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Japan posted a current-account surplus in January as exports climbed for a second month, an indication overseas demand is sustaining the nation’s recovery.

The gap was 899.8 billion yen ($9.9 billion) from a year earlier, when it was deficit, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg News was for a 783.9 billion yen surplus.

The report highlights the role overseas shipments have continued to play in propping up the world’s second-largest economy. Further export gains in coming months will prompt businesses to boost spending on plant and equipment, helping support the rebound, according to economist Naoki Iizuka.

“Right now the economy is being pulled by exports and inventory adjustments,” Iizuka, a senior economist at Mizuho Securities Co. in Tokyo, said before the report was released. “Once we enter the second quarter, manufacturers’ capital spending will be a new contributor to the economy’s growth.”

Today’s data adds to signs of sustained expansion in the first quarter. Factory production rose at the fastest pace since May and the unemployment rate fell to a 10-month low in January. The Finance Ministry said last week capital spending also fell 18.5 percent in the three months ended Dec. 31. While that was the 11th straight decline, it was also the smallest drop in a year.

Shipments to China rose at the fastest pace since 1985 in January, while exports to the U.S. advanced for the first time in more than two years, customs-cleared trade data showed last month. Today’s figures don’t include regional breakdowns.

Favorable Comparison

The export rebound has been driven in part by favorable year-on-year comparisons. Shipments had plunged last year in the wake of a global credit crunch caused by the collapse of Lehman Brothers Holdings Inc. Japan posted its first current-account deficit in 13 years in January 2009 as a result.

Overseas shipments of Nissan Motor Co. cars rose 29.6 percent in January, while Mitsubishi Motor Corp. shipped more than double the amount of vehicles compared with the same month a year ago, according to the Japan Automobile Manufacturers Association.

The Cabinet Office will say the economy expanded at a revised 4 percent annualized pace last quarter, according to the median estimate of 27 economists surveyed by Bloomberg News. Preliminary figures showed 4.6 percent growth. The report is due on March 11 at 8:50 a.m. in Tokyo.

The current account tracks the flow of goods, services and investment income between Japan and its trading partners. It includes trade not shown in the customs-cleared balance.

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Applied Materials, Inc. announced Wednesday it will cut between 1,300 and 1,500 employees, or 10% and 12% of its global workforce, over the next 18 months as part of its restructuring plan.

Half of the cuts will be in the U.S., and the other half will be in the company’s overseas staff, said company spokesman David Miller.

The reductions, which the company will start to make in the next few days, will cost the chipmaker between $100 million and $125 million in the first quarter of fiscal 2010 and will save $450 million on an annual basis.

In October 2008, the Santa Clara, Calif.-based company had announced plans to eliminate 1,800 positions to cut costs by $400 million annually. That measure coupled with other cutbacks resulted in savings of $460 million for fiscal 2009, the company said in a statement low cost payday loans.

Applied Materials (AMAT, Fortune 500) also reported better-than-expected earnings for the fiscal 2009 fourth quarter, which ended Oct. 24. Net income slipped 40% to $138 million, or 10 cents per share, compared to the same period last year. Analysts expected the technology company’s profit to tumble by 85%.

Revenue fell 25% to $1.53 billion compared to last year, better than the 36% drop analysts expected.

Shares of Applied Materials rose .8% in after-hours trading.  

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Indonesian President Susilo Bambang Yudhoyono starts a second five-year term today with a mandate to speed growth in Southeast Asia’s biggest economy. To do that, he must reconcile national and local policies, analysts say.

“Many targets couldn’t be reached because of bottlenecks,” Yudhoyono said earlier this month. The goal in the second term “is very clear,” he said. “Solve these clogs. That’s why we will reform bureaucracy, rearrange permits, control programs, and prevent incorrect practices.”

Yudhoyono won the July 8 election on pledges to end corruption and rein in terrorism. A July 17 suicide attack on two Jakarta luxury hotels was the country’s first in almost four years, and anti-terror squads killed most-wanted terrorist Noordin Mohammad Top last month. The president still must build roads, power plants and ports vital for growth, said Umar Juoro, of Jakarta-based Center for Information and Development Studies.

