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Warren Buffett, the billionaire investor who last year called the financial crisis an “economic Pearl Harbor,” said the U.S. economy has “hit a plateau at bottom.”

“We have not bounced but we’ve quit going down,” Buffett, the 79-year-old chief executive officer of Berkshire Hathaway Inc., said today in an interview on CNBC.

Signs the worst recession since the 1930s is over have accumulated in the past two months, with U.S. manufacturing expanding for the first time in 19 months in August and home- sales rising. The Bloomberg Professional Global Confidence Index exceeded 50 in September for a second month, meaning optimists outnumbered pessimists. Federal Reserve Chairman Ben S. Bernanke said yesterday “the recession is very likely over.”

“We’re through the worst of it in residential real estate in all probability,” Buffett said today, adding that he doesn’t expect a “double-dip” recession.

The number of contracts to buy previously owned homes rose more than forecast in July and increased for a record sixth consecutive month, while mortgage buyer Freddie Mac said the average price rose 1.7 percent in the second quarter.

The remarks from Buffett and Bernanke helped push stock and commodities prices higher, with the Standard & Poor’s 500 Index climbing 1.5 percent. Lead rose for a third day and copper prices advanced.

Stocks climbed yesterday as Buffett, known as the “Oracle of Omaha,” told a conference in California that his company was buying equities because “I am getting a lot for my money.”

Kraft Foods

Buffett built an equity portfolio valued at more than $48 billion by betting on companies including soft-drink maker Coca- Cola Co. and Kraft Foods Inc. that he believes have competitive advantages and enduring brand popularity.

Buffett told CNBC that, while he’s not opposed to Kraft’s bid for Cadbury Plc, he thinks the offer is a “pretty full” price. Last week, Cadbury rejected a takeover proposal from Kraft, valued at about $16 billion, as too low. Buffett said he has confidence in Kraft’s management. Berkshire is Kraft’s biggest shareholder free credit report instantly.

Berkshire is also the top holder in Wells Fargo & Co., the nation’s biggest home lender, and Buffett has been adding to the stake this year and saying the bank’s ability to gather deposits at low costs will boost profits as the economy recovers.

Credit Cards

“We’re gonna have unusual losses in credit cards and in commercial real estate” in the economy, Buffett said today. “But we’re a lot better off than we were a year ago. I mean for one thing, some of the toxic assets have been flushed through. There’s been capital raised.”

JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., the biggest U.S. credit-card lenders, said yesterday that defaults climbed in August as the unemployment rate jumped and the impact of tax refunds waned.

JPMorgan said yesterday that construction and development loans remained the “greatest area of concern” for its commercial bank portfolio as net charge-offs will continue to rise.

Buffett reiterated his praise for Federal Reserve Chairman Ben S. Bernanke, Treasury Department Secretary Timothy Geithner and former Treasury Secretary Henry Paulson, calling them “heroes” for their management of the economy since last year.

“You can look back and say you could have done this a little differently or that a little differently, but at the time I called it an economic Pearl Harbor and in the end we got through Pearl Harbor,” Buffett said. “And it could have turned out a lot differently.”

Profit Gain

Berkshire posted net income of $3.3 billion for the three months ended June 30, an increase of 14 percent from the prior- year period. The results, released last month, halted six straight quarters of declining profit at Berkshire that included a first-quarter loss of $1.53 billion.

Buffett’s firm gained $3,000 to $103,000 at 4: 15 p.m. in New York Stock Exchange composite trading. The shares have dropped about 18 percent in the past 12 months.

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Troubled banking giant Citigroup is seeking to scale back the massive stake the government acquired in the company over the past year, according to reports published Tuesday.

Citing people familiar with the matter, the Wall Street Journal reported that Citigroup approached the Treasury Department last weekend to initiate talks over shrinking the government’s investment in the firm.

Bloomberg, citing other sources, reported that the government may begin to sell shares in Citigroup as soon as October, with the hopes of completing a sale over the next six to eight months.

