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[sandi66]

How to Trade a Chinese Yuan Revaluation

Published: Thursday, 20 May 2010 | 3:45 AM ET

Treasury Secretary Tim Geithner said on Tuesday he planned to emphasize the need for a stronger Chinese yuan when he visits Beijing next week, amid some recent speculation that the country could relax its exchange-rate regime to some extent.

Investors may want to trade on potential yuan movement, but without the ability to simply buy and sell the currency they will need to find proxies and other mechanisms to play the currency.

One option is the WisdomTree Dreyfus Chinese Yuan Fund – an exchange-traded fund that trades on the New York Stock Exchange as CYB.

Other proxies “investors have used in the past include South Korean won and the yen., but the best proxy is the won,” Andrew Busch, BMO Capital Markets global currency and public policy strategist, said.

The South Korean currency is the best replacement because the country exports a large amount of goods to China, and also because it is liquid, Busch said.

Chinese Premier Wen Jiabao has pegged the yuan's exchange rate against the dollar at around 6.83 since July 2008 to help Chinese exporters cope with a global recession, a move that frustrated Western policymakers.

At the heart of Congressional demands for a yuan revaluation is the argument that this would increase the number of American jobs by boosting exports to China, thus alleviating the recession - but some analysts are unconvinced.

“If China's currency strengthens substantially and our exports to China increase, then this could help create some more manufacturing jobs in the U.S., but the number of jobs would not be sufficient to fundamentally change the jobless crisis in the U.S,” Richard Hastings, consumer strategist for Hunter Securities told CNBC.com.

Steer Clear of Hong Kong

The Chinese stock market has dropped 25 percent since August, and many analysts have predicted that the Chinese economy is due for a rebound.

But investors banking on a boost in Hong Kong stocks to coincide with a yuan appreciation may be frustrated.

“This will not be good news for stocks in Hong Kong nor globally,” Diana Choyleva, Director at Lombard Street Research, said .

“Investors should position for an increase in risk aversion and a growth relapse globally.” “Exporters from China will be negatively impacted by a Yuan revaluation,” Choyleva said. “They could benefit from foreign direct investment flows, but because the Chinese government limits FDI, it's problematic.”

Don’t Sell Big-Box Retailers

Investors are also unlikely to gain from shorting companies highly dependent on cheap, Chinese-manufactured goods such as Wal-Mart Stores.

“A revaluation does not mean instantaneous price hikes for companies like Walmart.” Alexandra Harvey, author of “The China Price: The True Cost of Chinese Competitive Advantage,” said.

“The first companies to take the hit from a renminbi revaluation will be China's exporters, because retailers and brands buying from China will resist price increases for as long as they can,” Busch agreed.

“Wal-Mart is so good at keeping costs low that it (a revaluation) won't affect it much.” But Busch argued that it’s not the yuan, but euro oscillations will rattle the markets, and investors should keep one eye focused on Europe.

“Even if you're right on direction of yuan, you could lose money because markets are heading towards a strong US dollar,” he said.

“I suggest going short euro, long South Korean won,” he added.

When to Expect a Revaluation

There still isn’t a clear consensus on whether China will revalue their currency several weeks or several years from now.

“The falling euro dramatically reduces the chance of China upward valuing the yuan because of fear of even further erosion of competitive advantage in its largest export market,” Navarro said.

“The fact that China has held its peg has been a major contributor to weak growth in Europe,” he added. “That will continue.”

But others disagree. “A yuan revaluation in the context of an overall Chinese tightening is likely this year,” Choyleva said.

“The Chinese have been under a lot of pressure to do this (revalue), and they're going do it in their own time, when it’s in their best interest. It is in their best interest right now, as they’re pressured by inflation,” Busch said. “But I don't believe they'll be very aggressive.”

“They may allow the yuan to appreciate against dollar gradually,” Choyleva added. “But at the end of the day, it’s a communist government that doesn’t believe in releasing control.

The financial crisis has convinced them that their market methods are better than the West.”

www.cnbc.com/id/37233650

[sandi66]

FACTBOX-Forecasts for the yuan rate and regime

Thu May 20, 2010 5:12am EDTBEIJING, May 20 (Reuters) -

Following are forecasts by selected banks and brokerages of what will happen to the yuan, or renminbi (RMB):

Currencies

Yuan top news page: link.reuters.com/jej52k

Yuan offshore forwards: CNYNDFOR=

Spot yuan: CNY=CFXS CNY=

FORECASTS:

CHINA INTERNATIONAL CAPITAL CORP (May 19)

"The European crisis further reduces the possibility of a rate hike in China and short-term renminbi revaluation. In the past week, the RMB strengthened 3.1 percent against the euro, 1.8 percent against the pound, and 2.3 percent against the Swiss franc, making appreciation against the U.S. dollar less urgent.

"We reiterate our call that both RMB appreciation against the USD and a rate hike are likely to be delayed, and the Chinese government should adopt a more flexible approach in policy tightening."

CAPITAL ECONOMICS (May 19)

"Worries about Europe have prompted us to revise down our forecasts for the renminbi's future pace of gains, but we still expect appreciation against the dollar to resume at some point between next week's Strategic and Economic Dialogue with the U.S. and the G20 summit at the end of June.

"Meanwhile, concern about the situation in Europe is weighing on minds in Beijing. The final impact on European demand for Chinese goods is still unclear, but the euro's slide has already resulted in a significant renminbi appreciation in trade-weighted terms. Nonetheless, we still expect to see a shift in Chinese currency policy before the end of June."

MORGAN STANLEY (May 18)

Stephen Roach, Asia chairman: "There'll be a big focus to the upcoming discussions between U.S. and Chinese officials in Beijing ... China wants to go back to a slightly more flexible policy than it has right now with the gradual RMB appreciation vis-a-vis the dollar, as was the case from mid 2005 to mid 2008. But the idea of a big increase in the renminbi, that's just off the table in a treacherous global environment, personified by pressures of both European growth and the European currency.

"I think if the world would have been fine, the Chinese might have already made the move. But I think it just gets deferred and very dependent on the state of the global economy when it does occur."

DEUTSCHE BANK (May 18)

"We continue to see a high likelihood of a RMB regime change (away from the current peg to the USD to a "flexible" peg to a basket) sometime in the remainder of this quarter. However, we think the recent USD/EUR movement will reduce the scope for a one-off RMB appreciation, and will reduce the potential magnitude for RMB appreciation vs the USD for the rest of the year after an initial regime shift."

"The potential of further USD appreciation vs the EUR suggests that after the RMB reform, the pace of RMB appreciation in NEER terms may be faster than the appreciation of the RMB/USD rate. We slightly revised our expectation of the RMB/USD rate for end-2010 to 6.67 (vs the previous 6.60)."

BARCLAYS CAPITAL (May 17)

The euro zone debt crisis is a significant factor of consideration for Beijing as it considers a yuan move. Therefore the probability of a policy change in China's exchange rate policy in the very near term has declined because of the euro. The policy objective of reforming the exchange rate regime is still there. The weakening euro has actually highlighted the problem with the peg to the dollar. Therefore, the reform objective should remain there. Once the situation in the durable market starts to stabilise, that agenda will be back again.

"And in terms of size of appreciation, the reform objective is more about exchangeable regime, that is to increase flexibility more than appreciation.

"On the appreciation side, our view is that we are going to see only a moderate size of appreciation, at annual rate probably around 5 percent a year."

GOLDMAN SACHS (May 13)

Jim O'Neill, chief global economist: "I've been thinking something (on the yuan) to happen for weeks. But I do think May is, was and still is the optimal time for some kind of move for a variety of reasons. And there appears to have been a few promises made to Geithner and Obama. So I would be really surprised if some sort of move didn't happen before May was over.

"I think a modest reval, some kind of repeat, more serious repeat of what happened five years ago. I think a modest reval anywhere from 2 to 5 percent. Importantly on a going forward basis, the introduction of a true band in which the renminbi fluctuates more frequently than it does these days. "They (Beijing) can't raise interest rates with this direct dollar peg because if they try it, it would bring in even more speculative flows. So they need to introduce some flexibility to the exchange rate for their own domestic reasons. And of course, if they did it in the way in which I said, it would also get them enormous number of brownie points with the G20, which of course is coming up in June as well."

CITI (May 7)

The Greek crisis both presents "a unique opportunity" for yuan reform and constrains the scope for any move to appreciation.

"The possible size of RMB appreciation is constrained by euro weakness.... The need and pressure for the RMB to appreciate versus the dollar has meaningfully decreased. We believe that a one-time appreciation of any size has become very unlikely."

"Despite reasons against appreciation, the odds of RMB reform has increased -The Greek crisis has absorbed attention and softened external pressure and market expectations for RMB appreciation.... Thus, we believe that the current environment is a good opportunity to introduce a change in the currency regime."

CIMB (May 4)

"We are looking at a 1.1-1.2 percent revaluation of the yuan to 6.75 from the existing fixing level of 6.82/83 and looking at a crawling peg method of revaluation via adjusting the mid point of the fixing level, likely to occur in the second half of this year.

"The PBOC is likely to be very cautious of making a very aggressive move on the currency buts instead will lean towards tightening rates and mopping up existing liquidity.

"We expect the yuan to be 6.75 per dollar at the year-end. It will be a minor move via the daily fixing and they stop at that level for much of the year."

www.reuters.com/article/idUSYUANVIEW20100520

[sandi66]

Asia Market Updates:

Strong Japan GDP talked down by Fin Min Kan

May 20, 2010

Asian Market Update: New Zealand budget sees higher sales tax, stronger growth to meet rising debt as NZD pares losses; Strong Japan GDP talked down by Fin Min Kan




ECONOMIC DATA

- (JP) JAPAN Q1 PRELIM GDP Q/Q: 1.2% V 1.4%E; ANNUALIZED: 4.9% V 5.5%E (highest since Q2 of 2009 in both measures); NOMINAL GDP Q/Q: 1.2% V 1.3%E (10-yr high); GDP DEFLATOR Y/Y: -3.0% V -3.0%E (multi-yr low)

- (JP) JAPAN Q1 HOUSING LOANS Y/Y: 1.0% V 1.6% PRIOR (first decline in 3 months)


- (SI) SINGAPORE Q1 FINAL GDP Q/Q: 38.6% V 33.4%E; Y/Y: 15.5% V 13.7%E (multi-year high for both figures)

- (AU) AUSTRALIA MAY CONSUMER INFLATION EXPECTATION: 3.6% V 4.1% PRIOR


- (AU) AUSTRALIA APR RBA FOREIGN EXCHANGE TRANSACTION: A$350M V A$892M PRIOR

- Despite the recovery in the US indices over the final hour of trading that led to futures rise over 0.5% in electronic session, Asian equity markets remain offered amid persistent investor skepticism. In the final hour of Tokyo trading, Nikkei225 and the Kospi are down over 1%, Sydney markets are down 0.9%, while Taiwan is off by 1.6%. Shanghai Composite is also in the red by 0.6% around 2,570, unable to preserve the opening hour rally above 2,600. With Philly Fed on tap for the Thursday session, US equity futures sold back down to unchanged levels below 1,110 after rising above 1,116.




SPEAKERS/PRESS
- New Zealand: After the call for fiscal consolidation by the New Zealand central bank in the prior session sank the Kiwi dollar, commentary in the annual budget statement promising to cut debt helped reverse some of that sentiment. The govt called for FY10/11 net debt at 19.5% rising to 23% by FY11/12, but did note it would raise sales tax to 15% from 12.5% while lowering the corporate tax rate to decline to 28% from 30% in 11/12. Additionally, policymakers raised their growth forecast for the year to 3.2% from 2.4%, noting that faster growth would reduce the need for more borrowing. Speaking after the budget release, Fin Min English said the budget is strong enough to counter rating agency negative outlook, even as Fitch maintained its negative view after the budget on AA-/+ rating.

- Japan: 3-quarter high rate of Japan GDP growth on both q/q and y/y basis was talked down by Fin Min Kan, who said that although the figures show the economy is recovering steadily, much of the improvement is attributable to external demand and fiscal stimulus. Moreover, Kan said downside risks to the economy, namely deflation and financial market volatility, remain, while calling for the BOJ to maintain a flexible policy in dealing with persistent deflation.

- Singapore: Also posting a revision to Q1 GDP data, Singapore saw an upward boost to multi-year high pace of growth. Speaking after the data, Singapore govt noted 2010 GDP would exceed 7-9% range unless European crisis deteriorates further and warned that price inflation in Asia poses a global risk.

- China: Vice Fin Min Zhu said next week's discussions with arriving Treasury Sec Geithner and Commerce Sec Locke would include the impact of the EU debt crisis, which could present a risk to the global economy. Zhu further said issues of currency will be mentioned, suggesting China may be open to modify Yuan as economic conditions improve. Separately, China Commerce Min reiterated yuan exchange rate would be kept stable, while China State Council researcher Wu Qing suggested Yuan exchange rate may be altered within the next 2-3 months - a step preferable to higher interest rates. An editorial by China Securities Journal citing local economists also had a conflicting view, suggesting the recent volatility has eased pressure for Yuan revaluation, also calling for Q2 GDP to slow to 10%, Q3 to 9% and Q4 to 8%.

Geopolitical: Japanese press reported the unpopular positioning of US Army base may be resolved through relocation by next week. In Korea, Seoul continued to consider a response to the alleged sinking of its naval ship by the North, potentially calling for preventing the North ships from entering its waters.