“The strength of Yudhoyono’s economic team has been in the macro level,” Juoro, who is also a commissioner at PT Bank Internasional Indonesia Tbk, said in an Oct. 19 phone interview. “When we see the results in the real sector like mining, agriculture and infrastructure, we will find many policies that didn’t run properly.”

While Indonesia made more key changes in easing business regulations than other East Asian and Pacific economies, as the World Bank’s 2010 “Doing Business Report” showed last month, a number of regional laws contradict national policies, creating legal uncertainty for investors, said Chris Kanter, vice president of the Indonesian Chamber of Commerce and Industry.

Professionals, Politicians

Yudhoyono’s next cabinet will be a combination of professionals and members of the five parties that have joined his Democrat Party in the ruling coalition. The latter group doesn’t represent “something the markets will be cheering over,” said Helmi Arman, an economist at PT Bank Danamon Indonesia Tbk in Jakarta, in an Oct. 19 E-mail.

“Partisan politics apparently still played a significant role in the assignment of other key ministerial posts,” Arman said. The president has “the added burden” of ensuring a consolidated agenda and “making sure that partisan cabinet ministers don’t go their separate ways,” he said.

Yudhoyono has told candidates for his next cabinet, which may be announced tomorrow, they should make Indonesia investment-friendly.

The crux of the interviews is that “we must embark on some acceleration in our economy”, said State Secretary Hatta Rajasa whom analysts and the Indonesian media have said may take the post of coordinating minister for economic affairs.

‘Political Shield’

Rajasa has “limited economic experience but he’s hoped to be able to give political shield for economic ministers under him in the parliament,” Fauzi Ichsan, chief economist at Standard Chartered Plc in Jakarta, said in an Oct. 19 interview.

Before serving as state secretary, Rajasa was Yudhoyono’s transport minister, and ran his successful re-election campaign. Rajasa comes from the National Mandate Party and was the Muslim- based group’s secretary-general from 2000 until 2005.

The former oilman also was his party’s parliamentary leader from 1999 to 2000. National Mandate has been a member of the president’s coalition since 2004.

Yudhoyono’s coalition holds 75 percent of the parliament after Golkar, the second largest party in the house, joined after Aburizal Bakrie, a Yudhoyono ally and a businessman who served in the president’s first-term team as chief social welfare minister, was elected as Golkar chairman Oct. 8.

Almost Tripled

Yudhoyono’s Democrat Party, which held 10 percent of the parliament during his first term, almost tripled its share to 148 seats in April 9 legislative elections, making it the biggest party in the 560-strong body.

The party’s legislative clout means “the political condition should be easier” for Yudhoyono to push his policies forward, said Ichsan.

Yudhoyono’s inauguration will be attended by envoys that include U.S. Ambassador Cameron Hume and heads of governments like Australian Prime Minister Kevin Rudd. About 18,000 policemen and soldiers will guard the ceremony, according to Rohimullah, secretary general of the Indonesian legislature.

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Argentina will be forced to default by 2011 unless the government reaches an accord with investors holding $20 billion of bonds kept out of the last restructuring offer, Stone Harbor Investment Partners says.

President Cristina Fernandez de Kirchner is negotiating terms of an agreement, which the government needs to regain access to international capital markets that it lost after stopping payments on $95 billion of debt in 2001. Since then, Argentina has relied on local markets and loans from Venezuela to meet financing needs, and seized about $24 billion of pension fund assets last year to compensate for falling tax revenue.

“They’ve got to get things straightened out — they need to do that now,” said Jim Craige, who manages $10 billion of emerging-market debt at Stone Harbor in New York and owns Argentine securities, including some of the defaulted bonds.

Argentine credit-default swaps also point to concern among investors. Traders demand 1.7 percentage points more to protect the country’s debt against default for two years than one, up from 1.35 points two months ago and the widest gap among major Latin American countries, according to data compiled by CMA Datavision. The one year-two year gap on Venezuelan debt — the country with the closest borrowing costs to Argentina in the region — is 0.26 percentage point.

A basis point equals 0.01 percentage point, which is equivalent to $1,000 a year on a contract protecting $10 million of debt. Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent.

‘Not Sustainable’

Argentina’s financing requirements jumped to $10.7 billion this year from $5.9 billion in 2008, prompting Fernandez, 56, to extend local debt maturities and turn to government agencies, state-run Banco de la Nacion and the central bank for funds, according to Credit Suisse AG. Borrowing needs will decline to $8.2 billion next year before rising to $10.2 billion in 2011, Credit Suisse estimates.

