Financial bonanza

BRUSSELS, Belgium – EU regulators on Monday cleared France's multi-billion euro fund to shore up banks and ease lending, as they set out new rules requiring banks with riskier investments to pay a higher fee for government cash bailouts.

EU Competition Commissioner Neelie Kroes said she also expected Germany to toughen the terms of a financial rescue plan for Commerzbank before the EU could clear it.

Banks are eager to shore up their positions with massive capital injections that governments have promised them to try and ease lending. They say they need this to continue to keep lending to customers in the wake of a financial crisis that paralyzed credit markets.

But EU regulators said they had to check carefully that the bailouts won't benefit the banks that get state aid over rivals that cope without.

The European Commission said it wants each bank should pay a premium for the money it receives, based on its risk profile. Banks in distress that are near insolvency should pay more for state support and face stricter safeguards.

The EU's executive has to clear major state subsidies to private companies to make sure they don't profit at the expense of rivals and trigger competition problems.

It approved France's capital injection program after Paris hiked the fees it charges healthy banks. Regulators said this would encourage the banks to turn to private lending as soon as they can.

"These conditions are essential if state intervention is to be kept to what is necessary to restore confidence on the financial markets," the Commission said.

France will invest in securities issued by banks and will be paid back at a fixed rate averaging around 8 per cent for five years and a variable rate after that. Different rates will be set for banks based on their risk of defaulting on the loan.

The fund is capped at euro21 billion (US$26.6 billion) although France only plans to spend euro10.5 billion ($13.3 billion) initially. Banks taking part must curb what they pay executives and traders and ban all severance payments to senior executives when the bank has collapsed fast pay day loan.

Germany is still seeking approval for its bailout plan and has complained that regulators are dragging their feet on a November government recapitalization for Commerzbank – Germany's second-largest bank by assets – of euro23.2 billion ($29.3 billion), including an euro8.2 billion ($10.3 billion) credit line.

Kroes said she was still waiting to hear from German officials on changes she expected them to make to the repayment terms of the loan – likely to be higher than Berlin originally wanted.

She said she would also clear Austria's banking rescue plan on Monday.

In general, regulators said the price of capital injections needs to be high to limit how long governments support the banking sector.

The rules form part of the European Commission's new guidelines for how governments could subsidize banks without breaking EU state aid rules.

The EU executive said it was setting out safeguards to make sure that taxpayers' money was used to sustain lending to the real economy and "not to finance aggressive commercial conduct to the detriment of competitors who manage without state aid."

It said they needed to draw a line between banks that are fundamentally sound and only require temporary support to ease lending – and banks in trouble who are in danger of collapse because of a business model that saw them take on too much risk.

State help for distressed banks could cause more competition problems in the wider economy, it said. This calls for stricter safeguards and thorough restructuring.

Over the past two months, European governments have tried to ease lending and prevent a financial crisis deepening an economic slowdown. They have issued credit guarantees totalling euro1.8 trillion ($2.3 trillion) and committed euro280 billion ($353 billion) in recapitalization schemes.

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EDF (EDF.PA: Quote, Profile, Research, Stock Buzz) unveiled a $6.5 billion deal to buy 50 percent of Constellation Energy Group’s (CEG.N: Quote, Profile, Research, Stock Buzz) nuclear assets and some other assets in an attempt to torpedo a rival bid from Warren Buffett.

The proposed offer would give EDF, the world’s largest nuclear utility, a solid foothold in the United States - the world’s biggest nuclear energy market - and represents a major plank of its global expansion strategy.

Shares in EDF, which have lost more than 45 percent so far this year, were down nearly 6 percent in early trade on Wednesday. By 0936 GMT, EDF was down 5.6 percent at 42.08 euros while the French blue-chip index .FCHI was 1.8 percent lower.

“EDF is right to invest in nuclear in the United States. But I am afraid that it is overpaying a bit for Constellation,” said David Thebault, sales trader at Paris broker Global Equities.

EDF is also trying to secure European Union anti-trust approval for its acquisition of British Energy (BGY.L: Quote, Profile, Research, Stock Buzz) announced in September and has set its sights on China and South Africa.

EDF said on Wednesday it had sent a letter to Constellation’s board saying it was offering $4.5 billion for half of Constellation’s nuclear power business which operates five reactors on the east coast of the United States.

