WASHINGTON – The Obama administration will use bailout money repaid by large banks to provide additional capital infusions to smaller banks, Treasury Secretary Timothy Geithner said Wednesday.

Banks with less than $500 million in assets will have six months to apply for the funds, Geithner said in remarks to the annual meeting of the Independent Community Bankers of America. They also will be able to apply for larger amounts than banks were allowed to request during the current round of investments.

The administration first indicated that the repaid funds would be used for further injections earlier this month when regulators announced the results of the “stress tests” conducted on the nation’s 19 largest banks. Those tests found that 10 of the banks, including Bank of America Corp. and Citigroup Inc., needed to raise additional capital to survive a worsening recession.

Geithner also said the administration will propose an overhaul of the financial regulatory system in the “next couple” of weeks. The reforms will simplify and streamline the existing oversight structure, which he said is “too complex.”

Due largely to the government’s efforts, “the financial system is starting to heal” and “a substantial part of the adjustment process is now behind us,” he said.

Still, the administration wants to move on an overhaul of the nation’s financial rule book “while memory of the crisis is still acute,” Geithner said.

WASHINGTON – Retail sales fell for a second straight month in April, a disappointing performance that raised doubts about whether consumers were regaining their desire to shop. A rebound in consumer demand is a necessary ingredient for ending the recession.

The Commerce Department said Wednesday that retail sales fell 0.4 percent last month. Many economists had expected a flat reading, and the April weakness followed a 1.3 percent drop in March that was worse than first estimated.

Retail sales had posted gains in January and February after falling for six straight months, raising hopes that the all-important consumer sector of the economy might be stabilizing. But the setbacks in March and April could darken some forecasts because consumer spending accounts for about 70 percent of economic activity.

The hope had been that consumers were starting to feel better about spending, helped by the start of tax breaks included in the $787 billion stimulus bill. Households had spent the fall hunkered down in the face of thousands of job layoffs and the worst financial crisis since the 1930s.

The latest retail data “are yet another illustration that, although the worst is now over, there is still no evidence of an actual recovery,” Paul Dales, U.S. economist with Capital Economics in Toronto, wrote in a research note.

While anecdotal evidence suggests some improvement in sales in recent weeks, “to offset the plunge in wealth, the household saving rate still needs to double from the current rate of 4 percent,” Dales wrote. “With falling employment hitting incomes, this can only be achieved by a further retrenchment in spending.”

The jobless rate rose to 8.9 percent in April when a net total of 539,000 jobs were lost and 13.7 million people were unemployed, the Labor Department said last week.

Wall Street tumbled after the weaker-than-expected retail sales report. The Dow Jones industrial average lost about 130 points in morning trading, and broader indices also fell.

In a separate report, the Commerce Department said business inventories fell 1 percent in March, a decline that matched economists’ expectations. It marked the seventh straight decrease, the longest stretch since businesses cut inventories for 15 straight months in 2001 and 2002, a period that covered the last recession.

Businesses are continuing to cut their stockpiles in the face of declining sales, a development that has intensified the current economic downturn. Still, the reductions in stockpiles held on shelves and in backlots eventually should help businesses get their inventories more in line with reduced sales. If that is the case, any strengthening in consumer demand should lead to increased production.

The April retail sales dip came despite a 0.2 percent increase in auto sales, which fell 2 percent in March. Excluding autos, the drop in retail sales would have been 0.5 percent, much worse than the 0.2 percent gain economists expected.

Sales outside of autos showed widespread weakness last month. Demand at department stores and general merchandise stores fell 0.1 percent and sales at specialty clothing stores dropped 0.5 percent.

Department store operator Macy’s Inc. on Wednesday reported a wider loss for the first quarter due partly to restructuring charges. Still, the company expects to see an improvement in sales from its localization efforts beginning in the fourth quarter of 2009, and in the spring of 2010.

Liz Claiborne Inc. reported a first-quarter loss that was worse than Wall Street expected. The apparel maker said its quarterly loss swelled on restructuring charges and a drop in same-store sales stemming from lower consumer spending and an extra week of sales in the year-ago period.

Sales also fell in April at furniture stores, electronic and appliance stores, food and beverage stores and gasoline stations, according to the Commerce Department.

The performance at department stores and specialty clothing stores came as a surprise since the nation’s big chain stores had reported better-than-expected results for April. Same-store sales, rose 0.7 percent last month compared with April 2008. It was the first overall increase in six months, according to the tally by Goldman Sachs and the International Council of Shopping Centers.

For April, some mall-based clothing stores saw their declines level off and Wal-Mart Stores Inc., the world’s largest retailer, had reported its same-store sales rose 5 percent, excluding fuel, which beat expectations. Same-store sales, or sales in stores open at least one year, is considered a key metric of a retailer’s financial health.

The chain store sales report last week showed that Gap, American Eagle and Wet Seal posted smaller sales declines at their established locations than analysts had forecast.

The Children’s Place, T.J. Maxx owner TJX Cos. Inc. and teen retailer The Buckle saw bigger gains than expected. But luxury stores again were hard hit as their higher-end wares find fewer takers.

Consumer spending grew 2.2 percent in the first quarter of the year, after posting back-to-back quarterly declines in the last half of 2008.

Economists believe the overall economy, as measured by the gross domestic product, will show a decline of around 2 percent in the current quarter. That would represent an improvement from the steep declines of 6.3 percent in the fourth quarter of last year and 6.1 percent in the first three months of this year, the worst six-month performance in a half-century.

NEW YORK – Wall Street fell sharply in early trading Wednesday after the government reported weaker-than-expected retail sales in April.

The market has put a two-month rally on hold amid concern that an economic recovery won’t come as fast as once hoped. The disappointing retail sales report added to investors’ uneasiness.

The Commerce Department said retail sales fell 0.4 percent. Economists had forecast sales would be flat for the month. March sales figures were revised lower as well, to a decline of 1.3 percent from a previous estimate of 1.1 percent.

Consumer spending accounts for about two-thirds of economic activity. Without improved spending, the economy is more likely to remain mired in a recession.

In morning trading, the Dow Jones industrial average fell 141.29, or 1.67 percent, to 8,327.82. The broader Standard & Poor’s 500 index fell 15.14, or 1.67 percent, to 893.21, while the Nasdaq composite index declined 24.92, or 1.45 percent, to 1,691.00.

