WASHINGTON — The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
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Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.
The payments to A.I.G.’s financial products unit are in addition to $121 million in previously scheduled bonuses for the company’s senior executives and 6,400 employees across the sprawling corporation. Mr. Geithner last week pressured A.I.G. to cut the $9.6 million going to the top 50 executives in half and tie the rest to performance.
The payment of so much money at a company at the heart of the financial collapse that sent the broader economy into a tailspin almost certainly will fuel a popular backlash against the government’s efforts to prop up Wall Street. Past bonuses already have prompted President Obama and Congress to impose tough rules on corporate executive compensation at firms bailed out with taxpayer money.
A.I.G., nearly 80 percent of which is now owned by the government, defended its bonuses, arguing that they were promised last year before the crisis and cannot be legally canceled. In a letter to Mr. Geithner, Edward M. Liddy, the government-appointed chairman of A.I.G., said at least some bonuses were needed to keep the most skilled executives.
“We cannot attract and retain the best and the brightest talent to lead and staff the A.I.G. businesses — which are now being operated principally on behalf of American taxpayers — if employees believe their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury,” he wrote Mr. Geithner on Saturday.
Still, Mr. Liddy seemed stung by his talk with Mr. Geithner, calling their conversation last Wednesday “a difficult one for me” and noting that he receives no bonus himself. “Needless to say, in the current circumstances,” Mr. Liddy wrote, “I do not like these arrangements and find it distasteful and difficult to recommend to you that we must proceed with them.”
An A.I.G. spokeswoman said Saturday that the company had no comment beyond the letter. The bonuses were first reported by The Washington Post.
The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said.
Of all the financial institutions that have been propped up by taxpayer dollars, none has received more money than A.I.G. and none has infuriated lawmakers more with practices that policy makers have called reckless.
The bonuses will be paid to executives at A.I.G.’s financial products division, the unit that wrote trillions of dollars’ worth of credit-default swaps that protected investors from defaults on bonds backed in many cases by subprime mortgages.
The bonus plan covers 400 employees, and the bonuses range from as little as $1,000 to as much as $6.5 million. Seven executives at the financial products unit were entitled to receive more than $3 million in bonuses.
Mr. Liddy, whom Federal Reserve and Treasury officials recruited after A.I.G. faltered last September and received its first round of bailout money, said the bonuses and “retention pay” had been agreed to in early 2008 and were for the most part legally required.
The company told the Treasury that there were two categories of bonus payments, with the first to be given to senior executives. The administration official said Mr. Geithner had told A.I.G. to revise them to protect taxpayer dollars and tie future payments to performance.
The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.
The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken. The official noted that even a provision recently pushed through Congress by Senator Christopher J. Dodd, a Connecticut Democrat, had an exemption for such bonus agreements already in place.
But the official said the administration will force A.I.G. to eventually repay the cost of the bonuses to the taxpayers as part of the agreement with the firm, which is being restructured.
A.I.G. did cut other bonuses, Mr. Liddy explained, but those were part of the compensation for people who dealt in other parts of the company and had no direct involvement with the derivatives.
Mr. Liddy wrote that A.I.G. hoped to reduce its retention bonuses for 2009 by 30 percent. He said the top 25 executives at the financial products division had also agreed to reduce their salary for the rest of 2009 to $1.
Ever since it was bailed out by the government last fall, A.I.G. has been defending itself against accusations that it was richly compensating people who caused one of the biggest financial crises in American history.
A.I.G.’s main business is insurance, but the financial products unit sold hundreds of billions of dollars’ worth of derivatives, the notorious credit-default swaps that nearly toppled the entire company last fall.
A.I.G. had set up a special bonus pool for the financial products unit early in 2008, before the company’s near collapse, when problems stemming from the mortgage crisis were becoming clear and there were concerns that some of the best-informed derivatives specialists might leave. It locked in a total amount, $450 million, for the financial products unit and prepared to pay it in a series of installments, to encourage people to stay.
Only part of the payments had been made by last fall, when A.I.G. nearly collapsed. In documents provided to the Treasury, A.I.G. said it was required to pay about $165 million in bonuses on or before Sunday. That is in addition to $55 million in December.
Under a deal reached last week, A.I.G. agreed that the top 50 executives would get half of the $9.6 million they were supposed to get by March 15. The second half of their bonuses would be paid out in two installments in July and in September. To get those payments, Treasury officials said, A.I.G. would have to show that it had made progress toward its goal of selling off business units and repaying the government.
The financial products unit is now being painstakingly wound down.
Saturday, March 14, 2009
Canada Prepared to Accelerate Asset Purchases to Help Economy
March 15 (Bloomberg) -- Canadian officials indicated they may broaden asset purchases to help lower borrowing costs and battle the effects a deepening global slump.
Bank of Canada Governor Mark Carney yesterday said purchases of non-government assets may be an option as the bank looks at policies beyond interest rate moves. In a separate interview, Finance Minister Jim Flaherty said he’s studying more efforts to shore up the commercial paper market.
“We have lots of options to look at,” Flaherty said in Horsham, England, on the sidelines of a meeting of finance ministers and central bankers from the Group of 20 “The key here is we’ll do what is necessary in order to make the markets function well in Canada.”
Canada’s economy shrank at a 3.4 percent annual pace in the fourth quarter, the most since 1991. Reports have also shown record job losses and trade deficits in recent months.
Carney signaled he’ll likely revise down his outlook for the world’s eighth-largest economy next month. The Bank of Canada’s forecast for 3.8 percent growth in 2010 is more than twice the pace predicted by the IMF.
