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The Georgia Senate Thursday approved a proposed tax on hospitals that Gov. Sonny Perdue is counting on to help balance Georgia’s recession-ravaged fiscal 2011 budget.

The 1.45 percent tax on net patient revenues, which passed 31-15, would raise $163 million to help shore up a state Medicaid program hit with significant enrollment increases due to the recession.

Hospital organizations, which balked when the governor recommended a 1.6 percent tax in January, had come around to support the bill as preferable to other alternatives Perdue said he was prepared to push forward.

Without the revenue from the hospital tax, the governor would be forced to slash Medicaid reimbursements to hospitals and other health-care providers by as much as 16.5 percent, said Senate President Pro Tempore Tommie Williams. That would hurt hospitals’ ability to serve low-income Georgians and drive some doctors to stop accepting Medicaid patients, said Williams, R-Lyons.

“This is about women with children in poverty and the aged, blind and disabled,” he said. “We that have give to those who don’t.”

But Democrats argued that taxing hospitals would hurt the very people Medicaid is designed to help because the tax would be passed on to poor patients.

“This is a sick tax that’s being placed on people in hospitals,” said Senate Minority Leader Robert Brown, D-Macon.

The bill’s supporters, however, said the tax would help Atlanta’s Grady Memorial Hospital, the state’s largest public hospital, because the additional state revenue would allow Georgia Medicaid to draw down several hundred million dollars in federal matching funds. Grady serves more Medicaid patients than any other hospital in Georgia.

In an effort to garner support for the bill, Republican legislative leaders put a three-year time limit on the tax.

But the measure’s opponents said there are better ways to raise the needed revenue. Throughout this year’s legislative session, health-care advocates have been pushing lawmakers to raise tobacco taxes in Georgia by $1 a pack.

The bill now goes back to the House to vote on changes made by the Senate.

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Sales of new homes dropped to a record low last month, dimming prospects for a swift recovery for the housing market.

Overall, sales were down 2.2 percent, to a seasonally adjusted annual rate of 308,000, the Commerce Department said Wednesday. Economists had forecast a 1.9 percent rise.

Those numbers followed a similarly bleak report on Tuesday that showed sales of existing homes dropped last month, despite a generous government tax credit meant to lure buyers.

Taken together, the data resurrected concerns that the market could fall into another downturn, with new downward pressure on prices as the supply of houses increases but demand dwindles.

"It was dismal no matter how one tries to slice and dice it," Joshua Shapiro, an economist for MFR Inc cash advance no faxing. wrote.

Sales of new homes have fallen 23 percent since October. Sales rose at a rapid pace last fall as buyers rushed to take advantage of an $8,000 tax credit before its original expiration date. The credit has since been extended to April 30, but there has been no evidence of a buying frenzy.

The drop in February was partly the result of stronger results the previous month: the government said sales reached a rate of 315,000 units in January, better than the 309,000 rate originally forecast. Economists said a series of snowstorms in February may also have contributed to the decline.

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Gasoline prices are continuing an upward trek, with the Florida average for a gallon of self-serve regular up 4 cents at $2.84 and Orlando-area prices up 5 cents at $2.78.

The nationwide average, meanwhile, is $2.78, up 4 cents from a week ago.

“Consumers in the Southeast are beginning to worry that retail gas prices will rise to $3 a gallon in the next week or two,” said Jessica Brady, manager of public and government relations for AAA Auto Club South.

However, Brady said, consumers are not fully confident that the economy and job market will soon improve, leading analyists to believe that fuel demand will be slow to rise.

“This makes it very likely the price of crude oil will further decline this week prolonging statewide increases and averages to $3 a gallon.”

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Marriott International Inc. has signed a management contract with Salt River Devco, a development company run by the Salt River Pima-Maricopa Indian Community in Arizona, to operate a Courtyard by Marriott-branded hotel on reservation property.

It is Marriott’s first hotel on U.S. tribal land. It is located just outside of Scottsdale, Ariz.

The hotel, owned by Salt River Devco, is part of a 108-acre development it manages which currently includes six commercial buildings with plans for eight more.

