Economic Outlook: Potentially confusing

U.S. auto sales figures faced scrutiny this week, as the U.S. government asked itself how its new incentives performed in the marketplace.

Sales jumped during the last week of July with the start -- and maybe the end -- of the wildly popular "Cash for Clunkers" program that offers buyers up to $4,500 to trade-in older gas guzzlers and buy new more fuel-efficient vehicles.

Critics were wondering out loud if there were any ethical problems with the government offering a rebate to buyers with taxpayer funds, given the government's position as major investor in both General Motors Co. and Chrysler Group, the entities that emerged from recent bankruptcies.

GM and Chrysler, did not do as well as Ford Motor Co, which reported a 2.3 percent jump in sales in July, the first monthly increase in two years.

Chrysler sales dropped 9 percent in the month compared to July 2008, while GM sales fell 19 percent, The New York Times reported Tuesday.

Now, the U.S. Senate is contemplating a $2 billion extension of the Car Allowance Rebate System.

Ford did better with the $1 billion program which ran out if money in the first week. Should the government now extend a program that seems to have benefited its chief competitor?

After the Transportation Department said new cars sold in the program were averaging 28.3 miles per gallon, Democrats pronounced the program a success, environmentally as well as economically.

"The statistics are much better than anyone dreamed they would be," said Sen. Dianne Feinstein, D-Calif., and slightly more confusing.

The Securities and Exchange Commission was also nibbling at its own tail, accepting a $33 million settlement with Bank of America in a case that involves what the bank told investors about the purchase of Merrill Lynch.

Robert Khuzami, director of the SEC's enforcement division, said it was imperative that companies fully disclose deals made with companies they expect to purchase. In this case, the deal involved the hot-button topic of bonus pay for Merrill Lynch employees. But now the directive applies to a bank with billions of taxpayer funds on its books, meaning financial firms could be paying fines with taxpayer money in cases in which government officials may have played a part in the wrongdoing, The Washington Post reported.

In Bank of America's case, Chief Executive Officer Kenneth Lewis has alleged the Treasury and Federal Reserve pressured Bank of America to pursue the deal and even to remain quiet about some of its concerns before the deal closed.

But, Khuzami also said, "Troubled Asset Relief Program status may come into play in only a few cases, but is unlikely to dictate the outcome."

In market activity, U.S. markets surged Monday. In Asia, markets were mixed Tuesday. The Nikkei 225 rose 0.22 percent. The Hang Seng index in Hong Kong slipped 0.05 percent. The Singapore Straits Times lose 1.23 percent, while the S&P/ASX in Australia rose 1.08 percent.

In midday trading in Europe, the FTSE 100 in Britain fell 0.91 percent. The DAX 30 in Germany lost 0.95 percent. The CAC 40 in France dropped 0.73 percent, while the broader DJStoxx 600 erased 0.87 percent.