Thursday morning headlines

Stocks head upward: Several days of losses might be enough to turn things around, along with improving numbers for unemployment claims. Dow is up about 50 points in early trading.

Governor opposes budget plan: He says he'll veto the Democrat proposal that includes $1.9 billion in new taxes. Showdown could head to the legislature in a few days. From the SF Chronicle:

Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), stressed at a Capitol news conference that their plan is close to the governor's proposal. The plan adopts 45 percent of the governor's proposal entirely plus other proposals to some degree, Bass said. Democrats said they increased taxes for tobacco users and oil companies and ended two corporate tax breaks so that they could build a reserve fund closer to the $4.5 billion cushion that Schwarzenegger has insisted on.

Rating financial overhaul: NYT columnist Joe Nocera says it's not close to what FDR did in scope and breath.

Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself. Without question, the latter would be more difficult, more contentious and probably more expensive. But it would also have more lasting value.

Here's how The Economist views the plan:

There is unease on Capitol Hill over an expanded role for the Fed, continued balkanisation and much else. Bank lobby groups support systemic regulation but will waste no time trying to water down the consumer agency and persuade lawmakers that higher capital requirements will curb lending to hard-working Americans (and put the industry at a competitive disadvantage without international harmonisation). Moreover, the reforms must jostle with health care and energy for legislative time, leaving some doubting their chances of passing in any form until next year. As uncharacteristically exciting as financial regulation has become, even bigger thrills may lie ahead.

More of the same: Short-selling expert Jim Chanos tells CNBC that the get-tough efforts will only have the bad guys find other ways of doing business, perhaps by moving offshore.

Live-blogging of Geithner: The Treasury Secretary's testimony before the Senate Banking Committee is being covered by the NYT's DealBook.

Feds fail with Downey: A government report finds that the Office of thrift Supervision botched its regulatory oversight of Downey Savings & Loan by allowing the Newport Beach thrift to take on billions of dollars. Downey eventually collapsed. From the LAT:

This week's reports are only the latest critical looks at failed thrifts supervised by the OTS. After the Federal Deposit Insurance Corp. spent $10.7 billion to back deposits at Pasadena's failed IndyMac Bank, the inspector general said in February that OTS examiners ignored repeated warning signs of trouble with exotic mortgages and allowed the thrift to backdate a cash infusion to make it seem stronger. The Downey failure attracted special attention because it was a major purveyor of one of the riskiest types of home loans: the pay-option adjustable-rate mortgage, which allowed borrowers to pay so little that their loan balances went up instead of down. These option ARMs, often written without checking borrowers' earnings or assets, emerged as a major contributor to the nation's foreclosure crisis.

Economy starts to bottom out: Chapman University economists James Doti and Esmael Adibi are a bit more optimistic than other forecasters. They see a pickup in employment for the second half of 2010, though California is likely to be behind other states in a recovery. (KPCC)

New CEO for Pac Sun: Former Vans Inc. CEO Gary Schoenfeld gets the job, succeeding Sally Frame Kasaks. The teen specialty retailer that's been hit with declining sales says Kasaks wasn't pushed out. (LAT)

New questions on Danny Pang: The OC financier accused of operating a multi-million dollar Ponzi-like scheme may have transferred $1 million to his lawyers at L.A.-based Latham & Watkins. That would be in violation of a court-ordered asset freeze. From the Daily Journal (no link):

At the heart of the matter is a declaration by Wilbur Quon, the former chief financial officer of PEMGroup, in which he alleges Pang told him he paid $1 million to Latham on the same day or the day after a judge issued an order freezing all personal and business assets under Pang and PEMGroup's control. The payment was part of $2 million overall that Quon said Pang told him he advanced to Latham during one week in late April. Pang's lawyer, David J. Schindler, of Latham & Watkins in Los Angeles, denied he or Latham have improperly received payments in violation of the asset freeze. Rather, he accused Quon of lying in the declaration, and complained he has refused to be deposed.