It also proposed to spend up to another $2 billion to buy non-nuclear assets such as gas, oil and coal-generation operations.

EDF’s indicative offer would include an upfront cash injection of $1 billion and would value the whole of Constellation at around $52 a share, EDF said — a significant premium to its closing share price of $25 payday loans online.15 on Tuesday.

The terms top a rival offer of $4.7 billion from Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz) unit MidAmerican Energy Holdings for Constellation that valued the U.S. energy company at $26.50 per share.

EDF, Constellation’s largest shareholder with nearly 10 percent of the company’s equity, stands to gain more from the deal than just the power generation assets as it could boost the value of its investment in Constellation.

EDF said it expected to win the necessary regulatory approvals for the deal and close it within six to nine months after signing a definitive agreement with Constellation.

Under the terms of EDF’s proposal, Constellation would stay a standalone company.

“Constellation is fundamentally strong and EDF, like many others, believes that the proposed MidAmerican transaction significantly undervalues Constellation and its future opportunities,” said EDF Chairman and Chief Executive Pierre Gadonneix in a statement.

In October, EDF dropped a bid for Constellation, saying the credit crisis had made financing more difficult to obtain.

In September, MidAmerican agreed to buy Constellation, which was on the brink of bankruptcy and also offered a $1 billion cash injection as part of its proposal. 

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Federal Reserve Chairman Ben S. Bernanke urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so.

Each option would require “some commitment of public funds,” Bernanke said, underscoring his position that the central bank alone can’t revive the economy through its interest- rate cuts and emergency lending programs. The Republican’s stance may also put him in line with President-elect Barack Obama, who said yesterday that “we’ve got to start helping homeowners in a serious way.”

“More needs to be done,” Bernanke said in a speech to a Fed research conference on housing and mortgage markets in Washington today. “Policy initiatives to reduce the number of preventable foreclosures should be high on the agenda.”

The government could buy “delinquent or at-risk mortgages in bulk,” then refinance them through the federal Hope for Homeowners program, Bernanke said. Congress could also help reduce loan rates and lender insurance premiums, he said.

Also today, two regional Fed officials warned that the economy, which entered a recession a year ago, faces a lengthy slump.

‘Protracted’ Slump

There will be a “protracted period of poor performance” and policy makers should remain “vigilant” in monitoring risks to growth, Chicago Fed President Charles Evans said in Michigan. Dennis Lockhart, president of the Atlanta Fed, said in New Orleans the yearlong recession is worsening this quarter and the economy will probably be “very weak” throughout next year.

Foreclosures may begin on 2.25 million homes this year, more than double the pace before the financial crisis, he said. Estimates show as many as 20 percent of borrowers may now be “under water,” where their mortgage is bigger than the price of their home, Bernanke said.

“Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high, with adverse consequences for both those directly involved and for the broader economy,” Bernanke said.

Market Failure

Some foreclosures are happening “even in cases in which the narrow economic interests of the lender would appear to be better served through modification of the mortgage,” Bernanke said. That is partly the result of packaging loans as securities for sale to investors, where there’s the risk of lawsuits and a lack of “clear guidance,” he said.

While Bernanke supports increasing government efforts on foreclosures, Fed officials have a different position toward the U.S. automakers seeking federal aid of as much as $34 billion.

Fed officials have an aversion to extending the too-big-to- fail doctrine beyond financial institutions. The premise of the central bank’s $85 billion rescue of American International Group Inc. in September was that the insurer’s failure posed a threat to the system through its role in the derivatives market cash advance.

Other obstacles involved in lending to carmakers might be finding large pools of collateral for the Fed to loan against. Officials are also unlikely to grant bank holding company status to auto-firm subsidiaries as a potential conduit for aid to the parent. Transactions between banks and affiliates are strictly regulated by the Fed.

‘Downward Spiral’

Until problems are fixed in housing, “we’re going to have at best slow growth,” Robert Eisenbeis, a former Atlanta Fed research director who is now chief monetary economist with Cumberland Advisors, said in an interview with Bloomberg Television. Bernanke is “trying to truncate what he fears will be a downward spiral.”

Bernanke said a mortgage-guarantee proposal by the Federal Deposit Insurance Corp. has “strengths,” including that the government is involved only if a borrower defaults again. FDIC Chairman Sheila Bair is pressing the Treasury Department to use authority in the $700 billion financial-rescue package to implement the program to spur mortgage modifications.

