- Let banks fail, says Nobel economist Joseph Stiglitz
- AIG in Talks for U.S. to Backstop Assets
- Now Hiring: Lehman
- Barclays’ credit rating downgraded
- Barclays Debt Swaps Jump as Moody’s Cuts Rating on Loss Concern
- Deutsche Post Predicts Economy Will Exit Recession in 2009
- BNP Paribas Drops as Revised Fortis Deal Fails to Boost Capital
- Barack Obama to dilute 'Buy American' plan after Europe threatens US with trade war
- Ford’s Worst Year May Signal Industry Need for More U.S. Aid
- Chrysler turns the screw on part makers
- Sirius Faces Debt Payment in Test of Its Viability
- Mattel Net Falls on Worst Holiday Season in 40 Years
Let banks fail, says Nobel economist Joseph Stiglitz
- Daily Telegraph
The Government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice, according to Joseph Stiglitz, the Nobel Prize-winning economist.
Professor Stiglitz, the former chair of the White House Council of Economic Advisers, told The Daily Telegraph that Britain should let the banks default on their vast foreign operations and start afresh with new set of healthy banks.
"The UK has been hit hard because the banks took on enormously large liabilities in foreign currencies. Should the British taxpayers have to lower their standard of living for 20 years to pay off mistakes that benefited a small elite?" he said….
AIG in Talks for U.S. to Backstop Assets
- Wall Street Journal
American International Group Inc. is in discussions with the government about Washington backstopping some of its troubled assets and is considering selling units through initial public offerings.
"We're looking at a broader array of recapitalization options," said Paula Reynolds, an AIG vice chairman who is overseeing the restructuring of AIG, which was rescued by the government in September with a bailout package that now totals $150 billion.
"We both realize that the environment's changing and we have to adjust to that environment," Ms. Reynolds said in an interview, referring to the federal government. She joined the company after the bailout to help the giant insurer break itself up to repay a massive federal loan…..
Now Hiring: Lehman
- Wall Street Journal
It's bankrupt. Its reputation is in tatters. And it has been forced from its plush headquarters building. Yet working for Lehman Brothers Holdings Inc. — what remains of it — has become one of the hottest jobs on Wall Street.
That's because Lehman, though a shadow of its former self after selling many of its businesses to Barclays PLC and Nomura Holdings Inc., retains a broad patchwork of assets. It has some $7 billion in cash and more than 1,400 private investments valued at $12.3 billion. Then there's a thicket of about 500,000 derivative contracts with 4,000 trading partners worth some $24 billion…..
Barclays’ credit rating downgraded
- Financial Times
Moody’s on Sunday night downgraded Barclays’ credit ratings, saying it expected the UK bank to record ”significant further losses” on credit-related writedowns.
The credit rating agency downgraded Barclays’ long-term debt from Aa1 to Aa3 after reviewing the bank’s prospects in the credit crisis…..
Barclays Debt Swaps Jump as Moody’s Cuts Rating on Loss Concern
- Bloomberg
The cost of hedging against losses on bonds sold by Barclays Plc rose after Moody’s Investors Service downgraded the bank because of the potential for further asset writedowns, triggering concern of a government bailout.
Credit-default swaps on Barclays increased 14.5 basis points to 187, according to JPMorgan Chase & Co. prices at 10:26 a.m. in London. Contracts on the Markit iTraxx Financial index of 25 European banks and insurers climbed 5 to 127.
Moody’s decision to cut Barclays’s rating two levels to Aa3, the fourth-highest investment-grade ranking, sparked speculation the London-based lender may find it harder, and more expensive, to bolster reserves. Barclays, which turned down money from the government last year and said it won’t need to raise more capital, wrote down about 8 billion pounds ($11.5 billion) of credit assets in 2008…..
Deutsche Post Predicts Economy Will Exit Recession in 2009
- Bloomberg
Deutsche Post AG, Europe’s biggest mail carrier, predicted the global economy to pull out of a recession in the second half of this year and said it won’t need to fire workers.
“I’m quite optimistic that we will see the first signs of an improvement already in the second half”, Chief Executive Officer Frank Appel said in a Bloomberg Television interview from Davos, Switzerland, where he was attending the World Economic Forum.
