China has allowed a long-standing territorial dispute with India to spill over into the international arena by withholding approval for a multilateral development plan for India.
The unusual friction between Asia’s two largest emerging economies occurred ahead of a board meeting of the Asian Development Bank at the end of last month, when China used its right to postpone approval of the lender’s country partnership strategy for India, outlining ADB lending to India until 2012.
The Chinese did not give a reason for their intervention. But the ADB said Beijing was unhappy that its Indian plan proposed lending to projects in the disputed north-eastern region of Arunachal Pradesh. People familiar with the plan said the projects were for flood management, water supply and sanitation. China and India fought a war in 1962 over disputed territory. China declared victory and then pulled back its troops.
The ADB would not provide the financial details of its India plan ahead of board approval, but India was the biggest recipient of ADB lending last year, with almost $2.9bn (€2.2bn, £1.9bn).
“The ADB has never deferred any loan to India. There is nothing like that [in the past],” said an ADB official in New Delhi
China’s reluctance to approve the country plan for India comes at a time when Beijing is lobbying hard for a larger role in the International Monetary Fund and other international organisations. Analysts said this incident could herald future conflicts once China gains the influence it is seeking in multilateral organisations if future initiatives infringe on what Beijing sees as its interests
“This effort [to block the ADB’s plan for India] is a clear signal to partner countries that China sees partnership as sometimes less important than power projection,” said Russell Moses, a Beijing-based political analyst. “There are powerful officials who have no problem injecting strategic considerations into multilateral financial decisions.”
Some analysts also worry that greater Chinese involvement in institutions such as the IMF could allow it to wield veto powers over rescue packages for countries that did not comply with its political demands, especially over issues such as Tibet and Taiwan.
“Of course this [incident within the ADB] makes some people nervous but at this point it doesn’t seem so unreasonable given the fact this is contested territory,” said David Zweig, director of the Center on China’s Transnational Relations at the Hong Kong University of Science and Technology.
“I’d be much more concerned if this was China blocking a development plan for a country whose leader had recently met the Dalai Lama.”
The ADB said it hoped to reschedule a meeting to approve the Indian plan, but at a yet unspecified date.
Pratibha Patil, India’s president, emphasised India’s claim to Arunachal Pradesh during a three-day visit last week. She said the state was “never far from the centre of the nation’s consciousness"
Saturday, April 11, 2009
Three-fold increase in girls at IIM-A
Ahmedabad: They were a rare sight at India’s premier business schools. The number of women making it to the Indian Institutes of Management never crossed 5%. But this year, women comprise nearly 16% of new students at IIM-Ahmedabad, over three times last year’s figure. Many believe this could transform boardrooms in future. The final admission list based on the Common Admission Test (CAT) and personal interviews was declared on Friday.
The rise in number of women admitted came about because of new admission criteria. From this year, the institute gave weightage to academic performance in Class X as well as Class XII. The result: the higher the marks in school board examinations, the better the chances of getting admission in IIM-A.
Professor in-charge of PGP admissions Satish Deodhar said, ‘‘I have been looking after admissions for the last two years and the absence of women candidates used to bother me, especially when I read that girls were performing better in board examinations.’’
‘‘Apart from the CAT scores, IIMA gave weightage to personal interview and pre-bachelors academic performance. Just this change has given us 50 girls in a batch of 315 students,” he added.
Senior faculty member at IIM-A, Deepti Bhatnagar, who was the first woman fellow at IIM-A, welcomed the shift. ‘‘No candidate is selected based on gender, but news that the batch will have more women candidates is exciting and I hope the trend continues. Women have demonstrated calibre and dedication. They bring a lot of commitment to the job.’’
NEW CATs ON BLOCK
Nearly 16% girl students at IIM-A this year
Three-fold increase as girls cross 5% barrier
Weightage to Class X & XII marks in new admission system
The rise in number of women admitted came about because of new admission criteria. From this year, the institute gave weightage to academic performance in Class X as well as Class XII. The result: the higher the marks in school board examinations, the better the chances of getting admission in IIM-A.
Professor in-charge of PGP admissions Satish Deodhar said, ‘‘I have been looking after admissions for the last two years and the absence of women candidates used to bother me, especially when I read that girls were performing better in board examinations.’’
