Global Articles on what is going on...posted daily

[sandi66]

Cobell deadline in peril
By Rob Capriccioso

Story Published: May 28, 2010

Story Updated: May 28, 2010

WASHINGTON – Senate Democrats said Thursday evening they would not be able to pass an extenders bill with the Cobell v. Salazar settlement attached in time to meet a deadline agreed to by the Indian plaintiffs in the case.

In recent days, legislators attached the $3.4 billion settlement to the American Jobs and Closing Tax Loopholes Act of 2010, a measure aimed at extending unemployment benefits, Medicare reimbursements, and several tax credits.

The White House supported the settlement as part of the legislation, although some Congress members wanted it to be voted on as a standalone measure.

Unable to come to an agreement on the overall bill due to cost concerns facing members in both chambers, Senate Democrats decided late Thursday to try to pass a short extension of unemployment benefits, rather than agree to a pared-down version of the larger bill the House had been working on.

Senate Majority Leader Harry Reid, D-Nev., said the Senate would work on passing the larger measure when senators return from Memorial Day recess June 7.

The problem with Reid’s timeline for the Cobell settlement is that congressional approval was needed by Friday for the deal to proceed. The agreement was initially finalized between Indian plaintiffs and the Obama administration in December, and has faced several setbacks.

May 28 was to be the last of four deadline dates that the plaintiffs and the administration had set for congressional action. There have already been three deadline extensions since December.

Dennis Gingold, the lead lawyer for the plaintiffs, previously said that if Congress did not meet the May 28 deadline, he would proceed anew with litigation. The case has already been ongoing since 1996.

Lawyers for both the Indian plaintiffs and the Justice Department, which is handling the case for the Obama administration, could not say Friday morning whether they might agree to another extension.

Gingold said Friday morning, “[W]e have no present plans to discuss an extension of the settlement agreement.”

Some observers have speculated that the plaintiffs should consider another deadline extension, since Congress seems close to approval. At the same time, there is no guarantee that legislators will move quickly after the Memorial Day recess.

The prospect of congressional approval has been in peril several times since December, with some Native Americans asking Congress members to take more time to consider tribal concerns, and some Congress members wanting modifications that the lead plaintiff in the case calls a deal breaker.

The tinkering continued through Thursday when Vice Chairman of the Senate Committee on Indian Affairs John Barrasso, R-Wyo., requested in a letter to the chairmen and ranking members of the Senate Finance Committee and House Ways and Means Committee that Congress make several changes to the agreement.

“I recently asked Indian tribal leaders for their feedback about five important parts of the Cobell settlement,” Barrasso said of his request, noting that some Indians have been especially concerned about attorneys’ fees, incentive awards for lead plaintiffs, and other components of the deal.

“We have an opportunity now to fix some of the concerns in a way that will help individuals in Indian country without destroying the agreement,” Barrasso said. He is hoping the parties agree to extend their deadline.

Earlier in the day, the House Rules Committee rejected an attempt to cap legal fees and make other changes to the agreement.

In broad terms, the settlement calls for $1.4 billion for individual Indian trust fund beneficiaries and $2 billion for a land consolidation program to be overseen by the Department of the Interior to buy back fractionated trust lands. Under the deal, many beneficiaries will receive around $1,000 to $1,500 for their claims.

For years, the litigation has hinged on the contention that the government mismanaged billions of dollars in oil, gas, grazing, timber and other royalties overseen by Interior for Indian trustees since 1887.

The Obama administration agreed that wrongs had been done, which helped them come to the $3.4 billion settlement figure.

Many Native Americans believe the settlement figure is far too low, noting that the plaintiffs had argued for around $50 billion during some points of the lawsuit.

Still, lead plaintiff Elouise Cobell, a Blackfeet citizen, has argued long and hard that the deal is solid. She has said it is probably the best that can be done without many more years of legal battles that could result in less return.

While Cobell only amounted to a small slice of the overall extenders bill, the cost of the legislation was on many Congress members’ minds in the days leading up to the decision to postpone action.

Some Democrats were hesitant to vote in favor of the overall legislation because they were concerned the political ramifications of the cost might hamper them in the fall election season.

Reflecting on the situation, Barry Piatt, a spokesman for SCIA Chairman Byron Dorgan, D-N.D., said that all bills are going to come with a cost.

“In this case, justice for Native Americans should prevail over cost.”

But Rep. Stephanie Herseth Sandlin, D-S.D., said the cost of the extenders bill was a big factor in her decision not to support it.

“My vote regarding the tax extenders bill is a vote for fiscal responsibility, and is not directed at the Cobell settlement. While the funds in the bill for the Cobell settlement are fully offset, and will not add to the deficit, once again, as with the Indian Health Care Improvement Act, I think Congress should have considered the funding for the Cobell agreement as a standalone measure, so that the merits of the settlement could be fully and fairly debated.”

Herseth Sandlin added that she has received much feedback from Indian constituents who are affected by the settlement, including from some who have expressed concerns about certain parameters.

She has urged the Obama administration to continue reaching out to those who have a stake in the case.

www.indiancountrytoday.com/home/content/95104459.html


ty nalmann

[sandi66]

May 28, 2010, 8:30 a.m. EDT · Recommend · Post:

SmartCard Marketing Systems Inc. (PINKSHEETS:SMKG) Launch of Credit Card Payment (API) Application Programming Interface

SAN ANTONIO, May 28, 2010 (BUSINESS WIRE) -- CEO Massimo Barone stated: "We are pleased to announce that we have completed the API (Application Programming Interface) for our merchants currently using the Velocitymoney.com platform. The availability of our API allows merchants to completely integrate their customers directly into Velocitymoney.com and transact independently with the full suite of global financial payment methods we offer including Credit Card payments. This will allow us to fast track customer activations in the short term improving results and increase transaction revenue significantly as merchants can seamlessly benefit from real-time connectivity optimizing settlements."

Velocitymoney.com Merchants

When a merchant registers with Velocitymoney.com they immediately have access to a multiple of payment methods of which they can make available to their customers for payment collection, money remittance, peer 2 peer transfers, expense reimbursement and payroll. Our customer profile virtual account manager allows merchants the flexibility of tracking and complying with Patriot Act and KYC (know your client) regulations which are becoming more stringent.

We seek safe harbour.

SOURCE: SmartCard Marketing Systems Inc.


SmartCard Marketing Systems Inc.
Massimo Barone, CEO, 1-866-774-2555
[e-mail]
www.gosmartcard.com

www.marketwatch.com/story/smartcard-marketing-systems-inc-pinksheetssmkg-launch-of-credit-card-payment-api-application-programming-interface-2010-05-28?reflink=MW_news_stmp

[sandi66]

US regulators shut three Bank of Florida units

Fri May 28, 2010 7:03pm EDT

May 28 (Reuters) - U.S. regulators closed three banks owned by Bank of Florida Corp (BOFL.O) on Friday, bringing the tally of banks closed so far this year to 76.

The Federal Deposit Insurance Corp said Bank of Florida- Southeast; Bank of Florida - Southwest; and Bank of Florida - Tampa Bay had a combined $1.48 billion in assets and 13 branches between them.

EverBank of Jacksonville, Florida has agreed to acquire the banking operations, including a combined $1.32 billion in deposits, the FDIC said.

The FDIC expects bank failures to peak this year following the worst financial crisis since the 1930s. Closures in 2010 are anticipated to exceed the 140 institutions that were shuttered last year.

Despite the rapid pace of failures, the bank industry is showing signs of hope.

FDIC Chairman Sheila Bair said at the agency's quarterly briefing on May 20 more banks in the past several weeks had been able to raise capital to boost their balance sheets or acquire other banks.

She also said the FDIC is seeing higher bids in failed bank auctions, meaning other firms are finding the assets of troubled banks more desirable.

www.reuters.com/article/idUSN2820609320100528

[sandi66]

Top Chinese Central Banker: Our Property Crisis Is Worse Than The US And UK Bubbles


Joe Weisenthal | Jun. 1, 2010, 12:57 AM |
The FT snagged an interview (via Yvees Smith) with Chinese professor and PBOC monetary committee member Li Daokui on the much talked about subject of the Chinese property situation.

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”

What does that mean? Basically that high prices cause their own societal problems.

Mr Li said the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of the property market.

“When prices go up, many people, especially young people, become very anxious,” he said. “It is a social problem.”

Meanwhile, Chinese premier Wen Jaibao is urging the world to maintain a "sense of crisis" in regards to the economy and that the global economy is too fragile to start withdrawing stimulus.

In other words: Dear countries that import our products, don't start slowing down.

www.businessinsider.com/top-chinese-central-banker-our-property-crisis-is-worse-than-the-us-and-uk-bubbles-2010-6


ty nalmann

[sandi66]

Rumours leave investors clamouring for havens
By Neil Dennis

Published: June 4 2010 11:29 | Last updated: June 4 2010 12:30

The dollar surged on Friday, overturing its losses in European morning trade, as investors dashed for cover amid talk of derivative trade problems at French bank Societe Generale, and that Hungary’s economy was in a perilous condition.

Societe Generale did not comment on the rumour, but its shares were down 5 per cent at midday. Meanwhile, Hungary’s forint fell 1.5 per cent to Ft286.51 versus the euro after Peter Szijjarto, a spokesman for Prime Minister Viktor Orban, said Hungary’s economy was in a “very grave situation” due to the last government manipulating official figures.

As investors clamoured for havens, the dollar climbed nearly a cent versus the euro, to stand 0.5 per cent higher at $1.2107.

The yen was driven lower this week on speculation Japan’s new prime minister would support a weak currency and actively encourage intervention in the market to stop it appreciating.

Naoto Kan, former finance minister, took over as Japan’s prime minister on Friday following the resignation on Wednesday of Yukio Hatoyama. Mr Hatoyama, who had been PM for less than nine months, had been under increasing pressure to stand down following scandals over campaign funding.

Mr Kan was expected to join the trend towards fiscal austerity, taking a tough stance on reining in the country’s massive public debt. For these efforts, a weaker yen would be beneficial and Mr Kan, when finance minister, stood behind Mr Hatoyama ready to intervene if the yen moved excessively.

Hans Redeker at BNP Paribas said: “The new PM has previously expressed his view of favouring a weaker yen and the new government is expected to have a more interventionist approach towards the currency.”

So far this week, the yen has fallen 1.9 per cent versus the dollar to Y92.78, and lost 1.9 per cent against the euro to Y113.20. Against the pound the yen has fallen 3.3 per cent to Y135.93.

An element of risk appetite returned to the market this week, which also undermined the dollar as well as the yen.

The Canadian dollar gained ground against its US neighbour as investors ignored a warning from the Bank of Canada not to bet on further near-term interest rate rises.

Canada was the first of the Group of Seven large industrial democracies to increase rates, lifting its main overnight lending rate by 25 basis points to 0.5 per cent on Tuesday.

The central bank said that given an uncertain outlook, further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Paul Ashworth at Capital Economics said: “Core inflation is at a 44-year low, money and credit aggregates are stagnant or shrinking and house prices are starting to fall. Under the circumstances, what the Bank of Canada has done is probably prudent and we expect it to hike rates to about 1.25 per cent by year-end.”

The Canadian dollar rose over the week by 1.4 per cent to C$1.0390 against the US dollar.

Data from the UK and the eurozone were generally lacklustre, but the pound and euro took diverging paths, with the single currency undermined by lingering eurozone debt concerns while sterling pushed higher on improving risk sentiment.

Investors on Friday, however, were awaiting the month’s key set of data: the US non-farm payrolls and employment report for May, published later in the day.

Expectations are that a huge number of temporary government jobs to cover the US census will mean about 515,000 jobs were created last month.