The market is “unwilling to absorb anymore good news, so it’s absorbing some bad news,” Joe Clark, managing director of Financial Enhancement Group in Anderson, Ind., said of the retail sales data and the market’s pullback in recent days. “The consumer is not broke, just unwilling to spend in some areas.”

However, Clark did note the market is unlikely to test the lows seen in early March before the rally began.

Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 248.9 million shares.

Department store chain Macy’s Inc. said its first-quarter loss widened to $88 million, or 21 cents per share, during the first quarter. But excluding restructuring charges, losses totaled 16 cents per share, better than analysts’ expectations for a loss of 20 cents per share. Analysts don’t typically include charges in estimates.

Macy’s affirmed its 2009 outlook excluding restructuring costs, which is shy of analysts’ expectations. However, the company said it will beat its own outlook if the economy improves in the second half of the year.

Shares of Macy’s fell 53 cents, or 4.3 percent, to $11.82.

Improvement in the housing sector is also seen as a key to an economic recovery, but investors got another dose of disappointing news Wednesday, when a new report showed the number of U.S. households facing foreclosure jumped 32 percent in April. More than 342,000 households received at least one foreclosure notice during the month, according to RealtyTrac Inc.

Investors had been shaking off weak economic reports over the past two months, pushing stocks sharply higher. But that trend hasn’t continued this week. On Tuesday, the Dow gained about 50 points, but broader indexes slid for the second straight day. The Dow fell Monday.

Meanwhile, bond prices were mixed early Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.12 percent from 3.18 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18 percent from 0.17 percent late Tuesday.

The dollar mostly rose against other major currencies, while gold prices also rose.

The Russell 2000 index of smaller companies fell 11.54, or 2.33 percent, to 483.64.

Overseas, Japan’s Nikkei stock average rose 0.5 percent. In afternoon trading, Britain’s FTSE 100 declined 1.5 percent, Germany’s DAX index declined 2.2 percent, and France’s CAC-40 fell 2 percent.

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BRUSSELS – The European Union fined Intel Corp. a record euro1.06 billion ($1.45 billion) on Wednesday, saying the world’s biggest chip maker used illegal sales tactics to shut out smaller rival AMD.

The fine exceeded a euro899 million monopoly abuse penalty for Microsoft Corp. last year. Intel called the decision “wrong” and said it would appeal.

Intel, based in Santa Clara, California, has about 80 percent of the world’s personal computer microprocessor market — and faces just one real rival, Advanced Micro Devices Inc.

The European Commission says Intel broke EU competition law by exploiting its dominant position with a deliberate strategy to keep AMD out of the market that limited customer choice.

It said Intel gave rebates to computer manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units, or CPUs, from Intel and paid them to stop or delay the launch of computers based on chips from AMD, which is headquartered in Sunnyvale, California.

Intel president and CEO Paul Otellini said the company would appeal to the EU courts because “the decision is wrong” and “there has been absolutely zero harm to consumers.” The company promised to comply with the EU order but criticized it as extremely ambiguous.

AMD’s Europe president Giuliano Meroni said the EU order “will shift the power from an abusive monopolist to computer makers, retailers and above all PC consumers.”

Regulators said the company also paid Germany’s biggest electronics retailer, Media Saturn Holding — which owns the MediaMarkt superstores — from 2002 to 2007 to only stock Intel-based computers.

This meant workers at AMD’s biggest European plant in Dresden, Germany, could not buy AMD-based personal computers at their city’s main PC store.

“Intel has harmed millions of European consumers by deliberately acting to keep competitors out of the market for computer chips for many years,” said EU Competition Commissioner Neelie Kroes. “Such a serious and sustained violation of the EU’s antitrust rules cannot be tolerated.”

Kroes joked that Intel would now have to change its latest global ad campaign — “sponsors of tomorrow” — to proclaiming “the sponsor of the European taxpayer.”

“I can give my vision of tomorrow for Intel here and now: Abide by the law,” she added.

EU regulators said they calculated Intel’s fine on the value of its European chip sales over the five years and three months that it broke the law. Europeans buy some 30 percent of the euro22 billion ($30 billion) in computer chips sold every year.

They could have gone even higher as EU antitrust rules allow them to levy a fine of up to 10 percent of a company’s annual global turnover for each year of bad behavior. Intel’s worldwide turnover was euro27.9 billion ($38.8 billion) in 2007.

European consumers group BEUC welcomed the fine and said Intel should be held to account to consumers through civil suits in European courts. So far these are rare but the EU is urging victims of antitrust action to seek damages.

“Intel should be liable to compensate the victims of its illegal practices,” said Monique Goyens, head of the group. “Consumers have been paying too much for their computers and they should be compensated.”

The manufacturer rebates started in 2002, the EU said, with most ending in 2005 — apart from a 2007 deal for one unidentified company to only source notebook computer chips from Intel.

Regulators said rebates that give discounts for large orders are illegal when a monopoly company makes them conditional on buying less of a rival’s products or not buying them at all.

Manufacturers depend on Intel to supply most of the chips they need and faced higher costs if they lost most or all of a rebate by choosing AMD chips for even a small order.

Hewlett-Packard buys a fifth of Intel chips with Dell taking 18 percent, according to market research from Hoovers.

The discounts were so steep that only a rival that sold chips for less than they cost to make would have any chance of grabbing customers, the EU executive said.

It said AMD offered 1 million free chips to one manufacturer — which could not accept because that would lose it a rebate on many millions of other chips. It only took 160,000 free chips in the end, regulators said.

Intel’s payments to manufacturers ordered the company to delay the European launch of AMD’s first business desktop by six months. They were also paid to only sell the AMD line to small and medium companies and to only offer them directly to customers instead of to retailers.

Other manufacturers were paid to postpone the launch of AMD-based notebooks by several months, from September 2003 to January 2004 and from September 2006 to the end of 2006 — missing the key Christmas market.

The European Commission said Intel tried to conceal the conditions attached to these payments and details only emerged from e-mails that regulators seized in surprise raids on the companies.

Regulators refused to rule out returning to other parts of their probe where they had investigated Intel’s behavior in the server market and allegations of below-cost pricing designed to hurt AMD. Intel strongly denies these charges.