‘‘Apart from the CAT scores, IIMA gave weightage to personal interview and pre-bachelors academic performance. Just this change has given us 50 girls in a batch of 315 students,” he added.
Senior faculty member at IIM-A, Deepti Bhatnagar, who was the first woman fellow at IIM-A, welcomed the shift. ‘‘No candidate is selected based on gender, but news that the batch will have more women candidates is exciting and I hope the trend continues. Women have demonstrated calibre and dedication. They bring a lot of commitment to the job.’’
NEW CATs ON BLOCK
Nearly 16% girl students at IIM-A this year
Three-fold increase as girls cross 5% barrier
Weightage to Class X & XII marks in new admission system
Four depts spring a surprise, surpass revenue target
Mumbai: Notwithstanding the fears expressed by the state finance minister Dilip Walse-Patil, four key departments—sales tax, stamp duty, excise and transport, have surprisingly managed to surpass the target set by the government.
A few months ago, when Walse-Patil reviewed key departments, he was told that it would not be possible to achieve the target set in March 2008 for the year 2008-2009. In fact, then heads of some of the departments had urged the government to reduce the target.
Subsequently, when Walse-Patil presented his interim budget, he too had expressed fears that there will be a shortfall of at least Rs 2,000 crore against the target. “The turnaround was possible owing to the stringent enforcement of rules and the recovery of fines at all levels,’’ C S Sangitrao, transport and excise secretary told TOI.
Against the target of Rs 2,200 crore, the transport department was able to mobilise Rs 2,234 crore, despite the fact that lesser number of vehicles were sold during the financial year 2008-2009. While 12 lakh motor vehicles were sold in ’06-07, 11.68 lakh in ’07-08, less than 10.5 lakh motor vehicles were sold in ’08-09. To ensure that there was no shortfall in revenue mobilisation, the transport department plugged loopholes, implemented the Motor Vehicle Act more effectively and above all, recovered fines and penalties at all levels. “We strengthened the checkposts further, as a result, we mobilised more revenue,’’ Sangitrao added.
However, it was found that the performance of regional transport officers of Thane, Amravati, Dhule, Nagpur and Kolhapur was dismal especially in relation to the target, he said. “We have issued showcause notices to all these five RTOs and will initiate a departmental probe against them due to their performance,’’ he added.
On the performance of the excise department, Sangitrao said that against the target of Rs 4,300 crore, the department was able to mobilise Rs 4,327 crore. The increased revenue was owing to the rising consumption of Indian-made foreign and country liquor. “We were able to stop the illegal trading of liquor with stricter implementation of excise and prohibition laws. As a result, we were able to surpass the target,’’ he added.
Salex tax commissioner Sanjay Bhatia too confirmed that his department was able to achieve his target. Against the target of Rs 30,489 crore, the department mobilised Rs 33,609 crore. In November 2008, it seemed that in view of the slowdown in the economy, the department would miss the target. However, the sleuths of the sales tax department galvanised its entire network, ensured that the laws were enforced in letter as well as spirit and that absolutely no leniency was shown in any case. “For us, it was a surprise when we achieved the target,’’ a sales tax department official said.
The task of the stamp duty and registration department was difficult as there was a slump in the real estate market. However, against the target of Rs 8,200 crore, the department realised Rs 8327.07 crore. “Our achievement was 101%. However, compared to the previous year, it was less as during 2007-08, we had mobilised 118% of the target,’’ a senior revenue official said.
During the year 2008-09, the department registered 17.82 lakh documents against 18.47 lakh registered last year. “Though fewer documents were registered in the current year, we were able to achieve the target owing to the effective enforcement of rules,’’ he said.
A few months ago, when Walse-Patil reviewed key departments, he was told that it would not be possible to achieve the target set in March 2008 for the year 2008-2009. In fact, then heads of some of the departments had urged the government to reduce the target.
Subsequently, when Walse-Patil presented his interim budget, he too had expressed fears that there will be a shortfall of at least Rs 2,000 crore against the target. “The turnaround was possible owing to the stringent enforcement of rules and the recovery of fines at all levels,’’ C S Sangitrao, transport and excise secretary told TOI.