Banco de la Nacion, which lent the Treasury 1 billion pesos ($261 million) in July, is authorized to provide the government as much as 7.3 billion pesos. Argentina has issued 4.2 billion pesos of debt to state agencies this year, according to the Economy Ministry.

“You cannot live forever doing this,” said Sebastian Briozzo, an analyst in Buenos Aires with Standard & Poor’s, which rates Argentine foreign debt B-, or six levels below investment grade. “At some point you will run out of local sources of financing. It’s not sustainable.”

A spokesman for the Economy Ministry didn’t return telephone calls seeking comment low fee pay day loans.

‘Muddling Through’

Cathy Elmore, who manages $500 million in emerging-market assets at Blackfriars Asset Management, said the country has proven more resilient than she expected while it’s been cut off from international markets.

“They’ve done a good job muddling through,” Elmore, who holds Argentine securities, said in a telephone interview from London. “I’m surprised they’ve been able to carry on for so long. They’ve plundered much of the resources available to them locally.”

Lawsuits from investors such as billionaire Kenneth Dart who kept their bonds out of the 2005 agreement are blocking the South American country from selling debt overseas.

Nestor Kirchner, Fernandez’s husband and predecessor, paid investors 30 cents on the dollar in 2005, the harshest government debt restructuring since World War II, according to Arturo Porzecanski, an international finance professor at American University in Washington. About 25 percent of creditors rejected the offer.

Bonds Rally

Economy Minister Amado Boudou told reporters in Buenos Aires on Sept. 21 that the government was talking with investors in search of a “definitive strategy” for the defaulted debt. The bonds trade at 38.5 cents on the dollar, up from 15 cents in June, according to London-based Exotix Ltd., a brokerage that specializes in distressed securities.

The extra yield investors demand to own Argentina’s dollar bonds instead of U.S. Treasuries narrowed to 6.47 percentage points, the smallest gap in 14 months, from 9.62 points at the end of July, according to data compiled by JPMorgan Chase & Co.

A restructuring “would change things dramatically,” said Craige. “It will give them the ability to access capital markets. There will be a normalization of the credit curve.”

Moody’s Investors Service said Oct. 8 that a restructuring may “improve the outlook” on the country’s B3 foreign debt rating, which is also six levels below investment grade.

Without such an accord, the government “would have severe trouble,” Elmore said. “There’s only so much muddling through they can do.”

Markets

Argentina’s peso gained 0.3 percent last week to 3.8288 per U.S. dollar. The Merval stock index advanced 7.1 percent to 2,169.04.

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Federal Reserve General Counsel Scott Alvarez said audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.

Congressional audits of monetary policy could “cause the markets and the public to lose confidence in the independence of the judgments of the Federal Reserve,” Alvarez told the House Financial Services Committee today in response to a question from Representative Dennis Moore, a Kansas Democrat. Alvarez said in his prepared remarks the audits would probably “chill” the central bank’s discussions on interest rates.

Fed Chairman Ben S. Bernanke and his colleagues are trying to persuade lawmakers not to pass legislation sponsored by Representative Ron Paul of Texas that would repeal the central bank’s immunity to audits of monetary policy. Fed officials used emergency powers to protect creditors of Bear Stearns Cos. and American International Group Inc. during the financial crisis, prompting congressional scrutiny.

“We don’t want to give the rest of the world or, more important, domestic investors the impression that we are somehow in a formal way injecting Congress into the setting of monetary policy,” said Representative Barney Frank, a Massachusetts Democrat and chairman of the committee. “That could have a very destabilizing effect.”

Frank added that “a lot needs to be done” on Fed transparency and said that Congress can accomplish that without interfering with the independence of monetary policy decisions.

Remove Exemptions

Paul’s legislation would remove Fed exemptions from audits in four areas: transactions with foreign central banks; deliberations on monetary policy matters, including discount- window operations; transactions made under the direction of the Federal Open Market Committee; and communications and discussions between the Board, the reserve banks and staff.

