Ten US banks fail recession test

May 8 2009

US banks would need a total of £50 billion in additional funds to survive if the recession deepens, the results of government "stress tests" showed.

An assessment of the robustness of the sector found that 10 of the 19 largest banks would need to find extra capital to see them through the bad times.

Bank of America faces the largest potential shortfall of £23 billion.

It joined a list of institutions that also includes Citigroup and Wells Fargo.

The stress tests were designed to gauge whether America's 19 largest banks have enough capital to see them through a deepening of the recession.

After Bank of America, Wells Fargo was found to have the second largest shortfall of £9.1 billion, followed by GMAC with a potential £7.6 billion black hole.

Citigroup is being asked to raise an additional £3.3 billion to make it secure. Goldman Sachs, JP Morgan Chase and American Express were among the nine banks deemed not to need to raise additional funds.

The stress tests were designed to help regulators assess the ongoing financial stability of US banks.

They look at two models of the economy going forward - one in which unemployment reaches 8.8% next year and house prices drop a further 14%. In the second scenario, joblessness rises to 10.3% and property slips another 22%.

Banks facing a shortfall under the model will have to come up with a plan to raise additional capital by mid June.

 If they cannot do so independently, they may have to turn to the government's £466 billion financial bailout fund.

sourced from Runcorn and Widnes Weekly News

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Indicators of economic depression ending-- Google searches vs. job losses

read the full article at examiner.com

Larry Summers, Obama's top economic advisor has summed up the state of the economy today in what Forbes online is calling "promising", but somewhat "obscure" signs of recovery.

 

The Job Impact of the American Recovery and Reinvestment Plan

• "Earlier this year traders were betting there was a one-in-six chance that the Dow would fall below 5,000, he said. Now they say it's one-in-a-hundred.


• The chances that corporate bonds will default has fallen by a third.


• And Google searches for 'economic depression,' which surged to quadruple their normal levels, have since returned to normal. (A growing number of economists do believe that the recession has ended or will end in coming months.)"

read the full article at  examiner.com

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NEW blog in development

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Hi all, I have been developing a new blog please come and visit it

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Obama calls for G20 joint action

US President Barack Obama has said that countries must take concerted action to spur global economic growth.

 

President Obama called for both stimulus and regulatory reforms

 

President Obama was speaking ahead of this weekend's meeting of G20 finance ministers in West Sussex near London.

He said the US had two goals at the G20 - to ensure joint action to jump-start economies and to move forward on a regulatory reform agenda.

He added that he was optimistic about the meeting's prospects. "We are in this together," he said.

Earlier, UK Chancellor Alistair Darling had also called for co-ordinated global action.

"We must work together not as a small group of advanced economies but globally, including the emerging and developing economies," he told reporters in London.

Growing rift

The finance ministers meet ahead of the main G20 summit of world leaders in London on 2 April.

 

It's very important to make sure that other countries are moving in the same direction, because the global economy is all tied together  US President Barack Obama Darling urges global co-operation

President Obama's comments came amid reports of a growing rift between the US and Europe over the G20 in recent weeks.

Washington has been calling for more spending plans, while most European leaders have been pressing for increased global regulation of the financial system.

Speaking at a meeting in the Oval Office with Treasury Secretary Timothy Geithner, Mr Obama said the $787bn stimulus package he signed into law last month was "doing a good job" stimulating the US economy.

He added: "It's very important for the American people to understand that, as aggressive as the actions we are taking have been so far, it's very important to make sure that other countries are moving in the same direction, because the global economy is all tied together."

On Tuesday the head of the US Federal Reserve, Ben Bernanke, also called for the revamping of the global system of financial regulation.

sourced from The BBC

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Recession

rom recession in more than a decade and a half. One yardstick is at least two quarters of negative economic growth - and Britain has not had even one three-month period of falling output since 1992.

This unbroken record has allowed Gordon Brown to boast that the economy is enjoying its longest spell of sustained growth since the dawn of the Industrial Revolution in the 18th century, although reliable quarterly data has only been available for around half a century.

Some economists believe this definition of recession is flawed, since an economy would not be in recession if it contracted by 5% in the first quarter, expanded by 0.1% in each of the following two quarters and then contracted again by 5% in the fourth quarter.

It would, however, be deemed to be in recession if it grew by 5% in each of the first and fourth quarters but contracted by 0.1% in each of the second and third quarters. An alternative - and tougher definition - is a full calendar year of negative output.

Given the UK economy has grown on average by 2.5% over many decades, it is rare for gross domestic product (GDP) to fall on an annual basis. There have been only five such years since the end of the second world war: 1974, 1975, 1980, 1981 and 1991.

The United States has its own method of assessing recession, with the National Bureau of Economic Research's business cycle-dating committee making a judgment.