Against the target of Rs 2,200 crore, the transport department was able to mobilise Rs 2,234 crore, despite the fact that lesser number of vehicles were sold during the financial year 2008-2009. While 12 lakh motor vehicles were sold in ’06-07, 11.68 lakh in ’07-08, less than 10.5 lakh motor vehicles were sold in ’08-09. To ensure that there was no shortfall in revenue mobilisation, the transport department plugged loopholes, implemented the Motor Vehicle Act more effectively and above all, recovered fines and penalties at all levels. “We strengthened the checkposts further, as a result, we mobilised more revenue,’’ Sangitrao added.
However, it was found that the performance of regional transport officers of Thane, Amravati, Dhule, Nagpur and Kolhapur was dismal especially in relation to the target, he said. “We have issued showcause notices to all these five RTOs and will initiate a departmental probe against them due to their performance,’’ he added.
On the performance of the excise department, Sangitrao said that against the target of Rs 4,300 crore, the department was able to mobilise Rs 4,327 crore. The increased revenue was owing to the rising consumption of Indian-made foreign and country liquor. “We were able to stop the illegal trading of liquor with stricter implementation of excise and prohibition laws. As a result, we were able to surpass the target,’’ he added.
Salex tax commissioner Sanjay Bhatia too confirmed that his department was able to achieve his target. Against the target of Rs 30,489 crore, the department mobilised Rs 33,609 crore. In November 2008, it seemed that in view of the slowdown in the economy, the department would miss the target. However, the sleuths of the sales tax department galvanised its entire network, ensured that the laws were enforced in letter as well as spirit and that absolutely no leniency was shown in any case. “For us, it was a surprise when we achieved the target,’’ a sales tax department official said.
The task of the stamp duty and registration department was difficult as there was a slump in the real estate market. However, against the target of Rs 8,200 crore, the department realised Rs 8327.07 crore. “Our achievement was 101%. However, compared to the previous year, it was less as during 2007-08, we had mobilised 118% of the target,’’ a senior revenue official said.
During the year 2008-09, the department registered 17.82 lakh documents against 18.47 lakh registered last year. “Though fewer documents were registered in the current year, we were able to achieve the target owing to the effective enforcement of rules,’’ he said.
As economy flags, vasectomies rise
The pregnant woman showed up at the medical centre in flip-flops and in tears, after walking there to save bus fare. Her boyfriend had lost his job, she told her doctor in Oakland and now—fearing harder times for her family—she wanted to abort what would have been her fourth child.
“This was a desired pregnancy but they re-evaluated expenses and decided not to continue,” said Dr Pratima Gupta. “When I was doing the options counselling, she interrupted me, crying, and said, ‘I just walked here for an hour. I’m sure of my decision.’”
Other doctors are hearing similarly wrenching tales. For many Americans, the recession is affecting their most intimate decisions about sex and family planning. Doctors and clinics are reporting that many women are choosing abortions and even more men are having vasectomies because they cannot afford a child.
The recent anecdotal data, if they hold, would have a historical parallel in the Great Depression, when the birth rate fell sharply.
As this recession continues, it is understandable that more people might hesitate to expand their families. A baby born in 2006—the latest year for which data are available—will cost middle-income parents $260,000 by the time the child reaches 17, according to the Agriculture Department. And that doesn’t include college.
In California, Planned Parenthood says that compared with last year’s first quarter, requests for vasectomies were up more than 30% in the first three months of this year at its clinics in San Diego and Riverside Counties, where 64 of the procedures were done. “The recession has created a new level of urgency among our clients,” said Vince Hall, a spokesman. “We used to have a three- to six-week waiting period. Now men have to wait two-and-a-half months to get an appointment.”
Helping spur demand, he said, might be the fact that unemployed men often qualify for free vasectomies under Family PACT, a California family planning program for low-income households.
On the Upper East Side of Manhattan, where the financial industry’s collapse has compressed many a household budget, Dr Marc Goldstein says he has been performing more vasectomies than usual over the last five months.