The euro stood at $1.2199 against the dollar, down 0.6 per cent over the week, while the pound was at $1.4647, up 1.3 per cent. The pound has gained 1.9 per cent against the euro over the past five days to £0.8323.

www.ft.com/cms/s/0/ec7ba61c-6fc0-11df-8fcf-00144feabdc0.html

[sandi66]

GLOBAL MARKETS-Stocks, euro tumble on banks, debt fears

Sunday June 06, 2010 06:22:12 AM GMT

MARKETS-GLOBAL (WRAPUP 4)* Stocks turn negative on banks' falls; Hungary debt fears
* Euro hits new 4-yr low to euro; record low to Swiss franc
* Equities may find support from US jobs number
(Updates prices, adds quote)
By Sujata Rao
LONDON, June 4 (Reuters) - Fresh fears over European banks and talk of a "Greek-style" debt crisis in Hungary pushed stock markets into the red on Friday while the euro hit a new four-year low to the dollar and a record low versus Swiss franc.

Markets had earlier been cautiously higher on expectation that U.S. jobs data would show recovery is gathering pace in the world's largest economy.

Analysts expect the data, due at 1230 GMT, to show the highest U.S. jobs growth last month since 1983 at 513,000. , the fifth straight month of gains. Some expect an ever bigger number. But by 1200 GMT MSCI world stocks fell 0.6 percent. European stocks were down 0.6 percent. led by the heavyweight banking sector which was hurt by concern over the derivatives division of French Societe Generale.

Societe Generale, which declined to comment on market rumours about losses in its derivatives division, fell 6.3 percent. BBVA and Credit Agricole fell 5 and 3.8 percent respectively. Before the falls started, global equity markets and U.S. Treasury yields had in the past week recovered nearly a quarter of the losses incurred over the previous two months when the European sovereign debt crisis triggered a scramble out of risk.

Investors were also spooked again by comments out of Hungary, perceived as the weak link in eastern Europe due to high debt ratios. A spokesman for the Prime Minister said a leader of the newly-elected ruling party had not exaggerated when he had said on Thursday Hungary may face a Greek-style debt crisis.

That pushed the forint currency to a one-year low and hit shares in European banks exposed to eastern Europe.

"There is fear coming back into the market," said Matthew Brown, sales trader at ETX Capital in London. "There are unsubstantiated rumours of a French bank having derivative losses and there are also comments coming out of Hungary."

U.S. futures also reversed their early stronger opening.

S&P 500 futures fell 8.6 points. Dow Jones industrial average futures sank 60 points and Nasdaq 100 futures dropped 15.5 points.

The optimism over the U.S. jobs is also tempered by the fact that two-thirds of the new jobs are likely to be temporary hires for the U.S. government census.

And worries over euro zone growth and banks are likely to continue acting as a check on gains.

"If the payrolls figure is good, it'll support stocks on both sides of the Atlantic. But this could be short-lived in Europe, where stimulus plans have not been enough to kick-start growth," said Christian Jimenez, fund manager and president of Diamant Bleu Gestion, in Paris. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a graphic showing changes in non-farm payrolls, click r.reuters.com/dyr28k ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^


DOLLAR REMAINS IN FAVOUR

The euro plumbed a fresh four-year low against the dollar after the French Prime Minister Francois Fillon said he was not concerned by the euro's decline.

The euro fell around half a U.S. cent to $1.2048 according to Reuters data, its lowest level since April 2006. The euro has lost 17 percent from early 2010 highs.

Against the Swiss franc the euro dropped to a lifetime low as the Swiss central bank failed to step in to stem its currency's strength.

The euro fell as low as 1.3865 francs according to electronic trading platform EBS, its weakest since the single currency's launch in 1999.

Fears about tougher funding conditions in Europe and the impact of spartan fiscal policy on growth may keep a lid on the nascent revival in risk taking and keep investors favouring the greenback and U.S. Treasuries.

"The dollar continues to attract safe-haven buying on the back of continued concern in the euro zone about sovereign debt and credit market liquidity," said Michael Hewson, analyst at CMC markets.

Reuters

www.forexyard.com/en/news/GLOBAL-MARKETS-Stocks-euro-tumble-on-banks-debt-fears-2010-06-04T122254Z

[sandi66]

Morgan Stanley Cuts Asia Currency Forecasts on Europe (Update1)

June 04, 2010, 3:46 AM EDT

By Lilian Karunungan

June 4 (Bloomberg) -- Morgan Stanley lowered its forecasts for Asian currencies, including the South Korean won and the Indian rupee, as Europe’s debt crisis saps demand for the region’s exports.

The Bloomberg-JPMorgan Asia Dollar Index, which tracks the 10 most-traded Asian currencies outside of Japan, reached an eight-month low on May 25 as concern Europe’s funding woes will slow a recovery wiped more than $4 trillion from the value of global equities last month. The euro dropped to its lowest level in four years against the dollar before the Group of 20 nations gathers today in South Korea to discuss the currency’s decline.

“A weak euro and fiscal drag in Euroland will impart weaker external-demand conditions for Asian currencies ex- Japan,” analysts Stewart Newnham and Yee Wai Chong wrote in a report dated yesterday. “We are mindful that if China slows too, this would further soften the regional currency outlook.”

South Korea’s won will likely strengthen to 1,175 per dollar by year-end, compared with an earlier forecast of 1,050, the report said. The currency closed trading at 1,201.80 in Seoul today, according to data compiled by Bloomberg. India’s rupee may climb to 46 and the Singapore dollar to S$1.39. The bank’s previous estimates were 43.50 and S$1.32.

The rupee dropped 0.6 percent this week to 46.63 against the dollar and the Singapore dollar lost 0.2 percent to S$1.40. The won fell 0.6 percent.

The Asia Dollar Index reached 108.77 on May 25, the lowest level since Sept. 15. The euro touched $1.2111 on June 1, the weakest since April 14, 2006.

Tightening Delays

Overseas shipments to Europe range from 9 percent to 27 percent of exports from Asian countries, with India sending 27 percent, China 23 percent and the Philippines 16 percent, the report said.

Asian currencies may become less attractive to investors as central banks delay raising interest rates, Morgan Stanley said. Asia, powered by China’s booming economy, has been leading the global economic recovery, where countries including Malaysia and India have increased borrowing costs.

Central banks in Indonesia and the Philippines kept interest rates at record lows yesterday and Thailand left borrowing costs unchanged a day earlier, as policy makers judged the European crisis to be a bigger risk to their economies than inflation.

China’s economic growth may slow to 9 percent in 2011 from an estimate of 11 percent in 2010, according to Morgan Stanley’s report.

“Asian currencies ex-Japan may also lose the support from a monetary tightening bias,” Morgan Stanley said.

Developing Asia will expand 8.7 percent in 2011, outpacing global growth of 4.3 percent, according to estimates from the International Monetary Fund on April 21.

www.businessweek.com/news/2010-06-04/morgan-stanley-cuts-asia-currency-forecasts-on-europe-update1-.html

[sandi66]

Euro debt crisis opens chance for yuan depegging

Fri Jun 4, 2010 8:38am EDT

(Reuters) - The euro zone's debt woes offer China a golden opportunity to unshackle the yuan from its virtual peg to the dollar, taking advantage of the U.S. currency's surge to create more two-way trading activity.

China

The raging crisis over the fiscal troubles of weaker euro zone economies has driven the dollar index up to 15-month peaks and gives Beijing the right environment for yanking the yuan out of its sideways drift of nearly two years.

While Chinese authorities would wait for renewed market calm after the severe volatility seen in May, the dollar's broad gains relieve their worries that any shift in yuan policy would invite a torrent of speculative capital hoping to jump on such a move.

"Now is a good time to free the yuan from the dollar," said Wang Haoyu, economist at First Capital Securities in Shenzhen.

"A depegging at this moment would enable China to reach its goal of deterring speculators from one-way bets on yuan appreciation while appeasing foreign critics, creating a win-win situation."

China is expected to manage the yuan against a trade-weighted basket of currencies, and as part of the shift it may start to allow the yuan -- also known as the renminbi, or people's money -- to lose ground against the dollar and major currencies.

The leeway to engineer such periodic falls in the yuan is vital to Chinese policymakers, who want to make it risky for speculators to bet heavily on the yuan embarking on a steady rise.

Such bets would ordinarily be a no-brainer, given China's robust economic growth and its large trade surplus with many major world economies.

But Beijing fears an influx of speculative money would fuel asset price bubbles and destabilize the economy, just as it is trying to cool the hot property market.

The slide of the euro and other currencies against the dollar also means those countries are less likely to complain that Beijing is defying their appeals for yuan appreciation, which they believe would ease chronic trade deficits with China.

Market players have slashed their expectations for a near-term move. One-year offshore forwards are pricing in slightly less than 1 percent appreciation, down from about 3 percent a month ago.

WINDOWS

A few windows of opportunity are coming up for China to shift toward allowing the yuan to edge higher -- especially as U.S. officials remain mostly mum on the subject.

Analysts are now penciling in a move in the third quarter, while some are looking at July as a possibility.

July marks the fifth anniversary of the yuan's initial revaluation and is also when the IMF typically conducts its economic consultation with China -- giving authorities the cover of an impartial international agency suggesting action for a move.

When Beijing revalued the yuan by 2.1 percent in July 2005, it adopted a "managed floating exchange rate system based on supply and demand" -- meaning that it was managing the currency against a trade-weighted basket.

But Beijing suspended the system in July 2008 as the global financial crisis escalated, virtually reimposing its previous system of fixing the yuan to the dollar in a very tight band around its "mid-point" reference rates.

Pressure for China to resume yuan appreciation has mounted since late 2009 as the global economy recovered.

While China has resisted external pressure to avoid appearing weak in its relations with other powers, it has said it would move ahead, paving the way for a depegging.

Last month the People's Bank of China (PBOC) said it would improve the yuan's exchange rate mechanism in reference to the performance of a basket of trading partner currencies.

Such a system would let the PBOC engineer a controlled float of the yuan against a wide range of currencies, including the euro, sterling and the yen, regardless of the dollar's direction.

The yuan's 2.5 percent fall against the euro last year and 14.6 percent jump so far this year are almost identical to the dollar's moves against the euro in global markets.

But after the 2005 revaluation, the yuan's movements against the euro diverged markedly from those against the dollar once it was linked to a trade-weighted basket.

The yuan fell 7.2 percent in 2006 and another 4.3 percent in 2007, even as the dollar jumped 11.5 percent and 10.6 percent respectively.

This divergence indicated that Beijing was using the yuan's depreciation against non-dollar currencies to compensate for its rise against the dollar in 2006 and 2007, and only allowed it to rise against a wide range of currencies in 2008.

"Allowing the yuan to move versus a currency basket may initially be based more on political than economic considerations from the Chinese side, " said Liu Dongliang, currency strategist at China Merchants Bank.

"But by gradually enhancing the importance of the currencies of China's trade partners other than the U.S. dollar, the move will help to push the yuan eventually to full convertibility."

In the basket-based system, the yuan's pricing would be calculated by the nominal effective exchange rate (NEER) and the real effective exchange rate (REER) -- that is its trade-weighted index and the trade-weighted index adjusted for inflation.

Pricing versus the basket will make the yuan's moves versus trading parter currencies more independent, thus better reflecting whether the Chinese currency is undervalued or not.

Only when the yuan rises against a wide range of currencies of countries with which China has large trade surpluses can Beijing offer convincing evidence that it is permitting real currency appreciation that will contribute to global rebalancing.

www.reuters.com/article/idUSTRE6531UL20100604

[sandi66]

Swiss Upper House Backs UBS Deal With U.S.
June 4, 2010, 6:29 am
A Swiss-U.S. deal to end a tax dispute that nearly crippled UBS and undermined Swiss bank secrecy inched closer to approval in the full Parliament as the upper house gave it its backing Thursday, Reuters reported.