“When we laid out the projections in the update in January, we also laid out some upside and downside risks,” Carney said in the interview. “It’s safe to say the downside risks, particularly around the outturn in the global economy, have materialized.”
Beyond Rates
Carney said purchasing non-government assets is an option the central bank may consider. Earlier this month the Bank of Canada cut its benchmark lending rate to a record low 0.5 percent, and said it is preparing to use policies beyond interest rate moves, if needed, to revive an economy hit by a recession and tight credit markets.
“As we bring out the framework, it will be consistent that the bank is managing credit easing or has a framework for managing credit easing and we’ll decide when and if to use it,” he said.
Credit conditions for corporations have tightened, with companies facing the worst prospects for obtaining loans or making new sales in a decade, according to a survey of executives by the Bank of Canada released Jan. 12.
Purchases of securities may help drive down longer-term interest rates, stimulating borrowing and economic growth.
Extraordinary Measures
Canadian policy makers left the door open for extraordinary measures earlier this month. The Bank of Canada said at its March 3 interest rate announcement that it will outline how it would implement such measures on April 23.
Fed Chairman Ben S. Bernanke has increased the central bank’s total assets by $1 trillion over the past year to revive the economy and stem the risk of deflation. In December, the Fed switched to using emergency credit programs as the main tool of monetary policy. The Bank of England this month began to acquire government bonds with newly created money.
So-called quantitative easing is designed to leave banks with so much cash that they stop hoarding and expand lending. It can involve a central bank buying securities and creating money to pay for them. A central bank can also try buying up securities to drive down longer-term interest rates, extending efforts to keep short-term rates low with benchmark rates.
Buying Assets
In Canada, the federal government has taken the lead in purchasing assets from the financial system in a bid to revive lending, including facilities to acquire as much as C$125 billion in mortgages from banks and C$12 billion in car loans and leases.
Carney said it’s logical for the government to purchase the mortgages through the state-owned Canada Mortgage and Housing Corp., rather than the central bank, because the agency already insured the assets. Still, the central bank has “providence” over “credit easing,” he said.
“It makes sense to run that through CMHC,” Carney said. “In terms of other potential measures, we’ll work with the government to decide how to design them.”
Flaherty said the finance department and the central bank are coordinating efforts.
“We both have a role. The key here is that the framework is a framework that matches what the bank can do with what the government can do,” Flaherty said. “I have regular discussions with the governor of the bank to make sure we don’t go off course, that what he proposes to do meshes with what the government is doing.”
Bank of Canada Governor Mark Carney yesterday said purchases of non-government assets may be an option as the bank looks at policies beyond interest rate moves. In a separate interview, Finance Minister Jim Flaherty said he’s studying more efforts to shore up the commercial paper market.
“We have lots of options to look at,” Flaherty said in Horsham, England, on the sidelines of a meeting of finance ministers and central bankers from the Group of 20 “The key here is we’ll do what is necessary in order to make the markets function well in Canada.”
Canada’s economy shrank at a 3.4 percent annual pace in the fourth quarter, the most since 1991. Reports have also shown record job losses and trade deficits in recent months.
Carney signaled he’ll likely revise down his outlook for the world’s eighth-largest economy next month. The Bank of Canada’s forecast for 3.8 percent growth in 2010 is more than twice the pace predicted by the IMF.
“When we laid out the projections in the update in January, we also laid out some upside and downside risks,” Carney said in the interview. “It’s safe to say the downside risks, particularly around the outturn in the global economy, have materialized.”
Beyond Rates
Carney said purchasing non-government assets is an option the central bank may consider. Earlier this month the Bank of Canada cut its benchmark lending rate to a record low 0.5 percent, and said it is preparing to use policies beyond interest rate moves, if needed, to revive an economy hit by a recession and tight credit markets.
“As we bring out the framework, it will be consistent that the bank is managing credit easing or has a framework for managing credit easing and we’ll decide when and if to use it,” he said.
Credit conditions for corporations have tightened, with companies facing the worst prospects for obtaining loans or making new sales in a decade, according to a survey of executives by the Bank of Canada released Jan. 12.
Purchases of securities may help drive down longer-term interest rates, stimulating borrowing and economic growth.
Extraordinary Measures
Canadian policy makers left the door open for extraordinary measures earlier this month. The Bank of Canada said at its March 3 interest rate announcement that it will outline how it would implement such measures on April 23.
Fed Chairman Ben S. Bernanke has increased the central bank’s total assets by $1 trillion over the past year to revive the economy and stem the risk of deflation. In December, the Fed switched to using emergency credit programs as the main tool of monetary policy. The Bank of England this month began to acquire government bonds with newly created money.
So-called quantitative easing is designed to leave banks with so much cash that they stop hoarding and expand lending. It can involve a central bank buying securities and creating money to pay for them. A central bank can also try buying up securities to drive down longer-term interest rates, extending efforts to keep short-term rates low with benchmark rates.
Buying Assets
In Canada, the federal government has taken the lead in purchasing assets from the financial system in a bid to revive lending, including facilities to acquire as much as C$125 billion in mortgages from banks and C$12 billion in car loans and leases.
Carney said it’s logical for the government to purchase the mortgages through the state-owned Canada Mortgage and Housing Corp., rather than the central bank, because the agency already insured the assets. Still, the central bank has “providence” over “credit easing,” he said.
“It makes sense to run that through CMHC,” Carney said. “In terms of other potential measures, we’ll work with the government to decide how to design them.”