The NBER defines recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales". It has not given a definitive ruling on whether the United States is technically in recession now, but analysts believe that it will give its verdict soon.

sourced from The Guardian

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US jobless rate increases to 8.1%

 

The US jobless rate jumped in February to 8.1%, according to official figures from the Labor Department. The number of people out of work rose by 651,000 during the month. Both figures were bigger than expected. The number of job cuts in January was revised up to 655,000 while December's losses were pushed up to 681,000. December's figure was the biggest job loss in a single month since October 1949. The unemployment rate was the highest since December 1983.   Rising unemployment has meant greater demand for free meals President Obama said that the number of jobs lost so far in the recession was "astounding". Speaking in Ohio, he added: "I don't need to tell the people of this state what statistics like this mean," saying that he had signed his economic stimulus package in order to save jobs. The extra 161,000 jobs added to December and January's figures mean that almost two million jobs have been lost in the past three months. A total of 12.5 million people are now unemployed in the US. "It just continues to show the grim state of the labour market, which suggests a deepening US recession," said Joe Manimbo, currency trader at Ruesch International in Washington. Across sectors There were further signs of companies cutting back on their spending with the news that the number of people who wanted to work full-time but were forced to work part-time for economic reasons rising 787,000 to 8.6 million.   FEBRUARY'S BIG JOB CUTS Goodyear: 5,000 Macy's: 7,000 General Motors: 3,400 Estee Lauder: 2,000 Lincoln Electric: 900 The average working week stood at 33.3 hours, matching the record low set in December. Jobs were cut in most sectors, with only government, education and health services adding staff. In the manufacturing sector 168,000 jobs were cut in the month while 104,000 jobs went in construction and 375,000 were cut in the service sector. "The payroll numbers are very weak. With the revisions, we've had significant job losses in the past four months," said Gary Thayer, senior economist at Wachovia Securities in St Louis. "Companies are reducing workers and output in order to bring inventories into line with weak sales." Among the companies that announced big job cuts in February were Goodyear, Estee Lauder, Macy's and General Motors. Federal Reserve Chairman Ben Bernanke told Congress earlier in the week that economic indicators "show little sign of improvement" and suggest that "labour market conditions may have worsened further in recent weeks".

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Brown under siege as Congress caps bankers' bonuses

A dramatic vote on Capitol Hill is set to bring major change to Wall Street's risk culture as cash incentives for executives, brokers and traders are limited to a third of their salaries. Gaby Hinsliff, Zoe Wood and Paul Harris report on the implications for Britain.

Gordon Brown was under rising pressure to clamp down on the City's bonus culture last night after the US Congress agreed to drastic curbs capping senior bankers' bonuses at a third of their salary.

The measures, which are expected to be signed into law by President Barack Obama (Barack Obama page on the Guardin website) this week, would apply to dozens of staff at American banks bailed out by the taxpayer and could cost Wall Street's wealthiest millions. Cash bonuses would be banned in favour of long-term share options, with the restrictions extending beyond a handful of top executives to senior brokers and traders.

read full article from The Gardian

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McDonalds to open 1,000 stores this year

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McDonald's to open 1,000 stores

McDonald's US sales were up 5% on the year before US fast-food chain McDonald's says it plans to open 1,000 new restaurants this year. The world's largest hamburger chain also said fourth-quarter net income fell 23% to $985.3m (£710m), from $1.27bn a year before. Revenue fell to $5.57bn from $5.75bn, even though global same-store sales rose 7.2%, as the firm was hit by the strong dollar. In the US, the firm raised the price of its Double Cheeseburger in November. Announcing the results, chief executive Jim Skinner said: "For 2009 we plan to invest $2.1bn in capital to open about 1,000 new restaurants and reinvest in our existing locations." Despite beef, cheese, and other ingredients rising in price, the company reported an 8% fall in total operating costs and expenses. McDonald's has seen sales rise in the economic downturn, helped by its low prices and ubiquity of its outlets. In the quarter, its same-store sales in the US rose 5% on the year before. International same-store sales were also ahead, rising 7.6% in Europe and 10% in the Asia-Pacific, Middle East and Africa division. sourced from The BBC

McDonald's to open 1,000 new stores

Despite falling short of Wall Street expectations, the burger chain experiences better-than-expected profit and will open 1,000 new restaurants.

NEW YORK (Reuters) -- McDonald's Corp. reported a better-than-expected quarterly profit on Monday though revenue fell short of Wall Street expectations due to a stronger U.S. dollar, and its shares fell more than 2%.

The world's largest hamburger chain also said it would open 1,000 restaurants this year.

Fourth-quarter net income fell about 23% to $985.3 million, or 87 cents per share, from $1.27 billion, or $1.06 per share, a year earlier, when results included a large tax-related benefit.

Analysts on average were expecting earnings of 83 cents per share, according to Reuters Estimates.

sourced from CCN Money read full article

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Downturn in the USA

Retail sales fell in December by 2.7 percent, a worse-than-expected number that shows how rising unemployment, stagnant wages and an ongoing housing crisis have undermined one of the basic props of the U.S. economy.

Consumer spending accounts for about two-thirds of U.S. economic activity but has headed down every month since June -- the longest period of decline since the current method of reporting the statistic was adopted in the early 1990s.

U.S. stock indexes dropped on the news, with the Dow Jones industrial average and other major exchanges losing about 1.5 percent in the opening minutes of trading. Losses had reached roughly 3 percent before noon.

read full article sourced from The Washington Post

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