The deal is yet to be approved by Parliament’s lower house, which is to vote on it next week. Yet the chances of full parliamentary backing have improved since Switzerland’s main party, the rightist SVP, lifted its objections in May.

“The vote of the SVP will be key also in the lower house,” said Fabio Abate, a member of the Liberal Party who sits in the lower house. “But I think in the end a majority should back the UBS deal.”

However a green light is not yet certain.

“I think it will be slightly more difficult in the lower house,” President Doris Leuthard of Switzerland told the television network SFInfo when asked about the chances of the lower house supporting the UBS deal.

The upper house also voted on Thursday against allowing a referendum on the tax deal. But the question is still open on whether the lower house would do the same, Mr. Abate said. A referendum would delay by several months the UBS agreement from coming into force.

The United States agreed last August to drop tax evasion charges against UBS after Bern promised it would disclose to U.S. tax officials bank the details of 4,450 of the bank’s U.S. clients, in breach of Swiss bank secrecy laws.

But a Swiss court ruling in January blocked the data transfer, forcing the government to bypass the court ruling with a legal patch that requires parliamentary approval and risks delaying the sharing of bank client information beyond a deadline agreed on for the end of August.

“The government is convinced that this agreement is the only way to finish with the UBS case, which has kept us busy for quite some time, and to prevent a not inconsiderable harm to the Swiss economy,” Justice Minister Eveline Widmer-Schlumpf told the assembly before the vote.

The United States had accused UBS of helping rich Americans hide almost $20 billion of untaxed money in secret accounts. The tax inquiry came while the bank was already weakened by about $50 billion of write-downs on toxic assets and put its survival at risk.

The Swiss government has repeatedly said that failure to get parliamentary backing for the deal would damage UBS and possibly other Swiss banks at a time when the country is under international attack over its bank secrecy laws.

But a Swiss court ruling in January blocked the data transfer, forcing the government to bypass the court ruling with a legal patch that requires parliamentary approval and risks delaying the sharing of bank client information beyond a deadline agreed on for the end of August.

“The government is convinced that this agreement is the only way to finish with the UBS case, which has kept us busy for quite some time, and to prevent a not inconsiderable harm to the Swiss economy,” Justice Minister Eveline Widmer-Schlumpf told the assembly before the vote.

The United States had accused UBS of helping rich Americans hide almost $20 billion of untaxed money in secret accounts. The tax inquiry came while the bank was already weakened by about $50 billion of write-downs on toxic assets and put its survival at risk.

The Swiss government has repeatedly said that failure to get parliamentary backing for the deal would damage UBS and possibly other Swiss banks at a time when the country is under international attack over its bank secrecy laws.


Reuters

www.nytimes.com/2010/06/04/business/global/04ubs.html?dbk

[sandi66]

Wyant: Pigford case continues to haunt black farmers and USDA staff

Published: Jun 03, 2010 1:05 pm - 0

By Sara Wyant
Special to the Farm Forum

I started my professional journalism career in 1980, just in time to witness hundreds of heart-wrenching stories unfold as families were unable to borrow money and keep their farming operations afloat. With the prime interest rate reaching 20% in January 1981, it was often difficult for even the best of farmers to hang on, while lender after lender pulled back.

If you were unable to get credit anywhere else, there was the “lender of last resort,” known then as the Farmers Home Administration (FmHA). But there were still no guarantees that you would be able to survive in farming during those extremely volatile times.

In 1994, the USDA was reorganized and the functions of FmHA were transferred to the Farm Service Agency (FSA). It was during the early part of that decade that an equally heart-wrenching story started to play out, primarily in FSA offices across the South. Black farmers claimed that they were unable to obtain financing or get the same type of equal treatment as white farmers because of their skin color. Eventually, they joined forces and filed a class action lawsuit against USDA.

The original lawsuit, named after North Carolina farmer Timothy Pigford, was settled in 1999.The first Pigford case awarded more than $1 billion in payments and debt relief to black farmers, but tens of thousands of farmers claimed that they were not aware of the settlement and missed the filing deadline. Over a decade later, this story continues to unfold with black farmers pushing Congress to provide at least another billion dollars to pay for those late filers.

It's an emotional and racially-charged issue, especially for John Boyd Jr., the head of the National Black Farmers Association, who has fought tirelessly on behalf of his fellow farmers. Boyd says many of the farmers seeking help are elderly and may not live to see these cases resolved.

“We needed $2.5 billion, but I didn't want to tie us up in federal court anymore,” Boyd told Agri-Pulse during an interview earlier this year. “I looked at the faces in the South and these people are old. That made me say, hey, let's settle this case and let's get the money to the farmers and help as many as we can.” He estimated that only about half of the 80,000 farmers seeking restitution will eventually get it.

White House priority

Settling this case is clearly a priority for the White House and USDA. Secretary Vilsack described a $1.25 billion funding agreement reached between the Administration and advocates for black farmers early this year as “an important milestone in putting these discriminatory claims behind us for good and in achieving finality for this group of farmers with longstanding grievances." All the Obama Administration needed was for Congress to appropriate the money, which lawmakers seem prepared to do next week as part of a tax and finance package.

However, confronted with the skyrocketing federal deficit, more officials are taking a critical look at the billion dollars spent thus far and wondering when these discrimination cases will ever end. Already, the number of people who have been paid and are still seeking payment will likely exceed the 26,785 black farmers who were considered to even be operating back in 1997, according to USDA. At that time, sources predicted that, at most, 3,000 might qualify.

At least one source who is extremely familiar with the issue and who asked to remain anonymous because of potential retribution, says there are a number of legitimate cases who have long been denied their payments and will benefit from the additional funding. But many more appear to have been solicited in an attempt to “game” the Pigford system. For example, our source said a large number of late filers had similar zip codes in large Ohio cities, suggesting a door-to-door effort might have taken place to find likely candidates.

In an attempt to verify these allegations, I filed a Freedom of Information Act (FOIA) request, asking USDA to provide the names and locations of those individuals who had received payments under all of the Pigford cases. However, unlike the farm program payment data released by USDA, the agency denied access to the Pigford information, citing an “unwarranted invasion of personal privacy.”

The agency did provide the total number of claims by state for cases that have already been decided as of June 30, 2009 (see table). This data does not include information on the late filers who could presumably be covered by the additional $1.25 billion.

As the table indicates, Alabama and Mississippi had the largest number of payment recipients under “Track A” which provided a flat $50,000 fee -plus relief in the form of loan forgiveness and offsets of tax liability ($12,500). These numbers seem to correspond with the outreach conducted and the large number of black farmers in those states. However, in Illinois, 163 people received checks under the Pigford I settlement as of last year, even though Ag Census data from 2002 indicates there were only 78 black or African American operators in the state.

USDA sources say the location of the check recipient may not be indicative of where the Pigford class member farmed or attempted to farm. The claimant may have been denied access to USDA programs, given up farming and moved to another state. Or the claimant may have died, and the check was sent to his or her heirs.

This could explain why 14 individuals in Washington, D.C. received payments as a result of the Pigford case. Another possible reason for the variance in numbers between the Ag Census and the Pigford cases is that multiple individuals could be farming together, even though only one operator was identified by the Census.

USDA tried to address the potential for undercounting in the 2002 Ag Census. In addition to the principal operator, information was gathered on up to two additional operators for the first time that year. When three operators per farm could be reported, a total of 30,605 farms in the U.S. had Black or African-American operators in 2002. The total jumped slightly, to 32, 938 farms operated by African-Americans in the 2007 Census.

If the Ag Census data is correct, it still seems difficult to understand how the number of people filing Pigford claims could be more than double the number of black farmers in the U.S. Unfortunately, few people at USDA are willing to even discuss this topic, for fear of appearing racist.

In the interest of transparency, it would seem helpful to have USDA provide the names and more information about who has or will be receiving payments under the Pigford cases. Adding more “sunlight” to this issue might help close another heart-wrenching chapter in farm loan history.

www.farmforum.net/node/21372

The suit:

The Pigford Case: USDA Settlement of a
Discrimination Suit by Black Farmers
Tadlock Cowan
Analyst in Natural Resources and Rural Development
Jody Feder
Legislative Attorney
April 21, 2010

www.nationalaglawcenter.org/assets/crs/RS20430.pdf

[sandi66]

Swiss take next step to end bank secrecy - Switzerland moved a step closer to ending its centuries-old laws which have protected the secrecy of the country's banks on Thursday after a key parliamentary vote.

By James Quinn, US Business Editor

Published: 6:15AM BST 04 Jun 2010

The upper house of the Swiss parliament ratified an agreement made by the Swiss government to hand over the names of thousands of UBS clients to the US.

The vote is seen as a major step forward in the US taxman's attempts to get his hands on the names of 4,450 of UBS's American clients as part of a wider investigation into tax avoidance.

However, in a separate vote, the lower house of the Swiss parliament – the Federal Assembly - will next week have to approve the Swiss-US deal, signed in August 2009 as part of a deal to drop tax evasion charges against the Swiss bank.

As part of that deal, the names of approximately 250 of the wealthiest people on UBS's US offshore client list have already been handed over. August 19, 2010 is the deadline for the remaining names under the agreement signed with the Internal Revenue Service and the US Department of Justice.

Prior to the deal, the US was accusing UBS of assisting wealthy Americans in hiding almost $20bn (£13.7bn) of assets in offshore accounts. As part of the settlement, UBS paid a fine of $780m in order to avoid criminal charges.

www.telegraph.co.uk/finance/newsbysector/banksandfinance/7801358/Swiss-take-next-step-to-end-bank-secrecy.html

[sandi66]

4 June 2010

Swiss Upper House votes in favor of US-UBS settlement

The Swiss parliament’s Upper House on Thursday endorsed a legislation intended to allow Bern to hand over account details of 4,450 UBS clients suspected of offshore tax evasion by the US, according to a report in The Wall Street Journal.

The bill, which could possibly be put to a popular referendum, requires the approval of the lower house - expected early next week.


www.wealth-bulletin.com/wealth-business/content/4063234988/

[sandi66]

United States: Changing the game for off-shore withholding and disclosure

4 June 2010

Over the last 18months, the offshore activities of United States taxpayers have been the subject of considerable attention, both in the media and from U.S. policymakers. This scrutiny included the highly visible criminal indictment against international banking titan UBS. The motive behind the criminal indictment was to compel UBS to disclose the identities of thousands of U.S. account holders.

On the heels of the UBS enforcement activity, the Internal Revenue Service (IRS) launched a voluntary disclosure program designed to encourage U.S. taxpayers to disclose offshore accounts that had not previously been disclosed. Participating in the voluntary disclosure program allowed U.S. taxpayers to avoid criminal prosecution and potentially reduce the draconian civil penalties that are imposed for failing to disclose an offshore account. During the process, the IRS informally suggested that foreign offshore accounts that are subject to taxpayer disclosure might include a much broader category of interests, such as equity interests in private equity or hedge funds. The rationale for increasing disclosure is to increase compliance with U.S. tax laws and reduce incidences of tax evasion and money-laundering activities. Increasing the disclosure of the offshore activities of U.S. taxpayers has, thus, been at the forefront of U.S. tax compliance initiatives.

On March 10,2010, the Hiring Incentives to Restore Employment Act of 2010,popularly known as the HIRE Act, became law in the United States. The primary purpose of the HIRE Act is to provide incentives to businesses to encourage job creation. In an era of rapidly expanding federal deficits, to offset the costs of incentives to the federal budget, legislation will often include revenue-raising measures. One such revenue-raising measure in the HIRE Act is a rider that will impact cross border activities by significantly increasing the disclosure of cross-border investments and modifying withholding rules for payments made to certain offshore entities. The rider to the HIRE Act is the Foreign Account Tax Compliance Act (FATCA).