Flaherty said the finance department and the central bank are coordinating efforts.
“We both have a role. The key here is that the framework is a framework that matches what the bank can do with what the government can do,” Flaherty said. “I have regular discussions with the governor of the bank to make sure we don’t go off course, that what he proposes to do meshes with what the government is doing.”
G-20 Pledges Sustained Growth Effort, Will Tackle Toxic Assets
March 15 (Bloomberg) -- Finance chiefs from the biggest developed and emerging economies pledged a “sustained” effort to end the global recession and to cleanse banks of toxic assets.
“We were seized by the fact that there was a sense of urgency,” U.K. Chancellor of the Exchequer Alistair Darling told reporters after the Group of 20 finance ministers and central bankers met in southern England yesterday. U.S. counterpart Timothy Geithner said there was a “clear commitment to do what’s necessary, to keep at it, to get the economy on track.”
Such promises marked a compromise at the end of a week in which U.S. calls for governments to spend more were rebuffed by euro-region ministers. The International Monetary Fund predicts the first global contraction in six decades and yesterday won a commitment to have its resources at least doubled to help it better fight the spreading turmoil.
“Our key priority now is to address the value of assets held on banks’ balance sheets, which are constraining banks’ lending” and damaging economies, the G-20 statement said. Banks are still hoarding cash after being stung by more than $1.2 trillion of writedowns and losses. Interbank lending rates this week rebounded to the highest level since Jan. 8.
The G-20 set a dozen principles to be followed as members take on impaired assets in an attempt to avoid an uneven approach that may distort capital flows and spark protectionism.
Hedge Funds
Among them: shareholders should be exposed by the “maximum possible” to losses or risks prior to a government intervening. There should also be flexibility when judging which assets can receive support, and it should be clear how they are valued.
The G-20 members also said they would strengthen ties between their individual banking supervisors. Credit rating companies, hedge funds, off-balance sheet vehicles and credit derivatives markets will be subjected to greater oversight.
“Support for the economy will serve for nothing if the financial system is not fixed,” French central bank Governor Christian Noyer told reporters yesterday.
The ministers met to craft an agenda for their leaders, who meet in London on April 2, as they struggle to get to grips with the toxic assets lying at the heart of the crisis.
Citigroup Inc., Commerzbank AG and Lloyds Banking Group Plc have lost more than three fifths of their value this year and the Standard and Poor’s 500 Financials Index has dropped 35 percent.
Worsening Economy
Data this week showed the outlook for recovery is darkening with Chinese exports plunging by a record, German factory orders sliding 38 percent in January and U.S. consumer confidence near a 28-year low.
President Barack Obama said in Washington yesterday investors can have “absolute confidence” in U.S. investments after China said it’s “worried” about its Treasury holdings.
G-20 central banks also committed to maintaining expansionary monetary policies for “as long as needed” after cutting interest rates to records and will use all the tools they can.
Geithner approached the G-20 meeting by lobbying his opposite numbers to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year. European officials argued they had already spent enough, had bigger social safety nets and didn’t want to blow out budgets.
Overcoming Differences
Papering over those differences, the G-20 said the IMF will monitor budget policies and judge if more action is needed. The officials pledged to coordinate efforts and to maintain fiscal discipline and price stability in the long- run.
“Yes to stimulus packages, but without losing sight of feasibility,” Italian Finance Minister Giulio Tremonti told reporters. France’s Christine Lagarde said her concerns about a split before the meeting were overdone and that officials had instead “agreed that the relaunch has to go ahead on four wheels.”
Some Europeans nevertheless reiterated their concern that policy makers risk overdoing their response. Germany’s Peer Steinbrueck said “it makes no sense to pump more and more money into our economy” when financial markets are still brittle.
“We’re desperately looking for a solution in which those who haven’t caused the problems are spared,” said Steinbrueck. France and Germany agreed it’s “important to talk about an exit strategy” when the global economy recovers, he said.
In a bid to address some of those concerns and avoid future crises, G-20 officials said they were working to subject the financial system to more curbs and ensure regulations “dampen rather than amplify economic cycles.”
Options include introducing buffers that limit leverage and encourage banks to save capital in good times.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
“We were seized by the fact that there was a sense of urgency,” U.K. Chancellor of the Exchequer Alistair Darling told reporters after the Group of 20 finance ministers and central bankers met in southern England yesterday. U.S. counterpart Timothy Geithner said there was a “clear commitment to do what’s necessary, to keep at it, to get the economy on track.”
Such promises marked a compromise at the end of a week in which U.S. calls for governments to spend more were rebuffed by euro-region ministers. The International Monetary Fund predicts the first global contraction in six decades and yesterday won a commitment to have its resources at least doubled to help it better fight the spreading turmoil.
“Our key priority now is to address the value of assets held on banks’ balance sheets, which are constraining banks’ lending” and damaging economies, the G-20 statement said. Banks are still hoarding cash after being stung by more than $1.2 trillion of writedowns and losses. Interbank lending rates this week rebounded to the highest level since Jan. 8.
The G-20 set a dozen principles to be followed as members take on impaired assets in an attempt to avoid an uneven approach that may distort capital flows and spark protectionism.
Hedge Funds
Among them: shareholders should be exposed by the “maximum possible” to losses or risks prior to a government intervening. There should also be flexibility when judging which assets can receive support, and it should be clear how they are valued.
The G-20 members also said they would strengthen ties between their individual banking supervisors. Credit rating companies, hedge funds, off-balance sheet vehicles and credit derivatives markets will be subjected to greater oversight.
