Finance Blog number 1

Treasuries fell for a second day on speculation record-low yields will curb demand when the U.S. auctions $99 billion of coupon-bearing debt beginning tomorrow.

The government plans to start the sales with $35 billion of two-year notes, followed by the same amount of five-year debt on May 23 and $29 billion of seven-year securities on May 24. Seven-year yields slid to 1.135 percent May 18, the least ever, raising concern U.S. bonds are becoming too costly. German and French finance ministers plan to meet today on the euro, after Europe

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Iraq’s oil ministry said Thursday that the U.S. oil giant Exxon Mobil Corp. is not allowed to bid in the May energy auction because of its oil deals with the northern self-ruled Kurdish region in Iraq.

The Texas-based Exxon signed six deals with the Kurds last October to search for oil in six areas, bypassing the Baghdad government, which maintains that it must ratify all deals. Some of the deals cover areas located in a land claimed by both Kurds and Arabs.

Deputy head of the Oil Ministry’s Licensing and Petroleum Contracts Department, Sabah al-Saidi, told The Associated Press that the reason for the move was Exxon’s refusal to abandon its controversial deals with Kurds.

“Exxon has been removed from the list of qualified companies because it refused to abandon the deals with the Kurdish region as requested by the Ministry of Oil,” al-Saidi said.

The Kurds and Arab-led government in Baghdad have been at loggerheads over who has the final say in resources development. They have unilaterally signed scores of oil deals, mostly with mid-sized companies which Baghdad considers illegal and has blacklisted the companies involved.

Baghdad recently said that Exxon sent two letters, assuring that it would freeze the deals until the central government and the Kurds resolve their differences. But the Kurds have maintained the deals are still valid and that Exxon is committed to them.

Thursday’s announcement came as the Oil Ministry published the final list of 47 oil companies that are qualified to bid in the May 30-31 bidding round for 12 exploration blocs nationwide.

Nearly 70 percent of the blocs on offer hold natural gas blocs and the rest a combination of oil and gas. They are expected to add about 29 trillion cubic feet of natural gas to the current 126.7 trillion cubic feet in reserves, and about 10 billion barrels of oil to the current 143.1 billion barrels of oil.

Since 2008, Iraq has awarded 15 oil and gas deals to international energy companies, the first major investments in the country’s energy industry in more than three decades.

Under a previous deal with Baghdad, Exxon and Shell are developing one of Iraq’s biggest oil fields, the 8.6 billion-barrel West Qurna Stage 1 field in southern Basra province.

Baghdad aims to raise the daily output to 12 million barrels by 2017 _ a level that would put it nearly on par with Saudi Arabia’s current production capacity.

Many analysts say that target is unrealistic, because of the degraded state of the industry’s infrastructure after wars and an international embargo that lasted more than a decade.

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Hungary

Chinese Vice President Xi Jinping is wrapping up a pivotal four-day visit to the United State with a daylong series of events in Los Angeles with his American counterpart Joe Biden.

China’s soon-to-be leader met with Gov. Jerry Brown on Thursday and toured a shipping terminal at the giant Port of Los Angeles.

The visit was a reminder of China’s huge footprint at the busiest port in the United States. Nearly 60 percent of the imports moving through the Port of Los Angeles come from China, including $120 billion worth of computers, TVs, sneakers and other goods last year

On Friday, Biden and Xi start with a China trade forum in downtown Los Angeles, followed by a luncheon and school visit to meet children learning Mandarin. They’ll end the day with a governor’s forum at Disney Hall.

Xi’s U.S. tour comes at a politically challenging time in U.S.-China relations, with the White House sending stern messages on currency and trade policies and Republican presidential candidates claiming President Barack Obama isn’t doing enough to keep America competitive with the Chinese economy.

The Asian power sells four times as many goods to the U.S. as the United States sends in return to China. The U.S. shipped $13.5 billion in exports to China through the Los Angeles port last year.

In a carefully scripted event, Xi took a short walking tour through the China Shipping terminal with Brown and Mayor Antonio Villaraigosa. The facility sprawls over nearly 100 acres.

“We’re not just growing our ports, but we’re greening our ports,” Villaraigosa told Xi.

