns that it might face trouble similar to Greece's recent travails.
The Dow Jones Industrial Average surged 284.54 points, or 2.9%, to 10258.99, recapturing the 10000 level after it had closed below it Wednesday for the first time since early February. All the Dow's components rose except Johnson & Johnson, which slipped 0.2%.
American Express was the strongest Dow performer in percentage terms, up 5.7%. Intel and Alcoa were also strong, up more than 5% each. Microsoft rose 4% erasing some of its losses from Wednesday, when the software giant's market capitalization slipped below rival Apple's. Microsoft Chief Executive Steve Ballmer said he is focused more on launching new products and improving profitability than worrying about being below Apple's market cap.
Apple, which isn't a Dow component, rose 3.8%.
[pan0527] Associated Press
Traders work on the floor at the New York Stock Exchange May 27.

Markets Hub: Global Markets Rally

Investors are moving into risky assets again after China denies reports it's reviewing its euro zone holdings, Simon Constable and Stephen Wisnefski report.
The Standard & Poor's 500-stock index rose 3.3% to 1103.06, above the 1090 level it struggled to top in the previous session. Traders said the measure's close above the key 1100 is a promising sign for the days ahead, though the market is likely to remain volatile as participants remain focused on Europe.
Analysts said the rally was also helped along by end-of-month buying, with some money managers looking to grab stocks on the cheap before sending statements to clients.
May has been anything but sunny for investors so far, with the three major indexes down about 7% each for the month, with just one full trading day to go. Major U.S. exchanges will trade as usual on Friday, then close Monday in observance of Memorial Day.
"A lot of the intensity of end-of-month trading lately has moved to the penultimate day of the month," said strategist Bill King, of M. Ramsey King Securities in Burr Ridge, Ill. "The institutions are frowning a little more on trading on the very last day. This time around, you also have to factor in that people will probably try to get things out the way and get out early on Friday."
The stock rally came despite slightly disappointing U.S. economic data. The Commerce Department revised its estimate of first-quarter gross domestic product down to a 3.0% annual rate from its prior estimate of 3.2%. Also, the number of U.S. workers filing new claims for unemployment benefits fell less than expected last week.
The euro rose to $1.2360, compared to $1.2193 late Wednesday, after the China State Administration of Foreign Exchange, the agency that manages the nation's reserves, said media reports that it is considering selling some of it holdings of euro-zone government bonds were "groundless."
"China has realized that you can't cut off your nose to spite your face," said Bob Froehlich, senior managing director at The Hartford. "China has an awful lot of exports that go to Europe. It reminds us once again how interrelated everything is."
Among stocks in focus, Tiffany jumped 7.5% after announcing that its fiscal first-quarter earnings more than doubled.
American depositary shares of BP climbed 7% after the U.S. Coast Guard, which is overseeing the disaster response in the Gulf of Mexico, said BP's effort to contain its leaking offshore site has so far "stabilized the wellhead." However, the "top kill" maneuver to seal the well and stop a gusher of crude fouling the Louisiana coast isn't complete.
Citigroup's shares rose 4.2% after the Treasury Department cut its stake in the bank to about 22% from 27%.
Investors' renewed appetite for risky bets on Thursday pushed prices of oil and other raw materials higher. The Dow Jones-UBS Commodity Index was up 1.9%.
The 10-year Treasury note slipped 1-1/32 to yield 3.340%.
—Kristina Peterson contributed to this article. Write to Peter A. McKay at and Donna Kardos Yesalavich at
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More In Markets Main

FGC BOLSA - FGC FINANCIAL MARKETS: M3 Money supply declined, matches the average from 1929 to 1923

According to The Telegraph

"The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.". Continues :

"The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever. ".

You can read this important article  by "Ambrose Evans-Pritchard", here

Forbes: What is a Cash Flow Statement? May 27th., 2010


Personal Finance

What Is A Cash Flow Statement?

Reem Heakal, 05.27.10, 02:00 PM EDT

How cash flow helps in analyzing company finances.

