The world's 20 top economies reached a deal Saturday, Nov. 15 to better regulate hedge funds and create more transparency in mortgage-related securities in a bid to halt a global economic slide. Negotiators agreed on a final declaration Saturday morning during the first-ever summit of the Group of 20 (G20) nations in Washington. Leaders will sign off on the agreement later Saturday, promising to close all gaps in financial regulation. That includes regulating hedge funds and boosting transparency of some of the complicated mortgage-related securities created by financial firms, which have been blamed for sparking the current financial crisis. Finance ministers have been given a deadline of March 31 to hammer out the specifics in 50 different areas, followed by another summit of the G20 leaders at a later date, according to the declaration.
Negotiators agreed on a final declaration Saturday morning during the first-ever summit of the Group of 20 (G20) nations in Washington. Leaders will sign off on the agreement later Saturday, promising to close all gaps in financial regulation.
That includes regulating hedge funds and boosting transparency of some of the complicated mortgage-related securities created by financial firms, which have been blamed for sparking the current financial crisis.
Finance ministers have been given a deadline of March 31 to hammer out the specifics in 50 different areas, followed by another summit of the G20 leaders at a later date, according to the declaration.
WASHINGTON (AFP) -- World leaders agreed at an economic crisis summit Saturday to an action plan for reforming the financial system and promised to work together to restore global growth, according to a final communique."We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," the final statement from the G20 group of countries said.The statement committed the leaders, whose countries account for 85 percent of the world economy, to fiscal measures to boost national economies and laid out a series of areas for review before a deadline of March 31.Six areas will be targeted: regulating those areas of the financial markets which have exacerbated the crisis, boosting transparency in the often murky derivatives markets and reforming compensation practices.The ministers must also evaluate global accounting norms and the financing needs of international financial institutions.
WASHINGTON (AFP) -- World leaders agreed at an economic crisis summit Saturday to an action plan for reforming the financial system and promised to work together to restore global growth, according to a final communique.
"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," the final statement from the G20 group of countries said.
The statement committed the leaders, whose countries account for 85 percent of the world economy, to fiscal measures to boost national economies and laid out a series of areas for review before a deadline of March 31.
Six areas will be targeted: regulating those areas of the financial markets which have exacerbated the crisis, boosting transparency in the often murky derivatives markets and reforming compensation practices.
The ministers must also evaluate global accounting norms and the financing needs of international financial institutions.
I know this is a huge undertaking, but is that soon enough? On the other hand, is it reasonable to ask them to work even faster? Truth unfolds in time through a communal process.
I always worry when I see these grand commissions that they are full of sound and fury, signifying nothing. The UK govt has a long and grubby history of promising change via investigations and commissions that take so long that finally all who knew anything are dead, yet the system carries on unchanged.
We are still investigating the Bloody sunday massacre, 35 years after it happened. Jean charles de Menezes is 3 years dead and we're still holding inquiries. I can cite loads of other examples.
I fear the same thing here: A lot of politicians whose success in the world is based on the way the world worked last year and last century and who every instinct is to do all they can to preserve last year and last century have no vested interest in creating anything that might be different and therefore not work to their advantage. keep to the Fen Causeway
Senate Majority Leader Harry Reid plans on Monday to move forward with a bill that would give the auto industry access to the $700 billion Troubled Asset Relief Program set up by the government in October to help ailing banks and other financial firms. The Bush administration and many Senate Republicans disagree with such an approach. Instead, President George W. Bush late Friday urged Congress to speed up release of $25 billion in already approved loans to the auto industry. Mr. Bush asked Congress to ease requirements that those loans be used to help the industry retool to meet higher fuel-economy standards, a move opposed by many Democrats. "We are now actively calling on Congress to pass legislation next week that will amend the loan program and accelerate much-needed funds to the auto companies," White House press secretary Dana Perino said. "It has become clear to us that the congressional Democrats...are choosing a path that will only lead to partisan gridlock."
Senate Majority Leader Harry Reid plans on Monday to move forward with a bill that would give the auto industry access to the $700 billion Troubled Asset Relief Program set up by the government in October to help ailing banks and other financial firms.
The Bush administration and many Senate Republicans disagree with such an approach. Instead, President George W. Bush late Friday urged Congress to speed up release of $25 billion in already approved loans to the auto industry. Mr. Bush asked Congress to ease requirements that those loans be used to help the industry retool to meet higher fuel-economy standards, a move opposed by many Democrats.