“When I heard that this is an environmentally friendly green port, I felt that this was a major achievement,” Xi later told a crowd in a brief statement after his stroll with Villaraigosa.

“This is a solid foundation for future U.S.-China trade and economic cooperation,” he said.

As with his previous travels, Xi was focusing on forging relationships.

Xi spent the morning Thursday in Iowa, where officials from the U.S. and China signed a five-year deal to guide discussions on food security, food safety and sustainable agriculture.

China became the top market for U.S. agricultural goods last year, purchasing $20 billion in U.S. agricultural exports, according to the U.S. Department of Agriculture.

Much of Xi’s visit, which began earlier this week in Washington, D.C., has been focused on agriculture. The strategic cooperation agreement signed Thursday outlines mutual goals and responsibilities of each nation.

“It charts the course and gives us a guiding document that we can reference and, over time, refine and improve,” said Scott Sindelar, the agricultural minister counselor at the U.S. embassy in Beijing, who attended the Des Moines conference.

According to the USDA, the value of U.S. farm exports to China supported more than 160,000 American jobs last year across a variety of business sectors.

U.S. Secretary of Agriculture Tom Vilsack said the two nations will have to work together to help feed a growing global population.

“We have the responsibility and opportunity to work together to address the causes of global hunger that effect more than 925 million people. Current populations trends mean that we must increase agricultural production by 70 percent in the year 2050 to feed nearly 9 billion people,” he said.

Not everyone celebrated the vice president’s arrival. The California Fair Trade Coalition, a San Francisco-based nonprofit that supports expanding trade while promoting economic justice, issued a statement calling on Brown to “address China’s predatory trade practices.”

“The economic potential for trade with China is massive, but if they aren’t forced to level the playing field, this can only be a losing proposition for U.S. workers,” said coalition director Tim Robertson.

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President Obama’s plan to reform the corporate tax system will come out in the next few weeks, Treasury Secretary Tim Geithner told a Senate panel Tuesday.

But don’t get too excited. It won’t be detailed legislation. In fact, it’ll be vague on purpose in an effort to find "common ground" on broad principles between Republicans and Democrats on Capitol Hill, Geithner said.

"We want to maximize the chance we can take advantage of that (common ground) to build consensus on something that’s going to work," Geithner told the Senate Finance Committee.

The Obama administration has been talking about unveiling a plan to fix corporate tax system for well over a year. Last year, the pressure for a corporate tax system fix heated up with news of General Electric’s zero tax rate in 2010 due to profits overseas and losses at its financial unit. General Electric (, Fortune 500) CEO Jeffrey Immelt is the chief of President Obama’s Council for Jobs and Competitiveness.

The top corporate tax rate of 35%, among the highest in the world, has long been bemoaned by business leaders and tax experts. They say it discourages foreign investment in the United States and hinders the ability of U.S. companies to compete internationally.

The Obama administration is expected to talk about lowering the top rate while axing some of the more than 130 business corporate tax breaks currently on the books and limiting companies’ ability to shift profits to nations where tax rates are lower.

"In short, it will help level the playing field for businesses and allow the government to collect needed revenue while promoting economic growth," Geithner said in his written statement.

Obama budget fails to tackle entitlements

However, cutting the top rate to below 30% will require some serious slash-and-burn action. And details are key to moving corporate tax reform forward, said Clint Stretch, managing principal of federal tax policy at Deloitte Tax.

For example, a lot of publicly traded companies will want to know what they would pay in a tax year versus what they can defer. And cash-sensitive companies are going to want to know if they can depreciate the value of capital equipment.

"At some point people have to step up and say here are the details — here are the winners and losers," Stretch said. "Folks want to know where they are on that spectrum."

- CNNMoney senior writer Jeanne Sahadi contributed to this report. 

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A member of the storied McDonnell aerospace family is suing Boeing, the company that acquired McDonnell Douglas in 1997, alleging the aircraft maker infringed on his patents related to an unmanned aerial vehicle landing system.

William “Randy” McDonnell is seeking $160 million in damages from Boeing Co. and Insitu, Boeing’s Washington state subsidiary that produces unmanned aircraft for the Hazelwood-based Boeing Defense, Space and Security division.