Through most of last year, Goldstein, who directs male reproductive medicine and microsurgery at the New York-Presbyterian Hospital/Weill Cornell Medical Center, was performing about six vasectomies a month. Then, in November, the number rose to nine, where it was holding steady through the end of March. “I’ve been in practice for 30 years, and I’ve never seen a spike like this,” Goldstein said. “Many of my clients work in finance and say they feel anxious about the expense of an added child.” NYT & AGENCIES
“This was a desired pregnancy but they re-evaluated expenses and decided not to continue,” said Dr Pratima Gupta. “When I was doing the options counselling, she interrupted me, crying, and said, ‘I just walked here for an hour. I’m sure of my decision.’”
Other doctors are hearing similarly wrenching tales. For many Americans, the recession is affecting their most intimate decisions about sex and family planning. Doctors and clinics are reporting that many women are choosing abortions and even more men are having vasectomies because they cannot afford a child.
The recent anecdotal data, if they hold, would have a historical parallel in the Great Depression, when the birth rate fell sharply.
As this recession continues, it is understandable that more people might hesitate to expand their families. A baby born in 2006—the latest year for which data are available—will cost middle-income parents $260,000 by the time the child reaches 17, according to the Agriculture Department. And that doesn’t include college.
In California, Planned Parenthood says that compared with last year’s first quarter, requests for vasectomies were up more than 30% in the first three months of this year at its clinics in San Diego and Riverside Counties, where 64 of the procedures were done. “The recession has created a new level of urgency among our clients,” said Vince Hall, a spokesman. “We used to have a three- to six-week waiting period. Now men have to wait two-and-a-half months to get an appointment.”
Helping spur demand, he said, might be the fact that unemployed men often qualify for free vasectomies under Family PACT, a California family planning program for low-income households.
On the Upper East Side of Manhattan, where the financial industry’s collapse has compressed many a household budget, Dr Marc Goldstein says he has been performing more vasectomies than usual over the last five months.
Through most of last year, Goldstein, who directs male reproductive medicine and microsurgery at the New York-Presbyterian Hospital/Weill Cornell Medical Center, was performing about six vasectomies a month. Then, in November, the number rose to nine, where it was holding steady through the end of March. “I’ve been in practice for 30 years, and I’ve never seen a spike like this,” Goldstein said. “Many of my clients work in finance and say they feel anxious about the expense of an added child.” NYT & AGENCIES
Friday, April 10, 2009
Showdown Seen Between Banks and Regulators
11th, Mach - 2009
WASHINGTON — As the Obama administration completes its examinations of the nation’s largest banks, industry executives are bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages.
Skip to next paragraph
Enlarge This Image
Ángel Franco/The New York Times
Without being specific, President Obama said his administration would take additional steps to bolster the economy over the next several weeks.
Multimedia
Interactive Graphic
Adding Up the Government’s Total Bailout Tab
Interactive Feature
Tracking the $700 Billion Bailout
Related
Room for Debate: The Economy's 'Green Shoots,' Real or Imagined (April 6, 2009) President Obama emerged from a meeting with his senior economic advisers on Friday to say “what you’re starting to see is glimmers of hope across the economy.” But there were also signs of growing tensions between the White House and the nation’s banks over the next phase of the financial rescue.
Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money.
Jamie Dimon, the chief executive of JPMorgan Chase, and two other executives of large banks raised the issue with President Obama and the Treasury secretary, Timothy F. Geithner, at a meeting two weeks ago.
“This is a source of considerable consternation,” said Camden R. Fine, who attended the White House meeting as president of the Independent Community Bankers, a trade group of 5,000 mostly smaller institutions, many of which are also complaining about the repayment requirements. Meanwhile, the Obama administration wants weaker banks to move more quickly to relieve their balance sheets of the toxic assets, the home loans and mortgage bonds that nobody wants to buy right now. But the banks are resisting because they would have to book big losses.
Finally, there is increasing anxiety in the industry that the administration could use the stress tests of the 19 biggest banks, due to be completed in the next three weeks, to insist on management changes, just as it did with General Motors when officials forced the resignation of its chief executive after examining that company’s books.
Senior officials, recognizing that the next few weeks could prove pivotal for both the industry and the bailout effort, are moving ahead with major plans.
“You will be seeing additional actions by the administration,” Mr. Obama said after the meeting Friday, when the officials discussed the bank stress tests and the new $500 billion to $1 trillion plan that will use public subsidies to encourage private investors to buy mortgage assets.