EQUITIES
- In individual names, TEPCO was reported to launch the country's first offshore wind power generation project with power output of 2,000kw. Resona shares also rose sharply after planning to repay public funds before retreating later in the day.
Also in Tokyo, local press said Nippon Steel profit may be cut by ¥17B on repair of its furnace operations. In Sydney, Healthscope said it has received a revised takeover offer of A$5.75/shr from private equity group. In Taiwan, Acer said it may raise prices of laptops shipped to Europe to reflect costs and the recent currency fluctuations.




CURRENCIES/FIXED INCOME/COMMODITIES
- In currencies, European majors consolidated the gains made in the course of the US session. After testing 1.2430, EUR/USD retreated to 1.2320, while GBP/USD traded from 1.4460 session high to 1.4320. Australian dollar was the biggest loser on the day as markets continue to reduce expectations of higher interest rates. AUD/USD fell from 0.85 to 0.8250, AUD/JPY plummeted from 78.00 to 75.00, while AUD/NZD took out 1.23 - all 8-month lows. USD/JPY fell nearly 100 pips below 90.90 as risk aversion returned to Asia, with JPY also erasing all of the declines against EUR and GBP made in the US session.

- In commodities, uncertainty over the impact of the new mining tax in Australia continued to haunt local markets, as Australia Trade Min Crean refuted rumors the administration may compromise on the new mining tax. Front-month crude sank on risk-off flows, trading back down to $70/brl. Spot gold also resumed its correction from the prior session, falling from $1,197 session high to $1,182 - a two-week low

www.fxstreet.com/fundamental/analysis-reports/asia-market-update/2010-05-20.html

[sandi66]

China not to succumb to external pressure on yuan

2010-05-20 15:00:38

China stood firm against outside pressure to revalue its currency on Thursday ahead of key talks with the United States, and reiterated its concerns about soaring American debt levels.

Assistant Finance Minister Zhu Guangyao told reporters: "We will not succumb to external pressure. Pressure and noise from the outside can only obstruct our progress."

Zhu's comments came during a briefing on the upcoming US-China Strategic and Economic Dialogue set for Monday and Tuesday in Beijing, which he said would touch on the issue of China's exchange rate policy.

The US and Europe want China to move toward a more market-based exchange rate regime and let its yuan currency rise.

Some American lawmakers say China manipulates the currency to make its exports cheaper and have called on President Barack Obama to take action against Beijing.

US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner will head the American delegation at the annual talks.

But some observers have said China now seemed less likely to move on a revaluation given the global financial uncertainty stemming from the eurozone sovereign debt crisis.

Zhu appeared to confirm that view, saying "exchange rate stability is an important factor" in the global response to the EU crisis.

He added that the soaring debt taken on by the United States to dig itself out of recession "is also something China is concerned about".

China is the top holder of US Treasuries and has in the past expressed worry that those investments were threatened by high American debt levels.

While acknowledging the yuan would be on the agenda for next week's Sino-US talks, Zhu played down its significance, saying it was just one of many issues to be discussed.

The China Daily quoted an advisor to China's central bank as also saying the yuan issue would not be central to talks, allowing Beijing to move on appreciating the currency without seeming to have done so under pressure.

"Officials from both sides are expected to play down the currency issue during the meeting, leaving more leeway for China to decide the fate of its own currency," Li Daokui, a member of the central bank's monetary policy committee, was quoted as saying.

www.commodityonline.com/futures-trading/currency/China-not-to-succumb-to-external-pressure-on-yuan-4328-2.html

[sandi66]

China to US: Put Your Fiscal House in Order

Published: Thursday, 20 May 2010 | 6:00 AM ET

Sovereign debt troubles in Europe underscore how important it is for the United States to control its own borrowing as its indebtedness reaches concerning levels, a senior Chinese official said on Thursday.

With China facing criticism for holding its currency in a de facto dollar peg, assistant finance minister Zhu Guangyao shifted attention to Beijing's own worries about U.S. policies, especially its soaring deficit, ahead of high-level bilateral meetings next week.

There will be "quiet discussions" about the yuan at the Strategic and Economic Dialogue, but external pressure will only delay the exchange rate reform that China wants to implement, he told a news conference.

The global economy's more urgent need is for financial conditions to stabilize in Europe in the wake of Greece's debt woes, Zhu said.

"The European sovereign debt crisis is a challenge not just for the countries that are party to it, such as Greece. In fact, it is a challenge to the stability of the entire international financial market," he said.

"It concerns the recovery of the entire international economy, and so it demands a common response from the international community," he said.

China will look to coordinate its economic policies with the United States as a buffer against the turbulence and would also like the G20 group of nations to play a role in strengthening the global response, Zhu said.

But the United States needs to take a hard look at its own fiscal situation in the light of what has happened in Europe, he said.

"We hope that the U.S. deficit will fall as a proportion of GDP as the economy recovers and reach a sustainable level," Zhu said.

This is a matter of concern for China and it has noted that U.S. officials, including President Barack Obama, have promised to keep an eye on debt levels, he said.

China is the world's largest holder of U.S. Treasuries with $895.2 billion. It added to its stockpile in March for the first time in seven months.

Chinese officials, including Premier Wen Jiabao, last year prodded the Obama administration to avoid pursuing fiscal policies that could erode the value of those treasury holdings.

Yuan on Backburner

Zhu said that currency policy would come up at the U.S.-China dialogue next Monday and Tuesday, but that such sensitive issues would be best handled only in "quiet discussions".

Just one month ago, it looked as if the big issue at the meetings would be Beijing's practice of locking the yuan to the dollar since mid-2008, an attempt to cushion the Chinese economy from the ravages of the global financial crisis.

Many analysts and investors had thought that the U.S.-China dialogue or a G20 summit in June were unofficial deadlines for Beijing to resume yuan appreciation, lest it face punitive measures for Washington.

But the debt troubles in Europe coupled with signs of a stronger U.S. recovery have softened criticism of China's policy and pushed back forecasts for any de-pegging.

The United States will continue nudging China to let its currency appreciate, but trade issues appeared to be higher on the U.S. agenda for the bilateral meetings.

That is the way it should be, Zhu said.

"Specific measures of yuan reform will be decided by China itself, according to economic developments in both China and the world," he said.

"What I want to particularly emphasize is that China will not push forward yuan reform under the external pressure," he added. "External pressure and noise can do nothing but slow down the reform process."

www.cnbc.com/id/37245640

[sandi66]

Europe’s Rescue for Greece Brings Euro to New Normal (Update1)

May 20 (Bloomberg) -- Europe’s debt crisis will depress the euro still further after it declined to the lowest level since 2006, according to UBS AG and BNP Paribas SA. For years to come.

For the 16 countries using the currency, that isn’t all bad. A drop over three to four years would benefit European exporters in countries such as Germany, where foreign sales help offset reductions in government spending and restraint by consumers concerned about inflation. U.S. exports, which President Barack Obama says he wants to double within five years, may become less competitive.

“The euro depreciation is very good news for the region” because the rest of the world economy is expanding, said Charles Wyplosz, head of the International Center for Monetary and Banking Studies in Geneva. “This is going to bring a welcome boost that may save the euro zone from outright recession.”

While Wyplosz puts the euro’s long-term “fair value” at between about $1.10 and $1.20, currency movements “tend to overshoot,” he said. “My bet is that the euro still has ample room to go down before it goes up.”

Wyplosz’s view is shared by strategists at UBS, Danske Bank A/S, Royal Bank of Scotland Group Plc and Bank of America Merrill Lynch. They predict the euro will trade at between $1.15 and $1.26 by the end of the year, with BNP Paribas saying it may fall below parity with the dollar in the first quarter of 2011, according to 43 forecasts compiled by Bloomberg.

Greek Contagion

The euro fell to the lowest against the dollar in more than four years on May 17 and is down 14 percent this year as the fiscal crisis spreading from Greece undermined confidence in the currency. Purchasing power parity, a measure of the relative cost of goods, indicates the euro remains 9.8 percent overvalued against the dollar, based on data compiled by Bloomberg.

Even if Greece is unable to meet debt obligations and is forced to reschedule interest and maturity payments, it will remain within the European Monetary Union and retain the euro, said bankers in Athens requesting anonymity because they are handling the government’s finances.

The currency’s value is still higher than the weekly average rate of $1.1833 since its introduction in 1999. The euro’s all-time low was $0.8272 in October 2000; the peak was $1.6038 on July 15, 2008. The common currency slipped 0.3 percent to $1.2378 as of 9:30 a.m. in London.

The euro may stick at lower levels for “three, four years” as Europe grapples with its fiscal crisis, Hans-Guenter Redeker, global head of currency strategy at BNP Paribas, said in a phone interview.

ECB Strategy

The euro may fall over the next three months to $1.16 as the sovereign debt crisis forces the European Central Bank to keep borrowing costs low, Credit Suisse Group AG strategists wrote in a note to clients on May 18.

The decline in the euro may hurt demand for the region’s sovereign bonds at the time when governments are issuing a record amount of debt. Standard Life Investments said on May 18 the fund has cut its holdings of European government securities, including German bonds, citing fiscal challenges and the tumbling euro.

“Countries in the euro region are bringing forward fiscal tightening and that reduces a chance of a swift and strong economic recovery,” said Richard Batty, a global investment strategist at the Edinburgh-based fund, which has $175 billion of assets under management. “That hurts the euro. By buying euro-denominated assets, you are simply buying into the idea that the euro will remain stable.”

Germany, ECB

Germany unilaterally imposed a ban on so-called naked short- selling and speculation on euro-area government bonds with credit default swaps on May 18 to reduce “exceptional volatility” in the market.

The country didn’t tell the European Central Bank that it planned such restrictions, ECB executive board member Jose Manuel Gonzalez-Paramo said in an interview with Il Sole 24 Ore newspaper.

The $1 trillion lending backstop for indebted euro nations agreed to by European leaders on May 10 also won’t halt the slide because investors remain concerned about government debt, the growth outlook for Europe’s weaker economies and trade imbalances within the euro area, said Mansoor Mohi-uddin, chief currency strategist at UBS in Singapore.

The Frankfurt-based ECB probably will refrain from raising interest rates to help offset declining government spending in the region, Mohi-uddin said. “The combination of tightened fiscal policy and looser monetary policy historically leads to a weaker currency,” he said.

“Biggest Headaches”

Even so, pressure on the ECB to raise rates may grow as the euro’s decline feeds inflation by making imports more expensive. European inflation accelerated to a 16-month high in April, the European Union’s statistics office said May 18.

For European exporters, the euro’s biggest crisis since the monetary union’s debut is an opportunity after China overtook Germany as the biggest exporter of goods last year. Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles, gets almost a quarter of its revenue in North America. Shares in Munich-based BMW have gained 23 percent this year. Paris- and Munich-based European Aeronautics, Defense and Space Co., the maker of Airbus jets, has called the euro’s rate to the dollar one of the company’s “biggest headaches.”

Munich-based Siemens AG, Europe’s largest engineering company, is also looking to benefit as it competes in 190 countries, according to Chief Financial Officer Joe Kaeser. “In general, a stronger greenback is good,” he said in a May 18 conference call.

Exchange Rate

“The super-competitive export machine of Germany is going to be compensated with a very, very weak exchange rate,” said Redeker. “You have a plus-plus situation on the profitability, especially for Siemens or the car industry. They will find a very profitable situation.”

Exports account for almost half of the German economy, making up 47 percent of gross domestic product in 2008, the latest year for which full data are available.

The biggest losers will be U.S. exporters that face a rising dollar, Barry Eichengreen, an economics professor at the University of California, Berkeley, said in a phone interview. “A weaker European economy is not good for us.”

Exports helped lead the U.S. economic recovery as the dollar declined against other major currencies last year, contributing 42 percent to the 5.6 percent growth rate in the fourth quarter of 2009, according to Commerce Department data. Since February, U.S. imports have been rising faster than exports.

Molotov Cocktails

While a cheaper euro may lure tourists to Europe, further boosting the continent, they may think twice about going to Greece, said Alan Ruskin, head of foreign-exchange strategy at RBS Securities in Stamford, Connecticut. He wrote in a note on May 13 that the euro could “easily head through parity” with the U.S. dollar.

“A weaker euro may help tourism in Greece. But on the other hand, a lot of people will be looking at the news and seeing Molotov cocktails flying through the air,” he said in a telephone interview. “That significant distraction could offset the benefit of a weaker currency.”

Concern by investors that the fiscal crisis will drag on and deficit-cutting in Europe’s biggest economies will undermine growth is keeping pressure on the euro. Another financial rescue package may be “inevitable,” former Bank of Bank of England official David Blanchflower said in a Bloomberg Television interview on May 18.

Deficit Cuts

Bringing down European budget deficits will take years. Greece’s government aims to lower the budget deficit from 13.6 percent of gross domestic product last year, more than four times the level allowed by the euro’s founding treaty. Spain, seeking to ward off Greek contagion, on May 12 unveiled the biggest budget cuts in at least 30 years to reduce the deficit to 6 percent of GDP in 2011 from 11.2 percent last year.

Germany, where Chancellor Angela Merkel is pressing other European countries to enforce fiscal discipline, plans to meet the deficit target of 3 percent by 2013 under a constitutional amendment that dictates cuts in government borrowing.

