Jan. 31 (Bloomberg) -- President Barack Obama said his administration is readying a plan to unlock credit markets and lower mortgage rates, and vowed that company executives will be stopped from siphoning money intended for economic recovery.
“Soon my Treasury secretary, Timothy Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” Obama said today in his weekly radio address. He didn’t provide specifics.
“We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs,” Obama said. “We’ll ensure that CEOs are not draining funds that should be advancing our recovery.”
Obama expressed outrage earlier this week after the New York state comptroller reported that Wall Street firms disbursed $18.4 billion in bonuses last year as the U.S. sank into a recession. While the figure represents a 44 percent decline from the previous year amid record losses in the securities industry, the bonus pool was the sixth-largest ever, the comptroller said in a yearly report.
Geithner will “have something to say about” bonuses as early as next week, Obama’s senior adviser David Axelrod said in an interview yesterday on Bloomberg Television’s “Political Capital with Al Hunt.”
Compensation Limits
Axelrod didn’t embrace a ban on bonuses for companies receiving bailout funds. He said the administration will take steps toward “limiting some of this executive compensation” as part of rallying public support for financial-rescue efforts.
“It’s very hard for the American people to understand how a bank executive should get a multimillion dollar bonus at a time when he’s asking the government to essentially bail out his institution,” Axelrod said.
Senator Claire McCaskill, a Missouri Democrat, yesterday introduced legislation to restrict compensation at companies receiving bail-out money to $400,000, the equivalent of the U.S. president’s salary.
“We have a bunch of idiots on Wall Street that are kicking sand in the face of the American taxpayer” by taking multimillion-dollar bonuses, McCaskill said.
Axelrod said the administration is crafting a plan that will “set up new rules of the road” for spending the remaining $350 billion of the financial-rescue package, known as the Troubled Asset Relief Program, approved under the Bush administration.
‘Strong’ Banks
The administration is committed to “a strong, private financial sector” in the bailout, he said when asked whether there are discussions to partially nationalize U.S. banks.
“Obviously, we’re trying to help these institutions on a temporary basis, but that’s our goal,” Axelrod said. “We’re going to provide assistance to these institutions and hope that they -- hope and expect that they’ll -- get back on their feet and that credit will flow.”
Axelrod defended Geithner, who sparked controversy during his confirmation hearings last week by saying Obama believes China is “manipulating its currency.”
“What Tim said was akin to what the president said during the campaign, these are issues that we have to work through,” Axelrod said. “We weren’t blazing new ground there.”
Obama spoke with President Hu Jintao of China this week following Geithner’s testimony. Axelrod wouldn’t say whether Obama reassured the Chinese leader on this issue.
Hurdle Cleared
Obama’s economic recovery plan cleared a hurdle this week with House passage of an $819 billion stimulus measure, which now goes to the Senate for approval.
Even though Obama took the unusual step of traveling to Capitol Hill to ask for support from Republican lawmakers, not a single House Republican voted for the bill.
Obama in his radio address today, said an economic recovery will “take years, not months,” and urged the Senate to pass the $819 billion fiscal stimulus package that cleared the House on Jan. 28.
Senate Republicans say they will push for revisions to the legislation.
“Democratic lawmakers in the House of Representatives produced a massive bill that many analysts say is unlikely to create new jobs or boost the economy anytime soon,” Senate Republican Leader Mitch McConnell of Kentucky said in his party’s weekly radio address today.
‘Wasteful Spending’
“Most of the infrastructure projects it includes won’t impact the economy for at least another year,” McConnell said. “Permanent spending would be expanded by about $240 billion, an increase that would lock in bigger and bigger deficits every year. And the bill is loaded with wasteful spending.”
Senate Democrats also have backed changes to the House bill. The Senate Finance Committee voted this week to add a $70 billion alternative-minimum tax cut to the package.
Obama cautioned that “no one bill, no matter how comprehensive, can cure what ails our economy.” Restoring credit markets must coincide with the stimulus package, he said.
“So just as we jumpstart job creation, we must also ensure that markets are stable, credit is flowing, and families can stay in their homes,” he said.
The economy shrank at a 3.8 percent annual pace in the fourth quarter, the most since 1982, as consumers and companies cut spending, a government report showed yesterday.
Companies from Starbucks Corp. to Eastman Kodak Co. have announced job cuts this month. The Dow Jones Industrial Average dropped 76.70 points this week to 8,000.86, driving its monthly loss to 8.8 percent.
Saturday, January 31, 2009
U.S. Economy May Keep Sliding After Shrinking Most
Jan. 31 (Bloomberg) -- The U.S. economy is likely to keep deteriorating in early 2009 after shrinking last quarter by the most since 1982, as consumers and businesses retrench.
The 3.8 percent annual pace of contraction in the fourth quarter was less than forecast, with a buildup of unsold goods cushioning the blow. Excluding inventories, the decline was 5.1 percent, the Commerce Department said yesterday in Washington.
Job cuts announced this month by companies from Starbucks Corp. and Pep Boys - Manny, Moe & Jack to Eastman Kodak Co. mean there’ll be little respite in the first half of this year, economists said. The Obama administration used the figures to reinforce its call for Congress to pass a stimulus package in excess of $800 billion to arrest the economy’s decline.
“The recession is going to last through most of 2009, and we’ll be lucky to have growth back at zero by the end of the year,” Kenneth Rogoff, a Harvard University economics professor, said in a Bloomberg Television interview from Davos, Switzerland, yesterday. Economic growth “will be pretty tepid for a long time.”
U.S. stocks fell yesterday, capping the market’s worst January, as more companies reported disappointing earnings. The Standard & Poor’s 500 Stock Index decreased 2.3 percent to close at 825.88. Treasuries advanced, sending benchmark 10-year note yields to 2.84 percent from 2.86 percent late on Jan. 29.
“This is a continuing disaster for America’s working families,” Obama said at the White House yesterday. “They need us to pass the American Recovery and Investment Plan,” designed to save more than 3 million jobs, he said. House lawmakers passed the stimulus Jan. 28, moving action to the Senate next week.
Spending Slump
Yesterday’s report underscored the hit to households from the biggest wealth destruction on record. Consumer spending, which accounts for about 70 percent of the economy, dropped 3.5 percent following a 3.8 percent fall the previous three months. It’s the first time decreases exceeded 3 percent back-to-back since records began in 1947.