Frank said he supports a delay in making some Fed information public, such as the securities it buys and sells, so it doesn’t have a “direct market effect.” Alvarez told Frank that the Fed is “giving serious consideration” to that idea and would be “happy to work with you on it fast payday loan no faxing.”

In an interview after the hearing, Paul said the audit powers in the bill may be altered to delay by three to six months releasing information on FOMC actions. The legislation is likely to be included in a broader Democratic package of financial-regulation changes in the House, he said.

‘Gentleman’s Agreement’

“It’s a gentleman’s agreement” with Frank, Paul said, adding that Frank fulfilled an earlier agreement to hold a hearing. “That doesn’t mean it will happen in the Senate,” even as prospects in the upper chamber are improving, Paul said.

In the hearing, Paul told Alvarez that the Fed had “failed” to stabilize interest rates, prices and employment, according to its mandate. “What we need is more oversight and more transparency rather than more authority to the Federal Reserve,” Paul said.

Alvarez said GAO audits of discount-window lending could reduce the effectiveness of “these facilities in promoting financial stability, maximum employment, and price stability.” The legislation could also “disrupt” the Fed’s relationships with foreign central banks, he said.

“Monetary policy independence prevents governments from succumbing to the temptation to use the central bank to fund budget deficits,” Alvarez said in his prepared testimony. “Financial markets likely would see the grant of audit authority to the GAO with respect to monetary policy as undermining the Federal Reserve’s independence.”

The legislation has 295 sponsors in the House, including every Republican member, Rachel Mills, a spokeswoman for Paul, said in an e-mail yesterday.

The Fed is facing other challenges by Congress, including a proposal to strip the central bank of its rule-writing power on some consumer financial products.

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Lithuania’s recession, the deepest in the European Union, is close to bottoming out and the economy may start growing next year if trade demand continues to gain strength, central bank Governor Reinoldijus Sarkinas said.

“Under positive external conditions, a recovery, even if at very low growth rates, may begin next year,” Sarkinas said in an interview in Vilnius yesterday.

The government of Prime Minister Andrius Kubilius expects the economy to contract 4.3 percent next year as the Baltic state adapts to tough austerity measures needed to comply with euro adoption terms. Lithuania, like neighboring Latvia and Estonia, pegs its currency to the euro inside the exchange rate mechanism, obliging the government to deflate the economy to stay competitive instead of relying on a weak litas.

The Baltic nation’s top monetary policy official called on the government to cut spending to a level “it can afford.”

Government spending cuts and tax increases contributed to a 20.2 percent economic contraction last quarter. The Cabinet yesterday proposed savings including cuts on social spending to stop next year’s deficit from widening beyond the 8 percent of gross domestic product estimated for this year.

“The deficit needs to start narrowing next year,” Sarkinas said. “We shouldn’t borrow just for consumption. One must live within one’s means.”

A swelling budget gap doesn’t mean the country will need outside help with its finances, he said. Lithuania has “no need at the moment” to ask for money from international lenders, “but there’s nothing frightful if such a need occurs,” he said.

IMF

Latvia, which is suffering the second-deepest recession in the EU after Lithuania, is relying on a 7.5 billion euro ($11 billion) loan from the International Monetary Fund and the European Commission to stay afloat.

Latvia’s economic difficulties “can’t be comforting to anyone, neither to us, nor to Latvians, nor to other countries,” Sarkinas said. “We’d benefit if the situation there would be solved as soon as possible and would begin improving.”

The government can avoid a bailout if it raises funds on the domestic bond market or abroad. “The Baltic region is three separate countries with different situations, and one shouldn’t put an ‘equals’ mark,” Sarkinas said.

Borrowing opportunities in foreign markets “have significantly improved since the start of the year,” he said, and the government is likely to borrow at a cheaper rate than earlier this year, when it sold euro-denominated bonds.

The Baltic economic crisis has had repercussions outside the region, with western European lenders suffering depleted loan portfolios as a growing number of Baltic borrowers were unable to service their debt.

‘Most Serious Risk’

The recession in the Baltic region poses the “most serious risk” to Sweden’s economy and budget, Swedish Finance Minister Anders Borg said on Sept. 21. Stockholm-based Swedbank AB and SEB AB are the biggest lenders in the region.

Sarkinas said Swedish lenders are operating “completely fine” in Lithuania, while adding an improvement in the banking industry’s loan quality may take longer. “It’s a difficult time for banks,” he said.