Since the crisis took hold a year ago, the government has had to step in more than once to pull Citigroup (C, Fortune 500) back from the brink. During that time, Treasury injected $45 billion into the firm and also agreed to share losses on a sizeable chunk of the bank’s troubled assets.

Regulators recently converted a portion of the government’s preferred-share stake into common stock to help bolster the firm’s health. U.S. taxpayers, as a result, now own approximately 34% of Citigroup.

The government’s stake has weighed heavily on Citi and other firms that have received exceptional federal assistance, such as Bank of America (BAC, Fortune 500) and insurer AIG (AIG, Fortune 500).

Compensation packages for Citi’s highest-paid employees are now subject to scrutiny from the White House, which has prompted some of its top-performing employees to seek opportunities elsewhere.

Hoping to scale back the government’s stake and its role in the company’s day-to-day operations, Citigroup executives have been considering a multibillion-dollar stock sale, according to the Journal. As part of the offering, Citi would issue new company shares. In addition, the Treasury Department would sell a portion of its holdings, the paper said.

Citigroup declined to comment on the matter. The Treasury Department was not immediately available for comment. 

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Federal Reserve Bank of San Francisco President Janet Yellen said prospects for a “tepid” recovery require that policy makers boost employment and guard more against inflation becoming too low rather than too high.

“We face an economy with substantial slack, prospects for only moderate growth, and low and declining inflation,” Yellen said today in a speech in San Francisco. Until the time comes to raise interest rates, “we need to defend our price stability goal on the low side and promote full employment,” she said.

Yellen, without calling for more monetary stimulus from the Fed, said “tight credit” may restrain growth for “some time to come.” The central bank in March authorized $1.45 trillion in purchases of mortgage-backed securities and other housing debt this year, and last month decided to taper off its $300 billion program buying U.S. Treasuries through October while debating a similar move with MBS.

“I expect the recovery to be tepid,” Yellen, who votes at interest-rate meetings this year, said in remarks to the CFA Society of San Francisco, a group of financial analysts.

“The gradual expansion gathering steam will remain vulnerable to shocks,” and the jobless rate will stay “elevated for a few more years,” she said, speaking one year after the Fed and the Treasury Department allowed Lehman Brothers Holdings Inc. to go bankrupt, intensifying the financial crisis.

Speaking to reporters, Yellen said she favors a tapering of the MBS purchases similar to the decision on Treasuries, “whatever level the MBS program is at or reaches when it comes to an end.” She declined to comment on whether the program will either be expanded or stopped short.

Main Rate Cut

The Fed cut its main interest rate in December almost to zero and switched to asset purchases as the primary tool of monetary policy. Central bankers have since reiterated that they will keep rates low for an “extended period,” and Yellen said in June that rates may stay near zero for several years.

Yellen said today the Fed’s moves “appear to be helping,” while the extent of their impact is “highly uncertain.” The Fed is mandated by Congress to promote stable prices and maximum employment.

There’s a “fear,” which is “real, growing and disruptive,” that the Fed will be unable to withdraw its $1 trillion expansion of credit and will print money to support the federal deficit, she said.

‘Loud and Clear’

“That’s why it’s so important for me to say the following loud and clear: We at the Fed are and will remain fiercely independent from politics,” Yellen said. “We have the means, we certainly have the will, to tighten policy when the time is right.”

That’s likely to happen before inflation rises to 2 percent because of the lag time following a monetary-policy decision, Yellen told reporters after the speech.

The central bank must be more mindful of asset-price bubbles now, she said. Low Fed rates “probably” helped inflate the housing bubble, Yellen said in response to an audience question.

The U.S. faces the possibility that inflation, excluding food and energy costs, will drift further below the Fed’s long- term objective of around 2 percent, Yellen said.

Treasury 10-year notes fell for the first time in four days amid speculation the rally that pushed yields to their lowest levels in two months can’t be sustained. The yield on the benchmark 10-year note climbed eight basis points, or 0.08 percentage point, to 3.42 percent at 5:50 p.m. in New York, according to BGCantor Market Data.