FATCA was the subject of a March 2010 article in Casino Enterprise Management, "A Legislative Assault on Tax Havens," which provided a nuts-and-bolts overview of the FATCA rules. IRS officials recently publicly stated that its offshore compliance initiatives would continue to be a priority. Now that FATCA has been enacted as part of the HIRE Act, the practical application of the new requirements for the gaming industry is worthy of further discussion. Both U.S. and foreign businesses will feel the impact of the new rules, which will go into effect for payments made after Dec.31,2012.

Rule Recap
Absent meeting an exception, the HIRE Act imposes a withholding tax on any person making a U.S.-sourced payment to either a "foreign financial institution" or a "non-financial foreign entity" equal to 30 percent of the amount of the payment.

The types of U.S.-sourced payments caught by the withholding tax may include such items as interest, rents, royalties, dividends and wages. The determinative factor is whether the payment is derived from sources within the U.S. The U.S. federal tax law establishes income-sourcing rules. For example, the source of a dividend payment is determined based on the place of incorporation of the payer. Thus, a Delaware corporation would be considered to pay dividends in the U.S.and the dividend payments would be sourced to the U.S.Different income-sourcing rules apply to rent and royalties, which typically consider the payment to be sourced to the place where the property is used.

At first blush, it would appear that only a narrow scope of payments will be caught by the new withholding tax based on the identity of the payment recipient. That is, the payment must be paid to either a "foreign financial institution" or a non-financial entity. The definition of "foreign financial institution" casts a wide net to capture entities that are normally not considered to be a financial institution. The HIRE Act defines a financial institution in a manner that includes any entity that may (1) accept deposits in the ordinary course of a banking or similar business; (2) hold financial assets for the account of others as a substantial portion of its business; or (3) is engaged primarily in the business of investing or trading in securities, partnership interests, commodities or any interests of the foregoing. The legislative history to the HIRE Act acknowledges that a foreign financial institution could include investment vehicles, such as hedge funds and private equity funds. Even if the foreign business escapes qualification as a foreign financial institution, it is likely to fall within the catchall category of foreign non-financial entities.

To avoid the 30 percent withholding tax, a foreign financial institution must enter into an agreement with the IRS to annually disclose detailed information. For a foreign financial institution, the information required to be disclosed concerns the financial institution's "United States accounts." The information that is required to be disclosed includes identifying the account holder, the account balance or value, and the gross receipts and gross withdrawals or payments from the account. If an account holder refuses to disclose the required information to the foreign financial institution, the 30 percent withholding tax will apply.

Non-financial entities must disclose the identity of any substantial U.S. owner.
Consistent with the robust nature of the withholding tax, the obligation to disclose "United States accounts" is similarly broad by virtue of adopting an expansive definition of the term "United States account." An account includes not only traditional financial institution accounts— namely, depository and custodial account—but also reaches any equity or debt interest in the financial institution. The HIRE Act carves out equity or debt interests that are publicly traded. Accounts held indirectly by a U.S. taxpayer are also considered to be a "United States account."

The HIRE Act also imposes new disclosure obligations on individuals by requiring the disclosure of offshore accounts and assets worth $50,000 or more. Failure to disclose is subject to a penalty equal to $10,000 for each tax year. An underpayment of tax that is attributable to an undisclosed foreign financial asset is subject to a penalty equal to 40 percent of the understatement.

The HIRE Act also imposes new disclosure obligations on individuals by requiring the disclosure of offshore accounts and assets worth $50,000 or more. Failure to disclose is subject to a penalty equal to $10,000 for each tax year. An underpayment of tax that is attributable to an undisclosed foreign financial asset is subject to a penalty equal to 40 percent of the understatement.


Practical Applications
From a 30,000-foot view, the new withholding and disclosure rules would seem to apply to a limited set of financial transactions that involve traditional bank accounts. Digging deeper into the statutory language, however, reveals that the new withholding and disclosure rules can have a much more expansive reach. Specifically, common organizational structures used by U.S. businesses with offshore relationships could trigger a withholding and/or disclosure obligation. Furthermore, foreign entities that may have U.S. activities could also be pulled within the reach of the new withholding and disclosure rules.

Consider the following organizational structure, which is graphically illustrated in Figure 1.Suppose International Gambling Co. enters into an agreement with U.S. Gaming Corp. to license the use of certain intellectual property rights in the United States.U.S.Gaming Corp.agrees to pay a $100 annual royalty to International Gambling Co., which may be subject to no or a low withholding rate under a tax treaty. Further, assume that International Gambling Co. has two minority shareholders who are U.S. residents. International Gambling Co.conducts an active business in the gaming industry.

Under the new withholding and disclosure rules, U.S.Gambling Co. would be required to withhold $30—that is,30 percent of its $100 royalty payment—unless International Gambling Co.entered into a disclosure agreement with the IRS. While International Gambling Co.may not qualify as a foreign financial institution (i.e., it does not accept deposits, hold financial assets or engage in the business of investing in securities), the withholding tax applies to non-financial foreign entities as well. To avoid the withholding tax, International Gambling Co.would have to disclose any U.S. substantial owner or certify it has no U.S. substantial owner.

As this example illustrates, the new withholding and disclosure rules can have a wide impact for both U.S.and foreign businesses. For a U.S. business, a withholding obligation may be triggered for payments it makes to foreign business entities. Similar to other withholding taxes, the payer (U.S.Gaming Corp. in the example) is primarily liable for the payment of the tax.

For foreign businesses, immediate economic returns can be impacted because the business will receive less if the 30 percent withholding tax applies. While the foreign business (or ultimate beneficiary of the payment) can seek a refund from the U.S., the U.S. now has 180 days to pay without interest accruing. Hence, the U.S. can receive funds interest free on a short-term basis. To avoid withholding, a foreign business subjects itself to new disclosure and reporting obligations, which can add administrative costs.

To determine whether the new withholding and disclosure rules apply, businesses can examine several steps. These steps include:

Determine whether the foreign entity is a foreign financial institution. If not, the business entity may still qualify as a foreign non financial institution.
Determine the type of payment. That is, what is the payment made for? For example, does the payment represent rent, debt repayment or dividends?
Determine whether the foreign entity has entered into an agreement with the IRS. For a non-financial institution, does the foreign entity have U.S. substantial owners? If not, a certification may negate the withholding tax. Similarly, for a foreign business, it is important to determine whether it has any "U.S.accounts" or U.S. substantial owners that itmay have to disclose to the IRS.
Finally, the U.S. entity making the payment must determine whether it has an independent disclosure obligation to the IRS.
Final Thoughts
A variety of common international transactions can become ensnarled in the new withholding and disclosure rules enacted as part of the HIRE Act. The above example illustrates a business transaction that could be subject to the withholding and disclosure rules. Other common business transactions, such as use of foreign debt financing entities or investments in private equity or hedge funds, may similarly be subject to the new withholding and disclosure rules. This means that payments, such as debt repayments, could be subject to withholding. The implications of these new rules are not solely for U.S. businesses to consider. Foreign businesses can be impacted as well, because payments may be subjected to a 30 percent withholding tax and because they may be obligated to disclose information to the IRS.

www.mondaq.com/unitedstates/article.asp?articleid=102002

[sandi66]

Cayman Islands in the foreign press


Published on Friday, June 4, 2010 Email To Friend Print Version

About 90% of the world’s superyachts fly the Cayman flag

LONDON, England: Superyacht Times, June 2, 2010 – Italy and superyachts seem to mix less well than oil from a leaking BP platform and water at the moment. Like the oil spill off the Florida coast, the recent reported activities of the Guardia di Finanza in seizing super yacht Force Blue on the Italian Riviera – using, it is reported, armed police and gunboats – seems to be wholly unexpected and shocking. But in the present feverish financial climate, powerful local prosecutors in Italy are flexing their muscles at perceived tax evasion, real or imagined, aided by a possible lack of understanding of the finer points of EU and international law that is not helping matters.

Much has been made of the fact that Force Blue flies the Cayman flag – but then again, about 90% of the world’s superyachts fly the Cayman flag. It is a highly regarded “Red Ensign” flag with a strong international reputation, on the “white list” of quality flags as identified in the respected Paris memorandum of understanding. The Cayman Register is sophisticated and follows the guidance of the UK Maritime Coastguard Authority (MCA).

In terms of regulatory compliance, it is hard to criticise the Cayman Islands Flag – it is first class. However, it is thought that some in the Guardia Di Finanza see the use of the Cayman flag as a sign the owner is trying to avoid tax.

There is obvious financial and local political pressure on the authorities in Italy and elsewhere to crack down on tax abuse and high net worth individuals and their assets are obvious targets. Superyachts are worth tens of millions or more – quite a prize. And bear in mind that in Italy, it may take at least 6 months before a final decision is rendered regarding a yacht seizure, so even if the case is thrown out, it will have cost the owner a small fortune in lost charter hire or simply inconvenience and embarrassment. Worse still, if the case is lost, the result may be that the yacht is sold with the state keeping the proceeds.

Regulatory compliance with international shipping standards and tax are two different things but there may of course be a link in that the owners of most superyachts are not people, but offshore companies, quite possibly also Cayman registered, and this is, of course, done for tax purposes.

www.caymannetnews.com/news-21307--1-1---.html

[sandi66]

INTERNET LAW - International Offshore Financial Centers Taxation Regimes

Alain Megias, IBLS

Many e-businesses are considering moving offshore because of the advantages related to offshore jurisdictions’ tax regimes. Although International Offshore Financial Centers (“IOFC”) have been under pressure from part of Western high-tax countries these last few years, they managed to preserve their attractive tax regimes.
Tax issues are often the main motivation for e-businesses operating in high tax countries, and clearly, the financial incentives available offshore may be rewarding. IOFC’s no-tax or low-tax environment offers legal ways for e-businesses to reduce their tax bills. However, since September 11, Western governments have become aware of the existence of international money laundering schemes used to finance terrorism, as well as the existence of massive tax evasion through offshore schemes, notably in the US. As a result, companies operating from IOFCs are closely watched.


What is a tax haven/IOFC?

A tax haven has been defined by the IRS as a country that provides a no-tax or low-tax environment. The term “tax haven” is sometimes used interchangeably with “International Offshore Financial Center” and consequently these terms are hard to distinguish. Some authors define tax havens as territories offering very low local tax exposures for foreigners, and offshore financial centers as territories with specific tax advantages designed to operate across a wide range of offshore financial service industry activities and which have infrastructure and legislative support for such activities.


What are the characteristics of offshore financial centers tax regimes?

Although tax legislation varies among IOFCs, there are some characteristics that are common to most of them. The common characteristics of tax havens are:
•Virtual absence of tax on personal, corporate income or capital;
•Bank secrecy and strict privacy laws;
•Nil or low withholding taxes on remittances from the tax haven;
•No exchange control restrictions on foreign capital;
•Wide range of local professional services, notably legal and tax advisers.



Can these tax regimes be expected to remain untouched?

