White House considers auto rescueAdblockCar union chief appeals for helpThe White House says it is considering using money earmarked to rescue the US banking industry to bail out the country's struggling carmakers.A $14bn (£9.4bn) bail-out deal for the US car industry failed to get Senate support, raising fears of job cuts and a possible industry collapse.The White House said that the US economy could not withstand a body blow like the collapse of the auto industry.Meanwhile General Motors said it was temporarily stopping some production.And Honda is also to cut back output in North America.GM, which has been pleading for an emergency government loan to avert collapse, said it would halt 30% of its North American production "in response to rapidly deteriorating market conditions".It saw vehicle sales fall 41% in November, when overall US car sales fell 26% industry wide.HAVE YOUR SAY The three US auto companies need to be seriously restructured in order to survive.Chris, UKRoger, California, USThe temporary shutdowns will affect 14 US factories as well as three in Canada and three in Mexico, reducing output by 250,000 vehicles in the first three months of 2009."The speed and severity of the US auto market's decline has been unprecedented in recent weeks as consumers reel from the collapse of the financial markets and the resulting lack of credit for vehicle financing," it added.'Irresponsible'Earlier this year, the US approved a $700bn (£467bn) bail-out for the finance industry, known as the TARP programme.It had previously been reluctant to use this money for other industries but White House spokeswoman Dana Perino said it would consider other options, including the use of the TARP program, to prevent a collapse of troubled automakers.She added that it would be "irresponsible" to further damage the economy by allowing the Detroit car companies to fail."The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," she added.President-elect Barack Obama said he was disappointed that the Senate failed to act, adding that "millions of jobs rely directly or indirectly on a viable auto industry". General Motors dealershipQ&A: Auto bail-outBail-out: Auto workers speak"My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term-restructuring that is absolutely required," he said.'Devastating'The Big Three - Chrysler, General Motors and Ford - employ 250,000 people directly, and many more indirectly, in companies making auto parts and car dealerships.The United Automobile Workers (UAW) union on Friday warned that if a bail-out was not forthcoming, the result would be "devastating."The union's president, Ron Gettelfinger said he was confident that there were "enough sane" people in Washington to find a solution despite the Senate's defeat of the bail out bill.Tense and emotionalThe White House had said the plan was American carmakers' "best chance to avoid a disorderly bankruptcy".Shares fell sharply around the world after the bail-out was rejected - with carmakers among the hardest hit.However the glimmer of hope that the government would step in to help carmakers helped the Dow Jones index pull back early losses to finish ahead.In Asia, stocks in Toyota, Honda and Nissan all lost at least 10%.The Republicans refused to back the bail-out after the UAW union refused to cut wages next year to bring them into line with their Japanese counterparts. UAW's current contract with the car makers expires in 2011."We were about three words away from a deal," said Republican Senator Bob Corker."We solved everything substantively and about three words keep us from reaching a conclusion."The BBC's Andy Gallacher in Washington saaid it was always going to be a battle to get the US Senate to approve the $14bn bridging loan.With a majority of just one in the Senate, the Democrats needed some Republicans to back the bill as some in their own party were expected to vote against it.The atmosphere in the Senate was tense and at times emotional, our correspondent says, as the Democrats made last-minute pleas to get their Republican counterparts to vote in favour of helping America's biggest car domestic makers, Ford, Chrysler and General Motors.Millions affectedThe failure of the bail-out raises the prospect of huge job losses.The Senate majority leader, Harry Reid, said he was "terribly disappointed" when it became clear the vote had collapsed, calling it "a loss for the country"."Millions of Americans, not only the auto workers but people who sell cars, car dealerships, people who work on cars are going to be directly impacted and affected."The deal would have given the Big Three carmakers access to emergency funding to help them cope with the sharp downturn in sales because of the global financial crisis.General Motors and Chrysler have said they risk ruin without immediate aid. Ford says it may need funds in the future.The bosses of the three firms had previously asked for $34bn from Congress.They have all seen sales fall sharply this year in the US, partly reflecting an industry-wide fall, and partly because their large gas-guzzling vehicles are no longer what customers want.
A Visual Guide to the Financial Crisis:The Bailoutby WallStats.com on 12/11/2008Tags: financial crisis62 commentsdigg stumbleupon facebook delicious redditWhat do you do if you don’t have the money to pay a debt? If you are like most of us, you borrow. The US Government is no different. In order to pay for the $700 billion bailout, it will have to borrow more money, increasing the national debt. But who will pay for this massive bailout? If you are a US taxpayer, you will.Here is a visual guide to understanding how the bailout is funded and a couple of financial experts’ take on how it could be funded.
