The big bank ramps up a program to modify terms for 400,000 homeowners and kills a highly criticized type of mortgage

By Christopher Palmeri

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In what may the biggest sign yet that banks are getting serious about attacking the nationwide wave of abiding-place foreclosures, giant JPMorgan Chase (JPM) announced on Oct. 31 that it is sharply ramping up its efforts to restructure the loans in its massive mortgage portfolio. For the next 90 days, JPMorgan will not place some new homes into foreclosure.

The banking behemoth, which acquired troubled lender Washington Mutual on Sept. 25, says it hopes to modify terms for the sake of 400,000 homeowners, accounting for $70 billion in loans. Among the steps it is taking: eliminating toxic "pay option" loans, offering strange loan terms to homeowners preceding they neglect, and hiring an additional 300 loan counselors to bring the company’sitting whole to 2,500. "While Chase has helped many families before that time, we feel it is our accountableness to provide additional help to homeowners during these challenging state of things," said Charlie Scharf, head of Chase’session retail financial services, in a prepared statement.

The JPMorgan Chase announcement comes as the U.S. bailout strategy seems to be shifting from the at the beginning approach of having the Treasury Dept. bribe $700 billion worth of troubled pledge assets from lenders, to investing directly in big banks to spur more loans (BusinessWeek, 10/29/08), and at that time toward a coordinated straining to restructure loan conditions for individual borrowers. Federal Deposit Insurance Corp. Chairman Shelia Bair has been pushing to have the federal regulation take a more active roll in loan restructurings (BusinessWeek.com, 10/30/08). The effort could have existence modeled in the pattern of the fast-track mortgage modification program the FDIC put in place posterior taking over failed IndyMac shore in July.

The banking and pledge industries have been criticized for not doing enough to obstruct foreclosures and to modify the terms of troubled loans. According to the most newly come facts compiled by the Hope Now Alliance of lenders, counselers, and other industry players, lenders started the foreclosure process on 565,000 homeowners in this year’s third divide in four equal parts. Some 265,000 homes were actually foreclosed on, nearly twice the equal in number from the third quarter of 2007. Moreover, more than 2.2 million homeowners are more than 60 days delinquent in their mortgage payments, also a near doubling from last year.

The Hope Now Alliance was put together to keep borrowers in their homes. However, while Hope Now says it reached lend modification terms with 593,000 borrowers in this year’s third quarter, only 265,000 really had the terms of their loans changed. The rest merely entered into payment plans, typically in what place the bank agrees to be repaid past-due payments and recent fees from one to another time. Mortgage industry critics say borrowers aren’t really out of danger unless the interest rates or principal is reduced, dark monthly payments.

With IndyMac, the FDIC is reducing interest rates (BusinessWeek, 10/8/08), typically for five years, in an effort to keep borrowers’ payments to no more than 34% of their monthly income.

JPMorgan Chase says it’s reviewing its entire portfolio to induce which homeowners may be in badger. The body says it will eliminate pay-option ARMs, a controversial type of adjustable-rate mortgage that allowed borrowers to defer part of their monthly payments, rolling the wrangle onto the great they owed. Borrowers were often enticed to take such loans by the agency of the reduce payments but now catch themselves consequential unruffled more on their dwellings, even as home values have slid. A recent study by research firm First American CoreLogic found nearly one in five borrowers in the U.S. owes more on a place of abode than it is worth.

New York City-based JPMorgan Chase in addition says it will proactively contact borrowers with prequalified offers to reduce their sympathy rates or lend principals and fix 24 new regional counseling centers to provide face-to-face help in markets with high delinquency rates. Many borrowers in trouble say it is herculean to reach lenders when they want to renegotiate loans. Many often feel they have to stop making payments to get a bank’s politeness.

On Oct. 6, Bank of America (BAC) announced a settlement with attorneys general officer in 11 states that involved an aggressive loan form program involving 400,000 borrowers and $8.4 billion in interest value reductions. Bank of America’s Countrywide division had been accused by state officials of putting borrowers into loans they couldn’t afford during the boom just so it could resell those loans to Wall Street at a fat profit. Bank of America acquired Countrywide in July.

