The great interest rate rip off part 1

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Lloyds chief Eric Daniels waives bonus

 

Eric Daniels, chief executive of part-nationalised Lloyds Banking Group, has waived his bonus of more than £2m.

 

Top UK property company bets on France, not Britain

 

Hammerson plans to focus on France rather than the UK this year because it believes the country's economy is stronger.

 

European banks 'need €240bn a year in fund-raising'

 

Europe's biggest banks may need to raise €240bn (£211bn) annually for the next three years to fund existing and new businesses, analysts warn.

 

Glaxo slide leaves large-caps under par

 

 

 

 

BAA pre-tax losses more than double to £822m

 

 

 

 

Primark momentum boosts AB Foods

 

 

 

 

Gemfields discovers giant 'elephant' emerald

 

 

 

 

Chaos as Lufthansa pilots start four-day strike

 

 

 

 

Shares in oil explorers connnected to Falklands rise

 

 

 

• Why Osborne's cut-price bank shares could cost the Tories 3 million votes
  

 

• Europe's monetary union an instrument of deflation torture
  

 

 

• Why economists are still not asking the right questions
  

 

Mandelson says deficit will stay within forecasts

 

 

 

UK businesses 'blinkered' on recovery

 

 

 

 

The week ahead: bonus time - who will be the first to take theirs?

 

 

 

 

UK growth figures may be revised upwards

 

 

 

 

Gordon Brown: Prime Minister says need to cut spending a 'myth'

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House Panel Says Toyota Misled Public on Safety Problem

 

By MICHELINE MAYNARD 22 minutes ago

 

 

Leading House Democrats said in a letter on Monday that Toyota made misleading statements on the repairs it said would fix an accelerator problem.

 

 

Judge Accepts S.E.C.’s Deal With Bank of America

 

By LOUISE STORY 12 minutes ago

 

But in his ruling, the judge delivered harsh words for the S.E.C., saying that the settlement was “half-baked justice at best.”

 

 

Iceland Asks U.S. to Help Ensure International Loans

 

By DAVID JOLLY 1:35 PM ET

 

Iceland wants the U.S. to help ensure that Britain and the Netherlands do not use a dispute over its collapsed banks to hold up international loans.

 

 

Wall Street Struggles to Extend Rally

 

By JAVIER C. HERNANDEZ and BETTINA WASSENER 5 minutes ago

 

Traders took in better-than-expected earnings from the home-improvement retailer Lowe’s, which said its fourth-quarter profit rose 27 percent.

 

 

Global Crisis Leads I.M.F. Experts to Rethink Long-Held Ideas

 

By SEWELL CHAN

 

Two papers suggest that the fund is re-examining some ideas on keeping inflation low and allowing money to flow freely across international boundaries.

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Tracy Residents Now Have To Pay For 911 Calls - cbs13.com

 

Tracy residents will now have to pay every time they call 9-1-1 for a medical emergency.

 

But there are a couple of options. Residents can pay a $48 voluntary fee for the year which allows them to call 9-1-1 as many times as necessary.

 

Or, there's the option of not signing up for the annual fee. Instead, they will be charged $300 if they make a call for help.

 

"A $300 fee and you don't even want to be thinking about that when somebody is in need of assistance," said Tracy resident Greg Bidlack.

 

Residents will soon receive the form in the mail where they'll be able to make their selection. No date has been set for when the charges will go into effect.

 

Something we can expect to see in the UK?

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A job, but there's a catch: a 1,000-mile commute - Yahoo! News

 

In the early dawn, after another week building cars, Michael Hanley leaves his job in Kansas. He quickly zips into Missouri, then heads up a ribbon of highway past grain silos and grazing deer, across the frozen fields of Iowa, over the Mississippi River and into the rolling hills of Wisconsin. Finally, he pulls into his driveway — 530 miles later. It's one heck of a haul: more than 1,000 miles roundtrip, 16-plus hours of driving, every week.

"I like to say I gave up an eight-minute commute for an eight-hour commute," he says wearily, running a hand though salt-and-pepper hair as he watches his two sons play basketball for the first time this season.

After the aging General Motors plant where he worked for 23 years was idled about a year ago, Hanley faced a Hobson's choice: Stay with his family and search for an autoworker's salary ($28 an hour) in a county where more than 40 percent of its manufacturing jobs disappeared from 2006 to 2009. Or hang on to his GM paycheck and health insurance and follow the job, no matter where it leads.

In his case, it led to Fairfax, Kan., the same place his brother and two brothers-in-law — also GM workers, and now his roommates — landed. For others, it has been Indiana or Texas.

 

More at the link.

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U.K. Household Finances Worsen as Prices Increase, Markit Says - Bloomberg.com

 

Britons’ finances are worsening as price increases for goods and services outpace income growth, Markit Economics and YouGov Plc said today. A gauge of household finances was 40.8 in February, the same as the previous month, the survey showed. A reading below 50 indicates contraction. The outlook for household finances over the next year deteriorated, with 34 percent of respondents expressing pessimism, compared with 26 percent holding optimistic views.

“February’s survey highlights that U.K. household finances are still deteriorating, despite the recession officially ending last year,” Tim Moore, an economist at Markit, said in the statement. “With household spending falling again, the latest data suggest that weak final domestic demand could limit the recovery in the wider economy.”

With elections looming, the ruling Labour Party and the opposition Conservatives are battling to convince voters they are best placed to steer Britain’s recovery, after the economy barely exited the recession in the fourth quarter. Inflation accelerated to a 14-month high in January, while jobless claims jumped to the highest level since 1997.