European policy makers are helping depress the euro with their strategy in the debt crisis, said Stephen Jen, a managing director at BlueGold Capital Management LLP in London.

“It’s hard to say what the sufficient conditions are for me to be bullish on the euro, but a necessary condition is that Greece and Portugal reschedule their debt,” he said. “The longer the Eurocrats resist this inevitable outcome, the less credible and consistent they appear.”

To contact the reporters on this story: Tony Czuczka in Berlin at [e-mail]. Anchalee Worrachate in London at [e-mail]

Last Updated: May 20, 2010 04:42 EDT

www.bloomberg.com/apps/news?pid=20601087&sid=az_nkNcZgoSE&pos=1

[sandi66]

Naked Short-Selling 'Turns Market Into a Casino'

Published: Thursday, 20 May 2010 | 11:32 AM ET

The German government announced plans to ban naked short-selling at the country's 10 most important financial institutions on Tuesday. Bill Spiropoulos, CEO of CoreStates Capital Advisors, shared his insights on the new proposal.

“Naked short-selling is wrong and it takes the marketplace and turns it into a casino,” Spiropoulos told CNBC.

“When you see stocks get blasted with flash trading, it destroys the entire confidence in markets. And the roller coaster activity makes people run to the sidelines and they have no interest whatsoever in investing,” he said.

Spiropoulos proposed that there should be a “cooling mechanism” that takes place when markets become extreme or highly charged.

“What happened during the flash crash, that’s what I mean by creating a casino atmosphere,” he said. “You ruin the capital formation process—there’s a consequence for that and I think stability and fairness is what marketplaces have to have.”

www.cnbc.com/id/37252812



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Obama Hails Advance of Wall Street Reform Bill

Published: Thursday, 20 May 2010 | 5:00 PM ET

President Barack Obama on Thursday hailed a U.S. Senate vote advancing a landmark Wall Street overhaul, saying the reform bill he will sign will hold financial firms accountable but not stifle the free market.

"This is not a zero-sum game where Wall Street loses and Main Street gains,'' Obama told reporters.

Obama spoke in the White House Rose Garden shortly after the Senate voted to end debate on the biggest overhaul of financial regulations since the 1930s, which could allow a final vote on the bill later on Thursday or on Friday.

www.cnbc.com/id/37261313

[sandi66]

Obama's Wall Street reform: Senate passes biggest financial regulation bill since Great Depression

Originally Published:Thursday, May 20th 2010, 9:12 PM
Updated: Thursday, May 20th 2010, 11:56 PM

WASHINGTON - Landmark finance reform that would rein in ruinous risk-taking on Wall Street and protect consumers passed the Senate last night, all but sealing a victory for another key piece of President Obama's agenda.

The bill would create an aggressive consumer financial watchdog, give the feds power to intervene in dangerously risky markets and firms, and regulate the complex financial instruments that imploded in the 2008 meltdown.

A top goal is to make sure banks and financial houses are no longer "too big to fail," the predicament that forced taxpayers to pony up a $700 billion rescue.

"The American people will never again be asked to foot the bill for Wall Street's mistakes. There will be no more taxpayer-funded bailouts - period," Obama declared shortly before the bill passed on a 59 to 39 vote.

The independent consumer watchdog would be housed under the Federal Reserve, empowered to police all sorts of firms offering financial products to people.

It would have broad powers to write rules to make sure consumers get clear, accurate information about mortgages, credit cards and other products.

It also would crack down on hidden fees, abusive terms and deception.

"From now on, every consumer will be empowered with the clear and concise information that you need to make financial decisions that are best for you," Obama vowed.

The bill - the greatest overhaul of the finance system since the Great Depression - also contains a controversial provision to get Wall Street banks out of the risky swaps and derivatives business. Mayor Bloomberg has complained that move would hurt the local economy.

Firms in the city handle trillions of dollars worth of such derivative deals, earning them billions. But reform backers note the city economy got hammered when huge numbers of secretive derivative deals - essentially bets on underlying securities - turned toxic as mortgages they were based on went bust.

The bill still has to be reconciled with a similar measure in the House, which imposes new regulation on the swaps and derivatives trade but lets banks stay in that business.

Supporters of the House version say shutting out banks would force the trade overseas, and keep it in the dark, largely unregulated.

Some Senate insiders think the House version will win out.

www.nydailynews.com/news/politics/2010/05/20/2010-05-20_wall_st_reform_senate_passes_sweeping_bill_on_how_the_banks_will_be_regulated.html

[sandi66]

Obama gets his big bank reforms
Robert Peston | 07:42 UK time, Friday, 21 May 2010

Financial reform in the UK was always going to be conditioned by whatever reforms are enacted in the US.

And as of last night, we now have a clearer - if not yet definitive - view of how Congress is planning to shake up Wall Street.

The important point is that the Senate has - finally - voted for financial reform. Which means that President Obama will get his way, and there will be an overhaul of America's biggest financial institutions more radical than anything we've seen since the 1930s.
But we can't yet be certain of the minutiae of the overhaul, because the Senate's reform package has yet to be reconciled with the House of Representatives.
Here, in general terms, is what is likely to happen:

(1) Most of the $600 trillion derivatives market will be forced through third-party clearing houses, to increase oversight of the deals and ensure participants in the deals put up sufficient margin or security against the risk of losses. As I've mentioned before, this will significantly reduce the profitability of derivatives trading for banks, because it will lessen their ability to blind gullible investors with the wizardry of their science.

(2) Banks may be banned from proprietary trading or speculating for their own account.

(3) An important part of banks' derivatives business, their swaps desks - which include the business of insuring loans through credit default swaps - may be walled off, or forcibly separated.

(4) There'll be a powerful new consumer protection agency.

(5) There'll be new powers for the authorities to seize control of large systemically important institutions that appear to be running into difficulties.

(6) There'll be new powers for the authorities to break up troubled systemically important institutions in a supposedly orderly way.

(7) There'll be new multi-authority oversight of the risks in the financial system.

(8) In general, the Federal Reserve will emerge as the regulatory super-power, though the precise scope of its remit remains to be defined.
What does it all mean?

In theory, banks will be taking fewer risks - and they will certainly be less profitable.
There will be a particular challenge to the business model of Goldman Sachs, which generates more profit - in a proportionate sense - from proprietary trading and derivatives than most of its competitors.

The reforms would have direct implications for Barclays, owner of defunct Lehmans' US operations.

And there will be indirect implications for all big British banks, because where America leads in financial reform has a significant influence on the room for regulatory manoeuvre of the British government.

Finally, there is a knock-on to conditions in global financial markets, especially stock markets, in the coming weeks.

Investors will fear that US banks forced by Congress to retrench and narrow their scope will be less generous with the provision of credit and liquidity, which could dampen the economic recovery.

There's always a bill, a price, for necessary financial reform. Calibrating that price, in respect of timing and size, is the tricky part.

www.bbc.co.uk/blogs/thereporters/robertpeston/2010/05/obama_gets_his_big_bank_reform.html

[sandi66]

Geithner to Stop in Europe for Talks on Crisis

Published: Friday, 21 May 2010 | 1:55 AM ET

U.S. Treasury Secretary Timothy Geithner will make stops in Britain and Germany next week to discuss troubled economic conditions there en route home from China, the Treasury Department said on Thursday night.

The announcement followed another day of turmoil in financial markets as France and Germany sought to patch up a public rift and work together to solve a European debt crisis.

The U.S. Treasury said Geithner will meet Britain's new Chancellor of the Exchequer, George Osborne, in London next Wednesday. He then travels to Germany for meetings with European Central bank President Jean-Claude Trichet in Frankfurt and German Finance Minister Wolfgang Schauble in Berlin on Thursday.

Geithner leaves on Friday for Beijing where he will participate in meetings next Monday and Tuesday of the U.S.-China Strategic and Economic Dialogue.

Concern has been rising that Europe lacks enough unity to come up with a package of measures to restore stability to the region, especially after Germany decided on its own earlier this week to ban some types of short selling to try to curb speculation.

That led to a clash between France and Germany, co-founders of the euro[EUR=X 1.2504 0.0044 (+0.35%) ], that spooked markets on Wednesday and and sent the currency to a four-year low beneath $1.22 U.S.

France and Germany now have pledged to work cooperatively but market participants are still uneasy about the potential for a European crisis to spill over into other regions that are still in recovery from the 2007-2008 financial crisis.

U.S. stocks sank nearly 4 percent on Thursday on fears the euro zone's efforts to tackle its sovereign debt crisis might fall short and jeopardize the global economic recovery.

Geithner said in a CNBC television interview this week that he wants to see Europe stick with agreed plans for restoring economic stability to the region.

He said it was important to keep moving on a 750-billion-euro package of loans -- from the European Union and International Monetary Fund -- to prevent the European debt crisis from spreading.

"Absolutely Europe has the capacity to manage through this. We just want to see them follow through," he said on Wednesday.

www.cnbc.com/id/37269139

[sandi66]

US-China Talks to Soothe, Not Solve Troubles

Published: Friday, 21 May 2010 | 2:04 AM ET

High-level talks between China and the United States next week will not bring big breakthroughs, but may help prevent destabilising breakdowns as the two powers grapple with North Korea and other contentious global troubles.

At their Strategic and Economic Dialogue (S&ED) next Monday and Tuesday, Washington and Beijing will trade views on political and economic strains that earlier this year tripped up ties between the world's biggest and third biggest economies.

Almost 200 Obama administration officials are flying to Beijing for the talks, led by Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner, and there will be plenty of U.S. demands jostling for China's attention, including complaints about China's trade policies and yuan exchange rate.

But the results are likely to look more like a sketchy map for avoiding trouble, not a blueprint for solving specific problems, said Shen Dingli, a professor at Fudan University in Shanghai who specialises in China-U.S. ties.

"Basically, this is a trouble-prevention system. It's about damage prevention, not about damage resolution. China won't change its positions on the yuan or North Korea or anything else because of what is said there," Shen said.

"The Strategic and Economic Dialogue is a stabilising mechanism," he added. "Each side wants to use it to shape the other's behaviour, but unless a proposal is mutually beneficial, then we can't expect it to get very far."

Iran and North Korea are likely to dominate the "strategic" half of the talks between Clinton and her Chinese counterparts, led by Dai Bingguo, a State Councillor who advises leaders and, inside the government, outranks the Foreign Minister Yang Jiechi.

Washington has long urged Beijing to do more to press these countries to curb their nuclear ambitions. South Korea's official finding that a North Korean torpedo sank its warship, the Cheonan, in late March killing 46 sailors will add to U.S. demands on China, the North's sole major backer.

Earlier this month, China hosted the North's leader, Kim Jong-il, on a visit that irritated Seoul.

"North Korea is the issue that stands out as the most contentious diplomatic issue," said Shi Yinhong, a professor of international security at Renmin University in Beijing.

"But however much they talk about it in private, China will keep public statements on North Korea to a minimum. There's only trouble for China in becoming tangled up with the Cheonan."

The meeting is ultimately about managing the broader strains accompanying China's growing economic and political weight, which has risen swiftly in the wake of the global financial crisis.

"They definitely recognize that despite their new-found prominence, they have a lot that they need to do with us," said Charles Freeman, an expert on China at the Center for Strategic and International Studies, a think-tank in Washington D.C.

"As a general rule, the Chinese don't look at these exercises as negotiating opportunities or problem-solving opportunities," he said. "They look at it as more a conceptual affair, an opportunity to talk about the big picture."

Not Entirely Aligned, Never Entirely at Odds

That the S&ED is happening at all underscores China's position that while it may be often irked by U.S. actions, it wants to avoid wide confrontation, said several analysts.

Earlier in the year, Washington's complaints about Chinese Internet censorship, U.S. weapons sales to Taiwan and President Barack Obama's meeting with the Dalai Lama drew angry counterblasts from Beijing, including threats of sanctions against U.S. companies involved in the arms sales.

Beijing has long rejected any challenging of its claims on Tibet and Taiwan. But this time the government's rancour reflected a widespread belief among the public and some officials that the United States owed China more respect that would reflect its growing economic and political stature.

From March, however, both sides moved to cool tensions, which threatened to spill over into their vital economic flows after U.S. complaints about the yuan joined the brew of disputes.

With prospects for global economic recovery leaning heavily on the United States and China, neither wants alarming fireworks.

Obama and Chinese President Hu Jintao will attend several global summits later this year, including a G20 meeting in late June, and Hu plans to make a state visit to the United States, a major diplomatic trophy for a Chinese leader.

Most recently, China backed a draft United Nations Security Council resolution to tighten sanctions on Iran, a step welcomed by Washington after months of negotiations in which Beijing stressed its misgivings about sanctions.

Despite nationalist pressures at home, China's leaders do not share the belief that the United States has lost or will soon lose global dominance, said Wang Jisi, an influential Chinese expert on the United States, in a recent lecture in Beijing.

"The agenda in China-U.S. relations is much more complex than before," said Wang, dean of the Peking University School of International Studies.

"But if you count all the issues, there is not one on which the two countries' interests are completely aligned, and there is not one on which their interests are completely at odds."

www.cnbc.com/id/37269065

[sandi66]

Wall Street Cuts Back Sharply on Political Spending

Published: Friday, 21 May 2010 | 5:19 AM ET

Major Wall Street firms sharply reduced their campaign donations to candidates for the U.S. Senate and House during April, while shifting what they did spend slightly toward Democrats.