The retailer was reeling from overexpansion and tough rivalship. Now it’s stressing bargains and pulling in crowds

By Christopher Palmeri

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These are heady times for Wal-Mart (WMT). The Bentonville (Ark.) retailer has been enjoying double-digit profit development and strong sales as transaction hunters crowd its aisles. Its stock is up about 20% since the start of the year. And shoppers like Sal Garcia of Downey, Calif., are joining the expanding ranks of loyal customers. “Look,” says Garcia, 52, putting the ultimate of 10 shopping bags into the coffer of his Lexus, “entirely that for $54!”

Wal-Mart’s turn in fortunes has as much to effect with a shift in strategy viewed like with the economic downturn. After years of stuffing a wider array of products into stores to broaden its appeal, the $375 billion mass trader is simplifying its look and drilling down prices of its most plain products. “You’d swear the alone reason they’re having any prosperous issue is the economy and customers trading down,” says analyst Daniel T. Binder of Jefferies & Co. “But the company has done a lot to help the consumer make that decision.”

A little over a year ago, the world’s largest retailer was suffering from a midlife crisis made worse by means of overdevelopment and a gorgeous push to take on Target (TGT) with “cheap chic” offerings. Core customers were confused by an ever-changing mix of products, while higher-end shoppers dismissed Wal-Mart like the epitome of uncool.

Now, the main make a thrust of Wal-Mart’s strategy is what Chief Merchandising Officer John Fleming calls “win, play, or show.” “Win” categories are those where Wal-Mart can outmaneuver rivals through softly prices on hot products such as flat-screen TVs, including higher-end models. Wal-Mart has doubled its share of the industry’s sales to 16% this year, according to market research firm TraQline, while increasing its average vent from $489 two years ago to $660. “Play” applies to areas like apparel where Wal-Mart can be a player but is unlikely to dominate. Here, it’session reducing the range of offerings to high-seasoned sellers like $20 L.e.i. jeans and cutting back in succession higher-end items. “Show” are the one-stop-shopping essentials such being of the class who hardware, which are necessary to compete with the likes of Lowe’s (LOW) and Home Depot (HD). “It’sitting important we have hammers and tape measures,” says Fleming, “on the contrary not 28 tape measures.”

But the big focus for Wal-Mart every holiday season is toys. Rivals have long dreaded the annual slashing of prices in its bubble aisle before Christmas. This year, instead of cutting prices by means of its usual 30%-plus transversely the board, Wal-Mart is afflicting to drive trade by emphasizing a deeply discounted $10 recompense on a handful of toys—including Barbie and Hot Wheels.

At the same time, Wal-Mart has tried to upgrade the feel of its stores. Crammed blue and hoary supplies are giving way to more disclose sales floors with warmer earth tones of mustard, tan, and green. Apparel departments boast wood flooring, while skylights brighten stores more naturally and save energy. It’s curbing expansion in every striving to stop just discovered locations from cannibalizing sales at advanced in years ones. From opening 218 new U.S. supplies in fiscal 2008, Wal-Mart may open just 142 nearest year with an emphasis on smaller, more intimate locations.

To consumers equal Mary Washington of Los Angeles, yet, size matters less than price. Washington, 67, heads to Wal-Mart every Monday for the food and $4 generic prescriptions. “Even if it’sitting just pennies,” she says, “it all adds up.”

For more on Wal-Mart’session recession strategy, watch a video report at businessweek.com/go/tv/walmart

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WASHINGTON — There are no comfortable ways for the presidential candidates to close the nation’sitting gap between rich and poor, now bigger than any span because the 1920s.

Sens. Barack Obama and John McCain say their economic plans have power to narrow the income cleft. Obama’s tax plan offers a classic way to do that by increasing taxes on the highly valued, but economists think neither plan is likely to bring dramatic changes.

“Taxes are not going to solve the income-gap problem,” said Roberton Williams, foremost research associate at the nonpartisan Tax Policy Center. “Nobody’s going to stand for the kind of confiscatory taxes you would distress.”