“It is a great example of Marriott’s diverse ownership program, which currently has more than 500 diverse-owned hotels,” said Eric Jacobs, senior vice president of lodging development for Marriott cash advance to savings account.

The 156-room hotel is scheduled to open in 2012. Courtyard is Marriott’s (NYSE: MAR) largest brand, with 860 properties now and another 150 in development.

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Taiwan’s economy probably exited the deepest recession on record last quarter as the global recovery spurred demand for the island’s semiconductors and mobile phones, according to a survey of economists.

Gross domestic product increased 7.1 percent in the three months through December from a year earlier, the median of the Bloomberg News survey’s nine estimates shows, after contracting for the previous five quarters. The report will be released on Feb. 22 at 1:30 p.m. in Taipei.

The emergence of the world economy from the worst slump since World War II spurred businesses in Taiwan, where exports equal half of GDP, to boost production and hire more workers. President Ma Ying-jeou is negotiating a trade accord with China that would cut import duties on Taiwanese goods in the world’s fastest growing major economy and help cement the recovery.

“Taiwan is ‘out of the woods’ for as long as the global economy is — and is particularly benefitting from a surge in growth in China,” said Dariusz Kowalczyk, chief investment strategist in Hong Kong at SJS Markets Ltd. “Since inflation in bound to return, we expect the central bank to begin raising rates in April, with 50 points of tightening likely in 2010.”

Taiwan’s exports to China, its biggest trading partner and No. 1 overseas investment destination, soared 187.8 percent in January from a year earlier, after a 96.7 percent gain in December. Shipments to the U.S., the second largest export market, rose 13.7 percent after increasing 4 percent in December.

Surging Profits

Stronger demand for electronics helped Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp., the world’s largest makers of custom chips, post fourth-quarter profits that beat analysts’ estimates and boost capital spending this year.

The economy is emerging from the worst recession since records began in the 1950s. Central Bank Governor Perng Fai-nan kept interest rates unchanged at a record-low 1.25 percent on Dec. 24, after slashing them by 2.375 percentage points from September 2008 to February 2009 to revive the economy.

The unemployment rate fell for a third month in December after reaching a record 6.09 percent in September. Taiwan Semiconductor, the island’s biggest company by market value, said it plans record spending this year and will add more than 3,000 engineers.

“Local exporters have been reporting good sales figures in the fourth quarter because of rising demand from overseas,” said Lee Ming-han, an economist at Sinopac Bank in Taipei. “Domestic consumption also improved on a falling jobless rate and gains in the stock markets.”

China Accord

President Ma’s administration has been pushing for the trade agreement with China to prevent Taiwan from being “marginalized” after a Chinese accord with the 10-member Association of Southeast Asian Nations took effect this year.

China and Hong Kong combined is Taiwan’s largest overseas market, accounting for 40 percent of the island’s $203.7 billion of exports last year. Overseas shipments of flat screens, computer chips and other electronics goods made up about 28 percent of the total. Asean, which represents a quarter of the world’s population, accounts for 15 percent of Taiwan’s exports.

The government estimates the so-called Economic Cooperation Framework Agreement with China would increase GDP by 1.65 to 1.72 percentage points annually, spurring exports and creating more than 260,000 jobs. Exports would rise as much as 5 percent a year and imports by 7 percent, it says.

Opposition Rally

The opposition is against signing the accord and is calling for a public referendum. The Democratic Progressive Party on Dec. 20 rallied 100,000 people into the streets of Taichung city to protest Ma’s China policies, on concern that they will erode the island’s sovereignty.

China and Taiwan have been ruled separately since Nationalist troops fled to the island after losing a civil war to Mao Zedong’s Communist forces in 1949. China has threatened to invade Taiwan if it declares formal independence, and in 2006 carried out a weeklong series of missile tests near the island.

The risks to Taiwan “are centered around the global outlook, which is strong only in the short term,” Kowalczyk of SJS said. “By late 2010 and early 2011 we see a double dip in G-3 economies, which will trigger a slowdown. This is bound to hit Taiwanese exports and reduce its growth rate in 2011.”