Improving Economy

In its Beige Book report last week, the Fed said that 11 of its 12 regional banks reported signs of a stable or improving economy in July and August, adding anecdotal evidence that the worst U.S. recession in seven decades is over. Five districts, including San Francisco, home to the biggest regional economy, “mentioned signs of improvement,” the report said.

“A wide array of data” supports the view that the recession has ended and the economy will expand in the second half, Yellen said. The growth this year will come from a “diminished pace of inventory liquidation by manufacturers, wholesalers and retailers,” she said.

Gross domestic product shrank at a 1 percent annual rate from April to June, following a 6.4 percent pace of contraction in the first three months of the year.

‘Low Gear’

The labor market “may keep the recovery in low gear for a while,” said Yellen, 63, a former Fed governor and top economic adviser under President Bill Clinton. Unemployment, a slowdown in wage growth and workers’ insecurity will “undoubtedly” restrain consumer spending and may result in “sluggish spending growth,” she said.

Yellen said potential losses on commercial real estate loans at small and mid-size banks represent a possible “financial contagion” that’s one of the biggest threats to economic recovery. “The likelihood of continuing losses by financial institutions will add new fuel to the credit crunch,” Yellen said.

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The former deputy Governor of the Bank of England said he was “astounded” the U.S. government let Lehman Brothers go under, and that the bank’s collapse marked a clear moment when people lost confidence in the markets.

Sir John Gieve said in an interview with Sky News he had fully expected U.S. authorities to step in this time last year to rescue the stricken investment bank, as it had done earlier with peer Bear Stearns.

The Federal Reserve put up $29 billion in March 2008 to underwrite JP Morgan Chase’s rescue of Bear Stearns, and was forced to step in again last September days after Lehman Brothers’ failure to prevent AIG from collapsing.

By propping up Bear Stearns, the Fed “created a presumption free 3-in-1 credit report… that the safety net had now been widened,” which was then “dash(ed) to pieces” by the inaction over Lehmans, Gieve said in the interview to be broadcast on Monday.

“I think letting Lehmans go really raised the question, did the U.S. have a grip on this thing?” he said.

But Gieve, who left his job at the British central bank in February, praised the steps taken to halt the global financial meltdown that followed the Lehman Brothers failure.

“Not just this government but governments across the West have been right to throw the kitchen sink at this,” he said.

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Mickey Mouse’s house and his Toon Town world will make way next year for a vastly larger Fantasyland, in the biggest-ever expansion of the Magic Kingdom at Walt Disney World in Florida, Walt Disney Co said on Saturday.

The Fantasyland expansion, whose price tag was not disclosed, will open in two stages in 2012 and 2013 and builds on the popularity of the Disney Princess and Fairies franchises, which have topped $4 billion in global retail sales.

Disney theme parks Chairman Jay Rasulo said the Fantasyland project, which breaks ground next year, will be paid for from funds designated for the theme park division’s annual capital expenditures.

Plans call for four Disney Princess characters — Cinderella, Sleeping Beauty, Belle from “Beauty and the Beast” and Ariel from “The Little Mermaid” — to be featured in “fantasy lands” where park visitors engage in dancing, storytelling or a birthday party with costumed characters from the films.

The expansion includes two new dining spots — Gascon’s Tavern and the 552-seat Beast’s Castle. A new underwater ride based on “The Little Mermaid, will be built both in the Florida Fantasyland and at the ongoing expansion of California Adventure in Disneyland.

The second phase of the Fantasyland expansion will be an oversized world based on the fairy world of Pixie Hollow from “Peter Pan,” but no other details were available because the attraction was still in early development stages, Rasulo said.

As part of the Fantasyland expansion, Disney plans to double the size of the popular Dumbo ride to add a covered “three-ring circus” waiting area with interactive games and a play area.