The Institute for Supply Management-Chicago said yesterday its business barometer decreased to 33.3 from 35.1 the prior month. The index has remained below 50, the dividing line for contraction, for four months. Meanwhile, consumer confidence rose less than forecast this month, a Reuters/University of Michigan index showed. The gauge climbed to 61.2 from 60.1 in December.
A separate report showed that employment costs in the U.S. rose at the slowest pace in almost a decade in the fourth quarter as companies limited wage gains and benefits. The Labor Department’s employment-cost index rose 0.5 percent.
GDP was forecast to contract at a 5.5 percent annual pace last quarter, according to the median estimate of 79 economists surveyed by Bloomberg News.
Without Stimulus
“Without the stimulus plan, the economy would be flat to declining in the second half of the year,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Federal Reserve Governor. With the recovery package, the unemployment rate may peak at 8 percent instead of 9.5 percent or higher, he added.
The world’s largest economy shrank at a 0.5 percent annual rate from July through September. The back-to-back contraction is the first since 1991.
Economists at Morgan Stanley and Deutsche Bank Securities Inc. in New York lowered their forecasts for growth in the first three months of 2009 following the report. They both now estimate the economy’s worst drop will occur this quarter.
For all of 2008, the economy expanded 1.3 percent as a boost from exports and government tax rebates in the first half of the year helped offset the deepening spending slump.
Prices Cool
The GDP price gauge dropped at a 0.1 percent annual pace in the fourth quarter, the most since 1954, reflecting the slump in commodity prices. The Fed’s preferred measure, linked to consumer spending and excluding food and fuel, rose at a 0.6 percent pace, the least since 1962.
Unadjusted for inflation, GDP shrank at a 4.1 percent pace, the most since the first three months of 1958. The drop in so- called nominal growth explains why corporate profits slumped as the year ended.
“This is a severe, steep, broadly based recession” with “no quick fix,” Stephen Roach, chairman of Morgan Stanley Asia Ltd., said in a Bloomberg Television interview from Davos, Switzerland yesterday.
Americans may pull back further as employers slash payrolls. Companies cut 524,000 workers in December, bringing total job cuts for last year to almost 2.6 million. The unemployment rate last month was 7.2 percent, up from 4.9 percent a year before.
Job Cuts
More cutbacks are on the way. Kodak, Target Corp. and Texas Instruments Inc. are among U.S. companies that announced thousands of layoffs this week.
Target, the second-biggest U.S. discount retailer, said this week it will slash 600 existing jobs and 400 open positions, mainly in its hometown of Minneapolis. It also said it will close a distribution center in Little Rock, Arkansas, later this year that employs 500 workers.
“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions,” Chief Executive Officer Gregg Steinhafel said in a Jan. 27 statement.
The economic slump intensified last quarter as companies also retrenched. Business investment dropped at a 19 percent pace, the most since 1975. Purchases of equipment and software dropped at a 28 percent pace, the most in a half century.
Housing Slump
The slump in home construction also accelerated, contracting at a 24 percent pace last quarter after a 16 percent drop in the previous three months.
PPG Industries Inc., the world’s second-biggest paint maker, said this week that it may cut as many as 4,500 employees, or 10 percent of its workforce, because of weak global demand from automakers and homebuilders.
“We are probably looking at the sharpest downturn that anyone working at our company has seen,” Chief Executive Officer Charles E. Bunch said in an interview Jan. 27. “The regions outside of North America, which had been really helping PPG in the first three quarters of last year, have sort of caught the disease that started here in the U.S. with the credit crisis.”
The slowdown in global demand indicates American exports are unlikely to contribute to growth in early 2009. World growth will be 0.5 percent this year, the weakest postwar pace, the International Monetary Fund said Jan. 28.
Inventories grew at a $6.2 billion pace in the fourth quarter, the first gain in more than a year. Its contribution to growth was the biggest since the fourth quarter of 2005.
The Fed this week said it’s prepared to purchase Treasury securities to shore up lending and warned inflation may recede too rapidly. Fed policy makers voted to leave the benchmark interest rate as low as zero.
The GDP report is the first for the quarter and will be revised in February and March as more information becomes available.
The 3.8 percent annual pace of contraction in the fourth quarter was less than forecast, with a buildup of unsold goods cushioning the blow. Excluding inventories, the decline was 5.1 percent, the Commerce Department said yesterday in Washington.
Job cuts announced this month by companies from Starbucks Corp. and Pep Boys - Manny, Moe & Jack to Eastman Kodak Co. mean there’ll be little respite in the first half of this year, economists said. The Obama administration used the figures to reinforce its call for Congress to pass a stimulus package in excess of $800 billion to arrest the economy’s decline.
“The recession is going to last through most of 2009, and we’ll be lucky to have growth back at zero by the end of the year,” Kenneth Rogoff, a Harvard University economics professor, said in a Bloomberg Television interview from Davos, Switzerland, yesterday. Economic growth “will be pretty tepid for a long time.”
U.S. stocks fell yesterday, capping the market’s worst January, as more companies reported disappointing earnings. The Standard & Poor’s 500 Stock Index decreased 2.3 percent to close at 825.88. Treasuries advanced, sending benchmark 10-year note yields to 2.84 percent from 2.86 percent late on Jan. 29.
“This is a continuing disaster for America’s working families,” Obama said at the White House yesterday. “They need us to pass the American Recovery and Investment Plan,” designed to save more than 3 million jobs, he said. House lawmakers passed the stimulus Jan. 28, moving action to the Senate next week.
Spending Slump
Yesterday’s report underscored the hit to households from the biggest wealth destruction on record. Consumer spending, which accounts for about 70 percent of the economy, dropped 3.5 percent following a 3.8 percent fall the previous three months. It’s the first time decreases exceeded 3 percent back-to-back since records began in 1947.
The Institute for Supply Management-Chicago said yesterday its business barometer decreased to 33.3 from 35.1 the prior month. The index has remained below 50, the dividing line for contraction, for four months. Meanwhile, consumer confidence rose less than forecast this month, a Reuters/University of Michigan index showed. The gauge climbed to 61.2 from 60.1 in December.
A separate report showed that employment costs in the U.S. rose at the slowest pace in almost a decade in the fourth quarter as companies limited wage gains and benefits. The Labor Department’s employment-cost index rose 0.5 percent.