Taiwan’s currency climbed 0.3 percent to close at NT$32.1 against the U.S. dollar on Feb. 12, the last trading before the Lunar New Year holiday, according to Taipei Forex Inc. The benchmark Taiex index gained 1.1 percent, after surging 78 percent last year, the best performance since 1993. Taiwan’s financial markets will resume trading on Feb. 22.

Export Growth

Taiwan is aiming for 22 percent growth in exports in 10 markets this year, including China, India, Japan, Russia and Brazil, the Ministry of Economic Affairs said last month. The island’s statistics bureau forecast in November that exports would increase 15.4 percent this year.

Nanya Technology Corp. last month reported NT$211 million ($6.6 million) profit in the fourth quarter, after posting losses in the previous 10 quarters, as demand for computers rebounded and prices of semiconductors rose. Smaller rival Powerchip said Jan. 20 that its fourth quarter profit exceeded NT$1.6 billion.

Taiwan Semiconductor, the island’s biggest company by market value, plans record spending of $4.8 billion on equipment and factories this year after reporting fourth-quarter profit more than doubled to NT$32.7 billion.

Prime View International Co., the screen supplier to Sony Corp.’s Reader and Amazon.com’s Kindle e-book readers, plans to triple its capacity in the U.S. and China this year on rising orders, Chairman Scott Liu said in an interview last month.

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The Federal Reserve is in talks with money-market mutual funds on agreements to help drain as much as $1 trillion from the financial system as policy makers prepare for the first interest-rate increase since June 2006, according to a person familiar with the discussions.

The central bank is looking to the money-market mutual fund industry which manages $3.2 trillion in assets because the 18 so-called primary dealers that trade directly with the Fed have a capacity limited to about $100 billion, estimates Joseph Abate, a money-market strategist at Barclays Capital in New York.

Money-market funds may welcome the opportunity to trade with the Fed after the financial crisis reduced the supply of safe assets in which they can invest. In one example of demand for such assets, auctions on four-week Treasury bills have attracted an average of $5.47 in bids for every dollar sold this year, compared with an average of $3.77 last year, according to Bloomberg data. Yields on the four-week bill were quoted at four basis points at 3:47 p.m. in New York trading from 18 basis points a year ago.

“There are lots of great credit stories, but the option of going with the Fed and the government — it takes away part of the risk,” said Deborah Cunningham, a chief investment officer at Federated Investors Inc. in Pittsburgh, which manages $318 billion in money-market investments. Conversations with the Fed “seem pretty positive,” she said, adding that the Fed and the industry should be in a position to conduct operations before the end of the year.

Fannie, Freddie

Chairman Ben S. Bernanke yesterday charted ways the Fed might withdraw record monetary stimulus pumped into the economy to fight the recession. Among the central bank’s tools are reverse repurchase agreements, in which the Fed sells securities with the intention of repurchasing them at a later date.

The Fed is also considering reverse repurchase agreements with mortgage lenders Fannie Mae and Freddie Mac, said the person familiar with the discussions. Freddie Mac spokeswoman Sharon McHale declined to comment. Fannie Mae spokesman Brian Faith also declined to comment.

“To further increase its capacity to drain reserves through reverse repos,” Bernanke said, the Fed is “in the process of expanding the set of counterparties with which it can transact” beyond primary dealers of government securities.

The primary dealers, which are required to bid at auctions of Treasury notes and trade directly with the New York Fed’s markets desk, include BNP Paribas Securities Corp., Banc of America Securities LLC and Goldman Sachs & Co.

‘Extended Period’

Bernanke repeated yesterday that while interest rates are likely to stay low for an “extended period,” the Fed in “due course” will need to “begin to tighten monetary conditions to prevent the development of inflationary pressures paydayloan.”

The central bank has created more than $1 trillion in excess reserves in the banking system through its purchases of $300 billion of Treasury debt and $1.25 trillion of mortgage- backed securities. To put upward pressure on the federal funds rate, the Fed may need to drain as much as $800 billion, Abate estimates.