He and others said there are many other factors affecting income, including the tumultuary financial markets, technological change, global competition, the erosion of drudge unions and corporate pensions, considered in the state of well as founded on tax and regulatory policies. Changing those policies to reduce income difference could entangle politically difficult measures, such as higher taxes or higher minimum wages and subsidies, none of which the candidates are considering.

Obama and McCain offer the kind of income strategies their political parties be seized of been championing for years.

Obama, the Democrat, sees a role for rule in helping people gain opportunities instead of education, training and work, while the wealthy who benefit most from society have an obligation to contribute more to the collective good.

McCain, the Republican, espouses a version of what some call the “trickle-down” rationale that allows the rich to keep to a greater degree of their income, on the theory that they will invest and spend, thereby creating jobs and wealth.

Republican loyalists said this concept worked well for the period of Ronald Reagan’s presidency, as the three-year tax divide that began in October 1981 helped shake the nation out of its worst recession since the Great Depression and triggered eight years of prosperity.

Democrats said over many lower-income earners never enjoyed the benefits of that boom, sustained, in apportionment, by collapsing oil prices and record federal pack deficits.

Obama wants to return the brace top income-tax rates to pre-2001 levels in 2011, the same rates as during the Clinton series, which had the longest sustained housekeeping expansion in U.S. history.

That would mean a top income-tax rate of 39.6 percent, far less than the 70 percent apex rate that existed till 1981 or the 50 percent top rate of 1982-86, not to mention the apex rates of more than 90 percent that prevailed from the end of World War II until 1963.

The nation’session topmost 1 percent of earners had a 22.9 percent share of quite pretax income in 2006, according to a March study by Emmanuel Saez, an economist at the University of California, Berkeley. The rise aloft 1 percent earned more than $382,600 in 2006.

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WASHINGTON — The government should ban the diabetes drug Avandia because of a broad variety of life-threatening risks, including heart and liver damage, a consumer group said Thursday.

The consumer group, Public Citizen, filed a petition with the Food and Drug Administration to be in possession of Avandia taken off the market.

It was the second setback in as many weeks for the GlaxoSmithKline medication, which had shown promise in reducing the blood-sugar levels of people through type 2 diabetes. Last week, the American Diabetes Association and a European reverse jointly released updated treatment guidelines for doctors that recommended against using Avandia.

“The FDA is in possession of clear, unequivocal evidence that [Avandia] causes a wide difference of toxicities,” Public Citizen before-mentioned in its prefer a request to.

The FDA said it will “carefully review” the petition.

Avandia’session heart risks were brought to insight two years ago in a medical-journal article that reported a 43 percent higher risk of mind attacks among Avandia patients when compared with those taking other diabetes drugs.

About 1 million U.S. patients consider Avandia.

Glaxo officials said they do not believe Avandia causes liver failure, the data on purpose attacks are inconclusive and the remedy is safe and adequate when used according to directions.

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MANILA, Philippines — Trick or treat? But no melamine, please.

As the busiest night for kids descended on some Asian households Friday, many parents were spooked through a real threat lurking inside candy, especially those made in China — the pertaining chemical melamine.

“Of bearing, it’s always better to look and be concerned and make sure that nothing slips by,” said Felix Barrientos, who took his masqueraded child to the front lawns of Manila’s posh Magallanes gated community, where residents set up stalls with candy bowls.

“We more or less know which ones are on the banned limit. It has been widely disseminated,” he uttered.

Similar stories were heard in other parts of Asia, where Halloween parties are chiefly reserved instead of American expatriates and other foreigners end have of late caught on with wealthier Asians.

In Bangkok, Thailand, Chompoonuch Kitsomsub, a mother of four, said she is not buying any candy from China. She took her kids trick-or-treating in one expatriate district where they “serve safe candy.”

Her daughter, 5-year-old Yayee Kitsomsub, dressed as Batgirl, said, “We know we need to be careful on this account that bad people oddity bad things in the candy.”

Milk pulverize contaminated with melamine has been blamed with a view to the deaths of four infants and for nauseous about 54,000 others in continent China.

Melamine is used in the manufacturing of plastics, fertilizer, paint and adhesives, and has been added to dairy products to make them appear more nutrimental. Health experts affirmation ingesting a small amount poses no danger, but in larger doses, the chemical can cause kidney stones and lead to kidney failure.

