CHINA has agreed to write off 80 per cent of the debt accrued by Iraq under Saddam Hussein, Iraq's Finance Ministry said.
Iraq's total debt to China was $US8.5 billion ($9 billion), the ministry said.
The decision followed a meeting between China's envoy to Baghdad and the Iraqi Finance Minister, Bayan Jabr, and would ''enhance economic co-operation between the two countries''.
With 83 per cent of votes in the parliamentary election counted, the Prime Minister, Nouri al-Maliki, and his Shiite-dominated bloc, State of Law, were about 40,000 votes in front of Iraqiya, the bloc led by the former prime minister Ayad Allawi, on Thursday.
Neither is likely to gain enough seats to form a government without other parties, and resulting instability could the US's attempts to reduce troop strength in Iraq from 96,000 to 50,000 by August.
Citigroup Reverses Plan to Shrink Mortgage Business (Update1)
March 19 (Bloomberg) -- Citigroup Inc., the bank 27 percent owned by the U.S. government, will ramp up purchases of mortgages underwritten by other firms and keep more loans on its balance sheet after reversing a plan to scale back home lending.
Citigroup has decided mortgages are a “core” product alongside consumer-banking staples savings accounts and credit cards, Sanjiv Das, who heads the New York-based lender’s U.S. mortgage business, said today in an interview. Citigroup CEO Vikram Pandit shifted the CitiMortgage unit into a new Citi Holdings division in January 2009 along with other “non-core” businesses tagged for sale, wind-down or restructuring.
“In order to be full-service consumer bank we had to be able to offer mortgages to our customers” Das said. “Then, we said, let’s now start to rebuild this business.”
Losses on home loans and writedowns on mortgage-backed bonds helped saddle Citigroup with a record 2008 net loss of $27.7 billion, and the bank cut back on residential lending to stanch further losses. Pandit said earlier this month he’s looking for ways to spur growth in the consumer, corporate and investment-banking businesses he plans to keep.
Citigroup, which got a $45 billion taxpayer bailout in 2008, last year repaid $20 billion, and the Treasury converted the remaining $25 billion into 7.7 billion common shares. Pandit said earlier this month that the bank, whose net loss narrowed to $1.6 billion last year, is well-positioned to return to profitability, driving up the company’s stock price. The Treasury’s shares are now worth $30.5 billion.
To win more business, Das said he cut rates this week on “jumbo” loans -- those of more than $417,000 in most areas -- by one percentage point to 5.875 percent. The offer applies only for loans sold through branches and the bank’s Web site, he said.
Some of the newly underwritten jumbo loans will be held on the bank’s balance sheet, he said. Since the mortgage crisis hit, O’Fallon, Missouri-based CitiMortgage had mostly operated with an “originate-to-sell” strategy, where loans were sold to government-owned mortgage-finance companies including Fannie Mae and Freddie Mac.
In November, Citigroup Vice Chairman Edward “Ned” Kelly said the bank’s “intention going forward” was “selling rather than retaining” new loans.
CitiMortgage also plans to double to about 300 the number of smaller banks and independent mortgage companies it’s willing to buy loans from, he said. Such companies, known as correspondent lenders, will be screened using a “scorecard” grading them on the performance of loans they previously sold to Citigroup, Das said.
Das reports jointly to Citi Holdings CEO Michael Corbat and Manuel Medina-Mora, whom Pandit named earlier this year to take over responsibility for Citigroup’s North American consumer- banking business from Teresa “Terri” Dial.
Citigroup had $172.4 billion of North American home loans on its balance sheet as of Dec. 31, down 12 percent from a year earlier, according to its most-recent financial statement. In January, the company announced plans to transfer $34 billion of U.S. mortgages from Citi Holdings to Citicorp, the division that contains the businesses the bank is keeping.
Most of those loans are “pristine,” Das said, meaning the borrowers have high credit scores, are current on their payments and the value of the home exceeds the amount of the mortgage. Income from those loans will be counted in Citicorp’s earnings, he said. The bank will continue to sell or wind down the “legacy” loans remaining in Citi Holdings, he said.
At the end of last year, 8.3 percent of the bank’s North American mortgages were more than 90 days past due, compared with 2.2 percent at the end of 2007.
To contact the reporter on this story: Bradley Keoun in New York at email@example.com.
Federal Reserve Must Disclose Bank Bailout Records (Update5)
March 19 (Bloomberg) -- The Federal Reserve Board must disclose documents identifying financial firms that might have collapsed without the largest U.S. government bailout ever, a federal appeals court said.
The U.S. Court of Appeals in Manhattan ruled today that the Fed must release records of the unprecedented $2 trillion U.S. loan program launched primarily after the 2008 collapse of Lehman Brothers Holdings Inc. The ruling upholds a decision of a lower-court judge, who in August ordered that the information be released.
The Fed had argued that disclosure of the documents threatens to stigmatize borrowers and cause them “severe and irreparable competitive injury,” discouraging banks in distress from seeking help. A three-judge panel of the appeals court rejected that argument in a unanimous decision.
The U.S. Freedom of Information Act, or FOIA, “sets forth no basis for the exemption the Board asks us to read into it,” U.S. Circuit Chief Judge Dennis Jacobs wrote in the opinion. “If the Board believes such an exemption would better serve the national interest, it should ask Congress to amend the statute.”
The opinion may not be the final word in the bid for the documents, which was launched by Bloomberg LP, the parent of Bloomberg News, with a November 2008 lawsuit. The Fed may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court.
Right to Know
If today’s ruling is upheld or not appealed by the Fed, it will have to disclose the requested records. That may lead to “catastrophic” results, including demands for the instant disclosure of banks seeking help from the Fed, resulting in a “death sentence” for such financial institutions, said Chris Kotowski, a bank analyst at Oppenheimer & Co. in New York.
“Whenever the Fed extends funds to a bank, it should be disclosed in private to the Congressional oversight committees, but to release it to the public I think would be a horrific mistake,” Kotowski said in an interview. “It would stigmatize the banks, it would lead to all kinds of second-guessing of the Fed, and I don’t see what public purpose is served by it.”
Senator Bernie Sanders, an Independent from Vermont, said
the decision was a “major victory” for U.S. taxpayers.
“This money does not belong to the Federal Reserve,” Sanders said in a statement. “It belongs to the American people, and the American people have a right to know where more than $2 trillion of their money has gone.”
The Fed is reviewing the decision and considering its options for reconsideration or appeal, Fed spokesman David Skidmore said.
“We’re obviously pleased with the court’s decision, which is an important affirmation of the public’s right to know what its government is up to,” said Thomas Golden, a partner at New York-based Willkie Farr & Gallagher LLP and Bloomberg’s outside counsel.
The court was asked to decide whether loan records are covered by FOIA. Historically, the type of government documents sought in the case has been protected from public disclosure because they might reveal competitive trade secrets.
The Fed had argued that it could withhold the information under an exemption that allows federal agencies to refuse disclosure of “trade secrets and commercial or financial information obtained from a person and privileged or confidential.”
The Clearing House Association, which processes payments among banks, joined the case and sided with the Fed. The group includes ABN Amro Bank NV, a unit of Royal Bank of Scotland Plc, Bank of America Corp., The Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., US Bancorp and Wells Fargo & Co.
Paul Saltzman, general counsel for the Clearing House, said the decision did not address the “fundamental issue” of whether disclosure would “competitively harm” borrower banks.
“The Second Circuit declined to follow the decisions of other circuit courts recognizing that disclosure of certain confidential information can impair the effectiveness of government programs, such as lending programs,” Saltzman said in a statement.
The Clearing House is considering whether to ask for a rehearing by the full Second Circuit and, ultimately, review by the U.S. Supreme Court, he said.
Oscar Suris, a spokesman for Wells Fargo, JPMorgan spokeswoman Jennifer Zuccarelli, Bank of New York Mellon spokesman Kevin Heine, HSBC spokeswoman Juanita Gutierrez and RBS spokeswoman Linda Harper all declined to comment. Deutsche Bank spokesman Ronald Weichert couldn’t immediately comment. Bank of America declined to comment, Scott Silvestri said. Citigroup spokeswoman Shannon Bell declined to comment. U.S. Bancorp spokesman Steve Dale didn’t return phone and e-mail messages seeking comment.
Bloomberg, majority-owned by New York Mayor Michael Bloomberg, sued after the Fed refused to name the firms it lent to or disclose loan amounts or assets used as collateral under its lending programs. Most of the loans were made in response to the deepest financial crisis since the Great Depression.
Lawyers for Bloomberg argued in court that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money.
“Bloomberg has been trying for almost two years to break down a brick wall of secrecy in order to vindicate the public’s right to learn basic information,” Golden wrote in court filings.
Banks and the Fed warned that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell- off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued.
Much of the debate at the appeals court argument on Jan. 11 centered on the potential harm to banks if it was revealed that they borrowed from the Fed’s so-called discount window. Matthew Collette, a lawyer for the government, said banks don’t do that unless they have liquidity problems.
FOIA requires federal agencies to make government documents available to the press and public. An exception to the statute protects trade secrets and privileged or confidential financial data. In her Aug. 24 ruling, U.S. District Judge Loretta Preska in New York said the exception didn’t apply because there’s no proof banks would suffer.
In its opinion today, the appeals court said that the exception applies only if the agency can satisfy a three-part test. The information must be a trade secret or commercial or financial in character; must be obtained from a person; and must be privileged or confidential, according to the opinion.
The court said that the information sought by Bloomberg was not “obtained from” the borrowing banks. It rejected an alternative argument the individual Federal Reserve Banks are “persons,” for purposes of the law because they would not suffer the kind of harm required under the “privileged and confidential” requirement of the exemption.
In a related case, U.S. District Judge Alvin Hellerstein in New York previously sided with the Fed and refused to order the agency to release Fed documents that Fox News Network sought. The appeals court today returned that case to Hellerstein and told him to order the Fed to conduct further searches for documents and determine whether the documents should be disclosed.
“We are pleased that this information is finally, and rightfully, going to be made available to the American public,” said Kevin Magee, Executive Vice President of Fox Business Network, in a statement.
Balance Sheet Debt
The Fed’s balance sheet debt doubled after lending standards were relaxed following Lehman’s failure on Sept. 15, 2008. That year, the Fed began extending credit directly to companies that weren’t banks for the first time since the 1930s. Total central bank lending exceeded $2 trillion for the first time on Nov. 6, 2008, reaching $2.14 trillion on Sept. 23, 2009.
More than a dozen other groups or companies filed friend- of-the-court briefs. Those arguing for disclosure of the records included the American Society of News Editors and individual news organizations.
“It’s gratifying that the court recognizes the considerable interest in knowing what is being done with our tax dollars,” said Lucy Dalglish, executive director of the Reporters Committee for Freedom of the Press in Arlington, Virginia.
“We’ve learned some powerful lessons in the last 18 months that citizens need to pay more attention to what’s going on in the financial world. This decision will make it easier to do that.”
The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).
To contact the reporters on this story: David Glovin in New York at firstname.lastname@example.org; Bob Van Voris in New York at email@example.com.
Published: Wednesday March 24, 2010 MYT 9:21:00 AM
GENEVA: A senior Swiss regulator said Tuesday that banks were right to close thousands of American-held accounts, and even encouraged Swiss financial institutions to avoid U.S. clients because of unclear Internal Revenue Service rules.
Many of these Americans have "no tax issues," said Urs Zulauf, deputy chief of the Swiss Financial Market Supervisory Authority, or FINMA.
But even if they aren't dodging U.S. tax authorities, he said they are still too risky in light of the U.S. crackdown on Swiss banking giant UBS AG and proposed U.S. regulations on offshore banking.
Americans, at home and abroad, are increasingly struggling to invest with foreign banks, according to U.S. citizens' groups overseas.
UBS transferred many accounts to a U.S.-based subsidiary, while private bank Wegelin announced its withdrawal from cross-border services last year with a "Goodbye to America" letter that cited increased regulatory requirements for foreign banks and planned changes to the estate tax.
In Switzerland, where banking secrecy rules long shielded both tax evaders and legitimate investors, the recent clampdown has been startling, as banks sought to protect themselves from growing American government demands for information and less Swiss resistance to cooperation.
FINMA last year ordered financial data on 150 Americans suspected of tax fraud handed over to U.S. authorities, in a historic break from past practice.
The two countries later agreed to an exchange of 4,450 further UBS client names, but that deal must still be ratified by Swiss parliament.
"Various banks have responded to the pressure exerted by the U.S. authorities by terminating their business relationships with thousands of U.S. clients," Zulauf said.
"FINMA must tolerate and even encourage the policy of these banks, which is justified by risk considerations."
The uncertainty regarding future U.S. rules, and the IRS' intentions, means dealing with U.S. clients could "further damage the Swiss financial center," he said.
Andy Sundberg, an American in Geneva who campaigns for fairer treatment of U.S. citizens abroad, said he wasn't surprised.
"It's as if the U.S. clients are bunker-busters now," he said.
"Once a bank takes a single American client, it then has to open all its books to the IRS. I can understand their reluctance." - AP
Bank of America Corp follows Citigroup on China expansion
Wednesday, 24 March 2010 Bank of America boss says more staff hires are likely for Chinese expansion.
Bank of America Corp (NYSE:BAC) have indicated that they are looking to increase their presence in China.
