Deepening crisis drags down business across every sector
From Fazle Rashid | Wednesday, 25 February 2009
NEW YORK, Feb 24: The governments, investors and business executives in US , Europe and Asia are panic stricken "as deepening global downturn is dragging down business across every sector of the economy". Losses are piling up everywhere. It is not the banks alone that have been inflicted with deep wounds providing few signs that would point to the end of the bear market.
Stocks of technology companies like Intel, Google and International Business Machine (IBM) are falling. On downhill slide are prices of scores of retailers, manufacturers and media companies. In last five trading days stock prices have fallen about 10 percent.
The government faced mounting pressure on Monday to put billions more in some of nation's biggest banks, automakers and the biggest insurance company despite billions it has already committed to rescuing them, the New York Times reported today. The Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might demand a direct ownership stake in major banks that do not have enough capital to weather a deeper downturn, the same paper reported.
The Government owns about 40 percent of Citigroup. AIG is in talks with the government over a new bail-out aimed at giving the stricken insurer, which is already 80 percent owned by the authorities, fresh capital to absorb an expected fourth-quarter loss and more time to sell assets, a reputed paper reported.
JP Morgan Chase another banking giant not in the news in recent times "surprised investors" by slashing its quarterly dividends by 87 percent to preserve capital. The bank said it is doing so in "highly stressed environment". The bank which took $25 billion from government will save $5.0 billion by cutting its dividends. A New York judge has ruled that John Thain, former chief executive of Merrill Lynch must furnish the names of those who were favoured with bonuses days before it was taken over of by Bank of America. Merrill Lynch reported a loss of $28 billion but was not deterred to pay bonuses totalling $3.6 billion. John Thain was in the news for buying a commode with $35,000 and a waste paper bin for $1400.
Investors gloom over GE deepened after an analyst raised concerns that the conglomerate might need to inject additional equity into its capital division. Banking regulators must not allow their attempts to build up bank capital to distort financial statements. Airlines which first suffered due to soaring oil prices are still in trouble due to drastic fall in the number of passengers. Some airlines in order to woo the passengers are offering beverages without any cost.
Many US newspapers will be forced to seek protection under bankruptcy regulation. Newspapers are losing circulation and facing shrinkage of revenue. Also in line to seek protection under bankruptcy regulations are two giant automakers General Motors and Chrysler. GM said it would need an additional sum of $30 billion and Chrysler's need has been estimated at $9.0 billion. This is inclusive of $13 billion and $4.0 billion they received earlier.
Regulations and oversight need to be extended to all systematically important financial institutions and markets said president of European Central Bank. The present crisis is a loud and clear call to extend regulations to institutions that pose fundamental risk to financial stability. US president Barack Obama echoed the same sentiment saying "it will be top priority to put in place new regulations to ensure that Wall Street does not bring the economy to its knees".
More than 325,000 financial service jobs have been axed worldwide since August 2007, according to ILO. Almost two-fifths of losses have occurred in past five months. The job losses will rise further, ILO warned.
Although European leaders have pledged to double the resources of the IMF but the multilateral funding agency is not sure from where the money would come. Only Japan has committed to lend $100 billion. ADB has dropped its plan to change its lending criteria. ADB is not sure as how to shore up its capital base. ADB president Haruhiko Kuroda is set to meet US treasury secretary Tim Geithner to lobby for capital increase.
Kuroda is likely to be disappointed by the US response.
Stocks of technology companies like Intel, Google and International Business Machine (IBM) are falling. On downhill slide are prices of scores of retailers, manufacturers and media companies. In last five trading days stock prices have fallen about 10 percent.
The government faced mounting pressure on Monday to put billions more in some of nation's biggest banks, automakers and the biggest insurance company despite billions it has already committed to rescuing them, the New York Times reported today. The Treasury Department, Federal Reserve and federal bank regulatory agencies announced that the government might demand a direct ownership stake in major banks that do not have enough capital to weather a deeper downturn, the same paper reported.
The Government owns about 40 percent of Citigroup. AIG is in talks with the government over a new bail-out aimed at giving the stricken insurer, which is already 80 percent owned by the authorities, fresh capital to absorb an expected fourth-quarter loss and more time to sell assets, a reputed paper reported.
JP Morgan Chase another banking giant not in the news in recent times "surprised investors" by slashing its quarterly dividends by 87 percent to preserve capital. The bank said it is doing so in "highly stressed environment". The bank which took $25 billion from government will save $5.0 billion by cutting its dividends. A New York judge has ruled that John Thain, former chief executive of Merrill Lynch must furnish the names of those who were favoured with bonuses days before it was taken over of by Bank of America. Merrill Lynch reported a loss of $28 billion but was not deterred to pay bonuses totalling $3.6 billion. John Thain was in the news for buying a commode with $35,000 and a waste paper bin for $1400.
Investors gloom over GE deepened after an analyst raised concerns that the conglomerate might need to inject additional equity into its capital division. Banking regulators must not allow their attempts to build up bank capital to distort financial statements. Airlines which first suffered due to soaring oil prices are still in trouble due to drastic fall in the number of passengers. Some airlines in order to woo the passengers are offering beverages without any cost.
Many US newspapers will be forced to seek protection under bankruptcy regulation. Newspapers are losing circulation and facing shrinkage of revenue. Also in line to seek protection under bankruptcy regulations are two giant automakers General Motors and Chrysler. GM said it would need an additional sum of $30 billion and Chrysler's need has been estimated at $9.0 billion. This is inclusive of $13 billion and $4.0 billion they received earlier.
Regulations and oversight need to be extended to all systematically important financial institutions and markets said president of European Central Bank. The present crisis is a loud and clear call to extend regulations to institutions that pose fundamental risk to financial stability. US president Barack Obama echoed the same sentiment saying "it will be top priority to put in place new regulations to ensure that Wall Street does not bring the economy to its knees".
More than 325,000 financial service jobs have been axed worldwide since August 2007, according to ILO. Almost two-fifths of losses have occurred in past five months. The job losses will rise further, ILO warned.
Although European leaders have pledged to double the resources of the IMF but the multilateral funding agency is not sure from where the money would come. Only Japan has committed to lend $100 billion. ADB has dropped its plan to change its lending criteria. ADB is not sure as how to shore up its capital base. ADB president Haruhiko Kuroda is set to meet US treasury secretary Tim Geithner to lobby for capital increase.
Kuroda is likely to be disappointed by the US response.