Magallanes and numerous other wealthy communities in Manila have adopted U.S.-style Halloween traditions, but giving away candy and force-meat in spooky costumes is still a novelty for the rest of the Philippines, where half of the population wallows in poverty.

Outside the high walls, smooth roads and freshly cut grass, in that place are not a single one carved pumpkins and corn stalks and most people are preparing for Saturday’s All Saints Day, one of the most important days in the Roman Catholic calendar then Philippine families head to cemeteries to pay respects to the dead.

But instead of those with money to spread around, the fear of melamine is this Halloween’s biggest fright.

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ATLANTA — The population’session obesity epidemic is exacting a heavy toll: The rate of new diabetes cases nearly doubled in the United States in the past 10 years, the government said Thursday.

The highest rates were in the South, according to the first state-by-state review of new diagnoses. The quell was in West Virginia, where about 13 in 1,000 adults were diagnosed through the disease in 2005-07. The lowest was in Minnesota, at what place the rate was 5 in 1,000.

Nationally, the rate of new cases climbed from touching 5 per 1,000 in the mid-1990s to 9 by means of 1,000 in the intermediate of this decade.

Roughly 90 percent of cases are Type 2 diabetes, the form linked to obesity.

The findings dovetail with trends seen in obesity and want of exercise — two health measures where Southern states also rank at the bottom.

“It isn’t surprising the problem is heaviest in the South — no pun intended,” agreed Matt Petersen, who oversees data and statistics in the place of the American Diabetes Association.

The meditate, led by Karen Kirtland of the Centers for Disease Control and Prevention, provides an up-to-date picture of whither the disease is exploding. The information should be a big help as the government and freedom from disease security against loss companies decide where to point of convergence prevention campaigns, Petersen said.

Diabetes was the race’session seventh-leading cause of death in 2006, according to the CDC. More than 23 million Americans have diabetes, and the reach the number of is rapidly growing. About 1.6 million new cases were diagnosed among adults extreme year.

Type 2 diabetics do not produce or practice insulin, a hormone needed to convert compliment into energy. The illness can cause sugar to build up in the carcass, leading to complications such as heart disease, blindness, kidney failure and poor circulation that leads to foot amputations.

The study involved a random-digit-dialed survey of more than 260,000 adults. Participants were asked if they had ever been told by a savant that they consider diabetes, and then the diagnosis was made. The comparisons between 1995-97 and 2005-07 covered only the 33 states for which the CDC had complete data for the one and the other time periods.

The researchers had data for 40 states for the years 2005-07.

West Virginia, South Carolina, Alabama, Georgia, Texas and Tennessee had the highest rates, all at 11 cases per 1,000 or higher. Puerto Rico was about as high as West Virginia. Minnesota, Hawaii and Wyoming had the lowest rates.

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WASHINGTON —

Looking for Election Night drama?

Don’t stop at the historic presidential contest at the reach the summit of of the ticket. A dozen Senate races could reshape politics on Capitol Hill.

“Democrats be delivered of a realistic shot at acquisition a supermajority of 60 seats,” Republican pollster Neil Newhouse said. “Races we never certainly dreamed would become competitive are now within the margin of misapprehension.”

Even “red state” strongholds such as Georgia and Kentucky are in play.

Blame it on President Bush. The president has been deep unpopular on account of the past two years, and the public is downbeat about where the country is headed. The pecuniary crisis was the equivalent of a roundhouse right, and opposition to the Iraq war remains conclusive.

Republicans have known in the place of months that they were going to yield Senate seats. Some have said dropping only five or six Tuesday would be a “humane night.”

The sight in the House isn’t much victory. Congress watchers predict Democrats could add two twelve to three dozen seats to their 36-seat full age.

Republican presidential nominee John McCain’sitting struggles in a number of reliably GOP regions are further complicating the tenuous prospects of some congressional Republicans, according to strategists in both parties and analysts.

Particularly difficult for Republican prospects is that McCain appears to be trailing badly in several moderate suburban districts in the Midwest and New England, while he is doing worse than Bush did in rural conservative districts.

