Bank of China's subprime exposure rattles Asia

NF Reporter · 08-24-2007, 10:33 AM

Reuters - Three Asian banks' heavy exposure to the limping U.S. home loan sector reinforced global credit wobbles on Friday but Germany, France and Italy saw no signs of new problems.

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waltky · 08-31-2007, 11:47 AM

Gotta keep the Chinese happy, Fearless W gonna fix the subprime problem...

Bush to propose subprime plan
August 31 2007: President will discuss initiatives for helping troubled mortgage holders keep their homes, make call for stronger lending practices.

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WASHINGTON -- President Bush will make a statement Friday morning in the Rose Garden about homeownership financing, a senior administration official said Thursday. The statement is scheduled for 11 a.m. "The president will discuss a number of initiatives and reforms intended to help homeowners with subprime mortgages keep their homes," the official said. "He will also discuss reform efforts to prevent these kinds of problems from arising in the future."

Bush will direct Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson to team up to help troubled mortgage holders get the services and products they need to avoid defaulting on their loans, the official said. He will also push Congress to pass Federal Housing Administration legislation that will give the agency more flexibility to assist mortgage holders with subprime loans, the official said.

The need for rigorous enforcement of predatory lending laws and stronger, more transparent lending practices are also on the agenda for the statement, the official said. "He will discuss his willingness to work with Congress in a bipartisan way on legislation to reform the tax code to help troubled borrowers rework their loans," he said.

Risky loans have fueled a rise in foreclosures and forced some lenders to shut down or file for bankruptcy themselves. Foreclosure filings, which include default notices, auction sale notices and bank repossessions, in July were up 9 percent over June - and 93 percent over July 2006.

Source

waltky · 09-23-2007, 11:43 PM

France caught in the financial whirlpool too...

French finances in trouble
Sunday 23rd September, 2007 - European Central Bank head Jean-Claude Trichet says France's public finances are in very great difficulty.

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Trichet said in an interview on Europe 1 radio that the deficit was becoming a heavy drag on the economy of France. Regarding the squeeze on credit sparked by the U.S subprime crisis, Trichet said the ECB had taken the right decision by pumping tens of billions of euros to facilitate inter-bank lending in global money markets.

He added that there were lessons to be learned from what was happening and that those who had taken unwise risks should be punished. Since coming to power in May, French President Nicolas Sarkozy has caused Mr Trichet to worry over his plans to cut taxes in order to stimulate economic growth.

Eurozone finance ministers committed in April to balance their budgets by 2010, but Sarkozy warned in July that as a result of his plans this goal might not be achieved until 2012.

French finances in trouble

waltky · 09-27-2007, 04:19 AM

Sacre bleu, big layoffs planned in France next year!...

France to cut 22,921 jobs in public sector next year
Sept. 26, 2007 -- The French government Wednesday announced up to 22,921 job cuts in the public sector next year as part of its 2008 budget plan.

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The move is expected to save the government 458 million euros (646 million U.S. dollars), according to the plan. While the education sector alone will eliminate 11,200 posts, there will be major cuts at the defense, economy and finance and interior ministries. Half of the cash saved will be used to improve the income and career prospects of those who remain, according to the plan.

President Nicolas Sarkozy said last week that in order to uphold his campaign promise of sweeping changes to the country's jobs sector, the public sector would be smaller but better paid. Sarkozy said the cuts would remain at an annual rate of 30,000 to 35,000 jobs in the next few years.

France had some 5.2 million state employees in 2005, accounting for almost one fifth of the nation's jobs. The government spent 133 billion euros (187 billion dollars), or 44 percent of the budget, on state employees last year.

Source

bizwiz · 09-27-2007, 08:28 AM

The subprime crisis is very far reaching, but Asia seems to be doing a good job avoiding heavy losses from the crisis. I hope America and the rest of the woreld recovers soon from this.

waltky · 09-27-2007, 05:41 PM

Now Germany gettin' hit...