Attending the session were Mr. Geithner; Sheila C. Bair, the head of the Federal Deposit Insurance Corporation; Lawrence H. Summers, the chairman of the National Economic Council; and other top regulators.
The tension between the industry and the administration is rising as the government’s bailout fund is dwindling, putting the administration in a bind. It is all but certain to need to seek more money from Congress, which wants to see results from existing programs first.
The fund is down to its final $134 billion, according to Treasury officials, and is expected to face new requests for money in the coming weeks to aid tottering banks, the auto industry and possibly insurance companies.
“Between now and Memorial Day we’re going to know a whole lot more about the degree of trouble the banks are in,” said Senator Charles E. Schumer, a New York Democrat who is vice chairman of the Joint Economic Committee. “At the same time, we will begin to have a good initial reading as to how well the administration’s programs are working.”
This month, the nation’s largest banks began announcing their latest quarterly earnings. Some, like Wells Fargo, have released results early to trumpet their profitable first quarter — and possibly to give them leverage in coming negotiations with their regulator.
The immediate concern for the administration is how to get the weaker banks to relieve their books of deteriorating mortgages and mortgage-backed securities
Industry analysts estimate that United States banks alone have more than $1 trillion of such mortgages on their books but have recognized only a small share of the likely losses.
Economists at Goldman Sachs estimated recently that banks were valuing their mortgages at about 91 cents on the dollar, far more than investors are willing to pay for them.
Even though the Treasury Department plans to subsidize the purchases of toxic assets by giving buyers low-cost loans to cover most of their upfront cost, a growing number of analysts warn that many if not most banks will remain reluctant to sell.
“The gap is still very wide,” said Frank Pallotta, a former mortgage trader at Morgan Stanley, now a consultant to institutional investors. “If every bank was forced to sell at the market-clearing price, you’d have only five banks left in the market.”
The stress tests of the banks are aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected.
Government officials do not plan to disclose the results for individual banks but may reveal broad results for the entire industry at the end of the month.
If the test indicates that the losses would leave a bank with too little capital, the bank will have six months to either raise extra money from private investors or get money from the government. Executives at some banks are worried that regulators will start demanding changes in management and strategy, possibly forcing them to merge with stronger institutions.
Treasury officials said they understood that banks had valid reasons for placing higher values on their mortgages than investors, and said they were hoping to avoid major conflicts.
Facing a host of government restrictions — from how much they pay executives to how many foreign citizens they employ — some small banks have returned the bailout money, and some larger ones, including Goldman Sachs, Wells Fargo and Northern Trust, have said they want to do so as quickly as possible.
On Friday, Sun Bancorp of Vineland, N.J., became the sixth bank to exit the program, returning $89.3 million just three months after it received its loan.
Regulators are reluctant to approve the early repayments until banks can show that they have the capital to withstand further erosion in the economy and will not curtail their lending.
Both large and small banks have pressed the Obama administration to make it less costly for them to exit the bailout program by waiving the right to exercise stock warrants the banks had to grant the government in exchange for the loans. At a meeting last month, the chiefs of three of the largest banks separately asked President Obama to direct the Treasury not to exercise the warrants, Mr. Fine said.
Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.
“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”
Stephanie Cutter, a spokeswoman at the Treasury Department, said it did not comment about the participation of specific banks in the plan or their efforts to exit the program.
WASHINGTON — As the Obama administration completes its examinations of the nation’s largest banks, industry executives are bracing for fights with the government over repayment of bailout money and forced sales of bad mortgages.
Skip to next paragraph
Enlarge This Image
Ángel Franco/The New York Times
Without being specific, President Obama said his administration would take additional steps to bolster the economy over the next several weeks.
Multimedia
Interactive Graphic
Adding Up the Government’s Total Bailout Tab
Interactive Feature
Tracking the $700 Billion Bailout
Related
Room for Debate: The Economy's 'Green Shoots,' Real or Imagined (April 6, 2009) President Obama emerged from a meeting with his senior economic advisers on Friday to say “what you’re starting to see is glimmers of hope across the economy.” But there were also signs of growing tensions between the White House and the nation’s banks over the next phase of the financial rescue.
Some of the healthier banks want to pay back their bailout loans to avoid executive pay and other restrictions that come with the money. But the banks are balking at the hefty premium they agreed to pay when they took the money.