“McCain is just running so poorly now. He’s collapsed in more districts. It’s brutal out there for Republicans,” said Stuart Rothenberg, editor of the competent Rothenberg Political Report.

Rothenberg’s predictions: Democrats will pick up 27 to 33 House seats and six to nine Senate seats.

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RALEIGH, N.C. — Sen. Elizabeth Dole, who speaks often about communion with god and trust, is gambling her re-election bid by raising religion in the campaign’s final days.

In a television ad this week, the North Carolina Republican questioned the Christian credentials of Democratic challenger Kay Hagan. The state senator responded angrily, filing a lawsuit Thursday and airing an ad that says Dole is breaking the Bible’s Ninth Commandment by bearing false witness.

The two candidates are locked in one of the state’sitting closest Senate races. Recent polls indicate that Hagan has a slight edge. The pair has spent months swapping negative ads, but even more Republicans think Dole’s assertions surrounding Hagan and her faith have gone too in great part.

“It’session pretty risky,” said Republican public consultant Carter Wrenn, who worked in favor of the late Jesse Helms, the senator Dole replaced six years ago. “Anytime you start questioning somebody’s religion, you’re acquirement on thin freeze.”

Dole’s 30-second ad shows clips of some members of an atheist advocacy assemblage — the Godless Americans Political Action Committee — talking about their goals, such taken in the character of taking “under God” out of the Pledge of Allegiance and removing “In God We Trust” from U.S. currency. It questions why Hagan went to a fundraiser at the home of a man who serves as an monitor to the group.

“Godless Americans and Kay Hagan. She hid from cameras. Took Godless money. What did Hagan promise in go?” the narrator says.

The ad ends with a picture of Hagan during the time that another woman declares in the background, “There is no God!”

Hagan is a Presbyterian church elder who teaches Sunday school. On Wednesday, her attorneys demanded the ad arrive down within 24 hours. On Thursday, Hagan’session attorneys filed a action accusing Dole of defamation and libel.

The court documents do not set forth Hagan’s replete case against Dole but allows Hagan 20 days to file the full complaint.

Dole’s campaign says the ad does not judicial Hagan’session faith, only her agenda and associations, and attorneys for Dole said in a letter to Hagan’s legal team that the ad was factual.

Dan McLagan, a Dole spokesman, said the campaign had no plans to pull the ad and dismissed the lawsuit for the reason that a “frivolous political gimmick.”

The editorial board of The Charlotte Observer, the state’s largest newspaper, compared Dole’sitting ad to an infamous blot run in 1990 by Helms against challenger Harvey Gantt, who is heinous. That ad showed a pair of white hands crumpling a rejection letter, while a narrator slammed “racial quotas.”

Republican consultant Wrenn, who helped write the so-called “hands” ad, before-mentioned both ads probably were steer together under similar position.

“When you get down into the 11th hour of a campaign, the pressure gets up pretty high, and your sleep deprivation middleman gets up pretty high,” Wrenn before-mentioned. “Sometimes you just lose your judgment a little bit.”

Quarterly results for Alcatel-Lucent were even worse than expected, but CEO Verwaayen says there are "great opportunities in front of us"

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Ben J. Verwaayen, formerly CEO of BT, now CEO of Alcatel-Lucent Getty Images

By Carol Matlack and Jennifer L. Schenker

No one said Ben Verwaayen’s work at jobs would be easy. But the difficulties facing the new chief executive of Alcatel-Lucent (ALU) were underscored on Oct. 30 when the French-American telecommunications-equipment maker reported quarterly results below analysts’ already shabby expectations. Operating profits fell 43% year-on-year, to $51 million, as revenues from its core business, sales to fixed-line and mobile-phone carriers, slumped 13%, to $3.5 billion.

In an interview through BusinessWeek, Verwaayen promised to deliver a plan by seasonable December to streamline the assemblage’s operations and product portfolio, while sharpening its focus put on lucrative recently made known businesses such as services. He also hinted at a shakeup in top management, which has changed in a small degree since Verwaayen, the author boss of British telco BT Group (BT.L), took over from former CEO Patricia Russo six weeks ago (BusinessWeek.com, 9/2/08). "We have truckloads of things to do only great opportunities in front of us," he says.