The EU charges also cover a time when AMD managed to take market share from Intel by launching higher performance microprocessors for servers in 2003, previously an Intel stronghold.

Intel fought back successfully by rolling out Core chips. More recently, it has grabbed more market share with Atom chips for netbooks.

EU regulators are not the only ones chasing Intel — South Korea fined the company $21 million last year.

And the U.S. may be stepping up action. The Federal Trade Commission upgraded a probe into Intel last year — and as the Obama administration is set to take a more aggressive approach against monopoly abuse by reversing a strict interpretation of antitrust law that saw regulators shun such cases.

NEW YORK – Investors were hard-pressed Tuesday to find a reason to extend Wall Street’s two-month rally.

Stocks mostly fell after sliding on Monday. Investors shifted into defensive corners of the market, driving up shares of drugmakers like Pfizer Inc. and food makers such as Archer Daniels Midland Co., which tend to hold up better in economic downturns.

The sideways moves come as some traders worry that the economic recovery won’t be as brisk as hoped when stocks were carving big gains over the past eight weeks. The Dow Jones industrials fell about 40 points.

With little news to excite investors, the financial stocks that pounded the market to 12-year lows in March and then led the bounce higher fell for a second day. Even after their slide Monday, bank shares have roughly doubled since early March, as measured by the KBW Bank Index. The sudden jump has some analysts saying those stocks are overdue for more selling.

Retailers fell ahead of a government report on retail sales due out Wednesday and in advance of quarterly results coming out from Macy’s Inc. Wednesday and Wal-Mart Stores Inc. Thursday.

Consumer spending accounts for more than two-thirds of U.S. economic activity so investors will be eager for forecasts from retailers for insight into whether the economy is stabilizing as many traders have been betting.

Analysts said a break in the market’s ascent had been overdue after the Standard & Poor’s 500 index jumped more than 35 percent since early March. The run came as economic and corporate reports signaled the economy could be stabilizing, though in many cases not improving.

“We need to see not just the promise of recovery, but actual data,” said Uri Landesman, head of global growth strategies at ING Investment Management. “The worst of the bear market is certainly behind us, but it doesn’t mean it’s going to be straight up.”

In early afternoon trading, the Dow Jones industrial average fell 43.08, or 0.5 percent, to 8,375.69 after falling 155 on Monday. The S&P 500 index fell 11.73, or 1.3 percent, to 897.51 and the Nasdaq composite index fell 33.93, or 2 percent, to 1,697.31.

Matt Lloyd, chief investment strategist at Advisors Asset Management Inc., said investors have only hit “pause,” not “stop” on the rally and that a slowdown in the climb after the surge from March is healthy.

“We need to kind of walk at a brisk pace as opposed to sprint,” he said.

The market retreated Monday after four banks announced plans to raise capital by selling common stock. Investors were nervous about the added shares in the market even as it was a welcome sign to see banks turn to Wall Street to raise money instead of relying on government bailouts. The extra supply of shares in circulation could push prices lower.

Detroit drew investors’ attention as Ford Motor Co. announced plans to raise cash through a common stock offering. Unlike General Motors Corp. and Chrysler LLC, Ford has been able to avoid needing government aid amid a sharp downturn in auto sales. Chrysler has filed for bankruptcy protection and GM is working on turnaround plans to help it avoid bankruptcy.

Ford fell 67 cents, or 11 percent, to $5.41.

GM shares tumbled to their lowest level since 1933 as investors worried that their shares would lose value if more are added to the market or the company declares bankruptcy. The company faces a June 1 restructuring deadline.

The automaker’s shareholders would be competing with bondholders, the U.S. government and the UAW for stock if the company is reorganized.

GM, one of the 30 stocks that make up the Dow industrials, fell 32 cents, or 22.2 percent, to $1.12.

In other trading, Dow-component Pfizer rose 91 cents, or 6.4 percent, to $15.06, while Archer Daniels rose 15 cents to $25.83.

Homebuilder stocks fell after the National Association of Realtors said home prices slid in nearly nine out of every 10 U.S. cities in the first three months of the year as first-time buyers in search of bargains dominated the market.

Pulte Homes Inc. fell 88 cents, or 7.8 percent, to $10.35, while Toll Brothers Inc. fell 81 cents, or 4 percent, to $19.49.

The Russell 2000 index of smaller companies fell 13.74, or 2.7 percent, to 488.20.

Three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 784.4 million shares.

Bond prices slipped but came off their lows as investors trimmed their appetite for risk and sought out safer investments. Prices gained back some of their losses after the Federal Reserve bought about $6 billion in government debt as part of its effort to drive down interest rates and reduce the costs of loans like mortgages.

The yield on the benchmark 10-year Treasury note rose to 3.18 percent from 3.17 percent late Monday.

Light, sweet crude rose 16 cents to $58.66 per barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies, while gold prices rose.

Overseas, Japan’s Nikkei stock average fell 1.6 percent. Britain’s FTSE 100 fell 0.2 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 fell 0.5 percent.

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WASHINGTON – The U.S. trade deficit rose in March for the first time since last July as the global recession cut sharply into sales of American exports. The politically sensitive deficit with China increased.

The Commerce Department said Tuesday the deficit widened to $27.6 billion in March, slightly lower than the $29 billion gap that economists had forecast.

The March deficit was 5.5 percent higher than February’s revised $26.1 billion trade gap, which had been the smallest since November 1999. Through the first three months of this year, the trade deficit was running at an annual rate of $359.7 billion, far below last year’s $681.1 billion. Economists expect the deficit will remain at low levels this year as a recession in the U.S. crimps demand for foreign goods.

Other reports out Tuesday showed home prices in most of the U.S. fell in the first quarter, which created buying opportunities in some states, while job openings have hit an eight-year low and companies remain reluctant to hire.

The global downturn also has cut into sales of U.S. exports. That will limit the amount of improvement seen in the deficit, which is the difference between what America imports and what it sells abroad. The slump in exports has been a blow to U.S. manufacturing giants such as Boeing Co. and Caterpillar Inc. who derive a large part of their sales from foreign markets.

For March, exports of goods and services fell 2.4 percent to $123.6 billion, the lowest level since August 2006. Sales of farm products dropped $2.4 billion, while exports of capital goods slid $1.7 billion, led by big declines in sales of civilian aircraft, telecommunications equipment, semiconductors, and domestic autos and auto parts.