Loan provisions average 3.28 percent of total lending, compared with 0.8 percent a year ago, and “will continue increasing.” Even so, lenders are “well-prepared” and “have accumulated sufficient capital to absorb future losses,” Sarkinas said.

Capital adequacy ratios average more than 13 percent, compared with the 8 percent ratio required by the central bank, Sarkinas said.

Credit portfolios, which shrank about 7 percent from the start of the year, are showing the first signs of stabilizing and may start growing in coming months, Sarkinas said. Loans to households and businesses were almost unchanged in August after shrinking in each of the first seven months.

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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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French oil group Total has moved expatriate staff and their families from Gabon’s industry hub Port Gentil to the capital Libreville because of post-election violence, the company said on Saturday.

Port Gentil has been hit by riots, looting and attacks on Total facilities and the French consulate since Ali Ben Bongo was declared the winner on Thursday of a presidential election denounced as fraudulent by opposition leaders.

Leading opposition figures have said they would mount a legal challenge to the victory of Ben Bongo, son of the late president Omar Bongo, who ruled the Central African oil exporter for 41 years until his death in June.

Protesters burned down a sports and social club owned by Total in Port Gentil overnight, a spokeswoman at the oil company’s offices in Paris said, adding that no one was injured in the fire.

French state radio station France Info reported two people had been killed during the night in the city, where looting broke out and protesters torched cars and buildings.

The radio station quoted Gabon’s Interior Minister Jean-Francois Ndongou as saying the dead were looters who were shot by a house owner.

“Some Total employees and their families have been transferred from Port Gentil to Libreville in a temporary move for their safety,” the Total spokeswoman in Paris said.

French state television showed images of French families with children disembarking from boats in Libreville. One mother, who did not give her name, said she had wanted to leave Port Gentil because the situation there was frightening used auto loans.

SECURITY PATROLS

A French resident of the oil city, who gave his name only as Pascal, told state television that he had seen the Total leisure center go up in flames from his residence.

“We could see the flames very well and we could hear gunshots and fighting. The building was completely burned down,” he said.

“Today the city is patrolled by police, gendarmes, troops. The French consulate is protected by French paratroopers.”

France, Gabon’s former colonial ruler, maintains a permanent military presence in Libreville and some French troops were deployed in Port Gentil on Thursday to help evacuate and protect the consulate after it was attacked, authorities said on Friday.

But the French troops did not get involved in the overnight violence, according to media reports in France.

Total said that for now the company planned to keep the transferred families at hotels in Libreville for the weekend and to move them back to Port Gentil when it was safe to do so.

“We are not evacuating anyone from Gabon itself. We are simply taking the right measures for no one to find themselves in the wrong place at the wrong time,” said Jean-Philippe Magnan, head of Total’s Gabon arm, speaking on France Info. 

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Despite the Obama administration’s promises that any Clunker deals written this weekend would be honored, the National Automobile Dealers Association is advising its members to play it safe and not close any more deals until the program’s fate is clearer.

"Regarding auto sales this weekend, one possible alternative is for dealers to take deposits in lieu of consummated sales with an eye toward legislative success next week," NADA spokesman Charles Cyrill wrote in an e-mail.

The House of Representatives allocated $2 billion more on Friday to continue the program after it apparently burned through its original $1 billion budget in the week since its official July 24 start date. The measure faces opposition in the Senate, however.

"We could have a legislative conclusion very quickly with the promise of more money for the program," Cyrill said later by telephone business cards. Until that’s settled, he said, the dealers’ organization is recommending that dealers proceed with caution.

Since the rules of the program require dealers to render traded-in vehicles permanently inoperable before applying for their rebates, dealers whose applications are not honored could be left with no money and no vehicle to sell.

Under the plan as enacted, vehicles purchased after July 1 will be eligible for refund vouchers worth $3,500 to $4,500 on traded-in gas guzzlers. The trade-in vehicle has to get a combined city and highway fuel economy rating of 18 miles per gallon or less.

The program aims to help the struggling auto industry by taking inefficient cars off the road and spurring new sales. 

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White House National Economic Council Director Lawrence Summers chastised some banks that received government aid for not doing enough to reduce foreclosures, while declaring that next year’s economic growth pace is “in doubt.”