"We are now actively calling on Congress to pass legislation next week that will amend the loan program and accelerate much-needed funds to the auto companies," White House press secretary Dana Perino said. "It has become clear to us that the congressional Democrats...are choosing a path that will only lead to partisan gridlock."
Frank Delaney ~ Ireland
The point is that if GM goes broke it's not just a U.S. problem, as usual...
Bernanke Refusal to Buy Genworth Paper Burdens Banks By Bryan Keogh Nov. 13 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's decision to deny commercial paper financing to all but the highest-rated borrowers is forcing some companies to seek the credit of last resort, backstop loans. Whirlpool Corp., American Electric Power Co. and AGL Resources Inc. chose to tap emergency bank lines negotiated before the credit crisis began rather than pay twice as much on commercial paper. The defections helped shrink sales of the IOUs in the past two weeks to the lowest in more than two years. ``You've got all these people taking loans that don't want loans. They want CP,'' said Christopher Low, New York-based chief economist at FTN Financial, a unit of Tennessee's largest bank. ``All of these programs have had unintended consequences elsewhere. Every time the government elevates one class of debt it displaces another.'' -Skip- AGL Resources Inc., the owner of Atlanta's natural gas utility, has repaid commercial paper by tapping a bank line with an interest rate of 28 basis points over one-month Libor, or about 1.69 percent. That compared with 5 percent to 6 percent for overnight commercial paper for the A-2 rated borrower, Chief Financial Officer Andrew Evans said. Whirlpool, the world's largest appliance maker, borrowed $800 million from a credit line to pay off outstanding commercial paper, opting to exit the market because of ``uncertainty concerning access,'' according to an Oct. 31 filing. The company, rated A-2/P-2, said the revolver has a rate of 0.35 percentage point over Libor.
Nov. 13 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke's decision to deny commercial paper financing to all but the highest-rated borrowers is forcing some companies to seek the credit of last resort, backstop loans.
Whirlpool Corp., American Electric Power Co. and AGL Resources Inc. chose to tap emergency bank lines negotiated before the credit crisis began rather than pay twice as much on commercial paper. The defections helped shrink sales of the IOUs in the past two weeks to the lowest in more than two years.
``You've got all these people taking loans that don't want loans. They want CP,'' said Christopher Low, New York-based chief economist at FTN Financial, a unit of Tennessee's largest bank. ``All of these programs have had unintended consequences elsewhere. Every time the government elevates one class of debt it displaces another.''
-Skip-
AGL Resources Inc., the owner of Atlanta's natural gas utility, has repaid commercial paper by tapping a bank line with an interest rate of 28 basis points over one-month Libor, or about 1.69 percent. That compared with 5 percent to 6 percent for overnight commercial paper for the A-2 rated borrower, Chief Financial Officer Andrew Evans said.
Whirlpool, the world's largest appliance maker, borrowed $800 million from a credit line to pay off outstanding commercial paper, opting to exit the market because of ``uncertainty concerning access,'' according to an Oct. 31 filing. The company, rated A-2/P-2, said the revolver has a rate of 0.35 percentage point over Libor.
Systemic Risk, Contagion and Trade Finance - Back to the Bad Old Days We are now starting to see the contagion effects of the current liquidity crisis feed through to the real economy. We are about to go back to the bad old days. Whether the zombie banks are kept on life support by the central banks and taxpayers of the world is highly relevant to whether the zombie bank executives pay themselves outsize bonuses and their zombie shareholders outsize dividends with taxpayer money. It appears sadly irrelevant to whether the banks perform their function of intermediating credit and commercial transactions in the real economy along the supply chain. The bailout cash and executive and shareholder priorities do not seem to reach so far. The recent 93 percent collapse of the obscure Baltic Dry Index - an index of the cost of chartering bulk cargo vessels for goods like ore, cotton, grain or similar dry tonnage - has caused a bit of a stir among the financial cognoscenti. What is less discussed amidst the alarm is the reason for the collapse of the index - the collapse of trade credit based on the venerable letter of credit. -Skip- Fixing this problem shouldn't be left to the Fed. They aren't going to make it a priority. Indeed, their determination to accelerate the payment of interest on reserves and then to raise that rate to match the Fed Funds target rate indicates that the Fed are more likely to constrain trade finance liquidity rather than improve it. Furthermore, the Fed may be highly selective in its allocation of dollar liquidity abroad, prejudicing the economic prospects of a large part of the world that is either indifferent or hostile to the continuation of American dollar hegemony. -Skip- If cargo trade stops, a whole lot of supply chain disruption starts. If the ore doesn't go to the refinery, there is no plate steel. If the plate steel doesn't get shipped, there is nothing to fabricate into components. If there are no components, there is nothing to assemble in the factory. If the factory closes the assembly line, there are no finished goods. If there are no finished goods, there is nothing to restock the shelves of the shops. If there is nothing in the shops, the consumers don't buy. If the consumers don't buy, there is no Christmas. -Skip- If cargo trade stops, the wheat doesn't get exported. If the wheat doesn't get exported, the mill has nothing to grind into flour. If there is no flour, the bakeries and food processors can't produce bread and pasta and other foods. If there are no foods shipped from the bakeries and factories, there are no foods in the shops. If there are no foods in the shops, people go hungry. If people go hungry their children go hungry. When children go hungry, people riot and governments fall.
