Thomas Jefferson said in 1802: 'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered..'
Peter G. Halll VP EDC Economics Weekly Commentary Peter G. Hall VP EDC Economics Weekly Commentary Dazed by the Dollar - July 1, 2009
What’s gotten into the loonie? Months of calm were shattered in late April as the dollar soared by 12 cents in 29 days. The swift increase would be shocking at the best of times, but this run-up is hitting exporters during the worst economic episode they have likely ever seen. What’s going on? Past issues | his WN page
Commentary podcast.
From Economist.com, Friday June 12th 2009
The following have been newly published on Economist.com:
Sunday 14 June 2009 MONTREAL: BANKS TOLD TO REIMBURSE CREDIT CARD CUSTOMERS
Canada's six major banks and four other financial institutions have been ordered to pay more than $200 million to tens of thousands of people who hold credit cards in the province of Quebec. The Quebec Superior Court ruled against the 10 financial institutions for charging a fee for foreign currency transactions on customers' credit cards. The banks claimed the fees are service and administrative charges. But the court ruled they are credit charges which are covered by Quebec's consumer protection law.
OTTAWA: CENTRAL BANKER WANTS MORE PRIVATE-SECTOR RISK
Bank of Canada Gov. Mark Carney says he wants governments to devise exit strategies from their intervention in the global economy. Mr. Carney says that such public-sector interventions have been necessary because of the recession, but that it won't be entirely overcome until private business resumes normal operations and accepts risks which governments are now assuming.
Wednesday 10 June 2009 OTTAWA: WORLD BANK CHIEF ADVISES AGAINST TRADE RETALIATION
The head of the World Bank, Robert Zoellick, has advised Canadians against retaliatory trade measures against the U.S. Speaking in the Canadian capital, he acknowledged that American trade protectionism represents a threat to global economic recovery from recession. Mr. Zoellick was critical of the economic stimulus package that requires local governments to buy U.S.-made goods and steel in infrastructure projects. Last weekend, the Federation of Canadian Municipalities voted by a narrow margin on the weekend to block bids by American companies on Canadian municipal projects. The resolution was in response to the blockage by American cities and towns of Canadian bids on projects funded by the stimulus package. Mr. Zoellick says such actions would hurt both countries.
Wednesday 03 June 2009 OTTAWA: FEDERAL DEFICIT STILL UNDERESTIMATED: TD BANK
Toronto Dominion Bank says the federal government continues to overestimate its future budget deficits. The bank's report on the matter says it agrees with Finance Minister Jim Flaherty that this year's deficit will come to more than $50 billion, but that the deficit for the 2010-2011 will be $45 billion not $30 billion. TD's economists forecast a five-year shortfall of $172 billion, or twice as much as Mr. Flaherty has predicted. The bank's pessimism is based on a much more modest economic recovery after the recession ends than what the government sees.
Sunday 24 May 2009 The world's best banks
As the dust starts to settle, which banks deserve the most plaudits?
NEW YORK (Reuters) - American International Group Inc said on
Thursday that its Chief Executive and Chairman Edward Liddy
would step down as soon as a successor is found to take over
running the bailed out insurer.
WASHINGTON (Reuters) - Treasury Secretary Timothy Geithner said
on Wednesday the Obama administration was making headway in
calming financial markets and would have a program to cleanse
toxic assets from banks' balance sheets up and running by July.
Sunday 10 May 2009 Banks unveil cash-raising plans
US banks Wells Fargo, Morgan Stanley and Bank of America unveil plans to boost reserves after failing 'stress tests'.
Friday 08 May 2009 US banks 'safe from insolvency'
No US bank being examined by regulators is at risk of insolvency, US Treasury Secretary Timothy Geithner says.
Friday 08 May 2009 OTTAWA: MORE GOVT. STIMULUS UNNEEDED: CENTRAL BANK
Bank of Canada Gov. Mark Carney predicts that the country's foundering economy will recover next year, achieving 2.5 per cent in 2010. However, the central banker also forecasts a mild recovery that will see the economy contract by three per cent this year. Mr. Carney affirms as well that the government and the Bank of Canada have provided sufficient financial stimulus to jumpstart the economy. He cites as encouraging signs the improvement of the world economy, the betterment of housing markets in the U.S. and Canada, the depreciation of the Canadian dollar and the country's sound financial system.
Friday 08 May 2009 Ten US banks fail 'stress tests'
Ten US banks need a combined $74.6bn (£50bn) of extra funds to boost their cash reserves, the government says.
Tuesday 05 May 2009 Opening View: Bulls Balk as 10 Banks Might Need Additional Capital The Wall Street Journal has reported. The figure represents more than half of the 19 that underwent government stress tests. The reaction from traders is muted so far, but the path of U.S. stock futures has trended lower as the open approaches, pointing toward a negative start.
Monday 04 May 2009 Canadian Banks - Becoming More Positive
RBC CM’s view on the Canadian bank sector is turning more positive based on recent improvements in indicators of future profitability and the view that banks have enough capital to handle the negative impact of challenging economic conditions on loan losses over the next 6 to 12 months. The upgrade of the sector is not reflective of a positive outlook for bank earnings over the near term, as RBC CM continues to believe that loan losses will negatively exceed expectations. However, the key to investing in bank shares is not to look at the immediate future for earnings but rather at whether the outlook for future earnings is improving and whether bank capital positions are adequate to face challenges until earnings actually turn. Negative news flow on the economy and credit is likely to continue, and consensus earnings expectations continue to appear vulnerable to further decline. As a result, a pull back in bank shares is quite possible, so the change of view is not a trading call. RBC CM believes that fundamentally, a pullback should be viewed as a buying opportunity as long as key indicators of future profitability trend in the right direction. RBC CM believes that upside in share prices over the next two years if leading indicators continue improving could be in the 40%-80% range on top of the annual dividend yield of 5-7% at current share prices.
Wednesday 29 April 2009 OTTAWA: CENTRAL BANKER SAYS UNPRECEDENTED INTERVENTIONS ONLY A LAST RESORT
Bank of Canada Gov. Mark Carney says that the use of non-traditional monetary policies would be used only as a last resort to fight the current recession. Several weeks ago, Mr. Carney mentioned the possibility of the central bank printing large amounts of currency to loosen credit markets and to become involved in the frozen market for non-bank paper assets. Mr. Carney assured the House of Commons finance committee that he has no interest in trying out strategies that are unnecessary. Last week, the bank lowered its growth projection for the economy, saying growth would shrink by three per cent this year, twice the decline its foresaw in January. The governor of the central bank explained that the new forecast was required because the U.S. and Europe had moved more slowly than expected to deal with the worldwide crisis. Mr. Carney says the first sign of whether the U.S. has accelerated its intervention will come next Monday when its releases a report on the top 19 American banks.
Saturday 25 April 2009 G7 offers hope crisis is easing
Finance ministers from the G7 say the world economy is showing positive signs but warn the financial crisis is not over.
Friday 24 April 2009
Regulators Disclose Criteria for Bank ‘Stress Tests’ Federal regulators released the criteria they used to assess the financial health of the nation’s 19 biggest banks on Friday, but provided little new information for investors to distinguish the industry’s weak players from the strong. In a 21-page report, the Federal Reserve regulators broadly laid out the tools they used to project bank losses if the economy worsens, and officials established an unspecified baseline to measure how much additional capital the banks should add as a buffer against higher losses. But they provided no concrete metrics to assess the depths of the troubles facing the industry or specific banks.
Thursday 23 April 2009 OTTAWA: GOVT. WEIGHS REGULATION OF CREDIT CARD FIRMS
The finance minister, Mr. Flaherty, says the federal government is considering regulating credit card companies but didn't give any information about what form the regulation might take, particularly whether the regulation of interest charges is intended. The comments coincided with testimony before the Senate banking committee by the heads of Visa Canada and MasterCard Canada, who argued against regulation. Tim Wilson of Visa and Devin Stanton of MasterCard argued as well in favour of allowing their firms to enter the debit-card market, which at president is dominated by chartered banks. The price of debit-card purchases is withdrawn directly from customers' bank accounts without charge. The Canadian Federation of Independent Business opposes permitting to credit card firms entry into the debit-card business on the grounds that they'll charge the same high rates as those imposed on their own cards. Mr. Wilson and Mr. Stanton said debit charges would be modest and wouldn't be charged to the customer.
Saturday 18 April 2009 The federal government has named the president and CEO of mortgage giant Fannie Mae, Herbert Allison Jr., to run the government's US$700-billion bank rescue effort. Mr. Allison will assume the position of assistant Treasury secretary for financial stability and will be a counselor to Treasury Secretary Timothy Geithner. Mr. Allison will be in charge of the Troubled Asset Relief Program, which has injected billions of dollars into the banking industry in the hope of releasing jammed credit. Fannie Mae was one of the principal mortgage firms mired in the subprime mortgage disaster that was one of the original detonators of the world financial crisis.
Wednesday 15 April 2009 OTTAWA: PRINTING PRESS SEEN AS ECONOMY'S SILVER BULLET
A research paper prepared for the C.D. Howe Institute says the Bank of Canada hasn't been as unorthodoxically aggressive as it should be to alleviate the economic recession. Its author, economist David Laidler, says that the central bank's reduction of short-term interest rates won't be of any long-term effectiveness against a shrinking economy and falling inflation rates. Mr. Laidler says that unless the bank takes other action the few encouraging economic signs will wither on the branch. The economist argues that the Bank of Canada should start printing money. Mr. Laidler says that normally the danger of running the printing press is inflation, but that in the present case the odds of an inflation problem arising are slight and that the current recession is a worse one.
Tuesday 14 April 2009 Goldman sparks bank shares rally
Financial shares across Europe rise sharply after US banking giant Goldman Sachs announces surprisingly good results.
Tuesday 14 April 2009 OTTAWA: BUSINESS CONFIDENCE REMAINS ABYSSMAL
The Bank of Canada had mostly, if not entirely, bad news on Monday. According to the central bank's quarterly survey of 100 selected firms, business confidence is negative on a range of questions, including sales volumes, product pricing, investment intentions and credit conditions. However, business sentiment wasn't as negative as it was in the previous survey three months earlier, when it recorded the lowest level since the surveys began in 1997. A separate survey by the Bank of Canada of lenders found that the cost of obtaining credit remains a problem. Finance Minister Jim Flaherty and Bank of Canada Gov. Mark Carney have made improved credit conditions a key condition for resumption of economic growth in Canada and the world.
April 3, 2009 video with Bill Moyers
The financial industry brought the economy to its knees, but how did they get away with it? With the nation wondering how to hold the bankers accountable, Bill Moyers sits down with William K. Black, the former senior regulator who cracked down on banks during the savings and loan crisis of the 1980s. Black offers his analysis of what went wrong and his critique of the bailout
Wednesday 01 April 2009 OTTAWA: DEVELOPMENT BANK ISSUES WARNING
The Business Development Bank of Canada is warning that the ability of Canada to develop the new technologies of the future is in jeopardy because entrepreneurs can't get financing to see them through the recession. The Crown corporation, which helps finance Canadian businesses, says the disappearance of venture capital in the country will snuff out hundreds of innovative small companies in infancy and their technology with them. The assessment was made by Edmee Metivier, the development bank's executive vice president of financing, to House of Commons subcommittee on Tuesday. Ms. Metivier said the BDC is a shareholder in about 150 technology firms and believes it may have to let a majority go to protect the best of these companies from becoming victims of the recession. She added that there are hundreds more such companies across the country that can't find capital to fund research and get new products to the markets.
Friday 27 March 2009 Articles-by-subject alert: Banking, pensions and financial regulation
From Economist.com, Friday March 27th 2009
The following have been newly published on Economist.com:
March 25, 2009 Some Hope For The U.S. Bank Sector The Public-Private Investment Program (PPIP) is a significant positive step forward in restructuring the troubled U.S. banking sector.
Wednesday 25 March 2009 OTTAWA: STIMULUS PLAN PASSES COMMONSWednesday 25 March 2009 UNITED STATES
New York Attorney General Andrew Cuomo says 15 employees who received some of the largest bonuses from American International Group have agreed to return the money in full. The commitments amount to more than $30 million of the $165 million in bonuses awarded earlier this month by the troubled insurer. Cuomo says he still hopes that more AIG employees will return their bonuses. He expects his office will be able to recoup roughly $80 million dollars of the money the insurer paid out. Last week, AIG's CEO, Edward Liddy, told Congress that some of the employees were going to give the money back. AIG has come under heavy criticism because the bonuses were given to employees after the company received $170 billion in U.S. government bailout money.
Tuesday 24 March 2009 Top AIG bosses 'to repay bonuses'
Nine of the 10 executives paid top bonuses by US insurance giant AIG agree to return them, officials say.
Monday 23 March 2009 US details toxic asset programme
US Treasury Secretary Timothy Geithner gives details of a $500bn plan to encourage private investors to buy up toxic assets. The "Public-Private Investment Programme" will purchase the troubled mortgages and securities that have been at the root of the credit crunch.
Sunday 22 March 2009 Fed to Buy $1 Trillion in Securities to Aid Economy
The Fed dramatically increased the amount of money it will create out of thin air to thaw frozen credit markets. WASHINGTON — The Federal Reserve sharply stepped up its efforts to bolster the economy on Wednesday, announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.
Sunday 22 March 2009 AIG bonuses 'higher than thought'
Controversial US insurance giant AIG paid $218m in bonuses - much more than previously thought, a senior US official says. more bbc
Sunday 22 March 2009 a class="b2" href="http://news.bbc.co.uk/2/hi/americas/7957355.stm" onmouseover="return overlib('click to bbc ', LEFT);" onmouseout="return nd();" target="_" >Obama fends off Geithner doubters
US President Barack Obama backs his embattled treasury secretary in a US TV interview, saying he would not be allowed to resign. ....Mr Geithner has come under fire as controversy rages over the scale of bonuses paid by bailed-out insurer AIG.
Saturday 21 March 2009 US banking losses revised upward
US banks lost $32.1bn (£22.3bn) in the last quarter of 2008 - nearly $6bn more than first reported, officials say.
Friday 20 March 2009 Why I Deserve My Bonus OK, so I bagged a chunk of change: $4,605,321.54, to be exact. But I'm here to tell you that I earned every penny of it before leaving AIG and I'm fed up with hearing everyone
Mar 19, 2009 The Fed Gets More Aggressive The FOMC's increasingly aggressive actions highlight a deep concern about the economic outlook. The Fed will run the printing presses until it gets results.