German subprime fears rising
Wednesday 26th September, 2007 - Subprime fears and rising food prices have sapped the confidence of Germany’s economy.

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The barometer of German household confidence has dropped twice in as many months. An inclination to save has also risen noticeably in economic surveys.

Other factors in the German lack of consumer confidence were debates about the euro's current strength against the dollar and its potential effect on the German economy; soaring oil prices and the likely effects on heating bills; and the chances of an overall economic slump in the United States, a major market for German exporters.

The survey is based on a monthly poll of around 2,000 people, with questions focused on expectations for the month to come concerning the economy, income and disposition to make purchases.

German subprime fears rising

waltky · 11-05-2007, 12:24 AM

They think its bad now, wait till credit card delinquency hits `em...

Chinese consumers increasingly shift to credit card rather than cash payment
November 05, 2007 - China has seen the use of credit cards spread quickly and reshape its people's shopping habits in the last few years, especially in cities, according to the Nielsen Company.

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While cash is still the main form of payment, most credit card holders prefer to use their credit cards for payment as a convenient substitute to carrying piles of banknotes around, according to the Nielsen's China's annual Personal Finance Monitor (PFM) released on Sunday. The report, based on 11, 500 Chinese consumers in 18 cities, highlighted Xiamen, a second-rank city less famous than Beijing and Shanghai, in east China's Fujian Province, as a good example.

The report said four out of 10 Xiamen consumers now own at least one credit card, and half of bankcard holders in Xiamen own at least two or more credit cards. Credit card holders in Xiamen put an average of 50 percent of their monthly income in their credit card account to indulge themselves with cashless shopping, said the Nielsen's PFM report. Consumers aged between 18 and 24 are the most active users of credit cards in the city, the report said.

"Today's Chinese consumers are clearly not interested in saving for a rainy day, a common practice in their parents' generation. They have been adopting Western habits and attitudes in almost every way, including their saving and spending habits," said Bega Ng, Director of Financial Services Research of the Nielsen Companyi n China. "For Chinese consumers in their 20s, spending tomorrow's cash to fund today's needs is a big new trend," Ng said.

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waltky · 11-22-2007, 04:12 PM

Asian markets shaken...

China stocks plummet
November 22 2007: Worries that Beijing will try to rein in economy send Shanghai index lower 4.4%; Tokyo's Nikkei edges higher.

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Most Asian markets fell Thursday, with shares in Hong Kong and Shanghai sliding sharply on concerns that Beijing will take steps to cool China's economy. The region's biggest bourse in Tokyo ended mixed amid persistent worries over the outlook for the U.S. economy, a vital export market for Asia, after Wall Street dropped again overnight.

"There still is a lot of uncertainties in the U.S. economic outlook, as well as on China's macro policies, that could dampen buying interest in the near term," said Peter Lai, a director at DBS Vickers in Hong Kong. In Hong Kong, the Hang Seng index sank 613.27 points, or 2.3 percent, to 26,004.92 after earlier rising as much as 1.4 percent. Leading decliners were port operator China Merchants Holdings and rival Cosco Pacific.

Some investors held back because of the U.S. Thanksgiving holiday Thursday. They were were also discouraged by economic data in the U.S. released Wednesday that showed a drop in consumer sentiment, with the Conference Board's Index of Leading Economic Indicators falling 0.5 percent in October. The Dow Jones industrial average fell 1.62 percent Wednesday to 12,799.94.

Asian markets have been battered in recent weeks. Since reaching record highs in October, benchmark indices in both Hong Kong and Shanghai - two of the world's best-performing markets this year - have fallen 17 percent. In Japan, the Topix index of all the issues of the Tokyo Stock Exchange's First Section, has declined nearly 21 percent from its 2007 high in February.

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Report: China wants strong dollar
November 22 2007: Governor of the People's Bank of China told Treasury Secretary Henry Paulson that China hopes to see the greenback rebound.