One potential tightening tool is the interest rate on reserves that commercial banks keep on deposit at the Fed. By raising that rate, the central bank “will be able to put significant upward pressure on all short-term interest rates,” Bernanke said.

The Fed can also use reverse repos to shrink the quantity of reserves, which in turn gives it “tighter control over short-term interest rates,” he said.

Risk for Fed

Fed officials face the risk that when they start to tighten policy by raising the rate they pay banks on reserves, other market rates may not follow. That would keep monetary conditions too loose in an expansion.

“They still seem nervous that they might not be able to control short rates, and if they can’t control short rates, how do they tighten?” said Mark Spindel, chief investment officer at Potomac River Capital LLC, which manages $200 million in Washington.

The Fed has sought to keep the benchmark rate in a range of zero to 0.25 percent since December 2008. The federal funds rate is now 0.13 percent, even though banks can earn 0.25 percent by keeping their money on deposit at the Fed.

One reason for the discrepancy is that Fannie and Freddie have become “significant sellers” of funds in the overnight market and aren’t eligible to place cash on deposit at the Fed, according to a December research paper by the New York Fed.

Some hurdles remain in the Fed’s efforts to secure bigger repo capacity. Fed officials and mutual-fund industry representatives are working on a structure that would allow funds to invest in relatively liquid assets that can be sold in seven days, while allowing the central bank to avoid having to renew billions of dollars in transactions each week.

“There needs to be liquidity,” said Cunningham of Federated. “A reverse repo contract is not considered to be liquid in the context of anything beyond seven days.”

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Canadian media luminaries Jerry Grafstein, Raymond Heard and Beryl Wajsman announced today they are leading a consortium of local investors to acquire Montreal’s The Gazette, The Ottawa Citizen and The National Post.

The group is in the process of filing a bid to buy the three dailies Canwest LP, a division of Canwest Global Communications Corp. The partners hope to be able to begin due diligence on the operating data in the next few weeks.

The consortium partners have received strong financial commitments from unspecified sources. They said additional participants in the consortium will be announced shortly.

“Our partnership represents a cross spectrum of engaged Canadians committed to a vigorous, independent media voice for the communities that each newspaper serves. We are encouraged by the positive response we have received from investors,” the three consortium partners said. “We are firm in our view that there remains a bright future for newspapers supported by creative web platforms.”

The offer may face an uphill battle. The papers are part of a larger chain of 11 publications, which is currently operating under bankruptcy court protection from creditors. The chain is being offered for sale as an intact group, not as individual publications.

The founding family, headed by Leonard Asper, chief executive officer of Canwest Global, has indicated it wants to keep the papers together. Asper has noted in a pre-filing letter that the newspaper chain and another Canwest property, the Global television network, benefit financially from being able to sell joint advertising space to major national advertisers.

As well, the newspaper group would somehow have to improve on the offer Canwest already has on hand from its secured creditors, led by Canada’s major banks. The creditors say they will pay $950 million for the chain, the amount they are owed by Canwest LP.

But the media consortium said today it believes the newspapers would benefit from local involvement that would produce timely, informative, well-written stories and grassroots journalism reflecting the priorities of Canada’s diverse communities. Each newspaper has a loyal and interested readership, which the consortium said it is confident can be broadened and deepened.

Grafstein is a former Senator and founder of CITY-TV in Toronto and other electronic and print enterprises in Canada, the U.S., Europe and Latin America. He retired from the Senate when he turned 75 — the mandatory retirement age — on Jan. 2.

Heard, a media consultant with major corporate clients, was White House correspondent and Managing Editor of the Montreal Star, editor of the London Observer News Service, and head of Global TV News, which is also owned by Canwest.

Wajsman, is editor of Quebec’s largest English-language weekly, publisher of the bilingual journal of political commentary, The Metropolitan, and was the producer and host of a Montreal radio news magazine program.

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European Central Bank President Jean-Claude Trichet intensified pressure on Greece to cut the continent’s biggest budget deficit with a warning that the country won’t get any favors from policy makers.