UNITED STATES
A U.S. congressman says that some of the top companies who received federal bailout funds owe huge amounts of tax to the federal government. John Lewis, the head of the House Ways and Means Committee, says 13 bailed out companies owe taxes, two of them owing more than $100 million each. The Congressman says the companies signed statements at the time of the emergency loans that they owed no federal taxes, a situation which the Congressman called "a disgrace." His subcommittee studied the finances of the top 23 recipients of the Troubled Asset Relief Program and found that more than one-half owed taxes, one owing $112.75 million from 2006 and 2005. More than $300 million of TARP funds have been paid to such companies as Citigroup, Bank of American and American International Group. Meanwhile, the U.S. House of Representatives on Thursday passed legislation calling for a 90-percent tax on bonuses at bailed-out firms like insurer AIG. A competing bill is under consideration in the Senate.
Wednesday 18 March 2009 A spokesman for President Barack Obama says his government is considering a variety of ways to recover millions of dollars of bonuses paid to employees of insurance giant American International Group. The spokesman says the president hopes to work with Congress to recover the money and is considering such possibilities as changing the tax code. House of Representatives legislator Barney Frank has suggested the government use its position as a majority stakeholder in AIG to sue the company. AIG paid its top executives $165 million in bonuses after the government injected $170 million in loans to prevent the company from collapsing. The injection left the government with an 80-per cent stake in the company. Meanwhile, New York's top legal officer said on Tuesday that AIG created 73 millionaires with bonuses of $1 million or more in 2008. New York Attorney General Andrew Cuomo, releasing details of a probe into payments at the insurer, said the top bonus recipient was paid more than $6.4 million, and the top 10 received a total of $42 million.
Mar 16, 2009 Canada: Unemployment Surges The Bank of Canada has reacted appropriately to deteriorating economic conditions, but will have to remain proactive throughout 2009.
Monday 16 March 2009
Bernanke hopeful for US recovery
The head of the US central bank, Ben Bernanke, says he expects the country's recession to end this year.
"This decline will begin to moderate and we'll begin to see a levelling off," the Federal Reserve chairman told the CBS 60 Minutes TV programme.
President Barack Obama has lashed out at executives of insurance giant American International Group for paying its top executives $165 million in bonuses after the government injected $170 million in loans to prevent the company from collapsing. The injection left the government with an 80-per cent stake in AIG. Mr. Obama says it's impossible to "justify this outrage" to taxpayers, blaming the bonuses on "recklessness and greed." The president says he has told Treasury Secretary Timothy Geithner to use every legal means to block the bonues. In Albany, meanwhile, New York Attorney General Andrew Cuomo says he'll issue subpoenas to obtain information about the bonuses and to find out whether their recipients were involved in AIG's near-collapse.
On CBS' Face The Nation this morning
New York Times columnist Tom Friedman weighed in on the financial crisis and the administration's plans to fight it, and said people should expect that whatever comes from the bailout of financial institutions, fairness will not be part of it.
Sunday 15 March 2009 A.I.G. Planning Huge Bonuses After $170 Billion Bailout
WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses … to executives in the same business unit that brought the company to the brink of collapse last year. This simply doesn't compute! DTN ... Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives. “We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” If these are the best and brightest, God help us all. DTN
From Economist.com, Friday March 13th 2009
The following have been newly published on Economist.com:
Bernard Madoff
History's biggest swindler faces life behind bars ... more
Wednesday 11 March 2009 Barclays 'corrupt regime' claim
Barclays Bank had dealings with one of the world's most corrupt regimes, anti-corruption campaigners claim.
OTTAWA: BANK EXUDES PESSIMISM
Toronto-Dominion Bank predicts several years of economic recession, a prediction a variance with the more upbeat forecasts of the Bank of Canada and the federal government, which have foreseen a painful but short recession winding down in the second half of 2009. TD, by contrast, predicts massive job losses and a recession that will last at least five years. The bank predicts that the downturn will cause 583,000 job losses, a figure that compares with the 482,000 positions lost in the 1990-1991 recession. TD says as well that corporate profits will decline by one-third this year and that Canadians will suffer in general from low commodity prices.
Monday 02 March 2009 AIG reports record $61.7bn loss
Insurance giant AIG reports the largest quarterly loss in US corporate history - as it receives more government help.
Friday 27 February 2009 TORONTO: RBC DOES WELL, CIBC LESS SO
Royal Bank of Canada announced a first-quarter profit of $1.05 billion, down 15 per cent from the previous first quarter. Earnings per share amounted to $1.25, about the $1.18 predicted by Thomson Reuters. The Canadian Imperial Bank of Commerce announced a profit of $147 million for the same period, as it continues to suffer from its involvement in the U.S. subprime mortgage debacle. The result nonetheless contrasts favourably with the $1.46-billion loss 12 months earlier. Of Canada's six chartered banks, CIBC is the most heavily committed to risky investments in the U.S.
Thursday 26 February 2009 RBS reports record corporate loss
Royal Bank of Scotland reports a loss of £24.1bn, a UK record, blaming "unprecedented turbulence" in world markets.
Tuesday 24 February 2009 TORONTO: CENTRAL BANK HAS GOOD, BAD NEWS
The Bank of Canada predicts that the economy will have a "difficult" year and that gross domestic product will shrink by 1.2 per cent. However, Senior Deputy Governor Paul Jenkins forecasts as well that the economy will rebound with growth of 3.8 per cent in 2010 on the basis of depreciation of the Canadian dollar and adroit monetary and fiscal policy. Mr. Jenkins also points to the country's relatively well-operating financial system and an improvement of commodity prices. The deputy governor acknowledges, however, that the predictions of all forecasters are subject to a high degree of uncertainty.
OTTAWA: FLAHERTY CALLS FOR FAST BUDGET APPROVAL
Federal Finance Minister Jim Flaherty has called on Parliament to put aside partisan considerations and to approve his Jan. 27 budget quickly. Mr. Flaherty recalled that it took three months for the House of Commons to approve his previous budget and that the country is in too much financial trouble to wait that long. The minister told a House committee on Monday that the year will be economically difficult, with weak economic activity and major job losses. The economy lost 129,000 jobs in January, the most in any single month since Statistics Canada began using its current method of compiling job loss data. On a related topic, Mr. Flaherty said that the government will hold cross-country hearings on federally regulated private pension funds, which have been severely affected by the financial crisis with many having fallen below the assets which they're required to maintain. Only seven per cent of private pension funds are federally regulated but the findings of the hearings are likely to affect the majority of funds which come under provincial jurisdiction.
OTTAWA: CONSUMERS BRIGHTEN
Canadian consumers may be regaining confidence in the market. A Harris-Decima poll found that 27 per cent of respondents say they will be better off in a year, compared with 13 per cent who expect to be worse off. That's an improvement from a similar poll in December, when only 20 per cent has a positive economic outlook. Meanwhile, the Canadian government's reporting agency, Statistics Canada, says that retail sales in December dropped by 5.1 per cent, the steepest downturn in 15 years
Monday 23 February 2009 Banks under stress
Is it time to nationalise Citigroup and Bank of America? AMERICA has been dithering about how to sort out its banking crisis. The market has forced its hand. On the morning of Monday February 23rd a joint statement by banking regulators said that they stood “firmly behind” the banking system and would initiate promised stress tests of banks’ capital positions on Wednesday. The fine print remains critical and, so far, unclear, but the statement should at least halt the scary market moves that took place last week.
Saturday 21 February 2009 Crisis may be worse than Depression: Volcker
(Reuters) Volcker noted that industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.
Given the extent of the damage, financial regulations must be improved and enhanced to prevent future debacles, although policy-makers must be cautious not disrupt things further while the turmoil is ongoing.
Sunday 15 February 2009 ROME: BANK OF CANADA HEAD EXPOUNDS ON U.S. RESCUE PLAN
The governor of the Bank of Canada, Mark Carney, says that it's too early to predict whether the U.S. government economic stimulus plan will work or not. Mr. Carney spoke on Saturday in Rome, where he heard more about the U.S. plan from U.S. Treasury Secretary Timothy Geithner, who was attending the Group of Seven meeting of finance ministers. Mr. Carney has predicted that Canada's economy will start growing again in the third quarter of this year, but only if the economy stabilizes in the United States. In Rome, Mr. Carney said that the implementation of the U.S. plan in the next few months will be important in determining the speed of the economic recovery. Canada relies heavily on trade with the United States. Canada saw its worst job losses on record last month, and its first trade deficit with the United States in nearly 33 years in December.
Friday 13 February 2009 Stimulus Bill Passes in the House With No G.O.P. Support
The vote was 246 to 183, reflecting the Democrats’ considerable majority and the Republicans’ deep dissatisfaction with the $787 billion package. WASHINGTON — The House approved a $787 billion economic stimulus package Friday afternoon, with Democrats successfully promoting it as a boost for middle-class Americans and Republicans countering in vain that it will only stimulate wasteful government spending.
Thursday 12 February 2009 US lawmakers reach stimulus deal
The US Congress reaches what President Obama praises as a "hard-fought compromise" on his economic stimulus plan.
Thursday 12 February 2009 ankers in America and Britain faced a roasting at hearings in Congress and Parliament. The chief executives of eight banks, including Bank of America, Citigroup and Goldman Sachs, were contrite in their testimony to congressmen, who wanted to know how the public aid that the banks receive is being spent, and when it would be repaid. Politicians in both countries also blasted bankers for continuing to pay out large bonuses. See article
Wednesday 11 February 2009 OTTAWA: BANK GOVERNOR HEDGES PREDICTIONS
Bank of Canada governor Mark Carney says the future is unpredictable, but one thing he is sure about is that 2009 will be a particularly difficult year for Canadians. The central banker says Canada's recovery will depend on how the world and financial markets recover from one of the worst economic crises in decades. Mr. Carney says he is sticking to his controversial projection that Canada's economy will grow by 3.8 percent in 2010, but concedes that the situation is unusually volatile. As far as the US is concerned, he thinks it will take more than two years for it to return to its pre-recession levels.
NEW YORK (Reuters) - The Dow and Nasdaq dipped on Monday as falling
oil prices hurt energy shares and a brokerage raised concerns
about Coca-Cola Co and PepsiCo , blunting a rise in financial
stocks on hopes a bailout will spare shareholders.
NEW YORK/BANGALORE (Reuters) - More than 1,000 U.S. banks, or
one in eight lenders, may fail in the next three to five years
as commercial loan losses rise, compounding problems from record
mortgage delinquencies and soaring home equity loan defaults,
RBC Capital Markets said on Monday.
Sunday 08 February 2009 US senators 'agree' economy bill
Senate Democrats say they have enough Republican backing to pass the US economic stimulus plan, but only in reduced form.
Wednesday 04 February 2009 TORONTO: BANK EXECUTIVES TAKE VOLUNTARY PAY CUT
The chief executives of two of Canada's major banks are are taking reductions in their salaries during the current economic crisis. Gordon Nixon, chief executive of the Royal Bank of Canada, and Rick Waugh, head of the Bank of Nova Scotia, have agreed to take a 20 percent reduction in their multi-million dollar salaries.
Friday 23 January 2009 OTTAWA: DEEP BUT SHORT
Canada's central bank is predicting a deep but short economic recession. In contrast to other more gloomy economic forecasts, this one by the Bank of Canada predicts the Canadian economy will bounce back as fast as it's dropped. However, before that happens, it says the country's GDP, or gross domestic product, will dive by almost five percent in this first quarter. Then, the rebound should start in the second half of the year, followed by a GDP rise of close to four percent in 2010.
OTTAWA: WORST CASE
On the gloomier side, there's a prediction that the economic downturn in Canada could last at least five years. That's a worst-case scenario presented by the Budget Officer of the Canadian Parliament, Kevin Page. He sees unemployment rising to 8 percent, and deficits totalling $100-billion. And that doesn't include the spending the finance minister will announce in his budget next week. Mr. Page says all the leading economic indicators are negative. Despite the government's promise to limit deficit financing to the short term, Mr. Page says with the economy expected to operate well below its potential for the next five years, it'll be very difficult to balance the books before then. A senior government official was quoted Thursday as saying the Harper government will run $34-billion deficit in the next fiscal year.
Wednesday 21 January 2009 US banking shares decline sharply
US indexes see their biggest fall for almost two months, with banking shares ending sharply lower. more
AIG ends Man Utd sponsorship deal
The troubled US insurer AIG will not renew its shirt sponsorship deal with Manchester United when it runs out in May 2010.
Tuesday 13 January 2009 More from the financial world. The ABCP/Purdy Crawford/Montreal Accord saga is coming to an end. While most small investors holding less than $1-million of the paper will be fully paid out in cash by the brokerage firms that sold them the paper, the Caisse, National Bank of Canada and the rest of the larger ABCP investors won’t have it so easy. They will be given bonds that will initially trade at a deep discount to face value. The hope is that they will mature at full value in about nine years. One Wednesday Nighter comments reasonably: “It seems that the retail investor will soon be made whole from the ABCP disaster; I expect that he will never again participate(buy) any more securitized debt obligations nor any other fancy-paper-promises (FPP). We are all, already witnessing this backlash, for similar reasons, from all investors across the globe. The financial fabric of our Country, torn by such abuses, will now bear a cleverly woven patch. Behind and within every pension fund (institution) there is a beneficial, retail (’small’) investor. Why are they not also getting paid now? DTN
And if that is not a sufficiently depressing item, then we urge you to take a look (warning this is a 30-minute item) at I.O.U.S.A. , described by Reuters as “To the U.S. economy what ‘An Inconvenient Truth’ was to the environment.” The New York Times says “Brimful of disquieting facts on inflation, trade deficits and Wall Street’s influence on national monetary policy, Patrick Creadon’s resolutely nonpartisan movie tracks America’s “fiscal cancer” through centuries of budgetary highs and lows. Packaging his inconvenient truths with as much humor as he can muster under the circumstances, Mr. Creadon balances his talking heads and pie charts with the folksy progress of the Fiscal Wake-Up Tour, a grass-roots effort spearheaded by David M. Walker, the former comptroller general of the United States, and Robert L. Bixby of the Concord Coalition. DTN
Wednesday 07 January 2009 MONTREAL: FLAHERTY CONTINUES ECONOMIC TOUR
Federal Finance Minister Jim Flaherty hinted Tuesday that personal tax reductions are in the offing for Canadians as a way to help boost the country's economy. Mr. Flaherty said his advisers have told him Canada needs to invest more in infrastructure. He then added that another way to help the economy is tax reduction. Mr. Flaherty met with the Canadian Taxpayers Federation on Tuesday. It was expected to ask him to provide tax relief. Mr. Flaherty has been meeting with special interest groups across Canada in recent weeks before he presents his budget on Jan. 27. On Monday, he met with the Canadian Bankers Association on Monday and announced that the government and the banks had agreed to form a group to work on ensuring adequate availability of credit and financing in Canada.