Imports declined 1 percent to $151.2 billion, the lowest level since September 2004. Imports of capital goods dropped $516 million, led by declines in industrial machinery. The overall import level fell even though imports of oil rose 6.2 percent to $17.2 billion, the highest level since January.

The politically sensitive deficit with China rose 10 percent to $15.6 billion in March, the largest gap since January. China for more than a decade has been the country with the largest trade surplus with the U.S. The gap has triggered repeated calls in Congress for a crackdown on what critics see as unfair trade practices in China that also have resulted in the loss of millions of American manufacturing jobs.

China reported Tuesday that its global export sales fell 22.6 percent in April from the same month last year, fresh evidence that pain in the country’s trade sector persists due to slumping global demand.

The Obama administration earlier this year said it will continue to hold high-level talks with China started by the Bush administration, although the frequency of the meetings was cut in half to once a year. The first meeting is scheduled for this summer in Washington.

With the U.S. recession expected to last until the second half of this year and the downturn in many other nations expected to drag into 2010, economists don’t expect a significant rebound in trade anytime soon.

Meanwhile, home prices in the U.S. also continue to fall, although that has prompted sales gains in a handful of states. The National Association of Realtors said that median sales prices of existing homes declined in 134 out of 152 metropolitan areas compared with the same period a year ago. Nationwide, sales of foreclosures and other distressed properties made up about half of the market.

Home sales fell in all but six states — Nevada, California, Arizona, Florida, Virginia and Minnesota — where buyers have been able to snap up foreclosures at a deep discount. Still, the median sales price nationwide was $169,900, down 13.8 percent from a year ago. The median price is the midpoint, which means half of the homes sold for more and half for less.

The housing slump and latest hit to export sales have added to the wave of job layoffs in the U.S. There were 2.7 million jobs available nationwide in March, down from 3 million in February and 4 million a year ago, according to the Labor Department. That’s also the lowest number in the eight years the department has tracked job openings.

Other recent reports indicate that while layoffs may be slowing compared with the waves announced earlier this year, hiring hasn’t picked up much since the department gathered the job openings data in March.

The department on Friday reported 539,000 net job losses in April. While still elevated, it was the lowest level in six months and below the 700,000 monthly average during the first quarter of this year.

Many economists believe the unemployment rate, which hit 8.9 percent in April, will climb to around 10 percent even if the recession ends and a recovery begins sometime this fall.

Without new hiring, the unemployment rate will continue to rise. That’s because many people who were discouraged and stopped looking for work at the depths of a recession customarily return to the labor market once a recovery begins. If jobs aren’t available, those new job seekers are added to the total of unemployed workers.

Georgia leads nation in bank closures with 9 in past year

The closure of the FirstCity Bank means residents of Gibson, Ga., have to travel 20 miles to the nearest bank.

GIBSON, Ga. – The banner above FirstCity Bank still reads “Celebrating 100 Years of Service,” but the 690 residents of this rural community aren’t in the mood – not since government regulators locked the door, emptied the vault and closed the only bank within nearly 20 miles.

Georgia leads the nation in bank failures, with nine banks shut down in the past year. Still, few in tiny Glascock County suspected the financial meltdown driven by toxic real-estate loans would scuttle the place they deposited paychecks earned from sawmills and row-crop farming, their local lender for buying tractors and pickup trucks.

“We need a bank, definitely,” says 70-year-old Charles Usry, who fits cars with new brakes and tires at his small auto parts store across Main Street from the now-empty FirstCity. “If you don’t have a bank, eventually people are going to go somewhere else. The towns are going to die.”

Eleven Georgia banks, most surrounding Atlanta, have been shuttered by regulators, followed by nine in California and four in Florida. Experts predict more could be closed in Georgia in the future. But what propelled Georgia to No. 1 in bank failures is complicated.

Experts say it’s a combination of an antiquated state law that favored a plethora of smaller community banks over multi-branch giants; a population explosion in metro Atlanta that fueled massive suburban real estate development and a crush of new banks formed to cash in on the Atlanta boom shortly before the market tanked.

First, Georgia is home to a huge number of state and federally chartered banks. At the end of 2008, Georgia had 334 banks. That’s more than California, which has nearly four times Georgia’s population, or Florida, which has twice as many people. Only five states – Texas, Illinois, Minnesota, Iowa and Kansas – have more banks than Georgia, according to the FDIC.

What these states had in common, until the mid-1990s, was some of the nation’s most restrictive laws on branch banking. Georgia, for example, prohibited banks from opening branches across county lines until 1996.

The law shielded local banks from worrying about competition from out-of-town rivals. It also guaranteed that Georgia, with a whopping 159 counties, would have a correspondingly large number of banks.

“It was really a belief that local banking was the best banking and you did not want to have the big city banks dictating the amount of credit available to small town and rural America,” said Steve Verdier, director of congressional relations for the Independent Community Bankers of America.

Even after interstate giants such as Bank of America, SunTrust and Wachovia could expand freely across Georgia, growth in Atlanta’s suburbs spurred the opening of new banks looking to profit from loans to real-estate developers.

Metro Atlanta had three of the nation’s 10 fastest growing counties of the 1990s. Because of that growth, about half the state’s banks ended up clustered around Atlanta, said Joe Brannen, president and CEO of the Georgia Bankers Association.

“Georgia is a tad unique in that we don’t have five or 10 big metropolitan areas. We’ve got one real big one,” Brannen said.

Georgia’s diversity of small banks was an asset when the economy was strong, with consumers benefiting from competitive rates and broader sources of credit, said James Verbrugge, a professor emeritus of finance at the University of Georgia’s Terry College of Business. It became a liability when the bottom fell out of the housing market and smaller banks had less capital to weather the crisis.

With the financial meltdown centered on Atlanta, nobody in Gibson expected to feel the fallout in tiny Glascock County, which has the third-smallest population of any in Georgia. But bad loans took a toll there, too, after the bank was sold to new owners who moved its headquarters to the Atlanta area.

The town’s bank was founded in 1905 as the Bank of Gibson. It survived two world wars and the Great Depression under the local ownership of Erasmus Eggleston Griffin Sr. and two succeeding generations – until family members with a controlling interest opted to sell the bank in 2000. Then, it was renamed FirstCity.