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Complementing the balance sheet and income statement, the cash flow statement, a mandatory part of a company's financial reports since 1987, records the amounts of cash and cash equivalents entering and leaving a company. The CFS allows investors to understand how a company's operations are running, where its money is coming from, and how it is being spent. Here you will learn how the CFS is structured and how to use it as part of your analysis of a company.
The Structure of the CFS
The cash flow statement is distinct from the income statement and balance sheet because it does not include the amount of future incoming and outgoing cash that has been recorded on credit. Therefore, cash is not the same as net income, which, on the income statement and balance sheet, includes cash sales and sales made on credit.
Cash flow is determined by looking at three components by which cash enters and leaves a company: core operations, investing and financing,
Measuring the cash inflows and outflows caused by core business operations, the operations component of cash flow reflects how much cash is generated from a company's products or services. Generally, changes made in cash, accounts receivable, depreciation, inventory and accounts payable are reflected in cash from operations.
Cash flow is calculated by making certain adjustments to net income by adding or subtracting differences in revenue, expenses and credit transactions (appearing on the balance sheet and income statement) resulting from transactions that occur from one period to the next. These adjustments are made because non-cash items are calculated into net income (income statement) and total assets and liabilities (balance sheet). So, because not all transactions involve actual cash items, many items have to be re-evaluated when calculating cash flow from operations.
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For example, depreciation is not really a cash expense; it is an amount that is deducted from the total value of an asset that has previously been accounted for. That is why it is added back into net sales for calculating cash flow. The only time income from an asset is accounted for in CFS calculations is when the asset is

THE WALL STREET JOURNAL : Lehman's Bankruptcy Estate Sues J.P.Morgan. May 27th, 2010


Lehman's Bankruptcy Estate Sues J.P. Morgan

Lehman Brothers Holdings Inc.'s estate sued J.P. Morgan Chase & Co., alleging J.P. Morgan illegally siphoned billions of dollars from Lehman in the days before the troubled investment bank filed for the largest bankruptcy in U.S. history.
The lawsuit alleges that J.P. Morgan Chief Executive James Dimon and other top executives used inside knowledge to take advantage of Lehman as its financial state worsened. J.P. Morgan, the suit alleged, coerced Lehman to turn over $8.6 billion in collateral in September 2008, triggering a liquidity squeeze that contributed to Lehman's collapse. The estate is hoping to recoup billions in collateral the bank demanded, and billions in other damages.
J.P. Morgan spokesman Joe Evangelisti said the lawsuit "is ill-conceived and meritless, and we will vigorously defend it."
The lawsuit, long expected, contains among the most-significant allegations to date about the interplay between Lehman and its onetime Wall Street brethren.
J.P. Morgan served as Lehman's main "clearing bank," meaning it acted as a middleman between Lehman and its lenders and investors. In this capacity, it knew more than most market players about Lehman's financial condition, which was growing more dire in the summer and fall of 2008.
The lawsuit alleges J.P. Morgan used this advantage to squeeze billions of dollars out of Lehman by demanding more collateral to cover its risks, ensuring J.P. Morgan "would stand ahead of all other [Lehman creditors]—not just for its clearance exposure, but for all possible exposure that could result from [a Lehman] bankruptcy."
Lehman bowed to J.P. Morgan's demands, said the suit, claiming Lehman feared that if J.P. Morgan ceased its clearing activities, it would have triggered the firm's immediate collapse.
A bankruptcy-court examiner found in a recent report that Lehman could pursue a legal claim against J.P. Morgan for making "excessive collateral requests," though he labeled it "not a strong claim." The examiner said Lehman could have a legal claim to claw back $6.9 billion of the $8.6 billion pledged to J.P. Morgan.
The bankruptcy-court examiner assailed Lehman for using certain accounting techniques to mask its leverage and mislead market participants before its collapse. Meantime, J.P. Morgan was among the only institutions to continue lending to Lehman before and after its bankruptcy.
J.P. Morgan's Mr. Evangelisti said: "As the examiner's report makes clear, it was the ill-advised decisions of Lehman itself and its principals to take on perilous leverage and to double-down on subprime mortgages ... and not any conduct by J.P. Morgan that led to Lehman's demise and the enormous losses to its various constituencies."
He added that there was "absolutely no inappropriate use of confidential information by any employee."
Lehman outlined a series of events in which it claimed J.P. Morgan took advantage of being the "ultimate insider" and contributed to Lehman's tumble into bankruptcy court. The following timeline is based on Lehman's versions of events contained in the suit:

Editors' Deep Dive: Cash Collateral in Dispute


    Goldman's Response

  • Dow Jones Corporate Filings Alert

    Judge OKs Settlement of J.P. Morgan Claim

  • Economist Intelligence Unit

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Access thousands of business sources not available on the free web. Learn More
In late August, J.P. Morgan, aware that Lehman's situation was deteriorating, asked Lehman to revise its clearance agreement to give J.P. Morgan added protections.
Not long after, in early September, senior J.P. Morgan and Lehman executives met to discuss Lehman's upcoming quarterly results. J.P. Morgan was given access to Lehman's books and records.
On Sept. 9, Mr. Dimon met with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson to discuss Lehman's fate and the government's intention to avoid rescuing the firm. Those meetings prompted J.P. Morgan to accelerate efforts to get Lehman collateral, the suit alleges.
The same day, Steve Black, co-head of J.P. Morgan's investment banking division, agreed to send a deals team to Lehman to discuss pumping money into the troubled firm—an idea Mr. Dimon had discussed with Lehman's chief executive, Richard Fuld.
But J.P. Morgan instead sent bankers to probe Lehman's records and plans, Lehman's suit alleges. The team later told Mr. Dimon and others that Lehman wanted a credit line from J.P. Morgan. In an email, Mr. Black responded by asking about the "drugs they apparently have been taking to think that we would do something like that."
In the evening hours of Sept. 9, J.P. Morgan's in-house lawyer, Diane Genova, called Andrew Yeung, a junior Lehman lawyer, alerting him that J.P. Morgan was drafting a new set of security agreements Lehman needed to sign before it released earnings results the next morning, the suit alleges.
Executives authorized to sign the agreement, including finance-chief Ian Lowitt, were unavailable, the suit alleges. J.P. Morgan told Mr. Yeung that Mr. Fuld, Lehman's CEO, had agreed to the new deal's terms in a conversation with J.P. Morgan's Mr. Black. Lehman said in the complaint that was "untrue."
The new agreement gave J.P. Morgan broader protections, requiring Lehman's holding company give broad guarantees to all J.P. Morgan's exposures to all Lehman entities, regardless of their nature. The new deal also canceled Lehman's access to previously pledged collateral through an overnight account, the suit alleges.
With the threat of J.P. Morgan stopping clearing activities looming, Mr. Yeung sent the agreement back, signed by Lehman treasurer Paolo Tonucci.
J.P. Morgan demanded more collateral over the next week, culminating in a $5 billion request late Sept. 11. Senior Lehman officers circulated a "Back-Up Contingency Plan" that noted J.P. Morgan continued to ask for collateral. "If we don't provide the cash, they refuse to clear, we fail ... , " part of the plan said.
On Sept. 12, Lehman delivered "what was essentially its last available $5 billion in cash," the complaint said. Over the weekend, Lehman "repeatedly" requested access to some of the collateral to stay afloat long enough to sell itself or wind down. J.P. Morgan refused.
The government declined to rescue Lehman. On Sept. 15, the then fourth-largest investment bank in the U.S. filed for bankruptcy, setting off the financial crisis.
Write to Mike Spector at and Susanne Craig at

FOX BUSINESS: Dow Soars on Euro. May 27th., 2010

05 2010 Traders 07 276
Dow Soars on EuroThe Dow soared more than 200 points and put the 10000 mark in its rearview mirror.

Top Kill a Success?

Coast Guard Admiral Thad Allens reportedly said BP's effort to plug its leaking oil well through its "top kill" procedure appears to be working.

'All-Starr' Advisor Charged With Fraud

Financial advisor to wealthy and famous Kenneth Ira Starr was charged with operating a Ponzi scheme.

Greece: It's About to Get Uglier

EMac When a country has been faking its budget numbers for decades, things can only get worse.

Mortgage Rates Continue to Slip

The average 30-year fixed mortgage rate hit a new low this week, inching to 4.92%.

THE WALL STREET JOURNAL : BP Decisions Set Stage for Disaster . May 27th, 2010


BP Decisions Set Stage for Disaster

It was a difficult drill from the start.
API Well No. 60-817-44169 threw up many challenges to its principal owner, BP PLC, swallowing expensive drilling fluid and burping out dangerous gas. Those woes put the Gulf of Mexico project over budget and behind schedule by April 20, the day the well erupted, destroying the Deepwater Horizon rig and killing 11 men.
Government investigators have yet to announce conclusions about what went wrong that day. The final step in the causation chain, industry engineers have said in interviews, was most likely the failure of a crucial seal at the top of the well or a cement plug at the bottom.
But neither scenario explains the whole story. A Wall Street Journal investigation provides the most complete account so far of the fateful decisions that preceded the blast. BP made choices over the course of the project that rendered this well more vulnerable to the blowout, which unleashed a spew of crude oil that engineers are struggling to stanch.
BP, for instance, cut short a procedure involving drilling fluid that is designed to detect gas in the well and remove it before it becomes a problem, according to documents belonging to BP and to the drilling rig's owner and operator, Transocean Ltd.
BP also skipped a quality test of the cement around the pipe—another buffer against gas—despite what BP now says were signs of problems with the cement job and despite a warning from cement contractor Halliburton Co.
Once gas was rising, the design and procedures BP had chosen for the well likely gave this perilous gas an easier path up and out, say well-control experts. There was little keeping the gas from rushing up to the surface after workers, pushing to finish the job, removed a critical safeguard, the heavy drilling fluid known as "mud." BP has admitted a possible "fundamental mistake" in concluding that it was safe to proceed with mud removal, according to a memo from two Congressmen released Tuesday night.