“Support for the economy will serve for nothing if the financial system is not fixed,” French central bank Governor Christian Noyer told reporters yesterday.
The ministers met to craft an agenda for their leaders, who meet in London on April 2, as they struggle to get to grips with the toxic assets lying at the heart of the crisis.
Citigroup Inc., Commerzbank AG and Lloyds Banking Group Plc have lost more than three fifths of their value this year and the Standard and Poor’s 500 Financials Index has dropped 35 percent.
Worsening Economy
Data this week showed the outlook for recovery is darkening with Chinese exports plunging by a record, German factory orders sliding 38 percent in January and U.S. consumer confidence near a 28-year low.
President Barack Obama said in Washington yesterday investors can have “absolute confidence” in U.S. investments after China said it’s “worried” about its Treasury holdings.
G-20 central banks also committed to maintaining expansionary monetary policies for “as long as needed” after cutting interest rates to records and will use all the tools they can.
Geithner approached the G-20 meeting by lobbying his opposite numbers to follow the U.S. in injecting fiscal stimulus equivalent to at least 2 percent of their economy’s gross domestic product this year. European officials argued they had already spent enough, had bigger social safety nets and didn’t want to blow out budgets.
Overcoming Differences
Papering over those differences, the G-20 said the IMF will monitor budget policies and judge if more action is needed. The officials pledged to coordinate efforts and to maintain fiscal discipline and price stability in the long- run.
“Yes to stimulus packages, but without losing sight of feasibility,” Italian Finance Minister Giulio Tremonti told reporters. France’s Christine Lagarde said her concerns about a split before the meeting were overdone and that officials had instead “agreed that the relaunch has to go ahead on four wheels.”
Some Europeans nevertheless reiterated their concern that policy makers risk overdoing their response. Germany’s Peer Steinbrueck said “it makes no sense to pump more and more money into our economy” when financial markets are still brittle.
“We’re desperately looking for a solution in which those who haven’t caused the problems are spared,” said Steinbrueck. France and Germany agreed it’s “important to talk about an exit strategy” when the global economy recovers, he said.
In a bid to address some of those concerns and avoid future crises, G-20 officials said they were working to subject the financial system to more curbs and ensure regulations “dampen rather than amplify economic cycles.”
Options include introducing buffers that limit leverage and encourage banks to save capital in good times.
G-20 members are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the U.S., the U.K. and the European Union.
Friday, March 13, 2009
Fiat Gains Following Report of Peugeot Merger Project
March 13 (Bloomberg) -- Fiat SpA jumped to a one-month high in Milan trading after the Il Sole 24 Ore newspaper reported that Italy’s biggest carmaker is considering a merger with PSA Peugeot Citroen of France.
Turin-based Fiat rose 7.6 percent, or 33 cents, to 4.66 euros, and was up 3 percent as of 3 p.m. in Milan. Paris- based Peugeot climbed as much as 4.6 percent in the French capital and was later little changed at 15.2 euros.
Fiat Chief Executive Officer Sergio Marchionne is evaluating whether to present the merger plan to the company’s board, according to the newspaper, which didn’t say where it got the information. The Turin-based manufacturer said in a statement today that it regularly looks at opportunities for accords that will open new markets or cut production costs, but hasn’t asked the board to examine any merger transactions.
“On paper it looks attractive, but in reality it would be almost impossible because the social costs of restructuring would be so huge that no government would let it happen,” said Alain Michelis, an analyst at Societe Generale in Paris with a “buy” rating on Peugeot and a “hold” on Fiat. “Peugeot and Fiat themselves couldn’t afford a restructuring either.”
Fiat in January agreed to take a 35 percent stake in Chrysler LLC, the third-biggest U.S. automaker, in exchange for sharing small-car technology. Marchionne has said only about five or six major car manufacturers will survive the recession and has indicated that Fiat is open to a European alliance.
Looking for Partners
Societe Generale’s Michelis said he understands that Peugeot is looking for partners, but that Fiat is “not on the list.” Peugeot Citroen shareholder Christian Peugeot seemed to exclude a combination in an interview with Italian daily Il Giornale, which on March 9 cited him as saying that the company is independent and “wants to stay that way.” The Peugeot family owns 30 percent of stock.
“We can’t comment on rumors on mergers and acquisitions in the car industry,” Peugeot Citroen spokesman Hugues Dufour said today by telephone.
Peugeot CEO Christian Streiff said Feb. 11 he was interested in partners “complementary in products or in geography” rather in than rival European volume manufacturers. “We do not want a lot of restructuring to do,” the Financial Times quoted him as saying. The company confirmed the comments.
Peugeot has a commercial-vehicle partnership with Fiat and also cooperates with Munich-based Bayerische Motoren Werke AG on engines. Streiff has repeatedly declined to comment on reports of talks with the German company.
Jobs Protected
Il Sole said that Mediobanca SpA helped form the plan, according to which Fiat’s production structure would remain unchanged, helping to protect Italian jobs, while the headquarters of the merged company would be in Paris and Marchionne would head the combined group. Mediobanca isn’t aware of any merger plan between Fiat and Peugeot, an official said.
“The rumor of a merger has been around for a long time,” Italian bank Cassa Lombarda said today in a research note, adding that it, too, regards social costs as likely to prove too high to be acceptable. The bank said it is “more realistic that Fiat-PSA are working on alliances for new models or engines to share in mature, and more likely in emerging, markets.”