GDP was forecast to contract at a 5.5 percent annual pace last quarter, according to the median estimate of 79 economists surveyed by Bloomberg News.
Without Stimulus
“Without the stimulus plan, the economy would be flat to declining in the second half of the year,” said Laurence Meyer, vice chairman of Macroeconomic Advisers LLC in Washington and a former Federal Reserve Governor. With the recovery package, the unemployment rate may peak at 8 percent instead of 9.5 percent or higher, he added.
The world’s largest economy shrank at a 0.5 percent annual rate from July through September. The back-to-back contraction is the first since 1991.
Economists at Morgan Stanley and Deutsche Bank Securities Inc. in New York lowered their forecasts for growth in the first three months of 2009 following the report. They both now estimate the economy’s worst drop will occur this quarter.
For all of 2008, the economy expanded 1.3 percent as a boost from exports and government tax rebates in the first half of the year helped offset the deepening spending slump.
Prices Cool
The GDP price gauge dropped at a 0.1 percent annual pace in the fourth quarter, the most since 1954, reflecting the slump in commodity prices. The Fed’s preferred measure, linked to consumer spending and excluding food and fuel, rose at a 0.6 percent pace, the least since 1962.
Unadjusted for inflation, GDP shrank at a 4.1 percent pace, the most since the first three months of 1958. The drop in so- called nominal growth explains why corporate profits slumped as the year ended.
“This is a severe, steep, broadly based recession” with “no quick fix,” Stephen Roach, chairman of Morgan Stanley Asia Ltd., said in a Bloomberg Television interview from Davos, Switzerland yesterday.
Americans may pull back further as employers slash payrolls. Companies cut 524,000 workers in December, bringing total job cuts for last year to almost 2.6 million. The unemployment rate last month was 7.2 percent, up from 4.9 percent a year before.
Job Cuts
More cutbacks are on the way. Kodak, Target Corp. and Texas Instruments Inc. are among U.S. companies that announced thousands of layoffs this week.
Target, the second-biggest U.S. discount retailer, said this week it will slash 600 existing jobs and 400 open positions, mainly in its hometown of Minneapolis. It also said it will close a distribution center in Little Rock, Arkansas, later this year that employs 500 workers.
“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions,” Chief Executive Officer Gregg Steinhafel said in a Jan. 27 statement.
The economic slump intensified last quarter as companies also retrenched. Business investment dropped at a 19 percent pace, the most since 1975. Purchases of equipment and software dropped at a 28 percent pace, the most in a half century.
Housing Slump
The slump in home construction also accelerated, contracting at a 24 percent pace last quarter after a 16 percent drop in the previous three months.
PPG Industries Inc., the world’s second-biggest paint maker, said this week that it may cut as many as 4,500 employees, or 10 percent of its workforce, because of weak global demand from automakers and homebuilders.
“We are probably looking at the sharpest downturn that anyone working at our company has seen,” Chief Executive Officer Charles E. Bunch said in an interview Jan. 27. “The regions outside of North America, which had been really helping PPG in the first three quarters of last year, have sort of caught the disease that started here in the U.S. with the credit crisis.”
The slowdown in global demand indicates American exports are unlikely to contribute to growth in early 2009. World growth will be 0.5 percent this year, the weakest postwar pace, the International Monetary Fund said Jan. 28.
Inventories grew at a $6.2 billion pace in the fourth quarter, the first gain in more than a year. Its contribution to growth was the biggest since the fourth quarter of 2005.
The Fed this week said it’s prepared to purchase Treasury securities to shore up lending and warned inflation may recede too rapidly. Fed policy makers voted to leave the benchmark interest rate as low as zero.
The GDP report is the first for the quarter and will be revised in February and March as more information becomes available.
Mahindra Profit Unexpectedly Tumbles 99% on Currency
Jan. 31 (Bloomberg) -- Mahindra & Mahindra Ltd., India’s largest maker of sport-utility vehicles and tractors, said third- quarter profit tumbled a more-than-expected 99 percent as currency losses mounted and sales fell.
Net income in the three months ended Dec. 31 dropped to 12 million rupees ($245,000) from 4.05 billion rupees a year earlier, the Mumbai-based company said in a statement. That is Mahindra’s smallest quarterly profit since at least since 2003 and the fourth straight decline, according to Bloomberg data. The median estimate in a Bloomberg News survey of nine analysts was for a profit of 1.09 billion rupees.
Mahindra incurred a currency loss of 1.2 billion rupees as the rupee dropped for a fourth straight quarter, completing the steepest slide in 17 years. Its utility-vehicle sales fell 26 percent in the quarter as banks tightened credit and rising job insecurity hurt sales in Asia’s fourth-largest automotive market. The Indian partner of Renault SA shut most of its plants for three to six days in December due to weaker demand.
“People are either postponing or canceling vehicle purchases as the slowdown has affected sentiment,” said Anup Maheshwari, an analyst at Mumbai-based K.R. Choksey Shares & Securities Pvt., who recommends investors “sell” Mahindra. “If you are unsure about future earnings, you are in a saving mode.”
India’s rupee fell 3.5 percent in the three months through December, taking its decline in 2008 to 19 percent. That was the currency’s worst performance since a balance of payments crisis in 1991 forced the South Asian nation to pawn its gold to pay for imports. The rupee was the second-worst performer last year among the 10 most-active Asian currencies outside Japan.
‘Recessionary Conditions’
The foreign-exchange loss was due to “cancellation of forward covers entered into by the company to hedge certain anticipated exports,” Mahindra said. Exports slumped 54 percent last quarter due to “recessionary conditions globally,” it said.
The last quarter was extremely challenging for both automobile and tractor industries, the company said in the statement. The “paucity of retail finance, its high cost and lukewarm consumer sentiment in the wake of the global financial turbulence saw volumes decline.”
Tata Motors Ltd., the Indian truck maker that owns Jaguar and Land Rover, yesterday reported its first quarterly loss in seven years as currency fluctuations aggravated the impact of falling sales in the last quarter.
Inflation, Rates
India’s central bank said Jan. 27 the nation’s economy may grow 7 percent in the year to March 31, lowering its earlier forecast of between 7.5 percent and 8 percent.
