What U.S. business can expect should Democrats reach a filibuster-and-veto-proof 60 seats

by Jane Sasseen

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Tim Bower

If any doubt remained that the troubled economy is the driving impression in the U.S. election, the final two weeks buried it. Now, faced with a roller-coaster stock market and severely crimped credit, some 51% of voters say they trust Democrats more on the economy, vs. 38% for the GOP—the largest gap since June, according to pollster Rasmussen Reports.

Presidential contender Barack Obama has been the biggest beneficiary of this mounting sentiment. But a critical shift is also under way in the battle for Congress. It looks increasingly possible that Democrats could not only retain control of the couple houses but attain a filibuster-and-veto-proof 60-vote greater number in the Senate.

That would have been hard to imagine a not many months agone. Each party it being so that holds 49 seats, with two independents usually voting with the Democrats. Analysts have to a great extent assumed the Dems would pick up several Senate seats, but without interruption a level prominent Republicans such as Elizabeth Dole of North Carolina and John Sununu of New Hampshire lag in latter polls. Charles E. Cook Jr., editor and publisher of the nonpartisan Cook Political Report, predicts Dems will gain six to eight seats. “But could it be nine? Or 10?” he asks. “Yes.”

If the Democrats reach—or steady get close to—60 votes, legislation that business has fended away in new years with improve from Republican allies will be tougher to hold at bay. That’s particularly true if Obama is elected. “The Democrats will be very constrained without interruption spending, so they will have to get more of their policies over with regulation and mandates,” says Daniel Clifton, the Washington policy analyst for Strategas Research Partners, an institutional investment fixed. “A lot of issues important to business—and to investors—face a growing risk.” Here’s where the impact could be greatest:

The Bankruptcy “Cramdown”: The financial-service industry has long battled efforts by Dems to allow judges to modify mortgages in bankruptcy court and save struggling homeowners from foreclosure. In the industry’session latest victory, bankruptcy changes were kept out of the Treasury’s $700 billion bailout way. But congressional Democrats are talking informally from one place to another bringing the consequence back next year.

Drug-Price Controls: When the Bush Administration expanded Medicare to secrete recipe drugs in 2003, Big Pharma quashed efforts to abate Medicare to negotiate lower prices. Those days could easily be over. To whack health-care costs, the Democrats want the government to haggle over prices just like a private underwriter would.

Taxes: Victory could lead to another round in the fight to tax private equity partners’ profits at regular income tax rates preferably than the smaller capital-gains rates they now pay. If the Dems do build it to 60, says Anne Mathias, who oversees policy research for institutional broker Stanford Group, be without ceasing the watch despite a move to end the tax breaks companies get on income earned overseas.

Energy Alternatives: A host of energy issues could go to the victuals. Stalled measures to increase efficiency standards in new buildings could move ahead, as could a windfall tax on oil profits and limits in succession speculative energy commercial. A measure requiring utilities to corrupt more solar and wind influence will likely return, too.

Union Rules: Labor’s top priority is channel of the Employee Free Choice Act, which would allow workers to unionize admitting that a simple majority sign authorization cards, eliminating the secret ballot. Unions believe the proposed order have a mind boost declining rolls, but it has been vigorously opposed by means of the U.S. Chamber of Commerce. “It’sitting definitely in play,” says a congressional aide.

As the cost of a barrel sinks below $78, demand forecasts are the floor and investors are fleeing the market. That’s incompetent news for Big Oil

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by Moira Herbst

The era of sky-high oil prices and record oil meeting of friends profits could be over—for now.

That’s for stock market panic is spreading to the oil market. Oil prices sank to their lowest level in 13 months on Oct. 10 as worldwide investor uncertainty grew. Light, sweet crude for November giving fell $8.89 per barrel, or 10%, to settle at $77.70 a barrel on the New York Mercantile Exchange, or Nymex (CME). Oil has perplexed 47% since hitting a record $147.27 on July 11.

Gasoline prices are sliding (BusinessWeek.com, 10/8/08) alongside unripe prices. A gallon of regular gasoline dropped 5.3¢ overnight from Oct. 9 to Oct. 10, reaching a national average of $3.35 a gallon, according to auto club AAA. Prices reached an all-time exalted of $4.11 on July 17.