US asks Arab nations for $300 Billion to fund auto bailoutJanuary 1, 2009 The US has had to go cap in hand to the Middle East asking for $300 Billion to fund the bail out for the auto industry. The US economy has long been shored up by the Gulf States and China. This time it is Saudi Arabia, UAE, Kuwait and Qatar who are being asked to foot the bill to save the US economy. It is not difficult to understand how mired the US is in Middle East politics and borrowed policy agendas, given the staggering dependency it has for both Arab oil and their money to keep it afloat. There is also a somewhat ironic twist that the US, funded as it is by the Arab nations, is so close a partner to Israel. The US again this week used its veto power to prevent a UN resolution calling for a end to the Gaza attacks. It must anger many Arab nations that the US, who some call ‘The Great Satan’, is saved from total economic meltdown, again, by members of its own brethren. The report comes from Saudi Arabia’s Arab News:“According to reports published in Al-Seyassah, a Kuwaiti newspaper, and some other Gulf newspapers, the United States has asked four Gulf states for financial aid close to $300 billion to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession.Washington is seeking $120 billion from Saudi Arabia, $70 billion from the United Arab Emirates, $60 billion from Qatar and $40 billion from Kuwait.The Kingdom has dismissed these reports. There is enough evidence that the Federal Reserve is out of ammunition. The Fed can only control the supply of money, it cannot control the velocity of money or the rate of its turnover. The outcome of this crisis will be that the currency will be “devalued” as policy makers seek to weaken it, undermining its role as an international reserve currency.The dollar is going to lose its status as the world’s reserve currency. The catalyst will be foreign creditors who are replacing dollar with gold. That will in turn lead to global recognition of the need for a vastly more disciplined financial system.The Gulf’s vast investment funds are run by professionals who know that stocks go down as well as up. But they have lost heavily because of their forays into Western markets, particularly with their investments in banks, which are hit by the credit crisis.Citigroup, Merrill Lynch, UBS and Barclays have all raised billions of dollars from the Middle East. The funds are now nursing heavy losses, such as those purchased by the Kuwait Investment Authority which invested in Citigroup whose shares have fallen by three quarters this year.The impact on Gulf state funds is particularly acute given that largely declining oil revenues fund them. They are also likely under political pressure to invest more locally than in the past because companies in the Gulf are themselves fighting for liquidity now that the credit crunch has reached the Middle East. Investment funds from Kuwait, Dubai, Qatar and possibly Abu Dhabi are all shifting their focus.Rick Wagoner, CEO of General Motors, the automaker in most imminent danger of failure, gave lawmakers three reasons why Chapter 11 was not an option. First, the special financing that usually tides companies over through reorganization is so scarce that GM might not be able to get enough to keep functioning. Second, the stigma of bankruptcy would deter consumers from buying GM cars.Third, GM is already in the midst of a dramatic reorganization that will pave the way to a profitable future. President George W. Bush preferred choice is Chapter 11 for the US auto industry. Saudi Arabia should create a sovereign wealth fund run separately and independently from other government agencies. They should report directly to the king to get the best and most secure business opportunities.We should not discredit or underestimate the threat raised by Henry A. Kissinger and Martin Feldstein in an article they published in the Herald Tribune in September.It is time for Gulf leaders to look at the interest of their own country first. Helping the US automobile industry is not a good option for now. Wages in the auto industry are very high compared to other industries, together with pension and health-care obligations and the lavish entitlement that the management receives.Gulf states have been helping and protecting the US economy for many decades i.e. having their currencies pegged to the dollar, quoting oil prices in US dollars, putting their entire surplus in passive investment in the US economy (they have lost over 40 percent of their assets because of the declining value of the dollar) and purchasing expensive weapons.Many voices would like to drag the Gulf states into a confrontation with Iran as they did in the early 1980s when they convinced Saddam Hussein to invade Iran. Everybody knows the disastrous results. What happened to Iraq and to the entire region? Iran is not nuclear, Israel is nuclear.Saudi Arabia and the Gulf states do not need the protection of other nations. They should depend on themselves and should not trust anybody but themselves for their protection. How could Saudi Arabia help the US auto industry and not help its own stock market that dropped over 80 percent from its value in the last 2 years? Saudi Arabia should help its citizens. Over 50 percent of Saudi families do not own homes. They rent homes.The monthly income of most Saudi families is below $1,500. To sum up, if there is good business opportunities in the US, let us invest in them but the decision must be based on business calculations rather than other considerations.”