To revive growth, the Reserve Bank of India has reversed four years of monetary tightening and the government announced economic stimulus plans. On Jan. 28, India cut retail fuel prices for the second time in less than two months. The central bank cut its policy rates this month for a fourth time since October to record lows.
Mahindra rose 2.7 percent to 302.25 rupees in Mumbai trading yesterday. The stock has gained 10.1 percent this year.
Cheaper crude oil, slower inflation and the Indian central bank’s measures to make money cheaper and more easily available in the financial system may reduce Mahindra’s costs in the coming months, the company said.
India’s inflation rate halved from a 16-year high touched in August. It was at 5.64 percent in the week ended Jan. 17, near an 11-month low. Crude oil has declined more than 70 percent from a record high of $147.27 per barrel reached in July.
Net income in the three months ended Dec. 31 dropped to 12 million rupees ($245,000) from 4.05 billion rupees a year earlier, the Mumbai-based company said in a statement. That is Mahindra’s smallest quarterly profit since at least since 2003 and the fourth straight decline, according to Bloomberg data. The median estimate in a Bloomberg News survey of nine analysts was for a profit of 1.09 billion rupees.
Mahindra incurred a currency loss of 1.2 billion rupees as the rupee dropped for a fourth straight quarter, completing the steepest slide in 17 years. Its utility-vehicle sales fell 26 percent in the quarter as banks tightened credit and rising job insecurity hurt sales in Asia’s fourth-largest automotive market. The Indian partner of Renault SA shut most of its plants for three to six days in December due to weaker demand.
“People are either postponing or canceling vehicle purchases as the slowdown has affected sentiment,” said Anup Maheshwari, an analyst at Mumbai-based K.R. Choksey Shares & Securities Pvt., who recommends investors “sell” Mahindra. “If you are unsure about future earnings, you are in a saving mode.”
India’s rupee fell 3.5 percent in the three months through December, taking its decline in 2008 to 19 percent. That was the currency’s worst performance since a balance of payments crisis in 1991 forced the South Asian nation to pawn its gold to pay for imports. The rupee was the second-worst performer last year among the 10 most-active Asian currencies outside Japan.
‘Recessionary Conditions’
The foreign-exchange loss was due to “cancellation of forward covers entered into by the company to hedge certain anticipated exports,” Mahindra said. Exports slumped 54 percent last quarter due to “recessionary conditions globally,” it said.
The last quarter was extremely challenging for both automobile and tractor industries, the company said in the statement. The “paucity of retail finance, its high cost and lukewarm consumer sentiment in the wake of the global financial turbulence saw volumes decline.”
Tata Motors Ltd., the Indian truck maker that owns Jaguar and Land Rover, yesterday reported its first quarterly loss in seven years as currency fluctuations aggravated the impact of falling sales in the last quarter.
Inflation, Rates
India’s central bank said Jan. 27 the nation’s economy may grow 7 percent in the year to March 31, lowering its earlier forecast of between 7.5 percent and 8 percent.
To revive growth, the Reserve Bank of India has reversed four years of monetary tightening and the government announced economic stimulus plans. On Jan. 28, India cut retail fuel prices for the second time in less than two months. The central bank cut its policy rates this month for a fourth time since October to record lows.
Mahindra rose 2.7 percent to 302.25 rupees in Mumbai trading yesterday. The stock has gained 10.1 percent this year.
Cheaper crude oil, slower inflation and the Indian central bank’s measures to make money cheaper and more easily available in the financial system may reduce Mahindra’s costs in the coming months, the company said.
India’s inflation rate halved from a 16-year high touched in August. It was at 5.64 percent in the week ended Jan. 17, near an 11-month low. Crude oil has declined more than 70 percent from a record high of $147.27 per barrel reached in July.
Friday, January 30, 2009
More News • Vekselberg Says Rusal May Sell Shares to Refinance $16.3 Billion of Debt • Budget Revenue May Decline by 40% This Year, Russian Financ
Jan. 30 (Bloomberg) -- Russia’s central bank raised two key interest rates for the third time since the start of November in a bid to curb inflation and to stabilize the exchange rate of the ruble.
The interest rate for one-day and seven-day loans from the bank in repurchase auctions will climb to 11 percent from 10 percent on Feb. 2, Bank Rossii said in an e-mailed statement today.
The ruble slid as much as 2.2 percent today to 35.8502 per dollar, just 0.4 percent away from breaking through Russia’s 36 per dollar limit, before paring declines. Chairman Sergey Ignatiev said today that Bank Rossii will intervene in the market, limit the amount of refinancing offered to banks and adjust interest rates to keep the ruble from breaking the new trading band.
Bank Rossii expanded its trading range for the ruble 20 times since mid-November before policy makers switched last week to let “market” forces help determine the exchange rate within a widened limit. The central bank drained more than a third of its foreign-currency reserves, the world’s third-largest, since August to stem the ruble’s 34 percent slide against the dollar.
Investors are betting against the ruble as a 69 percent slump in oil prices in the past six months weakens the economy, triggering Russia’s worst financial crisis since 1998. Some $290 billion left the country since August, according to BNP Paribas SA.
Finance Minister Alexei Kudrin said today that inflation may run at about 13 percent this year. Russia’s budget revenue may tumble by 4.4 trillion rubles ($124.6 billion), or 40 percent, as the slump in oil prices reduces tax revenue for the world’s largest energy exporter, Kudrin said.
As the U.S. Federal Reserve, European Central Bank and the Bank of England bring their interest rates closer to zero in a bid to pull their economies out of recession, Russia’s central bank is raising rates to dissuade banks from converting rubles into foreign currency.
The interest rate for one-day and seven-day loans from the bank in repurchase auctions will climb to 11 percent from 10 percent on Feb. 2, Bank Rossii said in an e-mailed statement today.
The ruble slid as much as 2.2 percent today to 35.8502 per dollar, just 0.4 percent away from breaking through Russia’s 36 per dollar limit, before paring declines. Chairman Sergey Ignatiev said today that Bank Rossii will intervene in the market, limit the amount of refinancing offered to banks and adjust interest rates to keep the ruble from breaking the new trading band.
Bank Rossii expanded its trading range for the ruble 20 times since mid-November before policy makers switched last week to let “market” forces help determine the exchange rate within a widened limit. The central bank drained more than a third of its foreign-currency reserves, the world’s third-largest, since August to stem the ruble’s 34 percent slide against the dollar.