Jamie Dimon, the chief executive of JPMorgan Chase, and two other executives of large banks raised the issue with President Obama and the Treasury secretary, Timothy F. Geithner, at a meeting two weeks ago.
“This is a source of considerable consternation,” said Camden R. Fine, who attended the White House meeting as president of the Independent Community Bankers, a trade group of 5,000 mostly smaller institutions, many of which are also complaining about the repayment requirements. Meanwhile, the Obama administration wants weaker banks to move more quickly to relieve their balance sheets of the toxic assets, the home loans and mortgage bonds that nobody wants to buy right now. But the banks are resisting because they would have to book big losses.
Finally, there is increasing anxiety in the industry that the administration could use the stress tests of the 19 biggest banks, due to be completed in the next three weeks, to insist on management changes, just as it did with General Motors when officials forced the resignation of its chief executive after examining that company’s books.
Senior officials, recognizing that the next few weeks could prove pivotal for both the industry and the bailout effort, are moving ahead with major plans.
“You will be seeing additional actions by the administration,” Mr. Obama said after the meeting Friday, when the officials discussed the bank stress tests and the new $500 billion to $1 trillion plan that will use public subsidies to encourage private investors to buy mortgage assets.
Attending the session were Mr. Geithner; Sheila C. Bair, the head of the Federal Deposit Insurance Corporation; Lawrence H. Summers, the chairman of the National Economic Council; and other top regulators.
The tension between the industry and the administration is rising as the government’s bailout fund is dwindling, putting the administration in a bind. It is all but certain to need to seek more money from Congress, which wants to see results from existing programs first.
The fund is down to its final $134 billion, according to Treasury officials, and is expected to face new requests for money in the coming weeks to aid tottering banks, the auto industry and possibly insurance companies.
“Between now and Memorial Day we’re going to know a whole lot more about the degree of trouble the banks are in,” said Senator Charles E. Schumer, a New York Democrat who is vice chairman of the Joint Economic Committee. “At the same time, we will begin to have a good initial reading as to how well the administration’s programs are working.”
This month, the nation’s largest banks began announcing their latest quarterly earnings. Some, like Wells Fargo, have released results early to trumpet their profitable first quarter — and possibly to give them leverage in coming negotiations with their regulator.
The immediate concern for the administration is how to get the weaker banks to relieve their books of deteriorating mortgages and mortgage-backed securities
Industry analysts estimate that United States banks alone have more than $1 trillion of such mortgages on their books but have recognized only a small share of the likely losses.
Economists at Goldman Sachs estimated recently that banks were valuing their mortgages at about 91 cents on the dollar, far more than investors are willing to pay for them.
Even though the Treasury Department plans to subsidize the purchases of toxic assets by giving buyers low-cost loans to cover most of their upfront cost, a growing number of analysts warn that many if not most banks will remain reluctant to sell.
“The gap is still very wide,” said Frank Pallotta, a former mortgage trader at Morgan Stanley, now a consultant to institutional investors. “If every bank was forced to sell at the market-clearing price, you’d have only five banks left in the market.”
The stress tests of the banks are aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected.
Government officials do not plan to disclose the results for individual banks but may reveal broad results for the entire industry at the end of the month.
If the test indicates that the losses would leave a bank with too little capital, the bank will have six months to either raise extra money from private investors or get money from the government. Executives at some banks are worried that regulators will start demanding changes in management and strategy, possibly forcing them to merge with stronger institutions.
Treasury officials said they understood that banks had valid reasons for placing higher values on their mortgages than investors, and said they were hoping to avoid major conflicts.
Facing a host of government restrictions — from how much they pay executives to how many foreign citizens they employ — some small banks have returned the bailout money, and some larger ones, including Goldman Sachs, Wells Fargo and Northern Trust, have said they want to do so as quickly as possible.
On Friday, Sun Bancorp of Vineland, N.J., became the sixth bank to exit the program, returning $89.3 million just three months after it received its loan.
Regulators are reluctant to approve the early repayments until banks can show that they have the capital to withstand further erosion in the economy and will not curtail their lending.