 

The UK is in too much debt. We need to pay it down.

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GlaxoSmithKline to create 1,000 jobs in UK - Times Online

 

GlaxoSmithKline is to create 1,000 jobs in Britain in response to a plan to cut tax to 10 per cent on revenues from patents developed in the UK.

 

At least 600 of the new jobs will be in the biopharmaceutical sector with the remaining 400 elsewhere in the company, GSK said. It did not give a timescale for the new jobs.

 

Plans for a special tax regime for patents, known as the “patent box”, were revealed by Alistair Darling, the Chancellor, in December as part of a drive to make Britain more attractive to high-technology companies, including those in the pharmaceutical and biotechnology industries.

 

The patent box will introduce the special corporation tax rate on UK patent income from April 2013. The usual corporation tax rate is 28 per cent.

 

At least some jobs are being created in this jobless recovery.

 

Will more high tech companies invest?

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Banks Pressure Customers on Overdraft Fees - NYTimes.com

 

For many households trying to improve their finances, tossing out pitches from the bank has become almost automatic. But in recent weeks, Chase has been fanning special letters out to consumers with an offer that it urges them not to refuse.

“Your debit card may not work the same way anymore, even if you just made a deposit. Unless we hear from you,” the message, emblazoned in large red type, warns. “If you don’t contact us, your everyday debit card transactions that overdraw your account will not be authorized after August 15, 2010 — even in an emergency,” with “even in an emergency” underlined for emphasis.

 

As the government cracks down on the way banks charge fees for overspending on debit cards, the industry is mounting an aggressive campaign aimed at keeping billions of dollars in penalty income flowing into its coffers. Chase and other banks are preparing a full-court marketing blitz, which is likely to include filling mailboxes with various aggressive and persuasive letters, calling account holders directly, and sending a steady stream of e-mail to urge consumers to keep their overdraft service turned on.

 

Starting this summer, banks must get consumers to agree, or “opt in,” to a service covering purchases on a debit card when there is not enough money in their account. The Federal Reserve has ordered the same restriction for banks that want to let people withdraw more than their balance at an automated teller machine. Many banks now automatically provide such coverage for fees of up to $35 or more.

 

So many people now dip their balance below zero that banks generated an estimated $20 billion from overdraft fees on debit purchases and A.T.M. transactions in 2009, according to Michael Moebs, an economist who advises banks and credit unions. All of this revenue is potentially at risk, since these are the two areas that the new Federal Reserve regulations cover. (Banks generate an extra $12 billion by covering checks and recurring bills; under the new rules, they can still cover those and charge fees without customers’ consent.)

 

Over the last decade, these fees have become an increasingly important source of income for banks as consumers have turned to debit cards to pay for a wide variety of their purchases, whether monthly bills or a pack of gum. (Many banks also offer less controversial overdraft programs in which consumers sign up to cover shortfalls in their checking account by pulling money out of a savings account or a credit card.)

 

The persuasion campaigns, which are just getting under way, come at a precarious time for many banks and credit unions as they scramble to find new revenue streams amid an economic downturn and new laws and regulations that threaten profitability. For instance, new credit card laws that went into effect Monday limit banks’ ability to raise interest rates on existing balances.

 

Given the billions at stake, consultants are urging banks and credit unions to hire them to help. “Your fee income will take a substantial ‘hit’ if you don’t start getting consumers to ‘opt-in’ for POS/ATM overdrafts NOW!” Mike Sobba, president of Strunk & Associates, a financial institution advisory service, warned banks in a pitch on the company’s Web site.

 

Some are even lobbying banks to focus their pitch on the minority of customers who are responsible for the vast majority of overdraft fees. According to a Federal Deposit Insurance Corporation study in 2008, 93 percent of overdraft fees come from the 14 percent of people who exceed their balances five times or more in a year.

 

“Doesn’t it make sense to try and protect this revenue stream and encourage these customers to opt-in?” said Eric Wittekiend, strategic adviser at Raddon Financial Group, in a report aimed at banks and credit unions. “Right now I’m favoring an aggressive opt-in strategy to protect as much revenue as possible,” he said.

 

Aren't the bankers lovely people. Bloated profits for years and now they are trying to maintain the illusion of profitability.

 

Would this sort of marketing be illegal in the UK?

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European banks face showdown over €1 trillion of debt - Telegraph

 

European banks need to roll over €1 trillion (£877bn) of debt over the next two years at a much higher cost and in direct competition with hungry sovereign states, according to a report by Morgan Stanley.

 

The bank has advised clients to prepare for chillier times as monetary tightening begins in the US and China, causing major spill-over effects in Europe.

 

Roughly €560bn of EU bank debt matures in 2010 and €540bn in 2011. The banks will have to roll over loans at a time when unprecedented bond issuance by governments worldwide risks saturating the debt markets. European states alone must raise €1.6 trillion this year.

 

"The scale of such issuance could raise a significant 'crowding out' issue, whereby government bonds suck up the vast majority of capital," said Graham Secker, Morgan Stanley's equity strategist. "The debt burden that prompted the financial crisis has not fallen; rather, we are witnessing a dramatic transfer of private-sector debt on to the public sector. The most important macro-theme for the next few years will be how easily countries can service and pay down these deficits. Greece may well prove to be a taste of things to come."

 

Lenders will have to cope with a blizzard of problems as new Basel rules on bank capital ratios force some to retrench. State guarantees are coming to an end, which entails a jump of 40 basis points in average interest costs. They must wean themselves off short-term funding as emergency windows close, switching to longer maturities at higher cost.