http://au.news.yahoo.com/a/-/world/5250438/porn-industry-seeks-bailout/Porn industry seeks its own US bailoutJanuary 8, 2009, 9:23 am Two porn moguls, including Hustler magazine founder Larry Flynt, are seeking a $US5 billion ($A7 billion) bailout from Washington, arguing that the limp US economy has thrown cold water on the adult entertainment industry.Flynt and Girls Gone Wild video series creator Joe Francis asked the newly convened 111th Congress "to rejuvenate the sexual appetite of America" in a bailout move similar to the one set aside for US auto manufacturers."Congress seems willing to help shore up our nation's most important businesses, (and) we feel we deserve the same consideration," Francis said in a statement."In difficult economic times, Americans turn to entertainment for relief. More and more, the kind of entertainment they turn to is adult entertainment."The pair were quick to admit that "the 13-billion dollar industry is in no fear of collapse, but why take chances?"Francis, recently imprisoned for nearly a year on a prostitution-related charge after pleading no contest in a plea bargain, cited industry figures that show adult DVD sales and rentals decreasing 22 per cent in 2008, as people turn to the internet for adult entertainment."With all this economic misery and people losing all that money, sex is the farthest thing from their mind," Flynt said."It's time for Congress to rejuvenate the sexual appetite of America. The only way they can do this is by supporting the adult industry and doing it quickly."Flynt said people were "too depressed to be sexually active.""This is very unhealthy as a nation. Americans can do without cars and such, but they cannot do without sex."
source : http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/26/MNVN14C8QR.DTLvia : http://www.stormfront.org/forum/showthread.php?t=548474QuotePaulson announced that 100s of banks are in trouble and being reviewed. No bailout money was allocated to these NEW troubled banks. More money will be requested to help them.What does this mean? Keep money in Treasury securities? In the mattress? Use it to buy property now or wait to buy property much cheaper later on?Hal Turner expects the economy to collapse by the end of February/early March 2009. By June 2009 at the latest.From Hal TurnerDecember 2, 2008U.S. FALLING APART! "HUNDREDS OF BANKS" APPLY FOR FEDERAL HELPThe march toward complete financial collapse of the USA is accelerating out of control. According to the US Treasury, "hundreds of banks" have asked for emergency help from the government.To help you understand the frightening implications of this, consider the following:Since the "financial crisis" began in September, The Treasury Department has injected $150 billion in capital by buying preferred shares in 52 institutions. 52 banks, $150 billion.Todays news that "hundreds of banks" are now in danger of failing caught my attention, so I contacted my sources inside the Treasury and I almost fell over when they told me: "Five hundred twenty additional banks are failing; ten times the number of banks that have already been bailed out."Do the math: If 52 banks needed $150 billion, 520 banks could translate into one point five TRILLION.That isn't the worst of it. The chart below (click image to enlarge) shows that our nation has already committed EIGHT POINT FIVE TRILLION to the financial mess and of that, they've already disbursed THREE POINT TWO TRILLION.Ask yourself this simple question: Where are they getting this money? The simple answer: They're printing it.Let's not forget that the money listed above is ON TOP OF the ten trillion dollars the government already owes from past deficit spending!Do the math again:$1.5 Trillion needed for another 520 failing banks$8.5 Trillion committed to more financial bailouts$10 Trillion in national debt from years of deficit spending.__________$20 TRILLION dollars in total (so far)Let me put this in better perspective for you. $20 Trillion dollars divided up among each of our 300 million citizens amounts to sixty-six-thousand, six-hundred sixty-six dollars ($66,666.) for every man, woman and child! Wow. That's like a satanic number!Need further perspective? If you took a loan for the $66,666 at one percent (1%) interest per year for ten (10) years, you would need to pay $584.06 per month for you, your wife/husband and each one of your children! For my family (Me, Wife, one son) that would be 1752.08 per month for ten years!!You're a smart person. I know you're smart because you read this blog! As a smart person ask yourself: How long is it going to be before the rest of the world says to themselves "The USA is totally bankrupt, they can't even hope to repay all the money they've borrowed, the US dollar isn't worth the paper its printed on because they printed so much of it, we're not going to accept it as money anymore."I'll tell you how long it will be: The end of February or early March 2009. Best case? Late June, 2009. That's it.At this point I think it is worth reminding all of you that in December 2007 and January, 2008, I warned everyone via my radio show and web site that "September is going to see major financial upheaval." I told everyone when and why. It happened exactly as I warned. So I hope you heed my warning about total financial collapse early next year.That's when the **** is really gonna hit the fan and this nation will fall into complete, total, economic collapse. A collapse brought about by our own federal government spending us into oblivion.Why do you think they re-deployed an active duty Army Combat Brigade with 4700 troops and support personnel from Iraq back here to the USA? Why do you think the Pentagon announced yesterday they are going to increase the number of combat