Fiat, controlled by Italy’s Agnelli family, might swap the Fiat Auto carmaking unit for a stake in Peugeot, UBS AG said in a Dec. 11 research note. Fiat may end up with a stake of as much as 45 percent in the newly merged company, Il Sole reported, citing no one.
Turin-based Fiat rose 7.6 percent, or 33 cents, to 4.66 euros, and was up 3 percent as of 3 p.m. in Milan. Paris- based Peugeot climbed as much as 4.6 percent in the French capital and was later little changed at 15.2 euros.
Fiat Chief Executive Officer Sergio Marchionne is evaluating whether to present the merger plan to the company’s board, according to the newspaper, which didn’t say where it got the information. The Turin-based manufacturer said in a statement today that it regularly looks at opportunities for accords that will open new markets or cut production costs, but hasn’t asked the board to examine any merger transactions.
“On paper it looks attractive, but in reality it would be almost impossible because the social costs of restructuring would be so huge that no government would let it happen,” said Alain Michelis, an analyst at Societe Generale in Paris with a “buy” rating on Peugeot and a “hold” on Fiat. “Peugeot and Fiat themselves couldn’t afford a restructuring either.”
Fiat in January agreed to take a 35 percent stake in Chrysler LLC, the third-biggest U.S. automaker, in exchange for sharing small-car technology. Marchionne has said only about five or six major car manufacturers will survive the recession and has indicated that Fiat is open to a European alliance.
Looking for Partners
Societe Generale’s Michelis said he understands that Peugeot is looking for partners, but that Fiat is “not on the list.” Peugeot Citroen shareholder Christian Peugeot seemed to exclude a combination in an interview with Italian daily Il Giornale, which on March 9 cited him as saying that the company is independent and “wants to stay that way.” The Peugeot family owns 30 percent of stock.
“We can’t comment on rumors on mergers and acquisitions in the car industry,” Peugeot Citroen spokesman Hugues Dufour said today by telephone.
Peugeot CEO Christian Streiff said Feb. 11 he was interested in partners “complementary in products or in geography” rather in than rival European volume manufacturers. “We do not want a lot of restructuring to do,” the Financial Times quoted him as saying. The company confirmed the comments.
Peugeot has a commercial-vehicle partnership with Fiat and also cooperates with Munich-based Bayerische Motoren Werke AG on engines. Streiff has repeatedly declined to comment on reports of talks with the German company.
Jobs Protected
Il Sole said that Mediobanca SpA helped form the plan, according to which Fiat’s production structure would remain unchanged, helping to protect Italian jobs, while the headquarters of the merged company would be in Paris and Marchionne would head the combined group. Mediobanca isn’t aware of any merger plan between Fiat and Peugeot, an official said.
“The rumor of a merger has been around for a long time,” Italian bank Cassa Lombarda said today in a research note, adding that it, too, regards social costs as likely to prove too high to be acceptable. The bank said it is “more realistic that Fiat-PSA are working on alliances for new models or engines to share in mature, and more likely in emerging, markets.”
Fiat, controlled by Italy’s Agnelli family, might swap the Fiat Auto carmaking unit for a stake in Peugeot, UBS AG said in a Dec. 11 research note. Fiat may end up with a stake of as much as 45 percent in the newly merged company, Il Sole reported, citing no one.
Japanese 10-Year Bonds Decline as Aso Orders Further Spending
March 14 (Bloomberg) -- Japan’s 10-year bonds completed a second week of losses after Prime Minister Taro Aso ordered a third spending plan, fanning concern debt supply will increase.
Ten-year yields reached the highest in a month after the Mainichi newspaper said yesterday that the next plan may total 20 trillion yen ($204.7 billion). Aso has already announced 10 trillion yen of spending since taking office. Government securities also slumped after Bank of America Corp., the biggest U.S. lender, said it was profitable and won’t need more federal aid, lifting up share prices in the U.S., Europe and Asia.
“Bond supply will be the key factor as the weaker the economy, the stronger and larger the stimulus package has to be,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life, which manages the equivalent of $54 billion in assets. A large economic stimulus plan may be financed through “an increase in bond issuance, so it’s very negative for the market.”
The yield on the 1.3 percent bond due March 2019 rose 2.5 basis points this week to 1.315 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.221 yen this week to 99.867 yen. The yield climbed half a basis point yesterday after touching 1.32 percent, the highest since Feb. 10.
Twenty-year yields increased two basis points this week to 1.9 percent. Ten-year bond futures for June delivery lost 0.17 this week to 138.67 at the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
Fiscal Stimulus
“We cannot avoid the fact that there is a risk of further economic downturn,” Aso said at a news conference in Tokyo yesterday. “We must act before the risk becomes reality.”
Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks. The world’s second-largest economy shrank an annualized 12.1 percent in the three months ended Dec. 31, the sharpest contraction since 1974, the Cabinet Office said on March 12.
The government “appears to be increasingly determined to implement ample economic stimulus measures,” said Chotaro Morita, head of fixed-income strategy research at Barclays Capital in Tokyo. “If so, it will likely have to finance those measures with straightforward JGB issuance,” which is “bound to make the bond market a bit jittery.”
Japan’s Ministry of Finance plans to boost bond supply by 7 trillion yen to 113.3 trillion yen in the financial year beginning April 1.
Profitable Year
“We have been profitable for the first two months of the year,” Bank of America Chief Executive Officer Kenneth Lewis said on March 12. “We expect to be profitable” in 2009. The bank may earn $50 billion this year, measured before taxes and provisions, Lewis said.