 

Worries about Europe's second-tier banks help explain why Berlin is warming to plans for a €25bn rescue for Greece. Germany's regulator BaFin has warned that €522bn of German bank exposure to state bonds in Portugal, Italy, Ireland, Greece and Spain may pose a systemic risk if contagion causes "collective difficulties of the PIIGS states".

 

A BaFin note obtained by Der Spiegel said Greece could be the trigger for a "downward spiral in these countries, as in the case of Argentina", leading to "violent market disruptions".

 

Citigroup said Europe's 24 largest banks must raise €720bn over the next three years, in a world where investors want a higher return for risk. "This could eventually drive up funding costs meaningfully," it said.

 

It said a mix of higher credit spreads, rising rates, and Basel III rules could "eat up" 10pc of bank earnings. While most lenders can cope, it will dampen economic recovery.

Morgan Stanley said the benchmark cost of capital – known as the 'risk-free rate' – is rising because governments themselves are becoming a riskier bet, with ripple effects through the entire economic system.

 

Laws of unintended consequences again?

 

However I'm also interest to know how much debt the large US banks also need to roll over in this period. Is the figure larger or smaller than the European banks need, because they are all now compete for ever decreasing capital. How long is this competition sustainable for before there's another crisis?

 

Don't forget all of the consumer debt that's out there as well all completing for these funds....

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World economy to be hit by several sovereign defaults, Ken Rogoff warns - Telegraph

 

The world economy will be hit by several sovereign debt defaults in coming years, according to Ken Rogoff, a former chief economist at the International Monetary Fund who predicted the global banking crisis.

 

After banking crises, “we usually see a bunch of sovereign defaults, say in a few years. I predict we will again,” Mr Rogoff, now a professor at Harvard University, said in Tokyo on Tuesday.

 

“It’s very, very hard to call the timing, but it will happen,” Rogoff told an audience in the Japanese capital. Many countries across the world will be forced to cut their spending once investors demand higher interest rates to lend money, he said.

 

The prospect of a country defaulting on its debts has long been seen as one of the greatest risks to the global economy this year, with fears currently centered on Greece. As interest rates rise, Greece and Portugal will "have a lot of troubles,” according to Rogoff.

 

“In rich countries - Germany, the United States and maybe Japan - we are going to see slow growth. They will tighten their belts when the problem hits with interest rates. They will deal with it.”

 

Mr Rogoff is the co-author with Carmen M. Reinhart of "This Time Is Different,” which charts the history of financial crises in 66 countries.

 

If we do see sovereign defaults will this trigger another banking crisis? The last time was a default crisis in the late 90's we had the LTCM fiasco which nearly caused a major financial crisis and required the big wall street banks to bail out the fund to prevent contagion, this time the banks are in no position to cover the bets this time.

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Skipton faces legal challenge to rate rise - Business News, Business - The Independent

 

Skipton building society is facing a legal challenge over its decision to ignore a mortgage rate guarantee.

 

The society – which has just over 100,000 borrowers – will increase its standard variable rate (SVR) from 3.5 per cent to 4.95 per cent from 1 March, leaving borrowers on a typical £150,000 mortgage needing to find around an extra £1,500 a year.

 

Skipton is not the only lender to announce increases in SVR – six others have done so while the base rate has remained at 0.5 per cent. But it is the only one to break a pledge to borrowers that the rate would never be more than 3 per cent higher than base rate. When announcing the increase, the society claimed it was responding to "exceptional market conditions". Skipton's chief executive David Cutter said: "It is a necessary step".

 

But the law firm Leon Kaye Solicitors claimed the move may be illegal if the economic downturn is not judged enough to trigger Skipton's get-out clause. The lawyers said: "These 'exceptional circumstances' clauses are normally submitted into contracts to ensure that the lender has an element of control if things turn bad. However, such clauses can fall foul of the Unfair Contract Terms Act 1977."

 

Leon Kaye has asked Skipton borrowers to contact them if they think they have a claim against the society, but the case could be short-lived, said Melanie Bien, a director of the independent mortgage broker Savills Private Finance. "It all hinges on the definition of 'exceptional circumstances'," she said. "I would have thought this law firm will struggle to successfully challenge Skipton." However, Ms Bien accused Skipton of not treating customers fairly. "Lenders shouldn't offer the guarantee if they can't stick to it."

 

I doubt that they will get anywhere with this challenge but interesting none the less.

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Goldman regrets secrecy over its Greek debt deals - Business News, Business - The Independent

 

The public should have been given more details of the currency deals that allowed Greece to hide the extent of its government debt, according to a senior executive at Goldman Sachs, the bank that arranged many of them.

Seeking to deflect some of the popular and political anger directed at its derivatives dealings with the Greek government, Gerald Corrigan, Goldman's managing director told a UK parliamentary committee that it had helped shave only a modest amount from Greece's official debt ratios.

Under the terms of entry to the euro, member countries were permitted to run budget deficits of no more than 3 per cent of GDP and a total national debt of no more than 60 per cent.

"Governments go to some lengths to try to manage their budgetary deficit and public debt positions," Mr Corrigan told the Treasury Select Committee. "There is nothing new about this, unfortunately, the practices have been around for decades, if not centuries."

Goldman disclosed more details of the most controversial currency swap deals in which the Greek government engaged in December 2000 and July 2001, but insisted it made little difference to the amount by which Greece breached the euro rules. They cut the value of the country's debt by €2.4bn, which Greece will pay back to Goldman over time, the investment bank said. The budget deficit was 4.5 per cent of GDP in 2001 because of the swaps, instead of 4.6 per cent.