Disney Imagineers, who design rides and attractions, said the Toon Town attraction would be dismantled and its popular Mickey Mouse and Minnie Mouse houses relocated to another section of Walt Disney World.

Rasulo also announced an upgrade to the Star Tours rides at Disneyland in Anaheim and Disney’s Hollywood Studio in Florida to open in 2011.

Star Tours simulates a ride through space aboard spacecraft like those in the original “Star Wars” film.

The updated version features new digital 3D effects and projectors that let ride operators vary “destinations,” as well as upgrades to the Star Speeder cabins, Rasulo said.

(Editing by Peter Cooney)

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The number of Americans filing for initial unemployment insurance fell last week, and ongoing claims also dropped, the government said Thursday.

There were 550,000 initial jobless claims filed in the week ended Sept. 5, down 26,000 from a revised 576,000 the previous week, the Labor Department said in a weekly report.

A consensus estimate of economists surveyed by Briefing.com expected 560,000 new claims.

The 4-week moving average of initial claims was 570,000 down 2,750 from the previous week’s revised average of 572,750.

"We’re still talking about declining at a slower pace, not outright job growth," said Tim Quinlan, analyst at Wells Fargo, who noted initial claims were at their lowest level since July.

Quinlan added that claims levels are well off the highs seen earlier this year amid mass layoffs, but they remain "roughly double what they would be in an expansionary economic environment."

Continuing claims: The government said 6,088,000 people filed continuing claims in the week ended Aug. 29, the most recent data available. That’s down 159,000 from the preceding week’s revised 6,247,000 claims.

The 4-week moving average for ongoing claims fell by 37,750 to 6,182,500, down from the prior week’s revised average of 6,220,250.

The initial claims number identifies those filing for their first week of unemployment benefits. Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks free instant credit reports.

The figures do not include those who have moved to state or federal extensions, nor people whose benefits have expired.

State-by-state data: A total of six states reported a decline in initial claims of more than 1,000 for the week ended Aug. 29, the most recent data available. Claims in Michigan fell the most, by 1,915.

Conversely, five states said that claims increased by more than 1,000. New York reported the most new claims at 4,546, which a state-supplied comment said was due to more layoffs in the transportation and service sectors.

Outlook: "In the short term, [claims] may give up some ground, but we probably have turned a corner," Quinlan said.

Wells Fargo estimates the recession ended in July, he said, but the labor market will likely not recover until the second quarter of 2010. Even when some signs of recovery are evident, "it will take a ton" to improve the unemployment rate, he added.

"It doesn’t mean the economy overall is [still] in greater trouble, but it lags overall recovery," Quinlan said.

Initial claims will probably fall within a range of 500,000 and 600,000 through the end of 2009, Quinlan said.

"[Filings] could even fall below the 500,000 mark," Quinlan said. "That’s optimistic, but it’s possible."  

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U.K. house prices rose for a second month in August as low borrowing costs lured homebuyers, a report by Halifax showed.

Home values climbed 0.8 percent to an average of 160,973 pounds ($266,000) after rising 1.2 percent in the previous month, the division of Lloyds Banking Group Plc said in a statement today. The median forecast of 14 economists in a Bloomberg News survey was for a 1 percent increase. Prices were down 7.6 percent from a year earlier.

The report adds to evidence that the property slump is easing. Mortgage approvals rose to a 15-month high in July. The Bank of England will probably continue a plan to buy 175 billion pounds of bonds with newly created money to cement the economy’s recovery from the worst recession in a generation.

“Demand for housing has increased since the start of the year due to better affordability and low interest rates,” Martin Ellis, housing economist at Halifax, said in the statement. “This, together with low levels of property available for sale, has boosted house prices over the last few months.”

The central bank will maintain the size of its bond purchase program, according to all 35 economists in a Bloomberg News survey. Policy makers will also keep the benchmark interest rate at a record low of 0.5 percent, all 60 economists in a separate survey said. The bank announces the decision at noon in London today.