Data filed with the Federal Election Commission ahead of a Thursday midnight deadline showed the political action committees of six Wall Street institutions — Goldman Sachs [GS 136.10 -4.00 (-2.86%) ] , Wells Fargo [WFC 28.69 -1.39 (-4.62%) ] , Bank of America [BAC 15.30 -1.01 (-6.19%) ] , Citigroup [C 3.63 -0.18 (-4.72%) ] , JPMorgan Chase [JPM 37.83 -1.55 (-3.94%) ] and Morgan Stanley [MS 25.64 -1.40 (-5.18%) ] — spending $25,500 on Republican candidates and $17,000 on Democrats.

Sixty percent of the money went to Republicans, while the remaining 40 percent went to Democrats. That was slightly narrower than the 62-38 percent margin that favored Republicans in March.

But the total was less than one-tenth of the $432,500 that the same six firms spend in March, as congressional candidates headed into a spate of spring primary elections and the Senate took an increasingly hard line on reform measures.

Embattled securities firm Goldman Sachs donated $15,000 to the Democratic Party's campaign committee for Senate candidates in April but said about $17,000 in checks to half a dozen candidates and congressional PACs went uncashed.

Following is a summary of Wall Street's latest PAC filings for April, year-to-date 2010 and full year 2009. Figures for 2009 were provided by the nonpartisan Center for Responsive Politics.

Bank Period Republicans Democrats
Goldman Sachs April $ 0 $ 0
Y-T-D 102,000 (55%) 83,500 (45%)
2009 56,000 (39%) 87,400 (61%)
Wells Fargo April $ 0 $ 0
Y-T-D 52,500 (43%) 68,500 (57%)
2009 63,500 (73%) 24,000 (27%)
Bank of America April 10,500 (51%) 10,000 (49%)
Y-T-D 86,000 (62%) 52,000 (38%)
2009 156,500 (57%) 117,500 (43%)
Citigroup April 5,000 (60%) 2,000 (40%)
Y-T-D 65,000 (71%) 27,000 (29%)
2009 159,000 (52%) 144,500 (48%)
JPMorgan April 5,000 (100%) 0 ( 0%)
Y-T-D 47,500 (59%) 32,500 (41%)
2009 36,537 (37%) 61,500 (63%)
Morgan Stanley April 5,000 (50%) 5,000 (50%)
Y-T-D 36,000 (73%) 13,000 (27%)
2009 98,500 (47%) 115,000 (53%)
Summary of Wall Street's Latest PAC Filings

www.cnbc.com/id/37270120

[sandi66]

Homegrown Hero Locke Faces Test on China Trade as Tensions Lurk

May 21 (Bloomberg) -- U.S. Commerce Secretary Gary Locke was leaving a ceremony in Shanghai this week when May Wang cornered him to get his autograph on a decade-old photo of the two of them with Locke’s wife, Mona.

Wang hoped to use that connection to persuade Locke, whose parents emigrated from China to the U.S., to let her write a biography for Chinese readers, she said moments later.

“The Chinese people are so crazy about him,” Wang said in an interview. “But we don’t have his stories.”

The relevance of Locke’s celebrity in China is being tested this week as he travels on a trade mission with executives from companies such as General Electric Co.,Duke Energy Corp. and First Solar Inc. While the visit is aimed at promoting American exports of clean-energy technology, Locke, 60, also has to tackle festering trans-Pacific tensions over China’s currency and trade policies.

It’s a change for Locke, whose encounters with his ancestral homeland were all about boosting U.S. exports when he was the Democratic governor of Washington state from 1997 to 2005, and when he was a private lawyer before joining President Barack Obama’s administration last year.

“He is learning China in a national way now,” Robert Kapp, the former president of the Washington-based U.S.-China Business Council and a consultant in Port Townsend, Washington, said in an interview.

Locke says his experience in China and his heritage help him in his push to promote American businesses and break down barriers to investment.

‘Raise the Issues’

“It gives me the ability to meet with more people at a higher level, so that I can raise the issues of concern,” he said May 14 in a Washington interview before heading to China.

U.S. companies and labor unions such as the United Steelworkers say they’re watching to see if Locke will be tough on issues from opening China’s markets to imposing tariffs on its exports -- despite or because of his popularity in China.

Papermaker NewPage Corp. of Miamisburg, Ohio, is pressing Locke for higher duties on imports from Chinese competitors to compensate for the advantage NewPage says they get from a weak Chinese currency.

“China’s government and exporters are being told we are fed up with their cheating on our fair trade laws,” United Steelworkers President Leo Gerard said last month when the department approved duties on imported Chinese steel pipes.

Using tariffs might be more important than the Treasury Department dubbing China a currency manipulator, as sought by lawmakers, because it would mean protection for American producers, said Michelle Applebaum, who runs a steel-research firm in Highland Park, Illinois. “This could be a meaningful support for struggling American companies,” she said.

Pressure From China

Locke simultaneously is facing demands from his Chinese counterparts to end restrictions on U.S. exports of civilian technology with military applications, and to cut back on duties in dumping cases filed against Chinese products. The Commerce Department adjudicates dumping cases.

In a meeting yesterday with Locke, Chinese Vice Minister of Commerce Ma Xiuhong complained about U.S. export controls and barriers for Chinese companies to invest in the U.S., a senior Commerce Department official said. He declined to be identified when discussing a private meeting.

If personal popularity can ease tensions, Locke’s trip to China suggests he may meet the test. A Hong Kong interviewer asked him if he would run for president. (No, he said.) A television interviewer in Shanghai asked for a photo memento, for her and each of the crew.

“You are my hero,” Qi Ye, deputy director of the China Sustainable Energy Program in Beijing, told Locke at a luncheon in Beijing yesterday.

Being With Bono

Last October, during a visit to the opening of a Sam’s Club in his family’s native Guangdong province, onlookers rushed Locke’s delegation. Staff members formed a wall to extricate him from the fans.

“The only thing I could liken it to, is being with Bono” of the rock group U2, Jon Huntsman, the U.S. ambassador to China who accompanied Locke on the October trip, said in an interview.

Locke’s grandfather immigrated from a village near Jiangmen city to Washington state more than a century ago, to work as a servant in exchange for English lessons. Locke’s parents were born in China too. Locke spoke a local dialect of Taishanese at home, and didn’t begin English lessons until he went to preschool in Seattle.

Yale, Boston

When he was 10, Locke’s family took him to see his grandmother, who had fled China and lived in a Hong Kong refugee camp. The family’s plan to leave him with the grandmother was abandoned when he became homesick and persuaded his parents to send him back to the U.S., he said.

Almost four decades later, after stops at Yale University and Boston University law school, Locke returned to China as Washington’s governor.

Jiang Zemin, China’s president at the time, broke protocol and asked the governor to come for a visit. His tour drew crowds at each stop, and led to newspaper photo spreads and local television coverage, Joe Borich, executive director of the Washington State China Relations Council, said in an interview.

“The only thing comparable I have seen” is when then- president Bill Clinton visited, said Borich, who accompanied Locke and was a Foreign Service officer in China for more than a decade.

As a private lawyer in 2006, after his gubernatorial term ended, Locke decided to lure current China President Hu Jintao to Seattle during his planned U.S. visit.

Dinner With Bill

When China’s State Councilor Tang Jiaxuan came to the U.S. to scout venues, Locke organized a dinner at a penthouse in the city’s tallest building, the Columbia Center, he recalled in the interview.

As they looked out over Elliot Bay at the distant Olympic Mountains on a rare, clear Seattle dusk, Locke said he pledged to have Microsoft Corp. Chairman Bill Gates host a dinner at Gates’s home if Hu would visit.

He just needed to work out one detail: “I hadn’t gotten Bill to agree to host him,” Locke said.

Gates did, and with his wife, Melinda, greeted Hu at their lodge-style estate overlooking Lake Washington, where they served smoked guinea fowl, Washington-grown asparagus and Alaskan halibut.

“Because you, Mr. Bill Gates, are a friend of China, I’m a friend of Microsoft,” Hu told Gates during the Seattle visit.

Before Hu arrived, China agreed to require computer makers to load legal software on new machines, helping unlock a $3 billion market for Microsoft. Days later, the maker of Windows software announced a $3.7 billion investment in China.

Victories like that are possible, Locke says.

“We have incredible opportunities for our companies with world-leading technology,” he said. “This is an extension of what I did as governor.”

To contact the reporter on this story: Mark Drajem in Beijing at [e-mail].

Last Updated: May 20, 2010 18:53 EDT

www.bloomberg.com/apps/news?pid=20601087&sid=agQ3lrIw_ZUI&pos=7

[sandi66]

24 Experts Warn Of Meltdown 2010 : Martial Law : Economic Collapse


Bob Chapman (ALSO: Germany Is Headed Towards Rioting)
First 6 months of 2010, Americans will continue to live in the 'unreality'…the period between July and October is when the financial fireworks will begin.
· The FED will act unilaterally for its own survival irrespective of any political implications …(source is from insider at FED meetings).
· In the last quarter of the year we could even see Martial Law, which is more likely for the first 6 months of 2011.
· The FDIC will collapse in September 2010.
· Commercial real estate is set to implode in 2010.
· Wall Street believes there is a 100% chance of crash in bond market, especially municipals sometime during 2010.
· The dollar will be devalued by the end of 2010.

Link:
www.abovetopsecret.com/forum/thread573315/pg1

[sandi66]

Provisions of House, Senate financial reform bills
By The Associated Press (AP) – 4 hours ago

Comparison of Senate and House financial regulation bills:

___

OVERSIGHT

_Senate: Creates a nine-member Financial Services Oversight Council made up of the treasury secretary, Federal Reserve chairman, a presidential appointee with insurance expertise, heads of regulatory agencies and a new consumer protection bureau that would monitor financial markets and watch for threats.

_House: Creates an 11-member council with similar duties.

___

CONSUMER PROTECTION

_Senate: Creates a Consumer Financial Protection Bureau within the Federal Reserve to police lending, taking powers now exercised by various bank regulators. Those regulators could appeal bureau regulations to the oversight council, which could veto the regulations with a two-thirds vote. Federal regulators could override state consumer laws on a case-by-case basis. Currently states have a more difficult time applying their laws to national banks. Excludes from oversight any small business that does not engage in financial services.

_House: Creates a stand-alone Consumer Financial Protection Agency to police lending. There's no process to veto agency regulations. State law provision is similar to Senate's. Specifically excludes from agency oversight real estate brokers and agents, accountants and tax preparers and auto dealers.

___

FEDERAL RESERVE

_Senate: The Federal Reserve would retain supervision over bank-holding companies and state-charted banks. It also would police large, interconnected nonbank institutions that the oversight council determines could pose a threat to the economy. With council approval, the Fed could break up large, complex companies that pose a grave threat to the financial system. The Government Accountability Office, Congress' investigative arm, would conduct a one-time examination of the Fed's emergency lending to financial institutions in the months surrounding the 2008 financial crisis.

_House: The Federal Reserve would lose consumer protection regulation authority and ability to unilaterally inject money into financial institutions. The GAO would be given broader power to conduct audits of the Fed.

___

CAPITAL STANDARDS

Senate: Banks with more than $250 billion in assets would have to meet capital standards at least as strict as those that apply to smaller banks. Banks would not be able to include as top tier capital certain securities that are tax deductible subordinated debt.

House: Any large bank holding company identified as posing a potential risk to the economy would be required to put up additional capital — more money and assets on hand. In computing capital requirements, regulators would include a bank's off-balance sheet activities, such as trusts held for clients. These companies also would face a leverage cap of 15-1 debt-to-net capital ratio.

___

DERIVATIVES

_Senate: Trades of derivatives, the complicated financial instruments blamed for accelerating the Wall Street crisis, would have to take place in regulated exchanges. Banks would have to spin off all their derivatives business into subsidiaries.

_House: Also regulates derivatives, but contains more exceptions for corporations that use derivatives as a hedge against price fluctuations, not as a speculative investment. The House does not require banks to spin off their derivatives business.

___

BANK RESTRICTIONS

_Senate: Regulators would devise rules to prohibit bank holding companies with commercial bank operations from speculative trading with their own accounts. Large, interconnected companies would have to put more money in reserve.

_House: The oversight council may prohibit any activity, including speculative trading by commercial banks with their own accounts, if it finds that the activity could threaten the stability of the financial system. Large, interconnected companies would have to put more money in their reserves.

___

EXECUTIVE PAY

_Senate: Shareholders would have the right to cast nonbinding votes on executive pay packages. The Fed would set standards on excessive compensation that would be deemed an unsafe and unsound practice for the bank.

_House: Shareholders would have the same right. Regulators would have a say on compensation practices, not on pay itself.

___

RATINGS AGENCIES

_Senate: An independent board would select ratings agencies to assess the risks of new financial products, replacing a long-standing practice where banks select and pay ratings agencies to rate their new offerings. The bill would also require a wholesale re-evaluation on how the government uses ratings agencies to assess risk. Ratings agencies are blamed for giving too high ratings to bad mortgage-related securities.

_House: Ratings agencies would have to register with the Securities and Exchange Commission and would face increased liability standards.