Investors are betting against the ruble as a 69 percent slump in oil prices in the past six months weakens the economy, triggering Russia’s worst financial crisis since 1998. Some $290 billion left the country since August, according to BNP Paribas SA.
Finance Minister Alexei Kudrin said today that inflation may run at about 13 percent this year. Russia’s budget revenue may tumble by 4.4 trillion rubles ($124.6 billion), or 40 percent, as the slump in oil prices reduces tax revenue for the world’s largest energy exporter, Kudrin said.
As the U.S. Federal Reserve, European Central Bank and the Bank of England bring their interest rates closer to zero in a bid to pull their economies out of recession, Russia’s central bank is raising rates to dissuade banks from converting rubles into foreign currency.
Asian Stocks Snap 3-Week Losing Streak on Financial Policies
Jan. 30 (Bloomberg) -- Asian stocks climbed for the first week in four, led by banks, as the U.S. and Japan stepped up efforts to revive credit markets and economic growth.
Sumitomo Mitsui Financial Group Inc., Japan’s second- largest bank by market value, jumped 14 percent after the government proposed equity financing for companies short of funding. KB Financial Group Inc. rallied 16 percent in Seoul as the U.S. moved closer to creating a bank to absorb toxic assets. Samsung Electronics Co., the world’s biggest computer-memory maker, gained 10 percent after the bankruptcy of a rival lifted confidence a chip supply glut will ease.
“Thanks to once-in-a-century measures from governments worldwide, the global economy will likely be better next year than this year,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $96 billion. “The market is starting to reflect that possible recovery.”
The MSCI Asia Pacific Index rose 3.5 percent this week to 82.12, climbing from a seven-week low. The gauge lost 7.1 percent in January, trailing only 2008 as the worst start to a new year in its two-decade history.
Japan’s Nikkei 225 Stock Average rose 3.2 percent. Most of the region’s markets were closed for part of the week for Lunar New Year. China’s markets will reopen on Feb. 2.
MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid slumping profits. Earnings estimates for companies included in the gauge dropped 43 percent in the past year, bringing them to the lowest level since Bloomberg began compiling the data in 2005.
Financials Rally
An index of financial companies on MSCI Asia Pacific rose 5.9 percent, the second-largest advance of 10 industry groups, amid speculation policy measures will help ease a crisis that has caused more than $1 trillion of losses at financial institutions worldwide.
Sumitomo Mitsui gained 14 percent to 3,650 yen even as it reported a 99 percent slump in third-quarter profit. KB, which controls South Korea’s largest bank, climbed 16 percent to 37,000 won. Commonwealth Bank of Australia, the nation’s largest mortgage lender, added 12 percent to A$26.90.
In Japan, the government proposed allowing the Development Bank of Japan to buy preferred and common shares in companies, aiding the ones that have difficulty obtaining capital, while the Bank of Japan pledged to purchase corporate debt to help ease credit markets.
Government Support
Parliament passed a 4.8 trillion yen ($53.9 billion) stimulus plan that includes cash handouts to individuals and support for laid-off workers.
In the U.S., President Barack Obama’s administration may announce next week the outlines of a plan to create a “bad” bank that will acquire unwanted assets from financial institutions and allow the government to rewrite the terms of some mortgages, a White House official said.
Additionally, the lower house of the U.S. Congress approved Obama’s $819 billion economic stimulus package, moving it to the Senate for final approval.
Samsung jumped 10 percent to 488,000 won and Elpida Memory Inc., Japan’s largest memory chipmaker, soared 27 percent to 649 yen after Qimonda AG, a German chipmaking rival that accounted for 5 percent of global production, filed for insolvency.
Oversupply in the industry helped push prices for chips down 42 percent in the last quarter of 2008, according to industry research firm DRAMeXchange.
Earnings Reports
Disappointing earnings figures capped gains this week. Toshiba Corp., the world’s second-biggest maker of flash memory chips, lost 14 percent to 318 yen after saying it expects a record loss this year because of falling prices for chips.
India’s Glenmark Pharmaceuticals Ltd. plunged 32.6 percent to 137.25 rupees, the steepest drop in the MSCI Asia gauge, after third-quarter profit tumbled 71 percent.
Boral Ltd., Australia’s biggest seller of building materials, dropped 17 percent to A$3.31 as the ongoing global housing slump forced the company to reduce its annual net income forecast by 40 percent.
“The recession is going to be deeper than what we read to be the consensus,” said Alistair Thompson, who helps manage about $16 billion in equities at First State Investments in Singapore. “People are saying there’s going to be a recovery toward the end of the year, but the credit binge we’ve had is going to take an awful lot longer to unwind.”
Sumitomo Mitsui Financial Group Inc., Japan’s second- largest bank by market value, jumped 14 percent after the government proposed equity financing for companies short of funding. KB Financial Group Inc. rallied 16 percent in Seoul as the U.S. moved closer to creating a bank to absorb toxic assets. Samsung Electronics Co., the world’s biggest computer-memory maker, gained 10 percent after the bankruptcy of a rival lifted confidence a chip supply glut will ease.
“Thanks to once-in-a-century measures from governments worldwide, the global economy will likely be better next year than this year,” said Yoshinori Nagano, a senior strategist at Tokyo-based Daiwa Asset Management Co., which oversees the equivalent of $96 billion. “The market is starting to reflect that possible recovery.”
The MSCI Asia Pacific Index rose 3.5 percent this week to 82.12, climbing from a seven-week low. The gauge lost 7.1 percent in January, trailing only 2008 as the worst start to a new year in its two-decade history.
Japan’s Nikkei 225 Stock Average rose 3.2 percent. Most of the region’s markets were closed for part of the week for Lunar New Year. China’s markets will reopen on Feb. 2.
MSCI’s Asian index slumped by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid slumping profits. Earnings estimates for companies included in the gauge dropped 43 percent in the past year, bringing them to the lowest level since Bloomberg began compiling the data in 2005.
Financials Rally
An index of financial companies on MSCI Asia Pacific rose 5.9 percent, the second-largest advance of 10 industry groups, amid speculation policy measures will help ease a crisis that has caused more than $1 trillion of losses at financial institutions worldwide.
