Climate Change Bill to Heat Up Senate

Word that the House has narrowly passed a (historic! landmark!) climate change bill that would employ a cap-and-trade system to reduce greenhouse gases in the United States to 83 percent below 2005 levels by mid-century, touches down on the front pages of each major paper and finds a top spot on most business news Web sites. The controversial bill now heads to the Senate, "where political divisions and regional differences are even more stark [than in the House]," according to the New York Times. Adds the Wall Street Journal, "The 1,200 page bill—formally known as the 'American Clean Energy and Security Act'—will reach into almost every corner of the U.S. economy. By putting a price on emissions of greenhouse gases such as carbon dioxide, the bill would affect the way electricity is generated, how homes and offices are designed, how foreign trade is conducted and how much Americans pay to drive cars or to heat their homes." The Congressional Budget Office estimates the measure would cost an average of $175 a year per household, Bloomberg says.

Cap-and-trade works by setting "a limit on overall emissions of heat-trapping gases while allowing utilities, manufacturers and other emitters to trade pollution permits, or allowances, among themselves. The cap would grow tighter over the years, pushing up the price of emissions and presumably driving industry to find cleaner ways of making energy," the NYT explains. Proponents of the bill, including Dow Chemical (DOW) and Ford (F), a slew of environmental clubs and the president himself, say the measure would create jobs while helping save the environment. Opponents


—chiefly House Republicans—argue that the bill is no more than a national energy tax that would, in fact, cause the economy to shed more jobs rather than gain them. Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, clearly lays out much of the opposition's view in a column published by Reuters, highlighting issues such as the lack of technology to meet the would-be requirements under the legislation: "Meeting these standards now is technologically impossible without radically reducing our standards of living, but Congress is hoping that technology will magically appear as needed." As well as the effect it would have on businesses: "Not only does the bill penalize American firms through higher costs, it gives firms a financial incentive to move abroad through 'offsets,' activities that supposedly lower carbon emissions elsewhere."

In the last court day before Bernard Madoff, 71, is sentenced in next week, U.S. prosecutors argued that he should get 150 years for conducting Wall Street's largest-ever fraud, or "a term of years that both would assure that Madoff will remain in prison for life," Reuters reports. In response, Madoff's lawyer, Ira Lee Sorkin, argued a sentence of 12 years "would be sufficient." Madoff plead guilty in March to 11 criminal charges. In other Madoff news, the WSJ reports that Ruth Madoff, Bernie's wife, has reached an agreement with federal prosecutors to cede her potential claim to more than $80 million worth of assets, instead keeping "just" $2.5 million in cash. The court has also issued an order for the family to forfeit $170 billion, "which represents the amount of money that prosecutors say flowed into his investment firm." However, the paper explains, "that massive amount is largely symbolic and simply an indication that prosecutors can tap any assets of Madoff's they can find." Over the years the $170 billion was used to pay investors' withdrawals and fund the Madoffs' "lavish lifestyle and that of some associates."

Regulators on Friday closed four small banks, bringing the total of bank closures this year to 44. That amount vastly surpasses last year's 25 failures and 2007's mere three, according to Reuters. But on a more positive note, the WSJ says small banks "are not shying away from TARP funds," casting a sharp contrast to the actions of Wall Street's biggest banks, which have rushed to pay back loans. Since May 31, 20 small banks have received a total of $164.1 million in taxpayer-funded capital, the paper says. With that, the banks are granting loans to local businesses and charities. "Analysts see no end in sight to the trend," according to the Journal. "The recession and borrowers are squeezing most of the 8,200 federally insured commercial banks and savings institutions in the U.S., so even a dollop of TARP funds could make a difference."

It appears, however, that not everyone is short on cash—or the need for advice from one of Wall Street's most sought-after sages. Yesterday, an unidentified bidder agreed to pay $1.68 million as part of a charity auction for a steak lunch with Warren Buffett. The auction marked the tenth year Buffett has participated, and the bid placed second among the most anyone has paid for the privilege. Last year's amount still holds the record at $2.11 million, which was forked over by Hong Kong-based investor Zhao Danyang. The starting price was $25,000. Winning bidders in the past have paid $650,100 (in 2007) and $620,100 (in 2006).The winner and up to seven friends may dine with Buffett at the Smith & Wollensky steakhouse in New York.

U.S. stocks fell last week, "giving the Standard & Poor's 500 Index the first two-week decline since March, after the highest American savings rate in 15 years spurred concern that consumer spending will slow and oil retreated," Bloomberg says. The savings rate surged to 6.9 percent, the highest level since December 1993. The S&P 500 dropped 0.2 percent to 918.88; the Dow Jones Industrial Average fell 34.01 points, or 0.4 percent, to 8,438.39. The dollar lost ground on a call from China's central bank for a worldwide currency, slumping 0.7 percent. In addition to a hike in the savings rate, consumer spending in May rose for the first time since February "as federal stimulus measures boosted incomes, bolstering the view that the economy was close to emerging from recession," Reuters reports. Consumer spending, accounting for more than 70 percent of U.S. economic activity, rose 0.3 percent last month.

And finally, Wacko Jacko (Michael Jackson's erstwhile nickname) has left behind a financial mess, the NYT says in a look at the departed pop star's monetary situation. Although Jackson had made some shrewd business moves over the years—see the rights to the Beatles' catalogue—his accounts have dwindled in recent years "as he burned through millions of dollars to maintain his Neverland ranch, go on art-buying sprees and indulge in whimsies like traveling with a pet chimpanzee named Bubbles." Alvin Malnik, a former adviser to Jackson, the (maybe) executor of the pop star's estate, and the (definite) godfather of Prince Michael II, the youngest of Jackson's three children, tells the Times, "Michael never thought his personal finances were out of control. He never kept track of what he was spending. He would indiscriminately charter jets. He would buy paintings for $1.5 million. You couldn't do that every other week and expect your books to balance." What will become of Jackson's assets remains unknown.

According to the paper, Jackson is estimated to have raked in some $700 million in the '80s and on, though much of that has likely been spent. His debts, on the other hand, could reach up to $500 million. "His single biggest asset is a 50 percent share in Sony/ATV Music Publishing—which owns the rights to more than 200 Beatles songs, along with thousands of others—valued at more than $500 million, but he has about $300 million of debt against it held by Barclays, Jackson's biggest creditor. He also owns his own publishing catalog, called Mijac, which is estimated to be worth $50 million to $100 million, and has an unknown amount of debt attached," the Times writes.