MORTGAGE LOANS

Senate: Lenders would be required to obtain proof from borrowers that they can pay for their mortgages. The would have to provide evidence of their income, either though tax returns, payroll receipts or bank documents. That provision seeks to eliminate so-called stated-income loans where borrowers offered no proof of their ability to make mortgage payments.

House: Similar provision.

www.google.com/hostednews/ap/article/ALeqM5gFeHiLFDhDYT42EYM0b2BwyK9rrQD9FR3EL00

[sandi66]

Whatever Germany does, the euro as we know it is dead

Angela Merkel's ban on short-selling is just a distraction from the horror to come

Published: 7:56PM BST 20 May 2010

For Angela Merkel, leader of the eurozone's richest country, a queue is forming of high-quality adversaries. As she tips German Geld und Gut into the furnace of a rescue package for the euro, while going it alone in a misguided ban on market "manipulators", the brass-neck Chancellor has infuriated domestic voters, angered her EU partners (in particular the French) and invited the so-called wolf pack of global traders to do its worst.

In one respect, Mrs Merkel is right: "The euro is in danger… if the euro fails, then Europe fails." What she has not yet admitted publicly is that the main cause of the single currency's peril appears beyond her control and therefore her impetuous response to its crisis of confidence is doomed to fail.

The euro has many flaws, but its weakest link is Greece, whose fundamental problem is that for years it spent too much, earned too little and plugged the gap by borrowing in order to enjoy a rich man's lifestyle. It flouted EU rules on the limits to budget deficits; its national accounts were a moussaka of minced statistics, topped with a cheesy sauce of jiggery-pokery.

By any legitimate measure, Greece was unworthy of eurozone membership. That it achieved card-carrying status was down to the sleight-of-hand skills of its Brussels fixers and the acquiescence of central bank bean-counters. Now we know the truth, jet-hosing it with yet more debt makes no sense. Another dose of funny money will delay but not extinguish the need for austerity.

This is why the euro, in its current form, is finished. The game is up for a monetary union that was meant to bolt together work-and-save citizens in northern Europe with the party animals of Club Med. No amount of pit props from Berlin can save the euro Mk I from collapsing under the weight of its structural dysfunctionality. You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.

What was once deemed unthinkable is now, I believe, inevitable: withdrawal from the eurozone of one or more of its member countries. At the bottom end, Greece and Portugal are favourites to be forced out through weakness. At the top end, proposals are already being floated in the Frankfurt press for a new "hard currency" zone, led by Germany, Austria and the Benelux countries. Either way, rich and poor are heading in opposite directions.

When asked on Sky if, in five years' time, the euro will have the same make-up as it does today, Jeremy Stretch, a currency analyst at Rabobank, the Dutch financial services giant, told me: "I think it's pretty unlikely." The euro was a boom-time construct. In the biggest bust for 80 years, it is falling apart.

Telegraph loyalists with long memories will be shocked by none of this. In 1996, Sir Martin Jacomb, then chairman of the Prudential, set out with great prescience in two pieces for The Sunday Telegraph why a European single currency, without full political integration, would end in disaster. His prognosis of the ailments that might afflict the eurozone's sickliest constituents reads as if it was penned to sum up today's turmoil.

"A country which does not handle its public finances prudently will find its long-term borrowing costs adjusted accordingly," Sir Martin predicted. "Although theory says that default is unlikely, nevertheless, a country that spends too much public money, and allows its wage costs to become uncompetitive, will experience rising unemployment and falling economic activity. The social costs may become impossible to bear."

Welcome to the headaches of George Papandreou. The bond markets called his country's bluff. Greece is skint, but its unions don't want to admit it. There is insufficient political will to tackle incompetence and corruption, never mind unaffordable state spending. But, locked into the euro, Greece cannot devalue its way out of trouble, so it relies on the kindness of strangers.

Dishing out German largesse to profligate Athens, with little expectation of a reasonable return, is a sure way for Mrs Merkel to join Gordon Brown as a political has-been. Fully aware of the revulsion felt by Mercedes and BMW employees at the prospect of their taxes being used to pay for a Hellenic car crash, she has resorted to creating a bogeyman – The Speculator.

By announcing a ban on the activities of short-sellers (those who bet to profit from falling prices in financial markets), she is hoping her decoy will avert German attention from the small print of Berlin's support for Greece, which talks of developing processes for "an orderly state insolvency". This sounds ominously like a softening-up process for a form of default.

Greece's severe difficulties were home-made. The euro has come under pressure not from dark forces of speculation but respectable investors, many of them traditional pension funds, which, quite correctly, worked out that when the crunch came, the Brussels elite would sanction an abandonment of its no bail-out rule and cough up for a messy fudge.

In 1990, the late Lord Ridley, when still a government minister, caused a storm by telling The Spectator that Europe's planned monetary union was "a German racket designed to take over the whole of Europe". One knew what he was getting at, but it has not turned out that way.

Protecting the euro has become a project via which profligate states dip their fingers in Berlin's till. Germany is taking on nasty obligations without gaining ownership of the assets. Germany's version of The Sun, Bild Zeitung, feeds its readers a regular diet of stories about the way ordinary Germans are being taken for mugs. Trust has turned to suspicion. Next stop is divorce.

As for the United Kingdom, we must be grateful that those frightfully clever Europhiles, such as Lord Mandelson and Kenneth Clarke, did not get their way. Had they been able to scrap the pound and embrace the euro this country would be even closer to ruin. Without a flexible currency, the colossal deficit clocked up by Mr Brown would have crushed us completely. We have little to thank him for, but it would be churlish to deny that his decision to reject Tony Blair's blandishments in favour of the euro was a life-saver.

Sterling's devaluation has not been pretty, but it is helping to keep our exports competitive while the coalition Government begins rebuilding the nation's finances. Siren voices from across the Channel, calling for closer integration between Britain and the rest of the EU, can be confidently rejected. As for joining the euro, I find it impossible to imagine any circumstances under which it would be in the UK's interest to do so.

www.telegraph.co.uk/finance/comment/jeffrandall/7746806/Whatever-Germany-does-the-euro-as-we-know-it-is-dead.html


ty nalmann

[sandi66]

US FDIC says reaches settlement on WaMu bankruptcy

WASHINGTON, May 21 (Reuters) - Washington Mutual Inc (WAMUQ.PK) and the Federal Deposit Insurance Corp have reached a global settlement, a critical step in the bankruptcy involving the biggest bank failure in U.S. history.

The FDIC said on Friday the agreement settles claims between the bankrupt bank's holding company and JPMorgan Chase (JPM.N), which acquired the failed bank.

The FDIC is involved because it was appointed receiver of Washington Mutual in September 2008, during the height of the financial crisis.

"This agreement will result in substantial recoveries to the receiver and resolve potential claims that could have taken years and millions of dollars to litigate," FDIC General Counsel Michael Bradfield said in a statement.

The settlement is subject to the approval of the U.S. Bankruptcy Court for the District of Delaware.

The settlement could clear the way for Washington Mutual to reorganize as a mortgage insurer and investment company with valuable tax breaks.

The company plans to sell shares to fund its exit from bankruptcy and reorganization.

www.reuters.com/article/idUSN2121139920100521

[sandi66]

(WAMUQ.PK) Washington Mutual Inc. Files Revised Plan of Reorganization and Disclosure Statement with Support of FDIC and JPMorgan Chase

MAY 22, 2010, 12:21 A.M. ET

Washington Mutual, Inc. Files Revised Plan of Reorganization and Disclosure Statement with Support of FDIC and JPMorgan Chase

SEATTLE--(BUSINESS WIRE)--May 22, 2010-- Washington Mutual, Inc. (Pink Sheets: WAMUQ.PK) ("WMI" or the "Company") today announced that it has filed with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") an Amended Plan of Reorganization (the "Plan") and Disclosure Statement (the "Disclosure Statement"). The Plan implements and incorporates the terms of a revised global settlement agreement (the "Settlement") reached among WMI, the Federal Deposit Insurance Corporation ("FDIC") and JPMorgan Chase Bank, N.A. (NYSE: JPM) ("JPMC").

The terms of Settlement were first announced on March 12, 2010. The terms of Settlement were subsequently modified as reflected in filings with the Bankruptcy Court on each of March 26, 2010 and May 16, 2010, and additional modifications are reflected in the Plan and Disclosure Statement filed today with the Bankruptcy Court. WMI noted that the Plan Disclosure Statement, and the Settlement were filed with the full support of the FDIC, JPMC and the Official Committee of Unsecured Creditors, which was appointed by the Bankruptcy Court.

WMI commented:

"WMI is pleased to have reached an agreement with the FDIC and JPMC, and we appreciate the strong support of the Creditors' Committee. WMI has worked diligently over the last 20 months to maximize the value of the bankruptcy estate and is confident that the Amended Plan will accomplish the objective of providing substantial recoveries for WMI's creditors."

As previously announced, the Plan under which the Settlement will be implemented contemplates, among other things:

-- WMI will establish a liquidating trust to make distributions to creditors on account of their allowed claims. In accordance with the terms of the Plan, the trust will distribute funds in excess of approximately $7 billion, including approximately $4 billion of previously disputed funds on deposit with JPMC. -- It is anticipated that the reorganized WMI will undertake a rights offering pursuant to which certain creditors will receive a right to purchase newly issued shares of reorganized WMI common stock. The reorganized WMI will retain equity interests in WMI Investment Corp. and WM Mortgage Reinsurance Company. -- JPMC will assume certain liabilities related to benefit plans (including the pension plan sponsored by WMI). -- The various litigations involving WMI, JPMC and FDIC will be stayed or dismissed. In addition, JPMC and the FDIC (in its capacity as receiver of Washington Mutual Bank and in its corporate capacity) will withdraw claims against WMI's bankruptcy estate and the parties will exchange mutual releases. -- Preferred and common equity securities previously issued by WMI will be cancelled. The Bankruptcy Court will hold a hearing on June 3, 2010 to consider approval of the Disclosure Statement. Following approval of the Disclosure Statement, WMI will ask the Bankruptcy Court to confirm the Plan by July 20, 2010.

WMI's Plan and Disclosure Statement, as well as the Settlement annexed to the Plan, are available at www.kccllc.net/wamu. The Plan is subject to confirmation by the Court. This press release is not intended as a solicitation for a vote on the Plan.

The Disclosure Statement filed today contains historical information regarding WMI and certain of its affiliates, a description of proposed distributions to creditors, an analysis of the Plan's feasibility, as well as many of the technical matters required for the solicitation process, such as descriptions of who will be eligible to vote on the Plan and the voting process itself.

online.wsj.com/article/BT-CO-20100522-700066.html?mod=WSJ_latestheadlines

[sandi66]

Wanted: 500 Extra Police Officers For G20 Summit
'Bombing, obviously, spooked people'

Adrian Humphreys and Kenyon Wallace, National Post
Published: Saturday, May 22, 2010


Toronto's G20 Summit organizers have renewed a call to bolster police ranks by 500 officers after a Royal Bank of Canada branch in Ottawa was firebombed by anarchists this week, the National Post has learned.

"The bombing, obviously, spooked people," said a Montreal police officer who asked for anonymity.

Officers from that city's force, and others, were told they could book their vacations during the summit dates and earn double-time pay while working 12-hour shifts for nine days straight in the days leading up to and during the summit.

The request suggests that Toronto can expect to see a heavy police presence long before dignitaries start arriving in motorcades.

Montreal police have experience in crowd control, having been called to provide security to major events in the past, most notably the 2001 Summit of the Americas in Quebec City.

Officers from out of town would have all travel expenses and room and board paid for, and would not be expected to be on the front lines as many are unable to bring their riot gear with them.

"It's a good deal for us," said an officer. "We'll make some good money."

The National Post has also learned that GTA forces have suspended approval of all new leave and vacation requests during the summit and police brass warned its officers they are "releasable" from all other case work should they be needed.

Another call to sign up officers went out after the firebombing of an RBC branch in Ottawa on Tuesday morning. After the attack, a group identifying itself only as FCCC-Ottawa posted an online video threatening to appear at the G20 summit in Toronto and the G8 summit near Huntsville next month.

Meaghan Gray, a spokeswoman for the G20 Integrated Security Unit, acknowledged that organizers have requested support from police forces across the country, but said she wasn't aware of any specific request brought on by Tuesday's firebombing.

"These arrangements have been underway for quite some time, well before any one specific incident," she said, noting that officers specially trained in crowd control are of particular interest.

www.nationalpost.com/news/canada/toronto/story.html?id=3060931

[sandi66]

Financial reform bills likely to be reconciled - House and Senate versions are 'very close to each other,' chair of banking committee says.

By Rick Rothacker and Barbara Barrett

Posted: Saturday, May. 22, 2010


Consumer advocates on Friday praised a sweeping financial reform bill passed by the Senate, while analysts warned the legislation could trim bank profits and squeeze consumer lending, potentially hurting the economic recovery.

The legislation, approved Thursday by a 59-39 vote, now needs to be reconciled with a House version passed in December. After a White House meeting Friday, the lead negotiators predicted President Barack Obama will sign the legislation into law by July 4.

"The two bills really are very close to each other," Senate Banking Committee chairman Chris Dodd, D-Conn., told reporters after the meeting. "There's not a great deal of difference."

Charlotte Rep. Mel Watt, a top Democrat on the House Financial Services Committee, said he hopes to be part of the committee that hashes out the final version of the bill.