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U.K. consumer confidence rose to the highest level in more than a year in August as signs mounted that the economy is emerging from the worst recession in a generation, Nationwide Building Society said.

An index of sentiment rose to 63, the highest since May 2008, from 61 in July, Britain’s biggest customer-owned lender said in an e-mailed statement today. TNS questioned 1,000 people for Nationwide from July 20 to Aug. 23.

The National Institute of Economic and Social Research said yesterday that the economy has started growing again, and a separate report today signaled the first improvement in the labor market for 17 months. The Bank of England will tomorrow probably stick to its plan to keep spending newly printed money as policy makers try to entrench the recovery, economists say.

“Consumers are beginning to feel more positive not only about the future, but also about the present situation,” Martin Gahbauer, chief economist at Nationwide, said in the statement. “A number of key economic indicators continue to show that we may have reached the bottom of the current recessionary cycle.”

A measure of Britons’ assessment of their present situation rose 1 point to 17, and a gauge of willingness to spend increased to 97 from 96, the report showed. Nationwide’s index of future expectations increased 3 points to 94.

Gross domestic product increased 0.2 percent in the three months through August, compared with a decline of 0.3 percent in the three months through July, Niesr, whose clients include the central bank, said yesterday. That’s the first time GDP has risen since the quarter through May 2008.

Trade Data

The U.K. trade deficit was wider than economists forecast in July as imports from outside the European Union rose faster than exports free credit report. The goods-trade gap was 6.5 billion pounds ($10.7 billion), the same as in June, the Office for National Statistics said today. The median forecast of 15 economists surveyed by Bloomberg News was for a 6.3 billion-pound deficit.

The labor market, where unemployment reached a 14-year high in the second quarter, may be showing signs of improvement, according to a separate report today by KPMG and the Recruitment and Employment Federation. Their measure of hiring for permanent jobs rose to 50.6 last month from 46.1 in July. That’s the first result above 50, signaling expansion, since March 2008.

Brown’s View

“There were some interesting and encouraging signs today but the prime minister’s view is that this is not a time for complacency,” Simon Lewis, Gordon Brown’s spokesman, told reporters today. “The prime minister feels strongly about the need to keep recovery going by maintaining the appropriate level of expenditure.”

The threat of deflation may convince policy makers to keep up their measures to stoke economic growth. Average U.K. shop prices fell 0.1 percent in August from a year earlier, the first annual decline since February 2007, according to a report released today by the British Retail Consortium.

The bank will leave the benchmark interest rate at a record low of 0.5 percent tomorrow, according to all 60 economists in a Bloomberg News survey. All 35 forecasts in another survey are for no change in the 175 billion pounds total that the bank plans to spend in U.K. debt markets with newly printed money.

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China must lower trade barriers and do more to protect intellectual-property rights or risk losing foreign investment, European Union Trade Commissioner Catherine Ashton said.

“With global competition for the best investment rising, governments should be seeking to attract not restrict investment,” Ashton said today at an investment fair in Xiamen, China. “Barriers in China not only cost European business, but also deprive the Chinese economy of investment inflows and significant tax revenues.”

A number of what Ashton called “warning signs” have emerged, signaling that China and EU are growing skeptical about investing in each other. EU investment in the world’s fastest- growing major economy dropped to 4.5 billion euros ($6.5 billion) last year from 7.1 billion euros in 2007, while Chinese investment in Europe fell by half a billion euros.

While part of the decline stems from the impact of the global financial crisis on capital markets, “this is not the whole story,” Ashton said. “Foreign direct investment should not be curtailed by equity caps, unnecessary joint-venture obligations or restrictions in sectors considered strategic.”

EU-China ties have soured in recent years amid growing European criticism of China’s human-rights record and its failure to crack down on counterfeiting, plus a rash of trade spats. While China is the 27-nation EU’s second-largest trading partner, the Asian nation is attracting “much less” foreign direct investment from Europe than other emerging economies such as India, Brazil and Russia, Ashton said paydayloans.