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The head of China's central bank says Beijing wants a strong U.S. dollar, a government news agency said Thursday. Zhou Xiaochuan, governor of the People's Bank of China, made the comment to U.S. Treasury Secretary Henry Paulson at a conference in South Africa, the Xinhua News Agency said. "Zhou said he told Paulson China hopes to see a strong dollar," Xinhua reported. It said Zhou was responding to Paulson's prediction of a long-term recovery of the weakening dollar, which fell to another record low against the euro Thursday. Zhou's comments put "weight behind the slumping currency," Xinhua said.

The U.S. dollar has been falling against the euro, yen and other major currencies amid fears for the health of the American economy, stoked by the subprime mortgage crisis. Concerns about the United States' huge trade deficit, which leaves more dollars in the hands of foreigners, also is weighing on the currency. On Thursday, the dollar rebounded slightly against the yen, inching back up to 108.70 yen after touching a 2 1/2-year low of 108.25 yen overnight. But the euro continued to rise to new highs, climbing as high as US$1.4873.

China keeps a large share of its US$1.43 trillion in reserves in dollar-denominated assets such as U.S. Treasuries, which means a falling dollar erodes the value of its holdings. Financial markets are watching to see whether Beijing shifts to a stronger currency such as euros. Zhou said that only when the dollar "devalues drastically can it be called weak, the scenario of which is likely to bring uncertainty to the world economy, to the reluctance of all parties concerned," Xinhua reported. Zhou and Paulson were attending a meeting in South Africa of the G20, which groups together the world's 20 biggest economies.

Source

waltky · 11-25-2007, 09:15 PM

A Sino-American New World Order?

Economist: U.S., China should join hands to reform world financial system
November 25, 2007 - The United States and China should join hands in an effort to reform the world financial system, which has currently entered the most deadly crisis in recent centuries, a renowned U.S. economist said Saturday.

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"The end of the present world monetary-financial system is inevitable, unless the system is replaced by a new world system during a relatively brief, remaining time available," said Lyndon La Rouche at a luncheon at the Forum on U.S.-China Relations and China's Peaceful Reunification. La Rouche, also a famous political activist, said the present international financial crisis could only be brought under control when major countries like the U.S. and China cooperate.

"Whenever a powerful combination of national governments can arrive at a suitable agreement to change a failed financial-monetary system, a solution for any modern financial crisis can be found," he said. He said that the United States should propose to form an initial sponsoring group made up of the governments of the U.S., China, Russia and India, therefore to rally a majority of nations in order to stabilize the world system.

LaRouche lamented that all evidence has confirmed the current crisis, notably the recent collapse of the U.S. dollar' exchange rates against other major currencies, but nothing visible had been done so far by any government to change the world financial system to solve the problem. The forum, jointly organized by several local Chinese-American, gathered nearly 100 government officials, scholars and activists form the U.S. and China, who were expected to discuss issues on U.S.-China relations and their implications on the Taiwan issue during the two-day event.

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waltky · 02-22-2008, 07:12 PM

Is China Losing Its Edge?...

Is China Losing Its Competitive Edge?
Feb. 22, 2008 - Rising Costs Squeeze Chinese Factories; Some Companies Look to Cheaper Markets

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The teddy bears selling for $1.40 in Shanghai's IKEA store may be just about the cheapest in town, but they're not made in China they're stitched and stuffed in Indonesia. The fluffy brown toys reflect a new challenge for China: Its huge economy, which has long offered some of the world's lowest manufacturing costs, is losing its claim on cheapness as factories get squeezed by rising prices for energy, materials and labor.

Those expenses, plus higher taxes and stricter enforcement of labor and environmental standards, are causing some manufacturers to leave for lower-cost markets such as Vietnam, Indonesia and India. Costs have climbed so much that three-quarters of businesses surveyed by the American Chamber of Commerce in Shanghai believe China is losing its competitive edge. The higher costs mean Western consumers are bound to face steeper prices for iPods, TVs, tank tops and many other imported products made by small Chinese subcontractors.