 

The greek tragedy will run and run.

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Now Eric Daniels gives up 'merited' bonus payment

 

Bank insists that decision not influenced by political pressure ahead of results

 

 

• Bank of England chief says recovery is fragile new
  
• BA vote to strike in protracted row over staff levels
  
• Goldman regrets secrecy over its Greek debt deals
  
• Sports Direct to block £20m rescue plan for Blacks Leisure
  
• UK is still in recession, says Hammerson chief executive
  
• BAA losses swell after £277m Gatwick sale charge
  
• Primark shrugs off snow and downturn as sales storm ahead of high street rivals
  

 

Agile, smaller enterprises are leading a revival in the industry

 

Excessive focus on big manufacturers is a distraction from the sector’s real innovators

 

• Stephen Timms: We're here for the times when a small business needs a lifeline
  
• Adventures in micro-business: 'Where can I get support to expand my business?'
  
• Virtual solution to a data dilemma
  
• Soapbox: ‘Look to collaborate with those who can do what you can’t’
  
• Roger Trapp: 'Even poets have been cited nio inspiring business founders & managers"
  
• Top of the fair trade fashion tree
  

 

James Moore: Daniels gives up bonus but where's UKFI?

 

Outlook: UKFI was given a brief to behave like a City institution, but politicians appear incapable of keeping their noses out

 

 

• Econoblog: Europe's internal devaluation new
  
• James Moore: What's the big deal with Aviva and its shares?
  
• James Moore: BA and unions need to stop
  
• Stephen King: Look beyond the UK for a true guide to economic austerity
  
• Hamish McRae: Next year's fiscal options are limited whatever bickering economists say
  

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Calculated Risk: Report: State Tax Revenues decline in Q4

 

From the Rockefeller Institute: States Reported Fifth Consecutive Drop in Tax Collections in the Fourth Quarter of 2009 (ht Ann)

State tax revenues declined by 4.1 percent nationwide during the final quarter of calendar 2009, the fifth consecutive quarter of reduced collections, according to a report issued today by the Rockefeller Institute of Government.

 

The five straight quarters of year-over-year decline in overall tax collections represent a record length of such decreases, the Institute said.

...

“Calendar 2009 will be remembered as bringing historically sharp declines in tax revenue to states,” the report says. “Revenue gains toward the end of calendar 2009 were often driven by legislated tax increases rather than growth in the economy and tax base.”

 

Despite revenue gains in some states during the fourth quarter, the report concludes, “another negative quarter for the nation as a whole would not be unexpected. The troubling fiscal picture for states remains clearly in place.”

Here is the report: Final Quarter of 2009 Brought Still

More Declines in State Tax Revenue

 

Tax revenues are still weak, and most states are still running large deficits. As a recent CNNMoney article notes:

States are looking at a total budget gap of $180 billion for fiscal 2011, which for most of them begins July 1. These cuts could lead to a loss of 900,000 jobs, according to Mark Zandi, chief economist of Moody's Economy.com.

This suggests that more state and local government job cuts are coming.

 

Looks like we are having a taxless recovery.

 

The global economy is in dire straits.

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Mervyn King: Quantitative easing may have to restart | Business | guardian.co.uk

 

• Bank of England governor tells MPs scheme could be extended if economy deteriorates

• Fears over the eurozone, the UK's major trading partner, causing 'particular concern'

 

Mervyn King, the governor of the Bank of England, warned today that the weakness of the eurozone is jeopardising the UK's recovery, and the emergency £200bn quantitative easing programme might have to be re-started if the economy deteriorates in the coming months.

 

"My particular concern at the moment derives from the health of the global economy, and in particular our major trading partner, the eurozone," the governor said.

 

Much of the 16-member eurozone bounced out of recession by last summer, but recently-released data for the final quarter of 2009 showed that Germany, the eurozone's largest economy, stagnated, and several other countries, including Spain and Ireland, remain weak, while Greece is battling to avoid a default on its debts.

 

Charlie Bean, the Bank's deputy governor, warned that he expects recovery in the eurozone, as in the UK, to be "sluggish".

 

King struck a pessimistic note about the prospects for a global recovery, and warned that the UK had, "embarked on a process of healing," which would take some time. He stressed that, "risks to the [bank of England's monetary policy] committee's central view of a gradual recovery of output remain to the downside."

 

Despite news last week that inflation jumped to 3.5% in January, the governor repeated his insistence that the monetary policy committee (MPC) stands ready to extend its £200bn scheme to pump money into the economy. The pound fell more than 1.2 cents against the dollar during the hearing, from $1.5539 to $1.5413.

 

It's clear the UK is going to try and print it's way out of this mess. It's a policy that has failed at every other time point in history but I'm sure this time it will be different.

 

Currency collapse seems inevitable.

 

Printy printy.

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Breaking news:

 

• Bosnia austerity bill sidelined as unions protest - Reuters
  
• Prices climb on weak consumer confidence index - Reuters
  
• Copper down on dollar, investors eye stimulus - Reuters
  
• Total pledges no French refinery closures - Reuters
  
• Target quarterly profit tops estimates - Reuters
  
• Dollar extends losses vs yen on U.S. consumer data - Reuters
  
• US STOCKS SNAPSHOT-Wall St falls after consumer confidence data - Reuters
  
• Raiffeisen sheds 12% on possible merger with parent - Reuters
  
• US consumer confidence falls to 10-month low in Feb - Reuters
  
• Ukraine's Ukrtelecom seeks debt restructuring - Reuters
  

 

 

 

• Mervyn King: Quantitative easing may have to restart
   
   
  Asset purchase programme could be extended if economy deteriorates, Bank of England governor tells MPs. By Heather Stewart 89 comments
   
  
  • Too soon to cut public spending, IMF warns
    
  • Vox pop: When should Britain cut the budget deficit?
    