The announcement follows that of Citigroup Inc (NYSE:C) who have indicated that emerging markets, such as China, are to be a key to expansion plans.
On the 5th of February the Chinese Vice Premier, Wang Qishan met with Citigroup Inc's Chief Executive Officer, Vikram Pandit in Beijing.
Citigroup launched domestically incorporated Chinese unit, Citibank (China) Co. Ltd, in April 2007, becoming one of the first foreign banks in China able to do savings business from local customers. CEO Vikram Pandit who last month was in China
Now Bank of America CorpCEO Brian Moynihan has said that his bank is planning to expand its operations in China by offering a full range of banking products and services in the country.
Bank of America, which is the biggest commercial lender in US., is planning to get a securities license as well as incorporation in China.
However, the bank has not set any timeline for its planned expansion. Moynihan gave his views about expanding in China on Wednesday while on a visit to the world’s third largest economy.
Since becoming the CEO, this is the first time Moynihan is visiting China. He said that Bank of America had a strong relationship with China Construction Bank, the second biggest lender in China.
Bank of America has an 11% stake in China Construction Bank and has no plans of buying a stake in any other Chinese lender. Prior to the financial crisis, it had a 16.7% stake in the Chinese lender, which was reduced to free up some capital as the crisis struck.
Speaking to reporters in China, Moynihan further said, “We are comfortable with where we are.
Based on our interaction and the amount of strategic support we have with CCB, I think that relationship is very strong." He added that the bank was looking to provide its Chinese customers with the same range of banking products and services it does to customers in its biggest markets.
Also incorporating in China would allow the bank to participate more in China’s debt market, according to Moynihan.
Tagging the yuan as a scapegoat is unfair (China Daily) Updated: 2010-03-24 07:48
As if the world economy wasn't fragile enough, politicians in the United States and China seem intent on fighting an old-fashioned currency war. The US is more wrong than China here, and it's important to understand why, lest the two countries send the world back to the dark age of beggar-thy-neighbor currency protectionism.
The battle concerns China's decision to peg its currency, the yuan, to a fixed rate of roughly 6.83 to one US dollar. To hear the American political and business establishment tell it, this single price is the source of all global economic problems. The peg keeps the yuan "undervalued" in this telling, fueling China's exports and harming the US, Europe and everyone else. If the Chinese would only let the yuan "float," it would soar in value, China's export advantage would fall, and the much-despised "imbalances" in global trade would end.
US President Barack Obama has picked up this theme, calling last week for Beijing to adopt "a more market-oriented exchange rate" that "would make an essential contribution to that global rebalancing effort." Less diplomatically, 130 Members of Congress sent a letter to Treasury this week demanding that unless China lets the yuan rise in value, the US should impose tariffs on Chinese goods. Just what the world needs: a trade war.
At the core of this argument is a basic misunderstanding of monetary policy. There is no free market in currencies, as there is in wheat or bananas. Currencies trade in global markets, but their supply is controlled by a cartel of central banks, which have a monopoly on money creation. The Federal Reserve controls the global supply of dollars and thus has far more influence over the greenback's value than any other single actor.
A fixed exchange rate is also not some nefarious economic practice rare in human affairs. From the end of World War II through the early 1970s, most global currency rates were fixed under the Bretton-Woods monetary system created by Lord Keynes and Harry Dexter White. That system fell apart with the US-inspired inflation of the 1970s, and much of the world moved to "floating rates."
But numerous countries continue to peg their currencies to the dollar, and with the establishment of the euro most of Europe decided to move to a fixed-rate system. The reason isn't to get some trade advantage against their neighbors but to gain the economic benefits of stable exchange rates - and in some cases a more stable monetary policy. A stable exchange rate eliminates a major source of uncertainty for investment decisions and trade and capital flows.
The catch is that under a fixed-rate system a country yields some or all of its monetary independence. In the case of euro-bloc countries this means yielding to the European Central Bank, and for dollar-bloc countries to the US Federal Reserve.
This is what China has done with its yuan peg to the dollar. By maintaining a fixed yuan-dollar rate, China has subcontracted much of its monetary discretion to the Fed in return for the benefits of exchange-rate stability. For more than a decade, this has served the world economy well, leading to an explosion of trade, cheaper goods for Americans that have raised US living standards, and new prosperity for tens of millions of Chinese.
For years, the US establishment has nonetheless been pressing China to "revalue" the yuan in the name of reducing the US trade deficit. Never mind that much of this deficit is intra-company trade, with US companies outsourcing production to China to stay globally competitive (and their US workers and shareholders profiting). Beijing bent for a while in the middle of the last decade and adopted a crawling peg that revalued the yuan by about 18 percent, but that had little impact on the trade deficit. China re-fixed the peg amid the financial panic of 2008, and now the American "revalue" clamor is rising again.
China is right to resist these calls, not least because a large revaluation could damage China's growth. China has learned from the experience of Japan, which bowed to similar US currency pressure in the 1980s and 1990s, revaluing the yen from 360 to the dollar to as high as 80 in 1995. As Stanford economist Ron McKinnon has shown, one result was domestic deflation in Japan and its lost decades of growth. Meanwhile, Japan continued to run a trade surplus, as imports fell with slower internal growth and cross-border prices adjusted. China has helped to lead the global economy out of this recession, and the world needs that to continue.
One proposed alternative is for China to once again move to a crawling peg, with a modest revaluation. But that would only invite more pressure on the yuan, as global "hot money" and currency speculators anticipate a further yuan rise. This is especially true with the Fed keeping dollar interest rates at zero, which also encourages more hot money into China in anticipation of a rising yuan.
This is not to say that the current arrangement is ideal. China's real problem isn't its peg to the dollar but the yuan's lack of convertibility to other currencies and capital controls. These controls have blunted the yuan's development as a tradable currency, which means private markets can't recycle the flow of dollars into China from its large trade surplus. Instead, the job is left to China's central bank, which buys dollars deposited in Chinese banks with yuan. This is why the central bank has accumulated some $2.5 trillion in dollar reserves.
China's build-up in dollar reserves is contributing to the world's anger at China, and it represents a huge misallocation of global resources. Instead of letting its dollar reserves find their best private investment use, China uses them to buy US Treasury bills or Fannie Mae securities.
One solution would be to make the yuan convertible, and let capital and trade flows adjust through private markets rather than the Chinese central bank. This is how Germany recycles its trade surplus. A one-time small revaluation to, say, 6.5 yuan to the dollar accompanied by convertibility would help with global adjustment while avoiding the perils of Japan-like deflation.
The Chinese government resists open capital markets because it fears less political control. At least at first a convertible yuan might also lead to a surge in capital outflows from China as Chinese companies and individuals diversified their currency holdings and investments. But over time, and probably quickly, markets would adjust and reach a new equilibrium. Convertibility would also increase the domestic pressure for China to further liberalize its financial system.
This is where the US should put its diplomatic pressure, rather than on the exchange rate. Even better would be a joint US Treasury-Chinese declaration on behalf of such a policy shift, which would give credibility to the new monetary arrangement.
We realize these views diverge from the current US establishment's patent medicine of smacking China and devaluing the dollar. But we hope they at least introduce a note of caution into the drive to blame the yuan and China for America's current run of economic anxiety.
It's especially dismaying to see the same US and European economists and columnists who peddled Keynesian stimulus as an economic cure-all now tell us that their policies would be working better if only the yuan-dollar price were different. Because their own ideas have flopped, they now want to make the yuan a scapegoat and risk a trade war with China. Haven't they done enough harm already?
Editorial reprinted from March 18 edition of The Wall Street Journal, Dow Jones & Company, Inc. All rights reserved
Editor's note: The debate on the valuation of the yuan has been escalating.
Chinese Premier Wen Jiabao said at the end of the annual meeting of the top legislature on March 14 that the Chinese currency is not undervalued as the United States stepped up pressure for China to change its currency policy.
What's behind the US push? How will China respond? And in what direction will the value of the yuan, or renminbi, move in the future?
Wen upbeat on US relations despite strains
Premier Wen Jiabao on Monday, March 22 rejected US accusations that the country undervalues its currency to seek a trade surplus.
Premier on Sino-US ties: Seeks to ease economic strains with Washington; Offers May strategic and economic dialogue in Beijing as forum to resolve differences; Warns against "currency or trade war"; Pledges to increase imports from US.
Tit-for-tat between China and US
March 21: Minister warns China will fight back if declared currency manipulator
March 19: He Ning calls on Washington to cool yuan pressure
March 16: Yao Jian denies yuan behind US trade gap
March 16: 5 US senators introduce Schumer bill on yuan
March 15: 130 US lawmakers demand Obama get tough with China over yuan
March 14: Wen stands firm on yuan, says stable rate has helped global recovery
March 12: Don't politicize yuan, Su Ning tells Obama
March 11: Obama criticizes Chinese currency policies
US strategy behind yuan rise talks
A. To ease trade deficit with China
In the United States, talks are escalating about the huge trade deficit with China, which many believe has cost millions of US manufacturing jobs.
Many Americans believe a rise in yuan could help because it could make China's exports more expensive and less competitive in the US market.
B. To reduce value of US debt held by China
The global economic crisis, a huge US budget deficit and a high jobless rate have made Americans increasingly concerned about China's huge holdings of US treasury bonds. The concerns are about a reduction in the debt as well as an increase, because a steep reduction will harm the US economy while a rise will make the US more financially dependent on the fastest-growing economy.
A stronger yuan could significantly lower the value of China's dollar assets and drag down China's economy. Thus, the US has dramatically stepped up pressure on China.
China is the biggest overseas owner of US treasury bonds, with staggering holdings of $889 billion, according to data released on March 15 in Washington by the United States Treasury Department.
C. To sustain dollar's dominance
The dollar's dominant role as global reserve currency will be under threat if China makes its currency fully convertible.
It is an inevitable choice for the US to force the yuan to appreciate in order to maintain the dollar's dominance and contain the emergence of the yuan as an international currency.
Similar case: Plaza Accord in 1985
Yen and the art of currency maintenance
In the 1980s, when the US ran a huge trade deficit with Japan, Washington forced the Asian power to drastically revalue the yen, as agreed upon in the Plaza Accord. But the US trade balance did not improve, and there was a massive stock market and real estate bubble in Japan.
The Plaza Accord was an agreement signed by the governments of France, West Germany, Japan, the United States, and the Britain on September 22, 1985 at the Plaza Hotel in New York City, to depreciate the US dollar in relation to the Japanese yen and German Deutsche Mark by intervening in currency markets. The exchange rate value of the dollar versus the yen declined by 51 percent from 1985 to 1987
Debate: Will RMB revaluatioin reduce US trade deficit? Since the global financial crisis broke out, the US has blamed the imbalances in international trade on China and labelled the nation as a "currency manipulator". Now facing mid-term election, US politicians again press China on yuan appreciation. Is China's currency the cause of US unemployment and trade deficit? Will a stronger yuan benefit US economy? [Share your opinion] Pros
Chinese yuan is grossly undervalued, consequently its cheap goods bring about trade surplus against US and harm the American economy. Yuan's appreciation can resolve imbalances in the world economy.
[Share your opinion] Cons
It's only a myth that Chinese yuan causes American economic problems. A stronger yuan cannot inspire US export, and a sharp revaluation of yuan would be a lose-lose situation for two countries.
[Share your opinion]
UN body against change in yuan
Leaving currencies to irrational market forces "will not help rebalance the global economy," said a UN agency.[Full Story]
EU: Wrong to pressure China on RMB
EU Ambassador to China Serge Abou said that the exchange rate was a "very complex issue" and pressure should not be put on China's currency. [Full Story]
World Bank: More flexibility may help
The World Bank said more exchange rate flexibility would help if Chinese leaders worry that higher interest rates might draw in speculative capital. [Full Story] Obama is 'playing with fire' over yuan
US President Barack Obama's pressure on China over its currency's exchange rate is a manifestation of hypocrisy from the West and will not work, a British economist has said. [Full Story]
Influence of a rise in yuan
Chinese labor-intensive exporters will bear the brunt
A Chinese semi-official trade group said a stronger yuan will spell the end for many Chinese exporters in labor-intensive sectors such as garments and furniture.
"If the yuan rises, these companies will face the immediate risk of going bust as their profit margin is already very narrow," said Zhang Wei, vice-chairman of the China Council for the Promotion of International Trade.
"So for these companies, the consequences would be disastrous," he told a news conference. [Full Story]
Sharp revaluation of yuan would be 'lose-lose' situation
The debate over China's currency policy is heating up among economists with Morgan Stanley Asia Chairman Stephen Roach saying that a sharp upward revaluation of the yuan would lead to a disastrous outcome for the United States and it would end up as a "lose-lose situation" for both Washington and Beijing.
"This is a disastrous outcome for the United States and would certainly be a very bad outcome for Chinese exporters as well," he said.[Full Story]
A stronger yuan may hurt US exporters, consumers
A stronger Chinese yuan will eventually hurt US exporters and cost US consumers more, said two US foreign exchange experts in an article published Tuesday by the US Foreign Policy journal. [Full Story]
Paper stocks may gain on yuan revaluation talk
Equities in China's paper manufacturing industry are poised to gain in the near term amid market expectations of a stronger yuan triggered by the steady recovery of exports, analysts said. [Full Story]
Three ways to revalue yuan
Radical way: Dramatic rise
In this way, the yuan may rise dramatically once and for all, so as to dispel strong expectation of appreciation in the Chinese currency. This means the value of the yuan would rise by about 20 percent against the US dollar at one time and remain unchanged for the next three to five years.