The overhaul is designed to prevent the type of crisis that waylaid big banks and the economy in 2008, leading to the collapse of firms such as Bear Stearns Cos., the sale of Wachovia Corp. and a major bailout for Bank of America Corp.

After weeks of uncertainty about the legislation, bank stocks climbed on Friday after a recent slump. Bank of America shares rose 4.5 percent to $15.99, while Wells Fargo & Co. shares increased nearly 5 percent to $30.11.

Among major provisions are the creation of a new agency that would monitor consumer financial products, requirements that complex financial instruments called derivatives be traded on exchanges, prohibitions against trading with a bank's own capital and procedures for winding down failing complex institutions.

"This is a major victory for American families and small businesses, and it should help us regain trust in a financial system that's been badly broken," the Durham-based Center for Responsible Lending said in an e-mail to supporters.

But analysts with research firm CreditSights said the bill reduces the profit potential for banks in consumer lending activities such as mortgages and credit cards. That might have the unintended consequence of reducing available credit to borrowers, the firm said.

"U.S. banks remain under severe pressure from regulatory and legislative changes that threaten the basic profits equation for the industry," said the CreditSights report.

Watered-down provisions?

In the reconciliation process, some provisions objectionable to the banking industry may be watered down, according to a report issued by analysts with BernsteinResearch and McBee Strategic consulting firm. The firms expected the consumer protection agency to be preserved but some derivatives provisions to be weakened or removed. The analysts expected the bill signed by the president will include some form of the "Volcker rule," which would prevent banks from trading with their own money and sponsoring hedge funds and private-equity funds.

A spokesman for Charlotte-based Bank of America, the nation's biggest bank, declined comment on the Senate bill's passage. Bank of America CEO Brian Moynihan, who dined at the White House this week, has largely expressed support for increased regulation, including creation of a consumer financial protection agency.

Bank of America has previously said the bank's business model focuses on serving customers and clients and it has been reducing risk since the financial crisis occurred. The bank has said it has ended or curtailed products such as derivatives and private-equity investments that are not part of a client banking relationship.

Wells Fargo, which bought Charlotte's Wachovia at the end of 2008, said it was too early to comment on how the bill would affect it. "However, it's important to note that Wells Fargo is for the customer and consumer protections," spokeswoman Julia Tunis Bernard said. "We believe reforms should give customers the best protection, should be uniform national standards and should apply to all providers of financial services."

Wells Fargo has said so-called proprietary trading is a "non-issue" for the bank. But CEO John Stumpf has said he does not support a standalone consumer protection regulator, preferring that current regulators handle those tasks.

Both banks have spent heavily on lobbying as Congress has weighed the new legislation. In the first quarter of the year, Wells spent $1.2 million on lobbying, while Bank of America tallied $1.1 million, according to filings with the U.S. Senate. The totals include lobbying by firms hired by the banks. In the fourth quarter of last year, Wells spent $160,000, while Bank of America spent $1.2 million.

Watt wants to work on bill

Watt, chair of a subcommittee of the House Financial Services Committee, said he would like a role in meshing the two bills, although he expects it to be difficult work.

Along with U.S. Rep. Brad Miller of Raleigh, he wrote the predatory lending language that passed as part of the House financial reform package. He also has been heavily involved in figuring out which regulations in the reform package would pre-empt state laws, and in providing transparency to the derivatives market.

And as a member of the Congressional Black Caucus, Watt said he wants to make sure some provisions - such as a focus on diversity in the regulatory agencies - remain in the combined bill.

He also wants to stay abreast of issues affecting the hometown banking industry. "I don't know whether (the reform bill) helps or hurts Bank of America," Watt said. "They're so tied in with our economy, and the world economy in fact, that if they failed they would set off shock waves throughout the entire system. This bill deals with setting up a new framework for dealing with too-big-to-fail."

U.S. Sen. Richard Burr, R-N.C., who voted against the reform bill, said before the vote Thursday that it was "worse policy than health care reform."

He said the bill would hurt small businesses such as orthodontists who offer extended payment plans to consumers by putting them under the consumer regulatory agency. And he criticized the agency's authority over a broad spectrum of financial transactions, saying he fears infringing on consumers' privacy. "The consumer protection component is way too broad and has no authority over it," Burr said.

U.S. Sen. Kay Hagan, D-N.C., voted for the Senate bill and praised it for bringing "commonsense and substantive reform to the financial industry to protect taxpayers on Main Street."

She said Republicans blocked a provision she authored that would have placed limitations on the payday lending industry. She plans to continue to push that legislation as a standalone bill. Bloomberg News contributed.

www.charlotteobserver.com/2010/05/22/1450787/financial-reform-bills-likely.html

[sandi66]

* Interesting Day Next Tues. (May 25th)

Posted by Fred Wilson on May 19, 2010 under Dinar Daddy Tidbits

Next week Tues. May 25th -

Indicating that on the twenty-fifth of this month will be the last government’s days in the absence of new government we have entered into a constitutional vacuum is real and thus should be enacted in this article to avoid a constitutional vacuum until the formation of the government.

Noting that “the Constitution permits the President as prime minister in addition to his position as President of the Republic in case of any reason, and we do not mind that in the event of the expiration of the mandate of the present government or the inability of the political blocs to form the House of Representatives next to the pending agreement to form a national government that includes the collection components.


LINK

State of Law extends the work of leadership committee for ten days
The work of the leadership body which includes fourteen members, responsible for developing mechanisms to select the next Iraqi PM is extended for ten days ( posted today May 18 )

LINK

Here are the next official steps and constitutional deadlines as Iraq’s fledgling democracy crawls toward establishing its next government:

* The Independent High Electoral Commission said it would publish the preliminary results on Monday and objectors would have three days to file complaints before the results could be sent to a court for final certification.

* The supreme court has no deadline for certifying the results but election officials said they did not expect a long delay. The court has been considering the results from 17 other provinces, excluding Baghdad, for several days already.

* President Jalal Talabani must call on the new parliament to convene within 15 days from the date of the certification of the election results.

* The oldest member of the Council of Representatives chairs the first session, in which members have a maximum of 15 days to elect a speaker and two deputies.

* The council elects a new president within 30 days of its first session.

* The new president has 15 days to ask the largest bloc in parliament to try to form a government and choose a prime minister.

* The prime minister-designate must form a governing coalition and name a cabinet, or Council of Ministers, within 30 days. * If the prime minister-designate fails to pick a cabinet in the required time, the president has 15 days to nominate someone else to try to form a government.

* The new prime minister designate has 30 days to try to form a governing coalition and council of ministers.

* A new government is deemed to have been formed when a prime minister’s cabinet nominees and their programmes win the approval of an absolute majority of the members of the Council of Representatives, or parliament.


LINK
BAGHDAD / Aswat al-Iraq: The Council of Ministers decided on Tuesday during its last session to implement the agreement between the oil ministry and the Kurdistan region to export crude oil extracted from the region, the official spokesman for the Iraqi government said.( posted May 18 )

LINK

We cannot forget Iraq’s Parliament Recess will begin around July!

Hang onto your seat it looks like next Tuesday will certainly be an interesting day.

iraqidinarnews.net/2010/05/19/interesting-day-next-tues-may-25th/

[sandi66]

MEP Muscardini Files a Glass-Steagall Resolution in European Parliament

May 22, 2010 (LPAC)—On May 17, Cristiana Muscardini, Deputy Chairman of the International Trade Committee in the European Parliament, filed a resolution to be voted on in the European Parliament. The resolution is entitled "On the Advisability of Re-Establishing the Principles of the 'Glass-Steagall Act' in the New Rules To Be Defined To Overcome the Systemic Financial Crisis." It reads:

"The European Parliament, considering the various meetings of the Ecofin and Eurozone member countries to confront the crisis of the euro, which since January has lost 14% of its value with respect to the U.S. dollar, considering the previous resolutions on the financial crisis and the need to define new rules to avoid the growth of speculative bubbles,

"A. Considering the function played in the U.S.A. in 1933 by the 'Glass-Steagall Act,' which in the midst of the 'Great Depression' protected banking deposits from speculation;

"B. Considering the amendment filed in the U.S. Senate last May 6 by Democratic Sen. Maria Cantwell and Republican Sen. John McCain, as an amendment to President Obama's financial reform introduced by Sen. Chris Dodd, modeled after the Glass-Steagall legislation that separated commercial banks from investment banks, preventing the latter from using taxpayer money;

"C. Considering the inadvisability of bailing out bankrupt banking operations with taxpayer money;

"Invites the Council and the Commission

"1. To consider the advisability of referring to the principles of the 'Glass-Steagall Act' in defining new rules to overcome the systemic financial crisis;

"2. To propose initiatives to reduce the excessive expansion of virtual money and to favor actions aimed at fostering investment for development, the only type of investment that produces real wealth and that can actually contribute to reducing debt."

www.larouchepac.com/node/14558



ty coladaking

[sandi66]

This is the End of RICO and the US Global Financial Systems

Sunday, 23 May 2010 08:39

Written by Tommy Tucci

Philadelphia, PA May 19, 2010.......The Senate passes the Wall Street Reform Bill (S. 3217) by a 59-39 vote. If this artificial reform bill is passed by the House, gangbanksters will get permanent and unlimited rigged Reverse Pyramid bailout authority from the private monolithic bank cartel corporation Federal Reserve. Reverse Pyramids are methodology operated in the grand looting theft of labor property and hard assets, instantaneously not over multiple decades. [source] Senate Passes Reform Bill

The End of RICO

This is the end of RICO and the US Financial Systems engineered by identical corrupt manipulators that helped broker the final compromise language on financial deregulation and repeal of Glass-Steagall Act -.........RICO No: not the stereotype RICO Hollywood fiction created in the 1920's..... The RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT. [source] by Global Research

The US financial and economic demise actually guarantees continued freefall downward slide and ultimate collapse with passing of Reform Bill 3217 into a TALF, TARP, TIFF, PPIP 'To Big To Fail" bailouts black hole of no return. Banking Barons will continue Naked CDS activities the primary manufacture for 2008 global equity collapse and the ultimate illegal bailout reverse pyramid of debt. [source] "Germany Bans Naked selling in Euro-Zone against Zombie Bankers."

Gangbanksters Prevail Park Avenue Parasites Party

Mainstream media, TV, editors, columnists, corrupt bureaucratic apparatus, cavalier academics, word smiths, publishers, and crony Wall Street gangBanksters continue communicating every cause and effect of this demise with no solutions. Operating the greatest pyramid theft of labor property and assets in recorded history simultaneously diverting hidden rigged criminal markets by focusing attention to the distraction and diversion of a Mr. Carlo Ponzi brand. The counterfactual and manufactured brand myth that Mr. Carlo Ponzi is the patent innovator, inventor, of unique one of a kind schemes and financial scams and is the parallel cause of global systemic financial collapse. The anathema Mr. Carlo Ponzi a weak uneducated Italian immigrant who dared to imitate pyramid scams by the over represented financial manipulators of that era, paid for his crime with a jail sentence and died in abject poverty.

Driving US Economy Forward By Looking In Rear View Mirror

The so called santimonous guardians of the US Constitution 'We The People' by their actions and tenor perpetuate global demise that is interrelated to; daily stereotyping, rigged markets, character assassinations, distortions, hidden and counterfactual historical events, crimes against humanity, illegal war malitarism genocides, brutal occupations for theft of other nations natural resources, environmental catastrophe, distractions, myths, double speak, diversions, deflection, and propaganda conditioning. The latest blatant example is Wall Street Reform Bill S-3217.

Solutions For Ultimate Global Collapse

The solution for the world's global victims daily illegal rigged financial pyramid market transactions is RICO, not the stereotype RICO Hollywood fiction created in the 1920's but the RICO STATUTE US CODE TITLE 18 - RICO LAWS.

The US Department of Justice deflection of Reform Bill S-3217 ignors and eliminates the commensurate filing of criminal and criminal conspiracy charges against the perpetrators of US financial calamity including "Where's The Money Madoff", "Bonus Baby Distraction AIG", "Reverse Robin Hoods Goldman Sad Sachs" "Old School Pyramid Scams BofA Citi Corp JP Morgan/Chase" "Reverse Pyramid Scams Wall Street Hedge Funds", "New York Stock Pyramid Exchange" the "21st Century Reverse Scams Federal Reserve" and more.

Conclusion

21st Century America at the greatest apogee of collapse with show trials of civil vs criminal charges against rigged financial markets, and passing artificial Congressional show reform legislation. "Goodbye America" by Occidental Observer. At no time have there been books published, academics, university educators, mainstream media, spectacular lazy intellect Hollywood, TV specials, internet articles associating, stereotyping, or branding epic Wall Street GREAT CRIME scam artists supreme. The Reverse Robin Hoods Merry Men; highlighting, focusing, filing criminal conspiracy charges, or associating their name to notorious swindles, spies, warmongers, gangsters, drug or arms traffickers. The apex of corrupt criminal bureaucrats colluding with Wall Street manipulators actions speak for themselves. Devoid and demonstrating the totality of any self dignity class and humanity influencing illegal public welfare policy, pyramid market schemes, illegally rigged manipulated controlled Wall Street, zombie government policy, crime against humanity, zombie banking, or the collapsing financial systems.