troops inside the US from its present 4700 up to 20,000? They KNOW the ****'s gonna hit the fan.When the economy fails -- and it will -- they are terrified about what We The People might do.They are afraid we might (rightfully) blame the government for wrecking our nation and that we might take retribution upon them by force.It's good they're afraid. They ought to be.I have compiled a compete list of the home addresses of every member of the House of Representatives, every member of the U.S. Senate, all nine Justices on the Supreme Court and a slew of other federal Judges in the various Circuit Courts of Appeal and District Courts.I have the home addresses of all the members of the Federal Reserve Board of Governors and every key person at every regional federal reserve bank.When the **** hits the fan, I am going to publish those addresses so the folks out here in the real world who have suddenly found they've lost everything, can pay a visit to those responsible for it!Oh, and in case you folks in law enforcement think you can grab me up and throw me into some dungeon to prevent the release of that info. . . . . . I've already distributed CD's with the info to quite a number of people whom I trust. They, in turn are making copies and sending those to people they trust.The CD's were sent with instructions to IMMEDIATELY disseminate that info as soon as they hear I have been grabbed.So there is no way at all the government can prevent "being held accountable."I am also presently researching the home addresses of all the Bankers and other financial hot shots involved in stocks, bonds, money markets, mutual funds and the like. Their home addresses are going out too!When the whole system collapses, it won't just be government types that get paid a visit; it will be the financial hot shots too.There's going to be retribution for the destruction of our financial system and our country. Nothing can prevent that retribution -- except if they find some way to stop the financial catastrophe they have caused. I wish them luck.[tags] Bailout Trillion
Paulson announced that 100s of banks are in trouble and being reviewed. No bailout money was allocated to these NEW troubled banks. More money will be requested to help them.What does this mean? Keep money in Treasury securities? In the mattress? Use it to buy property now or wait to buy property much cheaper later on?Hal Turner expects the economy to collapse by the end of February/early March 2009. By June 2009 at the latest.From Hal TurnerDecember 2, 2008U.S. FALLING APART! "HUNDREDS OF BANKS" APPLY FOR FEDERAL HELPThe march toward complete financial collapse of the USA is accelerating out of control. According to the US Treasury, "hundreds of banks" have asked for emergency help from the government.To help you understand the frightening implications of this, consider the following:Since the "financial crisis" began in September, The Treasury Department has injected $150 billion in capital by buying preferred shares in 52 institutions. 52 banks, $150 billion.Todays news that "hundreds of banks" are now in danger of failing caught my attention, so I contacted my sources inside the Treasury and I almost fell over when they told me: "Five hundred twenty additional banks are failing; ten times the number of banks that have already been bailed out."Do the math: If 52 banks needed $150 billion, 520 banks could translate into one point five TRILLION.That isn't the worst of it. The chart below (click image to enlarge) shows that our nation has already committed EIGHT POINT FIVE TRILLION to the financial mess and of that, they've already disbursed THREE POINT TWO TRILLION.Ask yourself this simple question: Where are they getting this money? The simple answer: They're printing it.Let's not forget that the money listed above is ON TOP OF the ten trillion dollars the government already owes from past deficit spending!Do the math again:$1.5 Trillion needed for another 520 failing banks$8.5 Trillion committed to more financial bailouts$10 Trillion in national debt from years of deficit spending.__________$20 TRILLION dollars in total (so far)Let me put this in better perspective for you. $20 Trillion dollars divided up among each of our 300 million citizens amounts to sixty-six-thousand, six-hundred sixty-six dollars ($66,666.) for every man, woman and child! Wow. That's like a satanic number!Need further perspective? If you took a loan for the $66,666 at one percent (1%) interest per year for ten (10) years, you would need to pay $584.06 per month for you, your wife/husband and each one of your children! For my family (Me, Wife, one son) that would be 1752.08 per month for ten years!!You're a smart person. I know you're smart because you read this blog! As a smart person ask yourself: How long is it going to be before the rest of the world says to themselves "The USA is totally bankrupt, they can't even hope to repay all the money they've borrowed, the US dollar isn't worth the paper its printed on because they printed so much of it, we're not going to accept it as money anymore."I'll tell you how long it will be: The end of February or early March 2009. Best case? Late June, 2009. That's it.At this point I think it is worth reminding all of you that in December 2007 and January, 2008, I warned everyone via my radio show and web site that "September is going to see major financial upheaval." I told everyone when and why. It happened exactly as I warned. So I hope you heed my warning about total financial collapse early next year.That's when the **** is really gonna hit the fan and this nation will fall into complete, total, economic collapse. A collapse brought about by our own federal government spending us into oblivion.Why do you think they re-deployed an