OTTAWA: THINK TANK WANTS HUGE STIMULUS PACKAGE
The federal government is being urged to adopt a massive $33-billion spending package that would stimulate the creation of 400,000 new jobs in its upcoming budget. The Canadian Centre for Policy Alternatives is cautioning Finance Minister Flaherty to avoid the politically easy path of relying on tax cuts to boost the economy. The think-tank says tax cuts represent among the least effective ways to provide economic stimulus. The group says about half the spending should go to ready-to-go infrastructure projects and a large chunk of the money should be for social supports such as employment insurance for laid-off workers. Canadian economists are expecting some high numbers when the job loss statistics come out Friday. They say it could be up to 30,000 jobs. However, they say a number of factors are pointing to a resumption of growth in the second half of 2009, including extremely low interest rates, favourable exchange rates and cheap oil.
2008
Friday 19 December 2008 OTTAWA: SERIAL DEFICITS FORESEEN
The Canadian government predicts four consecutive years of deficit. Papers released by the department of finance foresee annual deficits of $5 billion, $5.5 billion, $4 billion and $1 billion in the next four fiscal years. The deficits do not take into account any federal plans to stimulate the economy. The department anticipates a return to surplus budgets in five years.
OTTAWA: GOVT. TO RUN 'DEEP' DEFICITS
Meanwhile, the Canadian Press reports that the Conservative government intends to run "deep" deficits of between $20 billion and $30 billion as part of a stimulus package. CP cites an unnamed official who said the deficits would be "short-term," without specifying how many years would be involved. The money would fund public infrastructure and skills training programs for workers who lose their jobs. The government has officially projected a deficit of $5 billion next year and $5.5 billion in 2010-11.
SASKATOON: FINANCE MINISTER NAMES CRISIS COUNCIL
Canada's Minister of Finance has chosen a special economic council to advise him on measures to revitalize the economy. Jim Flaherty says he will also hold town hall meetings across Canada in the New Year to solicit their views on the economy. Mr. Flaherty says he is considering both tax reductions and government spending as ways to stimulate the economy.
TORONTO: BANKS CAN'T RESTORE CREDIT MARKETS ALONE
The Canadian Bankers Association says banks are lending as much money as possible but cannot restore credit markets all by themselves. Association President and CEO Nancy Hughes Anthony was responding to government suggestions to the contrary. The federal government and the Bank of Canada have injected billions of dollars into the financial to free up credit yet markets remain blocked. Mrs. Anthony says banks are working to "fill the gap" yet other sources of lending have been pulling back, citing the bond market, commercial paper, non-bank finance and leasing companies. The lack of credit has forced mining firms, oil companies, manufacturers and others to cancel deals and to cut jobs. Federal Finance Minister Jim Flaherty said on Thursday that he and Bank of Canada Gov. Mark Carney will meet with banking executives in January to receive an update on the state of their lending.
This time of year, we tend to reflect on the past twelve months, while doing some existential work on what needs fixing come January. In politics, in money, and in media, 2008 was more volatile than our collective imagination could have ever conjured. The National’s year-end At Issue panel had fun picking best and worst political plays; but by now you’ve heard it all, and have likely made up your own mind anyway. The Tories have done a bit of their own year-end navel-gazing, and have finally come to terms with the need for a big stimulus package that will sink them $30 billion in the red next year. Further, to the immense enjoyment of the Globe editorial board and the Post’s Kelly McParland, Finance Minister Jim Flaherty has named eleven top-notch business and economics leaders to a panel that will help him decide how to align the budget. (A very “Obama-like” move, the Globe lauds.) As Harper explained to CTV’s Bob Fife and Lloyd Robertson yesterday, the stimulus will be used for significant aid to the auto and forestry industries, as well as spending on infrastructure, social housing, worker retraining, and stimulating consumer spending. It likely can’t come soon enough; as of now, Canada’s monetary policies of slashing lending rates haven’t been effective. (Glen Hogson’s piece in the Post explains why fiscal policy can work faster than monetary policy.)
But toward 2009? Canada is deeper into a recession than the prime minister would like to admit, and the creation of the new Economic Dream Team reinforces the fact that throughout the holidays there will be lots of quibbling about what to do about the economy. To jump-start things, the Post’s Colby Cosh says we need tax cuts pronto, and the Globe retorts that tax cuts really aren’t that great, especially considering that municipalities are being forced to increase taxes to pay for basic amenities. Interesting, too, is that the federal government’s new budget watchdog has seen his funding frozen, and maybe not at the best time — La Presse reports today that, in the past four years, Canada Mortgage and Housing has spent $80,000 on golf balls. It’s a whirlwind note on which to leave 2008. But there is good news: McDonald’s, Wal-Mart and Marvel Comics stocks are up this year; a leader of the Rwandan genocide was sentenced to life imprisonment; and CSIS was ordered to stop wiretapping privileged attorney-client conversations. And, though it be at the cost of enormous travel difficulties, it looks like there will be a white Christmas for all Canadians, whether you care to celebrate it or not.
Thursday 18 December 2008 Madoff Scandal Shaking Real Estate Industry
Commercial brokers and developers had heavily invested with Bernard L. Madoff, whose business style mirrored the practices of the real estate world. Almost no segment of New York City’s real estate industry was spared in the Madoff scandal, which may be history’s largest Ponzi scheme: commercial brokers large and small, little-known developers and prominent families like the Wilpons and Rechlers all lost money to Bernard L. Madoff, industry executives say.
Thursday 18 December 2008 SASKATOON: IT'S OFFICIAL-- OTTAWA WILL HAVE DEFICIT
Federal Finance Minister Jim Flaherty says the government will run a budget deficit in the 2009-2010 fiscal year. However, he reiterated his previous prediction of a slight surplus for the year ending March 31. Canada has been the only G-7 country the government of which has had surpluses since 1997. The minister also forecast an economic shrinkage of .4 per cent for 2009, a contrast from the .3 per cent growth he had foreseen in his November fiscal update. Mr. Flaherty made the statements after a meeting in Saskatoon, SK, with his provincial and territorial counterparts. The minister says the flagging global economy and the U.S. recession, and in particular the U.S. housing slump, are factors too strong to be resisted by the measures outlined in his fall economic forecast. During the electoral campaign leading up to the Oct. 14 election, Mr. Flaherty and Conservative Prime Minister Stephen Harper repeatedly stated that the government wouldn't return to deficit spending.
Some of the world's biggest banks have revealed that they are victims of a US investment fund which lost $50bn (£35bn). Among the banks that have been hit are Britain's HSBC and RBS, Spain's Santander and France's BNP Paribas.
One of the City's best-known fund managers has criticised US regulators for not detecting the alleged fraud. more
Financial shock waves spread globally on Monday in the wake of the prodigious fraud of which Wall Street financier Bernard Madoff is accused, as banks, charities and wealthy individuals acknowledged losses in his alleged Ponzi scheme. Britain's HSBC Holdings Plcwas says it has $1 billion of exposure, making it one of the biggest victims. Also involved are Royal Bank of Scotland, Group Plcand Man, Group Plc in the UK, Japan's Nomura Holdings and Natixis SA in France. In the U.S., no major banks have acknowledged exposure but Sterling Equities, the owner of the New York Mets Big League Baseball team acknowledged that it accounts were run by Madoff. Real Estate tycoon Mortimer Zuckerman lost $30 million in a charitable trust. A trustee has been named to liquidate Bernard L. Madoff Investment Securities LLC.
December 13, 2008 You say you want a revolution - yeah, but is it gonna be all right? The financial revolution has been moving at light speed too, as our economy turns upside down. Firms that are 150 years old have crumbled before our eyes like sandcastles, while decades of our life savings evaporated in days.
Saturday 13 December 2008 SAINT JOHN: NOTHING TO FEAR BUT FEAR ITSELF: FM
Canadian Finance Minister Jim Flaherty says Canadians should not panic over the current global economic crisis. He says that Canada is better positioned to handle the global economic crisis than other countries, including the United States. Mr. Flaherty says that acting too quickly and making the wrong choices in the current economic climate will not help Canadian families or businesses. Mr Flaherty is currently preparing next month's federal budget.
Friday 12 December 2008 OTTAWA: CENTRAL BANK HEDGES BETS ON CRISIS
The Bank of Canada says the "most likely outcome" of the current world financial crisis is that markets and credit conditions will gradually improve as extraordinary measures by central banks and governments take effect. But the central bank warns, however, that that outcome isn't certain, and that there's great uncertainty about how long it will take for credit markets to return to normal. The Bank of Canada says that there will be severe consequences in Canada if global financial conditions worsen, including severe trouble for Canadians carrying heavy debt loads. In this case, there would be a substantial number of mortgage defaults.
VANCOUVER: MORTGAGE INDUSTRY UNFAZED
Despite the central bank's warning about mortgages, it says it's unworried by higher numbers of defaults. Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, says that although 2009 will be a tough year, he's more inclined toward the central bank's hypothesis of a recovery of markets and credit conditions. Mr. Murphy says that although the Canadian real estate market has slowed, "...we do have different products, we are in better shape, credit is available, and interest rates are low." He added that the percentage of Canadian mortgages in arrears is at an historic low. The Canadian Bankers Association says that in September the numbers of mortgages in arrears for at least three months was .29 per cent, 6.6 per cent lower than in the U.S.
Wednesday 10 December 2008 OTTAWA: CENTRAL BANK CUTS LENDING RATE
Canada's central bank has reduced its key interest rate by three-quarters of a percentage point to 1.5 per cent. It's the Bank of Canada rate's lowest level since 1960. The move is aimed at boosting the Canadian economy, which has been hard hit by the global financial crisis. Meanwhile, economists predict there could be further cuts in the spring if the economy continues to struggle. The Bank of Canada rate is the mark used by banks to calculate interest on consumer loans, lines of credit and some mortgages
Tuesday 09 December 2008 Bank of Canada chops borrowing costs to 50-year low With the interest rate reduction — which was the biggest drop since one of a similar size in October 2001— the bank's overnight rate now stands at 1.5 per cent, a level not seen since 1958.
Monday 01 December 2008 World economy 'weakest since 30s'
The United Nations says the world economy faces its worst downturn since the Great Depression.
Articles-by-subject alert: Banking, pensions and financial regulation
From Economist.com, Friday November 28th 2008
The following have been newly published on Economist.com:
Thursday 27 November 2008 MONTREAL: ANOTHER BANK CAUGHT IN MORTGAGE TURMOIL
National Bank of Canada, the country's sixth-biggest bank, is the latest to announce a quarterly charge because of the international financial tumult that started with the subprime mortgage crisis in the U.S. in the summer of 2007. National says it will assume before-tax charges of $237 million for the fourth quarter that ended on Oct. 31. Of that, $117 million is related to asset-backed commercial paper, a non-banking instrument deeply connected to the mortgage meltdown. The bank will report its results on Dec. 4. Royal Bank of Canada, Bank of nova Scotia and Toronto Dominion Bank in recent weeks have likewise warned of impending losses.
Wednesday 26 November 2008 Adding to the stimulus
More unconventional measures to stimulate America's economy THE Federal Reserve’s interest-rate target is near zero. The recession is deepening. No wonder that speculation is mounting about when America’s economic policymakers will start using truly unconventional measures to stimulate the economy.
Wednesday 26 November 2008 UNITED STATES
The U.S. government and the Federal Reserve have again intervened to unblock $800 billion of credit for credit cards, auto loans, mortgages and other types of borrowing. The federal government has now committed $7 trillion to jumpstart the U.S. economy. The financial news on Tuesday was mixed. The Dow Jones Industrials finished 36 points higher, its first three-day rise in more than two months. However, the Commerce Department revised its economic growth estimate for the July-September quarter downward for a loss of .5 per cent instead of .3 per cent.
Tuesday 25 November 2008 OTTAWA: FEDERAL DEFICIT FORECAST FOR NEXT YEAR
Parliament's budgetary officer has advised members of the House of Commons that a federal deficit of $3.9 billion is to be expected in the 2009-2010 fiscal year. Kevin Page based his forecast on a survey of a dozen private-sector surveys. He told MPs that the forecasters have downgraded the short-term prospects for the Canadian economy because of jobs losses, the credit crunch and low consumer confidence. The budgetary officer also sees a lower deficit of $1.4 billion for 2010-2011 and a small surplus in the following year. Mr. Page says the unemployment rate next year will be 6.9 per cent, .3 per cent high than the budgetary prediction, causing higher government spending on employment insurance. The budgetary officer concludes that the combination of a slumping economy and tax cuts mean that the era of large federal surpluses is over. Meanwhile, Finance Minister Jim Flaherty says he'll deliver his economic update next Thursday, also saying he doesn't entirely agree with Mr. Page's analysis.
Tuesday 25 November 2008 OTTAWA: FLAHERTY SAYS NO STIMULATION PLANNED SOON
Finance Minister Jim Flaherty says there will be no relief measures for the struggling Canadian economy when he presents an economic update next week. Mr. Flaherty says his update will not contain any items to stimulate the economy. He says he will wait until the next federal budget, sometime in February or March. The federal government has announced the update will be delivered in the House of Commons next Thursday. Despite a severe downturn in the global economy, analysts says Canada's financial position is in relatively good shape because of the soundness of the country's banks.
Sunday 23 November 2008 Obama Vows Swift Action on Vast Economic Stimulus Plan
Barack Obama offered the outlines of a plan to create or save 2.5 million jobs by investing in public works and alternative energy. In the Democrats’ weekly radio address, Mr. Obama said he would direct his economic team to craft a two-year stimulus plan with the goal of saving or creating 2.5 million jobs. He said it would be “a plan big enough to meet the challenges we face.”
Saturday 22 November 2008 Spending: Spree to crunch
The party's ending for Canadian consumers and the retailers and financial institutions who encouraged them to spend like there's no tomorrow.
ONLY a few months ago, inflation was the main concern of central banks as the price of oil and other commodities soared. Deflation was not only unthinkable but rarely mentioned in the press. Back in August, only six stories in the Wall Street Journal, International Herald Tribune and the Times mentioned “deflation”. In November, there have already been 50, and new figures released this week will mean many more. America's consumer-price index fell by 1% in October from September as oil prices plunged, the largest monthly fall since the series began in 1947. Britain's inflation rate has also fallen from its record high of 5.2% in September to 4.5% in October, the biggest drop in 16 years.
OTTAWA: CENTRAL BANKER SAYS MORE INTERVENTION NEEDED
The head of the Bank of Canada says further measures are needed to stimulate the economy. Mark Carney says Canada's banks remain sound but that the economy has been harmed by the global financial crisis. Mr. Carney says that not only have commodity prices dropped and it has become more difficult to obtain credit, but the U.S. slowdown, especially in the housing and auto sectors, affect key Canadian exports of lumber, vehicles and parts. Mr. Carney's statement suggests that the central bank will reduce short-term interest rates again on Dec. 9 in an effort to boost the economy.
20 November 2008 OTTAWA: FLAHERTY HAS WORDS OF CAUTION
The government will offer more specific measures on Thursday or Friday when Finance Minister Jim Flaherty presents a fiscal update. The minister said after the speech that the update won't be a budget or even a mini-budget and that Canadians shouldn't expect quick relief from the deepening economic slump or major measures to help the auto industry. Mr. Flaherty recalled that Industry Minister Tony Clement is in Detroit and Washington this week meeting executives and legislators, and that any initiatives would emerge from those meeting.