"Americans continue to want to buy at lower prices," said Kevin Burke, president and CEO of the American Apparel and Footwear Association. "They are used to going to the store during Christmas and getting something cheaper than a year ago." That's no longer a sure thing. For instance, American toy makers, who rely heavily on Chinese factories, expect prices to increase 5 to 10 percent for the 2008 holiday season, largely because of rising manufacturing costs.

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waltky · 07-16-2008, 01:07 AM

Following The Herd In China...

Chinese stock bubble hits investors
Jul 21, 2008 Issue - Beijing's meddling and immature investors make for a dangerous mix in equity markets.

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For all its communist trappings, China is one of the few countries in the world where the public obsession with the stock market routinely spills out onto the streets. Every weekend, the sidewalks of Guangdong Road, near Shanghai's People's Square, are thronged with hundreds of investors who come to exchange tips and opinions on the market. Some talk conspiratorially in small groups, while others express their views loudly and animatedly, attracting crowds of onlookers. Many participants are retired or laid off, others are menial workers, but some regulars here have sizeable investments. "I've put tens of thousands of dollars of my family's savings into the market," says a middle-aged man in a scruffy T shirt and trousers.

The mood on Guangdong Road has been glum lately, as it has in New York, London, São Paulo, Istanbul and pretty much every other world market. But the Chinese downturn is unique in terms of its sheer size and scope. Since late last year, the Shanghai composite index has plunged by more than 50 percent, from a high of more than 6,000 points—making the Chinese domestic exchanges the second largest in the world by market capitalization—to a low of just over 2,800 in June (by contrast, the New York Stock Exchange has fallen just under 20 percent over the past year). Now, many retail investors (which account for 60 percent of the market) have bailed; the rest are chewing their fingernails.

How China handles the fallout from this megabubble could have consequences which reach far beyond its retail investment community. Most of the people buying these shares are the middle class and wealthier consumers that China—and the rest of the world—was counting on to boost domestic consumption and rebalance the world economy. Now, with some households seeing as much as 50 percent of their wealth destroyed via market losses, and retail prices rising, there are early signs that they're being more cautious about spending. Meanwhile, market turbulence continues to be stoked by the fact that investors can't really get a clear grip on corporate fundamentals, in large part because the level of government control and meddling in the market makes true transparency impossible. This opacity—and the fact that many investors have always believed that Beijing will simply buoy the market by fiat at some point—makes the Chinese situation particularly volatile, even by emerging market standards.

More Chinese Stock Bubble Hits Retail Investors Hard | Newsweek International Edition | Newsweek.com

waltky · 08-17-2008, 07:40 PM

Is the yuan gonna be our new currency?...

Banks will need to consider restructuring
Sunday 17th August, 2008 - The ongoing credit crisis has caused major losses for some of the world’s biggest banks.

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The unprecedented losses have caused questions about whether the large financial organisations should be broken up in order to survive.

Major global banks have taken more than US$300 billion in asset write-downs, and organisations like the International Monetary Fund believe that amount could reach $1 trillion. There have recently been comments from economists that the universal bank models no longer work.

While the creators of global banks like Citigroup, JPMorgan Chase & Co., and HSBC Holdings had promised customers and shareholders that a diverse set of businesses would shield them from economic volatility, this hasn’t happened.

Banks will need to consider restructuring

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Chinese banks eye American soil
August 15, 2008: ICBC - the largest lender in China - is the latest to win approval to do wholesale banking stateside. Others may follow.

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The American banking system has become a melting pot in recent years as financial institutions from all over the world have set up shop in the United States. Now more Chinese banks, bolstered by a booming economy and recently forged alliances with big Western players, are eyeing a stateside presence. Earlier this month, the Federal Reserve gave the go-ahead to Industrial and Commercial Bank of China, China's largest lender, to open a wholesale banking operation in New York - a sign that some experts say could herald a wave of other Chinese banks entering the United States.