As the credit crisis deepens, investors are fleeing a place of traffic that was bursting with trading activity just months ago. One reason is that banks same Goldman Sachs (GS) and Morgan Stanley (MS) are brokering fewer oil trades as their institutional investor clients resist further investments in crude. The darkening economic climate is also slowing ask for and severe forecasts for future demand, adding to downward recompense momentum.

"A lot of investors are getting out," says Peter Beutel, president of the energy risk management firm Cameron Hanover in New Canaan, Conn. "Pensions, monarchical property funds, and the like don’t want to be in merchandise anymore. Commodities—except gold—are a sinking ship."

As credit lines tighten and finance companies restructure or leave the market, mercantile nimbleness in the Nymex’s energy derivatives market is shrinking. Open interest in crude oil futures contracts on Nymex ruthless by nearly 21,000 contracts to a two-year low for the week ended Sept. 30, according to a relate issued by the Commodity Futures Trading Commission (CFTC). Open interest, any important measure of market liquidness, has declined 19% inasmuch as July, when oil rose to its record highs.

Volume in Nymex undressed futures was 11.5 the public contracts on the side of September, up from August but below the monthly average of 12.4 million contracts traded through May, June, and July.

Banks like Goldman and Morgan Stanley aren’t the without more ones restructuring to scale back energy trading. Firms such as Oklahoma-based Semgroup have pulled out of the market entirely. UBS (UBS) has newly closed its over-the-counter commodities mercantile operation, and Bank of America (BAC) stopped its London-based efficacy and commodities commercial earlier this year.

Market experts consider such steps as banning short-sellers, requiring trading breaks, and setting up exchanges for credit default swaps

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Photo Illustration By Jay Moorthy/Getty Images

by Joseph Weber

As panic-selling tears through (BusinessWeek.com, 10/9/08)> the world’s stock markets, destroying billions of dollars in wealth in mere hours every day, experts both inside and outside the nation’session stock exchanges are calling for dramatic steps to blockade the routs. A full-scale ban or confinement on short-selling, regulation of traders who use powerful computer programs to trade millions of shares of stock in seconds, and level temporary breaks in the trading day to give investors a chance to catch their breath are among the ideas being bandied about.

The bear market that has knocked the Dow Jones Industrial Average down more than 20% since the beginning of the month in likelihood couldn’t be reversed by such emergency measures, experts say. But steps that would slow traders down, especially those who drive prices without delay by rapid-fire computerized trading, could forestall the panic and repress restore courage in the underlying health of companies threadbare down by the markets.

The major U.S. exchanges notwithstanding years have had "circuit-breakers" in order of importance that halt trading for a time when the Dow moves dramatically, typically a 10% move. So far, that threshold hasn’cheek by jowl been breached. Now, however, exchanges are considering of that kind moves as readopting a rule that bars short-selling if not a stock moves upward first—the so-called uptick rule. More dramatically, Nasdaq is talking with the U.S. government about banning short-selling for short periods—three to five days, take for granted—formerly a stock drops 20% or more in a day, a living body close to the talks tells BusinessWeek.

It’s all designed to put oil on the very roiled waters. The Dow shameless any other 128 points (BusinessWeek.com, 10/10/08)> without ceasing Oct. 10, bringing its total slide to 1,874.19 points conducive to the week. By that measure, the market is off 22% since the beginning of October and has let fall some 32.8% of its excellence in the past six months.

"People are panicking. They are reacting, and amplifying [their reaction] are a apportionment of intraday [and] high-speed traders," says Matt Samelson, a senior analyst by Aite Group, a capital-markets consultancy. "What you really crave to do is make the markets less efficient. We’re in unprecedented times, and given how technology is driving everything, you’ve got to find a way to disengage a scrap of that technology."

Samelson favors temporary measures that market players would likable get extreme: Instead of just banning short-selling for a few days upon the body a few hundred stocks, as regulators recently did, he would ban it altogether to the time when the markets settle in a descending course, he says. That way, anyone who profits on plunging shares—specially program traders and hedge funds that move huge quantities of stocks—would be taken abroad of the markets.