Supporters say this is an effective way to dismiss appreciation expectations, which the government hopes to avoid if it revalues its currency. However, this method is opposed by many experts.
Conservative way: Gradual rise at slow pace
In this way, China would resume a floating exchange regime that was employed between July 2005 and July 2008 and allow the yuan to rise gradually at a slow pace. However, it would draw in international speculative capital, which would greatly inflate liquidity and drive up asset prices.
Workable plan: Gradual readjustment
Sources close to the central bank believe that this is the viable way, which may include a one-off revaluation at the preliminary stage and a gradual readjustment later on. This is supported by a number of renowned economists, such as Dr Ha Jiming, chief economist at China International Capital Corp.
-- Posted Wednesday, 24 March 2010 | Digg This Article | Share this article| Source: GoldSeek.com
By Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
Like many of you, the passage of the healthcare bill wasn’t met with the popping of champagne in my house. I found myself chanting “Uncle Sam, Uncle Sham” as the day wore on. Higher taxes and other major changes are headed our way. And yet, I think there’s something in the bill that’s even more dastardly.
If you’re a supporter of the bill, you’d point to its benefits: Poor adults will get Medicaid. Low-income families will get federal subsidies to buy insurance. Small businesses may get tax credits. Kids will be able to stay on the parents’ policy until they turn 26. Seniors get additional prescription drug coverage. People with pre-existing medical conditions can’t be denied or dropped.
While no one is really against any of those things, the elephant in the room (or boa constrictor in the bed) is how those things are going to be paid for. Here’s how: the “wealthy” will pay higher taxes; businesses with 50 or more employees will have to insure them or pay a penalty; individuals will have to pay a fine if they don't buy insurance; premiums will rise for many who already have insurance; and seniors with Medicare Advantage policies could lose those plans or pay more to keep them.
Regardless of how you feel about the bill, the fact is that taxes are going up, and not necessarily just on the “wealthy.” The healthcare plan will cost $940 billion over the next decade, almost $100 billion a year.
I haven’t read the 2,407-page bill (almost twice as long as the Gutenberg Bible), but there are plenty now who have. Here’s a summary I compiled, from various sources, that outlines the tax ramifications of what is now the law of the land.
Assuming the Senate passes the package of changes, the biggest tax increases will be in Medicare payroll taxes. Those take two forms, both starting in 2013:
· Singles earning more than $200,000 and couples earning $250,000 will pay 0.9% more on wages and self-employment income.
· All investment earnings will be taxed an additional 3.8%. This includes capital gains, dividends, and interest, the first time in history the Medicare tax is applied to them.
But keep in mind that the Bush tax cuts expire at the end of this year, which will push the Medicare tax on capital gains to 23.8% in 2013 on these earners. Dividends, currently taxed at the top rate of 15%, will be taxed as ordinary income, with the top rate scheduled to rise to 39.6% (from 35%).
This means that the tax on dividends could go as high as 43.4% when the new Medicare tax goes into effect in 2013. (Obama has proposed a top dividend tax rate of 20%, so if Congress enacts his proposal, the top tax rate for dividends would “only” rise to the 23.8% level in 2013.)
You may think you’ll escape this tax if you’re not “rich.” But it’s those darn Unintended Consequences politicians never seem to think about that could still sting you. For example, the 3.8% Medicare surtax could snag you if you happen to sell some real estate for a big gain.
The other major tax increase is the one imposed on health insurance plans that are more generous, the so-called “Cadillac” health plans. And this tax increase doesn’t just apply to high-income earners; those state and union workers that lobbied for better health coverage instead of big pay increases are going to find they’re included with the “rich” in a new excise tax. Starting in 2018, family insurance plans valued at more than $27,500 ($10,200 for individuals) would pay a 40% tax above that level.
And there’s other ways you’ll be taxed, particularly through the magic of “passing it on to the consumer.”
For example, pharmaceutical manufacturers will pay an annual fee based on their market share starting in 2011; same for health insurers, starting in 2014. A 2.3% excise tax on the sale of medical devices will start in 2013. A 10% excise tax on indoor tanning services goes into effect this July.
How will all these businesses afford the additional tax? They won’t. You’ll pay it, through higher prices.
Further, were you one of those who incurred medical expenses above 7.5% of your income, thus allowing you to deduct them? That ceiling will be 10% starting in 2013. (It remains 7.5% for those over 65.)
There’s more, most of it in the form of greater restrictions, increased penalties, and higher fines on various entities, businesses, health plans, or individuals. But what I especially cringed at was this: the bill vastly expands the responsibilities of, and gives greater strength to, the IRS. The agency will hire as many as 16,500 additional auditors, agents, and other employees just to enforce all the new taxes and penalties.
Specifically, the bill will empower the IRS to do the following: verify citizens have “acceptable” health care coverage; impose fines up to $2,085 or 2% of income (whichever is greater) for failure to purchase “minimum essential coverage”; confiscate tax refunds; and increase audits.
The upshot is that this will force many taxpayers to be more conscientious of monitoring their income and tax withholding.
Perhaps most damaging to the government’s plans is if the bill leads some to ask the Ayn Rand/Atlas Shrugged questions: What if I just stop being productive? What if I stop working once my income approaches the threshold? What if I invest less so that I stay under the limits?
And last, here’s the time bomb that could trump the tax concerns: none of these taxes are indexed to inflation. Since the bill fails to index to inflation the exemption threshold for the Medicare taxes on both earned and unearned income, it’s almost certain many taxpayers will get to these tax levels a whole lot quicker than they think.
What this essentially means is there is now more incentive on the part of the government that we have inflation. If inflation reaches 10% at some point, which is below the 14%+ rate it hit in 1980 and far below any hyperinflationary level that’s possible, the $100,000 earner gets to the magical $200,000 level in seven-and-a-half years. From the government’s perspective, it makes the printing of money a lucrative affair.
Yes, higher taxes are coming. But with the government’s built-in incentive for inflation, along with the reward that comes from getting more citizens to higher tax rates, many may find the tax issue an annoying mosquito bite compared to the alligator chomp of inflation. And high inflation affects every citizen, regardless of income or tax rate. Those who think they’ve escaped the cold may find they’ve walked into a freezer.
With this added push to inflate, our investment strategy for the foreseeable future is now clear: We must invest in assets that not just keep up with inflation but outpace it.
All wise citizens do tax planning. Have you done inflation planning?
Treasury Will Use A Preset Plan To Sell Its Stake In Citigroup (C)
Posted on 03/25/10 at 3:26am by Ed Liston Bloomberg reports, citing people close to the matter, that the U.S. Treasury will sell its stake in banking giant Citigroup, Inc. (NYSE: C) using a preset plan, which will require it stick to a schedule to offload the shares of the bank. U.S. Treasury has a 27% stake in Citigroup.
Stephen Myrow, who worked at the U.S. Treasury previously and is now a managing director at ACG Analytics Inc., said, “What they are looking to do is to optimize taxpayer return while ensuring market stability.” With the sale of the government stake, the bailed out bank will take another step forward to exit the TARP. Citigroup had received $45 billion from the U.S. Treasury under the TARP after it was hit hard by the financial crisis.
The Treasury department is also planning to hire an investment bank to advise it on selling its stake. JP Morgan (NYSE: JPM), Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS) are apparently the banks said to be in the running to advise the Treasury on its planned sale. The Treasury will look to sell the stake in such a way that it maximizes the returns for the taxpayers.
One of the conditions set for the planned sale is that the participants in the deal will not posses any material information, which is non-public. This would make it a level playing field. David Martin, partner at Covington & Burling, a Washington based law firm, said, “The presumption is, I cannot know things that are material because everybody has this. The presumption is, I cannot know things that are material because everybody has this.”
Treasury Dept. to sell its stake in Citigroup acquired during bailout, may make $7.5 BILLION profit
March 29, 2010
The Treasury Department said Monday it will begin selling the stake it owns in Citigroup Inc., which could result in a profit to the government of about $7.5 billion.
The government received 7.7 billion shares of Citigroup in exchange for $25 billion it gave the bank during the 2008 credit crisis. It said it will sell the shares over the course of this year, depending on market conditions.
Like any investor, the government will likely hold on to its shares if prices fall steeply. However, Citi shares have steadily been rising with the broader market in recent months, which means the Treasury Department stands to pocket a hefty profit.
The government has been trying to unravel the investments in made in banks under the $700 billion Troubled Asset Relief Program, or TARP, that came in at the height of the financial crisis. Citi, one of the hardest hit banks during the credit crisis and recession, received a total of $45 billion in bailout money, one of the largest rescues in the program. Of the $45 billion, $25 billion was converted to the government's ownership stake in the bank.
The Treasury paid $3.25 a share for its stake.
New York-based Citi repaid the other $20 billion it owed the government in December.
The Treasury had been planing to sell 20 percent of its stock at the time when Citi was selling new shares late last year. At a price of $3.15 a share, the government would have lost $158.7 million on the sale, so it opted not to participate in the deal at that time but to unload all of its 7.7 billion shares over the course of this year.
Citi shares fell 8 cents to $4.23 in morning trading Monday. The government would make about $7.5 billion in profit on its stake in Citigroup if it sells the stock for that price.
When Citigroup agreed to repay the $20 billion in loans it still owed the Treasury Department, the pair also agreed the Treasury would sell the common stock it owned in the New York bank throughout 2010.
The Treasury owns about 27 percent of Citigroup's outstanding stock, based on the number of shares that were outstanding on Jan. 31.
Even after it sells its stake in Citigroup, the Treasury Department will still hold warrants to purchase future shares in the bank.
The Treasury said Monday that Morgan Stanley will handle the sale of the shares.
Americans for Responsible Health Care to Launch Nationwide Petition Drive to Support Repeal of New National Health Care Program
WASHINGTON, March 29, 2010 /PRNewswire via COMTEX/ -- Public can sign petition online at www.americansfrhc.org --
Americans for Responsible Health Care announced today that it is launching a nationwide campaign to collect ten million signatures of Americans determined to repeal, reform and replace the new government controlled national health care program that was enacted despite the public's overwhelming opposition.
Americans for Responsible Health Care Spokesman Jeff Cohen said:
"The American people are appalled that the Obama Administration, 219 Democrats in the House of Representatives, and 56 Democrats in the United States Senate flagrantly disregarded the overwhelming will of the people and enacted a government controlled national health care system.
"Despite strong, consistent and vocal opposition from millions and millions of Americans from every part of the country and every walk of life, the leaders we entrusted to protect our Constitution turned their backs on the people and our rights and instead voted with Washington's liberal elite ruling class. This cannot stand.
"Americans for Responsible Health Care is launching a nationwide campaign to collect ten million signatures from Americans who want to repeal this onerous government takeover of health care.
"Starting today, the public can join this effort by signing an online petition at www.americansfrhc.org to repeal and replace ObamaCare with responsible reforms our healthcare system needs and that the American people want."
Earlier this year Americans for Responsible Health Care conducted a successful independent expenditure in January's Massachusetts special election on behalf of U.S. Senator Scott Brown. That was followed by a series of print, radio and direct mail advertising campaigns targeting over one dozen Senators and Members of Congress around the country.
Paid for by Americans for Responsible Health Care.
Not authorized by any candidate or candidate's committee.
SOURCE Americans for Responsible Health Care
Copyright (C) 2010 PR Newswire. All rights reserved
Upside breakouts are normally seen as bullish. But in the past few trading days, we’ve seen a few that are anything but.
Breakout #1: Interest Rates
The first breakout of note is in interest rates. After ranging sideways for the first few months of 2010, the 10-year rate is on the rise again - seemingly drawn toward the critical 4% level.
In keeping with the rate breakout, U.S. Treasuries fell hard this week. (For interest rates to rise, bond prices have to fall.) The government routinely raises money by holding “auctions,” in which securities are sold off to the highest bidders through official channels. Fewer buyers than expected showed up for the latest auctions, causing concern.
“De Facto” Default
Higher interest rates make borrowing more expensive. When rates rise, debt service costs go up, for individuals and governments alike. An interest rate spike could thus act like a hammer blow for an economy still in the early stages of recovery.
But the real looming fear is that, at some point, investors - particularly foreign investors - will lose faith in U.S. Treasury bonds.
Because Uncle Sam borrows in his own currency, it is technically impossible for the U.S. government to default. It’s just a matter of printing more scrip.
But if the U.S. government is forced to “monetize” its debt - i.e. pay it off by printing reams of fresh dollars - that could be a de facto default if not a de jure one. (”De facto” is a Latin expression that means “by the fact,” or “in practice.”) When a government monetizes beyond the point of no return, bad debt becomes bad currency. The value of the currency then plummets.
And yet, though bonds took a very hard hit last week, the $USD did not. In fact it is surging.
Breakout #2: The $USD
The $USD breakout offers our second reason for concern.
With apologies to Mark Twain, rumors of the dollar’s death have been greatly exaggerated. For some time now, the dollar’s pending demise has become a note of conventional wisdom.
Here at Taipan Daily, your editor has been a contrarian dollar bull for months now - sometimes to the snorting and scoffing of others - not because he has any great faith in the greenback, but because the euro looked so precarious and the $USD predictions seemed so overwrought.
