Archive for the ‘banks’ Category

China Can’t Let Crisis End Reform, Central Bank Says; President Hu In U.S., Latin America

November 15, 2008

China can’t let the global credit crisis derail financial reforms that have benefited the public and helped the nation’s banks weather the turmoil, said Yi Gang, vice governor of the People’s Bank of China.

By Li Yanping, Bloomberg

“Although there have been doubts in the market on whether China’s financial reforms should continue after this crisis led to massive government bailouts and nationalization of financial institutions, China’s bank reforms can’t backtrack,” Yi said at a conference in Beijing today.

The worst financial crisis since the Great Depression has caused about $966 billion of writedowns and credit losses among financial institutions worldwide, according to data compiled by Bloomberg. The U.S. Treasury has initiated a $700 billion rescue plan to shore up distressed financial institutions.

“The U.S. and Europe may need to rethink financial innovations that exceed real economy needs and have pushed risks beyond control,” said Zhao Xijun, a finance professor at Renmin University in Beijing. “China’s financial services are under- developed by comparison, so we need to push ahead with reforms.”

Banks in China sold shares, accepted foreign strategic investors and enhanced risk management over the past three years to avoid repeating the bad-loans crisis earlier this decade, when the government spent $650 billion rescuing them. Limited buying of subprime debt has helped the banks avoid bigger losses.

`Unimaginable Shock’

“State-bank reform has been a success, benefiting people and greatly enhancing financial services,” Yi said. “China’s banks may have taken an unimaginable shock from this financial tsunami if they hadn’t completed shareholding reforms.”

Reforms based on market principles must continue to help shield banks from future risks during economic cycles, Yi said today. Banks will also be “tested” when the nation’s currency gradually become convertible and when interest rates are further liberalized, he added.

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http://www.bloomberg.com/apps/new
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Chinese President Hu Jintao, seen here, begins a Latin America ... 
Chinese President Hu Jintao, seen here, begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.

SAN JOSE (AFP) – Chinese President Hu Jintao begins a Latin America tour on Monday, taking in Costa Rica, Cuba and Peru, as China tightens economic ties and the region hopes for help in tougher times.

The Asian giant has increased diplomacy and investment in Latin America in recent years, with an eye on its natural resources and developing markets for manufactured goods and even arms.

Many in Latin America hope for an investment boost to help ride out the economic crisis.

Exports from the continent to China include soya and iron ore from Brazil, soya from Argentina, copper from Chile, tin from Bolivia, and oil from Venezuela.

The trade is still only a small percent of the continent’s total, but it is growing.

China’s state-run Xinhua news agency reported this month that exports to Latin America grew 52 percent in the first nine months of 2008 to 111.5 billion dollars.

Hu will visit San Jose and Havana between a G-20 meeting on the global crisis in Washington on November 15 and an Asian Pacific Economic Cooperation forum summit in Peru on November 22.

China and Cuba have remained all-weather friends for decades, their Marxist Socialist past a driving force in relations.

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http://news.yahoo.com/s/afp/20081115/wl_
afp/latamchinadiplomacy_081115063413

Reversal: $700 Billion Rescue Program NOT To Buy Troubled Assets

November 12, 2008

Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned.

Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

By MARTIN CRUTSINGER, AP Economics Writer

 
Treasury Secretary Henry Paulson said Wednesday the $700 billion government rescue program will not be used to purchase troubled assets as originally planned. Photo: Associated Press

He announced a new goal for the program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans.

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http://news.yahoo.com/s/ap/20081112/ap_on_bi_ge/
financial_meltdown;_ylt=AlOjuzzp7Mg
_YNmhDJGmChes0NUE

Jobless ranks hit 10 million, most in 25 years

November 8, 2008

The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

By JEANNINE AVERSA, AP Economics Writer

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Barack Obama, in his first news conference as president-elect, said the nation was facing the economic challenge of a lifetime but expressed confidence he could deal with it.

“Immediately after I become president, I’m going to confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity,” he said after meeting with economic advisers in Chicago. “I’m confident a new president can have an enormous impact.”

Wall Street revived somewhat after two days of big losses. The Dow Jones industrials rose 248 points.

Still, the Labor Department’s unemployment report provided stark evidence that the economy’s health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.