More on the Spill

See graphics covering how the spill happened, what's being done to stop it, and the impact on the region.
Finally, a BP manager overseeing final well tests apparently had scant experience in deep-water drilling. He told investigators he was on the rig to "learn about deep water," according to notes of an interview with him seen by the Journal.
Some of these decisions were approved by the U.S. Interior Department's Minerals Management Service, which has come under fire for what President Obama has called its "cozy relationship" with the oil industry. But in at least one case, the decision made apparently diverged from a plan MMS approved. MMS declined to comment.
Some of BP's choices allowed it to minimize costly delays. "We were behind schedule already," said Tyrone Benton, a technician who operated underwater robots and worked for a subcontractor. He said that on the day before the accident, a Monday, managers "hoped we'd be finished by that Friday.... But it seemed like they were pushing to finish it before Friday."
He added: "They were doing too many jobs at one time." Mr. Benton is suing BP and Transocean claiming physical injury and mental anguish.

Photos: The Gulf Coast

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BP acknowledges the well was running over budget but says it didn't cut corners. "Safe and reliable operations remain a priority regardless of how much a well is behind schedule or over budget," spokesman Andrew Gowers wrote in an email.
Some workers agree safety was paramount for both BP and Transocean. "Safety was their No. 1 concern. Protecting the environment was their No. 1 concern," said Darin Rupinski, a Transocean employee whose job was to help keep the rig in place.
BP was drilling to tap an oil reservoir it had identified called Macondo, the same name as the cursed town in Gabriel Garcia Marquez's novel "One Hundred Years of Solitude." As on many past projects, BP hired a drilling rig from Transocean, the largest deep-water driller. Workers from Transocean and other contractors did most of the work, under the supervision of BP employees on the rig and in Houston.
BP started working on the well in October, using a different rig. After three weeks natural gas got into the well, called a "kick." That's not uncommon. But two weeks later a hurricane damaged the rig and it had to be towed to port for repairs.
[WELLP1] Joe Shoulak
BP started again in January, this time with Transocean's Deepwater Horizon, a warhorse rig that had worked for BP for years. BP filed a new drilling permit with federal regulators.
According to a company document seen by the Journal, BP approved spending $96.2 million and about 78 days on the well. The target time was much less—about 51 days. By April 20, the well was in its 80th day, owing to delays such as one that had begun on March 8.
That day, workers discovered that gas was seeping into the well, according to drilling reports from the rig reviewed by the Journal. Workers lowered a measuring device to determine what was happening, but when they tried to pull it back up, it wouldn't budge. Engineers eventually told them to plug the last 2,000 feet of the then-13,000-foot hole with cement and continue the well by drilling off in a different direction.
The episode took days to resolve, according to drilling reports, not counting time lost to backtracking and re-drilling. Each additional day cost BP $1 million in rig lease and contractor fees.
Other problems arose. The rock was so brittle in places that drilling mud cracked it open and escaped. One person familiar with the matter estimates BP lost at least $15 million worth of the fluid.
Still, by mid-April, the well seemed a qualified success. BP was convinced it had found a lot of oil. Until engineers in Houston could make plans to start pumping it out, the workers on the nearly complete well, in a standard practice, would plug it and temporarily abandon it.
One of the final tasks was to cement in place the steel pipe that ran into the oil reservoir. The cement would fill the space between the outside of the pipe and the rock, preventing any gas from flowing up the sides.
Halliburton, the cementing contractor, advised BP to install numerous devices to make sure the pipe was centered in the well before pumping cement, according to Halliburton documents, provided to congressional investigators and seen by the Journal. Otherwise, the cement might develop small channels that gas could squeeze through.
In an April 18 report to BP, Halliburton warned that if BP didn't use more centering devices, the well would likely have "a SEVERE gas flow problem." Still, BP decided to install fewer of the devices than Halliburton recommended—six instead of 21.
BP said it's still investigating how cementing was done. Halliburton said that it followed BP's instructions, and that while some "were not consistent with industry best practices," they were "within acceptable industry standards."
The cement job was especially important on this well because of a BP design choice that some petroleum engineers call unusual. BP ran a single long pipe, made up of sections screwed together, all the way from the sea floor to the oil reservoir.
Jon M. Fletcher for The Wall Street Journal
'They were doing too many jobs at one time,' says Tyrone Benton, who worked on the rig.
Companies often use two pipes, one inside another, sealed together, with the smaller one sticking into the oil reservoir. With this system, if gas tries to get up the outside of the pipe, it has to break through not just cement but also the seal connecting the pipes. So the more typical design provides an extra level of protection, but also requires another long, expensive piece of pipe.
"I couldn't understand why they would run a long string," meaning a single pipe, said David Pursell, a petroleum engineer and managing director of Tudor, Pickering, Holt & Co., an energy-focused investment bank. Oil major Royal Dutch Shell PLC, in a letter to the MMS, said it "generally does not" use a single pipe.
BP's Mr. Gowers said the well design wasn't unusual. BP engineers "evaluate various factors" to determine what design to use for each well, he said.
Despite the well design and the importance of the cement, daily drilling reports show that BP didn't run a critical, but time-consuming, procedure that might have allowed the company to detect and remove gas building up in the well.
Before doing a cement job on a well, common industry practice is to circulate the drilling mud through the well, bringing the mud at the bottom all the way up to the drilling rig.