Wednesday 19 November 2008 There was argument before a House of Representatives panel on Tuesday, as lawmakers discussed how the US$700 billion financial rescue package should be used. The legislators grilled Treasury Secretary Henry Paulson and U.S. Federal Reserve Chairman Ben Bernanke on the subject. The original justification of the plan was to enable the federal government to buy from banks rotten mortgages and other bad assets. But last week, Mr. Paulson abandoned the mortgage strategy. Rep. Barney Frank, who helped draw up the rescue package, said the Treasury isn't doing enough to help distressed homeowners and should be doing more to force banks to use some of the bailout money to lend to customers. Federal Deposit Insurance Chairwoman Sheila Bair also recommended using $24 billion of the money to rescue Americans in danger of foreclosure to curb damage to neighbourhoods and for "broader economic health." Mr. Paulson responded that the use of the money to buy banks' toxic debts would have required a "massive commitment of the bailout funds, concluding that a better approach is to inject billions into banks to boost their cash, thereby stabilizing the financial system.
Wednesday 19 November 2008 Clash over $700bn bank bail-out
US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke defend the $700bn bank bail-out plan.
Tuesday 18 November 2008 OTTAWA: PM BRIEFS PREMIERS ON G-20
Prime Minister Stephen Harper on Monday briefed the premiers on the emergency meeting of G-20 leaders in a conference call. Mr. Harper recapped the results of the meeting at which leaders agreed that additional measures are needed to stimulate the stagnant world economy. After the call, Saskatchewan Premier Brad Wall said Mr. Harper hinted that he prefers investments in infrastructure, citing the Chinese government's plan to spend US$600 billion on new infrastructure projects. British Columbia Premier Gordon Campbell said the prime minister informed the premiers that he'll be writing to them a "broad outline of a national framework for action." At their meeting with Mr. Harper a week ago, the premiers were unanimous that federal funds already earmarked for infrastructure should be released as soon as possible.
TORONTO: MUTUAL FUNDS SUFFERED CATASTROPHIC MONTH
The Investment Funds Institute of Canada reports that the mutual funds business suffered its worst one-month setback ever. The institute reports that $8.4 billion was redeemed by nervous investors in October, compared with the previous record of $4.5 billion in net redemptions in September. Total industry assets fell by 19.5 per cent their level 12 months ago. Total assets were down at the end of October from September by 9.8 per cent at $571.3 billion. The mutual fund sector has been badly damaged by the drop of the TSX, which was trading 40 per cent lower since it was trading in June at over 15,000, also a record.
Tuesday 18 November 2008 UNITED STATES
Citigroup bank in the United States says it's cutting 53,000 jobs. The bank says that the global financial crisis plus four consecutive quarters of heavy losses have forced it to reduce its workforce to 300,000 jobs. Citigroup stock has dropped by 70 per cent in value this year and it has lost $20 billion. Earlier this year Citigroup laid off 24,000 employees. Citigroup has 5,500 employees in Canada. The announcement of more layoffs comes even though Citigroup received $25 billion in aid from the U.S. bailout package announced last month
Sunday 16 November 2008 More rabbits from the hat
As Hank Paulson buries one attempt to solve the financial crisis, he and regulators unveil two more
Sunday 16 November 2008 Summit pledge to 'restore growth'
Global leaders at the G20 financial summit in Washington pledge to work together to restore global growth.
Host Kathleen Petty heads to DC and talks with reporters from two emerging economic powers on what their countries are hoping to achieve at this weekend's G20 Summit. The PM's Director of Communications outlines Canada's position heading into the meeting,and former PM Paul Martin explains why the summit is so significant.Louise Elliott looks at how this meeting could change the global economic system.And former US Ambassador James Blanchard discusses the economic issues
Saturday 15 November 2008 World leaders grapple with crisis
Leaders will discuss plans to combat the global financial crisis in Saturday's G20 talks, but there is little hope of quick solutions.
Thursday 13 November 2008 OTTAWA: GOVT. TOLD TO BE BANK OF LAST RESORT
The Conference Board of Canada has joined industry groups in recommending that the federal government become a major lender to help Canadian business ride out the deepening economic slump. The Board's report on the subject says the government ought to become more "directly involved" in extending credit to business through loan guarantees and by injecting "significant equity capital" into public lending institutions. These include the Business Development Bank of Canada, Export Development Canada and Farm Credit Canada, which the report says can fill gaps in commercial money markets. Several hours after the Board made public its report, Industry Minister Tony Clement announced he had increased the Business Development Bank's borrowing authority by $2 billion to $11.5 billion. The CEO of the Canadian Manufacturers and Exporters lobby, Jayson Myers, says the auto and forestry industries are feeling the credit crunch most acutely at present, but warns that many other sectors could soon need to obtain loans. Automakers have asked for loans totalling more than $1 billion to survive until sales recover in the U.S.
Thursday 13 November 2008 TORONTO: OTTAWA TO ACQUIRE MORE MORTGAGES
Federal Finance Minister Jim Flaherty says the government will buy $50 billion more worth of residential mortgages to alleviate the credit crisis that banks are enduring. The move increases by three times the numbers of ensured mortgages that the government can acquire by the end of the fiscal year. The decision is intended to free up cash that under banking rules can be made available to borrowers. In related new, the Bank of Canada has announced it will inject an extra $8 billion into the country's money markets.
Monday 10 November 2008 SAO PAULO: FINANCE MINISTER WELCOMES CHINA'S ECONOMIC PLAN
Canada's finance minister, Jim Flaherty, has welcomed China's huge economic stimulus package, adding that it will be good for an exporting nation like Canada. China has announced a US$586 billion stimulus package for social welfare and infrastructure projects. Mr. Flaherty expects that emerging nations will also be announcing stimulus packages to restart the global economy. Mr. Flaherty spoke in Sao Paulo, Brazil, where he and his counterparts from the Group of 20 discussed the world financial crisis. Canada's government will inject CDN$2 billion to stimulate the country's economy next year. The G20 finance ministers ended their meeting without an agreement on new controls for the world financial system. Next week, Canada's prime minister and other leaders of the G20 will hold a summit in Washington to discuss the global financial crisis.
2008/10/30 theMetropolitain Bailout robbery U.S. Treasury Secretary Paulson hasn’t clearly explained why the U.S. needs to bail out the Wall Street millionaires, and he has even gone on record saying that the $700 billion figure in the bailout package is completely arbitrary. He has further admitted that the $700 billion number is “not based on any particular data point”. In other words he doesn’t have a clue.
Saturday 25 October 2008 Some Currencies Plunge as Stocks Sink Worldwide WASHINGTON — Fear that the financial crisis is infecting once-healthy economies created another white-knuckle day for investors Friday, causing stocks to tumble from Tokyo to New York.
Saturday 25 October 2008 OTTAWA: PRIVATE RESEARCHERS CONFIRM CENTRAL BANK'S FORECAST
The Conference Board of Canada predicts that the financial whirlwind in the U.S. will drag Canada's economic growth this year down to .8 per cent, and that there will be but weak growth in 2009. The prediction roughly confirms an evaluation offered on Thursday by the Bank of Canada. The researchers say the the turmoil in the U.S. is also affecting Europe and Asia, and that global growth will fall to 2.8 per cent this year and 2.4 per cent in 2009.
Saturday 25 October 2008 OTTAWA: INFLATION DROPS SLIGHTLY
Statistics Canada reports that inflation declined by .1 per cent in September to 3.4 per cent. The agency says it's the first time since March that the rate has fallen. The recent inflationary rise is due mainly to energy and food prices. The price of gasoline rose 26 per cent in September compared with that a year earlier.
Thursday 23 October 2008 International bank lending slides
International lending by banks fell by $1.1 trillion in the second quarter, the largest contraction since 2001, figures from the the Bank for International Settlements show.
Thursday 23 October 2008 UNITED STATES
President George W. Bush has invited Canada and the other Group of 20 nations to a summit in Washington on Nov. 15 to discuss the world financial turmoil. Participants will discuss its causes, review progress made in countering it and draw up reforms. The event is to be the first in a series of summits aimed at coping with the long international recession which economists have predicted. French President Nicolas Sarkozi visited Mr. Bush last Saturday and proposed a world economic summit. The managing director of the International Monetary Fund, the president of the World Bank and the UN Secretary General also will attend the summit.
* October 22, 2008 Mort Zuckerman on the Financial Crisis and what we should do The Anatomy of the Financial Crisis and Why We Must Get It Right
Everyone is haunted by the fear our financial crisis might unwind into something like the Great Depression. The world of finance is undergoing a hundred-year storm. It has inflicted the greatest destruction of wealth in our history. It swept away giant blue-chip financial firms, in a few months, even in a few days of fear, panic, and mistrust, that had made it through the Great Depression.
Wednesday 22 October 2008 The Mortgage Bankers Association says the U.S. economy is mired in a recession that won't end until the middle of next year, when a slow recovery will ensue. The group's chief economist, Jay Brinkmann, told its annual convention that the current recession is characterized by rising unemployment, shrinking manufacturing activity and drooping consumer spending. Mr. Brinkmann predicts that unemployment will reach 7.8 per cent by early 2010 before starting to decline. The economist also forecasts even worse pain in the housing sector, with downturns in new home sales and construction.
OTTAWA: CENTRAL BANK LOWERS LENDING RATE
The Bank of Canada cut its interest rate by a quarter of a percentage point on Tuesday to 2.25 percent. The move will ease the cost of borrowing. Later this week, Finance Minister Jim Flaherty is expected to announce that the federal government will guarantee loans made between Canadian banks. All of these moves are aimed at strengthening the economy following a collapse of global markets several weeks ago because of a mortgage crisis in the United States. The central bank also offered pessimistic growth predictions, forecasting growth of .6 per cent this year and next, down from an earlier forecast of one per cent this year and 2.3 per cent in 2009. After the central bank presented its latest projects, the TSX fell by 456 points, or 4.4 per cent to 9,796. The Canadian dollar dropped to its lowest level in 14 months.
Tuesday 21 October 2008 President George W. Bush says Americans' attitudes toward the world financial turmoil have shifted from "near panic" to "more relaxed." The president added that although people are heartened to see the effects of freed-up credit, the country has far to go before getting out of the woods. Federal Reserve Chairman Paul Bernanke, meanwhile, has told the House of Representatives budget committee that the time has arrived for the Congress to approve a second government stimulus package. The Congress passed a $700-billion rescue package on Oct. 3.
The International Labour Organization says that the global financial crisis will has caused at least 20 million lost jobs, bringing the total to 210 million by the end of next year. The ILO says this will be the first time the figure has exceeded 200 million since it started keeping records 10 years ago. ILO Director Juan Somavia said on Monday that world leaders need to concentrate on the impact of the crisis on individuals not just financial institutions.
Tuesday 21 October 2008 OTTAWA, TORONTO: GOVT. REPORTED SET FOR FURTHER FINANCIAL INTERVENTION
The Globe and Mail newspaper reports that the federal government is set to intervene again to allay the effects of the world financial crisis. According to the newspaper, Finance Minister Jim Flaherty is prepared later in the week to announce that the government is willing to offer guarantees for interbank lending to ease the credit crisis. The Globe's informants say that Mr. Flaherty was meeting his officials on Monday to review ways to match steps taken by governments including those of France and the U.S. to ensure that Canada's banks are not put at a competitive disadvantage internationally. The informants say the government is afraid that world banks will be more inclined to lend money to other banks based in countries where the government has guaranteed inter-bank loans.
Saturday 18 October 2008 TORONTO: CENTRAL BANK EFFORTS TO UNLOCK CREDIT MARKETS
The Bank of Canada has announced it will make extraordinary, temporary loans to institutions other than banks as part of its campaign to loosen frozen credit markets. The central bank explained that institutions which can show "significant activity in the Canadian dollar wholesale money markets" and are subject to provincial or federal regulations are eligible. Such could include money market funds and pension funds. Recipients of the loans will put up collateral.
Friday 17 October 2008 QUEBEC CITY: GLOBAL CRISIS LOOMS AT FRANCOPHONE SUMMIT
Organizers of this weekend's summit of French-speaking nations in Quebec City say that discussions of the global financial crisis will overshadow the established agenda. The secretary general of la Francophonie, Abdou Diouf, says delegates to the event will discuss world banking and finance, as well as the problems of world food supply and energy. The summit's scheduled subjects had been the environment, the economy, democracy and the rule of law and the situation in the world of the French language. The sources told Agence France Presse that French President Nicolas Sarkozy will propose a complete overhaul of the international financial system. Alain Joyandet, the French minister responsible for relations with francophone countries, told AFP that France will propose a new form of capitalism that favour entrepreneurs over speculators, more transparency of debt or credit rating agencies and a review of the salaries of business executives. Also on Friday, the annual Canada-EU summit will be held, with Mr. Sarkozy participating as well as Prime Minister Stephen Harper.
Friday 17 October 2008 TORONTO, NEW YORK: MARKETS CONTINUE ROLLERCOASTER RIDE
After springing sharply upwards on Tuesday, North American markets dropped again like a stone on Wednesday. In Toronto, the TSX plunged 632 points to 9,324, largely because of a 12-per cent tumble in oil prices. The loss eliminated much of the 890-point surge on Tuesday. In New York, the Dow Jones slid 733 points, or 7.9 per cent, to 8,478. Investors on both markets evidently are feeling queasiness about the prospects for the U.S. economy and frozen credit markets. In a speech to the Economic Club of New York, U.S. Federal Reserve Chairman Ben Bernanke said the economy won't recover quickly even if confidence in the U.S. economic system is restored.
OTTAWA: GOVT. WON'T TAKE BANK EQUITY
The prime minister, Mr. Harper, says his government will take further steps as early as this week to prop up the financial system but won't go so far as to take stakes in banks. The prime minister declined to mention any options but did say they won't involve large outlays of taxpayers' cash. Mr. Harper is expect to announce the new measures before he meets French President Nicolas Sarkozy on Friday in Quebec City. Unnamed analysts and banking industry insiders have told the Canadian Press that the government is worried that the recent aggressive bailout actions for banks by the U.S. and European governments could put Canadian banks at a competitive disadvantage. However, the CEO of the Canadian Banking Association, Nancy Hughes Anthony, says the country's banks are solid and solvent and that there's no sign they're disadvantaged by measures adopted elsewhere.
Fri 7 Oct 2004 Sarkozy upbeat on trade pact
French President Nicolas Sarkozy, declaring his love for Canada and touting his use of the Canadian ..