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http://news.yahoo.com/s/ap/20081108/ap_on_bi_ge
/financial_meltdown;_ylt=Aj1J5vsTtXduBFFeCnZz7Sqs0NUE

Best Analysis of Obama’s Economic Challenges, From The BBC and Peter Morici, Univ of Maryland

November 6, 2008

This is an audio feed from the BBC, Thursday, November 5, 2008. 

The second audio segment features Professor Peter Morici of the University of Maryland, which is an excellent review of the challenges facing President Elect Obama….

Listen:
http://www.bbc.co.uk/mediaselector/check/worldservice/meta/tx/wbr?nbram=1&nbwm=1&size=au&lang=en-ws&bgc=003399&ls=p23&ls=35603

Fed: Economy Sinks Deeper Into Rut

October 15, 2008

By JEANNINE AVERSA, AP Economics Writer

WASHINGTON – The country has sunk deeper into an economic rut, the Federal Reserve reported Wednesday.

Federal Reserve Chairman Ben Bernanke speaks at the Economic ... 
Federal Reserve Chairman Ben Bernanke speaks at the Economic Club of New York. Bernanke said Wednesday that a recovery from the financial crisis “will not happen right away” but that the US economy will eventually emerge “with renewed vigor.“(AFP/Getty Images/Chris Hondros)

The Fed’s new snapshot of business conditions around the nation showed the economy continued to lose traction in the early fall, reflecting mounting damage as financial and credit problems worsened.

Economic activity weakened across all of the Fed’s 12 regional districts, according to the report. Consumer spending — the lifeblood of the economy — slumped in most Fed regions. Manufacturing also slowed in most areas.

Some businesses had become more pessimistic about the economic outlook, the Fed said.

The survey was released shortly after Fed Chairman Ben Bernanke, in a speech in New York, warned that it would take time for the country’s economic health to mend even if badly needed confidence in the U.S. financial system returns and roiled markets stabilize.

THIS IS A BREAKING NEWS UPDATE
The US Federal Reserve in Washington, DC. The United States ... 
The US Federal Reserve in Washington, DC. The United States has slipped into recession, the head of the San Francisco branch of the central bank has said.(AFP/File/Karen Bleier)

U.S. Is Investing $250 Billion in Banks: Bush Addresses Financial Crisis

October 14, 2008
WASHINGTON — President Bush, speaking from the Rose Garden Tuesday before the markets opened in New York, called the government plan to invest up to $250 billion in banks essential to help assure stability in the nation’s financial system.

Under the proposal that is similar to those initiated by European governments on Monday, President Bush said the Treasury Department would invest up to $250 billion in banks, receiving an equity stake in return.

“This is an essential short-term measure to ensure the viability of the American banking system,” Mr. Bush said.

The United States would also guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers, officials said.

The Federal Deposit Insurance Corporation would also offer an unlimited guarantee on bank deposits in accounts that do not bear interest — typically those of businesses — bringing the United States in line with several European countries, which have adopted such blanket guarantees.

In addition, Mr. Bush said the Federal Reserve would start a program to become the buyer of last resort for commercial paper, a move intended to help businesses get the money they need for day-to-day operations.

Mr. Bush’s comments were the latest in series by administration officials and government leaders around the world to try to calm the financial turmoil and help stave off a deep recession. And markets around the world have rebounded on news of the coordinated efforts by various governments. The Dow Jones industrial average gained 936 points, or 11 percent, the largest single-day gain in the American stock market since the 1930s and future indexes were substantially higher. European markets were up at least 5 percent on Tuesday after rising nearing 10 percent Monday.

The president described the four measures as “unprecedented and aggressive.” Each of the new programs protects taxpayers and is “limited and temporary,” Mr. Bush said.

“These measures are not intended to take over the free market,” he said, but to safeguard it.

It will take time for our efforts to have their full impact,” Mr. Bush said, “but the American people can have confidence about our long-term economic future.

As the White House has done since the House rejected the initial bailout legislation, Mr. Bush sought to assure Americans that the efforts were necessary to protect their savings and retirement.

“I recognize that the action leaders are taking here in Washington and in European capitals can seem distant from those concerns,” he said. “But these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover.”

Treasury Secretary Henry M. Paulson Jr. outlined the plan to nine of the nation’s leading bankers at a meeting Monday afternoon d. He essentially told the participants that they would have to accept government investment for the good of the American financial system, according to officials.

Of the $250 billion, which will come from the $700 billion bailout approved by Congress, half is to be injected into nine big banks, including Citigroup, Bank of America, Wells Fargo, Goldman Sachs and JPMorgan Chase, officials said. The other half is to go to smaller banks and thrifts. The investments will be structured so that the government can benefit from a rebound in the banks’ fortunes.