International organizations such as the OECD and the European Union have long been concerned with “harmful tax competition” and “unfair tax practices” that they associate with offshore jurisdictions. As a result, in 1998, the OECD issued a report entitled “Harmful Tax Competition: An Emerging Global Issue.” This report identified factors that could undermine the integrity and fairness of tax systems and it listed four criteria to determine the harmful aspects of a particular jurisdiction and identify it as a so-called tax haven. These criteria are (i) no, or nominal, taxes and no, or low, effective tax rates; (ii) lack of effective exchange of information; (iii) lack of transparency; and (iv) no substantial activities. Under the OECD initiative, tax havens were blacklisted, and had to bring themselves into compliance with requirements or risk being subject to sanctions. Many tax havens had to seek an agreement with the OECD in order to get out of/stay off the black list. These agreements took the form of letters of commitment, under which tax havens accepted to share bank account information with foreign governments conducting criminal tax evasion investigations in certain circumstances. Many tax havens made concessions in order to maintain their tax characteristics and remain free of income tax, corporation tax, capital gains tax, etc. Running alongside the OECD initiative is the Financial Action Task Force (“FATF”), which role is to promote coordinated action on money laundering. FATF has its own blacklist, and pressures offshore jurisdictions to establish effective mechanisms for locating financial crime. These mechanisms include monitoring agencies and exchange of information.

www.ibls.com/internet_law_news_portal_view.aspx?s=articles&id=7946EE01-3EB1-4840-B509-B7AD416F31F8

[sandi66]

June 4, 2010, 1:12 PM GMT

Is China Revaluing Yuan by Back Door?

By Alen Mattich

AFP/Getty Images
China’s 100 Yuan, or Renminbi, notes, the largest denomination in Chinese currency. There are two ways to correct an undervalued currency.

You can let it appreciate relative to other currencies on the foreign exchange market, something China has staunchly refused to do since the start of the financial crisis, whatever the pressure put on it by Washington. Even before the credit crunch, China only pursued the gentlest of revaluation strategies, a slow and steady appreciation.

But that doesn’t mean China can’t, won’t and isn’t revaluing. There’s another path to the same outcome, and it’s called relative inflation. Which is exactly the one China is following, whether intentionally or not.

To see how inflation causes a revaluation, look at what happens from the point of view of an American manufacturer. Exchange rates remain the same, but as long as China’s inflation rate rises by more than the U.S.’s, the cost of production, and therefore the cost of output, will rise by more in China than in the U.S.

And that’s what’s happening.

The most recent data show Chinese inflation running at 2.8%. U.S. core consumer prices in April rose a mere 0.9% on the year. OK, so that’s not a huge difference. But U.S. consumer prices have been flat or falling, whereas in China they’ve been rising sharply. Last July Chinese consumer prices were contracting 1.8% year-on-year. If Chinese inflation continues to run at this pace, as some economists think is highly probable, we could see consumer prices of 6% or more before the end of the year.

For those worried about comparing headline consumer prices in China with core in the U.S., U.S. headline inflation ran at 2.2%. Even so, it might not be a mistaken comparison. Whereas consumer prices, stripped of energy and food, are more indicative of the underlying inflation trend in the U.S., food makes up around a third of the average Chinese consumption basket, according to Lombard Street Research. Stripping out food from Chinese CPI just doesn’t make sense.

And, if anything, Chinese food prices will rise later this year. Recently they’ve been held back by low pork prices, which, in turn, have been kept down by cheap feed prices. But with soya prices expected to rise later this year, so too will pork and, therefore, Chinese food price inflation.

But that’s not the end of it. Minimum wages in Beijing are being raised by 20%, while there are anecdotal reports of wages going up sharply in Shanghai factories as well.

What of China’s 3% inflation target?

It’s true, the Chinese government is sensitive to inflation. With a huge population on subsistence levels of income, fast rising consumer prices can trigger serious social unrest.

But to put too hard a brake on inflation now could well cause the Chinese economy to go into a tailspin were it to puncture the country’s property bubble.

It could well be that China’s policymakers see the best current outcome as a higher-than-targeted rate of inflation to maintain the asset-based part of the economy and to keep the U.S. sweet but not so much that it causes riots in the streets.

blogs.wsj.com/source/2010/06/04/is-china-revaluing-the-yuan-by-the-back-door/

[sandi66]

By: klonopin2mg
04 Jun 2010, 12:28 PM EDT
Rating: Rate this post: Msg. 938756 of 938782
(Reply to 938638 by CHICPICK)

Jump to msg. #
chic'"IT DRIVES YOU NUTS THAT I SOLD"

not hardly Jerry...lighten up, why the attack?

what shook your tree chic', i CONGATULATED you many times on your gains...and i congratulate you again today! if you went short after selling, what's the problem.... as long as it was legal. besides, it's only purported as a logical opinion not factual.

no.... your relationship to jenson Mr D, that concerns me tremendously.

your funds in Canada years ago JERRY, concern me.

you receive free shares/or for work in any stocks chic? simple yes or no, as that too concerns me.

NO SIR! my mind works very clearly.

so what if i have your party pics?

why aren't you telling jokes today?

as for your, "Strong note to follow." fine by me...i have strong opinions myself. you started this attack on others, not me. i simply was defending a friend. is jenson still a friend jerry? simple yes or no

and lastly, don't you and i want the same outcome?

somehow, i don't think so....and your anger enforces that thought...

yours, "IT'S DRIVING YOU NUTS THAT I WANT TO KNOW ABOUT A NON EXISTANT TRUST FUND"

no sir, again you are wrong...and question me this...

how can one "want to know about something that doesn't exist"?

JUST NOT LOGICAL!

ragingbull.quote.com/mboard/boards.cgi?board=CMKI&read=938756

[sandi66]

Swiss Legislators Support U.S. Tax Deal
Berne (June 4, 2010)

By WebCPA Staff

The Swiss Parliament’s upper house voted Thursday in favor of Switzerland’s deal with the U.S. government to share the identities of 4,450 U.S. clients of UBS with numbered bank accounts.

The lower house of Parliament has not yet voted on the agreement, which the two governments signed last August, but a vote is expected next week, according to The New York Times. A Swiss court objected in January to the transfer of the client information, citing violations of Swiss banking secrecy laws, prompting the Swiss Parliament to take up the matter.

A report by Parliament’s oversight committee earlier this week harshly criticized the government’s handling of UBS. The 360-page report blamed the government for waiting five months before it took action to avert the bank’s financial problems and not recognizing the seriousness of the U.S. tax investigation, according to World Radio Switzerland.

The report recommended that Switzerland’s financial services regulator, FINMA, look into whether UBS executives were aware that the bank was violating U.S. tax laws. One Swiss political party wants a special investigative panel to be appointed.

www.webcpa.com/news/Swiss-Legislators-Support-US-Tax-Deal-54470-1.html

[sandi66]

Jobs Report Staggers Financial Markets

JUNE 4, 2010, 2:18 P.M. ET

NEW YORK—A weak U.S. jobs report sent global financial markets reeling Friday as it dashed hopes that a strong U.S. economy would help counter the pressure from Europe's sovereign-debt crisis.

Investors had expected the Bureau of Labor Statistics to come out with a big jobs-growth number, a result that might have helped reinforce a notion that the U.S. economy could serve as a strong support for markets that have been whipsawed by the negative sentiment flowing from Europe. But the data showed far fewer private-sector jobs were created in May, raising questions about the capacity of the U.S. economy to recover without government support.

Although the 431,000 new jobs added in May marked the biggest gain in a decade, it was well below the 515,000 that economists had expected and was heavily inflated by the federal government's Census hiring, which added 411,000 positions. Most important, private-sector jobs grew by a mere 41,000, a sharp reversal from the 218,000 in April.

The data left financial markets precariously poised, with the Dow Jones Industrial Average falling more than 200 points and toying with the 10000 level. The euro fell below $1.20 for the first time since March 2006. Treasurys rallied and commodities including oil and gold fell.

"With the weakness in the U.S. jobs number, all of a sudden the global economic recovery starts to have another big uncertainty over it," said David Watt, senior currency strategist at RBC Capital Markets in Toronto.

The day began badly in Europe, as markets fretted over the comments on Thursday of a senior official from the recently elected Fidesz party in Hungary, who warned that his country is headed toward a Greece-like debt crisis. That helped drive stocks in Europe lower and sent the euro plunging. It also weighed on bonds from other heavily indebted euro zone nations, including Spain, Portugal and Italy. Insurance against default on euro-zone sovereign debt rose, with the price of protection on Spanish, French, Austrian and even German credit default swaps increasing.

The cost of insuring Hungarian sovereign debt against default rose to its highest since July 2009.

Hungary is not a member of the euro zone, but its travails are fueling the perception of a broadening European banking crisis. Hungary's woes are playing out vividly via the euro and the Swiss franc due to the large amounts of Hungarian banking-sector loans that are denominated in francs, said Alan Ruskin, global head of currency strategy for RBS Securities in Stamford, Conn.

The euro fell to a record low of 1.3975 Swiss francs, raising expectations of an intervention by the Swiss National Bank. The SNB, which will meet for a regular quarterly policy-setting meeting in mid-June, declined to comment on the latest exchange-rate development.

With Hungary, "the market fears another Greece situation," said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York. "Fear is taking a toll," he said, on the euro, the Hungarian currency and on riskier assets in general.

The euro has dropped more than 15% against the dollar since the start of 2010 as the sovereign-debt crisis has spread to the euro-zone periphery and now has triggered fears it will infect the region's financial system, and perhaps even stymie the entire global recovery.

In this scenario, the weak U.S. jobs number provided another large reason to sell and raises questions about the longer-term outlook for U.S. stocks and other assets.

"Everyone knew we were in a difficult recovery and that the pace is slow, but this pace is surprisingly slow," said Mike Shinnick, portfolio manager of the Wasatch-1st Source Long/Short Fund. "The longer we go without creating jobs, the more concern we have about is there a real recovery getting going."

The commodity linked Australian and Canadian dollars were harder hit by the softer-than expected U.S. jobs data than was the euro because of their greater sensitivity to growth expectations, Mr. Watt said. The Australian dollar was down nearly 2% against the greenback by around noon in New York.

The flight out of assets perceived to be risky in fixed income played into U.S. corporate debt as well as emerging-market sovereign debt, though the fallout was not nearly as severe in those as it was in the European markets. Both high-yield and high-grade corporate bonds dropped on the jobs data, but only modestly.

Crude-oil futures fell significantly on the payrolls data, though this in part was explained by the rise in the dollar, which tends to make dollar-denominated oil more expensive.



online.wsj.com/article/SB10001424052748704080104575286594048837602.html?mod=WSJ_Markets_LEFTTopNews

[sandi66]

WaMu, shareholders to meet on bankruptcy info2010-06-04 23:30:00
Washington Mutual Inc. has agreed to meet with shareholders seeking information in the company's Chapter 11 bankruptcy, the largest bank failure in U.S. history.

WaMu attorneys on Thursday said they would meet with parties wanting more information and would withdraw a motion setting deadlines for objecting to the company's reorganization plan and outlining rules to obtain information about it.

Judge Mary Walrath postponed consideration of the outline of Washington Mutual's reorganization plan and told attorneys to try to resolve their disputes over information sharing prior to another hearing on June 17.

Her decision came after an attorney for WMI's official committee of equity security holders said WaMu, JPMorgan Chase&Co. and the Federal Deposit Insurance Corp. are stonewalling efforts to obtain information about the bankruptcy and the proposed settlement of resulting lawsuits that is the basis for WaMu's reorganization plan.

The FDIC seized Washington Mutual's flagship bank in 2008 and sold its assets to JPMorgan for $1.9 billion. The parties subsequently filed lawsuits against one another over roughly $4 billion in disputed deposit accounts.

The shareholders are seeking information underlying the proposed settlement, in which JPMorgan agreed to turn over the disputed deposits to Washington Mutual. In return, JPMorgan would receive 80 percent of expected tax refunds resulting from WaMu's prior operating losses, which are valued at about $3 billion, with Washington Mutual getting 20 percent.

WaMu also would get 68.5 percent of a second round of operating-loss tax refunds valued at about $2.6 billion, with the rest going to the FDIC. WaMu's bank bondholders also would be eligible to receive up 5.5 percent of WMI's share of the second round of tax refunds, with a cap of $150 million, but shareholders would receive nothing.