Wednesday 15 October 2008 OTTAWA: CENTRAL BANK AGAIN INTERVENES
The Bank of Canada has decided to increase from $4 billion to $10 billion the cash which it will lend to financial institutions. The decision follows from Canada commitment to support the financial system by participating in the series of rescue measures put forward by G-7 finance ministers in Washington on Friday. At the beginning of the month, the central bank announced that it had injected $8 billion into markets and that because of continuing pressures on them it would take additional measures until Nov. 6 to bring its contribution to $20 billion. Tuesday's announcement brings the total to $26 billion. The Bank of Canada also recalled that if necessary it can resort to its $30-billion reciprocity accord with the U.S. Federal Reserve. On Oct. 21, the central bank will make public its decision as to the level of its trend-setting lending rate, which now stands at 2.5 per cent.
Wednesday 15 October 2008 The U.S. has followed the lead of European governments by committing itself to acquire up to $250 million of equity in private banks. Stakes are limited to $25 million each. Treasury Secretary Henry Paulson says that nine banks which he described as "healthy institutions" have agreed to federal equity shares for the good of the U.S. economy. The terms of the transaction require good governance and limits on executive pay. Mr. Paulson says he views government stakes in banks as "objectionable" but needed to reactivate the economy. President George W. Bush says the radical action isn't intended to take over the free market but to save it. The president also said that the Federal Deposit Insurance Corp. will guarantee new bank debt and that the Federal Reserve will become a buyer of last resort of the short-term loans that companies use to fund day-to-day operations.
Tuesday 14 October 2008 OTTAWA: CANADA BACKS G-7 CRISIS PLAN
Canada's finance minister, Jim Flaherty, says he strongly supports the action plan put forward this past weekend by the Group of Seven richest nations. At a meeting in Washington, Mr. Flaherty and the other G-7 finance ministers worked out a plan to stabilize the world's markets and restore credit flow to end the spreading financial crisis. He says the Canadian government will continue to work with its G-7 partners and to take appropriate steps to support Canada's financial system. Mr. Flaherty expects Canada to survive the economic crisis better than any other G-7 nation and even have modest growth next year.
Tuesday 14 October 2008 Investors around the world reacted enthusiastically to the news of the ambitious plan by European governments to rescue staggering financial instiltutions. Britain, Germany, France and other European governments have pledged more than one trillion euros to recapitalize ailing banks, underwriting in particular inter-bank loans which had almost dried up since the failure last month of the U.S. bank Lehman brothers, thus threatening the stability of the wider economy. In New York, the Dow Jones skyrocketed by 936 points, or 11.08 per cent, to 9,387, its biggest gain ever. Asian stocks gained more than 7 per cent. Mexico's stock market closed up more than 11 percent Monday in its highest rise since 1998, and the peso strengthened slightly against the dollar after hitting record lows last week. The TSX was closed for the Thankgiving Day holiday. The U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank have said they will lend commercial banks whatever they need at fixed rates to resuscitate inter-bank lending.
Echoes of a Dismal Past How does the current financial crisis compare to the Great Depression, and has the government learned the lessons of the 1930s?
Sunday 12 October 2008 WASHINGTON: FINANCE MINISTER DESCRIBES SERIOUS MOOD AT G7 MEETING
Emerging on Saturday from the White House after a meeting with U.S. President George W. Bush and finance officials of the Group of Seven, finance minister Jim Flaherty described the atmosphere as grim. Mr. Flaherty said that the mood was one of uncertainty and serious concern. He called the global credit crisis severe and protracted and continuing. But he reassured Canadians the the country's economy is expected to enjoy modest growth next year of 1.2 per cent. The International Monetary Fund expects Canada's economic growth would be the best among the G7. In an effort to loosen the tight credit squeeze, Canada's government and the central bank have injected CDN$45 billion in additional cash into the financial system
OTTAWA: BANKS LOWER PRIME RATES FURTHER
Canada's big banks have further lowered their prime rates, the rates that they charge their best customers. The banks were criticized earlier in the week when they passed on only part of a one-half percentage point drop in the Bank of Canada's interest rate. Toronto Dominion Canada Trust and CIBC say they will lower their prime lending rate by another .15 of a percentage point to 4.35 per cent next Tuesday. The Bank of Nova Scotia and Royal Bank are cutting their prime rate by a quarter-point to 4.25 per cent.
Saturday 11 October 2008 SUDBURY: NDP CHIEF LAMBASTES BANKS
New Democratic Party leader Jack Layton blamed corporate greed of the country's banks for refusing to pass on to their customers the half-percentage point drop in the Bank of Canada interest rate, choosing instead to reduce their prime rates by only one-quarter of a point. Mr. Layton says Canadians are "...tired of that kind of greed." The NDP leader also blamed the prime minister, Mr. Harper, and Finance Minister Jim Flaherty for failing to demand that the banks pass on the full interest savings to their clients, calling it "a failure of leadership." Mr. Layton says an NDP government wouldn't impose interest rates on banks, but would tackle such injustices on their part as fees for the use of automatic teller machines. The NDP has never formed a national government, although it has governed provincially.
Saturday 11 October 2008 TORONTO: PM 'DISAPPOINTED' BY BANKS INTEREST CUT RESPONSE
The prime minister, Mr. Harper, says he's "disappointed" by the reaction of the country's major banks to Wednesday decision by the Bank of Canada and other central to cut their trend-setting lending rate by one-half a percentage. The Bank of Canada's overnight rate has dropped by .5 per cent to 2.5 per cent. But the banks said they would drop their prime rate by only one-quarter of a point to 4.5 per cent, instead of the full half-point which the central banks had hoped would be passed down to consumers. While expressing disappointment, Mr. Harper said he's optimistic that consumers eventually will see the full effect of the reduction. The Canadian Bankers Association explained that many factors affect interest rates, some of them out of the banks' hands. An Association spokesman cited the conditions in financial markets and the availability of funds, as well as the Bank of Canada rate.
Saturday 11 October 2008 TORONTO, BRANTFORD: OTTAWA BUYS MORTGAGES
Federal Finance Minister Jim Flaherty has announced a plan by which the government will buy up $25 billion worth of residential mortgages from banks and transfer their ownership to the Canada Mortgage and Housing Corp. The mortgages of which the government is relieving the banks are already government-insured. Prime Minister Stephen Harper, for his part, denied that the government is bailing out the banks by acquiring bad assets, but rather is making cash available to banks so that they have the cash to make available for loans for the general public. The prime minister explained that the problem is "...an international credit crunch, which has banks leery of lending money even among themselves."
TORONTO: BANKS REACT POSITIVELY TO MORTGAGE BUY-UP ges by lowering their prime rates. The banks were criticized earlier in the week when they passed on only part of the one-half percentage point drop in the Bank of Canada's interest rate. Toronto Dominion Canada Trust and CIBC say they will lower its prime lending rate by another .15 of a point to 4.35 per cent next Tuesday. TD says Mr. Flaherty's announcement should free up bank capital and cut the cost of borrowing. The Bank of Nova Scotia and Royal Bank are cutting their prime rate by a quarter-point to 4.25 per cent.
Friday 10 October 2008 Moment of Truth Last month, when the U.S. Treasury Department allowed Lehman Brothers to fail, I wrote that Henry Paulson, the Treasury secretary, was playing financial Russian roulette. Sure enough, there was a bullet in that chamber: Lehman’s failure caused the world financial crisis, already severe, to get much, much worse. — in fact, they’d better announce a coordinated rescue plan this weekend — or the world economy may well experience its worst slump since the Great Depression.
Fri 10 Oct 2008 Fixing the banking system will be a big job BCA Research, a respected Montreal economic advisory company, has put together a comprehensive look at what should be done, based on past experience in several countries that have gone through banking crises.
Thursday 09 October 2008 OTTAWA: CENTRAL BANKS JOIN FORCES
The Bank of Canada has joined other central banks in reducing short-term interest rates by one-half a percentage point. The Bank of Canada's overnight rate will drop by .5 per cent to 2.5 per cent. Canada's central bank joins those of the U.S., the Bank of England, the European Central Bank, and those of Sweden and Switzerland in the same move. The central banks are trying to encourage banks, consumers and businesses to borrow, to lend and to spend more freely. The interest rate cuts will have an immediate benefit for consumers whose mortgages and other floating-rate loans are tied to the rates set by central banks. The Bank of Canada explained that the tightening of credit conditions signifies a drop in demand and consequently a lesser fear of inflation.
Treasury Secretary Henry Paulson has warned that more financial institutions are destined to fail in the U.S. Mr. Paulson says as well that the $700-billion rescue package approved by Congress last week won't mean an end to bankruptcies and won't in any case be in place for the government to buy up "toxic" assets for several weeks. The secretary explained that the package isn't intended to "...save every financial institution for its own sake." Mr. Paulson has recommended that emerging countries be included in international talks to surmount the crisis. The Brazilian government has said that a meeting of central bankers and finance ministers representing the G-20 grouping of rich and emerging nations will take place in Washington this weekend.
TORONTO, OTTAWA: FINANCE MINISTER SEES SILVER LINING
Canadian Finance Minister Jim Flaherty repeated earlier statements by himself and Prime Minister Stephen Harper that Canada is well-positioned to cope with the global financial meltdown. Mr. Flaherty says the country has a strong banking system, a stable housing market and a federal budget surplus. The minister also pointed toward a report Wednesday by the International Monetary Fund that Canada will lead G-7 nations economically next year with 1.2 per cent growth. Mr. Flaherty will meet in Washington on Friday with his G-7 counterparts to discuss ways to strengthen the international financial system.
Thursday 09 October 2008 TORONTO: CANADIAN BANKS DON'T PASS ALONG FULL CUT
Canada's big banks have declined to pass on to consumers the full cut in interest rates announced by the Bank of Canada and other central banks. TD Canada Trust, Canadian Imperial Bank of Commerce, Royal Bank of Canada, the Bank of Nova Scotia, the Bank of Montreal, National Bank and Laurentian Bank said they would drop their prime rate by one-quarter of a point to 4.5 per cent, instead of the full half-point which the central banks had hoped would be passed down to consumers. The prime rate is the benchmark used by banks to calculate interest on consumer loans, lines of credit and some mortgages. TD Bank explained that the turmoil in global credit markets makes it more expensive for banks to raise money, making it impossible at present to pass on the full half-point. In the U.S., such banks as Bank of American and Well Fargo did cut their prime rates by the same half-point as the U.S. Federal Reserve
VICTORIA: FLAHERTY TO PRESENT CANADIAN MORTGAGE RULES AS MODEL
Meanwhile, the prime minister, Mr. Harper, says his finance minister will present Canada's mortgage rules as an exemplar when he meets the other G-7 ministers. The prime minister says those rules do not allow people who cannot afford them to buy houses. Mr. Harper says Canada isn't having to cope with the subprime mortgage turmoil that prevails in the U.S. because of "more prudent, conservative lending practices." The prime minister also says he supports the idea of an emergency summit of G-7 leaders to draw up a response to the global banking crisis.
Tuesday 07 October 2008 The 27 EU countries are dealing with the meltdown individually rather than collectively by offering national guarantees for bank deposits. Such guarantees are now in effect in Ireland, France, Greece and Sweden. France, the occupant of the EU's rotating presidency, says no joint action will be forthcoming. German Finance Minister Peer Steinbrueck says the government opposes the idea of a Europe-wide bailout but will create a "shield" to protect Germany's entire financial sector. In Russia on Monday, the government shut down both of the country's stock markets after they fell more than 15 per cent.
Canadian Banks and Insurers - Lowering Estimates and Target Prices
RBC CM has lowered its 2008 and 2009 earnings estimates and target prices for the financial services stocks to reflect the deteriorating macro environment, namely weak equity markets, increases in short term funding costs, the deterioration in the health of the U.S. financial services system and continued deterioration in the U.S. economy (which increases the odds of the Canadian economy weakening). The fallout of the global financials crisis could lead to attractive buying opportunities for financial services companies that are well capitalized, well funded, and have manageable credit exposures. RBC CM believes that Manulife, Sun Life, Scotiabank, Royal Bank and ING Canada are best positioned to take advantage of potential acquisition opportunities. RBC CM would not rush to buy financial services stocks in spite of attractive valuations based on historical averages. The macro environment continues to worsen, with faster deterioration being witnessed in certain areas (equity markets, funding costs, access to liquidity for corporates). Valuations have declined and are attractive compared to "normal" valuation levels, but they are not that low compared to prior troughs. RBC CM sees more near term risk in lifecos than banks as they are more affected by equity markets than banks, and the three big ones have more exposure to U.S. credit via their investment portfolios.
Sunday 05 October 2008 FRANCE
Britain's prime minister urged Europe's major leaders on Saturday to do whatever is necessary to protect banks and restore financial stability. Gordon Brown spoke in Paris at a summit of major European leaders on the global financial crisis. European leaders differ on how far they should intervene. France proposed a multibillion-dollar government bailout plan but later dropped it. Germany prefers that banks find their own solutions. Britain has proposed a new fund to support small businesses that are vulnerable. Europe still has not dealt collectively with the financial crisis in the United States this week. Some E.U. members are angry that Ireland and Greece acted independently by offering government guarantees to protect their banks. France's president, Nicolas Sarkozy, said that the crisis is a global problem that needs a global response. The leaders urged the international community to hold a conference next month to seek solutions to the crisis.
Wednesday 01 October 2008 OTTAWA: CALL FOR STRONGER BANK DEPOSIT INSURANCE
There is a call for Canada to bolster confidence in its financial institutions by insuring bank deposits beyond $100,000. Brian Smith, a professor of finance at Wilfrid Laurier University, says American proposals to increase the federal deposit insurance on bank accounts in the U.S. will put pressure on Canada also to act. In 2005, the Canada Deposit Insurance Corp. raised insurance for eligible deposits to $100,000 from $60,000. It was the first hike by the CDIC in over 20 years.
Wednesday 01 October 2008 U.S. President George W. Bush met on Tuesday with Democratic Party presidential candidate and his Republic Party rival John McCain to discuss a new draft of the $700-billion bank rescue plan which the House of Representatives rejected narrowly on Monday. The U.S. Senate will vote on the rescue plan on Wednesday. About a dozen more votes are needed for an amended version to pass. Among the ideas under consideration is to raise the Federal Deposit Insurance Corp.'s insurance cap of $100,000 to $250,000 as a confidence-building measure. Mr. Mr. McCain and his adversary support the idea, as does the FDIC's chairwoman, Sheila Bair. The basic and most controversial aspect of the bailout is for the federal government to buy up bad mortgages and other deficient assets to ease a crisis of confidence and to encourage the banks to start lending again. The proposal sparked thousands of furious calls from angry constituents.
Tuesday 30 September 2008 Bail Me Out of the Stock Crash Last week US Treasury Secretary Henry Paulson literally bent down on one knee, begging House Speaker Nancy Pelosi to not withdraw party support for a $700-billion bailout plan that he claims would have rescued America’s financial markets from collapse.