The Nikkei 225 Stock Average yesterday completed the best week since Nov. 28, gaining 5.5 percent. Benchmark 10-year yields had a correlation of 0.74 with the Nikkei this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
zz
Ten-year yields reached the highest in a month after the Mainichi newspaper said yesterday that the next plan may total 20 trillion yen ($204.7 billion). Aso has already announced 10 trillion yen of spending since taking office. Government securities also slumped after Bank of America Corp., the biggest U.S. lender, said it was profitable and won’t need more federal aid, lifting up share prices in the U.S., Europe and Asia.
“Bond supply will be the key factor as the weaker the economy, the stronger and larger the stimulus package has to be,” said Yuuki Sakurai, general manager of financial and investment planning in Tokyo at Fukoku Mutual Life, which manages the equivalent of $54 billion in assets. A large economic stimulus plan may be financed through “an increase in bond issuance, so it’s very negative for the market.”
The yield on the 1.3 percent bond due March 2019 rose 2.5 basis points this week to 1.315 percent in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.221 yen this week to 99.867 yen. The yield climbed half a basis point yesterday after touching 1.32 percent, the highest since Feb. 10.
Twenty-year yields increased two basis points this week to 1.9 percent. Ten-year bond futures for June delivery lost 0.17 this week to 138.67 at the Tokyo Stock Exchange. A basis point is 0.01 percentage point.
Fiscal Stimulus
“We cannot avoid the fact that there is a risk of further economic downturn,” Aso said at a news conference in Tokyo yesterday. “We must act before the risk becomes reality.”
Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks. The world’s second-largest economy shrank an annualized 12.1 percent in the three months ended Dec. 31, the sharpest contraction since 1974, the Cabinet Office said on March 12.
The government “appears to be increasingly determined to implement ample economic stimulus measures,” said Chotaro Morita, head of fixed-income strategy research at Barclays Capital in Tokyo. “If so, it will likely have to finance those measures with straightforward JGB issuance,” which is “bound to make the bond market a bit jittery.”
Japan’s Ministry of Finance plans to boost bond supply by 7 trillion yen to 113.3 trillion yen in the financial year beginning April 1.
Profitable Year
“We have been profitable for the first two months of the year,” Bank of America Chief Executive Officer Kenneth Lewis said on March 12. “We expect to be profitable” in 2009. The bank may earn $50 billion this year, measured before taxes and provisions, Lewis said.
The Nikkei 225 Stock Average yesterday completed the best week since Nov. 28, gaining 5.5 percent. Benchmark 10-year yields had a correlation of 0.74 with the Nikkei this month, according to Bloomberg data. A value of 1 would mean the two moved in lockstep.
zz
Asian Stocks Post Weekly Gain on Stimulus Optimism; Banks Rise
March 14 (Bloomberg) -- Asian stocks rose for the first time in five weeks as Japan and China signaled more measures to buttress their economies from the deepening global recession.
PetroChina Co., the nation’s largest oil producer, climbed 12 percent in Hong Kong after crude oil surged and Premier Wen Jiabao said China can boost spending plans any time. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 4.5 percent in Tokyo after Prime Minister Taro Aso ordered more economic stimulus measures. Commonwealth Bank of Australia jumped 12 percent, pacing gains among financial companies, as three U.S. banks said earnings were improving.
“Markets can take comfort that countries with the ability to do so are providing fiscal stimulus, rather than waiting till it’s too difficult to fight the momentum,” said Tim Schroeders, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re seeing some money parked in safe havens returning to the market.”
The MSCI Asia Pacific Index rose 3.9 percent to 74.72 this week, snapping a four-week, 14 percent decline. Japan’s Nikkei 225 Stock Average climbed 5.5 percent to 7,569.28, while Hong Kong’s Hang Seng Index rose 5.1 percent.
Chartered Semiconductor Manufacturing Ltd., the world’s third-biggest maker customized chips, plunged 48 percent after announcing a $300 million rights offering. Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 23 percent after a merger with Taiwanese rivals failed to materialize.
‘Government Support’
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Reports this week showed China’s industrial production slowed, Australia’s jobless rate rose and Japan’s economy shrank the most since 1974 in the fourth quarter.
Japan’s Aso said yesterday he will consult a panel of economists, industry leaders and government officials next week on measures to stimulate the world’s second-biggest economy. China’s Wen told reporters the country has “adequate ammunition” to revive its economy and can add to its 4 trillion yuan ($585 billion) stimulus package at any time.
Also this week, Malaysia unveiled an additional $16 billion of spending, while New Zealand’s central bank reduced its benchmark interest rate to a record low.
PetroChina jumped 12 percent to HK$5.75 in Hong Kong this week after crude prices surged. BHP Billiton, Australia’s largest oil producer, climbed 15 percent to A$31.66.
Oil Surges
Crude oil for April delivery rose 1.6 percent in the week to $46.25 a barrel, its fourth week of gains. The contract surged before a meeting by the Organization of Petroleum Exporting Countries where it may decide to cut production.
Mitsubishi UFJ gained 4.5 percent to 419 yen in Tokyo. Nomura Holdings Inc., the country’s largest brokerage, jumped 12 percent to 469 yen. Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks and discuss ways to support the stock market.
Commonwealth Bank of Australia, the nation’s second-biggest lender, climbed 12 percent to A$30.25 in Sydney. Australia New Zealand Banking Group Ltd., the nation’s third biggest, rose 9.1 percent to A$13.49.
Bank of America Corp. joined Citigroup Inc. and JPMorgan Chase & Co. in saying this week that it was profitable in the first two months of 2009.