active duty Army Combat Brigade with 4700 troops and support personnel from Iraq back here to the USA? Why do you think the Pentagon announced yesterday they are going to increase the number of combat troops inside the US from its present 4700 up to 20,000? They KNOW the ****'s gonna hit the fan.When the economy fails -- and it will -- they are terrified about what We The People might do.They are afraid we might (rightfully) blame the government for wrecking our nation and that we might take retribution upon them by force.It's good they're afraid. They ought to be.I have compiled a compete list of the home addresses of every member of the House of Representatives, every member of the U.S. Senate, all nine Justices on the Supreme Court and a slew of other federal Judges in the various Circuit Courts of Appeal and District Courts.I have the home addresses of all the members of the Federal Reserve Board of Governors and every key person at every regional federal reserve bank.When the **** hits the fan, I am going to publish those addresses so the folks out here in the real world who have suddenly found they've lost everything, can pay a visit to those responsible for it!Oh, and in case you folks in law enforcement think you can grab me up and throw me into some dungeon to prevent the release of that info. . . . . . I've already distributed CD's with the info to quite a number of people whom I trust. They, in turn are making copies and sending those to people they trust.The CD's were sent with instructions to IMMEDIATELY disseminate that info as soon as they hear I have been grabbed.So there is no way at all the government can prevent "being held accountable."I am also presently researching the home addresses of all the Bankers and other financial hot shots involved in stocks, bonds, money markets, mutual funds and the like. Their home addresses are going out too!When the whole system collapses, it won't just be government types that get paid a visit; it will be the financial hot shots too.There's going to be retribution for the destruction of our financial system and our country. Nothing can prevent that retribution -- except if they find some way to stop the financial catastrophe they have caused. I wish them luck.
While Wall Street and the banking sector obsesses over the government’s controversial stress tests, Congress is moving on to the next hot-bottom issue—granting the government authority to take over and, if necessary, close big financial firms as part of a sweeping regulatory reform package.Sen. Chris Dodd (D-Conn.) Monday said the Senate Banking Committee will hold a public hearing Wednesday on the issue of so-called too-big-to-fail institutions, the first of what promises to be several hearings in Congress in the weeks to come. The House Financial Services Committee is expected to do the same as early as next week.“It’s going to be the next big thing,” said one senior Congressional staffer.In March, President Obama asked House Financial Services Chairman Barney Frank (D-Mass.) to fast-track legislation on the new regulatory power—similar to that which the FDIC now has over banks and thrifts with government-insured deposits—amid the latest public flap over executive pay at AIG [AIG 1.46 0.08 (+5.8%) ], which has received tens of billions of dollars in government aid.At the time, the plan was for the resolution authority measure to be drawn up as stand-alone legislation, and essentially rushed into law, but it will now be wrapped into a broader overhaul effort, including the creation a super or systemic regulator.“We thought we could break that out and pass it sooner,” said one Congressional source, Congress is thought to be waiting for the White House to take the lead on the legislation and forward its recommendations to legislators.Both the Treasury and the Federal Reserve have submitted proposals to Congress, although only the Treasury has made its ideas public.Supporters say resolution authority would close a dangerous and somewhat inexplicable hole in the government’s regulatory powers over large financial institutions other than commercial banks and would help prevent the messy collapse and collateral damage that occurred with Lehman Brothers last fall.“The situation is showing us, we need more regulation,” says banking industry consultant Ken Thomas, who also teaches at the University of Pennsylvania’s Wharton School of Business.Under current law, the FDIC uses its “bridge bank authority” to prevent a struggling bank from failing, while arranging for a friendly takeover, which creates a relatively seamless change in operations and avoids a run on deposits.In rare cases, the FDIC closes the bank and pays off depositors.The FDIC, however, does not control bank-holding companies, the parent companies of the commercial banks.That is the responsibility of the Fed, but the central bank is only legally allowed to make the company take "prompt corrective action" to deal with such things as capital requirements.Under the Treasury’s proposal, the new authority would “enable the federal agency acting as conservator or receiver to sell or transfer the assets or liabilities of the institution in question, to renegotiate or repudiate the institution’s contracts (including with its employees), and to address the derivatives portfolio, thus reducing the potential for further disruption.”Few doubt the need for all that after Federal Reserve Chairman Ben Bernanke last winter got the attention of one congressional panel looking into the industry’s escalating problems when he said: “I think what is missing is a comprehensive dissolution authority to address systemically critical firms.” Thus far, the financial services industry has been relatively supportive of the concept, but that doesn’t mean an easy ride for the legislation.Analysts as well as former government officials say the regulatory reform package—and the resolution authority in particular—will be subject to power struggles within Congress and regulators.There’s already been ample speculation about what regulator would get the new—and considerable—authority: The FDIC, the Fed and Office of the Comptroller of the Currency have all been mentioned.There’s a case to be made for any of them and each have their champions, but analysts expect plenty of political infighting and jockeying along the way.Some, however, say none of the above is the best course.