When FirstCity closed, residents felt it immediately. Customers’ ATM cards no longer worked. Outstanding checks were worthless. Until the FDIC issued checks the next week for the insured amount of residents accounts, people were left with nothing but the cash in their pockets.

Audra Mason, who styles hair at a salon two blocks from the bank, had several customers cancel haircut appointments because they didn’t have cash to pay her. Jennie Veazey, a cook at a local diner, got her boss to pay her in cash until she received checks and a new ATM card for her new account.

Hazel Bedingfield, 79, fretted over the 24-mile trip to claim her Social Security payment from Thomson, where the FDIC re-routed direct deposits for government checks to a new account at a SunTrust Bank in a nearby county.

“It does gall you,” Bedingfield said. “Just because we’re a little bitty county doesn’t mean we don’t need a bank. It wasn’t our fault.”

Private firm cleaning up at Tucson’s expense

Bill Hill and Chris Landeen dump their trash at the Los Reales Landfill, 5300 E. Los Reales Road.

Tucson officials estimate a transfer station opened in November by garbage giant Waste Management will siphon 100,000 tons of trash and $3 million in revenue from the city over the next year.

The lost revenue, in combination with plummeting prices for recyclables and high prices for gas, mean the 5-year-old and much scorned city garbage fee is set to go up. Landfill fees have already seen increases.

Environmental Services Department Director Andrew Quigley has asked the City Council to raise the trash fee to $14.50 per month beginning July 1.

A City Council vote on the proposed 3.6-percent increase is set to follow a public hearing June 2.

That day, the council also is slated to tentatively approve a $1.3 billion budget that, as of Friday, included $12.4 million in new or increased taxes and millions more in raised fees. The same day, the council will weigh whether to raise bus fares.

With a budget that relies heavily on sales tax receipts, the city has been struggling to pay its daily bills.

The Environmental Services Department is in similar shape, also having to contend with volatile gas and recyclables prices and relying on sources of funding that are on the decline, most notably private haulers’ landfill fees.

While the public landfill business appears on a downhill slide, Waste Management is reporting increased landfill profits.

The company stated in its first quarter earnings statement that its landfill revenues rose 3.1 percent from the same year before even as its overall earnings dropped more than 16 percent amid a recession.

Waste Management operates the largest network of landfills in the country, with 277 sites accepting more than 116 million tons of waste per year, according to its Web site.

Two of those sites are in the Tucson area, and both have represented challenges to the local governments operating nearby dumps.

A transfer station at 5200 W. Ina Road contributed to Pima County raising landfill fees last year and second-guessing the timing of the closure of its Northwest Side landfill at Tangerine Road.

The opening of Rincon Transfer Station at 5890 S. Mann Ave. in November is causing consternation among city officials because private haulers who once dropped waste at the city’s Los Reales Landfill have begun using the Waste Management facility.

Quigley estimates the shift will mean 20 percent less trash – 100,000 tons – entering the city’s Los Reales landfill next fiscal year, which begins July 1.

Waste Management Arizona spokeswoman Melissa Quillard would not say how much trash the Mann Avenue transfer station accepts. She said publicizing the information could give competitors an advantage.

But Quigley is certain a large proportion of the trash that had been going to Los Reales is now headed for ultimate disposal at Waste Management’s Maricopa and Pinal county dumps.

In a bid to recoup some of the financial losses that follow from the diverted trash, Quigley has offered cut rates to haulers that promise to deliver a set amount of waste.

He hasn’t received any responses yet, though he said haulers expressed interest when he first came up with the deal.

“Right now, we’re just waiting,” he said.

Councilwoman Nina Trasoff praised Quigley for his attempt to extend a deal to the haulers.

“I think that the money he’s going to recoup that way is a very creative approach,” she said.

Regardless of how successful the contract program is in luring haulers back to Los Reales, Environmental Services will almost definitely need other revenue to stay in the black.

That leaves the City Council with an unpopular political decision and one that brushes up against campaign promises made by at least two council members.

Both Trasoff and Councilwoman Karin Uhlich campaigned against the $14 a month trash fee four years ago, saying it was too expensive and implemented inappropriately.

They said when the fee was imposed the year before – 2004 – public comment opportunities were lacking and the waiver program for low-income city residents was inadequate.

Now they’re faced with upping the price.

“(Raising the trash fee) will never make me happy,” Trasoff said. “But it’s been demonstrated that there’s a real need and the money is used for garbage services. I can live with it so long as I know that we have a meaningful waiver program in effect.”

Uhlich takes a similar stance, though she puts the proposed increase in the context of a plan to attach fees to indexes.

“I think there seems to be support on the council to apply indexes across all city fees so that we avoid the large adjustments, which are historically more the norm,” she said.

The reason for indexing, Uhlich said, is that increases will be predictable and therefore easier to incorporate into budgets.

So that applying an index wouldn’t simply mean prices increase gradually but without any relationship to cost trends, Uhlich suggests using indexes that apply directly to the fee at hand.

A fuel index, for example, could be applied to a garbage fee because fuel is one of the primary costs in collecting trash, she said.

Councilman Rodney Glassman, like Trasoff, is not entirely opposed to indexing, though he is wary of applying indexes across the board.

“It’s important when looking at the question of indexing to consider other factors such as the economy and the actual cost of providing the services,” he said. “I support indexing as part of a pricing model but not something that can be relied upon as the sole indicator of price adjustment.”

He advocates giving department directors more leeway in setting fees and running departments more like businesses.

He also thinks the trash fee increase is a better alternative to letting garbage services suffer because there’s not enough money to pay for them.

“It’s unrealistic to think that the department can continue to provide services without adjusting their rates over time,” he said.

Councilwoman Regina Romero also seems to accept the fee increase but is less enthusiastic about using an index.

“It seems that the fees are accumulating,” she said. “At the same time, I see the budget holes.”

The Rincon Recycling and Transfer facility, 5890 S. Mann Ave.

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TRASH AT A GLANCE

Los Reales Landfill, 5300 E. Los Reales Road

Hours: 6 a.m. to 5 p.m. Monday through Saturday

Residential rates: $10 for a covered load weighing less than a ton; $30 per ton for heavier, covered loads; uncovered loads cost $5 more

Commercial rates: $30 per ton for covered loads; $5 more for uncovered loads

Waste Management’s Rincon Transfer Station, 5890 S. Mann Ave.