Confirming the total apex travesty of US Constitution Laws, Bill of Rights, International Human Rights Laws, Magna Carta, Habeas Corpus, to the detriment of 'We The People.' The current operators of massive “Pyramid Schemes” “Reverse Pyramid” scams continue their great crimes with assistance from government bureaucratic apparatus, policy stimulus bailouts, mythology, mainstream media distractions, diversions, Hollywood lazy intellect, cavalier academic shills, and rigged corrupt controlled markets.

Not one person or entity has been held accountable or charged on Rico Statute to date.

The world's victims will not witness either relief or accountability from the RICO STATUTE - RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT , nor reinstatement of Glass Steagall Act imposed by the US Department of Justice.

RICO HAS NOT BEEN SEEN OR HEARD THIS IS THE END OF RICO!

Author's website: 21stcenturyreversepyramid.blogspot.com/

Editor's note:

RICO should be used to go after the perpetrators of financial fraud and manipulation.

The text of the Legislation can be consulted by clicking below

CHAPTER 96: RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT

"The Racketeer Influenced and Corrupt Organizations Act (commonly referred to as RICO Act or RICO) is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. RICO was enacted by section 901(a) of the Organized Crime Control Act of 1970 (Pub.L. 91-452, 84 Stat. 922, enacted October 15, 1970). RICO is codified as Chapter 96 of Title 18 of the United States Code, 18 U.S.C. § 1961–1968. While its intended use was to prosecute the Mafia as well as others who were actively engaged in organized crime, its application has been more widespread.

It has been speculated that the name and acronym were selected in a sly reference to the movie Little Caesar, which featured a notorious gangster named Rico. The original drafter of the bill, G. Robert Blakey, refused to confirm or deny this."[1]
# # #

australia.to/2010/index.php?option=com_content&view=article&id=2917:this-is-the-end-of-rico-and-the-us-global-financial-systems&catid=73:oped&Itemid=165

[sandi66]

New battle lines are drawn on financial overhaul as derivatives, trading issues must be reconcile


Saturday, May 22, 2010

Nearly a year after President Obama laid out an 85-page wish list for reining in risk-taking on Wall Street, both chambers of Congress have delivered bills that hew closely to his outline. Key Democrats vowed Friday to protect the measures' core provisions against a final offensive by financial industry lobbyists.

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Crucial differences between the two bills must be resolved in a House-Senate conference committee, which is expected to begin meeting soon after the Memorial Day recess.

The financial industry is gearing up for a major battle over provisions in the Senate bill that would force some of the nation's largest banks to give up a multibillion-dollar business in derivatives trading and could restrict the trades they make with their own funds.

Democratic leaders declined Friday to forecast the fate of those provisions. But whether they are weakened or removed, lawmakers said public revulsion over the excesses of Wall Street had forged a powerful consensus for Obama's vision for reform, prodding the usually balky Senate late Thursday to approve a bill that offers far greater protection against a future banking crisis than many Democrats had hoped.

"Once public opinion got engaged, it blew away the lobbyists, the money, campaign contributions. Public opinion drove that bill," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, who steered the bill through the House. "And that will make an easier conference."

Frank and Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee and the chief architect of the Senate bill, met with Obama at the White House Friday. The president congratulated Dodd on a hard-fought campaign to push one of the administration's top domestic priorities through the Senate with bipartisan support. Although two Democrats voted against the measure, four Republicans voted for it, handing Obama a significant legislative victory. Frank and Dodd vowed to deliver a final bill to Obama's desk by July 4.

"This is one of the rare occasions when the two bills really are very close to each other. There's not a great deal of difference," Dodd told reporters.

The first step in that process will occur Monday, when Senate leaders plan to appoint seven Democrats and five Republicans to lead talks with the House. Aides to House Speaker Nancy Pelosi (D-Calif.) said she is likely to name House conferees after the Memorial Day break.

Dealing with derivatives


The biggest battle will be to reconcile regulation of the market of financial instruments known as derivatives -- complex contracts that allow traders to bet on the direction of prices of stocks, commodities and other assets.

The House and Senate voted to regulate derivatives, requiring them to be traded through public exchanges and clearinghouses. But the Senate bill also has a provision by Sen. Blanche Lincoln (D-Ark.) that would force the nation's biggest banks to spin off their highly profitable derivatives desks.

Some Democrats and administration officials want to see the Lincoln language softened. "I think the derivatives language gets yanked out," said Paul Miller, an analyst with FBR Capital Markets.

But an aide to Lincoln, who is likely to sit on the conference committee, said she will fight any effort to gut the provision. Its opponents are worried, noting that the measure survived an 11th-hour attempt by Dodd to postpone action for two years.

"No one has wanted to step up and take it out of the legislation for fear of appearing to weaken the legislation," said a House Democratic aide familiar with the negotiations. "While there's agreement that this is a problem, until someone takes it out, it's still a problem."

The 'Volcker rule'


Lawmakers will also have to resolve a stalemate over whether banks should be permitted to use their own capital -- instead of a client's -- to make trades, a process known as proprietary trading. The White House has proposed that such activity be restricted under the "Volcker rule," which reflects concerns about investment activities raised by Paul Volcker, a presidential adviser and former Federal Reserve chairman.

The financial industry says that the Volcker rule would unnecessarily limit some safe forms of trading. The House legislation does not address that issue, and the Senate version authorizes a study of the issue then gives broad authority to regulators to decide how best to implement a prohibition of that type of trading.

Other issues are expected to be more easily resolved. The House version of the legislation includes a $150 billion fund that could be used to seize and dismantle firms deemed to pose too much risk to the financial system. Similar language was stripped from the Senate bill after the fund became a point of GOP attack. The administration opposes the fund, and Frank said he is not likely to defend it.

Frank said the Senate is likely to back off a provision that calls for a new consumer-protection watchdog agency to be housed within the Federal Reserve. Frank described the proposal as a vestige of a political deal that Dodd cut with Sen. Bob Corker (R-Tenn.), who ultimately voted against the bill. "So I think that undercuts its longevity," said Frank, whose bill creates a stand-alone agency.

The financial services industry is bracing for numerous smaller clashes. Auto dealers want to preserve a loophole in the House bill -- opposed by the administration -- that would exempt them from tougher oversight over car loans. And bankers will make a last-minute push to strip out a Senate amendment that would limit the fees that banks can charge retailers when customers use their credit or debit cards.

"There are dozens of items that we need to try to fix in this bill that, while supposedly aimed at Wall Street, does tremendous damage to traditional banks," said Edward L. Yingling, president of the American Bankers Association.

Frank predicted Friday that such efforts would fail. "I wouldn't basically take a lot of investment advice from those banks if they're not better at that than they are at politics," he said.

www.washingtonpost.com/wp-dyn/content/article/2010/05/21/AR2010052104768.html?hpid=topnews

[sandi66]

Who might win big or lose big in financial overhaul? Financial reform to mete out penalties, prizes

Saturday, May 22, 2010

Even as the landmark financial bill passed by the Senate this week punishes some of the most famous companies in American finance, it may reward little-known firms that operate behind the scenes, below the radar or overseas.

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The nation's biggest banks, from Goldman Sachs to J.P. Morgan Chase, stand to lose billions of dollars as they are socked with new fees and regulations and forced to shed businesses.

But their loss could be a gain for other firms. If the banks are forced to stop trading with their own money or spin off activities focused on financial instruments called derivatives, this business could move to hedge funds, which are far more lightly regulated, or foreign banks that don't face the same restrictions.

The biggest banks also will face new oversight and tighter limits that could raise their costs and make it easier for smaller banks to compete.

With its bill, the Senate is picking winners and losers throughout the financial industry and across corporate America. Although some will clearly benefit and others not, the ultimate impact of the legislation is not yet clear for all companies. And if in the end the new rules save companies from making the kind of mistakes that fueled the financial crisis, the costs imposed on even the big banks may be relatively modest.

Much could still change. Senate negotiators will meet with House counterparts to work out differences between the two bills.

"There is a sense of bailout burnout in the country. The public looks around and sees that instead of being shut down, the largest banks benefited from public assistance," said Brian Gardner, an analyst at Keefe, Bruyette & Woods. "That has translated into a desire to take out frustration on the large banks."

But the bill gives many firms something to celebrate.

The Senate bill does not go as far as lawmakers and consumer advocates had hoped in whittling down the size of large financial companies, but smaller banks and businesses outside the financial sector would, on balance, fare better. They would face comparatively few new restrictions.

Community banks, for example, would not have to pay the hefty regulatory fees exacted from larger banks and would be largely exempt from oversight by the new consumer protection bureau, assigned to prevent abuses in mortgages, auto loans and credit cards.

Retail companies would enjoy far more flexibility than before in deciding when to allow customers to charge purchases on such credit cards as Visa and MasterCard.

The broad outlines of the financial overhaul bill have been known for many months. But it is in the details of how the regulations would work -- and in the many ways senators changed the bill in the final days -- that could decide who wins and who loses in corporate America.

Two of Wall Street's leading investment banks, Goldman Sachs and Morgan Stanley, stand to lose the most. The Senate bill targets two major sources of their profit: putting together derivatives for sale and proprietary trading, or trading with their own money. Other top banks, including J.P. Morgan Chase, Bank of America and Citigroup, also make a lot of money from these businesses, although they are more diversified.

Major banks would also take a hit, because they would have far less power to charge fees to retailers for credit card purchases. And under a new formula, these banks would have to pay much more than they do now to the Federal Deposit Insurance Corp. for guaranteeing deposits.

By contrast, smaller community banks will pay less for the deposit insurance fund and largely escape oversight by the new consumer protection agency.

But these smaller banks would still be hit hard by new restrictions on a type of investment known as a trust-preferred, which many small firms rely on to meet requirements that they have enough a large enough financial reserve to cover possible losses.

"It will undermine the capital position of over 1,000 banks," said Ed Yingling, president of the American Bankers Association.

If the major banks are forced to spin off their trading desks, hedge funds could see a significant windfall under the bill, although it requires them to register for the first time with the Securities and Exchange Commission.

"Pure play hedge funds would be the big beneficiaries," said Raj Date, chairman and executive director of Cambridge Winter Center for Financial Institutions Policy.

Among the other winners would be derivatives companies, including the Chicago Mercantile Exchange, which have expertise in setting up the new clearinghouses required, and institutional investors, like pension funds, that would gain greater say over corporate boards, despite heavy lobbying from big businesses.

Other losers would include the credit rating agencies, which will face new legal liability if their judgments on the safety of investments turn out to be wrong.

Several industries which might have faced tough new federal rules have so far escaped. The bill, for instance, would not affect insurance companies very much, a victory for industry lobbyists who initially worried that lawmakers would lump the firms into the same category as big banks.

Industrial companies like General Electric and Honeywell also avoided the prospect of heightened regulation because of a last-minute amendment. The measure offered by Sens. David Vitter (R-La.) and Mark Pryor (D-Ark.) bars systemic risk regulators from examining companies that earn less than 85 percent of their revenue from financial activities.

www.washingtonpost.com/wp-dyn/content/story/2010/05/21/ST2010052104935.html?sid=ST2010052104935

[sandi66]

The euro crisis is a judgment on the great lie of 'Europe' - The EU is paying the price for its pursuit of 'integration' at any cost, says Christopher Booker

By Christopher Booker
Published: 7:00PM BST 22 May 2010

Easily the most telling statement by any politician last week was that from an anguished Angela Merkel, in pronouncing that "the current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957". "If the euro fails," she went on, "Europe fails," warning that the consequences for the whole of Europe would be "incalculable".

We have still scarcely begun to wake up to the gravity of the crisis now upon us, not just for the eurozone but also for us here in Britain and for the entire global economy. The measures so far taken to prop up the collapsing euro, such as that famous "$1 trillion package", are no more than gestures.

Greece was just the antipasto: Italy, Spain, Portugal and others are now hanging over an abyss of debt which scarcely all the money in Europe could fill – created by countries living way beyond their means, thanks not least to the euro's low interest rates. The only possible consequence of
the collapse of one of the world's leading currencies, leaving Europe with no money to trade in, would be utter chaos.

What we are witnessing here is a judgment on the entire deceitful and self-deceiving way in which the "European project" has been assembled over the past 53 years. One of the most important things to understand about that project is that it has only ever had one real agenda. Everything it has done has been directed to one ultimate goal, full political and economic integration. The headline labels put on the various stages of that process may have changed over the years, such as building first a "common market", then a "single market", finally a "constitution". But by far the most important project of all was locking the member states into a single currency.

This was always above all a political not an economic project, to be driven through at any cost, which was why all those "Maastricht criteria" laid down to bring it about were repeatedly breached. But as expert voices were warning as long ago as the 1970s, when it was first put on the agenda, there was no way economic and monetary union could work unless it was run by a single all-powerful economic government, with the power to raise taxes.

As was advised by Sir Donald MacDougall's report to Brussels in 1978, it could only work if, following the US model, between 20 and 25 per cent of Europe's GDP was available to such a government, to enable a huge transfer of wealth from richer countries such as Germany to the poorer, more backward countries of southern Europe – and how ironically has that come about!

When the 10-year-long construction of the euro began in the 1990s, all these warnings were ignored. The cart was put before the horse. So fixated were the Eurocrats on the need to get their grand project in place that the "rules" were treated as mere window dressing. The member states were locked together willy-nilly in a one-size-fits-all system, with a single low interest rate, enabling countries such as Italy, Spain, Portugal and Greece to live on a seemingly limitless sea of borrowed money. And now, entirely predictably, judgment day has come.