This procedure, known as "bottoms up," lets workers check the mud to see if it is absorbing gas leaking in. If so, they can clean the gas out of the mud before putting it back down into the well to maintain the pressure. The American Petroleum Institute says it is "common cementing best practice" to circulate the mud at least once.
Circulating all the mud in a well of 18,360 feet, as this one was, takes six to 12 hours, say people who've run the procedure. But mud circulation on this well was done for just 30 minutes on April 19, drilling logs say, not nearly long enough to bring mud to the surface.
Alex Welsh for the Wall Street Journal
Darin Rupinski, also aboard when Deepwater Horizon exploded, has a different view: 'Safety was their No. 1 concern.'
This decision could have left gas at the bottom of the well. When workers poured in cement to seal the sides, that gas would have been pushed up the outside of the well. Expanding as it rose, it would have reached the top of the well, where it either would have pushed against a massive seal on the ocean floor or might have gone even higher and reached the bottom of the pipe connecting the well to the drilling rig.
BP's Mr. Gowers said the amount of time spent circulating mud is "one of many parameters considered when designing a successful cement job." He said BP's investigation is ongoing.
Three offshore engineers the Journal asked to review the drilling reports all pointed to the failure to circulate the mud completely as a serious mistake. Robert MacKenzie, a former oil-industry cementing engineer now at FBR Capital Markets, said, "If you have any worries about gas, if you have any worries about getting a good cement job, you should definitely do it."
BP also didn't run tests to check on the last of the cement after it was pumped into the well, despite the importance of cement to this well design and despite Halliburton's warning that the cement might not seal properly. Workers from Schlumberger Ltd. were aboard and available to do such tests, but on the morning of April 20, about 12 hours before the blowout, BP told Schlumberger workers their work was done, according to Schlumberger. They caught a helicopter back to shore at 11 a.m.
BP told the Journal Tuesday that the tests weren't run because they were needed only if there were signs of trouble in the cement job, and the work seemed to go smoothly. But the same day, BP officials told congressional investigators there were signs before the disaster that the cement might have been contaminated and that some cementing equipment didn't work properly, according to a memo from two Congressmen.
The mood aboard the rig on April 20 was upbeat. The work was nearly done, and workers were eager to put the troublesome well behind them.
Some saw indications that managers wanted to wrap up quickly. Kevin Senegal, a subcontractor employee who cleaned tanks, said he was told to be ready to clean two tanks on a coming shift instead of the usual one. "To me it looked like they were trying to rush everything," he said.
Drilling "mud," perhaps mixed with oil, appeared to spew from BP's crippled well Wednesday, the company said, after workers began trying to plug it. CEO Tony Hayward said success wouldn't be clear until Thursday.
A disagreement broke out on the rig on April 20 over the procedures to be followed. At 11 a.m., workers for the half-dozen contractors working on the rig gathered for a meeting. Douglas Brown, Transocean's chief mechanic on the rig, testified Wednesday at a hearing in Louisiana that a top BP official had a "skirmish" with top Transocean officials.
The Transocean workers, including offshore installation manager Jimmy Wayne Harrell, disagreed with a decision by BP's top manager about how to remove drilling mud and replace it with lighter seawater. Mr. Brown said he heard Mr. Harrell say, "I guess that is what we have those pinchers for," referring to a part of the blowout preventer that would shut off the well in case of an emergency.
BP won the argument, said Mr. Brown, who is a plaintiff in a suit against BP and Transocean. Mr. Harrell declined Journal requests for comment.
A little after 5 p.m., to check the well's integrity and whether gas was seeping in, rig workers did what is called a "negative pressure test." It was supervised by a BP well-site leader, Robert Kaluza. His experience was largely in land drilling, and he told investigators he was on the rig to "learn about deep water," according to Coast Guard notes of an interview with him. BP declined to comment on his experience.
A lawyer for Mr. Kaluza said he "did no wrong on the Deepwater Horizon."
The test initially strayed from the procedure spelled out in BP's permit, approved by the MMS, according to the Coast Guard interview with Mr. Kaluza. When the first test results indicated something might be leaking, workers repeated the test, this time following the permitted procedure. The second time, pressure rose sharply, with witnesses saying that the well "continued to flow and spurted," according to notes gathered by BP's investigators that were reviewed by the Journal. BP denies violating its MMS permit.
Well-control experts say it's clear gas was leaking into the well, most likely through the seal at the top but possibly through the bottom or even through a collapsed pipe.
Earlier this month, BP lawyers told Congress the test results were "inconclusive" or "not satisfactory." On Tuesday, according to the Congressmen's memo, BP said it saw signs of "a very large abnormality."
Just two things then stood between the rig and an explosive mixture of gas and oil. One was the heavy drilling mud. The other was the blowout preventer near the sea floor. But the BOP had various problems, among them some leaking hydraulics.
By 8 p.m., BP was satisfied with the test and had enough confidence to proceed. It was this that may have been "a fundamental mistake," a BP official told congressional staffers Tuesday, according to the memo from two members of Congress.
Following BP's instruction, Transocean workers turned to replacing the mud with seawater, according to Coast Guard interviews with Mr. Kaluza and Donald Vidrine, the top BP official on the rig. Removing the mud keeps it from polluting the sea but also means there's less weight to hold down any gas.
BP's plans for the well, approved by the MMS on April 16, called for workers to remove the mud before performing two procedures designed to make sure gas couldn't get into the well.
The first called for installing a giant spring to lock the seal at the top of the well in place after removal of the mud. There's no evidence in rig-activity logs the spring was ever installed. If gas was coming up the sides of the well, pushing against the seal, this spring would have helped prevent leakage.
Second, BP opted to remove the mud before placing a final cement plug inside the well.