In the context of a global economic recovery, it is a bad thing for the $USD to be rising. There are a few reasons for this:
A rising $USD suggests U.S. investors are withdrawing capital from emerging market investments, thus pushing up the dollar as the funds come home. A rising dollar threatens the many countries around the world that have smugly issued large amounts of dollar-denominated debt. (Issuing too much dollar debt was the mistake that led to the Asian Currency Crisis of the late ’90s.) A rising dollar hurts U.S. exporters, which further angers American politicians (like Senator Chuck Schumer) and fuels their heated trade-war rhetoric against China. The dollar’s latest breakout has a lot to do with Europe. As the Greek crisis comes to a head, it has become clear that Germany - the country that wears the pants in the eurozone - does not believe in “ever closer union” when the phrase matters most.
There are open questions as to whether the euro will survive long term, and if so, in what form. Short-term bursts of hope (in respect to Greek resolution) miss the key point: As a reserve currency candidate and a meaningful $USD alternative, the euro can no longer be trusted.
It is simply too plausible, likely even, that when the debt hits the fan for Spain or Italy or Portugal, investors will be put through this same song and dance all over again.
Because currencies trade relative to each other, a euro headed lower means a dollar heading higher. That, in turn, leads to political tension and the escalation of risks as noted above.
Breakout #3: China Trade Tensions
Less than three weeks ago, President Obama unveiled a plan to double U.S. exports over the next five years. “In a time when millions of Americans are out of work, boosting our exports is a short-term imperative,” Obama said.
It’s hard to increase exports with a strong and rising currency. When the value of a country’s currency goes up, that makes its goods more expensive for the rest of the world.
This is why China has long held its currency down - to keep exports competitive and sale prices cheap. China’s leaders have long sought to keep the country stable by employing as many people as possible. Exports have been crucial to this goal.
But now the U.S. has an aggressive employment mandate too. Politicians are thus growing increasingly vocal in their criticism of China’s currency peg, which they see as unfair competition. Influential columnists, like Nobel laureate Paul Krugman, have argued we should take a “baseball bat” to China in terms of forcing a currency adjustment.
There is no chart for this, but news flow points to a fresh “breakout” in China trade tensions - our third reason for concern. Rhetoric has grown notably heated on both sides.
This is frightening because, among other things, China sits on a massive mountain of dollar-denominated assets. It has been argued, fairly convincingly, that China cannot sell off those assets without doing great harm to its own financial position. But if Beijing’s leadership is forced into a trade war stance, there is no guarantee as to how rational the response will be.
Those who casually argue for punishing tariffs, as Krugman and others do, seem to have forgotten the lessons of the Smoot-Hawley Tariff of 1930, and the dramatic downward spiral in global trade that resulted.
Demand for gold in China to double in a decade2010-03-29 08:08:26[Go Back]Business Financial Newswire - The latest World Gold Council analysis suggests medium term outlook for Chinese gold mining supply will be challenging.
Chinese demand for gold is set to double in tonnage terms within just ten years according to the latest World Gold Council (WGC) analysis.
Chinese gold consumption was worth more than $14bn in 2009, which is equivalent to 11% of global gold demand.
Marcus Grubb, MD, Investment at WGC, said: “The excitement generated by the Chinese economic growth story is not new. However, clarifying the impact of China’s GDP growth trajectory on the outlook for the Chinese gold market has been elusive – until today.
“Now one of the world’s largest economies, China has already rapidly become a prominent gold market. However, our analysis confirms that significant untapped growth potential exists in the Chinese gold market. In China, if gold demand continues to accelerate and becomes more comparable with other major markets, WGC expects it to double in tonnage terms within the next decade, which would represent annual gold demand of approximately $29bn at year end 2009 average prices.”
Over the past five years, demand for gold has increased at an average rate of 13% per annum in China.
Canada Dollar Rises as Economy Grows at Fastest in Three Years March 31, 2010, 11:31 AM EDT More From Businessweek
March 31 (Bloomberg) -- Canada’s dollar reached the highest level in almost two weeks versus its U.S. counterpart after a report showed the nation’s economy grew at the fastest pace in three years in January.
Canada’s currency, nicknamed the loonie, pared gains as crude oil retreated and stocks declined. The loonie is poised for a 3.4 percent gain in the last three months, the fourth consecutive quarterly advance and the longest streak since 1988.
“It’s become typical for data from the Canadian economy to surprise on the upside and strong economic performance pushes the currency higher,” said Aaron Fennell, a futures and currency broker in Toronto at Lind-Waldock, a unit of MF Global Canada. “Looking further into the future, it’s hard to see the Canadian economy and dollar not doing well. It’s a structural bull market for the next decade.”
The Canadian currency appreciated 0.2 percent to C$1.0183 per U.S. dollar at 11:27 a.m. in Toronto, from C$1.0201 yesterday. It touched C$1.0130, the strongest level since March 19. One Canadian dollar buys 98.20 U.S. cents.
Crude for May delivery rose as much as 1.7 percent to $83.76 a barrel before trading at $82.52 a barrel on the New York Mercantile Exchange. The Standard & Poor’s 500 Index fell 0.3 percent. The loonie tends to track commodities and equities.
The report suggests first-quarter economic growth is still coming in faster than the Bank of Canada predicted, after output expanded at the highest quarterly rate since 2000 in the October-December period.
“There are some good signs, there are some consistent signs,” in Canada’s economy, Finance Minister Jim Flaherty told reporters in Ottawa today. “It’s too early to say that we are out of the woods yet.”
Governor Mark Carney signaled last week the central bank may raise interest rates as soon as June as inflation and growth outpace forecasts.
The GDP report “starts the first quarter with solid momentum and fits with that positive vibe the Canadian economy has had for some time,” said David Watt, senior currency strategist in Toronto at Royal Bank of Canada, Canada’s biggest bank. “The takeaway should be positive.”
The loonie reached C$1.0062 on March 19, the strongest level since July 23, 2008. The currency rose to parity with the greenback in September 2007 for the first time in three decades amid booming demand for raw materials. It was last at parity on July 22, 2008, and then lost 18 percent that year as the credit crisis crushed demand for commodities.
“The Bank of Canada has been on record saying they’re looking to raise interest rates and tighten liquidity, and there hasn’t been anything to indicate they shouldn’t,” said Lind- Waldock’s Fennell. “That’s why the Canadian dollar is pressing parity. The last time we saw parity a few years ago it didn’t stick. This time it will be a permanent move.”
Speculative net long positions -- bets that the Canadian currency will rise versus bets that it will fall -- increased to 73,027 contracts on March 23, the most since October 2007, compared with net longs of 69,640 contracts a week earlier, according to data from the Commodity Futures Trading Commission in Washington.
“There’s lots of traffic here at the C$1.0150 to C$1.0160 area,” said Firas Askari, head currency trader in Toronto at BMO Capital Markets, a unit of Bank of Montreal, Canada’s fourth-largest lender. “The Canadian dollar is still a crowded trade. It’s the right trade, but it’s crowded.”
--Editors: James Holloway, Dave Liedtka
To contact the reporters on this story: Chris Fournier in Montreal at firstname.lastname@example.org; Inyoung Hwang in New York at email@example.com.
To contact the editor responsible for this story: Dave Liedtka at firstname.lastname@example.org
Citi execs may be in for surprises at crisis probe Financial crisis panel may have surprises up its sleeve for Greenspan, Citi execs
Companies:Citigroup, Inc.CENTURY FINANCIAL MIFederal National Mortgage Association FILE - In this April 16, 2009 file photo, a sign at the Citigroup Center is shown in New York. A panel investigating the roots of the U.S. financial crisis will press current and former executives of Citigroup Inc. at hearings Wednesday April 7, 2010, about the bank's role in spreading trillions of dollars in risky mortgage debt through the banking system. (AP Photo/Mark Lennihan, file)
Daniel Wagner, AP Business Writer, On Wednesday April 7, 2010, 6:46 am EDT WASHINGTON (AP) -- Former executives of Citigroup Inc. could be in for some surprises when they appear before a panel investigating the roots of the financial crisis.
Commissioners and staffers for the Financial Crisis Inquiry Commission are readying pointed questions for eight former and current Citigroup executives due to testify at hearings that begin Wednesday. Some questions are based on a review of about 2 million pages of documents the commission has obtained, including 1 million pages from Citigroup.
That means witnesses including the bank's former CEO Chuck Prince and former chairman Robert Rubin may be confronted with their own words, as preserved in e-mails and memos provided to the commission.
The three days of hearings will feature testimony focused on high-risk mortgage lending and the way trillions of dollars in risky mortgage debt was spread through the financial system. The hearing is designed to provide a firsthand accounting of decisions that inflated a mortgage bubble and triggered the financial crisis.
The panel is using Citigroup as a case study because the bank was heavily involved in every stage of that process. The megabank was a major subprime lender through its subsidiary CitiFinancial. Other divisions of Citigroup pooled those loans and loans purchased from other mortgage companies and sold the income streams to investors.
As borrowers defaulted, Citigroup took losses on mortgage-related investments it held on and off its books. Mortgage troubles at Citi, defunct investment bank Bear Stearns and elsewhere exposed cracks in the financial system. In late 2007 and throughout 2008, those fissures grew into a full-fledged credit crisis that crippled the global economy.
The FCIC aims to dissect the bank's structure and show how its functions interacted. Wednesday's witness list includes current and former executives from CitiMortgage, parent company Citigroup Inc., and the division of Citi Markets & Banking that created the most notorious mortgage-backed investments.
Rubin and Prince are due to appear Thursday.
Wednesday's first witness will be former Federal Reserve chairman Alan Greenspan. Critics say the Fed's policy under Greenspan of keeping interest rates low encouraged lending to borrowers who had little or no chance of repaying.
As in recent interviews, Greenspan is expected to acknowledge some failings: The Fed failed to recognize the danger of the housing bubble, question the rapid growth of banks like Citigroup or exercise its authority to police risky consumer products like the subprime mortgages at the heart of the crisis.
The panel also will hear this week from a former risk officer with failed subprime lender New Century Financial Corp., a current and a former Comptroller of the Currency and former executives and regulators from government-backed mortgage giant Fannie Mae.
Fannie Mae's close ties to some leading Democrats and its so-far $75.2 billion bailout have made it a political lightning rod.
Congress created the FCIC last year to examine the causes of that crisis. It is structured like the 9/11 panel that examined intelligence failures preceding the terrorist attacks of Sept. 11, 2001.
Like that panel, the commission has authority to issue subpoenas to compel witnesses to testify or force companies to turn over documents. The commission is charged with examining 22 topics -- from executive compensation to tax policy -- in a report it must issue Dec. 15.
Geithner to visit Beijing amid currency dispute US Treasury Secretary Geithner to visit Beijing, suggesting ties better amid currency dispute
U.S. Treasury Secretary Timothy Geithner looks on during a meeting with India's leading financial entrepreneurs in Mumbai, India, Wednesday, April 7, 2010. India invited U.S. companies to invest in developing its infrastructure on Tuesday as Geithner and Indian leaders launched an effort to expand economic ties. (AP Photo/Rajanish Kakade) Aijaz Ansari, Associated Press Writer, On Wednesday April 7, 2010, 7:42 am
MUMBAI, India (AP) -- U.S. Treasury Secretary Timothy Geithner will visit Beijing for talks with a Chinese vice premier for economic affairs on Thursday, Geithner's spokesman said, in a sign the two sides are moving toward settling a dispute over China's currency controls.
Geithner will meet with Vice Premier Wang Qishan, spokesman Andrew Williams said Wednesday, as the Treasury secretary ended a two-day visit to India.
"The secretary and the vice premier have been working together to find an opportunity to meet for some time," Williams told reporters in Mumbai, the Indian financial capital.
Williams gave no details of the agenda, but the decision to hold such a high-level encounter suggested Washington and Beijing are moving toward settling the currency dispute, which has threatened to overshadow cooperation on the global economy, Iran's nuclear program and other issues.
Washington and other Chinese trading partners are pressing Beijing to ease exchange rate controls that they say keep its yuan undervalued, giving China's exporters an unfair price advantage and swelling its multibillion-dollar trade surplus. Some American lawmakers want punitive tariffs on Chinese imports if Beijing fails to act.
In another sign of warming ties, Chinese President Hu Jintao is due to hold talks with President Barack Obama during an April 12-13 visit to Washington for a nuclear security summit.
"After a time of disturbance and unpleasantness, Chinese-U.S. relations are entering a track of getting closer to one another," said Liu Jiangyong, a professor at the Institute of International Studies at Beijing's Tsinghua University. "I hope the Geithner visit could promote understanding."
The Obama administration delayed a report to Congress due April 15 in which it had the option of citing Beijing as a currency manipulator, a designation that could lead to a World Trade Organization complaint and possible trade sanctions. The White House denied the delay had anything to do with seeking Chinese support for penalties over Iran's nuclear program.
Obama vowed in February to press for an end to exchange rate systems that he said depress the value of currencies and harm U.S. companies.
Chinese Premier Wen Jiabao, the country's top economic official, and others have publicly rejected foreign pressure over the yuan, and Wen said in March the currency was not undervalued.