"This is an acknowledgement that they are on the way," said Henry Fields, a partner at the law firm Morrison & Foerster whose practice has centered around assisting foreign banks looking to establish operations in the United States. China's ICBC is hardly the first foreign financial institution to put down roots in the United States. This year alone, a number of banks from such far-flung countries as Azerbaijan and India were approved by the Fed to establish representative branches here in the United States.

ICBC is the second Chinese bank to set up shop in the United States over the past year. China Merchants Bank won similar approval from the Fed in November. Currently, only a handful of Chinese banks are chartered domestically. Under the Fed authorization, ICBC will be able to finance trade and support the increasing number of its clients doing business in the United States.

ICBC will not be able to take in FDIC-insured deposits, but the start of a commercial branch is often considered to be the first step for a foreign bank looking to expand into the United States. "Foreign banks have traditionally come through wholesale branches and then the banks usually expand into retail banking if there is a strategic reason to do so," said Fields.

Holding them back

waltky · 09-26-2008, 12:48 AM

Uh-oh, we in deep doo-doo now...

China banks told to halt lending to US banks-SCMP
Wed Sep 24, 2008 - Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.

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The Hong Kong newspaper cited unidentified industry sources as saying the instruction from the China Banking Regulatory Commission (CBRC) applied to interbank lending of all currencies to U.S. banks but not to banks from other countries.

"The decree appears to be Beijing's first attempt to erect defences against the deepening U.S. financial meltdown after the mainland's major lenders reported billions of U.S. dollars in exposure to the credit crisis," the SCMP said.

A spokesman for the CBRC had no immediate comment.

China banks told to halt lending to US banks-SCMP | Reuters

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Jack Welch says U.S. faces "deep downturn"
Wed Sep 24, 2008 - Former General Electric Co. Chairman and Chief Executive Officer Jack Welch said the U.S. economy faces a deep downturn in coming quarters, and he supports a proposed $700 billion government rescue package for the financial sector.

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"I now believe we are in for one hell of a deep downturn," Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 will likely be "brutal." Until recently, Welch said, he had believed the U.S. economy could avoid recession, but he has changed his mind.

"I am now caving," he said. "Get ready for real tough times. They're coming. There is no credit available." Welch said mortgage lenders, legislators, investment bankers and others are all to blame for the crisis, which stemmed from easy credit and investors' appetite for yield.

"The problem was money didn't cost anything," Welch said. "People took swings." He likened the crisis to Agatha Christie's "Murder on the Orient Express," in which all the suspects turn out to be guilty; but he singled out the role of investment banks in the crisis.

More Jack Welch says U.S. faces deep downturn | Reuters

waltky · 09-28-2008, 11:59 PM

China not happy with the way we runnin' things...

China bank regulator condemns US money practices
Saturday 27th September, 2008 : China's top bank regulator has condemned the United States' role in the global credit crisis and urged international cooperation on regulatory systems.

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The chairman of China's banking regulatory commission says that it was ridiculous that American regulators had allowed zero down payments on mortgages.

This weekend, US Congressional leaders are continuing talks in an effort to agree on a multi-billion dollar rescue plan for US financial system.

China bank regulator condemns US money practices

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Buffett warns Congress
September 28, 2008: Lawmakers face "biggest financial meltdown in American history" if they don't act.

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Legendary investor Warren Buffett warned Congressional leaders Saturday night of "the biggest financial meltdown in American history" if they did not act to secure the financial system. Buffett, by telephone, was consulted by lawmakers who were in marathon talks on Capitol Hill to forge a deal on the administration's $700 billion economic bailout plan, according to two sources. One lawmaker in the negotiations said that the participants called Warren Buffett to get his help in gauging potential market reaction.

Congressional leaders said shortly after midnight Saturday that they had reached a tentative deal. Members of both parties and Treasury Secretary Henry Paulson were aiming to craft final legislation by Sunday evening -- in time for the start of financial markets around the world. Assuring markets, especially credit markets that lend to businesses and consumers as well as between banks, is seen as a vital part of getting a deal done quickly.