Sumitomo Mitsui gained 14 percent to 3,650 yen even as it reported a 99 percent slump in third-quarter profit. KB, which controls South Korea’s largest bank, climbed 16 percent to 37,000 won. Commonwealth Bank of Australia, the nation’s largest mortgage lender, added 12 percent to A$26.90.
In Japan, the government proposed allowing the Development Bank of Japan to buy preferred and common shares in companies, aiding the ones that have difficulty obtaining capital, while the Bank of Japan pledged to purchase corporate debt to help ease credit markets.
Government Support
Parliament passed a 4.8 trillion yen ($53.9 billion) stimulus plan that includes cash handouts to individuals and support for laid-off workers.
In the U.S., President Barack Obama’s administration may announce next week the outlines of a plan to create a “bad” bank that will acquire unwanted assets from financial institutions and allow the government to rewrite the terms of some mortgages, a White House official said.
Additionally, the lower house of the U.S. Congress approved Obama’s $819 billion economic stimulus package, moving it to the Senate for final approval.
Samsung jumped 10 percent to 488,000 won and Elpida Memory Inc., Japan’s largest memory chipmaker, soared 27 percent to 649 yen after Qimonda AG, a German chipmaking rival that accounted for 5 percent of global production, filed for insolvency.
Oversupply in the industry helped push prices for chips down 42 percent in the last quarter of 2008, according to industry research firm DRAMeXchange.
Earnings Reports
Disappointing earnings figures capped gains this week. Toshiba Corp., the world’s second-biggest maker of flash memory chips, lost 14 percent to 318 yen after saying it expects a record loss this year because of falling prices for chips.
India’s Glenmark Pharmaceuticals Ltd. plunged 32.6 percent to 137.25 rupees, the steepest drop in the MSCI Asia gauge, after third-quarter profit tumbled 71 percent.
Boral Ltd., Australia’s biggest seller of building materials, dropped 17 percent to A$3.31 as the ongoing global housing slump forced the company to reduce its annual net income forecast by 40 percent.
“The recession is going to be deeper than what we read to be the consensus,” said Alistair Thompson, who helps manage about $16 billion in equities at First State Investments in Singapore. “People are saying there’s going to be a recovery toward the end of the year, but the credit binge we’ve had is going to take an awful lot longer to unwind.”
Obama Seems to Be Open to a Broader Role for States
The Obama administration seems to be open to a movement known as “progressive federalism,” in which governors and activist state attorneys general have been trying to lead the way on environmental initiatives, consumer protection and other issues, several constitutional experts say.
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A recent decision by President Obama that could open the way for California and other states to set their own limits on greenhouse gases from cars and trucks represents a shift in the delicate and often acrimonious relationship between the federal government and the states, legal experts say, possibly signaling a new view of federalism.
“I think it’s quite significant,” said Samuel Issacharoff, a professor of constitutional law at New York University law school. “It shows the Obama administration’s more benign view of government intervention,” Professor Issacharoff said, and “may indicate a spirit of cooperative federalism” in which Washington will look to the states for new ideas and even a measure of guidance.
Tom Miller, the attorney general of Iowa, who met with the transition team in December to discuss federalism and other issues, said he believed the Obama administration would “usher in a new era in federal-state relations.” Members of the new administration, Mr. Miller said, “are open to what we’re talking about, what we’re thinking.” They also appreciate, he said, the fact that state attorneys general often achieve a level of bipartisan cooperation when they band together to pursue lawsuits.
The general trend under previous administrations had favored federal pre-emption, the belief that the best law comes from Washington, a concept still favored by business leaders.
William L. Kovacs, a vice president for environmental and regulatory issues at the United States Chamber of Commerce, said free-for-all federalism was bad for business and would lead to a “patchwork of laws impacting a troubled industry.” Detroit, Mr. Kovacs said, would have to produce different cars for different parts of the country, and the environmental protection agency would grow tremendously to meet the new regulatory burden.
Many liberal thinkers skeptical of states’ rights and state actions since the days of segregation have begun to see that the states, to use Justice Louis Brandeis’s words from the 1930s, can “serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
Professor Issacharoff said states were often quicker than Washington to spot a problem when it emerged, and so “it may be the states that have the best initial take on it, and try different regulatory methods until we fasten on a single national solution.”
States have taken up the challenge of consumer protection, addressing issues like predatory lending well before the federal government took action, and often achieving reforms by suing the federal government to force it to enforce its laws and through legal settlements with industry. In October, 11 states reached an $8.4 billion settlement with Countrywide Financial in which it agreed to modify home loans to help people at risk of foreclosure. And in 2006, 49 states and the District of Columbia reached a $325 million settlement with the Ameriquest Mortgage company to change its policies.
Attorneys general also pressured major universities to adopt a code of conduct regarding their relationships with student lending companies. Eliot Spitzer, the former New York attorney general, achieved a settlement with the pharmaceutical company GlaxoSmithKline in 2004 in which it agreed to release more information about the risks to patients that had come out in clinical trials.
The Obama administration, then, is embracing a states’ rights movement that a liberal could love. “The pro-regulatory folks realized in the last eight years that the old line on federal power being the only good power wasn’t correct,” said William Marshall, a law professor at the University of North Carolina who was deputy White House counsel in the Clinton administration and a former solicitor general of Ohio.
“It doesn’t mean you abandon the federal regulatory process — you don’t, of course,” Mr. Marshall said. “But you treat it as a floor and not a ceiling.”
He added, “The Obama administration is signaling that state regulations may very well complement federal regulations, and they can both work together to achieve important goals.”
Still, James E. Tierney, the director of the National State Attorneys General Program at Columbia University Law School, cautioned against reading too much into a single presidential directive. “I don’t think we have a hallmark, sweeping view of states’ rights here,” Mr. Tierney said. He said “the Obama administration is going to take these one at a time” and “will be with the states as long as the states fit in with his view of the national interest.”
And Walter Dellinger, a solicitor general in the Clinton administration, said that the economic rise of the United States, compared with Europe’s, in the 1950s could be attributed in large part to the unified American market. Now Europe’s markets have unified, Mr. Dellinger noted. “There is a serious risk that if we decentralize regulations too much, we will, ironically, switch places with Europe,” he said.
Mr. Tierney, who is a former Maine attorney general, said that while he was an advocate for state power, there were areas where federal power should nonetheless hold sway. “What the federal government ought to do,” he said, “is open the door to the states, and let the states enforce the law that the federal government promulgates.”