Boeing denied the allegations, saying it would fight the lawsuit.

Randy McDonnell, an aeronautical engineer, is the son of Sanford McDonnell who served as chief executive and chairman of McDonnell Douglas from 1972 to 1988.

He is also a cousin of another former McDonnell Douglas chief executive and chairman - John McDonnell, who guided the corporation through its merger with Boeing.

John McDonnell still holds a seat on Boeing’s board of directors.

The suit was filed Thursday in U.S. District Court in St. Louis by Advanced Aerospace Technologies Inc., which is owned by Randy McDonnell.

The suit claims Boeing and Insitu knowingly encroached the patent McDonnell obtained for a “skyhook retrieval system” that enables drones to set down without a runway.

The technology is similar to the tail-hook mechanism that snags incoming manned jets on the decks of aircraft carriers, the suit says.

Randy McDonnell invented the process in the capacity of president and sole owner of Advanced Aerospace, an independent St. Louis County research and developmental engineering firm he founded prior to the Boeing merger, according to the filing.

He continues to operate the company to this day.

“I am greatly disappointed that Insitu, and then Boeing, declined to pay the compensation due for their use of my inventions and that I now must resort to court action,” McDonnell said in a statement issued through his Washington attorney, Craig S. King.

In a companion lawsuit filed in the U.S. Court of Federal Claims in Washington, McDonnell is also seeking remuneration from the federal government.

The District of Columbia filing asks the U.S. to reimburse McDonnell for profits Insitu and Boeing earned as independent contractors operating drones on behalf of the U.S. military.

Both suits stem from engineering designs developed by Randy McDonnell in the 1990s online payday loan lenders. The patents, owned by his company, were eventually issued in 2005 and again in 2006.

The lawsuit said McDonnell shared details of the design in 2000 upon learning that Insitu, then known as the Insitu Group, had encountered “difficulties” with its own retrieval system. At the time, the patent was pending.

A leader in the development and production of unmanned aircraft, Insitu produces the Boeing ScanEagle, Integrator and other drones currently deployed by not only behalf of the U.S. but the military forces of Australia and Canada as well.

“Without advising Mr. McDonnell, Insitu misappropriated critical features of Mr. McDonnell’s UAV retrieval solution … for use on the Insitu (unmanned aircraft systems),” the legal papers alleged.

The suit also claims that Insitu induced McDonnell to delay enforcement of the patents until the company’s sale to Boeing was finalized. Boeing purchased Insitu in 2008.

“Insitu’s decision to incorporate Mr. McDonnell’s inventions in its systems gave Insitu a major advantage in the industry,” the suit says.

The filing additionally accuses Boeing of ignoring warnings of possible patent infringement that Advanced Aerospace sent prior to the Insitu acquisition.

King, McDonnell’s attorney, said his client took legal action after failing to resolve the dispute with Boeing and Insitu out of court.

Boeing declined to comment on the specifics of the case, citing pending litigation.

“We believe our products don’t infringe on the patents in question and believe the court will agree with us,” spokesman John Dern said from Boeing corporate headquarters in Chicago.

King noted McDonnell refrained from filing an injunction that would have blocked Boeing and Insitu from further using the retrieval system until the matter is played out in court.

“The safety of our war fighters and performance of military missions is of paramount concern to (Advanced Aerospace), and neither will be affected by these lawsuits,” King said in a statement.

Lisa Brown of the Post-Dispatch contributed to this report

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Officials say a German woman who was listed among the missing from the cruise ship grounding off Italy has been located alive in Germany, bringing the number of people still unaccounted for to 21.

The Grosseto prefect’s office says Gertrud Goergens identified herself to police. Her name was removed from the official list of missing late Wednesday.

Italian authorities released the names of the missing Wednesday as the search for passengers and crew aboard the Costa Concordia was suspended because the ship shifted slightly from its perch on rocks off the Tuscan island of Giglio.

So far eleven bodies have been recovered; 21 people remain unaccounted for.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

ROME (AP) _ The first victim from the Costa Concordia diaster was identified Wednesday _ a 38-year-old violinist from Hungary who had been working as an entertainer on the stricken cruise ship.