“If they have it, it has to be some kind of a new body,” says Thomas.The only current legal option is the bankruptcy court process, which entails either protection from creditors or outright liquidation, neither of which would work particularly well given the complicated counter-party nature of such complex operations, whose assets and liabilities now reach into the hundreds of billions.Other analysts say expect fighting among congressional committee because the legislation spans apparent jurisdictions, covering core legal as well as financial issues, which is bound to attract the interest of House and Senate judiciary committees.“You’re effectively shifting a not insignificant sector of the US economy from jurisdiction under the bankruptcy code,” says independent banking analyst Bert Ely, who predicts a "battle in Congress over authority.”Still others are worried about the unintended consequences of such major legislation and are urging caution and due diligence all the way.Given all those factors—as well as the other components of the overhaul package—Congressional sources say legislation may not be ready until the end of the year. :lol: :lol: :lol:
October 9, 2008, 11:18 amThe National Debt Clock. (Associated Press)The national debt clock, the unofficial tracker of the federal deficit maintained by the Durst Organization in New York, has reached its limits. Last month, as the national debt exceeded $10 trillion for the first time, the clock ran out of digits to record the number.The dollar sign in the clock had to be deleted and replaced with a one to record the massive number. The clock’s owners say a new model — with space for two extra digits — will be in place early next year.Now the debt clock will be able to reach the quadrillions. Hopefully, that’s not a level that will be breached any time soon. –Phil IzzoPermalink | Trackback URL: http://blogs.wsj.com/economics/2008/10/09/sign-of-the-times-2/trackback/ [tags] National Debt Clock
By Lesley WroughtonISTANBUL (Reuters) - The International Monetary Fund on Wednesday lowered its estimate for global writedowns for banks and other financial institutions to $3.4 trillion but warned that loan losses were set to rise as unemployment grew.In April the IMF estimated in its Global Financial Stability Report that global bank losses could reach $4 trillion but said it cut the figure by $600 billion to reflect rising securities values and new methodology for calculating writedowns."Global financial stability has improved, but risks remain elevated and the risk of reversal remains significant," the IMF said. It added that the economic downturn was troughing but the recovery in advanced economies would be extremely slow.The report said that while banks have enough capital to survive, their earnings are not expected to fully offset writedowns expected over the next 18 months.It said stronger action was needed to bolster bank capital and earnings capacity to ensure banks could support a recovery.The Fund said while private-sector credit growth has contracted in big economies, overall borrowing needs have not slowed as quickly because of burgeoning government deficits."The likely result is constrained credit availability," it said, adding that continued support by central banks may be required to alleviate this.Using new methodology to calculate the writedowns, the IMF said bank losses on loans and securities holdings amounted to $1.3 trillion through the first half of 2009, with new writedowns of about $1.5 trillion still needed through the end of 2010.The report said U.S. institutions were about 60 percent through their needed writedowns, while their euro area and British counterparts had recognized only 40 percent of losses.DEAL WITH ITIt said loan losses are expected to account for around two thirds of total writedowns between 2007 and 2010, with housing the hardest hit in the United States and foreign loans the big contributors to loan losses in Britain and the euro area.The IMF urged authorities to deal with troubled assets still on banks' books, adding that reassuring stress test results and signs of economic stabilization have eased pressure to deal with the toxic debt."Authorities, banks and investors need to persevere with these programs," the IMF said, adding that in countries where banks were undercapitalized, such toxic assets should be ring fenced to reassure markets about future losses."Only when this source of uncertainty has been substantially reduced can banks fully participate in providing credit for recovery," the IMF said.The Fund said financial conditions in emerging markets have improved thanks to strong policies but estimated that companies faced foreign currency debt refinancing needs of $400 billion over the next two years. (Editing by Jan Dahinten)