Another option is to have the government share costs when a loan servicer reduces a borrower’s monthly payment, Bernanke said. While this would put a “greater operational burden on the government” than the FDIC plan, it would “build on, rather than crowd out, private-sector initiatives,” he said.

Scant Response

The Hope for Homeowners program, run by the Federal Housing Administration, has signed up few lenders since it started in October because banks must write off a large portion of the loan and pay high fees. The Fed sits on a board that oversees the program.

Bernanke’s proposed changes would go beyond those announced last month by Housing and Urban Development Secretary Steve Preston, who oversees the FHA. The agency will lower the amount of the loan a lender must forgive, allow banks to extend mortgage terms to 40 years from 30 years and give subordinate holders immediate payment for releasing their liens.

Congress could make the program more attractive by reducing the up-front insurance premium paid by the lender, which is now 3 percent of principal, and the borrower’s 1.5 percent annual premium, Bernanke said.

Lower Rates

Lawmakers should also consider reducing borrowers’ interest rate, which may be near a “quite high” 8 percent, he said. That could be accomplished by having the Treasury buy Ginnie Mae securities, or having Congress directly subsidize the rate, Bernanke said.

The Treasury, which already has a program to buy mortgage- backed securities issued by Fannie and Freddie, could step up those purchases to drive down interest rates on some loans to 4.5 percent, a government official said yesterday. The plan is preliminary and could change.

Last week, the Fed also announced a new program aimed at lowering borrowing costs for homebuyers, committing to buy as much as $600 billion of debt issued or backed by government- chartered housing-finance companies Fannie Mae and Freddie Mac.

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Russian service industries ranging from banking and telecommunications to supermarkets shrank in November by the most on record as the global financial crisis deepened.

The Purchasing Managers’ Index contracted for a second consecutive month to 37.2 from 47.4 in October, VTB Bank Europe said today in an e-mailed statement. A reading of 50 is the dividing line between expansion and contraction. VTB surveyed 300 purchasing managers at service companies.

“The services sector used to be the strongest pillar of economic growth,” said Vladimir Osakovsky, economist at UniCredit Bank in Moscow, in a note to investors. The numbers imply “considerable downside risks to broader real GDP growth.” .

Supermarkets and mobile phones retailers are slashing sales forecasts and firing staff, indicating consumers are set to rein in spending because of rising unemployment and wage arrears, Osakovsky said. Investors pulled $190 billion out of Russia since the start of August, BNP Paribas SA estimates, forcing the government to devise a $200 billion package to boost liquidity.

The contraction in service industries was “by far” the biggest since the survey began in October 2001, VTB said in the statement. “Activity, new business, employment and backlogs all registered much steeper contractions than in October.”

The benchmark Micex stock index was down 1.8 percent at 569.23 as of 11:37 a.m.. The ruble, which policy makers manage against a basket of dollars and euros, was at 27.9153 per dollar by 11 a.m. in Moscow, from 27.8993 yesterday. Against the euro, it traded at 35.4518 from 35.4720.

Gloom Ahead

Services globally are feeling the impact of the credit squeeze and loss of momentum in consumer spending. U.S. service industries probably contracted in November at the fastest pace on record, economists said before a report today. There were similar contractions in Spain, France and Italy, Reuters reported today.

Higher wages and increased employment sent ordinary Russians to shopping malls that sprang up during the recovery from the 1998 debt default and ruble devaluation free credit score. Retail sales, triggered by rising consumer borrowing, increased at an average annual rate of about 13 percent. Loans to individuals rose 58 percent last year, reaching 2.97 trillion rubles ($106 billion) on Jan.1.

Economic growth will slow to 3 percent next year from an average of 7 percent a year since 1999, the World Bank predicts, as the global credit squeeze blocks access to loans and erodes demand and investment. Prime Minister Vladimir Putin plans 550 billion rubles ($20 billion) of tax cuts to support businesses, in addition to a $200 billion package to boost liquidity amid the worst financial crisis since 1998.

‘Engine’ Failure

There may be a “rapid overall contraction in the services sector over the year ahead,” said Svetlana Aslanova, senior corporate analyst at VTB Bank Europe Research, in the report.

X5 Retail Group NV, the largest supermarket chain, will halve its investment budget for next year to $500 million. Sales growth will slow to about 25 percent in 2009, X5 said on Dec. 1, compared with 40 percent expected this year. The company will cut as many as 30 percent of jobs at its central Moscow headquarters to reduce costs, investor-relations head Anna Kareva said on Oct. 30.