But economists expect Beijing to allow the yuan to rise some time this year in order to ease strains in its own economy. A stronger yuan would increase the buying power of Chinese consumers, helping to increase domestic consumption and reducing reliance on exports.
Beijing tied the yuan to the dollar for decades but broke that link in 2005 and allowed it to rise by about 20 percent through late 2008. The government slammed on the brakes after the crisis hit and has held its currency steady against the greenback to help exporters compete as a plunge in global demand wiped out millions of Chinese factory jobs.
The United States and Europe downplayed currency complaints as they worked together with Beijing to revive global growth. But facing pressure to create jobs, they and governments as farflung as Brazil have renewed demands for China to act.
On Tuesday, a Chinese foreign ministry spokeswoman, Jiang Yu, said Beijing never has manipulated the yuan's exchange rate for profit.
On his India trip, Geithner met with Prime Minister Manmohan Singh and his counterpart, Finance Minister Pranab Mukherjee and entrepreneurs and chief executives of leading companies.
Mukherjee and Geithner presided over the first meeting of the U.S.-India Economic and Financial Partnership to promote trade and investment. The initiative is part of the Obama administration's efforts to forge closer relations with India, a fast-growing economy, the most populous democracy and a stable ally in a complex region.
Associated Press Writer Cara Anna in Beijing contributed to this report.
A Financial 9/11: How the Wall Street Crash Changed America Forever Posted Apr 07, 2010 08:00am EDT by Aaron Task in Newsmakers, Banking Related: XLF, FNM, GS, JPM, MS, BAC, C In The End of Wall Street, noted author and financial journalist Roger Lowenstein argues the crisis of 2008 marked more than just the end of Lehman Brothers, Bear Stearns, Washington Mutual and a host of other firms. "This was the collapse of an ethos that prevailed for a generation," Lowenstein says. "The idea that markets always have it right, that bankers knew when to set their own limits, that we didn't need government in Wall Street at all...that painful recessions were a thing of the past because the Fed had it all figured out -- that Wall Street I think we've seen the end of. "
But is it really the end of an era or just "the same old story?" Even after trillions of taxpayer-funded bailouts and a lot of heated rhetoric, there's a lack of new regulation (as detailed here) and a reemergence of risk-taking and speculation.
Lowenstein shares the frustrations of many Americans that it's taking so long to change behavior on Wall Street. Nevertheless, he's convinced something fundamental has changed in the American psyche. Just as the terror attacks of 9/11 forever altered our views about national security, "no one in our generation is ever again going to think 'bankers can be trusted, you can rely on the models, we don't need the government to regulate leverage,'" he says. "I think we have a greater level of insecurity...this crash was our 9/11."
Paulson's Short to Long Shift Earned Him Another $2 Billion
Companies:AngloGold Ashanti Ltd.Bank of America CorporationCitigroup, Inc. Topics:Investing Ideas & Strategies Related Quotes
the tickerspy.com Staff, On Wednesday April 7, 2010, 8:47 am While he fell short of his 2008 earnings and watched Appaloosa Management's David Tepper take the throne as the highest paid hedge fund manager, John Paulson managed to earn a personal $2.3 billion in 2009. According to AR: Absolute Return + Alpha, Paulson was ranked fourth among the top earnings hedge fund managers last year, and based on his Paulson & Co.'s top end-of-2009 holdings, he's looking to extend his winning streak with a slew of gold bets and financial names.
During the recession, Paulson made billions by betting against the U.S. housing market and financial system. Wall Street paid close attention when Paulson started adding long stakes in Bank of America (NYSE: BAC - News), Citigroup (NYSE: C - News), Capital One Financial (NYSE: COF - News), Suntrust Banks (NYSE: STI - News), and Wells Fargo (NYSE: WFC - News) during the equity rebound of 2009. Interestingly, the same financial names were also found among Tepper's top picks heading into 2010.
Meanwhile, Paulson's gold lust remains unmatched among his billionaire peers. Heading into the New Year the AngloGold Ashanti (NYSE: AU - News), Kinross Gold (NYSE: KGC - News), and a massive bet on the SPDR Gold Trust (NYSE: GLD - News) ETF were among his hedge fund's top U.S.-listed equity positions. According to a February report by Bloomberg, Paulson's fledgling gold fund dropped by -14% in its first month.
So far in 2010, Paulson's gold bets haven't paid off, but various financial names are among the top performers in his end-of-Q4 portfolio. Investors won't be sure where Paulson stands until the deadline for first-quarter 13F gilings arrives in mid-May, but members can see more of Paulson & Co.'s latest disclosed holdings and a chart of their combined performance at tickerspy.com.
Pro portfolio performance is based on institutions' top-15 holdings as disclosed in quarter-end filings with the SEC. Pro performance does not take into account additional holdings beyond the top 15 nor does it include positions that are not required to be disclosed by the SEC. As such, Pro portfolio performance should be considered an approximation and not a precise record of how an institution has performed over time.
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Singapore revalues currency after first-quarter-growth surge
HONG KONG (MarketWatch) -- Singapore's government declared victory in the battle to revive its economy on Wednesday, tightening monetary policy and effectively boosting the value of its currency after data indicated off-the-charts growth.
The Monetary Authority of Singapore said it would revalue its undisclosed targeted trading band for the Singapore dollar and aim for a "modest and gradual appreciation" against a basket of currencies.
The announcement coincided with the release of data showing Singapore's economy expanded 32.1% on a seasonally adjusted and annualized basis in the first quarter, compared with an unrevised 2.8% contraction in the fourth quarter. The quarterly growth figure was the fastest recorded in a data series that date back to 1975, according to calculations by HSBC.
Compared with the year-earlier quarter, the economy is estimated to have expanded 13.1%, more than the 10.8% increase expected by economists polled by Dow Jones Newswires, who also expected GDP to grow 19.9% from the previous quarter.
"The move is fully justified not only [on] the enormous strength of first-quarter GDP but the likely sustainability of the recovery," said Robert Prior-Wandesforde, HSBC's senior Asian economist in Singapore, in a published note. "As we have long argued, the Asian recovery has become self-sustaining."
Wandesforde said the recovery appeared to have broadened out to include the service sector, following what he described as "mind-boggling" manufacturing data, which showed 139% quarter-on-quarter rise in output. The spike, analysts said, was partly driven by a rebound in the cyclical pharmaceutical sector, where temporary shutdowns can skew output figures.
The Singapore government Wednesday revised its 2010 growth forecast to 7% to 9% from its earlier forecast range of 4.5% to 6.5%. It also raised its inflation forecast to 2.5% to 3.5%, an increase of half a percentage point from earlier estimates.
"The Monetary Authority would have risked falling behind the curve had it maintained its policy of zero appreciation for another six months until its next semi-annual policy review in October," wrote RBC Capital Markets analyst Brian Jackson in a note Wednesday.
HSBC's Wandesforde said it was possible full-year growth figures for trade-dependent Singapore would rise into the double-digits, saying the continuing acceleration could see authorities tapping the monetary brakes again later this year.
"Further fiscal action is probable in the second half," he said.
In Wednesday's session in Asia, the U.S. dollar slipped to S$1.3790, compared to S$1.3925 on Tuesday.
Singapore’s Revaluation May Spur China, South Korea (Update2) April 14, 2010, 10:18 PM EDT
(Adds China’s growth figures in sixth paragraph.)
By Shamim Adam
April 15 (Bloomberg) -- Singapore’s currency revaluation may prompt policy makers in China, Indonesia and South Korea to start withdrawing monetary stimulus as economic growth in the region outpaces the rest of the world.
Asian central banks are mostly “behind the curve” in tightening monetary policy and inflationary pressures may rise, said HSBC Holdings Plc’s Robert Prior-Wandesforde. Singapore yesterday announced it will allow its currency -- the city- state’s principal monetary tool -- to strengthen, even as China, South Korea and Indonesia keep interest rates unchanged.
“Singapore’s move is a signal that tightening in other nations in the region may come sooner or be more aggressive than what is currently expected by the market,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co. in Singapore.
“Growth in the region has picked up sharply over the last six to 12 months,” said Brian Jackson, an emerging-markets strategist at Royal Bank of Canada in Hong Kong. “It seems increasingly appropriate that policy settings should be returned to more neutral levels in the months ahead.”
Singapore’s economy expanded an annualized 32.1 percent in the first quarter from the previous three months, the trade ministry said yesterday. China said today its economy grew 11.9 percent last quarter from a year earlier, the fastest pace in almost three years and adding pressure on Premier Wen Jiabao to loosen the yuan’s peg to the dollar and raise interest rates.
Singapore’s GDP figure “represents the start of a series of strong Asian first-quarter numbers which will emphasize that central banks across the region have fallen significantly behind the curve,” said Prior-Wandesforde, who is senior Asian economist at HSBC in Singapore.
The Monetary Authority of Singapore uses the currency instead of interest rates to conduct monetary policy. It said yesterday it will “re-centre the exchange rate policy band at the prevailing level” of the Singapore dollar, shifting to a stronger trading range for the currency. The Singapore dollar extended yesterday’s 1.1 percent gain, rising to S$1.3735 as of 9:13 a.m. local time.
Singapore’s currency revaluation may have been prompted by expectations China was preparing yuan appreciation, said Tim Condon, chief Asia economist at ING Groep NV in Singapore. Twelve-month non-deliverable yuan forwards climbed for a second day to 6.613 per dollar, reflecting bets the currency will strengthen 3.1 percent from the spot rate of 6.8259, according to Bloomberg data.
Asian central banks have moved in lockstep on currency policy in the past. Malaysia on July 21, 2005, removed a seven- year peg on the ringgit to the dollar less than an hour after China said it would let the yuan appreciate by 2.1 percent against the dollar and let it fluctuate versus a basket of currencies.
Policy makers in Australia, Malaysia, India and Vietnam have raised interest rates in recent months. China has left its key one-year lending rate unchanged at 5.31 percent even as it increased the amount of money lenders have to set aside as reserves to drain cash from the economy. Bank Indonesia has kept its policy rate at a record low of 6.5 percent since August.
“We believe Indonesia and Korea are the next likeliest to begin tightening in the region, although currency strength will take some pressure off the need to hike policy rates until sometime closer to mid-year,” said Win Thin, a New York-based senior currency strategist at Brown Brothers Harriman & Co.
Asian swap contracts, in which traders exchange a fixed rate for a floating one, jumped for a second day after Singapore yesterday raised its growth forecast for 2010 and allowed a one- time appreciation of its currency, widening the spreads over benchmark interest rates.
The one-year contract in Malaysia rose to 2.905 percent as of 8:50 a.m. in Kuala Lumpur, the highest since December 2008, according to data compiled by Bloomberg. Similar contract in South Korea climbed to 3.03 percent, the highest since April 2 while the rate in India stood at 5.06 percent, the highest level this year.
The Bank of Korea raised its 2010 GDP forecast this week to 5.2 percent even as it left the benchmark interest rate at a record-low 2 percent at its April 9 meeting. Thailand’s central bank has said it plans to “normalize” rates, a move that may be delayed after political violence killed 22 people and injured hundreds this month.
Asian economies can afford to keep rates steady, said ING’s Condon, who predicted South Korea may wait until after the U.S. Federal Reserve moves to increase borrowing costs.
“I don’t see why any other central bank in Asia” should also start raising rates, Singapore-based Condon said. “There are wide output gaps, no inflation problems. What exactly is the hurry?”
The Philippines may need to increase interest rates from a record-low 4 percent this year as the economy improves, central bank Deputy Governor Diwa Guinigundo said April 7. Hildebrandt of JPMorgan predicts Thailand and the Philippines may raise rates in June.
Indonesia’s central bank will maintain a “careful” stance on monetary policy in the second half of 2010 because of a possible increase in commodity and electricity prices, Deputy Governor Hartadi Sarwono said yesterday.
While other central banks in the region are either debating or taking tentative steps toward ending stimulus, Singapore “has moved beyond mere policy renormalization to a managed tightening mode,” said Deyi Tan, a Singapore-based economist at Morgan Stanley.
Iceland's volcanic ash halts flights across Europe
April 15, 2010
By ROBERT BARR and JILL LAWLESS, Associated Press Writers Robert Barr And Jill Lawless, Associated Press Writers – 31 mins ago LONDON – An ash cloud from Iceland's spewing volcano halted air traffic across a wide swathe of Europe on Thursday, grounding planes on a scale unseen since the 2001 terror attacks as authorities stopped all flights over Britain, Ireland and the Nordic countries.
Thousand of flights were canceled, stranding tens of thousands of passengers, and officials said it was not clear when it would be safe enough to fly again.
In a sobering comment, one scientist in Iceland said the ejection of volcanic ash — and therefore possible disruptions in air travel — could continue for days or even weeks.
With the cloud drifting south and east across Britain, the country's air traffic service banned all non-emergency flights until at least 7 a.m. (0600GMT, 2 a.m. EDT) Friday. Irish authorities closed their air space for at least eight hours, and aviation authorities in Denmark, Norway, Sweden and Finland took similar precautions.
The move shut down London's five major airports including Heathrow, a major trans-Atlantic hub that handles over 1,200 flights and 180,000 passengers per day. Airport shutdowns and flight cancellations spread across Europe — to France, Belgium, the Netherlands, Denmark, Ireland, Sweden, Finland and Switzerland — and the effects reverberated worldwide.
