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Obama tells US banks to lend more and not oppose reform

2009-12-15T01:14:00.000-08:00

US President Barack Obama has told bankers to increase loans to small and medium-size businesses.

The president was speaking after a meeting - which he described as "candid" - with executives of some of America's top banks.

President Obama said US banks had received extraordinary assistance and demanded they show extraordinary commitment to rebuild the US economy.

He also warned their lobbyists not to block moves for regulatory reform.

Monday's meeting with executives from Goldman Sachs, JP Morgan Chase and Citigroup, among others, came a day after the president said he had not run for office to help out "a bunch of fat cat bankers on Wall Street".

In comments to reporters at the White House after Monday's talks, Mr Obama said: "America's banks received extraordinary assistance from American taxpayers to rebuild their industry, and now that they're back on their feet, we expect an extraordinary commitment from them to help rebuild our economy."

He urged bankers to "explore every responsible way" to boost lending and to "take a third and fourth look" at loan applications from small and medium-sized businesses. He said he was "getting too many letters" from creditworthy small businesses saying banks they have had long-term relationships are reluctant to give them loans.

Microscope

Speaking after the meeting, US Bancorp chief executive Richard Davis said he and his colleagues realised they were "under the microscope" to show they were doing a better job of listening to customers.

Many US citizens are angry the banking industry was granted a $700bn (£430bn) bail-out. The Obama administration has said the rescue was needed to stem the worst financial crisis since the Great Depression of the 1930s and head off a potentially greater calamity in the broader economy. The meeting came as Citigroup announced it was ready to pay back an emergency loan of $20bn to the US government earlier than expected. Wells Fargo, another leading bank, said it too had struck a deal to repay $25bn in government aid it received last year. The BBC's Adam Brookes in Washington says this may be a sign of the banking sector's recovery - but also a sign of how the banks want to shed government influence over their affairs.

Mr Obama also criticised lobbyists for trying to stall his administration's reform of the financial services sector. He warned if they were "willing to fight common-sense consumer protection, that's a fight I'm willing to have". Last week the US House of Representatives approved its version of the financial regulatory reform legislation. But before the bill can become law, it will also need approval from the Senate. It includes a plan to give regulators the power to dismantle businesses that threaten the economy in a way that ensures shareholders and unsecured creditors, not taxpayers, bear the losses.

source : BBC NEWS

Japan's Tankan sends mixed signals on fragile recovery

2009-12-14T09:15:00.000-08:00

TOKYO (MarketWatch) -- The Bank of Japan's quarterly Tankan survey sent mixed signals Monday on the outlook for the fragile economic recovery, showing better-than-expected sentiment but deteriorating capital-outlay expectations among Japanese companies.

The closely watched survey's "large manufacturers' diffusion index," which measures sentiment among those companies' top executives, stood at negative 24, better than the consensus forecast of negative 27 of economists surveyed by Nikkei and Dow Jones Newswires. It was an improvement from the negative 33 reading in the September tankan.

Sentiment at large non-manufacturers also edged up, rising to negative 22 from a reading of negative 24 in the previous survey.

The key large-manufacturers index improved for the third straight survey, after hitting a record low of negative 58 in the March survey. Companies expect the index to remain on an uptrend, predicting a reading of negative 18 for the March 2010 tankan.

But negative readings mean companies that are pessimistic about the outlook outnumber those that are optimistic, suggesting that a majority of companies still lack confidence in the economic recovery.

Moreover, all large companies said they plan to cut their capital spending by an average of 13.8% for the current fiscal year ending March 2010 -- a larger projected drop than the 10.8% decrease expected in the previous survey.

The headline numbers "were relatively better than we had expected, but we think today's results signal strong deflationary pressure will remain for the time being," said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo, in emailed comments.

The Tankan showed Japan's large manufacturers expect the dollar to trade at an average rate of 92.93 yen in the fiscal year through March 2010, weaker than their forecasts of 94.85 yen in the September survey and 97.18 yen in the March survey.

The yen's recent rise to 14-year highs against its U.S. counterpart could have had a negative effect on sentiment, as a stronger currency erodes the value of Japanese companies' repatriated overseas profits.

Technically, Japan pulled out of recession in the April-June quarter. But the latest data released by the Cabinet Office last week showed Japan's economy grew just 0.3% in real terms in the July-September period from the previous quarter -- far less than the on-quarter rise of 1.2% in the preliminary data. Read more on Japan revised GDP data.

The main reason for the sharp downward revision was corporate capital investment, which fell 2.8% on quarter, far worse than the preliminary data's 1.6% increase.

Last week, the Japanese government approved a new economic stimulus package, containing 7.2 trillion yen ($8.6 billion) in spending. Read more on Japan stimulus plan.

Earlier this month, the central bank took additional easing steps, including a new 10-trillion-yen lending facility, to support the economy amid deflationary pressures and a soaring currency. Read more on the Bank of Japan's latest easing steps.

The BOJ will meet on Thursday and Friday this week.

"We expect the BOJ to maintain its current policy in order to assess the effects of the measures" the central bank already took this month, said RBS Securities' Nishioka.

Lisa Twaronite is a MarketWatch reporter based in Tokyo.

Banks In Dispute With FSA Over Bonus Plans (Updated)

2009-12-11T10:07:00.000-08:00

UPDATE 18:00: The FSA's thinking on this subject appears to have evolved during the course of the day. As I understand it, the regulator is considering implementing a sliding scale for the level of variable compensation for employees of "significant influence" in the 26 key regulated institutions.