Hours: 7 a.m. to 3 p.m. Monday through Friday; 7 a.m. to noon Saturday

Residential rates: $38 per ton plus $14 per load for loads weighing less than 500 pounds

Commercial rates: $38 per ton plus about $5 in variable fees

Source: City of Tucson and Waste Management

DETROIT – For General Motors Corp., the task at hand is so difficult that experts say a Chapter 11 bankruptcy filing is all but inevitable.

To remake itself outside of court, GM must persuade bondholders to swap $27 billion in debt for 10 percent of its risky stock. On top of that, the automaker must work out deals with its union, announce factory closures, cut or sell brands and force hundreds of dealers out of business – all in three weeks.

“I just don’t see how it’s possible, given all of the pieces,” said Stephen J. Lubben, a professor at Seton Hall (N.J.) University School of Law who specializes in bankruptcy.

GM, which has received $15.4 billion in federal aid, faces a June 1 government deadline to complete its restructuring plan. If it can’t finish in time, the company will follow Detroit competitor Chrysler LLC into bankruptcy protection.

Although company executives said last week they would still prefer to restructure out of court, experts say all GM is doing now is lining up majorities of stakeholders to make its court-supervised reorganization move more quickly.

“If we need to pursue bankruptcy, we will make sure that we do it in an expeditious fashion. The exact strategies I’m not getting into today, but we’ll be ready to go if that’s required,” Chief Executive Fritz Henderson said last week.

The threat of bankruptcy, however, may be just a negotiating ploy to pull reluctant bondholders into the equity swap deal. In Chrysler’s case, some secured debtholders resisted taking roughly 30 cents on the dollar for what they were owed, but most gave in after they were identified in court documents.

Henderson, who took over in March when the federal government ousted Rick Wagoner, said last week there’s still time to get everything done by the deadline, although he conceded it will be difficult to meet a government requirement that 90 percent of its thousands of bondholders agree to the stock swap.

The biggest obstacle to GM restructuring out of court appears to be its bondholders, who have been reluctant to sign on to the stock swap when the government and United Auto Workers union would get far more stock in exchange for debts owed by GM.

Even though the U.S. government has agreed to back up GM and Chrysler new-car warranties, potential car buyers already view GM as if it is in bankruptcy, reflected by the company’s steep revenue drop in the latest quarter, Lubben said. On Thursday, GM posted a $6 billion first-quarter loss and said its revenue plunged by nearly half, largely because bankruptcy fears scared customers away from showrooms.

“I don’t think anyone is buying cars from a company who is wringing their hands about a potential bankruptcy for the past year or so,” he said.

WASHINGTON – The Obama administration defended its claim Monday that the $787 billion economic stimulus plan will save or create 3.5 million jobs before 2011, an assertion questioned by some economists and GOP lawmakers.

A report by the White House Council of Economic Advisers says the projections are based on conservative estimates and widely accepted assumptions. The 3.5 million job estimate remains valid, the report says, now that stimulus money is starting to pay for various projects throughout the nation.

The report says the analysis is based on what the CEA considers “the relatively conservative rule of thumb that a 1 percent increase in GDP corresponds to an increase in employment of approximately 1 million jobs,” the report says.

However, it also notes that every increase in the GDP does not translate into new jobs. Existing workers absorb some of the increased economic activity by working longer hours and being more productive, it says.

Models that predict the number of U.S. jobs with and without the stimulus still conclude that the bill will create or save 3.5 million by the end of 2010, the report says.

Many economists say it is difficult to calculate how many jobs are “saved” by a spending package designed to pump up the economy.

Republican officials have criticized President Barack Obama’s projections, calling them unduly optimistic efforts to quantify something that is extremely difficult to quantify.

Monday’s CEA report was seen in part as an effort to answer such criticisms.

It says job creation that can be attributed to the stimulus package “rises over 2009 and 2010, as the stimulus increases, and then falls as the fiscal stimulus is withdrawn.”

NEW YORK – Investors cashed in some of their gains Monday following last week’s rally and as the market’s focus shifts to consumer spending trends.

Investors put a two-month rally on hold after buying into the market last week. Markets had rallied on a better-than-expected report on unemployment and the disclosure of the government’s bank stress test results.

“There’s some profit taking,” said David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Ind. “There were a lot of gains last week, especially in the financial sector.”

This week, the focus will shift from banks to consumer spending. First-quarter earnings figures are expected later this week from Wal-Mart Stores Inc., Macy’s Inc. and other retailers and the Commerce Department reports retail sales for April.

Macy’s reports first-quarter results Wednesday, while Wal-Mart will announce its quarterly results on Thursday.

Consumer spending accounts for more than two-third of economic activity. Upbeat outlooks from key retailers could give investors another reason to jump into the market.

In the first hour of trading, the Dow Jones industrial average is down 128.16, or 1.5 percent, to 8,446.59.

Broader stock indicators also fell. The Standard & Poor’s 500 index fell 18.21, or 2 percent, to 911.02, and the Nasdaq composite index fell 30.14, or 1.7 percent, to 1,708.86.

Last week, investors welcomed the government’s bank stress test results that showed which of the nation’s largest banks would need additional cash to cover any further weakening in the economy. Removing that uncertainty about which banks might need more capital helped calm many fears in the industry.

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ON THE WEB

New York Stock Exchange: www.nyse.com

Nasdaq Stock Market: www.nasdaq.com

Tim Samick, a laid-off factory worker from Elk County, Pa., laments the chances of finding a good job as he passes the time at the VFW on Main Street in Ridgway, Pa. Officials and residents of this struggling manufacturing community are learning they will receive no immediate transportation money from the economic stimulus plan despite their 13.8 percent unemployment rate. Counties suffering the most from job losses are receiving the least help so far from President Obama's plan to spend billions of stimulus dollars on roads and bridges, an Associated Press analysis has found.

WASHINGTON – Counties suffering the most from job losses stand to receive the least help from President Barack Obama’s plan to spend billions of stimulus dollars on roads and bridges, an Associated Press analysis has found.