Sandor Feher’s body was found inside the wreck, and identified by his mother who traveled to the Italian city of Grosetto, according to Hungary’s foreign ministry.

The $450 million Costa Concordia cruise ship was carrying more than 4,200 passengers and crew when it slammed into a reef Friday off the tiny Italian island of Giglio after the captain made an unauthorized maneuver. The death toll stands at 11, with 22 people still missing.

Italian rescue workers suspended operations Wednesday after the cruise ship shifted slightly on the rocks near the Tuscan coast, creating deep concerns about the safety of divers and firefighters searching for the missing.

Jozsef Balog, a pianist working with Feher on the ship, told the Blikk newspaper that Feher was wearing a lifejacket when he decided to return to his cabin to pack his violin. Feher was last seen on deck en route to the area where he was supposed to board a lifeboat.

According to Balog, Feher helped put lifejackets on several crying children before returning to his cabin.

Italian authorities earlier released the names of 24 passengers and 4 crew still missing, a list that includes six bodies which have been pulled from the ship since Monday. The missing included 13 Germans, six Italians, four French, two Americans and one person each from Hungary, India and Peru.

Instruments attached to the ship detected the movements early Wednesday even though firefighters who spent the night searching the area above water for the missing could not detect any movement.

“As a precautionary measure, we stopped the operations this morning, in order to verify the data we retrieved from our detectors, and understand if there actually was a movement, and if there has been one, how big this was,” said Coast Guard Cmdr. Filippo Marini.

By late afternoon, officials still did not have enough data to reassure them that the ship had stopped resettling. The latest victims were discovered after navy divers exploded holes in the hull of the ship to allow easier access.

Premier Mario Monti offered his first comment on the disaster Wednesday, telling a press conference in London that it “could and should” have been avoided.

Monti also thanked the residents of Giglio, which has a wintertime population of about 900, for opening their doors to the 4,200 refugees who struggled ashore with nothing and were given clothes, food and shelter.

And he acknowledged concerns about the 500,000 gallons of fuel still aboard the ship.

“Everybody can be assured that the Italian authorities are both taking care of the prevention and limitation of any environmental negative implications of this accident, as well as in the first place providing all the necessary help to those affected.”

Passengers were still making their way home, with consistent claims that crew members were ill-prepared to handle an emergency evacuation.

“The crew members had no specialized training _ the security man doubled as the cook and bartender, so obviously they did not know what to do,” passenger Claudia Fehlandt told Chile’s Channel 7 television after being embraced by relatives at Santiago’s airport.

“In fact, the lifeboats, even the ones that did get lowered, they did not know how to lower them and they cut the ropes with axes,” she said.

Much of the focus has been on the cruise ship captain’s actions.

In a dramatic phone conversation released Tuesday, a coast guard official was heard ordering Capt. Francesco Schettino, who had abandoned the ship with his first officers, back on board to oversee the evacuation. But Schettino resisted, saying it was too dark and the ship was tipping dangerously.

“You go on board! Is that clear? Do you hear me?” the Coast Guard officer shouted as the Schettino sat safe in a life raft and frantic passengers struggled to escape after the ship rammed into a reef off the Tuscan coast. “It is an order. Don’t make any more excuses. You have declared ‘Abandon ship.’ Now I am in charge.”

The officer confronted him with an expletive-laced order to get back on board, which has quickly entered the Italian lexicon. The four-word phrase has become a Twitter hashtag and Italian media have shown photos of T-shirts bearing the command.

Schettino, later in the same exchange, denied having abandoned the ship, replying that he had tripped and fell.

“I did not abandon a ship with 100 people on board, the ship suddenly listed and we were thrown into the water,” Schettino said, according to a transcript published Wednesday in the Corriere della Sera paper.

Jailed since the accident, Schettino appeared Tuesday before a judge in Grosseto, where he was questioned for three hours. The judge ordered him held under house arrest _ a decision that federal prosecutors are planning to challenge.

Schettino’s lawyer, Bruno Leporatti, told a news conference Wednesday in Grosetto that house arrest made sense given there was no evidence the captain intended to flee. He cited the fact that the captain coordinated the evacuation from the shore after leaving the ship.