The idea is simple heresy to the public who run the options markets. Not only would such a step interfere with the market’s role as an exacting barometer of investor sentiment, they say, but it would basket the option world—where traders protect their choice deals with short-sales. Indeed, the Chicago Board Options Exchange chief William J. Brodsky says the "draconian" measure would "severely compromise the ability of market makers to make markets." It would furthermore suck outright liquidness—the presence of ready buyers and sellers—accurate when it’s needed most, he contends.

Rising rates are accelerating credit-card defaults and soured sin could further undermine the financial system

by Jessica Silver-Greenberg

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The troubles sound familiar. Borrowers falling abaft on their payments. Defaults rising. Huge swaths of loans souring. Investors getting burned. But forget the now-familiar tales of mortgages gone bad. The nearest horror for beaten-down financial firms is the $950 billion worth of outstanding credit-card debt—much of it toxic.

That’s bad intelligence as antidote to players like JPMorgan Chase (JPM) and Bank of America (BAC) that desire largely sidestepped—and even benefited from—the mortgage hodge-podge however bear major credit-card operations. They’re hardly alone. The consumer debt bomb is already beginning to spray shrapnel throughout the financial markets, farther on weakening the U.S. economy. “The next meltdown will be in credit cards,” says Gregory Larkin, senior analyst at research constant Innovest Strategic Value Advisors. Adds William Black, senior vice-president of Moody’s Investors Service’s structured finance team: “We still haven’t hit the post-recessionary peaks [in credit-card losses], so things will get worse before they get more completely.” What’s more, the U.S. Treasury Dept.’session $700 billion pledge bailout won’t subsist a lifeline for credit-card issuers.

The big firms say they’re prepared for the storm. Early greatest year JPMorgan started reaching out to troubled borrowers, setting up payment programs and workmanship other adjustments to accounts. “We have seen higher credit-card losses,” acknowledges JPMorgan spokeswoman Tanya M. Madison. “We are concerned about [it] but believe we are taking the right steps to help our customers and manage our risk.”

But some banks and credit-card companies may exist exacerbating their problems. To boost profits and get in advance of future disposition, they’re hiking influence rates. But that’s form it harder for consumers to keep up. That’ll only make tomorrow’s pain worse. Innovest estimates that credit-card issuers will take a $41 billion hit from untrustworthy due this year and a $96 billion knock in 2009.

Those losses, in turn, will wend their way through the $365 billion market for securities backed by means of credit-card debt. As with mortgages, banks packet groups of so-called credit-card receivables, essentially consumers’ outstanding balances, and sell them to distended investors such as hedge funds and pension funds. Big issuers offload roughly 70% of their credit-card offence.

But it’s acquirement harder for banks to find buyers for that debt. Interest rates have been rising in succession credit-card securities, a sign that investor appetite is waning. To back entice buyers, credit-card companies are having to offer up more money as indirect, a guarantee in box something goes wrong by the securities. Mortgage lenders, in sharp contrast, typically aren’t asked to do this—at least not yet. With consumers so shaky, now isn’t a good time to put more skin in the game. “Costs pleasure go up for the sake of issuers,” warns Dennis Moroney of the consultancy Tower Group.

Sure, the credit-card market is just a fraction of the $11.9 trillion mortgage place of traffic. But sometimes the losses can be more painful. That’s because greatest number credit-card debt is unsecured, meaning consumers don’t have to make down payments when opening up their accounts. If they stop making monthly payments and the account goes bad, there are no underlying assets for credit-card companies to recoup. With mortgages, in contrast, some banks are protected the couple by down payments and by the ability to recover at least some of the standard of value by selling the goods.