He added, “This is the opportunity to have the attorneys general join their own government instead of suing their own government.”
Skip to next paragraph
Blog
The Caucus
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The latest on President Obama, the new administration and other news from Washington and around the nation. Join the discussion.
* Election Results | More Politics News
A recent decision by President Obama that could open the way for California and other states to set their own limits on greenhouse gases from cars and trucks represents a shift in the delicate and often acrimonious relationship between the federal government and the states, legal experts say, possibly signaling a new view of federalism.
“I think it’s quite significant,” said Samuel Issacharoff, a professor of constitutional law at New York University law school. “It shows the Obama administration’s more benign view of government intervention,” Professor Issacharoff said, and “may indicate a spirit of cooperative federalism” in which Washington will look to the states for new ideas and even a measure of guidance.
Tom Miller, the attorney general of Iowa, who met with the transition team in December to discuss federalism and other issues, said he believed the Obama administration would “usher in a new era in federal-state relations.” Members of the new administration, Mr. Miller said, “are open to what we’re talking about, what we’re thinking.” They also appreciate, he said, the fact that state attorneys general often achieve a level of bipartisan cooperation when they band together to pursue lawsuits.
The general trend under previous administrations had favored federal pre-emption, the belief that the best law comes from Washington, a concept still favored by business leaders.
William L. Kovacs, a vice president for environmental and regulatory issues at the United States Chamber of Commerce, said free-for-all federalism was bad for business and would lead to a “patchwork of laws impacting a troubled industry.” Detroit, Mr. Kovacs said, would have to produce different cars for different parts of the country, and the environmental protection agency would grow tremendously to meet the new regulatory burden.
Many liberal thinkers skeptical of states’ rights and state actions since the days of segregation have begun to see that the states, to use Justice Louis Brandeis’s words from the 1930s, can “serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”
Professor Issacharoff said states were often quicker than Washington to spot a problem when it emerged, and so “it may be the states that have the best initial take on it, and try different regulatory methods until we fasten on a single national solution.”
States have taken up the challenge of consumer protection, addressing issues like predatory lending well before the federal government took action, and often achieving reforms by suing the federal government to force it to enforce its laws and through legal settlements with industry. In October, 11 states reached an $8.4 billion settlement with Countrywide Financial in which it agreed to modify home loans to help people at risk of foreclosure. And in 2006, 49 states and the District of Columbia reached a $325 million settlement with the Ameriquest Mortgage company to change its policies.
Attorneys general also pressured major universities to adopt a code of conduct regarding their relationships with student lending companies. Eliot Spitzer, the former New York attorney general, achieved a settlement with the pharmaceutical company GlaxoSmithKline in 2004 in which it agreed to release more information about the risks to patients that had come out in clinical trials.
The Obama administration, then, is embracing a states’ rights movement that a liberal could love. “The pro-regulatory folks realized in the last eight years that the old line on federal power being the only good power wasn’t correct,” said William Marshall, a law professor at the University of North Carolina who was deputy White House counsel in the Clinton administration and a former solicitor general of Ohio.
“It doesn’t mean you abandon the federal regulatory process — you don’t, of course,” Mr. Marshall said. “But you treat it as a floor and not a ceiling.”
He added, “The Obama administration is signaling that state regulations may very well complement federal regulations, and they can both work together to achieve important goals.”
Still, James E. Tierney, the director of the National State Attorneys General Program at Columbia University Law School, cautioned against reading too much into a single presidential directive. “I don’t think we have a hallmark, sweeping view of states’ rights here,” Mr. Tierney said. He said “the Obama administration is going to take these one at a time” and “will be with the states as long as the states fit in with his view of the national interest.”
And Walter Dellinger, a solicitor general in the Clinton administration, said that the economic rise of the United States, compared with Europe’s, in the 1950s could be attributed in large part to the unified American market. Now Europe’s markets have unified, Mr. Dellinger noted. “There is a serious risk that if we decentralize regulations too much, we will, ironically, switch places with Europe,” he said.
Mr. Tierney, who is a former Maine attorney general, said that while he was an advocate for state power, there were areas where federal power should nonetheless hold sway. “What the federal government ought to do,” he said, “is open the door to the states, and let the states enforce the law that the federal government promulgates.”
He added, “This is the opportunity to have the attorneys general join their own government instead of suing their own government.”
Financial Crisis Dims Hopes for Giant Cross-Border Banks in Europe
FRANKFURT — Only a few years ago, the future of European banking was said to belong to European champions, big border-straddling banks that would compete with the American giants.
Instead, European integration has been replaced by Balkanization.
Because of the financial crisis, banks are retrenching and refocusing on their home markets, all but abandoning ambitions of banking on a Continental scale — or bigger. Strings-attached government rescue plans and basic business logic are driving the change.
So instead of strategies for global conquest, Martin Blessing, the chief executive of Commerzbank, is concentrating on ways to keep credit flowing to the small and medium-size businesses that form the backbone of the German economy.
“We will see a domestic refocusing of banking but not because everyone is turning nationalist or because one or the other governments take stakes,” he said during a recent interview at his office in the bank’s stunning Norman Foster-designed office tower here. “Banks are going to look at where their franchise is strongest.”
These new realities could end up hurting Eastern Europe most. After communism, privatization led to an extended gold rush for Western bankers. Now those investors are having to decide whether to continue lending at home — in France or Austria — or in Poland, the Czech Republic or Hungary. In the global financial crisis, with the health of many banks dependent on the good will of their home governments, the choice is not hard. The thinking at the heart of cross-border expansion in Europe was always straightforward: Europe needed banks that could achieve economies of scale and have the global reach, global clients and global influence to compete with American titans.
Operating on that basis, a handful of European banks moved to grow and consolidate. In 2004, Banco Santander of Spain bought Abbey National of Britain. A year later, Italy’s UniCredit swallowed the bank HVB Group of Germany. In early 2007, Royal Bank of Scotland led a consortium that snapped up ABN Amro of the Netherlands for 70 billion euros, or $92 billion at current exchange rates.
That deal is already coming undone, with the implosion last year of Fortis, one of Royal Bank’s partners.
More broadly, nationalist impulses are on the move across the Continent, with many politicians arguing — as some Democrats are in the United States — that if the government is going to bail out banks, then taxpayers should get some ownership and some say in how they operate.