Tuesday 30 September 2008 OTTAWA: CENTRAL BANKS UNITE TO FIGHT CREDIT CRISIS
The Bank of Canada joined other central banks this morning in taking further action to ease an international credit crisis. The Bank of Canada and the U.S. Federal Reserve agreed to expand an arrangement that gives them access to each other's cash reserves. Either bank will be able to draw up to US$30 billion from the other, triple the amount that was initially announced earlier this month. The arrangement makes more money available to financial institutions suffering from the credit crisis. The U.S. Federal Reserve has similar arrangements with other central banks.
Monday 29 September 2008 $700B deal struck
As United States lawmakers geared up to vote today on creating a $700-billion government fund to buy..
Sunday 28 September 2008 'Great progress' in US bail-out
US congressional leaders say they have reached the broad outline of a rescue plan for the American financial system.
Sunday 28 September 2008 U.S. reaches outline for bailout deal
...The proposed legislation would disburse the $700 billion in stages. The first $250 billion would be issued when the legislation is enacted while another $100 billion could be spent if the president decided it was needed. The remaining $350 billion would be subject to congressional review, said a statement issued by Pelosi's office early on Sunday morning.
To further protect taxpayers, institutions selling assets under the plan would issue stock warrants giving "taxpayers an ownership stake and profit-making opportunities with participating companies," Pelosi's statement said.
The plan also would let the government buy troubled assets from pension plans, local governments and small banks.
In response to a clamor for limits on executive pay, no executives at participating companies could get multi-million-dollar severance pay -- known as golden parachutes -- while CEO pay that encourages excessive risk-taking would be limited.
Saturday 27 September 2008 Another major financial institution has failed. Washington Mutual Inc., one of the biggest American banks, has collapsed under the weight of poor mortgage commitments and was seized on Thursday by the Federal Deposit Insurance Corp. The latter immediately sold its assets to JPMorgan Chase & Co. for $1.9 billion. Washington Mutual, founded in 1889, is the biggest bank to have failed in U.S. history. FDIC says the transaction won't affect depositors. However, shareholders' equity has been erased. This is the second acquisition by JPMorgan Chase this year of a financial institution crippled by involvement in mortgage markets; in March, it bought investment bank Bear Stearns Cos. for $1.4 billion. JPMorgan Chase is now the second-largest bank in the U.S. after Bank of America Corp. In Canada, insurer Sun Life Financial Inc. says it has $270 million in bond exposures to the failed bank, less than one per cent of invested assets.
TORONTO: SECURITIES WATCHDOGS APPLY STETHOSCOPE TO FINANCIAL SYSTEM
Canadian securities regulators are carrying out a fact-finding review of money-market funds in light of the worldwide credit crisis and the tumult in the financial sector. The operation is being conducted by the Canadian Securities Administrators, which represents the country's provincial securities commissions, and the Investment Industry Regulatory Organization of Canada, which oversees brokerage firms. The regulators are sending out questionnaires and will carry out "selected on-site reviews" to assess money-market funds' exposure to assets that have been devalued or cannot be easily traded. Money-market funds hold a variety of short-term securities, such as government or corporate bonds nearing maturity, treasury bills and various forms of corporate debt. The recent collapse or 11th-hour rescue of financial institutions in the U.S. has created doubt about the true value of many investments.
Saturday 27 September 2008 Congress to resume bail-out talks
Congressional leaders are to meet over the weekend to try to hammer out a proposed $700bn financial bail-out plan.
More cash is injected into banks
Central banks are to take co-ordinated action to lend billions of dollars of extra cash to struggling banks.
Friday 26 September 2008 Bush says bail-out will be passed
President George W Bush says legislators will rise to the occasion and pass the rescue package, but admits disagreements remain.
Wall Street rescue deal stalemate
House Speaker Nancy Pelosi on ABC Good Morning America
Talks to agree a huge $700bn (£380bn) bail-out of the US financial industry have ended in a "shouting match".
WASHINGTON: PRESIDENT, PRESIDENTIAL HOPEFULS MEET TO DISCUSS CRISIS
President George W. Bush met at the White House of Thursday with Republican Party presidential candidate John McCain and Democratic Party hopeful Barack Obama. All three urged the U.S. Congress to go along with a multi-billion-dollar bailout of the country's beleaguered financial institutions. Mr. Bush had wanted the Congress to approve a $700-million relief package but a tentative deal reached by key lawmakers is different. The legislators would approve $250 million immediately, plus an additional $100 million if needed. Three-hundred-and-fifty-billion dollars more could be blocked by a vote of Congress to give the lawmakers more control of the package. The government plans to buy up the mortgage-based assets of shaky financial institutions to keep them from bankruptcy, setting off aftershocks that would wipe out retirement savings, increase home foreclosures, bankrupt businesses and destroy jobs. A vote on a plan is expected in the Senate and House of Representatives within
Thursday 25 September 2008 OTTAWA: BANK OF CANADA MAKES MORE CASH AVAILABLE
The Bank of Canada will make another two billion dollars available to Canadian commercial banks this week. The cash injection is the second that the bank has made in recent days in an effort to maintain commercial lending. Global financial markets were in danger of collapsing last week because of the heavy debt incurred by major U.S. investment banks
U.S. Federal Reserve Chairman Ben Bernanke on Wednesday expressed his bleakest outlook since a credit crisis began in the United States last year. He described global markets as under extraordinary stress. The wave of home foreclosures and loan defaults in the United States has created the worse financial crisis since the Great Depression of the 1930s. Mr. Bernanke spoke as U.S. legislators looked skeptically at a government proposal to bail out beleagured Wall Street financial firms with US$700 billion. U.S. Senator Charles Schumer said that leading Democrats in the U.S. Congress were committed to passing some sort of emergency measure in the next few days. But lawmakers made clear that they would not approve the proposal without changes. They demanded more protection for taxpayers and restrictions on the pay of executives at companies that unload bad assets. On Wednesday, the Republican Party's candidate for president, Senator John McCain, predicted that the proposal would not pass in its current form. He announced that he would suspend his electoral campaign the following day to concentrate on finding an adequate solution to the financial crisis. He invited leaders of the Democratic Party to join him in a bipartisan effort. On Tuesday, the billionaire investor, Warren Buffett, showed his confidence in the Wall Street firm, Goldman Sachs, by investing US$5 billion in the company. U.S. President George W. Bush was scheduled to comment on the proposed government bailout in a televised address on Wednesday evening.
Thursday 25 September 2008 TORONTO: INVESTMENT BANK SENDS WARNING TO CANADA
The Canadian branch of the U.S. investment bank, Merrill Lynch, warns that Canada might still have a housing and mortgage crisis similar to the one in the United States. The bank's economists, David Wolf and Carolyn Kwan, say that the debts of many Canadian households are overextended even more than in the United States. The economists suggest that a crisis in Canada is only a matter of time. Their report contradicts the prevailing view that Canada's housing and banking sectors will likely slow down but not crash because they are more stable than their American counterparts. In response, Prime Minister Stephen Harper disagreed with the report's conclusions, saying that Canada is in much more stable financial shape than the United States. Many observers argue that Canadian residential properties are not overvalued because of the strength of regional economies in resource-rich provinces. Merrill Lynch is one of the U.S. financial institutions that came close to financial collapse earlier this month.
Monday 22 September 2008 US banks make shock status switch
The last two major US investment banks change their status, in a bid to survive the ongoing upheaval in the financial sector.
Monday 22 September 2008 Canadian Banks - Recent Gov’t and Regulatory Actions Bring Relief To Bank Stocks
RBC CM wrote in detail on the Canadian banks on September 2, 2008, following the release of their Q3/08 results. What a three week stretch it has been; Lehman Brothers failed, Fannie Mae, Freddie Mac were placed in conservatorship, AIG was put on life support by the U.S. Government, and Merrill Lynch was essentially forced to sell itself. Credit spreads widened significantly and funding markets stopped functioning properly, until Thursday. Canadian bank stocks fared better than their European and U.S. counterparts as concerns over financial system stability grew, as their direct exposure to the rapidly deteriorating funding conditions was much lower. At their trough, though, the Canadian bank stocks were down 8%. Recent initiatives (some actual, some announced) by U.S. Government and regulatory organizations should bring tremendous relief to the short term pressure on both credit markets and bank stocks. Canadian banks stocks understandably rallied from the 2-week trough Thursday afternoon and Friday as (1) bank shares worldwide rose, (2) systemic risk has declined, and (3) declining credit spreads from peak levels decreases concerns over write-downs of fixed income holdings. Share prices are now up 4% compared to September 2, 2008. While the volatility of the last three weeks has been massive, RBC CM’s view on Canadian banks today is not different from what it was on September 2, 2008 when we last wrote a detailed report on Canadian banks: it is still too early to buy bank stocks. Canadian banks should (and do) trade higher than they did earlier last week given U.S. Government actions that greatly reduced systemic risk, but the operating environment is not that different from what it was three weeks ago for Canadian banks. RBC CM continues to believe that it is too early to buy Canadian bank stocks, reflecting its expectations for continued pressure on profitability due to both a slowing economy and credit/funding markets that remain challenged, and valuations that are not overly cheap on a historical basis considering the economic environment we think the banks will be facing.
Sunday 21 September 2008 The downturn in facts and figures The panic in world financial markets has led to sharp falls in share prices and led to the contraction of credit markets. BBC News looks at how key indicators around the world have moved as recession fears grow.
Sunday 21 September 2008 Proposed Bailout Could Set a Record WASHINGTON — The Bush administration on Saturday formally proposed a vast bailout of financial institutions in the United States, requesting unfettered authority for the Treasury Department to buy up to $700 billion in distressed mortgage-related assets from the private firms.
Saturday, September 20, 2008 Rebuilding Wall Street a mys read
'Capitalism carries the seeds of its own destruction: As odious as government intrusions may be, laissez-faire economics brings the roof down eventually --just as it did in 1929' The fate of the giant insurance company AIG is a tale with a clear moral. Over a period of 40 years, Hank Greenberg built this company up from a storefront, turning it into the greatest insurer in the world, doing business successfully, and often as a pioneer, all over the globe.
The Wall Street Bailout Plan, Explained
The upheaval in the world of finance has resonated for people who know little about Wall Street. Here are questions and answers of concern to Main Street Americans. WASHINGTON — News reports about the upheaval in the world of finance have been full of esoteric terms like “mortgage-backed securities” and “credit-default swaps,” but the crisis has resonated for people who know little about Wall Street and who did not think they would ever have to know. Here are several questions and answers of concern to Main Street Americans:
Saturday 20 September 2008 FARNHAM: OTTAWA WON'T BAIL OUT BANKS
On another matter, Mr. Harper says the federal government won't engage in any rescue of the country's financial institutions. While campaigning in the national election campaign in Quebec, he said that the finances of the banks and insurance companies are solid, rendering government aid unneeded. Mr. Harper spoke after the U.S. government said it would expend billions of dollars to acquire weak assets of American financial institutions. The prime minister says that although credit has become tighter in Canada, he doesn't expect any crisis and therefore consumers shouldn't panic.
Saturday 20 September 2008 U.S. President George W. Bush has announced a four-point plan to prevent the current financial crisis from damaging the economy further. The plan calls for the government to buy up approximately $100 billion worth of subprime mortgages, which led to the current crisis. Mr. Bush also announced government insurance for mutual funds, tougher financial oversight rules, and a temporary ban on the practice of "short selling," a technique in which investors profit when stock prices move lower. Mr. Bush said that U.S. government intervention is needed to keep the financial crisis from damaging the economy further. Advance news of Mr. Bush's announcement allowed global markets to make gains over 24 hours after a week of major losses over the failure of Lehman Brothers, a major investment company in the United States.
OTTAWA: HIGH COURT WON'T HEAR ABCP CASE
The Supreme Court of Canada has declined to hear a challenge to a rescue plan for holders of $32 billion of frozen asset-backed commercial paper. The decision is a setback for a group of disgruntled investors led by Jean Coutu Group, which rejects the plan. The commercial paper has been frozen since August 2007 because of the instruments' connection to the subprime mortgage crisis in the U.S. Under a stakeholders' plan, investors would be issued new long-term notes that would mature in six or seven years. The plan has been ruled legal by Ontario Superior Court and Ontario Court of Appeal. But a group of noteholders rejects it on the grounds that it removes their right to sue their financial advisers or others involved in the transactions, except in cases of fraud. The restriction on lawsuits encouraged banks, investors and other financial players to accept the rescue. The investors committee which drew up the plan comprising large investment groups, particularly pension plans, expects to start its implementation at the end of the month.
Tuesday 16 September 2008 Fed bails out AIG
$85 billion loan includes 79.9% stake in insurance giant Central bank announces $85 billion loan to keep cash-starved insurer falling into bankruptcy. Fed 's terms include stake in company, other conditions.
A Year of Heavy Losses
A year ago, financial companies were flying high. But as problems in the mortgage and credit markets have grown, the stocks of many Wall Street firms have been hard hit. Some of the biggest companies have been bought out, taken over by the government or gone bankrupt.
Tuesday 16 September 2008 Canadian Banks - AIG’s Health A Key Risk To Monitor For the Banks
AIG has seen its stock price drop from $22.76 to $4.76 in five trading sessions (the stock traded at over $70 per share in 2007). At the heart of the company's problems are (1) written credit default swaps on collateralized debt obligations in its financial products division, which have seen material mark to market pressure, and (2) holdings on residential mortgage securities in insurance subsidiaries. Last night, 3 rating agencies cut their ratings on AIG. The downgrades will lead to AIG having to post as much as $14.5 billion in incremental collateral to support its credit default swaps. In order to bulk up its liquidity and/or capital, AIG has been reported to have been in talks with private equity firms to raise capital, to have considered selling assets, to have gone to the Fed to attempt to secure a loan, and to having negotiated with private sector banks to access a loan. The importance of raising liquidity is further highlighted by the rating agencies' comments that they remain concerned about the direction of their ratings if AIG cannot strengthen its liquidity and capital position. Further downgrades would lead to greater collateral requirements. AIG has written a net $441 billion in credit default swaps, and RBC CM suspects that many of the buyers of those credit default swaps would have been banks looking to hedge their CDO portfolios. The global credit default swap market amounts to approximately $62 trillion in notionals, of which $823 billion resides on the 6 Canadian banks books. Lehman was a counter-party to $730 billion in total derivatives (credit derivatives would have been a portion of that $730 billion). The health of AIG as a counter-party is a key risk to monitor for Canadian (and other) banks. Banks and broker dealers are already busy trying to find counter-parties to replace Lehman on transactions where they are no longer hedged since Lehman filed for bankruptcy. RBC CM does not know how AIG's situation will turn out, but if banks suddenly found themselves exposed to future price movements on a notional $441 billion in CDOs, trading losses would very likely follow and risk weighted assets would jump as finding a counter-party to take on exposure to CDOs at this time would be much more difficult than it would be for interest rate/fixed income hedges.