Ownership Caps

China is backsliding on reforms to open its economy to foreign business, which are impeded by a lack of legal and political transparency and violations of intellectual-property rights, the EU Chamber of Commerce in China said last week. Forced joint ventures and ownership caps are making China less appealing as an investment destination for many European companies, the chamber said.

Europe’s carmakers, for instance, can’t establish their own manufacturing facilities in China and must operate via 50-50 joint ventures, it said. And local governments are required to buy Chinese products for projects under China’s 4 trillion-yuan ($585 billion) stimulus plan.

“Protection of intellectual property, especially patents, is also crucial if more companies are to bring their ideas and their technology to China,” Ashton said. “Without the promise of protection for their innovations, European companies are sometimes hesitant to invest here. It is therefore very encouraging that the Chinese leadership sees the necessity of a well-enforced IPR system as a stepping-stone to future economic development.”

Chinese Premier Wen Jiabao said on June 25 that the nation didn’t discriminate against foreign enterprises or products.

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The Polish central bank’s new rate- setting council will need to raise borrowing costs, after it is selected in February, to curb inflation, said Jerzy Hausner, an informal adviser to the government.

“Monetary policy in Poland will have to be much tighter than it is now,” Hausner said in an interview in Warsaw on Sept. 2. “Inflation is definitely going to be one of Poland’s future problems.”

The European Union’s largest eastern member and the only one that emerged from the global crisis without falling into recession must balance the need to keep price growth under control and sustain growth as the economy recovers from near- stagnation in the first quarter.

Annual inflation has remained above the target limit of 3.5 percent for 15 of the past 18 months. The Finance Ministry on Sept. 1 said the rate probably rose to 3.7 percent in August. The benchmark interest rate is at a record-low 3.5 percent.

While other post-communist nations in the region suffered from contractions, Poland’s gross domestic product was buoyed by its large internal market, which shielded it from a drop in exports as demand from its rich western neighbors waned.

Even so, rising unemployment and the effect of higher rates on investments are risks to the economy, said Hausner, a former economy minister who heads the economics and public administration department at the Krakow University of Economics.

‘Hit That Hard’

“We’ll start having problems with private consumption soon as a result of the labor market situation, and I don’t believe that we’ll reach our export levels from before the crisis any time soon,” he said. “Investments will be far more important than before, and tighter monetary policy will hit that hard.”

The economy expanded an annual 1.1 percent in the second quarter. Hausner said the recovery will be tentative, without an acceleration in the last two quarters and may last longer than some economists predict. He sees GDP stagnating or rising 1 percent this year.

“It doesn’t make much difference where it is on that scale, growth will be far, far slower than last year,” he said. “We haven’t come out the other side of our difficulties yet.”

Prime Minister Donald Tusk said on Aug. 28 Poland would need “serious fiscal discipline” to rein in the deficit.

The European Commission, the EU’s regulatory arm, in May initiated a so-called excessive budget deficit procedure against Poland after its shortfall shot above the bloc’s limit last year. The Organization for Economic Cooperation and Development predicted the general government deficit to reach 6.3 percent of GDP this year.

‘Growing Problems’

“Next year’s budget will be extremely difficult, and slightly higher growth than was expected in the second quarter won’t put a stop to the growing problems,” Hausner said. He added Poland needs annual growth of “at least” 4 percent to “put us on the safe side with the budget and allow us to continue catching up with western Europe.”

Hausner said the new Monetary Policy Council will have to ignore pressures to keep rates low at the expense of boosting inflation.

“The current council is coming to the end of its term and is very likely to keep its stance neutral,” he said. “We need to have a balanced Monetary Policy Council that’s composed of people who think independently and don’t make decisions as a result of outside pressure.”

The MPC will end its term early next year. The president and the two chambers of parliament can each recommend three members to the 10-seat body. Bank Governor Slawomir Skrzypek, who took office in January, 2007, is the 10th member, with the power to break potential ties.

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