   

  [*] Eric Daniels turns down £2.3m bonus

   

   

  Lloyds boss has waived the £2.3m bonus the loss-making bank considered he had earned – other directors will receive deferred bonuses paid in shares 26 comments

   

  • Nils Pratley: Daniels? A bonus? How?
    
  • Jill Treanor: Bailed out but still the losses mount
    
  • RBS chief turns down bonus amid outcry
    
  • Would you buy shares in the nationalised banks?
    
  • Tories plan to sell cut-price RBS and Lloyds shares
    
  • Nils Pratley: Osborne's cut-price share plan is flawed
    

   

  [*] Toyota could be prosecuted in US

   

   

  The Japanese carmaker has received a grand jury subpoena over safety issues and has been accused of misleading the public

   

  • Toyota's Akio Toyoda: profile
    
  • Toyota saved $100m over recall
    
  • Timeline: Toyota's recall woes
    
  • More on the Toyota recall crisis
    

   

  [*] Gaviscon prescriptions investigated

   

   

  Competition watchdog has claimed that Reckitt Benckiser abused its dominant position to stop doctors supplying cheaper generic versions of its Gaviscon heartburn medicine

   

  • Glaxo damned by US Senate committee
    

   

 

 

• 
  BA cabin crew vote to strike
   
   
  British Airways faces lengthy walkout next month after air stewards endorsed industrial action. By Dan Milmo 80 comments
   
  
  • Video: Lufthansa pilots strike
    
  • Lufthansa strike 'threatens Germany's recovery'
    
  • BAA lost £277m on Gatwick sale
    
  • Nils Pratley: Time for talk at BA
    

   

  [*] BMW insures pension fund against rising life expectancy

   

   

  German carmaker signs £3bn deal with Deutsche Bank and reinsurers to offset risk of pensioners living longer

   

  [*] BBA: Mortgage approvals slump

   

   

  End of stamp duty relief and weather blamed for sudden drop in January, while analysts say consumer debt levels still biting hard 8 comments

   

 

 

• More business news
   
   
  
  • Sports Direct to veto Blacks fundraising
     
     
     
    

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Eurozone weakness worries BoE chief, sterling falls

 

Mervyn King warns stalling eurozone is a threat to British recovery, pound hit by hints of more quantitative easing.

 

European banks face €1 trillion debt showdown

 

Banks face direct competition to refinance from hungry sovereign states, says Morgan Stanley.

Goldman admits helping Greece 'fiddle books'

 

 

 

FTSE 100 slips back despite Wolseley spike

 

Wolseley, the building materials supplier, surged to the top of the leaderboard after a surprise update.

 

OFT alleges Reckitt abused Gaviscon's dominance

 

UK regulator accuses Reckitt Benckiser of abusing its market position in heartburn medicines.

 

UK Treasury fails to allay tax fears with vague new code

 

 

 

 

AstraZeneca to pay UK £505m to settle tax dispute

 

 

 

 

Retail investors reveal doubts over Tory bank share plan

 

 

 

• The questions that MPs should have asked Mervyn King today
  

 

• We've now had a pound of flesh from the banks
  

 

 

• Why Osborne's cut-price bank shares could cost the Tories 3 million votes
  

 

World economy to be hit by several sovereign defaults, Ken Rogoff warns

 

 

 

Britain doesn't have the luxury of time when it comes to cutting the deficit

 

 

 

 

Gordon Brown pledges a low debt economy, should we laugh or cry?

 

 

 

 

Mandelson says deficit will stay within forecasts

 

 

 

 

UK businesses 'blinkered' on recovery

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Gaviscon firm faces trading probe

The Office of Fair Trading accuses Reckitt Benckiser of rigging the market for Gaviscon following a BBC investigation.

Gaviscon makers' plans revealed

BBC hands OFT files on Gaviscon

Newsnight's 2008 report

Toyota took 'too long' on recalls

 

Toyota admits it took "too long" to deal with safety issues which led to the recall of 8.5 million vehicles worldwide.

 

'More resignations' in downturn

 

More managers resigned in the past year than in the previous 12 months, despite the economic downturn, research suggests.

 

Halifax to end guarantor mortgages

 

Recession takes its toll on TNT

Toyota recall delay 'saved $100m'

 

Greece 'not looking for a bailout'

 

OTHER TOP BUSINESS STORIES

BA set to resume talks with union

 

Wall Street bonuses 'jump 17%'

 

AstraZeneca agrees £505m tax deal

 

Lib Dems 'not anti-banker party'

 

Sharp fall in new mortgage loans

 

Lufthansa 'back to normal soon'

 

MORE FROM BUSINESS

Letting agents warned over fees

 

Flights from Paris hit by strikes

 

Quick Pompey deal ruled out

 

Commerzbank warns on outlook

 

Special pension contributions cut

 

Union blockades Athens exchange

 

BA cabin crew back strike action

 

Mixed fortunes for brewing firms

 

Record profits at the Leeds

 

Lloyds boss to waive bonus

 

Beer group calls for lower taxes

 