Although the intent of the money is to put people back to work, AP’s review of more than 5,500 planned transportation projects nationwide reveals that states are planning to spend the stimulus in communities where jobless rates are already lower.

One result among many: Elk County, Pa., isn’t receiving any road money despite its 13.8 percent unemployment rate. Yet the military and college community of Riley County, Kan., with its 3.4 percent unemployment, will benefit from about $56 million to build a highway, improve an intersection and restore a historic farmhouse.

Altogether, the government is set to spend 50 percent more per person in areas with the lowest unemployment than it will in communities with the highest.

The AP reviewed $18.9 billion in projects, the most complete picture available of where states plan to spend the first wave of highway money. The projects account for about half of the $38 billion set aside for states and local governments to spend on roads, bridges and infrastructure in the stimulus plan.

The very promise that Obama made, to spend money quickly and create jobs, is locking out many struggling communities needing those jobs.

The money goes to projects ready to start. But many struggling communities don’t have projects waiting on a shelf. They couldn’t afford the millions of dollars for preparation and plans that often is required.

“It’s not fair,” said Martin Schuller, the borough manager in the Elk County seat of Ridgway, who commiserates about the inequity in highway aid with colleagues in nearby towns. “It’s a joke because we’re not going to get it, because we don’t have any projects ready to go.”

The early trend seen in the AP analysis runs counter to expectations raised by Obama, that road and infrastructure money from the historic $787 billion stimulus plan would create jobs in areas most devastated by layoffs and plant closings. Transportation money, he said, would mean paychecks for “folks looking for work” and “folks who want to work.”

“That’s the core of my plan, putting people to work doing the work that America needs done,” Obama said in a Feb. 11 speech promoting transportation spending as a way to expand employment.

Also, Congress required states to use some of the highway money for projects in economically distressed areas, but didn’t impose sanctions if they didn’t. States can lose money, however, if they don’t spend fast enough.

The AP examined the earliest projects announced nationwide, the ones most likely to break ground and create jobs first. More projects are continually being announced, and some areas that received little or no help so far may benefit later. The Obama administration could also encourage states to change their plans.

To determine whether there was a disparity in where the money would go, the AP divided the nation’s counties into four groups by unemployment levels. The analysis found that, no matter how the early money is measured, communities suffering most fare the worst:

• High-unemployment counties, those in the top quarter of jobless rates, are allotted about 16 percent of the money, compared with about 20 percent for areas least affected by joblessness.

• In low-unemployment counties nationwide, those in the bottom quarter of jobless rates, the federal government is spending about $89 a person compared with $59 a person in the worst-hit areas.

• In counties with the largest populations, the government is spending about $69 a person in areas with the lowest unemployment and $40 a person in places with the greatest job need.

The analysis also found that counties with the highest unemployment are most likely to have been passed over completely in the early spending.

Among them: Wheeler County, Ore.; Steuben County, Ind.; Macon County, Ga.; and Crowley County, Colo.

Many others are getting minimal help in this round: Vermillion County, Ind.; Lapeer County, Mich.; Presidio County, Texas; Tallahatchi County, Miss.

Those counties still will benefit from job creation elsewhere in their states, said Lana Hurdle, a Transportation official overseeing the agency’s stimulus money.

“Even if you have to drive to it, it’s better than no job,” Hurdle said.

Joel Szabat, who also oversees the stimulus for the Transportation Department, said the agency presses states to build projects in struggling areas but does not normally consider how much money is going to each county.

Presented with AP’s findings, he said: “I will be going back to ask our folks to do this kind of analysis, the overall amount for the projects.”

“Our goal, and I think it is a goal that will be achieved, is that you will see that a fair share of this money will go to these areas,” Szabat said.

Obama’s plan sends $38 billion to states and local governments for roads, bridges, transit and other infrastructure, about 5 percent of the overall program that also includes money for, among other things, schools, community development, technology, worker training and tax breaks.

All counties will receive some stimulus relief eventually. But the haste voiced by the White House is not reflected in the flow of highway money so far.

“We cannot wait,” Vice President Joe Biden said last week when announcing a $30 million transit project in his hometown of Wilmington, Del., where the 7.7 percent unemployment rate remains below the national average. “We’re spending a lot of time and money. Why? It’s about … jobs, jobs, jobs, jobs. That’s why we cannot wait.”

Yet residents of Perry County, Tenn., will have to wait. County Mayor John Carroll said he’s disappointed his community, which suffers from 25.4 percent unemployment, won’t receive a dime any time soon for its road needs.

“It’s pretty easy to draw a connection between the high unemployment rate and the lack of any four-lane highways,” he said.

Federal auditors acknowledge they can’t yet track the transportation money that is leaving Washington and there is no single list of the thousands of projects planned in each state. For its analysis, the AP used lists of projects approved through March by the Transportation Department and collected lists of stimulus projects that have been announced in 49 states, Puerto Rico and the Virgin Islands.

Federal officials have approved 2,800 projects. The remaining projects on the AP list represent the states’ official plans for the money. Only Virginia, which has not announced its plan, is not included.

As the number of projects grows, places like Elk County, Pa., could still be left out because they could not afford the upfront costs needed to put proposals in the pipeline.

“It’s all based on this ‘shovel readiness,”‘ said Elk County Commissioner Daniel Freeburg. “That’s been our stumbling block.”

Elk County surely could use jobs. The once thriving north central Pennsylvania county is home to metal factories that equip the nation’s auto industry. Layoffs are mounting.

Freeburg is pinning hopes on getting future stimulus money, such as for energy conservation programs, that will create jobs and rekindle the local metal and lumber industries.

In promoting his plan, Obama went to hard-hit communities such as Elkhart, Ind., and Peoria, Ill., and promised the jobs would come.

“Now, I know that some of you might be thinking, ‘Well that all sounds good, but when are we going to see any of that here in Elkhart?”‘ Obama said. “‘What does all that mean for our families and our community?’ Those are exactly the kind of questions you should be asking of your president and your government.”

Obama kept his promise to Elkhart, which so far is expected to receive $13.7 million, and Peoria, which should receive at least $10.6 million. But other, similar counties have not been so lucky.

For now, laid-off workers in Elk County, Pa., question why they’ve missed out, while money flows to more prosperous places.