Last month, Walrath directed Washington Mutual to provide information relevant to the settlement to the shareholders committee. But Justin Nelson, an attorney for the equity committee, said WMI, JPMorgan Chase and the FDIC have provided little information.

sify.com/finance/wamu-shareholders-to-meet-on-bankruptcy-info-news-international-kgerEGchghc.html

[sandi66]

Friday, June 4, 2010, 2:18pm CDT

Atlanta Fed CEO says Southeast banks need more time to heal


The Southeastern region of the nation is on the rebound from the rocky two-year recession, but as banks continue to struggle, the prospects for a full recovery remain on shaky ground, according to Dennis P. Lockhart, CEO of the Federal Reserve Bank of Atlanta.

“I have said repeatedly that stabilization of financial markets is a precondition of a return to economic growth,” Lockhart said Friday at the Alabama Bankers Convention, held this year in Braselton, Ga. “Here in the Southeast, the banking industry still needs more time to heal.”

A growing number of economic indicators recently perked up in the Southeast, which is a sign that the local economy is on the right track, he said in the pre-written speech.

For example, retail merchants in the region are seeing increased traffic and sales, homebuilders indicate that new home sales softened recently but remain above the very low levels recorded at the same time last year. Residential real estate agents have reported a recent increase in existing home sales.

However, some challenges still exist. Commercial property markets continue to experience falling rents and rising vacancy rates, he said.

Also, as some banks continue to struggle, more bank failures in the Southeastern region are imminent, he said.

“I believe that banks are stabilizing and, although not improving rapidly, not getting significantly worse as a group,” Lockhart said. “That said, as I look forward, more bank failures in the region are likely.”

Across Alabama, profits at the state’s banks improved modestly in the past year, he said. Return on assets at Alabama banks collectively rose to 0.41 percent, and the percentage of unprofitable institutions declined to 17 percent.

“This performance is far short of early 2007 the days before the recession,” he said. “In that period, ROA was above 1 percent and only 5 percent of banks were unprofitable.”

On the other hand, asset quality for Alabama banks deteriorated in early 2010 compared with last year. And annualized net charge-offs rose to more than 1 percent of total loans, and 4 percent of loans were noncurrent in the first quarter, he said.

birmingham.bizjournals.com/birmingham/stories/2010/05/31/daily32.html

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How changes in community banking are affecting directors and officers liability insurance

June 2010

Chris Rafferty, Aon Risk Services’ Financial Services Group

Challenging macro-economic conditions have negatively impacted companies across all sectors since the 2008 financial crisis. However, financial institutions — particularly community banks — have been among the most severely affected, says Chris Rafferty, vice president of Aon Risk Services’ Financial Services Group.

“This environment has directly impacted banks’ earnings power and capital ratios, and it has had a significant direct impact to the directors and officers (D&O) liability insurance marketplace,” says Rafferty. “Formerly, community banking D&O insurance was available with broad terms, three-year deals and very low premiums. However, the current economic and regulatory environment is changing that, and community bank directors and officers have reason to be wary.”

Smart Business spoke with Rafferty about how community banking is changing and how it is affecting the directors and officers liability insurance marketplace.

Why is the community banking D&O marketplace changing?

For reasons we are all familiar with, the community banking D&O environment has been very challenging. In 2009, 140 banks failed in the U.S., and 50 banks have failed this year as of April 21. The FDIC list of ‘problem banks’ rose to 702 banks at the end of 2009 (up from 117 at the end of the second quarter 2008), representing approximately one in 11 lenders. These bank failures impacted banks both large and small, as 80 percent of the 140 failed banks in 2009 had less than $1 billion in assets.

The anticipated cost of the bank failures is huge, as the FDIC estimates the cost to its reserve fund at approximately $100 billion per the latest projections. According to Gerard Cassidy, banking analyst at RBC Capital Markets, ‘We still see hundreds of bank failures over this cycle, and we’re not certain when the cycle will end. If you assume that the cycle lasts five years and that bank failures began in late 2007 or early 2008, it will be 2013 before we can say it’s over.’

With that as the background, both community banks and the FDIC are girding for long-term instability and the impact that has had — and will have — on the FDIC’s reserve funds and on the premiums that banks pay to the FDIC to support the insolvency fund.

Why is this impacting D&O insurers?

During the savings-and-loan crisis in the 1980s and early 1990s, more than 1,000 banks failed. Of the financial institution firms that failed between 1985 and 1992, the FDIC initiated claims against the former directors and officers of 24 percent of those institutions. If history is any guide, industry observers expect the FDIC to bring suit against a similarly large percent of failed community banks from the current crisis.

When a bank is closed, the FDIC becomes conservator/receiver, and it often petitions the court to ‘stay’ failed bank litigation as per its rights under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989. This stay requires that investors’ claims must be satisfied under the administrative claim procedure of FIRREA, and the FDIC decides which claims get to move forward.

Accordingly, the FDIC generally leads the charge to pursue claims against bank directors and officers to recover losses.

In the wave of bank failures from 2008 until now, the FDIC has begun to investigate many failed banks and make prelitigation demands for payment of civil damages against directors and officers. And in some instances, the FDIC has sent its demand for payment of civil damages directly to D&O insurers of the bank in question.

However, the pace of litigation by the FDIC has not yet reached the level that the D&O insurance industry expects it to.

While the FDIC has not yet brought the expected tidal wave of litigation, D&O insurers are still exposed to other sources of litigation. Banks can also be sued by shareholders — see Sterling Financial Corp., New Frontier Bank, and Alpha Bank and Trust for examples — as well as employees. Many of the D&O claims against community banks in this current environment are related to these sources of litigation, with additional FDIC activity expected to come.

How are D&O insurers reacting?

Historically, four D&O insurers wrote the lion’s share of community banking D&O insurance. However, The Big Four are re-evaluating their books of D&O insurance, and many insureds have been forced to consider other insurers, many of which are relatively new writers of community banking D&O insurance.

The Big Four are tightening underwriting scrutiny for community banks and demanding higher premiums at most all renewals as well as narrowing coverage terms and conditions at many renewals.

What should community bank directors and officers be concerned about?

The most worrisome coverage exclusion some banks have faced at renewal is a regulatory exclusion, which precludes coverage for actions brought by the FDIC, state regulators and the other alphabet soup of regulatory agencies with bank oversight. Community banking directors and officers must be aware of any regulatory exclusion in their D&O programs and must look to procure coverage including regulatory coverage (i.e., without a regulatory exclusion).

The Big Four are particularly unwilling/unable to remove a regulatory exclusion for distressed banks. However, some of the new insurers are much more willing and able to consider providing regulatory coverage.

In the event that a community bank is subject to a memorandum of understanding or other regulatory action, the availability of coverage for regulatory claims is crucial to personal asset protection for the directors and officers.

Chris Rafferty is vice president of the Financial Services Group at Aon Risk Services. Reach him at [e-mail] or [phone].

www.sbnonline.com/National/Article/19879/0/How_changes_in_community_banking_are_affecting_directors_and_officers_liability_insurance.aspx?Category=

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George Osborne set to clash with euro giants

By SIMON DUKE IN BUSAN, SOUTH KOREA

Last updated at 9:56 PM on 4th June 2010

George Osborne is set to open up fault lines with Germany and France over banking reform amid widening fissures in the global drive to prevent a repeat of the financial crisis.

The growing discord will raise fears that the protracted overhaul of the banking industry will be delayed yet further.

The Chancellor will today warn of the dangers of diluting tough new rules aimed at insulating the banking system from future losses.

At a meeting of finance ministers from the world's 20 biggest economies in Busan, South Korea, Osborne will insist that planned measures forcing banks to hold more cash on their balance sheets must be implemented in full.

This is likely to ratchet up tensions across the G20, which is struggling to show unity in the wake of eurozone debt crisis and the ensuing turmoil on global markets.

Germany and France want to allow banks to count complex financial instruments - known as hybrid debt - as a buffer against losses on their loan book.

The two heavyweights of the single currency are concerned that impelling banks to hoard too much cash will rupture credit lines to industry and choke off the economic recovery.

But Osborne wants to 'end the uncertainty' over the stricter capital rules by sticking to the provisional deal reached last year. last night he said: 'One of the things i'll be pressing for is that the agreements that were reached last year on capital, leverage and liquidity are now concluded.'

A final deal on the new 'Basel iii' framework is set to be signed by the end of the year, before being put into force in 2012.

An aide to Osborne said Britain was prepared to delay the implementation of the new capital controls to secure an agreement.

Analysts believe the measures could force banks around the globe to raise as much as £260bn in fresh capital.

At a meeting with Chinese vice premier Wang Qishan earlier this week, Osborne was left in no doubt of Beijing's deep concerns over the towering debt levels across the eurozone, a G20 source said.

Osborne will today argue that deficit nations, such as Britain, must take immediate action to put their finances in order, or risk endangering long-term economic growth.

This message chimes with the austerity drive in Germany, which is attempting to impose similar financial rectitude on profligate eurozone nations like Greece, Spain and Portgual.



www.dailymail.co.uk/money/article-1284110/George-Osborne-set-clash-euro-giants.html?ito=feeds-newsxml

ty colada

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German businesses could steer the country out of the eurozone

Saturday, June 5, 2010
FRANKFURT -- Must Mattheus Schneider's ice cream shop bear responsibility for the future of Greece?

With the euro fighting a crisis that continues to push its value lower, that question about the willingness of German taxpayers and businesses to stand behind economically weaker nations with which they share the euro as a currency could determine whether the continent's decade-old monetary union survives its recent shock or begins to tatter.

Germany's political leadership has pledged the country's credit to back a bailout of Greece as well as a separate nearly trillion-dollar fund to help other countries, but the larger issue of shared responsibility within the eurozone remains to be joined -- and will be central to the future of an area considered one of the pillars of the global economy.

Sharing a currency with Greece is one thing. But sharing a future is another, and Germany's expanding commitment to the eurozone has many here wondering how their own financial plans -- Schneider hopes to turn his Dulce store into a franchised chain -- could be damaged if Europe's problems become too draining and drag down the local economy.

"Even if they ruin [the euro], Germany runs a stable country," said the young German entrepreneur, who said Germany has benefited from the euro so far but should be ready to pull out and reinstate the Deutschmark. "We'll always be able to get loans."

Approval of the bailout programs, coordinated with the International Monetary Fund, has given Greece breathing room to restructure its economy, but the euro had already dropped sharply over concerns that several eurozone governments had accumulated unsustainable levels of debt. Despite the rescue programs, the euro on Friday fell below 1.20 for the first time in four years amid continued concern about government debt and mistrust that eurozone countries will address the region's problems.

The currency union

A more foundational debate lies ahead over the structure of the currency union -- the degree to which the countries are responsible for one another, and the power that central institutions like the European Commission have to enforce common rules. The crisis over the euro began when Greece revealed that it had accumulated debts far beyond the level eurozone countries agree to meet when joining the currency group, a fact that prompted Germany in particular to argue that any bailout needed to be followed by more rigorous rules and better enforcement.

German Chancellor Angela Merkel and French President Nicolas Sarkozy, heads of the two largest and most influential eurozone nations, are set to meet next week to continue talks that could see eurozone countries asked to cede some powers, face investigative oversight by a central statistics agency, and encounter financial and political sanctions if they fail to meet spending and budget limits.

Angelos Pangratis, acting head of the European Union's delegation to the United States, said in a recent presentation that it was "naive" to think that countries like Greece and Germany could not co-exist in a common currency area and that there is broad confidence in the currency zone's survival. But he acknowledged that over the euro's first decade there had not been the "convergence of competitiveness" that eurozone architects thought would even out wages, growth rates and other key variables across the countries involved and help prevent problems like the one that occurred in Greece.

"When we created the euro, we knew there were two conditions," Pangratis said. "You need fiscal responsibility . . . and we must have a convergence of competitiveness."