A 33 percent jump in wage arrears in October and rising unemployment will put the breaks on Russian consumption, the “main engine” of Russian economic growth, Alfa bank economist Natalya Orlova said in a report on Nov. 20.

The seasonally adjusted services PMI is a composite of five differently weighted indexes including business, employment and new, outstanding and future business, according to VTB.

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Manufacturing shrank around the world as the financial crisis enters its 17th month, providing fresh evidence that the global economy is in recession and intensifying pressure on policy makers to respond.

Industry contracted in the U.S. at the fastest pace in 26 years last month, while factory indexes in Europe, Russia, China and South Africa showed record shrinkages, reports released today showed.

Signs the worldwide slump is worsening pushed down stocks and sent yields on U.S. Treasuries to record lows as investors sought the safest assets. Manufacturers are suffering as the persistent lack of credit hammers demand from companies and consumers, forcing them to cut output and jobs.

“The pace of manufacturing decline has been vicious,” said Kevin Gaynor, head of economic and interest-rate strategy at Royal Bank of Scotland Group Plc in London. “If we thought the last quarter was bad for the global economy, the current quarter is shaping up to be a lot worse.”

With the financial crisis that began in August 2007 now morphing into a worldwide economic downturn, economists at JPMorgan Chase & Co. estimate industrial production will decline in developed markets this quarter by the most since 1980.

The MSCI World index of stocks in 23 developed markets today fell 3.9 percent to 857.72 at 2:49 p.m. in London as the deterioration in manufacturing unnerved investors. The yield on two-year U.S. notes dropped as low as 0.95 percent and the rate on 30-year bonds fell to a record 3.387 percent.

U.S. Factory Index

The Institute for Supply Management’s U.S. factory index dropped to 36.2, the lowest since 1982, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction. The index was projected to drop to 37, according to the median of 61 economists’ forecasts in a Bloomberg News survey.

That leaves economists forecasting one of the most severe U.S. recessions in the postwar era, forcing the Federal Reserve to consider more interest rate cuts and incoming President Barack Obama to mull a stimulus program.

Fleetwood Enterprises Inc., the third-largest U.S. maker of recreational vehicles, last week said its second-quarter net loss widened as tight credit and a weak economy eroded demand for motor homes.

Manufacturing in the 15 nations sharing the euro contracted by the most on record in November. A purchasing managers’ index dropped to 35.6 from 41.1 in October, remaining below the expansion threshold for a sixth month. That’s the lowest since Markit Economics began the poll in 1998, and below an initial estimate of 36.2 published on Nov. 21.

Malaise

With the euro-region economy already in its first recession in 15 years, the malaise leaves the European Central Bank facing calls to accelerate the pace of interest rate cuts this week. Having reduced its benchmark rate twice by 50-basis points since early October, investors are betting the Frankfurt-based bank may lower it as much as three-quarters of a percentage point when its governing council convenes on Dec. 4 quick loans.

Rautaruukki Oyj, Finland’s biggest producer of carbon steel, said today it will cut output and as much as 6.7 percent of its workforce, reducing annual costs by 60 million euros ($75.9 million), on weaker demand.

“There is a compelling case for the ECB to slash interest rates by 100 basis points” for the first time, said Howard Archer, an economist at IHS Global Insight in London.

U.K. Rate Cuts

Investors are already predicting the Bank of England will cut its key rate by at least a percentage point the same day, having slashed by 1.5 points last month, the biggest reduction in 16 years. Chancellor of the Exchequer Alistair Darling said yesterday he may need to take additional steps to combat the slump.

“Interest rates have got to fall significantly further,” said Nick Kounis, an economist at Fortis in Amsterdam and a former U.K. Treasury official.

The slump in industrial economies is now infecting emerging markets, depriving the world of power it was relying on to cushion the slowdown. Manufacturing in China, the fastest- growing major economy, fell by the most on record in November, the China Federation of Logistics and Purchasing reported today. Its purchasing managers’ index fell to a seasonally adjusted 38.8 from 44.6 in October.

‘Grim Month’

“Another grim month for China manufacturing,” said Eric Fishwick, head of economic research at CLSA Asia-Pacific Markets in Hong Kong, whose own index for China showed a record drop. “Export orders will weaken further and we expect further cuts in production and employment.”