By David LawderISTANBUL (Reuters) - The head of the U.S. Federal Deposit Insurance Corp. said on Sunday that she wanted to end the "too big to fail" doctrine and shrink the shadow banking system that operates outside the reach of regulators.FDIC Chairman Sheila Bair, speaking to the Institute of International Finance meeting here, said a U.S. proposal to create the authority to shut down failing systemically important financial firms may need to be extended to insurers and hedge funds."We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair said.Bair said she believed that bank holding companies with subsidiaries that are shut down by regulators also should be made to pay the price of failure by being subject to the same wind-down process."I believe that the new regime should apply to all bank holding companies that are more than just shells and their affiliates regardless or not whether they are considered to be systemic risks," she said, adding that including only systemically important firms in the shut-down regime could reinforce the 'too big to fail' doctrine.Financial firms subject to systemic risk shutdown authority should likely also be required to publish "living wills" -- details on how an orderly wind-down would play out -- on their websites to provide more clarity to shareholders and customers.And by applying the resolution authority more broadly outside of normal regulated bank holding companies, it would help shrink the shadow banking system by discouraging regulatory arbitrage under which financial firms shop for the most lenient supervisors."If you tighten regulation of the banks even more without dealing with the shadow sector you could make the problem even worse," she said.Bair added that reducing the shadow banking system and regulatory arbitrage is her top priority for the U.S. Congress as it works on legislation to revamp U.S. financial oversight this fall.She said there were some problems in extending resolution authority beyond banks to insurers and hedge funds, which she called a "sea change" in their oversight. But these could be overcome and it was appropriate to consider including them in the systemic risk resolution authority regulation."If the entity is systemic, that means if the entity gets in trouble it could create problems for the rest of us," she said.Bair added that the FDIC is talking with the American Securitization Forum, a financial trade group, and others regarding the agency securitizing some of the assets that it has taken over from failed banks in order to help jumpstart U.S. securitization markets.(Additional reporting by Steven Slater in Istanbul, Editing by Ruth Pitchford)
Washington to enforce executive pay cuts(AFP) – 45 minutes agoWASHINGTON — US President Barack Obama's administration will order cash salary cuts of 90 percent on average for top executives at firms that received significant government aid, newspapers reported Thursday.Seven companies that received the most government assistance at the height of the US financial crisis will each be required to cut the salaries of their 25 best-paid executives.The biggest cuts will be to the cash portions of the 175 employees' salaries, which will be slashed by an average of 90 percent, and will mostly fall below 500,000 dollars, the Wall Street Journal reported.The salary restrictions come after domestic and international outrage over the huge bonuses being paid to employees of companies that received billions in government assistance and were widely blamed for helping to spark the financial crisis with irresponsible trading and business practices.In the wake of widespread anger over the salaries being paid to employees of bailed out insurance giant American Insurance Group (AIG), Obama appointed Kenneth Weinberg his "salary czar" to tackle the issue.Weinberg is now expected to unveil a set of measures limiting compensation packages for employees at the seven companies that received the biggest government bailouts -- AIG, Bank of America, Citigroup, General Motors Co., GMAC Inc., Chrysler Group LLC and Chrysler Financial.For many of the 175 executives, the cash they would have received will be replaced by stock that will be restricted from immediate sale.The New York Times reported that total compensation for the top earners, including stock and bonuses, will drop on average by about 50 percent under the plan to be announced in the next few days by the Treasury Department.The Wall Street Journal said Weinberg would also demand a series of "corporate-governance" changes at the firms.They included splitting the positions of chairman and chief executive officer and requiring boards of directors to create a committee to assess risk.Some of the toughest pay restrictions will come at the financial-products unit of AIG blamed for the insurance giant's near-collapse at the height of the crisis, the Journal said.No employee within that unit will receive compensation of more than 200,000 dollars, it said, citing people familiar with the matter.But the impact of most of the salary cuts was expected to be less significant than some had called for because the averages announced are skewed by a few individual cases.The Washington Post reported that among the cases used to calculate the average cuts was the 100 million dollar bonus that Citigroup intended to pay star trader Andrew Hall.Ultimately, Citigroup opted to sell Hall's unit to another company and defer his payment until 2010, when it will not come under Feinberg's mandate, meaning his 2009 bonus is listed as zero.Another case that may skew the average is the salary that Bank of America's outgoing Chief Executive Ken Lewis has agreed to forfeit. He will still be paid 70 million dollars in retirement money by the bank, which received 45 billion in government aid.The Post said Weinberg will also seek to curtail some of the most extravagant corporate perks offered to executives, including the use of corporate jets for personal travel, drivers and reimbursement for country club membership.Individual perks worth more than 25,000 dollars have received particular scrutiny, the Post said.