We are now starting to see the contagion effects of the current liquidity crisis feed through to the real economy. We are about to go back to the bad old days. Whether the zombie banks are kept on life support by the central banks and taxpayers of the world is highly relevant to whether the zombie bank executives pay themselves outsize bonuses and their zombie shareholders outsize dividends with taxpayer money. It appears sadly irrelevant to whether the banks perform their function of intermediating credit and commercial transactions in the real economy along the supply chain. The bailout cash and executive and shareholder priorities do not seem to reach so far.
The recent 93 percent collapse of the obscure Baltic Dry Index - an index of the cost of chartering bulk cargo vessels for goods like ore, cotton, grain or similar dry tonnage - has caused a bit of a stir among the financial cognoscenti. What is less discussed amidst the alarm is the reason for the collapse of the index - the collapse of trade credit based on the venerable letter of credit.
Fixing this problem shouldn't be left to the Fed. They aren't going to make it a priority. Indeed, their determination to accelerate the payment of interest on reserves and then to raise that rate to match the Fed Funds target rate indicates that the Fed are more likely to constrain trade finance liquidity rather than improve it. Furthermore, the Fed may be highly selective in its allocation of dollar liquidity abroad, prejudicing the economic prospects of a large part of the world that is either indifferent or hostile to the continuation of American dollar hegemony.
If cargo trade stops, a whole lot of supply chain disruption starts. If the ore doesn't go to the refinery, there is no plate steel. If the plate steel doesn't get shipped, there is nothing to fabricate into components. If there are no components, there is nothing to assemble in the factory. If the factory closes the assembly line, there are no finished goods. If there are no finished goods, there is nothing to restock the shelves of the shops. If there is nothing in the shops, the consumers don't buy. If the consumers don't buy, there is no Christmas.
If cargo trade stops, the wheat doesn't get exported. If the wheat doesn't get exported, the mill has nothing to grind into flour. If there is no flour, the bakeries and food processors can't produce bread and pasta and other foods. If there are no foods shipped from the bakeries and factories, there are no foods in the shops. If there are no foods in the shops, people go hungry. If people go hungry their children go hungry. When children go hungry, people riot and governments fall.
See also my comment on this DailyKos diary: Two signs that something is seriously wrong
Most of the international shipments use letters of credit to guarantee payment. It is one of the oldest and safest form of short-term credit and it is vital for international trade. As early as October, it has been reported that sellers started to refuse buyers' letters of credit because they didn't trust tha banks issueing them anymore. naked capitalism: International Trade Seizing Up Due to Banking Crisis Letters of credit. issued by banks, assure payment. They can also serve to finance the shipment (ie, fund the inventory while it is in transit).Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks. From the above-mentioned reader: At the end of the day, if every counterparty is bad then you don't have a market and you don't have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up. We spoke later in the evening and said he had heard of another instance of a trade transaction failing, different parties entirely, this a shipment of coal, again due to the unwillingness of the seller's bank to accept an LC from the buyer.Confirmation comes from the Financial Post, "Grain piles up in ports" (hat tip reader Vox Sanus): The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said."There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy." That probably explains the dramatic fall in the Baltic Dry Index. If it expands, we could see the international trade coming to a halt and shortages (of food, raw materials, fuel...) taking place with ugly social and political consequences...
naked capitalism: International Trade Seizing Up Due to Banking Crisis
Letters of credit. issued by banks, assure payment. They can also serve to finance the shipment (ie, fund the inventory while it is in transit).Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks. From the above-mentioned reader: At the end of the day, if every counterparty is bad then you don't have a market and you don't have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up. We spoke later in the evening and said he had heard of another instance of a trade transaction failing, different parties entirely, this a shipment of coal, again due to the unwillingness of the seller's bank to accept an LC from the buyer.Confirmation comes from the Financial Post, "Grain piles up in ports" (hat tip reader Vox Sanus): The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said."There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."