Animated footage of the "top kill" procedure which BP will perform later this week at the Deepwater Horizon site in an effort to stop the leak.
In documents presented to Congress, BP has hypothesized that gas could have gotten into the inside of the pipe through a failure of the cement at the bottom of the well. BP was planning to set a second, backup cement plug in the well before declaring its work done.
But workers began removing mud before setting this plug, leaving little to prevent any gas inside the pipe from rising to the rig. That plan was approved by the MMS on April 16, according to the permit reviewed by the Journal.
A spokeswoman for the Interior Department, of which the MMS is a part, said it was "looking at everything, from what happened on the rig that night and the equipment that was being used to the safety, testing and backup procedures."
About 9:45, the seawater and remaining mud began to head back up the pipe. Witnesses say they saw mud shooting out of the derrick like water from a firehose. A worker on the rig floor made a frantic call to BP's Mr. Vidrine, who had gone to his office, according to his interview with the Coast Guard.
Transocean workers raced to tame the well. Nothing worked. This was no ordinary gas kick. It was far more ferocious.
Workers rushed to hit the emergency button to activate the blowout preventer's clamps and detach the rig from the well, according to witness accounts. They were too late. Gas flowing out found an ignition source, and an explosion rocked the rig.
Well No. 60-817-44169 was beyond control and on its way to becoming infamous.
—Vanessa O'Connell, Jeffrey Ball, Douglas A. Blackmon, Ana Campoy, Miguel Bustillo and Jennifer Levitz contributed to this article.