The yuan fell the most since a fixed exchange rate ended in 2005, sliding 0.7 percent to close at 6.8848 per dollar. Economists at Citigroup Inc. said “more immediate policy help” was now needed on top of last month’s $586 billion stimulus package and biggest interest-rate cut in 11 years.

In Russia, VTB Bank Europe said its measure of purchasing managers fell for a fourth month in November to 39.8, below the level recorded in 1998 when the government devalued the ruble and defaulted on $40 billion of debt.

OAO Severstal, Russia’s largest steelmaker, shut down a blast furnace that supplied 13 percent of the pig iron produced at its main Russian factory because of its age and as global steel demand weakens, the company said on Nov. 28.

“The sense of doom and gloom was only deepening” in November, Tatiana Orlova an economist in Moscow at ING Group NV said. “The mood isn’t getting any better.”

Indexes for Poland, Hungary, Sweden and the Czech Republic also showed some of the steepest-ever declines as recession struck their main export markets. South African manufacturing shrank at the fastest pace in at least nine years, pushing Investec Asset Management’s Purchasing Managers Index to 39.5 last month from 46.2 in October.

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san francisco–Facebook Inc., the worlds largest social-networking website, won an order requiring the owner of a Canadian-based site to pay $873.3 million (U.S.) for illegally using Facebook users’ log-in information to send spam.

U.S. District Judge Jeremy Fogel in San Jose, California, on Nov. 21 issued the order against Adam Guerbuez, of Montreal, the owner of Atlantis Blue Capital and the site Ballervision.com.

Fogel awarded Facebook damages of $436.6 million for the spam and doubled the award against Guerbuez for aggravated violations of the 2003 CAN-SPAM Act by illegally accessing Facebook data, said Facebook spokesperson Barry Schnitt.

"This should make it clear that were going to be aggressive about protecting our users from spam, Schnitt said. "Certainly, the amount is beyond his resources, but we are working through the channels to find and seize what assets he does have."

The judge barred Guerbuez from accessing Facebook’s data.

Guerbuez never fought the case or appeared in court, according to Schnitt. He didn’t have a lawyer and he couldn’t be reached for comment business card maker.

As such, the victory probably won’t yield a windfall for privately held Facebook, whose revenue this year is expected to range between $250 million to $300 million.

Court records indicate the alleged spammer has been difficult to find since Facebook sued him four months ago.

But Facebook is hoping the size of the judgment will scare off other spammers who might be tempted to target the Palo Alto, Calif.-based company’s audience of more than 120 million users.

Facebook said Guerbuez fooled its users into providing him with their usernames and passwords. One method was the use of fake websites that posed as legitimate destinations.

After Guerbuez gained access to user’s personal profiles, he used computer programs to send out more than four million messages promoting products including marijuana and penis enlargement drugs, Facebook said.

From the Star’s wire services

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OTTAWA–Ottawa is moving forward on plans for a national securities regulator but will let provinces opt out if they oppose the scheme.

In yesterday’s throne speech, the federal Conservatives echoed their pledge to institute a single national stock market watchdog in a bid to replace the patchwork of provincial regulators in place now.

Finance Minister Jim Flaherty cited the economic volatility and instability as one justification to move ahead with the idea.

"Canada’s system is held out and looked on as a model around the world but the flaw we have in our system is the fact that we still have 13 securities regulators. So we are going to go ahead and create a Canadian securities regulator," Flaherty said.

However, the finance minister noted the opposition to the plan from Quebec, which wants to maintain its own independent regulator fast cash in one hour.

"We’re going to do this with our willing partners … Those who do not choose to, will not join," he said.

Ontario is one of the provinces supporting the idea of a single regulator.

Flaherty said he will consult with the provinces on establishing a Canadian securities regulator early next year after a report from Tom Hockin, a former minister in the Mulroney government who was asked to head a panel on how a national stock market regulator would work.

Flaherty has made creation of a single regulator a priority since becoming finance minister in January 2006.

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Wal-Mart is highlighting flat screen TVs, Blu-ray players, Xbox 360 consoles and home computers in its much-anticipated Black Friday deals this year, according to a copy of the retailer’s circular obtained by CNNMoney.com.

Black Friday - the day after Thanksgiving - is one of the busiest shopping days for the nation’s retailers. Black Friday is of particular interest this year because the country is experiencing a sharp slowdown in consumer spending.