Airlines in the United States were canceling some flights to Europe and delaying others. In Washington, the Federal Aviation Administration said it was working with airlines to try to reroute some flights around the massive ash cloud.
Flights from Asia, Africa and the Middle East to Heathrow and other top European hubs were also put on hold.
The volcano's smoke and ash poses a threat to aircraft because it can affect visibility, and microscopic debris can get sucked into airplane engines and can cause them to shut down. The plume, which rose to between 20,000 feet and 36,000 feet (6,000 meters and 11,000 meters), lies above the Atlantic Ocean close to the flight paths for most routes from the U.S. east coast to Europe.
It was not the first time air traffic has been halted by a volcano, but such widespread disruption has not been seen the Sept. 11, 2001 terror attacks.
"There hasn't been a bigger one," said William Voss, president of the U.S.-based Flight Safety Foundation, who praised aviation authorities and Eurocontrol, the European air traffic control organization, for closing down airspace. "This has prevented airliners wondering about, with their engines flaming out along the way."
At Heathrow, passengers milled around, looking at closed check-in desks and gazing up at departure boards listing rows of cancellations.
"It's so ridiculous it is almost amusing," said Cambridge University researcher Rachel Baker, 23, who had planned to meet her American boyfriend in Boston but got no farther than Heathrow.
"I just wish I was on a beach in Mexico," said Ann Cochrane, 58, of Toronto, a passenger stranded in Glasgow.
The National Air Traffic Service said Britain had not halted all flights in its space in living memory, although most flights were grounded after Sept. 11. Heathrow was also closed by fog for two days in 1952.
In Iceland, hundreds of people have fled rising floodwaters since the volcano under the Eyjafjallajokull (ay-yah-FYAH'-plah-yer-kuh-duhl) glacier erupted Wednesday for the second time in less than a month. As water gushed down the mountainside, rivers rose up to 10 feet (3 meters) by Wednesday night, slicing the island nation's main road in half.
The volcano still spewed ash and steam Thursday, but the floods had subsided. Some ash was falling on uninhabited areas, but most was being blown by westerly winds toward northern Europe, including Britain, about 1,200 miles (2,000 kilometers) away.
"It is likely that the production of ash will continue at a comparable level for some days or weeks. But where it disrupts travel, that depends on the weather," said Einar Kjartansson, a geophysicist at the Icelandic Meteorological Office. "It depends how the wind carries the ash."
The ash cloud did not disrupt operations at Iceland's Keflavik airport or caused problems in the capital of Reykjavik, but has affected the southeastern part of the island, said meteorologist Thorsteinn Jonsson. In one area, visibility was reduced to 150 meters (yards) Thursday, he said, and farmers were advised to keep livestock indoors to protect them from eating the abrasive ash.
In Paris, all flights north were canceled until midnight. In Copenhagen, spokesman Henrik Peter Joergensen said some 25,000 passengers were affected.
"At the present time it is impossible to say when we will resume flying," Joergensen said.
Eurostar train services to France and Belgium and cross-Channel ferries were packed as travelers sought ways out of Britain. P&O ferries said it had booked a passenger on its Dover-Calais route who was trying to get to Beijing — he hoped to fly from Paris instead of London.
The U.S. Geological Survey says about 100 aircraft have run into volcanic ash from 1983 to 2000. In some cases engines shut down briefly after sucking in volcanic debris, but there have been no fatal incidents.
Kjartansson said until the 1980s, airlines were less cautious about flying through volcanic clouds.
"There were some close calls and now they are being more careful," he said.
In 1989, a KLM Royal Dutch Airlines Boeing 747 flew into an ash cloud from Alaska's Redoubt volcano and lost all power, dropping from 25,000 feet to 12,000 feet (7,500 meters to 3,600) before the crew could get the engines restarted. The plane landed safely.
In another incident in the 1980s, a British Airways 747 flew into a dust cloud and the grit sandblasted the windscreen. The pilot had to stand and look out a side window to land safely.
Last month's eruption at the same volcano occurred in an area where there was no glacial ice — lessening the overall risk. Wednesday's eruption, however, occurred beneath a glacial cap. If the eruption continues, and there is a supply of cold water, the lava will chill quickly and fragment into glass.
If the volcano keeps erupting, there's no end to the flight disruptions it could cause.
"When there is lava erupting close to very cold water, the lava chills quickly and turns essentially into small glass particles that get carried into the eruption plume," said Colin Macpherson, a geologist with the University of Durham. "The risk to flights depends on a combination of factors — namely whether the volcano keeps behaving the way it has and the weather patterns."
Iceland, a nation of 320,000 people, sits on a large volcanic hot spot in the Atlantic's mid-oceanic ridge, and has a history of devastating eruptions.
The worst was the 1783 eruption of the Laki volcano, which spewed a toxic cloud over Europe with devastating consequences. At least 9,000 people, a quarter of the population of Iceland, died, many from the famine caused by the eruption, and many more emigrated. The cloud may have killed more than 20,000 people in eastern England and an estimated 16,000 in France.
FOREX-U.S. dollar slips after Singapore revalues, Intel
* Dollar index down 0.2 pct at 80.31 .DXY
* Singapore revalues currency, lifts Asian units vs dlr
* Risk appetite also boosted by upbeat Intel earnings
* Fed's Bernanke to testify on economic outlook at 1400 GMT
(Adds quotes, updates prices)
By Tamawa Desai
LONDON, April 14 (Reuters) - The U.S. dollar eased across the board on Wednesday after Singapore effectively revalued its currency and as upbeat earnings from technology bellwether Intel Corp (INTC.O) boosted appetite for riskier currencies.
The revaluation was viewed as a mark of confidence in economic recovery and boosted higher-yielding currencies seen most likely to benefit from faster global growth.
Commodity currencies such as the Australian and Canadian dollars gained against the U.S. unit, while the low-yielding yen also softened.
The euro edged up against the dollar, still benefiting from a financial aid mechanism for Greece announced at the weekend, but its gains were capped by longer-term concerns about the debt-stricken country and details of the plan's implementation.
German/Greek government bond yield spreads widened to their highest since the euro zone agreement.
"The aid plan put default risks off the table for now, but the euro's upside is limited as the package may just be delaying a resolution to Greece's problems," said Lutz Karpowitz, senior currency strategist at Commerzbank.
By 1020 GMT, the euro was up 0.2 percent to $1.3643 EUR=, but could not rise beyond Monday's high of $1.3692.
Options with strike prices of $1.3640 and $1.3600 were set to expire later on Wednesday, traders said, limiting the euro's rise.
A German economist plans to launch a legal challenge at the Constitutional Court against the euro zone aid package for Greece agreed by finance ministers at the weekend, a German newspaper reported. [ID:nLDE63D0E1]
The dollar fell 0.2 percent on the index measuring its performance against six other major currencies .DXY to 80.31. It breached its 55-day moving average at 80.49 and was nearing a one-month low set on Monday.
Singapore's central bank re-centred its trade-weighted band to the prevailing exchange rate level, which was in the upper half of the previous band. [ID:nSGE63B0D6].
Markets took the move as a signal of the central bank's confidence in the economic outlook, as it also shifted policy to modest and gradual currency appreciation. The move also revived speculation about when China might revalue the yuan.
"It reaffirms a move of Asian central banks shifting to monetary tightening while the major economies stand pat," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ.
"It also instils market confidence over global recovery prospects."
Improved risk sentiment boosted the Australian dollar through a psychological barrier at $0.9300 AUD=D4, but failed to top a five-month peak just below $0.9400 set on Monday.
The Canadian dollar CAD= rose back above parity against the U.S. dollar, nearing its highest since July 2008.
The yen also softened. The dollar was up 0.2 percent at 93.41 yen JPY=, while the euro rose 0.5 percent to 127.60 yen EURJPY=R above its 100-day moving average at 127.03 yen. Resistance was seen at a previous high of 128.00 yen.
The market awaited U.S. Federal Reserve Chairman Ben Bernanke's congressional testimony on the economic outlook at 1400 GMT.
Most market players expected he would not deviate from language stating interest rates would remain low for an extended period, especially if U.S. consumer price inflation due out at 1230 GMT comes in at a meagre 0.1 percent increase, as expected.
Several Fed officials are also due to speak and the market will also be watching for retail sales data due at 1230 GMT.
Traders will also keep an eye on U.S. corporate earnings, with JPMorgan Chase (JPM.N) set to release results at 1100 GMT.
Singapore Unexpectedly Revalues Currency on Growth Singapore Unexpectedly Revalues Currency on Growth April 14 (Bloomberg) -- Singapore unexpectedly revalued its currency, triggering the biggest gain in a year, after the government raised forecasts for economic growth and inflation. The Monetary Authority of Singapore said it will seek a “modest and gradual appreciation” in the local dollar and shift to a stronger range for currency fluctuations, the first such combined move in its 39-year history. The trade ministry said the economy will expand as much as 9 percent in 2010, compared with a previous outlook of 6.5 percent, after the fastest growth since at least 1975 in the first quarter. Currencies across Asia rallied as investors bet governments will switch to fighting inflation from stimulating growth, after oil, copper and aluminum prices jumped more than 60 percent in the past year. The decision adds to signs that China, which will probably report its quickest expansion in three years tomorrow, is preparing to end the yuan’s 21-month-old peg to the dollar.
Leaders from Brazil, Russia, India and China attending the two-day BRIC summit that commenced on Thursday in Brasilia, believe it is time to raise their voice and have a greater say in world affairs.
There is a consensus among the four countries that they need to form strong ties to better participate in international affairs and the governance of the global economy.
"The emerging powers, whose group rise is one of the world's major trends, have amplified their influence over international political and economic affairs amid the financial crisis," Chinese Ambassador to Russia, Li Hui, said.
sarge_66: "I think what we need to look at now is to find a greater voice in the management of international financial institutions, such as the World Bank and the IMF," said B.S. Prakash, Indian ambassador to Brazil. The Ambassador said the BRIC still lacks decision-making power.
"Although our economies are growing, although they are large, we do not have the representation, we do not have the voice, we do not have the decision-making power", explained the ambassador.
Chinese Ambassador to Brazil Qiu Xiaoqi said the emerging countries represent a new concept for international relations, and called for more exchanges and cooperation on the basis of equality and mutual benefit.
BRIC cooperation is a "strong counterweight to established powerhouses in economic and political terms", Reuters quoted an unnamed senior official at India's finance ministry on Wednesday as saying. Meanwhile China's vice Foreign Minister stressed the aim of the summit is to "seek mutual benefit" and not to confront third parties.
Only the second summit of BRIC leaders, it will focus on a range of pressing global issues from economic recovery and reform of the international financial system, to climate change and multilateral cooperation.
However, the BRIC countries will not repeat the mistakes of the past and will pay attention to the needs of the so-called "G172", the countries that do not belong to the G20, said secretary-general of Brazil's Ministry of Foreign Affairs Antonio Patriota.
Li Yang, vice president of the Chinese Academy of Social Sciences, said the four countries share similar positions on issues concerning the reforms of international organizations, such as the IMF and the World Bank. Li suggested BRIC countries could use their own currencies in trade with each other and promote currency swaps among themselves.
"The combined contribution of BRIC countries to world economic growth exceeded 50 percent over the past five years." Li said. "BRIC countries should and can reinforce and expand cooperation, because we are all developing countries and share the common historical tasks and interests."
With regard to the climate change issue, he said that the BRIC countries need to further expand cooperation through the exchanges of concrete technologies in such areas as clean energy, forest protection, improvement of energy efficiency and so on. As major emerging markets, BRIC countries account for 42 percent of the world's population, 14.6 percent of the world's GDP and 12.8 percent of global trade. Xinhua contributed to story.
MARKET SIGNALS-Playing a Chinese yuan revaluation across assets
SINGAPORE, April 16 (Reuters) - As the day when China will unleash its currency from a 20-month old virtual peg draws closer, investors are picking trades that can profit the most from any yuan revaluation.
The most obvious candidates are Asian currencies with a close correlation to the yuan CNY=CFXS, commodities and resource-linked companies which benefit from strong growth in China, as well as importers in China.
But picking the perfect proxy trades for a yuan revaluation is complicated by several factors, the main one being that many of these markets have already priced in such a move to a large extent, leaving them susceptible to profit-taking.
Second is the uncertainty over whether the yuan's gains will be moderate and whether the People's Bank of China decides that a yuan appreciation precludes the need for big interest rate rises later this year to quell inflationary pressures.
Many economists expect Beijing will start to allow the currency to move more freely against the U.S. dollar later this year, though it is likely to ensure appreciation is gradual.
RINGGIT MOST CORRELATED
While's China's onshore markets are out of bounds for most foreign players, the non-deliverable forwards CNYNDFOR= are unattractive because of the dollar discount already priced into those forwards and the heavy loss if the yuan does not move. Already the 3-month NDF is pricing in a 4 percent annualised appreciation in the yuan.
Given those constraints, speculators tend to position for a yuan move by going long currencies such as the Malaysian ringgit MYR= and Taiwan dollar TWD=TP, or through options in low volatility currencies such as the Taiwan dollar.