The other option would be to increase the £500,000 threshold for defining "significant influence" (though what any new, higher figure would be isn't yet clear). Banks have been informed of the FSA's adjusted stance this afternoon, so there should be more news on this next week.

Banks In Dispute With FSA

I’ve learned that there are heated discussions taking place between the City regulator and some of the world’s largest banks over the bonuses that they want to pay out in the new year.

The debate (‘row’ would probably be too strong a word for it) has arisen over the definition of a “person of significant influence” in the 26 major banks and building societies which the Financial Services Authority (FSA) is responsible for regulating. That list includes the likes of Barclays, Goldman Sachs, HSBC and Royal Bank of Scotland.

The sticking point relates to Principle 8 of the FSA's new remuneration code, which applies to “a person who performs a significant influence function for a firm”.

The issue is that while many of the firms have submitted proposals to the FSA which include a relatively small number of employees in the Principle 8 category, the regulator believes that the definition of “significant influence” can be much wider.

There has apparently been a wide discrepancy between the submissions of many of the banks on this subject, so I understand that the FSA has decided to define it as meaning anyone who earns more than £500,000 a year, or anyone earning more than twice their basic salary as a bonus. Under the FSA code, anyone falling into either category will have to have at least 60pc (and possibly two-thirds) of their bonus deferred over a period of several years.

This has angered some of the banks, which believe they will find it much more difficult to manage their compensation discussions with employees as a result.

Of course, most people would find it rather bizarre to hear of someone earning more than £500,000 a year in a bank but not being deemed an influential employee. Hard as it may be to believe, there are many people working in the IT and other back-office departments of major investment banks who earn that kind of money.

And of course, there’s unlikely to be a huge amount of sympathy from the general public for bankers who earn more than twice their salary as a bonus.

Indirectly, one of the effects of this FSA decision is likely to mean that the amount of cash paid out by banks in bonuses in 2010 (which was already being sharply reduced by the new FSA and G20 codes and Britain’s one-off bonus tax) will come down even further. But it won’t dramatically alter the overall headline figure for bonus awards - although the Treasury hopes that that part of the job will be achieved by the new 50pc levy on bonuses above £25,000.

French Join Brits In Supertax On Bonuses

2009-12-10T10:21:00.000-08:00

France is expected to follow Britain's lead and slap a one-off 50% tax on bank bonuses over 27,000 euros.

Gordon Brown and Nicolas Sarkozy are keen for other EU countries to follow suit

Chancellor Alistair Darling announced in the pre-Budget Report on Wednesday that the British Government would impose a one-off 50% tax rate on bonuses above £25,000.

The move is to recoup cash spent saving the financial sector during the crisis.

Sky News' city editor Mark Kleinman said:"The French government is planning to impose a one-off levy on banks operating in France and that will capture British banks like HSBC and Barclays which operate in France as well."

He added: "This is good news for Alistair Darling because it means he is not acting in complete isolation.

"But of course the city heavyweights who are threatening to quit Britain now over this supertax are not going threatening to go to Paris, they are threatening to go Switzerland, Singapore and Hong Kong - so it is mixed news for Britain."

President Nicolas Sarkozy and Gordon Brown made a joint appeal for world leaders to impose a tax on bank bonuses in a commentary published in The Wall Street Journal newspaper.

It is believed France had been considering the tax for a while but the country's government was worried about losing its financial competitiveness.

Fed chairman Ben Bernanke says recovery in US 'fragile'

2009-12-07T21:54:00.000-08:00

Although the US economy is improving, it is too early to say that the recovery will last, Federal Reserve chairman Ben Bernanke has said.

Unemployment could stay "elevated", although inflation is likely to remain "subdued", he said in a speech to the Economic Club of Washington. Interest rates were likely to stay low for "an extended period", he added. Following Mr Bernanke's comments, the dollar lost recent gains it had made against the euro.

The euro rose by more than one cent to $1.4883 after Mr Bernanke's remarks, before falling back to $1.4821. US stocks also rose modestly after the speech, but finished broadly flat, with the Dow Jones index closing just 1 point higher at 10,390.

'Some way to go'

During Mr Bernanke's tenure, the US central bank has cut interest rates to close to zero, and has spent $3 trillion (£1.8tn) on propping up the credit markets and trying to boost the economy. Investors had been hoping that Mr Bernanke would give some clues as to how the Fed might unwind its economic stimulus efforts, following a government report on Friday which showed that in November, employers cut the lowest number of jobs since the recession began.

The surprisingly positive report had fuelled speculation that interest rates could rise sooner than had been anticipated. But Mr Bernanke said that rates would remain low, and the outlook for rates would be discussed at the Fed's meeting on 15-16 December.

"We still have some way to go before we can be assured that the recovery will be self-sustaining," he said

source : BBC NEWS

Gulf Stock Markets Fall Again On Dubai Fear

2009-12-01T10:14:00.000-08:00

Stock markets across the Gulf fell steeply again on Tuesday, triggered by uncertainty over debt problems in Dubai.

The Dubai stock market plunged by 6.25% on opening, coming back only slightly to end the day 5.61% down. Abu Dhabi, which has pledged to help to its stricken neighbour "on a case-by-case basis", saw its main index slip another 3.5%.

Markets in both emirates fell by more than 7% on Monday, their first day of trading after the four-day Muslim holiday of Eid al Adha. Meanwhile Qatar's DSM Index, which was closed on Monday, joined the slide on opening. The index shed more than 8% over the day amid a panic sell-off, losing all its 2009 gains.