Letters of credit. issued by banks, assure payment. They can also serve to finance the shipment (ie, fund the inventory while it is in transit).Not only are banks now leery of lending to each other for much longer than overnight, they are also starting to refuse to honor letters of credit from other banks. From the above-mentioned reader:
At the end of the day, if every counterparty is bad then you don't have a market and you don't have an economy. I spoke to another friend of mine this afternoon, whose father has been in the shipping business forever. Pristine credit rating, rock solid balance sheet. He says if he takes his BNP Paribas letter of credit to Citi today for short term funding for his vessels, they won't give it to him. That means he can't ship goods, which means that within the next 2 weeks, physical shortages of commodities begins to show up.
We spoke later in the evening and said he had heard of another instance of a trade transaction failing, different parties entirely, this a shipment of coal, again due to the unwillingness of the seller's bank to accept an LC from the buyer.Confirmation comes from the Financial Post, "Grain piles up in ports" (hat tip reader Vox Sanus):
The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.Before cargoes can be loaded at port, buyers typically must produce proof they are good for the money. But more deals are falling through as sellers decide they don't trust the financial institution named in the buyer's letter of credit, analysts said."There's all kinds of stuff stacked up on docks right now that can't be shipped because people can't get letters of credit," said Bill Gary, president of Commodity Information Systems in Oklahoma City. "The problem is not demand, and it's not supply because we have plenty of supply. It's finding anyone who can come up with the credit to buy."
That probably explains the dramatic fall in the Baltic Dry Index. If it expands, we could see the international trade coming to a halt and shortages (of food, raw materials, fuel...) taking place with ugly social and political consequences...
German Chancellor Angela Merkel has invited leaders from automaker Opel to talks to discuss the company's financial status.On Friday, the car company requested credit guarantees from the government, saying it wants the guarantees to counter a downturn in car orders.However, the unit of General Motors Corp, which itself is seeking a US government bailout, said it was facing no liquidity problems."It is important that we consult about the proper steps to take so we can try to support the automobile industry," said Merkel on the sidelines of the global financial summit in Washington.
German Chancellor Angela Merkel has invited leaders from automaker Opel to talks to discuss the company's financial status.
On Friday, the car company requested credit guarantees from the government, saying it wants the guarantees to counter a downturn in car orders.
However, the unit of General Motors Corp, which itself is seeking a US government bailout, said it was facing no liquidity problems.
"It is important that we consult about the proper steps to take so we can try to support the automobile industry," said Merkel on the sidelines of the global financial summit in Washington.
The deputy supervisory board chairman of General Motors Corp.'s (GM) Opel unit said Saturday that any financial aid from the German state must not be burned from the parent company, but has to stay within the Opel brand. "We as employees will make our contribution in this difficult time to ensure future investments. But we won't provide a single cent, which then would be burned from GM," Klaus Franz said in a statement. Franz is also the top labor representative of GM's European division. Referring to Opel's recent request for state-backed guarantees for credit lines, Franz said that "Opel has no liquidity problem. This is purely a precautionary measure". The guarantee would have to be linked to concrete plans for future investments on plants and for securing jobs. Opel is "very well positioned with its quality and models," Franz said.
The deputy supervisory board chairman of General Motors Corp.'s (GM) Opel unit said Saturday that any financial aid from the German state must not be burned from the parent company, but has to stay within the Opel brand.
"We as employees will make our contribution in this difficult time to ensure future investments. But we won't provide a single cent, which then would be burned from GM," Klaus Franz said in a statement. Franz is also the top labor representative of GM's European division.
Referring to Opel's recent request for state-backed guarantees for credit lines, Franz said that "Opel has no liquidity problem. This is purely a precautionary measure".
The guarantee would have to be linked to concrete plans for future investments on plants and for securing jobs.
Opel is "very well positioned with its quality and models," Franz said.