The Taiwan dollar and Korean won KRW= are also cheaper in trade-weighted terms than their peers, if you compare the movement in the past 7 to 8 years. But investors need to bear in mind that while other Asian currencies continued to rise in 2005 after Beijing's July yuan revaluation, the Taiwan dollar retreated sharply until the end of that year. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a chart on correlations between Asian currencies and the yuan, click:
For a chart of Asian real-effective-exchange rates, click on:
RATES: FORCES OTHER THAN YUAN
Both onshore yuan interest rate swaps (IRS) and non-deliverable IRS are tugged by forces other than just the yuan. Since paying swaps is a hugely negative carry trade, any policy tightening expectations may not fully manifest themselves in swaps.
Second, market players would have to decide whether the yuan revaluation is part of a multi-pronged policy tightening by the PBOC and if authorities would still also aggressively raise interest rates.
A better strategy, some analysts say, would be to position for a flatter U.S. Treasury curve, taking the view that a rising yuan would mean a slower pace of reserves accumulation by PBOC, and therefore less appetite for the short end of the Treasury curve that China has been buying of late.
For a U.S. Treasury yield curve chart, click on: here 8.jpg BUY RESOURCES, CHINESE AIRLINES
A yuan revaluation, if in moderation and at a gradual pace, should be positive for Chinese equities .SSEC as well as Hong Kong shares .HSI, especially Hong Kong-listed Chinese firms .HSCE, which foreigners can buy freely.
In 2005, the MSCI Asia ex-Japan index .MIAPJ0000PUS was steady before the July revaluation and then moved up 6 percent in the next two months.
Stocks that could benefit this time, if there are no major concerns China will also pull the reins hard on infrastructure investment and bank lending, will be those of companies such as top Indonesian coal producer Bumi Resources (BUMI.JK).
Other beneficiaries would be Chinese airlines and other domestic firms with heavy foreign currency debt, which a stronger yuan will make easier to service.
One such is China Eastern Airlines (600115.SS), which has a higher gearing. It is also listed in Hong Kong (0670.HK) and has ADRs in the United States (CEA.N). (For a list of other Chinese firms traded via American Depositary Receipts, click CN/ADR1 in a quote window)
For a chart on how stocks did in 2005, click here: here 4.jpg
Looking back at the Reuters-Jefferies CRB index .CRB after the July 2005 revaluation, the expected global commodities rally was tepid but almost uninterrupted for more than a year afterwards. A modest pace of appreciation should be positive this time, too, especially because of China's massive plans for building its railways network and other infrastructure this year, as well as its voracious demand for raw materials in general. Crude oil CLc1 could be another beneficiary if the yuan policy shift is accompanied by assurances from the Chinese authorities that any monetary tightening will be paced to ensure sustained growth and demand.
China trims holdings of US Treasurys by 1.3 percent
THE ASSOCIATED PRESS • April 15, 2010
WASHINGTON — China trimmed its holdings of U.S. Treasury debt 1.3 percent in February, the fourth consecutive decline. Those reductions are raising concerns that the U.S. government could face higher interest rates to finance its soaring budget deficits.
The Treasury Department said Thursday that China's holdings dropped $11.5 billion to $877.5 billion. That still left China as the largest foreign holder of U.S. Treasury debt. Japan retained the No. 2 spot with $768.5 billion, a drop of 0.4 percent from the January level.
Net foreign purchases of long-term securities, a category that includes both government and corporate debt, totaled $47.1 billion in February. That compared with an increase of $15 billion in January.
Analysts said the rebound in net purchases in February was a good sign that foreigners continued to be interested in U.S. debt securities even in a period when Treasury debt has soared, reflecting the record budget deficits.
Brian Bethune, chief U.S. financial economist at IHS Global Insight, said while the demand for U.S. debt was not as robust as it has been in the past it was "still reasonable and not a concern for funding the U.S. current account deficit or the U.S. dollar."
Win Thin, senior currency strategist at Brown Brothers Harriman & Co., said he believed that the March report could well show a rebound in purchases by China. He said part of the changes reflected a decision by China to rebalance its holdings away from shorter-term Treasury bills.
"China is still a steady buyer of U.S. Treasury notes and bonds but has been paring back its Treasury-bill holdings," he said in a research note.
The Treasury report showed that in contrast to the declines in holdings of Treasury securities by China and Japan, holdings by Britain jumped 12.2 percent to $321.7 billion. Hong Kong also recorded a large increase of 4 percent to $152.4 billion.
Private analysts said that a likely explanation for at least a part of the drop in Chinese holdings is that Chinese investors are buying their securities through other countries such as Britain and the ownership is being recorded with those countries rather than with China. That would overstate the drop in demand that is occurring with China.
Once a year, the Treasury Department does an adjustment of the data to sort out ownership of the securities by nationality rather than the country where the purchases were made.
The latest adjustment released in February showed that China had retained its top ranking as the largest foreign holder of U.S. Treasury securities. The adjustment revised data released just 10 days earlier which showed China had cut its holdings so sharply that it had dropped from the No. 1 spot.
That adjustment reallocated bond holdings purchased in Britain and other countries to China to reflect the investor's correct home country.
Economists say that unless foreign demand for U.S. Treasury debt remains strong, the interest rates that the government has to pay for that debt could rise sharply, making the U.S. deficit picture look even worse.
Rising rates for government debt would also put upward pressure on private debt. That would send borrowing costs up for U.S. businesses and consumers and add another risk to the U.S. economy.
The debate about what China might be doing with its holdings is occurring at a time when China is facing growing pressure from the United States to allow its currency, the yuan, to rise in value against the dollar.
President Barack Obama raised the subject during one-on-one meeting he had Monday with Chinese President Hu Jintao. On Wednesday Federal Reserve Chairman Ben Bernanke made his strongest comments on the need for China to allow a revaluation, which he said would be in China's interests.
He said it would be good for China to allow for more currency flexibility to "address inflation and bubbles within their own economy." Bernanke made his comments in response to questions from Sen. Charles Schumer during a hearing of the congressional Joint Economic Committee.
Schumer, D-N.Y., is pushing legislation that would punish China with economic sanctions if the country does not move faster to allow the yuan to rise in value. American manufacturers contend the Chinese currency is undervalued by as much as 40 percent, making Chinese goods cheaper for American consumers and U.S. products more expensive in China.
There is a growing expectation that China will allow its currency to resume apreciating against the dollar, possibly before Obama, Hu and other leaders of the Group of 20 nations meet for talks in Toronto in June.
Cobell Indian Trust Funds Settlement Deadline Extended Until April 16
By Ryan J. Reilly | February 26, 2010 4:46 pm
With action from Congress not expected before Sunday, the deadline for a settlement in a long-running case on the misuse of Indian trust funds was extended until mid-April, a Justice Department spokeswoman confirmed to Main Justice.
“In order for the agreement to remain valid after its existing February 28, 2010 legislative enactment deadline, the parties have agreed to extend that deadline through Friday, April 16, 2010,” DOJ spokeswoman Melissa Schwartz said.
The parties announced on Dec. 8 that they had reached a settlement in Cobell v. Salazar, a lawsuit that accused the Interior Department of mishandling funds in trust funds that belong to individual American Indians.
One of the largest class action lawsuits against the U.S. government, the case was originally filed in 1996 by Elouise Cobell on behalf of more than 300,000 American Indians holding individual accounts. In the waning days of 2009, both parties agreed to extend the year-end deadline for final resolution of the settlement to Feb. 28, 2010.
Because Congress will not pass the required legislation before Sunday, the deadline was extended once again.
In late January, both sides were hopeful they could meet the deadline, but left open the option of extending it if Congress was unable to reach the deadline.
Keith Harper (Kilpatrick Stockton). “We’re certainly hopeful that we will get passage of that,” Associate Attorney General Thomas Perrelli told Main Justice in late January. “I don’t have any specifics. But we remain hopeful that it’s going to get passed.”
Keith Harper, a Kilpatrick Stockton lawyer representing Cobell, told Main Justice in late January that the settlement did not have any serious opposition.
“The holdup doesn’t have anything to do with our particular legislation,” said Harper. “Both sides have been supportive of this resolution.”
‘There are a lot of moving parts, but both sides agree that this is the right thing to do,” said Harper. “Whether we can continue to extend the deadline is another question, but right now all energies are focused and we’re feeling very good.”
Harper was not immediately available to comment on the latest extension.
With Cobell Settlement, Congress Takes Its Time By Ryan J. Reilly | March 9, 2010 10:21 pm
If things had gone according to schedule, the implementation of the settlement of one of the largest class action suits brought against the U.S. government would have already gone through Congress, been approved by a judge and the government would soon be cutting checks. But the legislative branch does not always work on the judicial branch’s schedule.
On Wednesday morning, Associate Attorney General Thomas Perrelli will take to the Hill to urge legislators to pass a bill that would finally end a lawsuit that has played out in courts for nearly 15 years.
Elouise Cobell (photo by Ryan J. Reilly / Main Justice) On Dec. 7, the government reached a $3.4 billion settlement in Cobell v. Salazar. The lawsuit, filed by Elouise Cobell on behalf of more than 300,000 American Indians, alleged that the Interior Department mishandled thousands of individual Indian trust fund accounts over more than 100 years.
The settlement requires congressional approval, however, and the original terms gave lawmakers a Dec. 31 deadline to finish the necessary legislation. That deadline has been extended twice and is now set to expire in April.
Congressional aides said they were not asked for input on the establishment of the deadline. Nor did the Justice Department lawyers who negotiated the settlement consult with members of Congress about the logistics of passing legislation just as Congress was dealing with other top priority issues — namely health care legislation — in an effort to complete work before its end-of-session Christmas break, according to the aides. A person familiar with the negotiations said that Judge James Robertson, the U.S. District Court judge who heard the case, dictated the short deadline.
Aides in the House and Senate said both the original deadline of Dec. 31 and the second extended deadline of Feb. 28 were unreasonable. Aides said they are more optimistic about the new April 16 deadline, but nobody is making any promises.
As the parties to the settlement wait for congressional approval, Cobell and her team are left with only private funds to explain the terms of the settlement to a hard-to-reach segment of the population. A massive planned government-backed awareness campaign – which includes television, radio, and print advertising across Indian country, as well as materials explaining the settlement in Native American languages — will not kick in until after Congress acts.
According to Cobell, government lawyers did not want to allocate any funds for outreach to Indian Country prior to the passage of legislation.
“The government instead assured us that legislation would be passed a few weeks after we signed the settlement agreement on Dec. 7,” Cobell wrote in the Native American Times. “Unfortunately, legislation was not passed (and has still not been passed) and the need to meet with Indian Country is stronger than ever.”
A Justice Department spokeswoman noted that Perrelli and the Solicitor of Interior Hilary Tompkins recently appeared before the National Congress of American Indians to answer questions on the settlement and that other federal representatives have appeared before tribal organizations.
“If Congress enacts legislation, we can then — per the settlement – provide for more extensive outreach to inform individual Indians and tribal governments about the settlement,” DOJ spokeswoman Melissa Schwartz said.
Bill Dorris, one of the lawyers representing Cobell, said that in talking with the Justice Department and with members of Congress, they have not found any real opposition to the legislation. Dorris said he was unsure why the legislation has not yet moved forward.
“We hope the new goal is realistic, we haven’t heard anything to indicate otherwise,” said Dorris.
Perrelli is set to testify before the House Natural Resources Committee Wednesday along with Cobell and several other American Indian leaders.
The Natural Resources panel’s top Republican, Doc Hastings of Washington, is expected to press the witnesses about how lawyers who negotiated the deal would be paid and about the lack of regional consultations between the Obama administration and Indian Country.
“The executive branch obviously wants this to happen quickly,” said Spencer Pederson, a spokesman for committee Republicans. “This will give us some opportunities to get some questions answered at the hearing.”
Those scheduled to testify at Wednesday’s hearing include:
Michael Finley, president, Intertribal Monitoring Association on Indian Trust Funds.
Austin Nunez, chairman, Indian Land Working Group.
Richard Monette , professor, University of Wisconsin Law School.
David Hayes , deputy secretary of the Interior.
Thomas J. Perrelli , Associate Attorney General.
This story has been modified to clarify that the judge who is hearing the case has not yet approved the settlement, since it requires Congressional action.
Cobell, Justice Urge Congress to Act as Critics Question Settlement
By Ryan J. Reilly | March 11, 2010 12:56 pm
The lead plaintiff in a long-running class action suit criticized Congress Wednesday for its slow pace in approving a proposed settlement of the case.
Appearing before the House Natural Resources Committee, Elouise Cobell, the named plaintiff in the suit filed in 1996 on behalf of more than 300,000 American Indians, expressed frustration at how long it has taken congressional leaders to consider the legislation necessary to OK the settlement.
“I thought that all we had to do was come and talk to Congress because they had so many years and they knew about this, and it’s almost like sometimes Congress acts oblivious to all the issues that we talked about,” Cobell said.
Early last December, the government and the plaintiffs reached a $3.4 billion settlement in Cobell v. Salazar. The lawsuit, which is one of the largest class action suits against the government in U.S. history, alleged that the Interior Department mishandled thousands of individual Indian trust fund accounts over more than a century.
The settlement requires congressional approval, however. The original terms gave lawmakers a Dec. 31, 2009, deadline to finish the necessary legislation. That deadline has been extended twice and is now set to expire on April 16.
Aides on Capitol Hill questioned the short deadlines given the time it often takes Congress to pass legislation. A person familiar with the temporary settlement arrangement said that the judge who handled the case — District Judge James Robertson — dictated the legislative deadline.