Lufthansa pilots suspend strike

 

Energy firms' profit margins rise

 

YOUR MONEY

Bank charges face new challenge

 

Investors face tar sands campaign

 

Credit card rates 'unjustified'

 

ECONOMY

Bad weather knocks German firms

 

Goldman defends Greece debt swaps

 

Oil price reaches six-week high

 

COMPANIES

New owner at Red Driving School

 

Judge backs Bank of America fine

 

TNT hurt by 146m-euro writedown

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Toyota US boss on course for clash over car faults

Jim Lentz will tell US Congress the company took too long to respond to defects but will refuse to back down over the cause

• GRAPHIC: Toyota worldwide recall
  

• Japanese minister hints at Toyota cover-up
  

Sterling plunges as King warns on money scheme

Governor presses Government to detail plans to reduce the country's £178bn deficit to help the 'heal' the economy 67 Comments

• Record fall in bank lending to business
  

• Bank voted unanimously to halt money scheme
  

Reckitt accused of abuse over Gaviscon prices

OFT claims company withdrew cheap version of drug from NHS lists, forcing GPs to recommend a costly alternative 6 Comments

• The allegations: Reckitt's Gaviscon monopoly
  

• Reckitt puts drug worries aside as profits soar
  

New mortgages fall after stamp duty relief ends

The trend for consumer belt-tightening continues as adverse weather and tax relief deters house hunters 3 Comments

• Mortgage lending surges on stamp duty rush
  

• ‘Generation Rent’ warned to forget buying
  

Pendragon limps into black on used car sales

After huge losses in 2008, the motor retailer has been helped back into profit by the recovery in second hand vehicles

AstraZeneca pays £505m to settle tax dispute

Anglo-Swedish drugs group says the deal will boost this year's earnings after setting aside a £890m contingency fund

Lloyds chief forgoes his bonus again

Eric Daniels is the latest banking boss to decline the payment in an attempt to defuse the dispute about remuneration
Minerva boss sees turn in commercial property

Shortage of City space drives demand, says chairman, but battle with big investor continues after failed bid

• Space shortage has lifted rents
  

• BlackRock gazumps Macquarie
  

Zavvi's former boss to replace Luminar founder

Stephen Thomas will leave the nightclub operator's board this month but stay on to hand over the reins to Simon Douglas


Oil exceeds $80 as French strike bites

A strike by refinery workers in France has led to an 8 per cent rise in the crude oil price over the past week

'Half-baked' BoA-Merrill settlement approved

A federal judge reluctantly approves the $150m settlement between BoA and the SEC despite branding it inadequate
Morgan Stanley to sell CICC stake

KKR and TPG Capital are in line to buy the investment bank's 34.3% stake in China International Capital Corp

• Chinese target $21bn in world’s largest IPO
  

• Chinese bank aims to be global giant
  

'Buy farmland and gold,' advises Dr Doom

Marc Faber, the noted bear, tells pension and sovereign fund managers to prepare for a 'dirty war'

[interestrateripoff]

Sterling plunges as King warns on money scheme - Times Online

 

Sterling fell sharply today after Mervyn King, the Governor of the Bank of England, warned that it may be necessary to continue the Bank’s asset purchase programme and pressed the Government to reveal its plans to reduce the country's record £178 billion deficit.

 

In his last appearance before MPs before the general election, Mr King outlined the political challenges facing the economy.

 

He said: “The crisis has left us facing many serious challenges. Among them are how to reform the international financial system, how to reduce our largest peacetime fiscal deficit, and how to restructure our banking and financial system to prevent another, more serious, crisis in future.

 

"The crisis did not originate in the non-financial sectors of the economy but that is where most of the costs are falling.

 

“You don’t need me to tell you that its impact is not just economic but also social and political in nature.”

 

The Governor, who was appearing before the Treasury Select Committee, said that ratings agencies were looking for a “detailed explanation” of how Britain intended to reduce its budget deficit.

 

But he warned: “You certainly can’t eliminate the deficit in one year. There has to be a programme announced that will start and continue right through the lifetime of the next parliament.”

 

The pound lost more than one cent against the US dollar after the Governor also told MPs that, although the UK economy had “embarked on a process of healing”, this would take time.

 

Mr King added: “The risks to the [Monetary Policy] Committee’s central view of a gradual recovery of output remain to the downside.”

 

..........

 

Mr King also warned that bank lending could prove scarce during coming months.

 

He told MPs: “We would like to get back to a situation where the banking sector can expand its lending, but I am not sure that is going to happen until we have seen further consolidation in the balance sheets of the banking sector.

 

"There’s still quite a way to go on that front.”

 

Seems King is admitting growth is in the UK is completely down to bank lending and he wants a return to it. Doesn't look like that will happen any time soon.

 

So the plan is to reduce the deficit by printing money instead? Why bother earning money when you can print it.

 

It seems the lure of the magic printing press is too great to resist, once the presses are turned on it becomes too difficult politically to turn them off as politicians are too week.

[interestrateripoff]

Mr King suggested that while the recovery in the UK was likely to be fragile, he was more concerned about the world economy.

 

In his final appearance in front of the Treasury Committee during this Parliament, he added that a weaker pound had so far failed to lift exports as desired.

"My particular concerns at present derive from the state of the world economy and our largest trading partner, the euro area...that will inevitably have an impact in the UK and we are already seeing that despite the depreciation of sterling, we haven't so far seen much evidence of a pick up in net trade, which is an important part of our rebalancing.