Despite the kind of Verwaayen agrees are "unsatisfactory" profits, the Dutch-born CEO conspicuous that Alcatel-Lucent is generating positive cash flow from operations, some $134 million during the quarter. And he said the company is sticking with its earlier government for 2008, which calls in the place of operating margins in the low to mid-single digits and revenues downright to slightly down vs. 2007. Investors appear to be reassured: Alcatel-Lucent shares soared 22% in early trading on Oct. 30, though they’re still down some 80% since the company was created through a transatlantic merger sum of two units years gone.

Alcatel-Lucent’s results also continued to loiter those of its closest rivals. Sweden’s Ericsson (ERIC) throb analyst estimates when it reported third-quarter revenues on Oct. 20 of $6.36 billion, up 13%, though its net gains hew down 28%, to $384 million. Nokia Siemens Networks, a joint venture of Nokia (NOK) and Siemens (SI), reported third-quarter revenues down 5%, to $4.38 billion, on Oct. 16, with a small operating loss of $1.26 million.

Verwaayen, who won plaudits for his stewardship of BT, is already signaling he’ll be a contracting cost-cutter. He’s selling off Alcatel-Lucent’s fleet of corporate jets. And rather than hiring consultants to diagnose the house’s woes, he has invited customers and employees to e-mail him with criticisms and suggestions. "Engaging in direct dialogue is a more useful way than bringing a consultancy in. You hear it from the horse’s mouth," he says.

Verwaayen says he sees opportunities for "weighty require to be paid savings" by eliminating duplication in operations and in the merged company’session product portfolio. But he downplays the potentiality of major job cuts, beyond the 16,500 positions—closely 20% of its workforce—already set for elimination under an earlier restructuring contrivance. "Everybody immediately jumps to job cuts," he says. "I think it is the wrong focus to institute from."

Third-quarter earnings jumped 58%, if it be not that production was off. With oil prices plunging, investors think the decline in output may be a bad sign

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By Steve LeVine

ExxonMobil’s (XOM) third-quarter proceeds demonstrate the associated universe occupied by Big Oil as a whole today—the company reported memorial profits but its lowest fruit volume in almost a decade. The Irving (Tex.)-based incorporated body says it earned $14.8 billion in the third quarter, an increase of 58% from the same period ultimate year. Exxon is on track for a third straight year of record earnings—in one while well as the other 2006 and 2007, the company earned more $40 billion. In each year, that was the most through all ages concerning any company on the planet.

Despite the breathtaking profit, however, the report weighed on Exxon’s share cost forward Oct. 30. Exxon closed up 0.5%, at 75.05, after falling as low as 71.44 during the trading session. One of the main reasons was its reported extension volume. The collection produced just 3.6 million barrels of oil through day, an 8% drop from the same period last year. It’s the lowest lengthening since Exxon bought Mobil in 1999. Since hereafter, Exxon’s production has chiefly fluctuated between 3.8 million and about 4.2 million barrels a day.

Some of the third-quarter drop was predicable to seasonal hurricanes, maintenance outages at Exxon facilities, and production-sharing contracts that reduce volume it receives when oil prices rise, but that accounted as being just three percentage points of the 8% decline. The other 5% was independent of special factors. In antecedent quarters, the company has noted that it has considerable production increases arrival online in the next couple years. But the decrease seemed to worry Wall Street, nonetheless.

In somewhat unusual statement in the earnings report, Exxon Chairman Rex Tillerson sought to calm any worries about the company’s strength amid the global financial meltdown and reassure investors that the firm’s capital spending plans remain intact. Some smaller energy companies have trimmed capital expenditure as oil prices have plummeted from a loftily of about $147 a barrel for the time of the summer to less than $70 a barrel now.

"Despite the continuing irregularity in world financial markets, ExxonMobil has maintained a strong financial affirmation," Tillerson said. "We plan to continue our disciplined capital investments with our full-year capital and examination expenditures projected to be about $25 billion, consistent with previous guidance."

Revenue for the quarter was $13.7 billion, 34% higher than the same era last year. The company earned $2.59 a share excluding special items, or 20¢ higher than the $2.39 expected by analysts.