Elouise Cobell (photo by Ryan J. Reilly). But critics of the settlement, some of whom appeared before the committee on Wednesday, said they want more time to find out how account holders would benefit under the proposed settlement. The critics said there has not been enough transparency and criticized the communication with Native American leaders.
Representatives from the Justice Department and the Department of the Interior shot back at the suggestion they have not reached out to Native Americans, pointing out that they were on a conference call with tribal leaders the day the settlement was announced.
The department officials also said they plan to begin a massive public relations campaign once Congress approves the legislation. Deputy Secretary of the Interior David Hayes told the panel that it would have been presumptuous to educate the public about the details of the settlement before Congress has given its approval.
Cobell said she was frustrated by the “misinformation regarding the settlement conveyed by a very small number of individuals, many of whom are not beneficiaries and do not speak for individual Indian beneficiaries.”
But the concerns aren’t just about communicating the latest information to all involved parties. Richard Monette, former chairman of the Turtle Mountain Band of Chippewa, testified that the proposed Cobell settlement would be a “breach of trust.”
And Michael Finley, who chairs the Inter-Tribal Monitoring Association on Indian Trust Funds, told lawmakers that many of those he spoke with had problems with the size of attorneys fees arising from the settlement.
Under the terms of the proposed agreement, lawyers could receive between $50 to $100 million, plus payment of up to $12 million for work performed after the settlement.
Government officials said that the caps on attorneys fees are very low compared to other class-action suits.
Finley also cited the first deadline — Dec. 31, only weeks after the settlement was announced — as raising suspicions about what was contained in the agreement. “No one understood the reason for the very short time frame and it made people very wary of what was actually being proposed,” Finley said.
He also said that it was not possible for many people affected by the settlement to go to a Web site to get answers to their question, when many of them “have no electricity in their homes and limited access in their communities.”
Another witness, Austin Nunez, representing the Indian Land Working Group, said the organization’s board of directors had endorsed the legislation, despite concerns about some of the details of the settlement,.
The Next Steps All the witnesses promised lawmakers they would respond to their questions and concerns within two weeks.
Recently the Obama administration began circulating a draft of legislation in the House and is working with leadership in that chamber to move it forward.
According to Senate aides, Sen. Byron Dorgan (D-N.D.) is trying to find the right bill to which he can attach the language approving the settlement, in an effort to speed the legislative process in the Senate.
Ranking Member Rep. Doc Hastings (R-WA) and Chairman Rep. Nick Rahall (D-WV). If Congress does not act, or if there are any changes to the proposed legislation, the settlement agreement will become null and void.
Although they raised some concerns about the proposed legislation, both Natural Resources panel Chairman Nick Rahall (D-W.Va.) and the committee’s top Republican, Doc Hastings of Washington, indicated they shared the Justice Department’s goal of closing the matter.
Associate Attorney General Thomas Perrelli said that he hoped that both congressional authorization and final approval from the court would happen quickly.
Throughout the negotiations, government lawyers were guided by two principles, Perrelli said.
“First, we wanted true peace for the parties, he said. “We wanted to turn the page on history. The resolution of the accounting and trust administration pieces of this litigation will do that. And second, we wanted to put Interior on a new path for the future, and to give it tools to address some of the underlying conditions that have contributed to its challenges. The land consolidation program will do that.”
WASHINGTON -- A judge has granted more time for Congress to approve a $3.4 billion settlement against the government for swindling Indian tribes out of royalties for oil, gas and grazing leases.
But U.S. District Judge James Robertson warned that the latest delay -- which moves the deadline for congressional action from April 16 to May 28 -- is the last he will approve. The delay is the third since the settlement was reached in December.
'From where I sit, the settlement app-ears to be a win-win proposition," Robertson said at a court hearing Thursday. 'It needs to get done."
If Congress does not confirm the settlement by mid-May, Robertson said, he will order Interior Secretary Ken Salazar and other officials to appear before him to explain why.
The proposed settlement, which would end a 14-year legal case, calls for the Interior Department to distribute $1.4 billion to more than 300,000 Indian tribe members across nearly all 50 states.
The government also would also have to spend $2 billion to buy back and consolidate tribal land broken up in previous generations and create a $60 million Indian Education Scholarship fund.
Most lawsuit participants would receive at least $1,500, and many would receive considerably more.
If cleared by Congress and Robertson, the settlement would be the largest Indian claim ever approved against the U.S. government, exceeding the combined total of all previous settlements of Indian claims.
Deputy Interior Secretary David Hayes called the proposed settlement historic and said it represents 'an opportunity to turn the page on a period of history" in which the federal government did not meet its legal or moral obligation to Indian tribes.
The Interior Department manages about 56 million acres of land and leases it for mining, grazing and oil and gas production. Money collected from those leases is distributed to more than 384,000 individual Indian accounts and about 2,700 tribal accounts.
The 1996 lawsuit filed by Elouise Cobell, a member of the Blackfeet Tribe from Montana, alleged the government had breached its responsibility to manage assets belonging to American Indians and had refused to fix a flawed accounting system that led to the loss of billions of dollars.
Keith Harper, one of Cobell's lawyers, said the settlement 'is a win for our trust beneficiaries, a win for Indian country, and it turns the page on a problematic past."
Cobell and others involved in the case are disappointed that Congress has not yet acted, Harper said, but are confident that approval is imminent.
Under the deal, Harper and other lawyers would be paid between $50 million and $100 million. Cobell and three other plaintiffs could receive up to $15 million to reimburse them for expenses paid.
Some Indian leaders have complained that the settlement favors the government and the Cobell team.
Richard Monette, a law professor at the University of Wisconsin and former chairman of the Turtle Mountain Band of Chippewa Indians, said at a public hearing last month that, if enacted, the proposed Cobell settlement 'will itself be a breach of trust."
Monette told a House panel the deal appeared to be structured in a way to benefit Cobell and her lawyers, rather than the majority of individual Indians.
But Harper said there is widespread support for the deal. Cobell and other leaders in the case have conducted about 40 meetings in a dozen states, 'and in the vast majority of those, there is not a single dissent," Harper said.
Cobell herself, in testimony last month to Congress, called the negotiations tough.
'I think I did the best job that I could, along with my class counsel, to negotiate a settlement. I felt we were owed much more money, but this could go on for hundreds of years," she said.
AP – Senate Majority Leader Harry Reid of Nev. gestures during a news conference on Capitol Hill in Washington, … By Kevin Drawbaugh Kevin Drawbaugh – 1 hr 38 mins ago WASHINGTON (Reuters) – Democrats pressed ahead with financial regulation reform in the Congress on Thursday, rejecting Republican complaints and preparing the way for a final vote on legislation in the Senate.
The last unfinished piece of a massive Democratic bill -- new rules for the $450 trillion over-the-counter derivatives market -- was expected to take clearer shape on Friday with the release of proposals from the Senate Agriculture Committee.
The OTC derivatives component is crucially important to Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America, which dominate the unpoliced market.
Lobbyists for the firms were on the defensive after it emerged that Agriculture Committee Chairman Blanche Lincoln planned to propose stricter rules than those approved by the Senate Banking Committee and the House of Representatives.
Senate Democratic Leader Harry Reid said the main Senate reform bill must accommodate Lincoln's proposals.
"We hope to get it on the floor next week," Reid told reporters at a briefing, referring to a final bill.
The House approved a sweeping reform bill in December. It would have to be merged with whatever the Senate produces before a final measure could go to President Barack Obama to be signed into law. Obama strongly favors reform.
OBAMA TO MEET WITH ADVISERS
The president will meet with economic advisers on Friday to discuss financial reform, including derivatives market oversight, a White House spokesman said, adding Obama was expected to make some public comments on Friday.
Addressing a Democratic fundraiser in Miami, Obama urged both parties to find common ground for reform and not let financial firms and their lobbyists kill the legislation.
"We should all agree that we've got to pass common-sense Wall Street reform that prevents the kind of situation that led us into this crisis in the first place," he said.
Obama likened how financial institutions had attacked reform proposals to what happened from "throwing a piece of meat into a piranha tank." "They're going to race to see how fast they can tear it apart. But we cannot allow them to succeed."
The top Agriculture Committee Republican criticized the proposals about to emerge from the panel on derivatives, including credit default swaps, which will seek to push more of those instruments through clearinghouses and exchanges.
Senator Saxby Chambliss said there was some bipartisan agreement on the basic need for writing rules for swaps, but he said disputes remained unresolved on which businesses must clear swaps, and how they would be reported and transacted.
"Unfortunately our bipartisan negotiations have now been halted," Chambliss said, accusing the administration of intervening to stop the committee' work.
The White House has said repeatedly it will oppose Republican attempts to weaken the Senate legislation. Republicans have worked closely for months to do just that with lobbyists for the banking industry and Wall Street.
Polls show bankers are deeply unpopular with voters after a severe financial crisis tipped the economy into a deep recession, hammering home values, jobs and retirement plans.
Democrats are betting that Republicans, eyeing congressional elections in November, will be reluctant to stand too closely at the banks' side when the times comes for a vote in the Senate on tightening bank and capital market oversight.
"We still expect Congress to enact a moderate financial reform bill before the start of summer," said policy analyst Jaret Seiberg at investment firm Concept Capital.
"As for timing, we believe this could go to the floor as soon as April 27. This date could easily slip. The real deadline is to pass it out of the Senate by Memorial Day."
(Additional reporting by Christopher Doering, Charles Abbott, Donna Smith, Patricia Zengerle, Emily Kaiser, Roberta Rampton, Richard Cowan, Karey Wutkowski, Thomas Ferraro and Matt Spetalnick; Editing by Peter Cooney)
Asian currencies to gain from yuan revaluation: analysts
By David Watkins (AFP)
Sunday April 18, 09:06 AM
TOKYO — Speculation of an imminent yuan revaluation has boosted other Asian currencies against the dollar recently, reflecting the region's world-leading recovery from recession, say analysts.
With a move by Beijing to let the yuan appreciate against the dollar seen as increasingly likely in the near future, emerging Asian economies that compete directly with China are in line to benefit the most, they say.
"A Chinese currency revaluation would boost the export industries of countries that have trade relations with China," said Yunosuke Ikeda, senior forex strategist at Nomura Research Institute.
"Generally speaking it would help China's neighbours, while having little negative impact on the Chinese economy."
Despite rising against the euro, the dollar has fallen against a basket of Asian currencies this year. It is down 4 percent against the Australian dollar, linked to a commodity-rich economy driven by Chinese demand for raw materials.
The Korean won, the Malaysian ringgit and the Indian rupee in particular have rallied strongly. The dollar is down 6 percent against the ringgit, 5 percent against the won and 4 percent against the rupee.
Asian currencies are also likely to bounce from anticipation that other Asian central banks are moving to tighten their monetary policies, unlike their counterparts in more advanced economies, say analysts.
Singapore on Wednesday revalued its currency -- the city-state's principal monetary tool -- prompting speculation that China and South Korea may be next in line.
"Given this expectation, firm risk appetite, and more follow-through from Singapore's foreign exchange move, the outlook for other Asian currencies remains bullish," Credit Agricole analysts said.
Pressure is now growing on Beijing to raise interest rates and loosen currency controls after official data showed Thursday that the economy grew at a red-hot 11.9 percent in the first three months of the year.
The yuan was effectively pegged at about 6.8 to the dollar in mid-2008 as the financial crisis sank its teeth into global trade, after the unit rose by more than 20 percent since 2005 as China's export-driven economy soared.
Having recovered from the grip of recession, Asia is now "leading the global rebound," a recent World Bank report said.
In comparison the dollar has been pressured by a series of false dawns, and markets have repeatedly seen their recovery hopes dashed by disappointing data, reducing the chances of an imminent US rate rise, economists say.
"A yuan revaluation will add to the conviction that Asia can appreciate against the dollar even in a stronger dollar environment versus the euro," Royal Bank of Scotland analysts told Dow Jones Newswires.
However, who exactly stands to win and lose from a yuan revaluation is under debate with currencies affected differently by risk sentiment, exposure to commodities and how respective economies balance foreign reserves.
The yuan's peg against the dollar forces other export-oriented Asian economies to smooth their currencies? performance against the greenback and, therefore, the yuan as they struggle to remain competitive.
A yuan appreciation against the greenback would boost the strength of other Asian nations against China's exporters, and reduce the need for Asian central banks to buy dollars to curb their currencies' ascent, analysts say.
"The Malaysian ringgit and the Singapore dollar are likely to benefit most from the revaluation, " said Ikeda, adding that the ascendant Australian dollar would be likely hit by profit-taking.
For the Japanese yen, however, the picture remains clouded.
Barclays Capital said in a recent report that the Japanese currency stands to gain the most because a yuan revaluation would increase investor concerns about China's growth and demand for commodities.
Currencies with higher commodity exposure, notably Australia, would be hit while commodity-importing Japan would stand to gain.
However, the impact of a higher yen hitting the repatriated earnings of Japanese exporters obscures the issue. Japan's mountainous public debt approaching 200 percent of GDP is also a potential driver against the yen.
"It does not necessarily follow that the Japanese authorities would be more tolerant of yen appreciation against the dollar," said Julian Jessop of Capital Economics.
What is agreed is that any rate move by Beijing would be slow and gradual. The yuan would have to rise "20 to 30 percent" to have a major impact on the broader economy, said