Monday 15 September 2008 Lehman Bros files for bankruptcy
Top US investment bank Lehman Brothers files for bankruptcy protection, sending shockwaves through financial markets.
Monday 15 September 2008 One of the world's largest investment banks, Lehman Brothers Holdings, moved closer to insolvency on Sunday after talks to sell the company faltered. Britain's Barclays Bank had seemed ready to take over the American company, but withdrew because the U.S. government declined to provide financial guarantees. Lehman has been collapsing under the weight of toxic assets, mainly related to real-estate, that are worth only a small fraction of their original prices because of the credit crisis triggered by America's sub-prime mortgage loans.
Saturday 13 September 2008
U.S. Gives Banks Urgent Warning to Solve Crisis
Three top officials convened the heads of Wall Street’s biggest investment banks for an emergency meeting to impress upon them the need to find a plan to rescue Lehman Brothers.
Wednesday 03 September 2008 Canadian Banks - Still too Early to Buy
RBC CM continues to believe that it is too early to buy Canadian bank stocks at this time. This view is based on expectations for continued pressure on profitability due to both a slowing economy and credit markets that remain in turmoil, and valuations that are not overly cheap on a historical basis considering the challenges the banks are likely to face. While the banks' dividend yield and P/E valuations are attractive, they are not necessarily indicators that the time is right to buy today. A number of indicators in four key areas should be watched closely in order to pick a bottom in Canadian bank shares:
1) signs of credit market stress,
2) housing market strength,
3) employment growth; and
4) the price of oil.
Those indicators are not overly positive today. RBC CM also downgraded Scotia (BNS) from Sector Perform to Underperform, reflecting primarily a valuation multiple that leaves little room for disappointment. The bank's industry high valuation could decline relative to peers when concerns over structured finance and US credit abate and/or concerns over Canadian growth increases. National Bank (NA) was upgraded from Underperform to Sector Perform. In the near-term, the bank should benefit from limited exposure to US credit and structured finance, and expense initiatives are boosting bottom line growth in spite of weak retail revenue momentum. RBC CM expects the gap between the more richly valued banks and the ones at the bottom to narrow in 2009 as differences in operating performance are not expected to be as large as in the last 12 months. A successful resolution of the non-party ABCP restructuring looks likely, which reduces risk related to those holdings.
Wednesday, September 3, 2008 Key rate steady
Bank of Canada holds rate as signs of economic weakness overshadow inflation
Outlook for Canada reduced again The outlook for growth for Canada's economy this year has been cut again to less than one per cent and less than half that of the U.S. economy.
Friday 29 August 2008 TORONTO: BANKS' PROFITS DOWN
The country's biggest banks suffered a 21 per cent in earnings in the third quarter, at $4.15 billion, on losses from bad loans as the credit crisis continued. All of the main banks suffered to some degree because of their links to problems with the U.S. housing and financial sectors. Canadian Imperial Bank of Commerce suffered the most, reporting a profit of only $71 million on Wednesday.
Monday 25 August 2008 Flaherty cuts economic forecast
Finance Department's projection of 1.1 per cent growth more in line with private economists, Bank of Canada 22/08/08
Monday 25 August 2008 Central bank faulted for low pay, irrelevant studies
U.S. report says Bank of Canada is unable to draw top researchers and is plagued by micromanaging senior officials ...The central bank's 42-person research team is probably the largest economic shop in Canada, and aims to be at the global forefront of economic thought and modelling in order to give the central bank a solid basis for policy making.
Thursday 21 August 2008 Fannie, Freddie and Lehman ensure August is anything but quiet
Doubts continued to swirl around Fannie Mae and Freddie Mac, causing their share prices to plunge by almost half between August 18th and 20th. Freddie Mac auctioned $3 billion of its debt, but only after offering very favourable terms to investors (Fannie Mae recently conducted a similar auction). Last month the Treasury received authority from Congress to provide the government-backed mortgage giants with new financing in the form of loans or equity if needed. Hank Paulson, the treasury secretary, was said to be ready to intervene if market confidence collapsed.
Wednesday 20 August 2008 TORONTO: COMMERCIAL PAPER RESCUE AGAIN SNAGGED
The plan to salvage $32 billion of frozen non-banking assets has met another obstacle in the form of an intended appeal to the Supreme Court of Canada. Ivanhoe Mines says it will appeal the ruling on Monday concerning the rescue plan by the Ontario Court of Appeal, which upheld a lower court by finding that the plan should go ahead. Asset-backed commercial paper assets have been frozen since last summer as a result of the investor funk caused by the subprime mortgage catastrophe in the U.S. A group of mid-sized investors, corporations and large individual investors had opposed the rescue package devised by the Pan-Canadian investors committee because it prevents individual and corporate investors to sue brokerages, financial services companies, banks and bond-rating agencies for their losses.
Tuesday 19 August 2008 TORONTO: NON-BANKING INVESTMENT RESCUE UPHELD
Ontario Court of Appeal has maintained a lower court ruling that a plan to salvage $32 billion worth of asset-backed commercial paper should proceed. The court thus upheld an identical ruling made by Ontario Superior Court two months ago. The assets have been frozen since last summer as a result of the investor funk caused by the subprime mortgage catastrophe in the U.S. A group of mid-sized investors, corporations and large individual investors had opposed the rescue package devised by the Pan-Canadian investors committee because it prevents individual and corporate investors to sue brokerages, financial services companies, banks and bond-rating agencies for their losses. But the appeals court ruled that the appelants, who together account for $1 billion of the $32 billion at stake, shouldn't have the right to block the plan. The terms of the accord provide for long-term redemption of the ABCP.
Saturday 16 August 2008 TORONTO: DECISION ON FROZEN PAPER ASSETS DUE
Ontario Court of Appeal will render its decision on a plan to rescue $32 billion in asset-backed commercial paper investments on Monday afternoon. The non-banking investments were among the fallout from last summer's world credit crisis which originated with the subprime mortgage collapse in the U.S. Investors worried that the ABCP that they had acquired was tied to the risky American mortgages. A rescue plan would seek to salvage the assets by tying them up for several years while investors' fears would be allayed, thus steadying the market. The Court of Appeal will rule on the objections by several corporations owning ABCP to that feature of the rescue package that would grant immunity from litigation to the banks, brokers and rating agency involved in the ABCP business.
Monday 11 August 2008 Canadian Banks - Q3 Earnings Preview
The big six Canadian banks will report their Q3 results between August 26th and 28th. RBC CM expects another difficult quarter with earnings risk greatest for banks with US exposures, both in banking and capital markets. In the near term, National Bank and Scotiabank should be less impacted by US credit quality and capital markets write-downs. Until last quarter, banks had been challenged with weak capital markets and US exposures but there was little sign of deterioration in core Canadian banking businesses. Capital Market and US challenges remain in place, but RBC CM expects more issues in the core Canadian business over the next 6 to 12 months with increases in credit losses from low levels, slower loan growth, margin pressure and soft wealth management results. While Canadian banks have high Tier 1 ratios by global and historical standards, banks are not likely to be looking to return or deploy capital quickly and as such no dividend increases are expected this quarter. RBC CM continues to believe that it is too early to buy Canadian bank stocks due to expectation for continued pressure on profitability, the potential for further negative earnings revisions, and valuations that are not overly cheap on a historical basis based on price to book, with the banks trading at a median multiple of 1.9x book versus a trough of 1.65x six years ago when credit and equity markets were weak.
Sunday 10 August 2008 Fannie Mae unveils loss of $2.3bn
US mortgage finance company Fannie Mae plunges $2.3bn into the red as a result of housing market woes.
Tuesday Aug 5, 2008 Fannie Mae and Freddie Mac make out like bandits
It's hard to deal with an alcoholic. But most experts would agree that the answer is not to leave your credit card behind the bar, persuade the pub landlord to stay open until dawn, and leave the inebriate to get on with it.
Tuesday Jul 29, 2008 IMF sees no end to financial problems
The bottom of the U.S. housing downturn is not yet visible, while rising inflation is making it tougher to set monetary
Monday 21 July 2008 OTTAWA: CENTRAL BANK SEES ECONOMIC SURGE
The Bank of Canada's latest economic update paints an upbeat picture after the negative growth recorded in the first quarter. The central bank says the economy has rebounded and grew by .8 per cent in the second quarter ending June 30. It forecasts growth of 1.3 per cent and 1.8 per cent in the third and fourth quarter respectively and 2.8 per cent for the first half of next year. The Bank of Canada's Monetary Policy Report attributes the growth in great part to high prices for many of Canada's commodities, including oil, natural gas, minerals, potash and grains. The central bank says those prices will lead to higher wages and salaries, higher government revenues, higher corporate profits and stronger investment.
The Federal Reserve may extend into next year a facility that gives investment banks access to emergency cash if the financial turmoil persists.
Wednesday 09 July 2008 OTTAWA: CENTRAL BANK ENDS SPECIAL CREDIT LOANS
The Bank of Canada has announced that it has ended its injections of cash to chartered banks through short-term loans, saying that the credit conditions that resulted from last summer's subprime mortgage crisis in the U.S. have eased. The bank says it will continue to monitor markets and if necessary to intervene to provide liquidity. The U.S. Federal Reserve, on the other hand, has said it will continue providing short-term loans to financial institutions until the end of the year.
Tuesday 08 July 2008 TORONTO, OTTAWA: CONSUMERS, BUSINESS GLOOMY
Two polls show gloom about the future among both consumers and business people. A survey by the Conference Board of Canada shows consumer confidence at its lowest level in 13 years. The board's rating of consumer confidence fell 6.2 points in June to 79.6, its lowest level since the fourth quarter of 1995. The number of those who thought that the moment isn't right to major a major purchase such as a car or a house rose 6.1 percentage points to 54.9 per cent. Fifteen-point-two per cent felt there would be more jobs in their communities in six months, down from 17.4 per cent. In a survey by the Bank of Canada, 51 per cent of respondents predicted that their costs will rise due to soaring energy prices, and 42 per cent of these expected to pass them on to their customers. Only 22 per cent thought their costs would fall. And 36 per cent believed that inflation would rise above three per cent in the next two years, a record response.
Friday 04 July 2008 OTTAWA: BANKS MILDLY UPBEAT ON ECONOMY
The Royal Bank of Canada and the Bank of Montreal have issued moderately optimistic economic forecasts. The reports follow the negative growth in the first quarter. Royal Bank predicts yearly growth of 1.4 per cent and 2.5 per cent in 2009. BMO sees one per cent growth this year and 2.2 in the next. Both banks sees difficult times for Ontario and Quebec because of the high Canadian dollar, weak U.S. demand for imports and high energy prices. Ontario's finance ministry earlier on Thursday reported negative growth of .3 per cent for the first quarter. Despite the woes of central Canada's manufacturing sector, Royal Bank and BMO report that high commodity prices, particularly for oil, are sustaining the services sector, housing, employment and consumer spending.
Monday 30 June 2008 Central bankers warn of inflation scourge
Central bankers issued a stern warning yesterday against the dangers of surging inflation, saying rising energy costs risk damaging growth in rich and poor countries alike.
Sunday 29 June 2008 TORONTO: CREDIT VOTE MAY PROCEED
Ontario Superior Court has ruled that an investor vote on a plan to resuscitate $32 billion worth of frozen asset-backed commercial paper may proceed on Friday as scheduled. The court ruled against parties who wanted a delay, finding that such an eventuality would doom a restructuring plan. The freeze resulted from the international credit crisis that originated with the U.S. high-risk mortgage meltdown last August. Under the plan by the "Pan Canadian" investor committee, short-term ABCP notes would be exchanged for long-term securities in the expectation that by the time they mature, the underlying assets will have recovered all or most of their value. For the plan to succeed, it requires the acquiescence of more than one-half of the votes cast and be approved as well by noteholders representing at least two-thirds of the value of the outstanding notes.
Tuesday Jun 17, 2008 MPs criticize banking regulator
The head of Canada's banking system regulator fended off accusations from MPs yesterday that she and her agency, the Office...
Saturday 14 June 2008 HALIFAX: LAW NEEDED TO PREVENT CANADIAN SUBPRIME ERUPTION
A Nova Scotia-based investment firm says it's necessary to legislate to prevent a repetition in Canada of the worldwide credit crisis that originated in the U.S. last summer from subprime mortgages. Jamie Baillie, the president and CEO of Credit Union Atlantic, says there's no reason why Canada shouldn't have legislation to ban adjustable mortgages by which the rate changes a year later, or mortgages that commence with a monthly payment too small even to cover the monthly interest rate on it. Mr. Baillie says that the subprime borrowers are themselves victims because they are among the most vulnerable members of U.S. society. He also notes that the sellers of such mortgages don't care whether the buyers default because they bundle them with other mortgages in packages sold to Wall Street investment firms, which were badly stung when the flimsy financial instruments collapsed.
LAVAL: PM MORE UPBEAT
Despite the central bank's relative pessimism, Prime Minister Stephen Harper has offered a brighter vision of the country's economic future. Speaking to the Laval Chamber of Commerce, he said that his government's moves to lower income taxes and to reduce the national debt have been crucial to Canada's success in "uncertain economic times." The prime minister concedes that Canada faces challenges from the U.S. economic slump, turbulent credit markets and the drop of the U.S. dollar and acknowledges that economic growth will slow over the next two years.
Sunday 29 June 2008 CALGARY: GAS, OIL PRICES RIDING JUGGERNAUT
A Canadian bank predicts that gasoline and oil prices have only just begun to take off. Canadian Imperial Bank of Canada forecasts that drivers will be paying $1.43 a litre this summer, compared with about $1.23 a litre now, and that it will thus cost about $80 to fill a tank. The report also sees the price of a barrel of crude oil at US$150 by 2010, which will soar to US$225 a barrel four years later.
Saturday 07 June 2008 TORONTO: NON-BANKING PAPER MESS CLOSER TO SOLUTION
Ontario Superior Court has rendered a decision that will be a step toward unfreezing $32 billion of asset-backed commercial paper that has been frozen since August because of the worldwide credit crisis. The court has accepted an amendment that would allow some noteholders under certain conditions to lay claims of fraud against brokerages and dealers who sold them ABCP. The ruling sets the stage for a final phase in the proposed restructuring: a three-week period during which individual and corporate investors may appeal the plan by which the commercial paper in question would be redeemable in several years.