“Why are they helping them?” asked Wendy Cameron, 50, of Saint Marys, Pa., who lost her job in a metal factory last year. She doesn’t have health insurance and would gladly take road work. “They’re not in need. We are.

“What are these people going to do? Is everybody going to go on welfare? I’ve never been on welfare. I don’t want to be on welfare.”

Associated Press writer Cal Woodward contributed to this report.

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ON THE WEB

Interactive tracking stimulus money on a map: tinyurl.com/orulga

By Brett J. Blackledge, Matt Apuzzo

Report sparks optimism of end of recession

Employers shed 539,000 jobs in April, pushing the nation’s unemployment rate to 8.9 percent, but the pace of job losses slowed, leading some analysts to predict the recession will end in a few months.

A record 13.7 million Americans were out of work last month and 5.7 million jobs have been lost since the downturn began in December 2007, the Labor Department reported Friday.

The jobless rate was up from 8.5 percent in March and the highest since fall 1983. A year ago, unemployment was 5 percent.

Still, the smallest number of jobs losses in six months provided the latest in a series of signs the recession’s ferocity is easing.

“It’s a step in the right direction, but we still have a long way to go,” said Maury Harris, chief U.S. economist for UBS.

Recent reports have shown manufacturing and services industries shrinking more slowly. Also, consumer spending and confidence have ticked up and the housing market has shown signs of bottoming.

Analyst Richard Yamarone of Argus Research said he expects the recession to end by late summer but, like many economists, predicts unemployment will remain high through 2010.

Harris said enthusiasm over April’s decline in job losses was restrained by the fact that it was partly due to the addition of about 60,000 government workers for the 2010 census.

“We have to appreciate that they’re temporary (workers),” he said.

Still, the 539,000 job cuts were far less than March’s 699,000 and January’s peak of 741,000.

President Obama said Friday “the gears of our economic engine do seem to be slowly turning once again.”

He asked states and colleges to help jobless people pursue education and training without losing their unemployment benefits. States generally require people who collect unemployment to be actively looking for work, which can make it difficult to sign up for school or job training. Under Obama’s plan, going to school would satisfy the requirement that they were seeking new employment.

“We’re still in the midst of a recession that was years in the making and will be months or even years in the unmaking,” Obama said. But he added: “Step by step, we are making progress.”

Allows for stabilization, says President Crow

Arizona State University President Michael Crow says money from the federal stimulus program and a new tuition surcharge will provide the Tempe-based university with a financial “calming point.”

Crow told university faculty and staff in a video message e-mailed Friday that the additional funding will provide ASU with “sufficient resources to financially stabilization the institution” despite state funding cuts.

He said university officials plan to use the next two years to focus on lower-cost options and on faculty recruitment and retention.

In Crow’s words, “while the financial hurricane is far from over, we believe that we are stable moving forward.”

WASHINGTON – The head of the Securities and Exchange Commission said Friday she favors a new proposal for federal regulators sharing oversight of companies that pose financial risks to the economy.

SEC Chairman Mary Schapiro said she’s “inclined toward” the idea floated this week by the head of the Federal Deposit Insurance Corp. for a new “systemic risk council” to monitor large institutions against financial threats. The council would include the Treasury Department, Federal Reserve, FDIC and SEC, according to the proposal by FDIC Chairman Sheila Bair.

Congress and the Obama administration are working to craft an overhaul of U.S. financial rules to prevent a repeat of the crisis that plunged markets worldwide into distress.

Speaking to the Investment Company Institute, the mutual fund industry’s biggest trade group, Schapiro said she is concerned about an “excessive concentration of power” over financial risk in a single agency.

Some key lawmakers have proposed that the Fed alone assume the role of systemic regulator.

But Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said this week he is “more attracted to the council idea” than having a single regulator play that role.

Policymakers want to replace the “too big to fail” model used by the government as it rushed in to rescue huge financial institutions caught up in the global crisis last fall.

Regulators are calling for a new system of supervision that prevents institutions from taking on excessive risk and becoming so large their failure would threaten the financial system.

At the same time, Schapiro on Friday reaffirmed her position that the SEC must play a key role as an independent watchdog protecting investors in the new system of financial regulation.

“There is a need for a regulator entrusted with responsibility for our capital markets,” she said. For the SEC, “independence is indispensable.”

Staking out the SEC’s position in the sweeping overhaul of the financial rule book that Congress and the administration have begun, Schapiro said it “would be a disaster” for that supervision over the markets to be split among various agencies.

Schapiro, an Obama appointee who became head of the SEC in January, stressed to the audience of mutual fund executives how hard Americans have been hit by the worst economic crisis in 70 years.

Around 92 million Americans entrust $9 trillion of their savings to mutual funds, and retirement savings plans were devastated by the stock market slide beginning last fall. The market has been on an upward swing since early March, rising more than 25 percent from 12-year lows, but the climb back remains steep and investors are rattled.

“The SEC is acting aggressively” to become a stronger and more agile regulator to help restore investor confidence, Schapiro said. The agency is revamping and strengthening its enforcement program, she said, and already this year has stepped up the number of actions taken against investment fund managers and others alleged to have violated securities laws.

On Tuesday, the SEC filed civil fraud charges against Reserve Management Co. Inc. and its two top executives, alleging they withheld key facts from investors when its $60 billion money-market fund “broke the buck” last fall after Lehman Brothers filed for bankruptcy protection. The Primary Fund, which had invested $785 million in Lehman’s debt, saw the value of its assets fall to 97 cents per investor dollar put in — below the dollar-for-dollar level needed to fully repay investors.

New York-based Reserve Management said it “intends to defend itself vigorously” against the SEC’s allegations.

About $46 billion, or about 90 percent of fund assets, have been returned to investors, the company has said. Schapiro said Friday the SEC is working to recover more money for them.

In the wake of the episode, the SEC is considering how regulation of money-market mutual funds could be tightened to better protect investors, she said.

The Investment Company Institute has proposed its own tightened rules for money funds. They include toughened requirements to screen money fund investments for safety, and to ensure that fund companies can return cash on demand to investors — even if redemption orders come in a panic-induced rush. The industry is rejecting private insurance to protect investors against losses, and opposes easing current requirements that money funds hold at least $1 in assets for each investor dollar put in.

Schapiro called the trade group’s proposals “helpful,” but has said the SEC’s eventual rule changes are likely to go further.