As Prime Minister George Papandreou struggles to convince investors and European Union governments he can regain control of the country’s budget, Trichet yesterday said no nation can expect any “special treatment.”

“The central bank has clearly chosen to maintain its pressure on the Greek government, rather than easing the heightened tensions in bond markets,” said Laurent Bilke, a former ECB economist now at Nomura International Plc in London.

Greek bonds extended declines after Trichet’s comments, which came after the ECB left its benchmark interest rate at a record low of 1 percent. While Greece was his main target, Trichet told other euro members to take the “difficult decisions” needed to tackle “sharply rising” budget gaps or face higher borrowing costs that hurt economic growth.

The Greek remarks eclipsed those made on monetary policy as officials turn their attention from the financial crisis to the nations most hurt by the recession. German Chancellor Angela Merkel said in comments published yesterday that Greece’s fiscal woes could hurt the euro and Luxembourg Prime Minister Jean- Claude Juncker said International Monetary Fund aid wouldn’t be “appropriate.”

Collateral

Rating downgrades sparked a rout in Greece’s bonds in December as investors tuned into a budget deficit of 12.7 percent of gross domestic product, more than four times the European Union limit. The yield on the 2-year Greek note today rose 6 basis points to 3.559 percent, extending yesterday’s gain of 44 points.

Arguing that it has received enough of a benefit from euro membership, Trichet said the ECB won’t help Greece by delaying the reintroduction of its pre-crisis collateral rules at the end of 2010. Downgrades by Fitch Ratings, Moody’s Investors Service and Standard & Poor’s have fanned concerns its bonds will be excluded from the ECB’s market operations.

“We will not change our collateral policy for the sake of any particular country,” Trichet said.

The subsequent selloff suggests the market “still harbors hopes that the ECB would abort its collateral decision,” said Elga Bartsch, chief European economist at Morgan Stanley in London guaranteed high risk personal loans. Juergen Michels, chief euro-area economist at Citigroup Inc., said the ECB will ultimately agree to rules “that do not put too much additional pressure on member countries.”

Short Shrift

Trichet also downplayed the importance of Greece for the euro region as a whole. While Greece makes up about 3 percent of the bloc’s GDP, 13 percent of the U.S. economy is accounted for by California, which is also suffering financial difficulties.

Those remarks drew short shift from Andrew Bosomworth, a former ECB economist and now head of portfolio management at Pacific Investment Management Co. in Munich. He warned Greece could still cause “contagion” to other economies with poor finances such as Portugal or Spain.

“While each of those countries in their own right may not be very big, or a threat to the euro area, if one of them were to go you have potential domino effect that could snowball into a big problem for the euro area,” Bosomworth said in a television interview yesterday.

Marco Annunziata, chief economist at UniCredit Group in London, said policy makers are playing a “nerve-wracking game of chicken” in the hope that their tough rhetoric will pressure Greece into action.

Budget Shortfall

“If a rescue turns out to be necessary, a rescue operation will be mounted,” Annunziata said.

In Athens, Papandreou yesterday pledged to “do whatever it takes” to rein in the budget shortfall and restore confidence in the country’s finances when he published the three-year budget plan.

The government’s latest proposals, to be presented to the European Commission today, call for about 10 billion euros ($14 billion) of spending cuts and revenue increases this year to bring the shortfall from 12.7 percent of output to 8.7 percent by year-end.

“Our country can and is obliged to exit as soon as possible this vicious circle of misery,” Papandreou said. “We will not retreat; we will proceed quickly.”

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A unit of Smith International Inc. has taken over a three-year contract with Petróleo Brasileiro, Brazil’s state-owned energy giant.

Houston-based Smith (NYSE: SII) will operate the Petrobras contract through its PathFinder Energy Services unit at its new facility in Macae, Brazil.

The deal represents possible revenue of between $80 million and $100 million business card design. PathFinder will also acquire all related directional drilling assets from San Antonio International do Brasil.

San Antonio International had previously been the lead contractor through which PathFinder had taken on contracts in that country, Smith officials said in a statement.