The marathon negotiations on Saturday culminated several chaotic - and at times politically divisive - days on Capitol Hill as lawmakers and administration officials tried to quickly find common ground on a complicated proposal. Earlier in the week, Buffett also warned that the financial crisis is "everybody's problem," not just Wall Street's. The potential collapse of financial institutions would cause industry to grind to a halt, he told CNBC Wednesday, and could have "gummed up the economy."

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waltky · 10-01-2008, 03:43 AM

Asians gettin' nervous...

Asia Urges U.S. to Act as Shares Plunge
September 30, 2008 - Asia urges quick action on bailout for U.S. financial crisis to stem fallout.

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Asia was shaken Tuesday by the collapse of the U.S. financial bailout effort, with the region's political leaders expressing hopes for a quick solution and Japan's central bank injecting more cash into money markets to promote liquidity and lending. "This is a bad development," Australian Prime Minister Kevin Rudd said of the U.S. House of Representatives' rejection Monday of a $700 billion plan to rescue ailing financial companies burdened with piles of bad mortgage-related debts.

"The outcome has caused a major impact not only the U.S. economy but also the world economy," said Japan's Economy and Fiscal Policy Minister Kaoru Yosano, urging Washington to renegotiate a workable package. The bailout plan, defeated by a vote of 228-205, is aimed at preventing a possible collapse in the U.S. financial system, which would have dramatic repercussions for Asia and the entire global economy. While few Asian financial companies have been hurt badly by the credit crisis, the fallout could spread, and a recession in the U.S. would batter Asia's export-oriented economies.

Jitters about the crisis were evident last week in Hong Kong when hundreds of customers descended on branches of Bank of East Asia to withdraw money amid rumors spread by cell phone text messages that questioned the bank's stability. The bank and authorities called the rumors baseless, and the bank run subsided after a day or two. The Bank of Japan pumped another 3 trillion yen ($28.7 billion) into money markets Tuesday as part of the coordinated effort of the world's central banks to boost liquidity and lending. Since the collapse of U.S. brokerage Lehman Brothers earlier this month, Japan's central bank has injected 21 trillion yen ($200 billion) into markets.

More ABC News: Asia Urges U.S. to Act as Shares Plunge

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Financial Crisis Hits World Markets
Sept. 30, 2008 - World Markets Rebound Day After Bailout Bust

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The financial crisis has left Wall Street reeling, and begging, for a handout. The implications of the House rejection of the proposed $700 billion bailout plan have been felt well beyond the bustling streets of New York's financial district. Across Europe, the U.K.'s FTSE 100 fell 5.3 percent, Germany's DAX index was down 4.2 percent and France's CAC-40 saw a 5 percent fall Monday as trading mercifully ended.

Asian markets have not been spared either. Japan's Nikkei fell 4.12 percent despite the Bank of Japan seeking to increase liquidity and lending by injecting 3 trillion yen into money markets. Hong Kong's Hang Seng index also fell 5.6 percent before ending the day with a gain. The Chinese markets are closed this week because of a national holiday. On Monday, Washington voted on what many hoped would offer a silver bullet fix or at least some progress to alleviate the problem. But help from the Beltway did not come as the U.S. House of Representatives rejected the proposed $700 billion bailout plan by a vote of 228-205.

European markets have rebounded today, along with U.S. stocks. U.K.'s FTSE 100 followed its early morning gains as it rose more than 117 points at one point during the day, France's CAC was up nearly 85 points and Germany's DAX had gained more than 23 points before closing. Michael Hunter of the Financial Times told ABC News the stabilizing of European markets is a result of a simple deduction by investors. "We've hit the bottom. The only way to go is up." Hunter said there is of course no way of knowing if that is the case.

More ABC News: Financial Crisis Hits World Markets