 

"Recovery in our largest export market – the euro area – appears to have stalled."

 

It had been hoped that the weakness of the pound since the onset of the financial crisis would provide a boost to the UK economy by making British goods cheaper abroad and therefore pushing up exports. That however is reliant on recovery in foreign demand.

 

Mr King said he was struck by the mood at a recent meeting of G7 finance ministers and central bankers in Canada, "where several of the major economies said quite openly that they were relying on external demand growth to generate growth in their economy."

Sterling fell sharply - 1.3 cent to $1.5451 - after Mervyn King hinted that the BoE may have to restart quantitative easing.

 

It fell further when David Miles, a fellow member of the Bank's Monetary Policy Committee, said his decision to vote for a pause in the committee's £200bn quantitative easing programme in February had been a "pretty finely balanced decision".

 

.......

 

As the hearing closed Mr King thanked John McFall, chairman of the Treasury Committee, for the work the committee had undertaken during the financial crisis.

 

He said he had appeared in 17 occasions in front of the Treasury Committee since the downturn began, citing it as "some sort of record."

 

"It hasn't been fun, it hasn't been easy, but it has been productive," he said.

 

It certainly appears that we will be having a recoveryless recovery.

[interestrateripoff]

Mish's Global Economic Trend Analysis: Doomsday Arrives for State of Illinois; Insane Tax Hike Proposals; Watchdogs or Warthogs?

 

In a flash of recognition that readers of this blog understood years ago, a nonpartisan group proclaims 'Doomsday is here for the state of Illinois'.

 

It will take a massive tax increase -- and $2 billion more in cuts -- to reach solvency, group says.

 

To become solvent, the state must enact the largest tax-increase package in Illinois history, whack another $2 billion from already starved government programs and wrest major financial concessions from the state's unionized work force, a nonpartisan government watchdog contends.

 

In a new analysis of Illinois' "horrific" finances, the Civic Federation lays out the painful choices awaiting Gov. Quinn and the Legislature as they stare down an epic $12.8 billion budget deficit that has choked the flow of state cash to public universities and schools, transit systems and social-service agencies to the point of economic collapse.

 

"Doomsday is here for the State of Illinois," said Laurence Msall, the organization's president.

 

The Civic Federation recommends that the state income tax be increased from 3 percent to 5 percent for individuals, that retirees' pension and Social Security checks be taxed for the first time at the same rate as workers' paychecks, and the tax on cigarettes be raised by another $1 per pack. The group also favors getting rid of $181 million in corporate tax breaks.

 

But AFSCME Council 31, state government's largest union, has shown no interest in having its members -- who have accepted furloughs and deferred pay increases -- pay more toward their pensions and health care or in establishing what is known as a two-tier pension system where new employees would receive a less-generous retirement package than existing workers.

 

"Since this proposal to slash $2 billion exempts education and health care, it would mean reducing human services and public safety," AFSCME spokesman Anders Lindall said. "We think that's reckless, especially in a recession that's driving demand for public services up, not down."

 

House Minority Leader Tom Cross (R-Oswego) has taken a tax increase off the table, instead pressing for budget cuts and pension reforms and noting the state's fiscal crisis bloomed under seven years of Democratic-crafted budgets that Republicans didn't vote for.

 

O dear doesn't sound good does it.

 

Everywhere you look the money has run out. I wonder if these tax increases will actually bring in any increase tax revenue? In the current climate I would suspect they will actually decrease tax revenues.

 

Too many promises have been made that cannot possible be kept.

[interestrateripoff]

Mish's Global Economic Trend Analysis: The Mortgage Bubble

 

Here is an interesting snip about mortgages and the housing situation both in the US and Canada by Dave Rosenberg in Monday's Breakfast with Dave.

 

Once again, this Houdini recovery has involved a situation where mortgage rates have plunged and yet Treasury bond yields have been rising — 30-year fixed rate mortgages have fallen to 4.93% and are sitting are record-tight spreads over long Treasury bonds (see Chart 7). Historically, the average spread is 150bps and this differential is now 20bps. This is remarkable and our concern is that investors who may be exposed to mortgages are at serious risk because there is a considerable chance that these rates will be moving higher over the intermediate term — notwithstanding continued support from Uncle Sam’s pocketbook.

 

Investors must be reminded time and again that mortgages are callable, Treasuries are not; and we are now in a situation where net of fees, which average 70bps, anyone buying mortgage paper today is receiving a rate that is less than what the borrower is paying, How nutty is that?

 

Remember — despite all the ridiculous comparisons to the Weimar Republic, the long bond is THE risk-free benchmark interest rate in the U.S. and with State taxes going up, Treasuries are an even further bargain because of their tax status.

 

 

The stretch for yield is just as evident in Canada where provincial bonds now trade at a tight 42bps over the Government of Canada (the spread exceeded 100bps at the end of 2008); and Nova Scotia (Canada’s second smallest province) just issued a 30-year bond that has since tightened to a mere 7 bps over Ontario government debt (perhaps this is a market comment on Ontario’s fiscal strategies of overspending and over-borrowing as much as it is a comment on investor risk appetite at the current time. Both messages make us uncomfortable).

 

CANADIAN CONSUMER LESS ROBUST THAN MEETS THE EYE

 

All of a sudden, the Canadian economic data are coming a tad below expectations, including the 0.4% MoM advance in December retail sales, which just came up short from recouping the 0.5% decline the month before (revised from down 0.3%). Excluding autos, sales are running at a 2.1 % annual rate over the past three months, which can only be described as tepid in view of all the rampant monetary and fiscal stimulus percolating through the system.