Instead, the first years of the euro were marked by divergence. Some countries, particularly in the south of Europe, enjoyed lowered interest rates that fueled an economic boom, pushed up wages and contributed to asset and price bubbles that are now being painfully corrected. Some governments borrowed well beyond their means.

It was a risk identified early on.

"The euro is a currency without a foundation in a state," then-IMF managing director and future German president Horst Kohler said in 2001, two years after the euro's inception. That, he said, left a "question mark" over the future of the currency unless it could be "underpinned by greater political cohesion among member states."

Short of 'optimal'

On some fronts, the euro remains short of what economists would regard as an "optimal currency zone." In the United States for example, wide differences in wage and growth rates among states would prompt people to migrate from less prosperous areas, a fluid movement of labor aided by a common language and culture. The movement of labor is not as dynamic among the nations of the eurozone. Where the United States' large federal budget and common federal regulations can help even out economic differences among the states -- areas with large numbers of children from poor families, for example, would receive more in federal school lunch subsidies -- the European Union's central budget is tiny by comparison and not used in the same way.

It has taken a decade, but the implications of that design weakness are now on full display, from the budget cuts and possibility for social turbulence in Athens and Madrid, to the skepticism often encountered among Germans.

There is still a conviction here, for example, in a nation preoccupied with the dangers of inflation, that the original conversion from the Deutschmark to the euro led to a rise in price, a point that economic studies have refuted but that remains a point of anecdotal faith for people quick to recount how a candy bar that cost one and a half marks suddenly cost the equivalent of two marks after the euro was introduced.

In Athens, the focus is on outside powers -- a hazy cabal of the IMF, international bankers and the government in Berlin -- clamping down on the Greek government for what are perceived to be their own purposes. In Madrid, powerful labor groups have threatened a showdown over recent public wage cuts.

Few think the currency union will break up over such tensions. But it does mean that some long-standing issues may finally have to be addressed.

"Everybody knew the situation. Everybody participated. Everybody made money," Vassilis D. Kaskarelis, Greek ambassador to the United States, said in a recent talk to the Greater Washington Board of Trade. "Now it is time to pay the bills."

www.washingtonpost.com/wp-dyn/content/article/2010/06/04/AR2010060404815_2.html?hpid=topnews

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Saturday, June 5, 2010 - 09:12

ECB's Trichet: Euro is a 'Credible,' 'Solid' Currency
.
BUSAN (MNI) - European Central Bank President Jean-Claude Trichet declined to comment directly on recent euro weakness when asked by reporters about the single currency's approach toward parity with the U.S. dollar.

But he did say there has been a problem with "translation" in the understanding of the euro recently.

"The euro is a solid currency, a credible currency, a currency that has kept its value in terms of price stability," he said at a press conference on Saturday following the Group of 20 meetings.

Trichet noted that Eurozone inflation was at 1.95% at the end of the year and pointed out "the quality of a currency which keeps its value so exceptionally well, better than any particular economy in Europe for instance over such a period of time since World War 2, is a currency which has a major asset in the eyes of domestic and external investments."

He also said he welcomed the support of the world for Europe's current financial crisis and compared it with the support given the U.S. during its debt crisis.

"In the time where the U.S. authorities had to cope with acute problems the world was supporting them. I felt the same support with what we were doing in Europe," he said.

imarketnews.com/node/14488

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Geithner urges China to resume exchange rate reform

June 5, 2010 - (AFP) – 46 minutes ago

BUSAN, South Korea — US Treasury Secretary Timothy Geithner urged China on Saturday to let the yuan appreciate as a critical part of its economic reforms.

Geithner, speaking after a Group of 20 finance ministers' meeting, said the grouping had discussed "a more flexible exchange rate policy" in China.

He said revaluing the yuan was an important part of wider economic reforms pursued by Beijing to make its economy less dependent on exports and drive up domestic demand.

"China has laid out very ambitious reforms designed to help strengthen growth in household income, consumption growth and to strengthen domestic demand," he said. "A necessary part of that reform is to resume reform of their exchange rate mechanism."

In a communique following the two-day meeting, the G20 warned that market convulsions sparked by Europe's debt crisis posed major challenges to the global economy. They did not single out specific currencies for mention.

Critics of China's currency policy say Beijing keeps the yuan artificially low to make the country's exports cheaper than those of rivals.

Speculation had grown in recent months that China was ready to allow a gradual yuan appreciation. Analysts say that now looks unlikely because the government will seek exchange rate stability as the European sovereign debt crisis rages.

At recent annual talks with the United States, President Hu Jintao said China would adjust its exchange rate policy at its own pace.
Beyond the yuan issue, Washington is concerned about accusations China is skewing its trade and investment climate in favour of domestic companies.

However, in his comments Geithner framed the yuan issue as part of a wider effort to rebalance the global economy.

"A shift towards higher saving in the United States would need to be complemented by strong domestic demand growth in Japan and in the European surplus countries," he said.

www.google.com/hostednews/afp/article/ALeqM5ji-I7mjVXQoVKghX2Y134yIA5hdg

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Foreign exchange rates in Hong Kong -- June 5

Posted on: Sat, 05 Jun 2010 06:13:47 EDT

HONG KONG, Jun 05, 2010 (Xinhua via COMTEX) --
The following are foreign exchange rates against Hong Kong dollar released on Saturday by the Bank of China (Hong Kong) Limited:

Buying Selling

Japanese yen 847.00 851.20

Swiss franc 668.60 672.30

British pound 1,126.45 1,133.50

Australian dollar 644.25 647.65

Canadian dollar 731.70 736.35

Euro 932.25 937.85

U.S. dollar 778.45 780.35

(The above exchange rates are expressed per 100 units for the foreign currency, except per 10,000 units for the Japanese yen.)

www.tradingmarkets.com/news/stock-alert/bachf_foreign-exchange-rates-in-hong-kong-june-5-967109.html

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NOCZIM accuses Central bank of making fictitious payment

SATURDAY, 05 JUNE 2010 11:56


The National Oil Company of Zimbabwe (Noczim) has accused the Reserve Bank of Zimbabwe (RBZ) of making a false payment of $15,1 million for the fuel the parastatal supplied to farmers under a central bank quasi-fiscal facility in 2008.

Noczim is also accusing the central bank of tampering with its bank deposits amounting to $18 million.

The deposits – held by the RBZ – comprised $15,1 million “purportedly made by the RBZ into the Stanbic account on behalf of the farmers under an RBZ farmers' facility” and $2,9 million made by Noczim’s customers into its ZB account, according to minutes of the company’s extraordinary board meeting held in April this year.

The matter came to light when Noczim payments to the Zimbabwe Revenue Authority (Zimra) and the Zimbabwe National Roads Agency (Zinara) could not be honoured allegedly owing to insufficient funds.

At the time Noczim sent the payment instructions, deposits made by its customers other than the RBZ were also not available, an indication that the central bank had diverted the funds.

The RBZ incurred the largest proportion of its $15,1 million debt – $13 million – when it set up a fuel facility for farmers and then requested Noczim to make fuel available to them through that arrangement.

By February last year, the central bank had only managed to offset $11,5 million through a reverse fuel supply to Noczim, leaving an outstanding balance of $6,5 million.

“Of this total amount of $18 million, the company accessed fuel worth $11,5 million purchased by RBZ leaving out a balance of $6,5 million as owing by RBZ to the company,” Noczim said in the minutes.

“The company sent payment instructions to its banker to pay Zimra and Zinara dues, these payments were not honoured.

The Ministry of Energy was advised of this position at the time it happened.” The RBZ is also accused of sidetracking the foreign currency deposits of gold mining companies amounting to $35 million, as well as foreign currency belonging to non-governmental organisations and other foreign currency account holders during 2008.

To date, the monetary authorities have literally failed to pay back the improperly-acquired obligations, including redeeming gold bonds it issued to mining companies as payment.

The RBZ debt to Noczim has aggravated the beleaguered state-owned enterprise’s financial doldrums as it also owes a number of foreign suppliers of fuel over $90 million, as at March 20 this year, which it has no capacity to settle.

The government also owes the parastatal $2,2 million through fuel advances it received during the transition to the multi-currency system.

Government departments that owe the oil company include Airforce of Zimbabwe, District Development Fund headquarters, Ministry of Finance, Parliament of Zimbabwe, President’s Department, the Zimbabwe National Army, Zimbabwe National Army Staff College and Zimbabwe Republic Police.

www.zimdiaspora.com/index.php?option=com_content&view=article&id=3443:noczim-accuses-central-bank-of-making-fictitious-payment&catid=67:art&Itemid=289

[sandi66]

The Case for $5,000 Gold: And How to Profit

Written by: Martin Hutchinsonon June 5, 2010


Topics:Goldman Sachs Group, Inc. (US Composite:GS), Greece, Spain, Portugal, Ireland, Italy, Euro, EUROZONE INTERNATIONAL CO SRL, S. Africa, Gold, BGI iShares COMEX Gold Trust (NYSE:IAU), East Texas Financial Services Inc. (US Composite:ETFS), ETFS Physical Swiss Gold Shares (Pacific:SGOL), India, USA, U.S. Dollar, IMF, China, ETF (Jakarta:R-LQ45X), ProShares Ultra Gold (Pacific:UGL), Gabelli Global Gold Natural Resources & Income Trust (US Composite:GGN), Newmont Mining Corp. (Holding Co.) (US Composite:NEM), Copper, Australia, Peru, Indonesia, Ghana, Canada, Mexico, Aurizon Mines Ltd. (US Composite:AZK)
The gold bull is unstoppable.

Gold prices are up fourfold since 2001 and hit a new record high near $1,250 an ounce on May 14. But they're still nowhere close to finished.

In fact, another four-fold increase could be in the cards.

It sounds like a gold bug's dream. But looking back to the last inflation-adjusted peak price in 1980, it's far from impossible that the gold price could soon go above $5,000.

Increased demand for gold along with dwindling supplies (there's a reason it's a "precious" metal - there isn't much of it!) are creating a perfect storm: a storm that could send gold to unprecedented highs. Read on to learn the case for $5,000 gold... and for four specific ways to profit.

Forecasting Skyrocketing Gold Prices
A recent survey of more than 75 gold market experts by David Bradshaw, editor of the brokerage newsletter Real Money Perspectives, found that most see gold topping $1,500 an ounce in the not-too-distant future, with $2,000 not far behind.

Even a few who are cautiously pessimistic, like Goldman Sachs Group, Inc (NYSE: GS), which last month cut its 2011 gold price outlook, still foresee higher prices - Goldman's new estimate is $1,350 an ounce, down from $1,425.

It's easy to see why so many analysts anticipate higher prices. The European debt contagion that's being driven by Greece, Spain, Portugal, Ireland, and Italy - collectively referred to as the PIIGS - has weighed the euro and undermined confidence in the European banking system.

In fact, the euro - which has fallen below $1.25 - could be in danger of failing as a currency.

Investors are rushing into gold to hedge against the Eurozone's financial turmoil. And because that the euro is the reserve currency for many nations, its drop in value translates to a higher price for gold purchases made in euros. Both these catalysts will continue to bolster gold prices until the underlying issues are resolved.

However, several other factors also contribute to gold's price movements, and most appear biased to the upside for the near future...

Supply and Demand
The earth has a finite supply of gold, and the increasing difficulty involved with retrieving the yellow metal is making it steadily harder to keep up with demand - especially since some long-time production leaders are now exhausting their reserves. South Africa, for example, produced 74% of the world's new gold at the turn of the century, but that has now dropped to 19%.

Estimates put the world's existing stock of processed gold at 160,000 metric tons, with about 2,400 tons being added each year. That amounts to a growth rate of just 1.75%, well below the worldwide increase in demand (though recycling of "used" gold, which accounts for about 30% of new supply each year, helps offset some of the imbalance).