Read the rest:
http://www.nytimes.com/2008/10/15/business/economy/15bailout.
html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1223989371-GE
1byNeb0SM8dBDEOs0rOg

U.S. Investing $250 Billion in Banks: Financial ‘Bailout’ Continues to Intill Hope

October 14, 2008

By Mark Landler
The New York Times

WASHINGTON — The Treasury Department, in its boldest move yet, is expected to announce a plan on Tuesday to invest up to $250 billion in banks, according to officials. The United States is also expected to guarantee new debt issued by banks for three years — a measure meant to encourage the banks to resume lending to one another and to customers, officials said.

A euro coin and one US dollar bill. The dollar has dipped against ... 

And the Federal Deposit Insurance Corporation will offer an unlimited guarantee on bank deposits in accounts that do not bear interest — typically those of businesses — bringing the United States in line with several European countries, which have adopted such blanket guarantees.

The Dow Jones industrial average gained 936 points, or 11 percent, the largest single-day gain in the American stock market since the 1930s. The surge stretched around the globe: in Paris and Frankfurt, stocks had their biggest one-day gains ever, responding to news of similar multibillion-dollar rescue packages by the French and German governments.

Treasury Secretary Henry M. Paulson Jr. outlined the plan to nine of the nation’s leading bankers at an afternoon meeting, officials said. He essentially told the participants that they would have to accept government investment for the good of the American financial system.

Of the $250 billion, which will come from the $700 billion bailout approved by Congress, half is to be injected into nine big banks, including Citigroup, Bank of America, Wells Fargo, Goldman Sachs and JPMorgan Chase, officials said. The other half is to go to smaller banks and thrifts. The investments will be structured so that the government can benefit from a rebound in the banks’ fortunes.

President Bush plans to announce….

Read the rest:
http://www.nytimes.com/2008/10/14/business
/economy/14treasury.html?_r=1&hp&oref=slogin

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Asian Markets Soar On Signs of Renewed Hope

By JEREMIAH MARQUEZ, AP Business Writer 18 minutes ago

HONG KONG – Asian markets soared for a second day Tuesday, led by a record 14 percent jump in Tokyo, after Wall Street rallied from its worst week ever on optimism that government rescue efforts will heal the crippled global financial system.

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http://news.yahoo.com/s/ap/20081014/ap_on_bi_ge/world_
markets;_ylt=AhU9ssfZ2fvgiOjAnyoc0oSs0NUE

A businessman walks past an electonic board showing the Hang ...
A businessman walks past an electonic board showing the Hang Seng Index. Global stock markets staged spectacular gains Monday as governments pumped hundreds of billions of dollars into banks crippled by the credit crunch, coaxing newly confident investors to buy shares.(AFP/Mike Clarke)

A South Korean woman passes a foreign exchange facility in Seoul. ... 
A South Korean woman passes a foreign exchange facility in Seoul.(AFP/File/Jung Yeon-Je)

Dow jumps 936 as governments pledge bank aid

October 13, 2008

By TIM PARADIS, AP Business Writer 

NEW YORK – Wall Street stormed back from last week’s devastating losses Monday, sending the Dow Jones industrials soaring a nearly inconceivable 936 points after major governments’ plans to support the global banking system reassured distraught investors. All the major indexes rose more than 11 percent.
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The market was expected to rebound after eight days of precipitous losses that took the Dow down nearly 2,400 points, but few expected this kind of advance, which saw the Dow by far outstrip its previous record one-day point gain, 499.19, set during the waning days of the dot-com boom. The Standard & Poor’s 500 index also set a record for a one-day point gains.

Trader Thomas Riley, right, smiles as he works on the floor ... 
Trader Thomas Riley, right, smiles as he works on the floor of the New York Stock Exchange, Monday Oct. 13, 2008. Wall Street stormed back from last week’s devastating losses Monday, sending the Dow Jones industrials soaring a nearly inconceivable 936 points after major governments’ plans to support the global banking system reassured distraught investors.(AP Photo/Richard Drew)

There were cheers and applause on the floor of the New York Stock Exchange at the closing bell, and trading was so active that prices were still being computed several minutes after the closing bell, longer than it would take on a quieter day.