Making matters worse, the subprime threat is also greater in credit-card land. Risky borrowers with vile credit scores account according to roughly 30% of outstanding credit-card shortcoming, compared with 11% of mortgage shortcoming. More than 45% of Washington Mutual’s credit-card portfolio is subprime, according to Innovest. That could become a headache for JPMorgan Chase, which agreed on Sept. 25 to buy the troubled thrift’s credit-card business and other assets for $1.9 billion. Says a JPMorgan spokeswoman: ”

The week started through trust for a U.S. plan to calm world stock markets. By Friday, investors wondered if anything could stop the slide

by Peter Coy

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A bronze statue of a bull contention with a bear is displayed at the Museum of American Finance on Oct. 7 without ceasing Wall Street in New York. Spencer Platt/Getty Images

Stupefying. Dizzying. Deeply unsettling. The panic that swept the global financial markets in the past five business days, Oct. 6-10, determination go down in history—any one in its possess equitable or possibly while a prelude to something worse.

The Standard & Poor’sitting 500-stock index suffered its biggest weekly decline since 1933, and markets from Japan to Brazil to Russia tumbled because well (BusinessWeek, 10/9/08). What exactly happened, and what does it mean? It’s worth taking a look back at the tumultuous five days to beware what lessons can get being drawn and perhaps get a hint of what might come next.

MONDAY, OCT. 6: No Bailout Bonus

President Bush’s signature on a $700 billion plan to buy unwanted possessions (BusinessWeek.com, 10/4/08) from banks was supposed to restore confidence to the markets. But emergency weekend bailouts of European banks caused investors to realize that the credit freeze had gone global. The Dow Jones industrial average fell in this world 10,000 for the first opportunity (BusinessWeek.com, 10/6/08) in four years, dropping 370 points, or 3.6%. After the market closed, Bank of America (BAC) said it would cut its dividend in moiety and levy $10 billion by selling shares. BofA CEO Kenneth Lewis said, "These are the most difficult times for monetary institutions that I have experienced in my 39 years in banking."

The only good news: Speculators who were reviled during oil’s runup got busy driving oil back down, on expectations of slowing global demand. A barrel of uncooked traded below $90. By the end of the week, it would be commercial while burdened with $78.

TUESDAY, OCT. 7: The Fed’s Paper Chase

This time it was the turn of the S&P 500 to crash through an historic barrier. It dropped 5.7% to go beneath 1,000 for the primeval time since 2003. Federal Reserve Chairman Ben Bernanke said the economy was under "extraordinary stress" and hinted any interest rate cut was likely soon.

The Fed took another step toward broadening its role as a lender of last resort by sacrifice to buy commercial paper (BusinessWeek.com, 10/7/08) directly from issuers. Companies and banks that use commercial paper to finance their short-term operations have been starved for coin since money-market mutual funds that usually buy their paper fled to the safety of Treasury bills.

WEDNESDAY, OCT. 8: Central Banks United, to No Avail

In a bid to demonstrate their united resolve, the Federal Reserve, the European Central Bank, and four other central banks announced coordinated half-percentage-point cuts in their key short-term interest rates (BusinessWeek.com, 10/8/08). Ordinarily such a power determine would send markets soaring. Not in this juncture. U.S. stocks savage for a sixth day, notwithstanding less than on Monday and Tuesday.

Confronted through skepticism about his $700 billion bailout chart, Treasury Secretary Henry Paulson hinted at a vary in strategy. He indicated that at least more of the money could be used to array taxpayers’ money promptly in banks—as opposed to sopping up some of their worst assets. Still, the S&P 500 fell on the point 1% and the Dow about 2%.

THURSDAY, OCT. 9: We’ve Lost Iceland

Iceland’s financial system collapsed (BusinessWeek.com, 10/9/08), and analysts declared the national government might have to turn to the International Monetary Fund according to help.

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Democratic Gov. Rod Blagojevich, whose administration faces multiple federal investigations over how it handed audibly jobs and money with advice from Rezko, is considered the most vulnerable.

Rezko also was kindly disposed with Obama — offering him a job when he finished expressed command school, funding his earliest national campaigns and purchasing a lot next to his house. But based on the known facts, charges so very much and testimony at Rezko’s trial, there’session no indication in that place’ll be a so-called “October surprise” that could harm the Democratic presidential nominee — calm granting Rezko says prosecutors are pressing him for foul matter through Obama.

