Further problems lie ahead of global banking sector
Friday, 14 November 2008
From Fazle Rashid
NEW YORK, Nov 13: The US Treasury Department has abandoned the idea of spending the entire bail-out money amounting to $700 billion for recapitalisation of banks and other financial institutions. The reason behind the reversal of the decision has been banks' stringency to lend money to the consumers, the main artery of the American financial system.
Henry Paulson, the treasury secretary, is carving out a new lending strategy that would be administered by the Fed reserve. The new plan aims at unlocking the frozen consumer credit market. The new plan envisages an investment of $50 billion into new loan facility with the aim of helping companies that issue credit cards, make student loans and finance car purchases. "I will never apologise for changing an approach or strategy when the facts change", a reputed paper quoted Henry Paulson as saying.
The US regulators threatened action against banks and insurance companies that pay high dividends and warned them not to dole out large bonuses in a stark reminder to the Wall Street that government money should be used to help economy to rebound.
The total losses incurred by the financial sector is running close to a whopping $1000 billion ($1.0 trillion) in the wake of recent frenzy in the global financial system. International Monetary Fund's estimate is little higher. The IMF says the total losses in the financial sector will be in the neighbourhood of $1400 billion. The losses stood at $945 billion in April.
The market analysts are predicting that further problems lie ahead. Losses will put renewed pressure on financial groups in US and Europe because of the shrinkage of capital markets. The financial institutions in Europe would require an additional infusion of $104 billion if the current economic downturn proved as severe as that of early 90s.
Meanwhile, Italy's Mafia gangs are making the best use of the credit crunch by lending money to Italy's small businesses using their vast pool of cash. Intel, the world's largest chipmaker issued a warning saying there has been a rapid decline in its business.
China disturbed by the news of slowing growth and reports of factory closures will step-up support to manufacturers raising export tax rebates on 3700 kinds of merchandise.
Speculators are at play in Dubai sending down prices for the first time since the construction boom started in 2002. Dubai opened its property market to non-Gulf Arab buyers.
Meanwhile, the Bush administration and the incoming Obama team both signalled that they did not intend to be bounced into firm commitments on reforms of the international financial system at this weekend's G20 summit.
The President-elect who has opted out of G20 summit has nominated former secretary of state Madelein Albright to meet with the world leaders coming to Washington for G20 summit. Morgan Stanley plans to cut 2000 jobs as a part of renewed focus on acting as a financial intermediary.
Maersk, world's largest container shipping line said there has been a huge decline in its revenue earnings because of steep drop in the volume of its business in its most lucrative Asia-Europe route.
General Electric's financial arm won a federal guarantee on its debts to help ensure its businesses and tap capital markets for funding.
NEW YORK, Nov 13: The US Treasury Department has abandoned the idea of spending the entire bail-out money amounting to $700 billion for recapitalisation of banks and other financial institutions. The reason behind the reversal of the decision has been banks' stringency to lend money to the consumers, the main artery of the American financial system.
Henry Paulson, the treasury secretary, is carving out a new lending strategy that would be administered by the Fed reserve. The new plan aims at unlocking the frozen consumer credit market. The new plan envisages an investment of $50 billion into new loan facility with the aim of helping companies that issue credit cards, make student loans and finance car purchases. "I will never apologise for changing an approach or strategy when the facts change", a reputed paper quoted Henry Paulson as saying.
The US regulators threatened action against banks and insurance companies that pay high dividends and warned them not to dole out large bonuses in a stark reminder to the Wall Street that government money should be used to help economy to rebound.
The total losses incurred by the financial sector is running close to a whopping $1000 billion ($1.0 trillion) in the wake of recent frenzy in the global financial system. International Monetary Fund's estimate is little higher. The IMF says the total losses in the financial sector will be in the neighbourhood of $1400 billion. The losses stood at $945 billion in April.
The market analysts are predicting that further problems lie ahead. Losses will put renewed pressure on financial groups in US and Europe because of the shrinkage of capital markets. The financial institutions in Europe would require an additional infusion of $104 billion if the current economic downturn proved as severe as that of early 90s.
Meanwhile, Italy's Mafia gangs are making the best use of the credit crunch by lending money to Italy's small businesses using their vast pool of cash. Intel, the world's largest chipmaker issued a warning saying there has been a rapid decline in its business.
China disturbed by the news of slowing growth and reports of factory closures will step-up support to manufacturers raising export tax rebates on 3700 kinds of merchandise.
Speculators are at play in Dubai sending down prices for the first time since the construction boom started in 2002. Dubai opened its property market to non-Gulf Arab buyers.
Meanwhile, the Bush administration and the incoming Obama team both signalled that they did not intend to be bounced into firm commitments on reforms of the international financial system at this weekend's G20 summit.
The President-elect who has opted out of G20 summit has nominated former secretary of state Madelein Albright to meet with the world leaders coming to Washington for G20 summit. Morgan Stanley plans to cut 2000 jobs as a part of renewed focus on acting as a financial intermediary.
Maersk, world's largest container shipping line said there has been a huge decline in its revenue earnings because of steep drop in the volume of its business in its most lucrative Asia-Europe route.
General Electric's financial arm won a federal guarantee on its debts to help ensure its businesses and tap capital markets for funding.