Wal-Mart (WMT, Fortune 500) is not expected to officially unveil its Black Friday deals until Nov. 24. But as more Americans cut their holiday gift budgets this year, many will likely turn to discounters such as Wal-Mart in search of bargains.

According to the circular, Wal-Mart’s so-called doorbuster deals offered between 5 a.m. and 10 a.m. ET will include a 50-inch Samsung plasma HDTV ($798), Magnavox Blu-ray player ($128), Xbox 360 ($199) sold with free Guitar Hero III Legends of Rock game and wireless guitar, HP Pavilion desktop computer ($398) and a UniFlame gas grill ($175).

In addition, Wal-Mart’s Black Friday ad shows a GE microwave for $25, children’s clothing priced between $4 and $8 and a variety of toys, including a Hannah Montana doll for $10 or less.

Wal-Mart spokeswoman Melissa O’Brien declined to address the leaks from the Black Friday sales circular, saying only that "we plan to share the facts directly with customers on Monday, Nov creditscores. 24th."

Still, the retailer in recent days has made no secret of its intention to aggressively court this year’s budget-conscious holiday shoppers.

Last week, the retailer said it would offer more discounts on thousands of products over the next seven weeks.

Judging from other leaked Black Friday ads, additional retailers are also readying huge discounts in a bid to tempt reluctant shoppers.

Sears’ leaked Black Friday circular, which appeared last month on Gottadeal.com, a Web site that markets itself as one of many "official" Black Friday deals sites, showed the retailer would offer deals on washer-dryers, a category that Sears’ hasn’t heavily promoted in the past.

One of Sears’ standout deals for Black Friday is a Kenmore high efficiency front-load washer-dryer set for $599.99. That’s as much as 50% off the price of the individual washer and dryer.

"This really is an incredible deal, and it indicates how nervous retailers are about the season," said Britt Beemer, retail analyst and chairman of America’s Research Group.  

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North American stock markets plunged deep into the red on Wednesday morning as commodities prices and overall confidence lost ground even as governments announced new measures to calm fears.

Toronto's S&P/TSX composite index accelerated its earlier losses and fell 352.31 points in morning trading to 9,071.69.

The TSX energy sector slipped 4.3 per cent as the price of crude oil continued to fall. Light sweet crude for December delivery was down $2.39 at US$56.94 a barrel on the Nymex.

The gold sector was down 4.6 per cent as the price of bullion fell $15.80 to US$717 an ounce on the New York Mercantile Exchange.

On Wall Street, the Dow industrials were down 280.68 to 8,413.28. The Nasdaq composite index lost 40.39 to 1,540.51, while the S&P 500 declined 27.60 to 871.35.

The TSX diversified metals sector slid 8.8 per cent. Teck Cominco Ltd. (TSX: TCK.B) dropped another 16 per cent, or $1.44, to $7.31. On Tuesday, Teck said that contrary to rumours, it is not planning a stock offering to raise money to pay debt.

The Canadian dollar dropped to 81.41 cents, down 2.17 cents, after the Bank of Canada said it will inject an additional $8 billion into the country's tight money markets under new liberal terms.

The bank says the new Canadian-dollar term loan facility will be conducted in four auctions of $2 billion each over the next few weeks.

Finance Minister Jim Flaherty also announced that the federal government will purchase another $50 billion in residential mortgages to ease the credit crunch facing Canadian banks. It follows a similar move last month to purchase up to $25 billion in mortgages.

Retailers continued to erode optimism around the start of the holiday shopping season. Consumer electronics seller Best Buy Co. says it is cutting its 2009 guidance on fears that consumer spending will erode even further.

Department store operator Macy's Inc. says it lost $44 million in the third quarter. U.S. investors are worrying that a severe pullback in consumer spending – which drives more than two-thirds of the U short term cash loans.S. economy – will prolong a global economic slump.

ING Canada Inc. (TSX: IIC) reported a third-quarter profit drop to $57 million from year-earlier $92 million due to stock market volatility. Shares were down 80 cents to $31.03.

ATS Automation Tooling Systems Inc. (TSX: ATA) shares rose 10 cents to $3.89 after the company said it plans to trim five per cent of its workforce – or about 170 jobs – by next spring after reporting a quarterly net profit of $9.3 million, up from a year-ago loss of $18.8 million.