For example, Gordon Brown, the British prime minister, has said he wants to stay out of the operating side of the banks Britain has bailed out. But his government is under heavy pressure to help small businesses at home, and the documents that created the new British vehicle for investing in banks, United Kingdom Financial Investments, cite domestic lending as its priority.
French and German governments have also injected cash into their banks, both with the goal of keeping money flowing to businesses inside their borders.
Daniel Gros, director of the Center for European Policy Studies in Brussels, called the developments the Balkanization of European finance.
“Whenever governments get into the share capital of banks, even in a small way, of course they think nationally,” Mr. Gros said.
For instance, few banks expanded more rapidly in Germany over the last decade than Royal Bank of Scotland. The British financier muscled onto Continental turf with attractive financing packages for German manufacturers. Today, Royal Bank is majority-owned by the British government after losses in 2008 from £7 billion to £8 billion, or $9.2 billion to $10.5 billion.
According to two senior German executives, Royal Bank is now playing tough with German clients, calling in loans as the bank retrenches in favor of its British business. The executives, who asked not to be identified, because they were not authorized to publicly discuss confidential negotiations, said Royal Bank had demanded that its clients on the Continent sell assets, despite the catastrophic state of financial markets, so the bank could recover its cash quickly, perhaps to lend in Britain.
Most recently, Royal Bank was a major creditor of Adolf Merckle, the German billionaire who killed himself when it became clear the banks — with Royal Bank in the lead, the executives said — would insist on the sale of his prized possession, the generic drug maker Ratiopharm.
Christine Kortyka, a Royal Bank spokeswoman in Germany, denied the bank was retrenching. “We are an international bank with international clients and we will continue to serve them where they need us,” she said.
Mr. Blessing, who took over at Commerzbank just in time to sell a 25 percent stake to the German government to stabilize its finances and complete a major acquisition, does not dispute that governments are angling for national advantage.
Commerzbank styles itself the bank of Germany’s Mittelstand, as this country’s small and midsize companies are known.
Mr. Blessing says he is comfortable with focusing on serving the Mittelstand, because that has always been the bank’s core mission. .
As part of the deal for a cash infusion, the German government received the right to veto major decisions by the bank. That means it can ward off any acquisition from abroad — or any effort at a European expansion.
Instead, European integration has been replaced by Balkanization.
Because of the financial crisis, banks are retrenching and refocusing on their home markets, all but abandoning ambitions of banking on a Continental scale — or bigger. Strings-attached government rescue plans and basic business logic are driving the change.
So instead of strategies for global conquest, Martin Blessing, the chief executive of Commerzbank, is concentrating on ways to keep credit flowing to the small and medium-size businesses that form the backbone of the German economy.
“We will see a domestic refocusing of banking but not because everyone is turning nationalist or because one or the other governments take stakes,” he said during a recent interview at his office in the bank’s stunning Norman Foster-designed office tower here. “Banks are going to look at where their franchise is strongest.”
These new realities could end up hurting Eastern Europe most. After communism, privatization led to an extended gold rush for Western bankers. Now those investors are having to decide whether to continue lending at home — in France or Austria — or in Poland, the Czech Republic or Hungary. In the global financial crisis, with the health of many banks dependent on the good will of their home governments, the choice is not hard. The thinking at the heart of cross-border expansion in Europe was always straightforward: Europe needed banks that could achieve economies of scale and have the global reach, global clients and global influence to compete with American titans.
Operating on that basis, a handful of European banks moved to grow and consolidate. In 2004, Banco Santander of Spain bought Abbey National of Britain. A year later, Italy’s UniCredit swallowed the bank HVB Group of Germany. In early 2007, Royal Bank of Scotland led a consortium that snapped up ABN Amro of the Netherlands for 70 billion euros, or $92 billion at current exchange rates.
That deal is already coming undone, with the implosion last year of Fortis, one of Royal Bank’s partners.
More broadly, nationalist impulses are on the move across the Continent, with many politicians arguing — as some Democrats are in the United States — that if the government is going to bail out banks, then taxpayers should get some ownership and some say in how they operate.
For example, Gordon Brown, the British prime minister, has said he wants to stay out of the operating side of the banks Britain has bailed out. But his government is under heavy pressure to help small businesses at home, and the documents that created the new British vehicle for investing in banks, United Kingdom Financial Investments, cite domestic lending as its priority.
French and German governments have also injected cash into their banks, both with the goal of keeping money flowing to businesses inside their borders.
Daniel Gros, director of the Center for European Policy Studies in Brussels, called the developments the Balkanization of European finance.
“Whenever governments get into the share capital of banks, even in a small way, of course they think nationally,” Mr. Gros said.
For instance, few banks expanded more rapidly in Germany over the last decade than Royal Bank of Scotland. The British financier muscled onto Continental turf with attractive financing packages for German manufacturers. Today, Royal Bank is majority-owned by the British government after losses in 2008 from £7 billion to £8 billion, or $9.2 billion to $10.5 billion.
According to two senior German executives, Royal Bank is now playing tough with German clients, calling in loans as the bank retrenches in favor of its British business. The executives, who asked not to be identified, because they were not authorized to publicly discuss confidential negotiations, said Royal Bank had demanded that its clients on the Continent sell assets, despite the catastrophic state of financial markets, so the bank could recover its cash quickly, perhaps to lend in Britain.
Most recently, Royal Bank was a major creditor of Adolf Merckle, the German billionaire who killed himself when it became clear the banks — with Royal Bank in the lead, the executives said — would insist on the sale of his prized possession, the generic drug maker Ratiopharm.
Christine Kortyka, a Royal Bank spokeswoman in Germany, denied the bank was retrenching. “We are an international bank with international clients and we will continue to serve them where they need us,” she said.
Mr. Blessing, who took over at Commerzbank just in time to sell a 25 percent stake to the German government to stabilize its finances and complete a major acquisition, does not dispute that governments are angling for national advantage.
Commerzbank styles itself the bank of Germany’s Mittelstand, as this country’s small and midsize companies are known.
Mr. Blessing says he is comfortable with focusing on serving the Mittelstand, because that has always been the bank’s core mission. .
As part of the deal for a cash infusion, the German government received the right to veto major decisions by the bank. That means it can ward off any acquisition from abroad — or any effort at a European expansion.
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