“He never left the scene,” Leporatti said. “There has never been a danger of flight.”

Leporatti added the captain was upset by the accident, contrary to depictions in the Italian media that he did not appear to show regret.

“He is a deeply shaken man, not only for the loss of his ship, which for a captain is a grave thing, but above all for what happened and the loss of human life,” the lawyer said.

Criminal charges including manslaughter and abandoning ship are expected to be filed by prosecutors in coming days. Schettino faces a possible 12 years in prison if convicted of the abandoning ship charge alone.

_____

Barry reported from Milan.

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Pressure mounted on Greece’s two main political parties on Wednesday to wrap up three days of critical power-sharing talks and name a new prime minister to take over at the helm of an interim government.

Over the past couple of days, attention has focused more on Rome than on Athens amid increasing concerns that Italy’s economy was heading the same way as Greece’s. The fear that Italy is running out of time to get a handle on its debts hit markets in Europe hard Wednesday even though Italy’s Premier Silvio Berlusconi pledged to stand down, echoing a similar decision from Greek Prime Minister George Papandreou.

Greek officials defended the time it was taking for the new unity government to be established. Greece’s big two political parties, the Socialist PASOK party and the conservative New Democracy, are renowned for their opposition to each other and have rarely worked together since the rejection of the monarchy in 1974.

Papandreou was due to hold with Greece’s president at 5:00 p.m. (1500 GMT), a possible indication that a conclusion may have been reached.

Papandreou’s office said the premier spoke by telephone with French President Nicolas Sarkozy Wednesday morning and discussed “the developments in Europe and the eurozone,” as well as the power-sharing negotiations in Athens.

Sarkozy’s office said Papandreou informed the French president “of the imminent (formation) of a new government in Greece supported by the majority and the opposition.”

Former European Central Bank vice president Lucas Papademos had been tipped to become the interim prime minister, but it was unclear whether he remained the favored candidate by Wednesday.

By early afternoon, the conservative opposition was issuing angry statements demanding a swift conclusion to the talks, and blaming the embarassing delay on the current government.

“The solution is in the hands of Mr. Papandreou,” said a statement from the New Democracy party. “No further delay is conceivable. We must finally finish this.”

Earlier, deputy government spokesman Angelos Tolkas had said the new government would be announced later in the day, but gave no indication who the new prime minister would be. Similar comments had been made on Tuesday, too.

“This process is new to the country,” Tolkas told television channel Skai in the morning cash advance companies. “So I think three days was a reasonable time for the consultations to be made and for each side to make the necessary concession.”

On Tuesday, Papandreou’s ministers offered their resignations as part of the process of creating the new government, which is only expected to last until February when early elections are to be held.

The new government will be tasked to secure the country’s new euro130 billion ($179 billion) European rescue package and then get it through parliament. That approval will allow the release of a euro8 billion ($11 billion) loan installment from its existing bailout. Without the funds, Greece will go bankrupt before Christmas, potentially wrecking Europe’s banking system and sending the global economy back into recession.

The political crisis erupted last week, when Papandreou said he would put the new European rescue package to a referendum. Other eurozone nations were horrified by the delay, markets around the world tanked and Greece’s international creditors froze the payment of the next bailout installment.

On Monday, eurozone finance ministers said the heads of the two main parties had to commit in writing to the terms of the country’s bailouts before Athens can receive the next loan installment.

Government officials in Greece say the written agreement requires the signatures of Papandreou, New Democracy leader Antonis Samaras, the Bank of Greece governor, the new coalition prime minister and the new finance minister _ a demand that has prompted an angry response from Greece’s conservatives.

Greece has survived since May 2010 on a euro110 billion ($150 billion) bailout package from its eurozone partners and the International Monetary Fund. The second rescue package involves private bondholders voluntarily agreeing to cancel 50 percent of their Greek debt.

In return for the rescue funds, Greece has endured 20 months of punishing austerity measures. The efforts by Papandreou’s government to keep the country solvent have prompted violent protests, crippling strikes and a sharp decline in living standards for most Greeks.

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