Cumulatively, recent demand has outstripped supply by more than 1% a year, and that rate is accelerating - in part due to the introduction of exchange-traded funds (ETFs) that back their shares with stores of physical gold. The three largest - SPDR Gold Trust (NYSE: GLD), iShares Gold Trust (NYSE: IAU) and ETFS Physical Swiss Gold Shares (NYSE: SGOL) - now hold nearly 1,400 tons of gold, or more than half of annual production.

That will not only provide a basis for future gold price increases, but also provide a foot to put the brakes on any corrections.

One other demand consideration is also worth noting. Because of the weak economy and tightened personal finances, individual consumer demand for physical gold - both as an investment and in jewelry - still lags levels of a decade ago. However, that's starting to change - the World Gold Council reported recently that consumer demand in India surged to 193.5 tons during the first quarter of 2010, up nearly 700% from the same period a year ago.

As consumer demand for gold rises - both for hedging and jewelry - it feeds on itself. With financial uncertainty topping the daily news, ways to deal with it move to the front in both investment planning and cocktail party chatter. Nearly every financial advisor is now suggesting investors put some of their assets - usually 5% to 20% - into gold, which supports prices.

Inflation on the Horizon
As already noted, the euro has taken a beating recently - but it's not the only currency that's suffering. What's more, many analysts believe the ill-advised and poorly executed efforts by governments to "stimulate" the global economy out of recession will ultimately debase all of the world's paper currencies.

Just as an example, the United States is now $13 trillion in debt and, even with the artificially low rates still being mandated by the Federal Reserve, will have to pay $224 billion in interest this year - and even more in the future as spending and rates increase.

That situation is leading many economic pessimists - and nearly all gold bugs - to argue that the dollar will eventually be worthless, leaving gold as the only accepted form of exchange.

Turn the currency-devaluation issue around, and it becomes inflation - always a justification for higher gold prices.

Based on (the rate of) consumer price inflation, the peak of $875 an ounce for gold in 1980 is equivalent to about $2,300 today.

And, if you scale up gold's price to the rate of growth in economic output, which has increased six-fold since 1980, it could justifiably top out around $5,300 an ounce.

Central Banks Stock Up
Central banks - the monetary authorities for the world's nations - are the largest traders of gold, buying and selling as needed to support their currencies and fund global trade. For the past two decades, central banks have been net sellers of bullion - but that has reversed in the past year.

Since early 2009, banks from emerging nations have turned into net buyers of gold. India, for example, bought 200 tons of gold from the International Monetary Fund (IMF) late last year, boosting its holdings to 6% of its total foreign exchange reserves. India's gold holdings peaked in 1994 at 20% of its foreign exchange reserves.

Meanwhile, China has been a huge net buyer of gold over the past five years, reportedly increasing its bullion reserves from 600 tons to 1,054 tons, and it will have to continue building reserves if it hopes to encourage global acceptance of the yuan in international trade.

So, there are plenty of arguments underlying the overwhelmingly bullish outlook for gold in the near future. Given the current levels of global uncertainty - economic, political and otherwise - it would be foolish not to include some form of hedge in your portfolio.

And, gold remains the classic choice in filling that role.

Getting Your Hands on Gold
Other than the obvious method - physically buying gold bullion or coins - here are four ways to add some glitter to your holdings:

ProShares Ultra Gold ETF (NYSE: UGL) - With current assets of $180.1 million, UGL is considerably smaller than the ETFs mentioned earlier. But this fund takes a different approach. Rather than investing entirely in bullion, it uses leverage and invests in derivatives and other assets with the goal of doubling the return of physical gold, as measured by the London p.m. fixing price in U.S. dollars. As such, it's more speculative than other gold ETFs - but may also do better in the event of a correction in bullion prices.

Gabelli Global Gold, Natural Resources & Income Trust (AMEX: GGN) - Similar to an ETF, this closed-end mutual fund invests in gold and other natural resources stocks in markets around the world. It focuses on companies engaged in exploration, mining, fabrication, processing, distribution, and trading of gold, as well as financing and managing gold-related activities. For investors concerned with income, it also pays a dividend, though the current yield is just 0.90%.

Newmont Mining Corp. (NYSE: NEM) - For those who prefer to cut out the middle man and go straight to the source, Newmont is one of the world's oldest, largest and most profitable gold-mining companies, with an additional focus on copper. It has assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. At the start of 2010, NEM had proven and probable gold reserves of approximately 91.8 million ounces. With trailing-12-month earnings per share of $3.36, the stock also pays a 40-cent dividend.

Aurizon Mines, Ltd. (AMEX: AZK) - Another straight-to-the-source play, Aurizon is smaller and far more speculative than Newmont. The company, based in Vancouver, B.C., has mining operations in the Abitibi region of northern Quebec, and is engaged in exploration in other areas of Canada. The company beat production goals in 2009 and posted record revenues, cash flow and earnings ($9.9 million, or 20 cents per share), which it used to pay down debt. That means the bulk of any added revenue from higher gold prices should go straight to the bottom line after accounting for production expenses.

www.emerginvest.com/Source/Money_Morning/2010/6/5/the-case-for-5-000-gold-and-how-to-profit.html

[sandi66]

Saturday, June 5, 2010 - 10:52
US Geithner: Deficit Cuts Should Be Med-Term, Growth Friendly


By Steven K. Beckner

BUSAN, South Korea (MNI) - U.S. Treasury Secretary Timothy Geithner stopped short Saturday of openly telling Germany and others to go slow on budget deficit reduction, but emphasized that fiscal consolidation should be done over the "medium term" and be "growth friendly."

Geithner, at a press conference following a meeting of Group of 20 finance ministers and central bankers here, said Germany "understands" how important its continued growth is for Europe and the global economy.

Geithner also reiterated the U.S. government's long-running desire to see China move to a more flexible exchange rate regime that would allow the yuan to float higher against the dollar.

Earlier, in a communique, the G-20 policymakers addressed the fiscal policy issue in the vaguest of terms, reflecting differences among the members about the appropriate pace of deficit reduction.

In an obvious reference to Europe's sovereign debt crisis, the communique observes that "recent volatility in financial markets reminds us that significant challenges remain" to global recovery. And it says "the recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, growth-friendly measures, to deliver fiscal sustainability, differentiated for and tailored to national circumstances."

"Those countries with serious fiscal challenges need to accelerate the pace of consolidation," the joint statement continues. "We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions...."

The communique also states that "within their capacity, countries will expand domestic sources of growth, while maintaining macroeconomic stability" to "help ensure ongoing recovery."

As for monetary policy, the G-20 policymakers say it "will continue to be appropriate to achieve price stability and thereby contribute to the recovery." The Federal Reserve was represented here by Fed Governor Kevin Warsh rather than chairman Ben Bernanke, but other top central bank chiefs were in attendance.

In wake of the Greek debt crisis and its fall-out, Euro-zone kingpin Germany has expressed an intention to accelerate its own pace of deficit reduction, and that has not set well with the Obama administration.

Before journeying to Korea, Geithner wrote a letter to his G-20 colleagues emphasizing that deficit reduction should be a "medium term" proposition, at least for the major industrial nations.

Geithner wrote that "concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of recovery." And he added, "we are concerned by the projected weakness in domestic demand in Europe and Japan...."

He made clear he did not want to see overly early or aggressive deficit reduction in other G-20 countries, an apparent reference to countries such as Germany.

"Fiscal reforms are necessary for growth, but they will not succeed unless we are able to strengthen confidence in the global recovery," he continued. But "the challenge is to demonstrate the capacity to deliver fiscal sustainability over the medium term without creating the perception that this will require a generalized, undifferenteated, move to pull forward consolidation plans."

He said "the necessary and inevitable withdrawal of fiscal and monetary stimulus needs to be calibrated to proceed in step with the strengthening of the private sector recovery in our economies."

In a similar vein, in his post-G-20 press conference, Geithner said: "the withdrawal of fiscal and monetary stimulus must proceed in step with the strengthening of the private sector recovery in our economies. Fiscal consolidation should be 'growth friendly' -- as the (International Monetary Fund) puts it -- with the pace and composition of adjustment varying across countries."

Asked about Germany's deficit cutting plans and its impact on European and world recovery, Geithner said, "My sense is they understand how important it is for Germany, Europe and the world that Germany be growing ... My sense is that the German government has a very good appreciation ... how important growth is going to be...."

Speaking of Europe more generally, but still with obvious import for Germany, Geithner said "the best way for Europe to contribute to the global recovery process is to make sure that Europe acts to put in place this very powerful program of reforms and financial support ... to try to make sure strongest, richest countries in Europe keep acting to help support recovery..."

"I think those are the right priorities, and I think you see a very strong commitment in Europe today and in (recent) weeks to implement that program..," he continued.

"Of course, we all recognize -- and you see it in the communique -- that a durable recovery requires credible commitments to restore fiscal sustainabiity over the medium term..." But he added that different countries need to "get there in different time frames ... to help support growth..."

There was little doubt that the U.S. treasury secretary is fine with the likes of Greece, Spain and Portugal taking fiscal austerity measures to satisfy financial markets, but that the same is not appropriate for Germany, or for that matter the United States, just now.

Asked about his leaked letter, Geithner downplayed it.

Observing that Europe has "a very strong, very powerful framework of reforms and financial support," which "they are moving very quickly" to implement, he said he was "just making obvious point that they've got a very strong framework, and people want to see it take shape ..."

Asked about the yuan, Geithner began by crediting China with having "laid out a very ambitious agenda of reforms designed to strengthen growth in household income, strengthen consumption growth, to increase markets for ... investment and strengthen domestic demand...

He said these reforms are built on "the recognition that as China grows larger it doesn't want to be in a position of depending as much as they did in past on exports to the United States."

But, he added, "part of that reform ... is to resume reform of the exchange rate mechanism ..."

Geithner failed to get the G-20 to agree on a new "bailout tax" or levy on large banks which would be collected before the next financial crisis to help pay for the resolution of that crisis. However, while the G-20 did not concur on such an "ex ante" bank tax, the communique did state an agreement that "the financial sector should make a fair and substantial contribution towards paying for any burdens associated with government interventions, where they occur, to repair the banking system or fund resolution."

"To that end, recognizing that there is a range of policy approaches, we agreed to develop principles reflecting the need to protect taxpayers, reduce risks from the financial system, protect the flow of credit in good times and bad, taking into account individual country's circumstances and options, and helping promote level playing field," the communique continued. "The IMF will deliver their final report at the Toronto Summit."

The Treasury Department took that section of the statement as at least a partial victory.

"On financial reform, we want to accelerate agreement on the core elements of the international agenda," Geithner told the press, noting that in the United States, both chambers of Congress have now passed bills "consistent with all of the major principles agreed to by the G-20."

"We expect a strong package of reforms to become law this summer," he said.

"Within the G-20, we have broad agreement on the major elements, and we should be able to move forward with agreement on the core reforms," he continued. "Reducing uncertainty about the ultimate shape of these new rules will help minimize financial headwinds for recovery."

"We are making progress on the broad elements of a new capital framework and will strive to finalize the specifics by the Seoul Summit," he went on. "Stronger capital and liquidity requirements and constraints on leverage will help ensure that globally active financial institutions are better able to withstand future financial and economic shocks. We will expedite development of the new rules while setting a transition period that allows financial institutions to meet the new rules over time."

Geithner said "we are also moving forward with a stronger, more consistent framework for oversight of derivatives market. We are working to forge consensus around improved tools to manage the failure of global financial institutions and common principles to free taxpayers from the financial costs of financial crises. And we want to establish a stronger framework of transparency and disclosure requirements across institutions and markets."

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