“I’m not as skeptical as many others,” Appel said, comparing his view with that of the International Monetary Fund, which said on Jan. 28 there will be little or no growth in 2009, said Appel. The deepening slump of the world economy reflects “very irrational behavior” by consumers who have stopped buying as they’re concerned about losing work or are delaying purchases until prices fall further, he added…..
BNP Paribas Drops as Revised Fortis Deal Fails to Boost Capital
- Bloomberg
BNP Paribas SA, France’s biggest bank, fell as much as 14 percent in Paris trading after saying the revised purchase of Fortis units won’t increase its capital ratio as previously announced.
BNP Paribas slid 3.72 euros to 26.29 euros at 10:40 a.m., the biggest drop in the 64-member Bloomberg Europe Banks and Financial Services Index. The Paris-based bank is down 12 percent this year, valuing it at 23.9 billion euros ($31.4 billion).
“It’s not good,” said Mamoun Tazi, a London-based analyst at MF Global Securities Ltd. “The capital ratio uplift from the Fortis deal didn’t materialize” after the Belgian bank’s fourth- quarter losses, he said…..
Barack Obama to dilute 'Buy American' plan after Europe threatens US with trade war
- Daily Telegraph
Barack Obama is expected to water down "Buy American" plans in his economic stimulus package after European diplomats privately threatened to launch a trade war in retaliation.
The White House has promised to review the protectionist proposals, passed last week by Democratic allies in the House of Representatives, which would ban the use of non-American steel in the $800 billion of construction projects.
Obama officials are under pressure from what European diplomats in Washington describe as a discreet but outspoken campaign of "quiet fury" from America's closest allies….
Ford’s Worst Year May Signal Industry Need for More U.S. Aid
- Bloomberg
Ford Motor Co.’s biggest annual loss in its 105-year history may herald tougher times for struggling U.S. automakers being propped up by the federal government.
Even as Ford insisted last week that it can survive without U.S. aid, it took new precautions with a deeper cut in first- quarter output, a lower estimate of 2009 domestic auto demand and a decision to tap a $10.1 billion credit line.
Those steps from the only U.S. automaker shunning a bailout suggest that pressure also is mounting on General Motors Corp. and Chrysler LLC. All three face a weakening economy that is raising doubts about industry forecasts for a second-half rebound, and they’re likely to say tomorrow that January U.S. sales fell at least 30 percent for a fourth month in a row…..
Chrysler turns the screw on part makers
- Financial Times
Chrysler has stepped up pressure on beleaguered North American automotive parts makers by demanding price cuts as part of its drive to meet the conditions for receiving $4bn in US government loans.
The Detroit carmaker, which is also seeking an additional $3bn from Washington, is understood to be seeking a 3 per cent reduction in parts costs, although suppliers with long-term contracts providing for price reductions above the target will not be required to make further cuts……
Sirius Faces Debt Payment in Test of Its Viability
- Wall Street Journal
Sirius XM Satellite Radio Inc. is facing an important test of its viability this month: how it handles $174.6 million in debt coming due Feb. 17.
Questions over how the company can pay it, along with $750 million more in debt due later in the year, have been dogging the company's stock price for months. Trading around $3 a year ago, shares in recent weeks have been stuck in the 10 cent-to-12-cent range.
But even if the company solves its looming debt deadlines, it will have merely bought time to prove to the investment community that its business of paid subscription radio has legs. And the high-interest solutions it seems likely to find would transfer more of the company's value to debt holders and away from stockholders, likely dulling any post-refinancing zip to the share price…..
Mattel Net Falls on Worst Holiday Season in 40 Years
- Bloomberg
Mattel Inc., the world’s biggest toymaker, said fourth-quarter profit plunged 46 percent as consumers cut spending on Barbie dolls and Hot Wheels cars during the worst U.S. holiday-shopping season in 40 years.
Net income fell to $176.4 million, or 49 cents a share, from $328.5 million, or 89 cents, a year earlier, the El Segundo, California-based company said today in a statement. Revenue dropped 11 percent to $1.94 billion.
Declining home values and the worst unemployment in almost 16 years caused parents to spend less on toys for their children over the holidays. Barbie sales dropped 21 percent, and revenue from Hot Wheels decreased 22 percent in the three months through Dec. 31, the company said……