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Stocks ended a choppy session barely higher Wednesday, with the Dow and Nasdaq eking out fresh 2009 highs as investors mulled a stronger dollar and opted to play it cautious at the end of a tumultuous year.

The Dow Jones industrial average (INDU) added a few points, ending at the highest point since Oct. 1, 2008. The S&P 500 index (SPX) ended just above the unchanged line, closing just shy of 15-month highs hit two days ago.

The Nasdaq composite (COMP) added a few points, ending at the highest point since Oct. 3, 2008.

Stocks ended a volatile session modestly lower Tuesday, with the three major indexes breaking a six-session winning streak that had left the market at 15-month highs. That weakness spread into Wednesday’s session, the second-to-last trading day of the year.

A stronger U.S. dollar put some pressure on the market as well, dragging on commodity prices and stocks, and pulling down shares of companies that do a lot of business overseas and therefore benefit from a weaker dollar. After sliding for most of the year versus the euro and yen, the dollar has gained over the last few weeks as investors have bet that the economy is improving.

Trading volume has been low this week, with many market pros and individual investors on vacation. Lighter trading volume can cause increased volatility. All financial markets are closed Friday for the New Year’s Day holiday.

Year-to-date, the Dow has risen 20%, the S&P 500 has climbed almost 25% and the Nasdaq has gained 45%, as of Tuesday’s close. All three indexes have posted more substantial gains since falling to multi-year lows on March 9 amid the height of the financial crisis.

"I think the market seems to have ended the year on a slightly positive note, with many investors happy to lock in their profits and look ahead to the new year," said Michael Sheldon, chief market strategist at RDM Financial Group.

Any stock market gains accrued next year are expected to be a lot milder, analysts say, as the government stimulus fades at the same time the slow-growing economy struggles to create jobs. Meanwhile, the consumer spending environment is expected to stay weak, the dollar could firm up and the Federal Reserve is expected to begin raising interest rates in the second half of 2010.

Sheldon said that 2010 could end up looking something like 2004, which proved to be a leveling year after the massive gains of 2003. 2003’s gains followed a three-year bear market.

The S&P 500 rose 26% in 2003, seesawed for the first nine months of 2004 and then managed a big run in the last quarter, ending the year up around 9%.

Sheldon said it wouldn’t be surprising to see the market churn or even selloff a bit in the first half of the year but eventually move back up to end the year with gains of 10% to 15%.

Other analysts are concerned that a bigger selloff could take hold, particularly if economists have been overly-optimistic about the economy’s ability to recharge once the fiscal and monetary stimulus starts to fade out.

"Right now the sentiment in the stock market is at bullish levels that haven’t been seen since 2007," said Matt Havens, wealth advisor at Global Vision Advisors. In October 2007, the S&P 500 and Dow industrials closed at all-time highs and the Nasdaq composite at the highest point since 2000.

"The underlying strength of the economy is uncertain going into the next year and the longer stocks keep moving higher, the greater the potential for a significant pullback," Havens said.

Economy: The Chicago PMI, a regional read on manufacturing, rose to 60 in December from 56.1 previously. The improvement was a surprise, with economists surveyed by Briefing.com expecting it to drop to 55.1.

Financials: Troubled auto and mortgage financing firm GMAC Financial Services is expected to receive a third round of bailout funds, according to a published report. GMAC is expected to get an additional $3.8 billion on top of the $13.5 billion it has already received since Dec. 2008.

World markets: Asian markets mostly ended lower. In Europe, London’s FTSE 100 lost 0.7%, Germany’s DAX lost 0.9% and France’s CAC 40 lost 0.6%.

Commodities and the dollar: COMEX gold for February delivery fell $5.60 to settle at $1,092.50 an ounce. Gold closed at an all-time high of $1,218.30 an ounce earlier this month.

U.S. light crude oil for February delivery rose 41 cents to settle at $79.28 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices rose, lowering the yield on the 10-year note to 3.79% from 3.80% late Tuesday. Treasury prices and yields move in opposite directions.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by eight to seven on volume of 645 million shares. On the Nasdaq, advancers topped decliners seven to six on volume of 1.31 billion shares. 

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