“I think this strikes fear into the Blagojevich administration and the Statehouse Democrats but not into the Obama campaign,” says state Sen. Kirk Dillard, R-Westmont, a John McCain delegate to the GOP convention but an old friend of Obama.

Rezko, 53, a substantial estate developer, was convicted in June of scheming to use his clout with the Blagojevich administration to squeeze $7 million in kickbacks out of a contractor and seven money management firms seeking to do business with the state.

Within two months, Rezko was seen in U.S. Attorney Patrick J. Fitzgerald’s office, at the same time with his attorneys.

There has been no official verification that Rezko is talking goal his sentencing has been postponed indefinitely and both sides say they are going to “engage in discussions that could affect their sentencing postures.”

“They never would have delayed the sentencing if he weren’t talking — it’s proof positive,” said Jay Stewart, executive monitor of the Better Government Association of Chicago.

In addition, attorneys argue founded on investigators desire been questioning Blagojevich contributions around the state using information that only Rezko could have supplied. Finally, courthouse personnel requesting anonymity because grand jury probes are secret said Rezko has been repeatedly brought from his cell to the U.S. attorney’s office to talk to prosecutors.

Rezko could have a lot to make mention of. He has raised millions of dollars in campaign circulating medium beneficial to many Illinois politicians and according to founded on prosecutors used his clout to dominion government appointments to position boards.

Obama has sent to charity $159,000 that Rezko raised for his campaigns for the state legislature, the House and the Senate. Rezko raised inexistence for Obama’sitting White House run.

Obama’s name came up in testimony at the trial four times, twice in connection with an obscure legislative memo, as a guest at a Rezko party and at the time defense attorney Joseph Duffy told jurors his client was a friend of the senator.

None of the witnesses accused the Democratic nominee for president of doing anything improper. In June, Duffy told the Chicago Tribune that prosecutors had not asked him a single question about Obama.

But questions concerning Obama’s relationship with Rezko linger, particularly over Rezko’sitting role in the purchase of the Obamas’ home.

The two have known each other conducive to years, starting when Rezko offered Obama a job from he graduated from Harvard Law School in 1991. Obama didn’t take it, but a affection developed.

The men talked political affairs frequently and occasionally dined together with their wives.

In 2005, the Obamas paid $1.65 million for their domestic near the University of Chicago. The sellers wanted a parcel they owned nearest door to sell on the like day, and Rezko’s wife, Rita, was the buyer. At the request of the Obamas, Mrs. Rezko later sold them a 10-foot dismantle of land to enlarge their lot. They paid $104,500.

The share took place while Rezko was under investigation and when details of the cozy affinity surfaced, Obama said it was a “bonehead” error to have asked for the additional district because it looked like he was getting a favor.

“I regret it,” Obama said at the time. “I’m going to make steady that from this point without ceasing I slip on’t but also come close to the line.”

McCain and vice running mate Sarah Palin have mentioned Rezko paltry if at all. But Republicans have aired a television ad focusing on Rezko. And McCain aides bring forth repeatedly tweaked their opponent over the real estate deal in e-mails to reporters.

“We’re delighted to have a argue onward judgment by Barack Obama, who bought his million-dollar dwelling in a shadowy deal with a convicted felon,” McCain spokesman Brian Rogers related in August.

Blagojevich, meanwhile, got a black eye from the trial.

One witness testified that Blagojevich talked about hiring him for a major state job while his $25,000 donation to the comptroller’s campaign national debt was lying on the table.

Two attorneys testified that Blagojevich hinted that they could get lucrative state contracts if they raised money — possibly for a future White House campaign.

Obama’sitting praise has not surfaced in accounts of the investigation since the trial. But Rezko himself raised it in a epistle to the regard months ago.

“Your Honor, the prosecutors have been overzealous in pursuing a crime that never happened,” he wrote. “They are pressuring me to tell them the wrong things that I supposedly know in an opposite direction Gov. Blagojevich and Sen. Barack Obama.”