 

Not only that, but the supply response in the Canadian housing market is beginning to, at the margin, alter the inventory balance. The number of new listings surged 4.0% in January and has risen sharply now in three of the past four months. After outpacing new listings over 90% of the time between January and October of 2009, sales has now lagged in each of the past two months and this has taken the sales-to-listing ratio down to 0.614x from 0.634x in December and the nearby October high of 0.683x (and now stands at its lowest level in eight months). Pricing is sure to follow suit. Better buying opportunities lie ahead for the fence-sitters, in our view.

Even without the caution about callable securities, why anyone would be rushing into mortgages with the Fed about to pull the plug on buying is certainly a mystery. Are pension funds chasing yield to ridiculous extremes again? Can the Fed's purchasing account for 100% of that silliness?

 

Assuming the answer to the second question is no, this is yet another one of those reflation risk trades that just will not die, until it does, more than likely all of a sudden, and more than likely sooner rather than later.

 

It appears that the global economy is fast becoming one huge bomb which is going to explode.

[interestrateripoff]

RBS May Post Biggest Loss of Any European Bank (Update1) - Bloomberg.com

 

Royal Bank of Scotland Group Plc, Britain’s biggest government-controlled lender, may post the largest loss of any European bank for the second half of 2009 after provisioning for bad loans and writedowns. The Edinburgh-based bank may record a net loss of 4.66 billion pounds ($7.25 billion) from a net loss of 23.48 billion pounds a year earlier, according to the median estimate of eight analysts surveyed by Bloomberg. The bank is scheduled to report earnings at 7 a.m. on Feb. 25.

RBS declined 31 percent in the six months to yesterday, a period during which the European Union ordered the bank to sell assets and the Basel Committee on Banking Supervision issued proposals to raise bank capital requirements. Chief Executive Officer Stephen Hester said last month that RBS, which required the world’s most expensive bank bailout of 45.5 billion pounds, is ahead of schedule with the most complicated restructuring ever undertaken by a company.

“They are still in a fairly difficult position” said Keith Bowman, a London-based equity analyst at Hargreaves Lansdown. “The bank is still a few years away from returning to profit and there are lots of uncertainties about what the shape of the bank will be like a few years from now.”

Other European banks that received government assistance are expected by analysts to report better second-half figures than RBS.

Allied Irish Banks Plc, Ireland’s second-biggest lender by market value, may report a second-half loss of 1.72 billion euros ($2.34 billion) when reporting on March 2, according to five analysts surveyed by Bloomberg.

 

They could post a mere £3.36bn loss but why do that when you can pay out a bonus?

 

Aren't UK taxpayers lucky devils, what a great investment RBS is.

[interestrateripoff]

List of Troubled Banks at 16-Year Peak, F.D.I.C. Says - NYTimes.com

 

After weathering the nation’s worst run of bank failures in nearly two decades, the Federal Insurance Deposit Corporation announced Tuesday that it had added 450 institutions to its list of challenged lenders in 2009 and warned that the industry was likely to remain under stress.

The number of so-called problem banks rose to 702 at the end of 2009, compared to 252 at the beginning of the year. Both the number of troubled institutions and their total assets are at the highest level since 1993, putting enormous strain on the government-administered insurance fund that protects customer deposits.

 

The F.D.I.C. does not disclose which banks it considers at risk. Lenders on its list are not necessarily in imminent danger of failure.

With banks failing in growing numbers, the F.D.I.C. said its insurance fund fell deeper into the red, ending 2009 with a deficit of $20.9 billion. That position was nearly $38.1 billion weaker than a year earlier. The bulk of that decline reflects funds that the F.D.I.C. is setting aside to cope with future losses.

 

In its annual report on the banking industry, the agency suggested that many of the nation’s 8,100 lenders essentially broke even during 2009 but that many remain in fragile condition. Many smaller lenders, in particular, are struggling. Bad credit card, mortgage and corporate loans escalated in the final months of 2009 — the 12th straight quarterly increase — albeit at a slower pace. Fewer than a third of banks reported a net loss for the fourth quarter, which officials held out as a glimmer of good news.

 

Still it could be worse.

 

Thank god FDIC isn't insolvent, that would be really worrying.

[interestrateripoff]

Deal to Sell Hummer to China Company Nears Collapse

 

By KEITH BRADSHER 7:15 AM ET

 

Hostility from Chinese regulators and bank financing problems have raised obstacles to plans by a Chinese machinery company to buy the G.M. unit.

 

Deal Seen for Stake in China Investment Bank

 

By DAVID BARBOZA 9:46 AM ET

 

Kohlberg Kravis Roberts & Company and TPG Capital have tentatively agreed to pay close to $1 billion to acquire Morgan Stanley’s stake in China’s leading investment bank.

 

U.S. Home Prices Rise Modestly

 

By DAVID STREITFELD 45 minutes ago

 

While the 20-city home price index rose 0.3 percent from November to December, the index was off 3.1 percent from December a year ago.

 

 

Wall Street Bonuses Said to Rise 17% in 2009

 

By DEALBOOK 8:59 AM ET

 

One year after the finance industry received its massive government bailout, Wall Street firms paid out 17 percent more in bonuses to more than $20 billion, New York State’s comptroller said.

Shares Roam as Investors Take In Latest Earnings

 

By THE ASSOCIATED PRESS 10:13 AM ET

 

Several retailers reported better-than-expected earnings as investors have been looking for signs that consumers are spending more.