Tuesday 03 June 2008 Canadian Banks - No Need to Buy Yet
RBC CM maintained its cautious view on the bank stocks, reflecting its expectations for continued pressure on profitability, the potential for further negative earnings revisions, and valuations that are not overly cheap on a historical basis given the current challenge. Canadian lifecos are expected to outperform the banks, as the macro environment, while negative, should not impact lifeco earnings as much and is better reflected in valuations. Q2 results were weaker than expected, as core earnings declined a median 4% even when excluding separately disclosed writedowns. RBC CM’s three favourite banks (TD Bank, Royal Bank and Scotiabank) are now rated Sector Perform, as it rates them in the context of its financial services universe. The relatively narrow distribution of ratings also reflects its view that the differentiation between the top and bottom bank stocks will be lower in the next year than it was in the past year. RBC CM has lowered its rating on Royal Bank (RY) from Outperform to Sector Perform given deteriorating credit quality in the bank’s US loan portfolio and slowing retail banking revenue growth.
Saturday 31 May 2008 TORONTO: BANK PROFITS TANK
Canada's biggest banks have had their earnings almost halved in the second quarter to $2.47 billion, compared with last year's second-quarter results. The cause is the credit crunch that start in the U.S. last summer and battered the American housing sector. The crisis has affected consumer spending, corporate lending and mortgages in Canada. On Thursday, the Canadian Imperial Bank of Commerce reported a $1.1-billion quarterly loss. The banking results published Friday show that the Bank of Nova Scotia has outstripped the Royal Bank as the country's most profitable.
Friday 30 May 2008 US Bank Sector
Thank goodness it’s more bank comments: The latest statistics from the U.S. Federal Deposit Insurance Corporation (FDIC) shows recent financial turmoil in the U.S. has caused pain in the banking industry. Commercial banks and savings institutions insured by FDIC reported net income of $19.3 billion in the first quarter of 2008, a decline of $16.3 billion (45.7%) from the $35.6 billion that the industry earned in the first quarter of 2007. The primary reason for the drop of the profits is higher provisions for loan losses as more than half of all insured institutions (50.4%) reported lower net income in the first quarter.
The numbers were better than the Q4 results. FDIC reduced industry earnings for that quarter from the $5.8 billion previously reported to $646 million, as a result of additional charges for goodwill impairment. That is the lowest quarterly net income for the industry since Q4 1990. FDIC is still concerned that: 1) Non-current loans are still rising sharply; 2) Earnings remain burdened by high provisions for loan losses; 3) The industry’s “coverage” ratio – its loss reserves as a percentage of nonperforming loans – continued to erode; and 4) The FDIC’s Deposit Insurance Fund (DIF) reserve ratio fell. Given the crisis is not over, the Federal Reserve announced yesterday that it will make more short-term cash loans available to squeezed banks, marking the latest round in a program that was launched in December to ease stressed credit markets. The Federal Reserve said
it will conduct three auctions in June, with each one making $75 billion available in short-term cash loans.
LIBOR Rate
Doesn’t everyone lie about their number? Several weeks ago we highlighted a Wall Street Journal article, which expressed concern that the very important Libor (London Interbank Offered Rate) was not properly reflecting the actual cost of interbank borrowing. LIBOR is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the London wholesale money market. The difference between the LIBOR rate with the “risk-free” government shortterm money rate is frequently used to measure the perceived health or risk of the banking sector. Everyday at about 11am (London Time) traders from 16 banks report what it would cost them to borrow unsecured money for lengths of time range from overnight to a year. The reported borrowing rate for each participating bank is then published by Thomson Reuters (TRI). The Libor rate is then calculated by averaging the rate for each time period after removing outlier data. The Libor rate sets a benchmark borrowing rate for trillions of dollars of financial instruments globally, including residential mortgages, exotic derivative products and commercial lending. Some market participants and analysts believe that banks are mis-reporting the true costs of their borrowing rate. As each bank’s borrowing rate is published, the banks could be motivated to under report their true borrowing rates, as a higher than average rate would broadly signal to the market that lenders view the bank as having higher than average liquidity risk. The WSJ compared the banks’ self-reported borrowing rate with the credit default insurance and noted that the spread between these number varied greatly with some banks, including Citigroup (C), J.P. Morgan Chase (JPM) and UBS (UBS) – possibly indicating misrepresentation of the Libor rate. Incidentally, the Royal Bank (RY) was noted as one bank who’s published Libor rate was very close to the implied credit insurance risk rate – oh, those honest Canadians.
The WSJ reported that the BBA (British Bankers Association) is expected to meet today to discuss possible djustments to the system, although major changes to the system are not expected.
Friday 23 May 2008 NEW YORK: CENTRAL BANKER WANTS OUNCE OF PREVENTION
The governor of the Bank of Canada, Mark Carney, says the worldwide credit crisis that began last summer with the subprime mortgage uproar in the U.S. is easing. In a speech to the New York Association for Business Economics, Mr. Carney said that central banks need new powers to bring into play the next time that financial institutions start behaving irresponsibly. The central banker says that central banks now have at present the ability to inject liquidity into financial markets when credit grows tight, but that they don't have the means to absorb excess liquidity, as was the case in the period of "easy money" preceding the mortgage eruption. Mr. Carney didn't offer a prediction as to when credit markets will return to normal.
Thursday 22 May 2008 Identify e-mails trying to steal your identity You open your in-box and find e-mail from eBay or PayPal, warning that your account has been compromised by identity thieves and that you must log on immediately to verify your information. more good tips
Articles-by-subject alert: Banking, pensions and financial regulation
From Economist.com, Friday May 16th 2008
The following have been newly published on Economist.com:
Securitisation and its flaws
Securitisation has its flaws, but many of them can be mitigated
Finance in Asia
The credit crisis has cooled Asia's ardour towards Western banks. But the region stands to gain even more from opening up than Wall Street does
Defending the banking system
Modern finance is under attack. Yet the banking system has done much better than it is given credit for
The next crisis
Cross-border supervision needs more attention
Spain's better way
A simple way of curbing banks' greed
Regulators and the cycle
Regulators need to counterbalance the cycle, not accentuate it
Sunday 04 May 2008 Warren Buffett: big is bad for banks
THE big banks have become too large to manage their own risks properly, Warren Buffett, the world’s most successful investor, warned last night. Their size had led to the recent meltdown in financial markets.
Buffett’s business partner Charlie Munger said a “crazy culture of greed and overreaching” had led to the excesses of the credit crisis and was “counter-productive for the country”.
Burning money
Urban sprawl and the car culture hit Quebecers right in the wallet We all know the impact of the soaring price of oil on our own wallets. But its effect on Quebec's overall prosperity is getting much less attention.
Friday 02 May 2008 OTTAWA: CENTRAL BANK WON'T RESCUE INCOMPETENT FIRMS
The governor of the Bank of Canada, Mark Carney, has warned that the central bank won't intervene to rescue companies in danger of bankruptcy because of unwise business decisions. Mr. Carney told the Senate Committee on banking, Trade and Commerce that the Bank of Canada won't intervene as the U.S. government did when the Bear Stearns investment house became submerged in the subprime mortgage turmoil and that the bank won't help firms that try to maximize profits by ignoring risks. Mr. Carney acknowledges that the central bank has a responsibility as a lender of last resort, but that applies only to institutions that are solvent not those who merely need to be bailed out. On another subject, Mr. Carney dismissed speculation that the economy is headed toward recession, speculation stoked by the revelation on Wednesday that it shrank by .2 per cent in February. The central banker predicts that the economy will slow in the first half but recover in the second.
Sunday 20 April 2008 Don't buy bank shares yet
It looks too early to be buying financial stocks ... After all, the news has been so gloomy, what with the write-downs on mortgage-related bonds, the exposure to a slowing American economy and the crisis at Bear Stearns. Perhaps sentiment has become unduly pessimistic. Richard Cookson of HSBC points out that only three American banks have gone bust so far, compared with 534 in 1989, when the savings and loan crisis was in full swing.
Thursday 17 April 2008 OTTAWA: FINANCE MINISTER CONVOKES BANKERS
Federal Finance Minister Jim Flaherty has called a meeting of the country's top bankers for next week to discuss implementation of financial reforms accepted by the world's top economies. Mr. Flaherty and his six G7 counterparts adopted recommendations put forward by the Financial Stability Forum last weekend. The minister says Canadian regulators and bankers deserve praise for avoiding the deep losses incurred by American and European financial institutions since the subprime mortgage crisis erupted last summer in the U.S. The Financial Stability Forum represents some 60 of the world's strongest economies and made a variety of suggestions aimed at avoiding similar turmoil. These include strengthening the oversight of capital, liquidity and risk management; better valuation of risk; and betterment of the application and uses of credit ratings. Mr. Flaherty says next week's meeting is aimed at ensuring that the reforms are carried out uniformly in Canada.
Tuesday 18 March 2008 Marching to the beat of a different drummer. According to the Wall Street Journal, Royal Bank (RY) was one of a number of
potential buyers that took a look at Bear Stearns (BSC). Other potential buyers included private-equity investors J.C. Flowers,
Kohlberg Kravis Roberts and British bank Barclays PLC. None of whom could put together a deal by Sunday. Was there really
any other option to the JP Morgan’s (JPM) offer? As CNBC’s David Faber said, it was either JP Morgan or bankruptcy for
Bear Stearns. The Fed has a deal with JP Morgan to provided $30 billion in non-recourse financing. If anyone were to buy Bear
Stearns, would the Fed still have been there? The Journal quoted an unnamed person familiar with the sale process in saying,
“The government said you have to do a deal today...we may not be there tomorrow to back you up.” In any case, the Bear
Stearns rescue may be another case of a stronger balance sheet company buying a weaker balance sheet company. If something
like this were to happen in Canada, do you think the Canadian government would finally give in to bank mergers? It was 10
years ago that the Canadian government blocked the merger attempts of four of the country's banks. Royal Bank and Bank of
Montreal (BMO) had plan to merge, as had TD Bank (TD) and CIBC (CM). The Canadian government has appointed a
panel to look into the merger issue and the panel is due to report by mid-year.
Sunday 16 March 2008 Fed Chief Shifts Path, Inventing Policy in Crisis
Ben S. Bernanke, who has long argued that a central bank should act on consistent principles, now has to improvise.
WASHINGTON — As chairman of the Federal Reserve, Ben S. Bernanke has long argued that a central bank should base its policies as much as possible on consistent principles rather than seat-of-the-pants judgment.
BUSINESS Saturday 15 March 2008
Bear Stearns gets emergency funds
US bank Bear Stearns gets emergency funding, raising fears that one of Wall Street's biggest names may collapse.
Fresh banking fears knock shares
US shares fall sharply on renewed fears about the impact of bad mortgage debt and the wider credit squeeze.
Bush reassures over economic woes
President Bush attempts to reassure US businessmen that the country's economy is fundamentally strong.
Friday 14 March 2008 Credit crunch Plugging holes Central banks' latest moves to increase liquidity will ease but not solve the credit crunch
Wednesday 12 March 2008 OTTAWA: CENTRAL BANK AGAIN INTERVENES TO AVERT CREDIT CRISIS
The Bank of Canada has again intervened in tandem with its U.S. and European counterparts to inject cash into financial markets to alleviate the world credit scarcity and to avert recessions. The banks have injected $245 billion overall, Canada's contribution being $4 billion. The central bank says its contribution is relatively modest because Canada's money markets aren't under the same kind of pressure as others. This is the second time since December that the Bank of Canada has intervened in concert with other central banks to make more money available for borrowers.
Friday 07 March 2008 When the rivers run dry
Can bank regulators and central banks prevent future liquidity crises? POLICYMAKERS and academics are still grappling with the causes and consequences of the credit crunch. One broad area of agreement is that ample “liquidity” encouraged the lax lending that led to bad mortgage debts, and a sudden dearth of it helped to precipitate the crisis. But what is liquidity, why does it suddenly evaporate and what can central banks and regulators do to ensure that its ebb and flow does not destabilise economies? This and much else is the subject of a special issue of the Bank of France's Financial Stability Review.*
Monday 28 January 2008 Should Bankers Pay for Their Mismanagement?
From the savings and loan meltdown in the 1980s to the current housing-led seizure, financial institutions have proved unable to curb their appetite for risky assets — blowing up the bank and spreading economic mayhem.
Monday 28 January 2008 Event
Bank share prices have continued under pressure early in 2008, driven by fears of monoline
insurance companies defaulting, recession fears, and concerns about overall financial
market instability.
What It Means
Negative sentiment from headline news and troubled U.S. Financials has more than offset
any comfort investors may have received from the release of solid fourth quarter results by
the Canadian banks and the confirmation of their low exposure to high-risk assets except for
CIBC.
Canadian bank stock price declines have pushed up dividend yields relative to long Canada
bonds to levels never seen before.
We are stress testing bank earnings for a recession again this year following our fiscal 2006
analysis. We believe banks can weather a recession with return on equity troughing in the
17%-18% range. If we cut 2008 earnings to recession levels, banks would be trading at a P/E
multiple of 12.1x with dividend payout ratio of 52%. Thus the current dividend levels are
totally maintainable and defensible. Hence the Best Buying Opportunity in Decades.
We are adjusting modestly our earning estimates and share price targets. Remain
overweight the bank group with TD and RY 1-Sector Outperform.
BUSINESS Saturday 26 January 2008
Worldwide share jitters continue
Global stocks end down on Friday, as concerns return about the state of the worldwide financial sector.
Banks 'may need an extra $143bn'
Banks may need $143bn to weather the credit crisis if bond insurers lose their top credit ratings, new research shows.
Police search rogue trader's bank
French police search the headquarters of Societe Generale, the bank where rogue trading lost huge sums.
Wednesday 23 January 2008 OTTAWA: BANK ACTIONS EASE JITTERS
Central banks in Canada and the United States leapt to the rescue of panicky financial markets Tuesday by chopping interest rates, in the hopes of averting a full-blown recession. In separate but related moves, the Bank of Canada trimmed its key overnight rate by one-quarter percentage point, less than an hour after the U.S. Federal Reserve, acting a week before its scheduled announcement date, axed its target rate by three-quarters of a point. By the end of the day Tuesday, the Toronto Stock Market hadn't quite regained all of Monday's massive losses, but it did make a substantial recovery. The TSX closed up more than 500 points, after losing 605 points Monday. In New York, the Dow rallied from a 457-point deficit to close down 128 points. New York's Nasdaq composite index fell 48 points to 2,292. Economists warn, however, that the interest rate cuts won't be enough to end market turmoil.
Sunday 06 January 2008 OTTAWA: BANK OF CANADA SAYS COFFERS FORGOTTEN
The Bank of Canada says it is seeking some 845,000 people who have abandoned bank accounts worth millions of dollars. Some of the forgotten accounts have been inactive for at least 10 years, and some for as long as 99 years. A statement on the Bank's website says one apparently unknowing Canadian has an unclaimed account worth over $420,000.
KAL's cartoon
Jun 18th 2009 
Andy Nulman 
Peter G. Halll VP EDC Economics Weekly Commentary
Goldman sparks bank shares rally 
Aislin 
Bernanke hopeful for US recovery
AIG reports record $61.7bn loss
Banks hit worldwide by US fraud
'The party is over'
Bloomberg
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