Both large and small banks have pressed the Obama administration to make it less costly for them to exit the bailout program by waiving the right to exercise stock warrants the banks had to grant the government in exchange for the loans. At a meeting last month, the chiefs of three of the largest banks separately asked President Obama to direct the Treasury not to exercise the warrants, Mr. Fine said.
Douglas Leech, the founder and chief executive of Centra Bank, a small West Virginia bank that participated in the capital assistance program but returned the money after the government imposed new conditions, said he complained strongly about the Treasury Department’s decision to demand repayment of the warrants. That effectively raised the interest rate he paid on a $15 million loan to an annual rate of about 60 percent, he said.
“What they did is wrong and fundamentally un-American,” he said. “Even though the government told us to take this money to increase our lending, the extra charge meant we had less money to lend. It was the equivalent of a penalty for early withdrawal.”
Stephanie Cutter, a spokeswoman at the Treasury Department, said it did not comment about the participation of specific banks in the plan or their efforts to exit the program.
Japan’s Bonds Fall a 3rd Week on Optimism Global Crisis Easing
April 11 (Bloomberg) -- Japanese bonds fell for a third week, matching the longest losing streak since June, as stocks rallied worldwide on optimism the worst of the financial turmoil may be over.
Benchmark 10-year yields touched the highest level in almost five months yesterday as the government unveiled an additional stimulus package totaling 15 trillion yen ($150 billion), fueling concern debt sales will increase. Longer- maturity bonds fell more than short-dated ones this week, steepening the so-called yield curve.
“Expectations that the U.S. and Japanese economies may be bottoming out are now growing, spurring euphoria about prospects for stock markets,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd. “Benchmark yields may test 1.5 percent.”
The yield on the 10-year bond rose three basis points, or 0.03 percentage point, this week to 1.45 percent, at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 1.3 percent security due in March 2019 slid 0.256 yen to 98.698 yen. The yield touched 1.49 percent yesterday, the highest level since Nov. 18.
Ten-year bond futures for June delivery fell 0.73 this week to 136.68 on the Tokyo Stock Exchange. The difference between five- and 20-year yields, a measure of the yield curve, widened to 1.24 percentage points, matching the most since Dec. 12.
Stocks Gain
Bonds declined as the Nikkei 225 Stock Average gained for a fifth week, the longest winning stretch since May 2008. Local equities followed U.S. shares higher after White House chief economic adviser Lawrence Summers said on April 9 the “free- fall” in the U.S. economy will end soon.
The VIX index of volatility fell to its lowest closing level since September, dropping 6 percent to 36.53 on April 9. The VIX had only surpassed 40 in four periods of its 19-year history before Lehman Brothers Holdings Inc. filed for bankruptcy in September.
“Rising stock prices improve the risk appetite and make investors feel like buying more riskier assets and less bonds,” said Yasuhide Yajima, an economist in Tokyo at NLI Research Institute Ltd. If the Nikkei 225 approaches 10,000, the 10-year bond yield may rise to 1.6 to 1.7 percent, he said.
Daily Gain
Bonds rose yesterday, ending two days of losses, on speculation yields approaching the highest level in five months attracted investors.
“The 1.5 percent mark may continue to serve as an important support line for 10-year bonds,” said Masashi Shimominami, a Tokyo-based market analyst at Mizuho Securities Co., a unit of Japan’s second-largest bank.
The 10-year yield will fall to 1.22 percent by the end of September, according to the weighted forecast of economists and analysts surveyed by Bloomberg News. Should that estimate prove accurate, investors who bought 10-year debt yesterday will make a return of 2.3 percent by Sept. 30.
“Ten-year bonds are now looking attractive,” said Toshiro Yanagiya, general manager of the securities business division at Aozora Bank Ltd. in Tokyo. “The ongoing announcement of quarterly profits in the U.S. may reveal that things are not developing in such a positive way as the market would prefer.”
Profits at S&P 500 companies fell 38 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of seven straight quarterly earnings declines is the longest since at least the Great Depression, data compiled by Standard & Poor’s and Bloomberg show.
Debt Supply
Bonds also fell this week on speculation the supply of debt will keep increasing as the government spends more to help the economy emerge from recession.