“Prudent financial institutions will recognize that the profits they’re enjoying are in part a reflection of the commitment government and the broader society have made to the financial system that has enabled them to enjoy those profits,” Summers said in an interview with Bloomberg News yesterday in Washington.

While Summers, President Barack Obama’s chief economic adviser, didn’t identify any firms, he said the government will disclose names as part of reports on loans and foreclosures. Last week, Goldman Sachs Group Inc. reported record quarterly earnings, while JPMorgan Chase & Co. said it had second-quarter profit of $2.7 billion.

Separately, Summers, 54, said Obama hadn’t consulted him on the potential reappointment of Federal Reserve Chairman Ben S. Bernanke, 55. “The president will consult with whoever he wishes,” Summers said when asked whether he would recuse himself from conversations about the Fed post, for which he’s regarded by Fed watchers as a potential candidate.

Summers said the U.S. economy is “no longer in freefall,” and poised for recovery starting this year. The former Treasury secretary and Harvard University president cited recent increases in exports, and said fiscal-stimulus and foreclosure- relief programs will create a “gathering force” in the coming months.

Income Growth

Even so, income growth may not “resume in the near term,” he told Bloomberg editors and reporters.

“The pace of growth next year, I think, is very much in doubt and difficult to predict,” Summers said. That “will depend crucially on our effectiveness in implementing the programs that have been legislated” and what Congress may do on health care, financial regulation and energy, he said.

The U.S. contraction, the worst in a half-century, probably slowed to a 1.8 percent annual pace in the second quarter from a 5.5 percent rate in the first three months of 2009, economists surveyed by Bloomberg News estimate. Growth will resume in the second half of the year, the economists predicted.

Summers called the banking industry’s mortgage-relief efforts “substantially variable” from company to company.

“I would hope” those firms “consider very carefully the needs of their customers as they formulate their lending policies,” Summers said. “Some institutions I think have been very conscious of the kind of contribution they can make, and others have been much slower to get started.”

Government Aid

He said financial companies have benefited from an “aura of government support,” as well as programs to guarantee debt, backstop commercial-paper issuance and “support weaker financial institutions that were their counterparties compare car insurance.”

In the government’s bailout of American International Group Inc., $105 billion flowed to U.S. states and banks including Goldman Sachs and Bank of America Corp., AIG said in March.

Summers repeated the Obama administration’s call for stricter regulation of financial firms that may be considered “too big to fail.” Those banks and other companies should face higher capital requirements and limits on leverage, which would essentially tax their large and interconnected status, he said.

“We’re very focused on the ‘too big to fail’ problem,” Summers said. He declined to comment on a proposal by Federal Deposit Insurance Corp. Chairman Sheila Bair to slap fees on the biggest financial holding companies because it hasn’t been released yet.

Fed Chairman

Obama has declined to comment on whether he will reappoint Bernanke, who was picked by former President George W. Bush. Bernanke’s four-year term ends Jan. 31. Other potential candidates may include Summers and Janet Yellen, president of the San Francisco Fed bank.

Traders are placing low odds on a Summers Fed. Intrade, a Web site that lets users trade futures contracts for political outcomes, shows a 10 percent chance of Obama appointing him as central bank chief and a 65 percent chance of Bernanke getting a second term.

On health care, Summers said a top Obama priority is to standardize treatment practices and costs for essentially the same illnesses in comparable populations, using Medicare reimbursement policies as the engine.

That approach is modeled after a congressionally created commission that rewards the value of care physicians provide to Medicare recipients rather than the volume of services they deliver.

Medicare Program

Such incentives, Summers said, could “fundamentally change Medicare reimbursements in ways that we can achieve very substantial savings in the health-care system.”

Regional differences in the range of treatments vary today by as much as a two-to-one ratio, he said.

In some cases, studies have show that patients receive better care at two-thirds or half the cost, depending on regional differences, Summers said. “And that’s something that’s going to be very much influenced by reimbursement procedures, which is why the president has the emphasis that he does on Medicare.”

Summers also reiterated Obama’s pledge to sign only a health-care bill that is deficit-neutral over 10 years. The plan will be “paid for in advance,” he said. “I don’t actually understand the argument that it will increase the deficit.”

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