Research in Motion (TSX: RIM) debuted its latest challenge to Apple Inc.'s iPhone – the BlackBerry Curve 8900 smart phone. Its shares dropped 94 cents to $53.98.

The future of the country's top automakers remained a major concern on the Street. House Speaker Nancy Pelosi wants Congress to support a financial bailout for the troubled U.S. auto industry, which is suffering under the weight of poor sales, tight credit and a sputtering economy.

President-elect Barack Obama, when he met with President George W. Bush at the White House on Monday, urged Bush to support aid for the auto industry, and Democrats in Congress have begun drafting legislation that would give General Motors, Ford and Chrysler access to $25 billion of the rescue funds.

Overseas, London's FTSE 100 index was down 1.3 per cent in afternoon trading in London. The German DAX fell three per cent and the Paris CAC-40 lost three per cent.

The Bank of England predicted inflation will fall below the government's target of two per cent next year as the economy contracts. This raised expectations that the British central bank will lower its benchmark rate – possibly to the lowest level ever.

Japan's Nikkei index closed down 1.3 per cent and Hong Kong's Hang Seng declined 0.7 per cent.

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Canadian cultural policy has long relied on two levers to promote Canadian content. First, regulators require broadcasters and cable companies to allocate a portion of their revenues to help support the creation of new Canadian content. Second, that content is granted preferential treatment through minimum "CanCon" requirements for both television and radio broadcasting.

While these approaches may have worked for conventional broadcasting, the big question in the Canadian Radio-television and Telecommunications Commission’s forthcoming hearings on new media is whether they can be applied to the Internet.

Canadian cultural groups, the biggest proponents (and beneficiaries) of this policy approach argue that similar mechanisms can be adapted to the Internet by requiring Internet service providers to hand over a portion of their subscriber revenues for the creation of new media content. ISPs unsurprisingly opposed, arguing an Internet tax is unfair since it forces all subscribers to fund content in which they may have little interest. Moreover, they note such a scheme may also be illegal since it applies the Broadcasting Act to telecommunications activities.

The CRTC adopted a new CanCon approach for the introduction of satellite radio in Canada and similar creative thinking is needed for the online environment.

One possibility would be to provide new media creators – whether independent filmmakers, digital photographers, musicians, podcasters, or bloggers – with the assurance of equal access to online audiences by mandating that Canadian ISPs treat all similar content in an equivalent or neutral fashion.

In recent months, many Canadian ISPs have engaged in "network management practices" that degrades the bandwidth allocated to certain applications and content. While the ISPs argue such practices are essential to ensure quality of service for the majority of their users, similar activities in the United States have drawn a rebuke from the Federal Communications Commission and a promise from President-elect Barack Obama to address the issue.

This issue has been typically treated as telecom matter, yet there would be considerable benefits in assessing it through the lens of Canadian cultural policy. Granting preferential treatment for Canadian content may have made sense in a world of scarcity when there were limited channels and bandwidth, however, it no longer applies in a world of abundance in which the Internet offers virtually unlimited choice pay advance in 24 hour.

Canadian creators, therefore, do not need guaranteed space since there is room on the Internet for everyone. Rather, they need guaranteed access – the assurance that their content can find an audience by being treated like any other video or cultural programming. As ISPs move toward tiered access that grants preferential treatment (such as faster speeds) to their own content or to premium content promoted by deep-pocketed interests, an equal approach to new media content would bring CanCon into the Internet era by asking for nothing more than a fair shake.

This approach would also address the funding side of cultural policy. Many ISPs object to the equal treatment principle by maintaining that new media creators should pay for equal access and avoid using technologies such as BitTorrent that are viewed as transferring the cost of distribution from the creator to the network provider. From their perspective, if a new media creator (or a public broadcaster like the CBC) wishes to use an application to distribute content subject to reduced speeds, a requirement to grant unimpeded access should be regarded as a subsidy from the network provider to the content creator.

If so, such a subsidy could be seen as the Internet equivalent of cultural funding. Rather than adopting an ill-suited ISP tax, the costs associated with providing Canadian content with equal treatment could be treated as the financial contribution, thereby eliminating the legal concerns associated with an ISP tax and allowing the CRTC to extract support from network providers for the benefit of Canadian cultural production.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at mgeist@uottawa.ca or online at www.michaelgeist.ca.

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