TARP watchdog: Main Street still not out of the woodsBy Hibah Yousuf, staff reporterApril 20, 2010: 3:44 AM ETNEW YORK (CNNMoney.com) -- Though the government's $700 billion Wall Street bailout package will be less of a financial burden than initially expected, plenty of big challenges remain for Main Street, a TARP watchdog said Tuesday.In a report, the Special Inspector General for the Troubled Asset Relief Program noted that TARP losses are estimated to be $127 billion, mostly driven by funds for AIG, the automakers, and attempts at preventing foreclosures.Financial institutions, meanwhile, have paid back $186 billion. While that's widely perceived as good news, the benefits have not been far reaching, said the special inspector general, Neil Barofsky."Even as Wall Street regains its footing, however, signs of distress on Main Street remain disturbingly persistent," wrote Barofsky.Barofsky's biggest concerns are the progress in two key objectives of TARP: staving off mounting foreclosures and boosting small business lending.Foreclosure program poses new problemsIn March, Barofsky slammed the Treasury's Home Affordable Modification Program designed to address the millions of homes at risk of foreclosure.Barofsky noted that foreclosure filings were up 16% in the first quarter of 2010, and that bank repossessions were up by 35%.In the March report, Barofsky said the Treasury Department initially set targets that weren't "meaningful," mismanaged the implementation of the program, and risked a substantial number of "re-defaults," with many participants ultimately losing their homes anyway.Barofsky said that the Treasury Department has since attempted to address those flaws. There are new provisions aimed at reducing mortgage payments for unemployed homeowners, and reducing principal for borrowers who owe more than their homes are worth. But Barofsky said the policies create new challenges for the agency."Treasury's urgency in rolling out the new initiatives, as laudable as it is, risks significant costs in the form of ill-defined goals, incomplete program guidelines, increased vulnerability to fraud, incentives that may prove ineffective, and the potential for arbitrary treatment of participating borrowers," Barofsky wrote.Barofsky said that allowing lenders to judge whether borrowers merit a reduction in their principal may not eliminate the risk of re-defaults. He said loan providers are rewarded based on the total amount of outstanding mortgages they service, so they may have more incentive to modify mortgages without reducing the principal.Barofsky recommended that Treasury reconsider the voluntary spirit of the principal reduction program to make to maximize its effectiveness.Barofsky also said the Treasury's move to help unemployed homeowners doesn't go far enough. While the initiative provides at least three months of relief to job-seeking homeowners, the median length of unemployment at 21.6 weeks is much longer than that brief period, and average long-term joblessness is at a record high at 31.2 weeks.Oversight needed for small-business lendingIn February, the administration announced a plan to seek $30 billion in TARP funds to spur small-business lending, which remains depressed from pre-recession levels, Barofsky said.The Treasury said the capital would be invested through Community Development Financial Institutions, which target more than 60% of funding to lending to small businesses in areas underserved by traditional financial institutions.Though the funds would be operated outside of TARP, Barofsky suggested that the Treasury include the program in the inspector general's oversight provisions.The Treasury agreed to institute careful screening of the institutions receiving the TARP funds and provide the inspector general with access to CDFI's records provided to the Treasury.