If the euro does disintegrate, as
Mrs Merkel warns, the consequences would be incalculable. Replacing all the national currencies was a gargantuan task, by far the most ambitious ever attempted in the name of European integration, and there is no Plan B. Without a currency, trade would collapse – leaving Britain, dependent on Europe for 50 per cent of its trade, just as seriously affected as everyone else. A system failure on this scale would make the 1930s pale into insignficance.

Inevitably, cries went up last week for the EU to be transformed into a proper economic government with control over national budgets and
the power to raise taxes – exactly
what MacDougall and others were talking about in the 1970s. But it is
too late, and all that remains are desperate gestures.

As reported by the think tank Open Europe, Mrs Merkel was even calling last week for a "global" tax on financial transactions to raise 321 billion euros a year Europe-wide – 204 billion euros of which would come from Britain, still the world's leading financial centre, with 43 billion euros from Germany and just 17 billion euros from France.

As alarming as anything, with this tsunami roaring down on us, has been the sight of our new leaders preening themselves with their list of irrelevant little "coalition policies" and babyish boasts about the "greatest democratic shake-up since the 1832 Reform Act", as if none of this was happening. As one analyst put it: "They are like children let loose in the sweet shop, seemingly oblivious to the horrendous reality unfolding before us."

A well-known economist said wryly to me last week: "Bring back the days of Alistair Darling and Gordon Brown. At least they had some grasp of what is going on. This lot are just totally out of their depth."

www.telegraph.co.uk/comment/columnists/christopherbooker/7754100/The-euro-crisis-is-a-judgment-on-the-great-lie-of-Europe.html

[sandi66]

MAY 24, 2010, 2:32 A.M. ET

2nd UPDATE:China Reiterates Gradual Yuan Exchange Rate Reform

By Aaron Back and Ian Talley

Of DOW JONES NEWSWIRES

BEIJING (Dow Jones)--After U.S. Treasury Secretary Timothy Geithner encouraged China to reform its exchange rate, and Chinese President Hu Jintao said reform will be gradual, the two delegations had no further discussions of the yuan issue in the morning session of the Strategic and Economic Dialogue, a vice chairman of China's economic planning agency said Monday.

How and to what extent Chinese and U.S. officials will discuss the yuan at the annual S&ED talks remains unclear. But economists have begun to downplay the likelihood that China will make any major policy change on the yuan soon, as the European debt crisis has raised global market volatility and driven down the euro, boosting the yuan's value relative to the currency of its largest trading partner.

Geithner and U.S. Secretary of State Hillary Clinton are leading one of the largest delegations in U.S. history to Beijing--with over 200 officials and more than a dozen agency chiefs and Cabinet executives--at the annual S&ED talks with China.

At the opening of the two-day summit Monday, Chinese President Hu Jintao said China will push forward yuan reform, but provided no new details.

"China will continue to steadily push forward reform of the yuan exchange-rate formation mechanism in a self-initiated, controllable and gradual manner," Hu said, reiterating China's long-standing position.

Geithner didn't mention currency in the opening session of the talks. At the launch of the economic track, however, he said China should allow the yuan exchange rate to reflect market forces, and welcomed recognition that exchange-rate reform is an important part of China's broader reform agenda.

"Allowing the exchange rate to reflect market forces is important not just to give China the flexibility necessary to sustain economic growth with low inflation, but also to reinforce incentives for China's private sector to shift resources to more productive, higher-value-added activities that will be important to future growth," he said.

China has kept the yuan effectively pegged to the U.S. dollar since the outbreak of the global financial crisis. The country's trading partners say China is keeping the yuan artificially undervalued to boost Chinese exporters' competitiveness.

In Washington, lawmakers and some in industry had pressed the administration to take advantage of the summit to press the yuan issue again, but U.S. officials said the weakness of the euro and a possible political backlash if U.S. officials are seen to be scolding their Chinese counterparts mean Geithner won't make the issue a priority.

Instead, the two sides discussed the impact of the European debt crisis on the value of the euro, Zhang Xiaoqiang, a vice chairman of the National Development and Reform Commission, told a media briefing afterward.

The scale and scope of the European sovereign debt crisis aren't so great, Zhang said.

But he added, "Of course, because Europe is one of the largest economies in the world and China's largest trading partner, the European sovereign debt crisis will not only affect Europe's recovery, it will also affect the recovery in China's external demand."

Standard Chartered on Monday pushed back its forecast for the timing of any yuan "de-pegging" from the U.S. dollar to the third quarter, from its earlier call of May. The bank cited recent financial market volatility, worries over the recovery, and, by implication, the yuan's recent sharp rise against the euro.

Hu said Monday that he hopes the U.S. and China can build trust through candid discussions.

Differences between the U.S. and China are inevitable, Hu said, but the two countries should respect each others' core interests and "properly handle sensitive issues."

Hu pledged to "expand market access in line with international trade principles, and...uphold and improve international trade and investment liberalization."

He made no specific mention of North Korea and Iran, but appeared to allude to those issues by saying the U.S. and China should work together to deal with "regional hot-spot issues."

online.wsj.com/article/BT-CO-20100524-701091.html?mod=WSJ_World_MIDDLEHeadlinesAsia

[sandi66]

May 23, 2010, 11:54 p.m. EDT · Recommend (2) · Post:

China's president stresses willingness to reform currency

By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) -- Chinese President Hu Jintao used the kick-off of talks with the U.S. to repeat Beijing's willingness to reform the yuan, offering an apparent tick forward toward a more liberal currency policy, despite the lack of a timetable.

Speaking Monday at the formal opening of the U.S.-China Strategic and Economic Dialogue, Hu said China would reform its currency regime on its own timing, which would be guided by the principles of independence, controllability and continuity.

Several analysts expect the talks to make significant headway in sealing an agreement that would ultimately see China revalue its currency, beginning with the first step of dropping the yuan's de-facto peg to the U.S. dollar, and tying it instead to a trade-weighted basket of currencies.

But they added that action on such an agreement would be delayed so as to avoid the appearance that Beijing had capitulated to U.S. pressure. See full story on possible U.S.-China deal on yuan.

U.S. Treasury Secretary Timothy Geithner said he welcomed Beijing's recognition of the importance of reforming its currency.

"Allowing the exchange rate to reflect market forces is important, not just to give China the flexibility necessary to sustain economic growth with low inflation, but also to reinforce incentives for China's private sector to shift resources to more productive, higher-value-added activities that will be important to future growth," Geithner said.

Geithner also urged freer trade between the two countries, part of an expected push to improve the U.S. trade account with the Chinese.

"China has benefited enormously from the open and rules-based global system of trade and investment, as have we," he said. "Continued, reliable access to the large and growing United States market is an important underpinning of China's prosperity and growth." See story on U.S. side's hope to improve trade with China.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong.

www.marketwatch.com/story/hu-stresses-chinas-willingness-to-reform-yuan-2010-05-23?reflink=MW_news_stmp

[sandi66]

Hu Says China Will Move Gradually on Yuan Policy (Update2)

May 24, 2010, 5:52 AM EDT

By Rebecca Christie and Nicole Gaouette

May 24 (Bloomberg) -- President Hu Jintao said that China will move gradually and independently in making changes to the nation’s exchange-rate mechanism as talks with the U.S. opened in Beijing today.

China will continue to “steadily advance” reform “under the principles of independent decision-making, controllability and gradual progress,” said Hu, 67, echoing language in a May 10 central bank outlook for policy making.

U.S. Treasury Secretary Timothy F. Geithner said today that a more market-driven currency would help Chinese officials to sustain growth, keep inflation low and adjust the nation’s growth model. So far, China has resisted calls from trading partners to let the yuan strengthen after maintaining a peg of about 6.83 to the U.S. dollar for 22 months as a crisis policy.

Hu is “sending a signal” that China is working on the currency issue even if the nation isn’t yet ready to announce a policy shift, Frank Lavin, a former U.S. undersecretary of commerce, said on Bloomberg Television in Hong Kong today. “They are trying to say we know this is high on your agenda.”

“There’s a strong political requirement” for China to take steps to allow yuan gains “in the next few months,” said Lavin, an Asia-Pacific chairman for public relations firm Edelman.

Exiting Crisis Policies

Zhang Xiaoqiang, vice chairman of China’s National Development and Reform Commission, said the currency’s exchange rate wasn’t mentioned in talks this morning between officials including central bank governors Zhou Xiaochuan and Ben S. Bernanke. China hasn’t changed its yuan policy, Zhang added at a press briefing.

Both nations’ representatives agreed that caution is needed in exiting from crisis policies because the foundation of the world recovery isn’t solid and Europe’s sovereign-debt crisis has added to uncertainties, Zhang said. Still, Zhou told reporters that “the general analysis is the pace of the global economic recovery will be maintained.”

The Shanghai Composite Index closed 3.5 percent higher, the biggest gain since October, on speculation that the government may delay economic tightening measures.

Yuan forwards were little changed as of 5:24 p.m. in Hong Kong, trading near their weakest since September. The contracts slumped last week on speculation that China may defer appreciation as Europe’s woes threaten the global recovery. They now indicate that investors expect the Chinese currency to gain about 1 percent against the dollar in the next year.

Yuan’s Trading Band

Li Daokui, an academic adviser to the Chinese central bank, said today that some progress in the nation’s currency reform “in the near future” would make political sense. He advocated widening the yuan’s trading band and a “slight” gain against the dollar. Li said the comments to Bloomberg Television in Beijing were a personal view.

As the two-day Strategic and Economic Dialogue began, Geithner said that the U.S. and China shared the goals of a more balanced world economy and stronger economic ties.

Chinese Vice Premier Wang Qishan said that the European crisis had “impacted market confidence.”

“It has brought many uncertainties to the slowly recovering world economy, and added to the difficulties of countries concerned in implementing their macro policies,” Wang said.

Geithner on Europe

In contrast, Geithner, 48, said the U.S. and China are well placed to withstand the European crisis, with both countries experiencing stronger-than-expected economic recoveries.

“Economic growth in the U.S. and China is broader and stronger than many had anticipated, even a few months ago,” Geithner said. Even as European nations face challenges, the United States and China, along with India, Brazil and other emerging economies, are “in a much stronger position today to overcome the challenges ahead,” he said.

China needs to reinforce its shift to relying more on domestic demand as exceptional stimulus measures are withdrawn, the Treasury secretary said.

Geithner, who last month delayed a report to Congress that could label China a currency manipulator, said he welcomed the government’s stance that exchange-rate changes are “important.” Countries need to compete on a “level playing field” and share in the “benefits and responsibilities” of global trade, he added.

China’s Growth Model

“As we reform the U.S. economy to promote savings and investment, China is reforming its growth model to promote domestic demand and consumption,” he said. “Our common interests lie in building a more stable global financial system less prone to crisis.”

Secretary of State Hillary Clinton is also in China for the talks. Geithner next visits London, Frankfurt and Berlin to reinforce his call for coordinated efforts to fight the region’s crisis and rein in government spending.

The Treasury secretary also addressed Chinese efforts to promote technology development, which U.S. companies say may discriminate against foreign-owned businesses.

“We welcome a more open China today,” Geithner said. “Innovation flourishes best when markets are open, competition is fair, and strong protections exist for ideas and inventions.”

U.S. Chamber of Commerce President Tom Donohue will today say American companies are concerned that China may be “backtracking on the progress it has made to open its economy,” according to a statement released by the organization. In a speech in Shanghai, Donohue will urge China to make “some additional movement on currency,” the statement said.

www.businessweek.com/news/2010-05-24/hu-says-china-will-move-gradually-on-yuan-policy-update2-.html

[sandi66]

MAY 24, 2010, 12:55 A.M. ET

China Citic Plans Bond Sale

SHANGHAI—China Citic Bank Corp. said Monday it will sell as much as 16.5 billion yuan ($2.42 billion) of subordinated bonds on the domestic interbank market Thursday and Friday to boost its capital to meet the banking regulator's requirements.

The medium-sized bank, in which Spain's Banco Bilbao Vizcaya Argentaria SA owns a 15% stake, is the latest Chinese lender to tap the capital markets after a sharp increase in lending last year--the key platform of China's stimulus effort—eroded domestic banks' capital.

Citic Bank said in a statement it plans to sell up to 5 billion yuan of 10-year bonds and as much as 11.5 billion yuan worth of 15-year bonds.

Citic Securities Co., China International Capital Corp. and China Securities Co. are the main underwriters of the deal, the lender said.

Citic Bank's capital adequacy ratio was 9.34% as of March 31, down 0.8 percentage points from the end of last year and below the minimum 10% regulatory requirement for mid-sized banks set by the China Banking Regulatory Commission.

After the bond sale, Citic Bank's capital adequacy ratio will rise to 11.74%, it said.

Chinese banks have embarked on massive fund-raising campaigns in recent months to shore up their capital. The country's four largest listed banks plan to raise as much as US$46.5 billion in the coming months in Shanghai and Hong Kong.

Earlier this month, Citic Bank peer Hua Xia Bank Co., in which Deutsche Bank AG owns a 17% stake, said it aimed to raise as much as 20.8 billion yuan through a private placement.

—Wang Ming contributed to this article.

online.wsj.com/article/SB10001424052748704226004575263492713508292.html