Still, while the magnitude of Monday’s gains stunned investors and analysts, few were ready to say Wall Street had reached a bottom. The market is likely to have back-and-forth trading in the coming days and weeks — and may well see a pullback when trading resumes Tuesday — as investors work through their concerns about the banking sector, the stagnant credit markets and the overall economy.

John Lynch, chief market analyst for Evergreen Investments in Charlotte, N.C., said Monday’s rally was encouraging but he doubted it signaled the worst has passed.

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http://news.yahoo.com/s/ap/20081013/ap_on_bi_st_
ma_re/wall_street;_ylt=ApLYsluY1tCh_XFB4mDKYges0NUE

Europe puts more than US on the line for banks

October 13, 2008

By ANGELA CHARLTON and EMMA VANDORE, Associated Press Writers

PARIS – Europe put $2.3 trillion on the line Monday to protect the continent’s banks, a figure that dwarfs the Bush administration’s $700 billion rescue program, in its most unified response yet to the global financial crisis after a stumbling start.
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The pledges by Britain and the six countries that use the euro helped soothe stock markets, along with a promise by top central banks to provide unlimited short term dollar credits.
French President Nicolas Sarkozy delivers a speech during a ... 
French President Nicolas Sarkozy delivers a speech during a press conference after an extraordinary Cabinet meeting at the Elysee palace in Paris, Monday, Oct. 13, 2008. Sarkozy said his government will provide up to Euro360 billion (US$491 billion) to help banks stay afloat through the financial crisis. The measure is part of a raft of proposals agreed with other governments sharing the euro currency on Sunday to unblock frozen credit markets.(AP Photo/Christophe Ena)

The action by Germany, France, the Netherlands, Spain, Portugal, Austria and Britain came after weeks in which the governments often acted at cross purposes and sniped at each other — a piecemeal approach that failed to stop steep and frightening slides on financial markets.

“The time of each one for itself is fortunately over,” French President Nicolas Sarkozy said, following a Cabinet meeting that approved France’s spending in the framework of the plan.

“United Europe has pledged more than the United States,” added Sarkozy, who has taken a lead in getting the cooperation.

The pledged money will not go into a collective pot. Instead, governments were deciding individually how much to commit to supporting their own banks under broad guidelines agreed at a summit Sunday. The sums are considered a maximum, and might not all be spent if the financial crisis eases.

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http://news.yahoo.com/s/ap/20081013/ap_on_bi_ge/eu_
europe_meltdown;_ylt=Ah_1dsixaJ0s77MY8jMVC.Ks0NUE

The Next World War? It Could Be Financial.

October 12, 2008

By Peter Boone and Simon Johnson
The Washington Post
Sunday, October 12, 2008; Page B01

The global financial outlook grows more dire by the day: The United States has been forced to shore up Wall Street, and European governments are bailing out numerous commercial banks. Even more alarmingly, the government of Iceland is presiding over a massive default by all the country’s major banks. This troubling development points not only to an even more painful recession than anticipated, but also to the urgent need for international coordination to avoid something worse: all-out financial warfare.

The ramifications of Iceland’s misery are probably more serious than people realize. The country’s bank assets are more than 10 times greater than its gross domestic product, so the government clearly cannot afford a bailout. This is going to be a large default, affecting many parties. In the United Kingdom alone, 300,000 account holders face sudden loss of access to their funds, and the process for claiming deposit insurance is not entirely clear.

But there’s a broader concern. With European governments turning down his appeals for assistance, Iceland’s prime minister, Geir Haarde, warned last week that it was now “every country for itself.” This smacks of the financial autarchy that characterized defaulters in the financial crisis in Asia in the late 1990s. Similarly, when Argentina defaulted on its debt in 2001-’02, politicians there faced enormous pressure to change the rule of law to benefit domestic property holders over foreigners, and they changed the bankruptcy law to give local debtors the upper hand. In Indonesia and Russia after the crises of 1998, local enterprises and banks took the opportunity of the confusion to grab property, then found ways to ensure that courts sided with them.

This is a natural outcome of chaotic times. Iceland’s promise to guarantee domestic depositors while reneging on guarantees to foreigners may be just a first step. British Prime Minister Gordon Brown’s decision last week to sue Iceland over this issue may escalate the crisis. The use of counterterrorist legislation to take over Icelandic bank assets and operations in the United Kingdom also has a potentially dramatic symbolic effect.

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http://www.washingtonpost.com/w
p-dyn/content/article/2008/10/10
/AR2008101002441.html?hpid=opinionsbox1