The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion and helped a rally in global equities. The MSCI World Index gained 8.5 percent this week, the most since the period ended Nov. 28.
Fund Raising
“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”
Chartered Semiconductor, which joined HSBC Holdings Plc and Shinsei Bank Ltd. in seeking to raise capital, tumbled 48 percent to 13 Singapore cents.
Elpida Memory Inc. plunged 23 percent to 418 yen after Taiwan ruled out a state-led merger of local computer chipmakers that would have resulted in an investment in the Japanese company.
PetroChina Co., the nation’s largest oil producer, climbed 12 percent in Hong Kong after crude oil surged and Premier Wen Jiabao said China can boost spending plans any time. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, gained 4.5 percent in Tokyo after Prime Minister Taro Aso ordered more economic stimulus measures. Commonwealth Bank of Australia jumped 12 percent, pacing gains among financial companies, as three U.S. banks said earnings were improving.
“Markets can take comfort that countries with the ability to do so are providing fiscal stimulus, rather than waiting till it’s too difficult to fight the momentum,” said Tim Schroeders, who helps manage about $2.6 billion at Pengana Capital Ltd. in Melbourne. “We’re seeing some money parked in safe havens returning to the market.”
The MSCI Asia Pacific Index rose 3.9 percent to 74.72 this week, snapping a four-week, 14 percent decline. Japan’s Nikkei 225 Stock Average climbed 5.5 percent to 7,569.28, while Hong Kong’s Hang Seng Index rose 5.1 percent.
Chartered Semiconductor Manufacturing Ltd., the world’s third-biggest maker customized chips, plunged 48 percent after announcing a $300 million rights offering. Elpida Memory Inc., Japan’s biggest memory-chip maker, slumped 23 percent after a merger with Taiwanese rivals failed to materialize.
‘Government Support’
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II. Reports this week showed China’s industrial production slowed, Australia’s jobless rate rose and Japan’s economy shrank the most since 1974 in the fourth quarter.
Japan’s Aso said yesterday he will consult a panel of economists, industry leaders and government officials next week on measures to stimulate the world’s second-biggest economy. China’s Wen told reporters the country has “adequate ammunition” to revive its economy and can add to its 4 trillion yuan ($585 billion) stimulus package at any time.
Also this week, Malaysia unveiled an additional $16 billion of spending, while New Zealand’s central bank reduced its benchmark interest rate to a record low.
PetroChina jumped 12 percent to HK$5.75 in Hong Kong this week after crude prices surged. BHP Billiton, Australia’s largest oil producer, climbed 15 percent to A$31.66.
Oil Surges
Crude oil for April delivery rose 1.6 percent in the week to $46.25 a barrel, its fourth week of gains. The contract surged before a meeting by the Organization of Petroleum Exporting Countries where it may decide to cut production.
Mitsubishi UFJ gained 4.5 percent to 419 yen in Tokyo. Nomura Holdings Inc., the country’s largest brokerage, jumped 12 percent to 469 yen. Finance Minister Kaoru Yosano said the government will also inject 121 billion yen into three regional banks and discuss ways to support the stock market.
Commonwealth Bank of Australia, the nation’s second-biggest lender, climbed 12 percent to A$30.25 in Sydney. Australia New Zealand Banking Group Ltd., the nation’s third biggest, rose 9.1 percent to A$13.49.
Bank of America Corp. joined Citigroup Inc. and JPMorgan Chase & Co. in saying this week that it was profitable in the first two months of 2009.
The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion and helped a rally in global equities. The MSCI World Index gained 8.5 percent this week, the most since the period ended Nov. 28.
Fund Raising
“Positive comments from the U.S. banks are reassuring, but we’re not out of the woods yet,” said Nicole Sze, a Singapore- based investment analyst for Bank Julius Baer & Co., which manages $350 billion. “Investors are still waiting for concrete signs that the economy has bottomed, stimulus measures are working and that the global financial system has stabilized.”
Chartered Semiconductor, which joined HSBC Holdings Plc and Shinsei Bank Ltd. in seeking to raise capital, tumbled 48 percent to 13 Singapore cents.
Elpida Memory Inc. plunged 23 percent to 418 yen after Taiwan ruled out a state-led merger of local computer chipmakers that would have resulted in an investment in the Japanese company.
Thursday, March 12, 2009
Asian Stocks Rise as Recession Concern Eases; Canon, BHP Gain
March 13 (Bloomberg) -- Asian stocks rose, as banks and electronics makers led the regional benchmark index to the first weekly gain in a month, after Bank of America Corp. said it was profitable and Japan signaled more economic stimulus.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, rose 5.3 percent as the Mainichi newspaper reported Prime Minister Taro Aso will order his government to compile an additional stimulus package. Canon Inc., the world’s largest camera maker, jumped 7 percent after forecasting profit to increase. BHP Billiton Ltd., Australia’s biggest oil producer, rose 3.4 percent in Sydney as crude soared 11 percent yesterday.
“Nervousness about the stability of the financial system has been behind recent declines, and the retreat of those fears is a definite plus,” Kazuhito Suzuki, a strategist in Tokyo at Shinkin Asset Management Co., which oversees about $6.1 billion, said in an interview with Bloomberg Television. “The outlook today is bullish.”
The MSCI Asia Pacific Index rose 2.8 percent to 74.17 as of 11:14 a.m. in Tokyo, taking its advance this week to 3.1 percent. The gauge has slumped 17 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from BHP to Canon.