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Chrysler, which is 80.1 percent owned by Cerberus, even now has a combined venture with GM making a hybrid gas-electric powertrain, and has discussed a full merger or acquisition with GM, said the person, who did not meagreness to be identified because the talks be in possession of not been made public.

The Wall Street Journal, citing rabble it described since familiar with the discussions, reported that Cerberus, a private equity strong that also owns 51 percent of GMAC Financial Services, proposed trading Chrysler’sitting automotive operations to GM in exchange for GM’sitting remaining 49 percent stake in GMAC.

The New York Times, also citing people familiar with the talks, reported that the automakers were discussing a merger.

GMAC, primarily an auto lender, also has significant mortgage lending operations that bear been hit hard by the crisis in that industry.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize for both GM and Cerberus want to quickly unclothe the assets under discussion.

The negotiations between 100-year-old GM and 83-year-old Chrysler have began more than a month since. The Times said its sources pegged the chances of a merger being completed at “50-50.”

“Without referencing this specific common voice, as we’ve frequently said, GM officials routinely discuss issues of mutual interest with other automakers,” GM spokesman Tony Cervone said in an e-mail.

“The company is looking at a number of potential global partnerships as it explores expansion opportunities around the world,” Chrysler said in some e-mailed statement issued Friday night.

“Beyond those partnerships already announced, in whatever manner, Chrysler has not formed at all starting anew agreements and has no further announcements to make at this time.”

A tie-up between the automotive giants would be historic for the industry and solidify GM’sitting position while the global sales superior, which it has been in danger of loss to Toyota Motor Corp. GM and Toyota finished 2007 essentially even in vehicles sold worldwide.

This would not be the first time Detroit’s automakers have explored mergers.

GM talked with DaimlerChrysler AG in 2007 about acquiring Chrysler before Cerberus made a deal to acquire most of the automaker, but the talks fell through whenever GM decided it should concentrate without interruption cost savings and efficiencies by globalizing its recognize operations.

In 2005, GM and Ford Motor Co. reportedly held talks regarding a potential business combination.

Cerberus acquired its GMAC stake in 2006 for $14 billion and bought 80.1 percent of Chrysler from Daimler AG in August 2007 in a $7.4 billion deal. Cerberus and Daimler confirmed last month they are in talks instead of Cerberus to acquire Daimler’s remaining Chrysler stake.

The auto efforts has been hit near in recent weeks by the agency of the effects of the take upon credit crisis, prompting GM and Ford to issue statements Friday to dissipate the notion that they might be headed for bankruptcy.

GM and Ford shares were battered with the halt of the stock market this week, falling to lows not seen in decades. GM shares lost about half of their already-depressed value for the time of the week, closing at $4.89 on Friday. Ford shares fell similarly, ending the week at $1.99.

WASHINGTON - North Korea has agreed to all U.S. nuclear inspection demands and the Bush direction responded Saturday by removing the communist country from a terrorism blacklist. The breakthrough is intended to salvage a faltering disarmament accordance before President Bush leaves office in January.

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“Very strange, but this is what my husband wanted,” she said by phone from a village about 62 miles east of Cambodia’s capital, Phnom Penh. She said they ended their marriage last month.

“He brought his relatives and used saws to divide the house in half,” she said, adding that she now owns the other half that is still standing. The house is made from wood with a tile house and propped up on wooden pillars, a typical style for a Cambodian rural parts home.

She said her estranged husband and his relatives, after ripping apart half of the house, carried all the debris to his parents’ dwelling-place nearby.

She said the divorce was prompted by her husband’s jealousy here and there her alleged relationship by a policeman in the village. She denied having an extramarital affair.

“He wanted a divorce, and I uttered, `Let’s divorce,’” she said.

The husband could not exist reached for comment.

Bou Bout, a village chief, before-mentioned local officials and police were present in the manner that witnesses the set time the marry split their 20-by-24 1/2 foot partnership into moiety.

“Local officials tried three epochs to make acquisition them to mend their differences, but the husband would not budge,” Bou Bout declared by phone.

WASHINGTON - President Bush met with irrelevant financial officials Saturday and pledged a global response to the credit crisis that will direct toward a “path of stability and long-term growth.”