Japan’s Nikkei 225 Stock Average gained 4.4 percent to 7,514.23, while Hong Kong’s Hang Seng Index rose 3 percent. Australia’s S&P/ASX 200 Index jumped 3.2 percent. All markets open for trading advanced except the Philippines.
Credit Ratings
Futures the U.S. Standard & Poor’s 500 Index lost 0.4 percent as Fitch Ratings cut its credit rating on billionaire Warren Buffett’s Berkshire Hathaway Inc. The S&P 500 jumped 4.1 percent yesterday as General Electric Co. said losing the top credit rating at Standard & Poor’s won’t hurt business.
Bank of America yesterday followed Citigroup Inc. and JPMorgan Chase & Co. in saying it was profitable in the first two months of 2009. The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion.
Mitsubishi UFJ Financial rose 5.6 percent to 418 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, gained 3.5 percent to 177 yen.
Aso’s stimulus package may total 20 trillion yen ($205 billion) and the government may sell more bonds to pay for the measures, the Mainichi newspaper reported. Finance Minister Kaoru Yosano said today the government will sink funds into Minami-Nippon Bank Ltd. and Fukuho Bank Ltd.
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II.
Oil Surges
Canon climbed 7 percent to 2,440 yen in Tokyo. The company said yesterday its net income will increase to 150 billion yen in 2010 from this year’s forecast of 98 billion yen. That reflects Canon’s expectations that the global economy may recover next year.
BHP Billiton, the world’s biggest mining company, rose 3.4 percent to A$31.39 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 4.5 percent to A$37.60. Inpex Corp., Japan’s largest oil explorer, soared 4 percent to 677,000 yen in Tokyo.
Crude oil for April delivery rose 11 percent to $47.03 a barrel in New York, the biggest gain since Feb. 19. The contract surged before a meeting by OPEC this weekend where production may be cut for a fourth time.
Sony Corp., the world’s second-largest maker of consumer electronics, gained 6.5 percent to 1,848 yen. The company will buy equipment for manufacturing LCDs from Seiko Epson as part of an alliance, the companies said yesterday.
Mitsubishi UFJ Financial Group Ltd., Japan’s biggest bank, rose 5.3 percent as the Mainichi newspaper reported Prime Minister Taro Aso will order his government to compile an additional stimulus package. Canon Inc., the world’s largest camera maker, jumped 7 percent after forecasting profit to increase. BHP Billiton Ltd., Australia’s biggest oil producer, rose 3.4 percent in Sydney as crude soared 11 percent yesterday.
“Nervousness about the stability of the financial system has been behind recent declines, and the retreat of those fears is a definite plus,” Kazuhito Suzuki, a strategist in Tokyo at Shinkin Asset Management Co., which oversees about $6.1 billion, said in an interview with Bloomberg Television. “The outlook today is bullish.”
The MSCI Asia Pacific Index rose 2.8 percent to 74.17 as of 11:14 a.m. in Tokyo, taking its advance this week to 3.1 percent. The gauge has slumped 17 percent this year, extending last year’s record 43 percent drop as the global recession decimated profits at companies from BHP to Canon.
Japan’s Nikkei 225 Stock Average gained 4.4 percent to 7,514.23, while Hong Kong’s Hang Seng Index rose 3 percent. Australia’s S&P/ASX 200 Index jumped 3.2 percent. All markets open for trading advanced except the Philippines.
Credit Ratings
Futures the U.S. Standard & Poor’s 500 Index lost 0.4 percent as Fitch Ratings cut its credit rating on billionaire Warren Buffett’s Berkshire Hathaway Inc. The S&P 500 jumped 4.1 percent yesterday as General Electric Co. said losing the top credit rating at Standard & Poor’s won’t hurt business.
Bank of America yesterday followed Citigroup Inc. and JPMorgan Chase & Co. in saying it was profitable in the first two months of 2009. The comments eased concerns about the global credit crisis that has caused writedowns and losses at institutions worldwide to swell to more than $1.2 trillion.
Mitsubishi UFJ Financial rose 5.6 percent to 418 yen in Tokyo. Mizuho Financial Group Inc., Japan’s second-largest bank, gained 3.5 percent to 177 yen.
Aso’s stimulus package may total 20 trillion yen ($205 billion) and the government may sell more bonds to pay for the measures, the Mainichi newspaper reported. Finance Minister Kaoru Yosano said today the government will sink funds into Minami-Nippon Bank Ltd. and Fukuho Bank Ltd.
Governments from the U.S. to Japan and China have stepped up efforts to avert what the World Bank predicts will be the first global economic contraction since World War II.
Oil Surges
Canon climbed 7 percent to 2,440 yen in Tokyo. The company said yesterday its net income will increase to 150 billion yen in 2010 from this year’s forecast of 98 billion yen. That reflects Canon’s expectations that the global economy may recover next year.
BHP Billiton, the world’s biggest mining company, rose 3.4 percent to A$31.39 in Sydney. Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 4.5 percent to A$37.60. Inpex Corp., Japan’s largest oil explorer, soared 4 percent to 677,000 yen in Tokyo.
Crude oil for April delivery rose 11 percent to $47.03 a barrel in New York, the biggest gain since Feb. 19. The contract surged before a meeting by OPEC this weekend where production may be cut for a fourth time.
Sony Corp., the world’s second-largest maker of consumer electronics, gained 6.5 percent to 1,848 yen. The company will buy equipment for manufacturing LCDs from Seiko Epson as part of an alliance, the companies said yesterday.
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