The government will issue as much as 11 trillion yen of additional debt to pay for Prime Minister Taro Aso’s extra stimulus plans, Chief Cabinet Secretary Takeo Kawamura said on April 9. The Ministry of Finance said in December it plans to boost bond sales by 7 trillion yen to 113.3 trillion yen in the financial year that began on April 1.
Including financial measures and guarantees, the government’s latest stimulus plan will total 57 trillion yen, Aso said at a press conference in Tokyo yesterday. His third package since taking office in September would take total spending to 25 trillion yen.
“Additional bond issuance stemming from the compilation of new pump-priming measures exceeds my expectations,” said Makoto Yamashita, chief Japan interest-rate strategist at Deutsche Securities Inc. in Tokyo.
Deutsche Bank raised its 10-year yield forecast for the next three months to a range from 1.2 to 1.6 percent, from an earlier prediction of between 1 percent and 1.5 percent, Yamashita said.
Benchmark 10-year yields touched the highest level in almost five months yesterday as the government unveiled an additional stimulus package totaling 15 trillion yen ($150 billion), fueling concern debt sales will increase. Longer- maturity bonds fell more than short-dated ones this week, steepening the so-called yield curve.
“Expectations that the U.S. and Japanese economies may be bottoming out are now growing, spurring euphoria about prospects for stock markets,” said Takeshi Minami, chief economist in Tokyo at Norinchukin Research Institute Ltd. “Benchmark yields may test 1.5 percent.”
The yield on the 10-year bond rose three basis points, or 0.03 percentage point, this week to 1.45 percent, at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price of the 1.3 percent security due in March 2019 slid 0.256 yen to 98.698 yen. The yield touched 1.49 percent yesterday, the highest level since Nov. 18.
Ten-year bond futures for June delivery fell 0.73 this week to 136.68 on the Tokyo Stock Exchange. The difference between five- and 20-year yields, a measure of the yield curve, widened to 1.24 percentage points, matching the most since Dec. 12.
Stocks Gain
Bonds declined as the Nikkei 225 Stock Average gained for a fifth week, the longest winning stretch since May 2008. Local equities followed U.S. shares higher after White House chief economic adviser Lawrence Summers said on April 9 the “free- fall” in the U.S. economy will end soon.
The VIX index of volatility fell to its lowest closing level since September, dropping 6 percent to 36.53 on April 9. The VIX had only surpassed 40 in four periods of its 19-year history before Lehman Brothers Holdings Inc. filed for bankruptcy in September.
“Rising stock prices improve the risk appetite and make investors feel like buying more riskier assets and less bonds,” said Yasuhide Yajima, an economist in Tokyo at NLI Research Institute Ltd. If the Nikkei 225 approaches 10,000, the 10-year bond yield may rise to 1.6 to 1.7 percent, he said.
Daily Gain
Bonds rose yesterday, ending two days of losses, on speculation yields approaching the highest level in five months attracted investors.
“The 1.5 percent mark may continue to serve as an important support line for 10-year bonds,” said Masashi Shimominami, a Tokyo-based market analyst at Mizuho Securities Co., a unit of Japan’s second-largest bank.
The 10-year yield will fall to 1.22 percent by the end of September, according to the weighted forecast of economists and analysts surveyed by Bloomberg News. Should that estimate prove accurate, investors who bought 10-year debt yesterday will make a return of 2.3 percent by Sept. 30.
“Ten-year bonds are now looking attractive,” said Toshiro Yanagiya, general manager of the securities business division at Aozora Bank Ltd. in Tokyo. “The ongoing announcement of quarterly profits in the U.S. may reveal that things are not developing in such a positive way as the market would prefer.”
Profits at S&P 500 companies fell 38 percent on average in the first quarter, according to analysts’ estimates compiled by Bloomberg. The stretch of seven straight quarterly earnings declines is the longest since at least the Great Depression, data compiled by Standard & Poor’s and Bloomberg show.
Debt Supply
Bonds also fell this week on speculation the supply of debt will keep increasing as the government spends more to help the economy emerge from recession.
The government will issue as much as 11 trillion yen of additional debt to pay for Prime Minister Taro Aso’s extra stimulus plans, Chief Cabinet Secretary Takeo Kawamura said on April 9. The Ministry of Finance said in December it plans to boost bond sales by 7 trillion yen to 113.3 trillion yen in the financial year that began on April 1.
Including financial measures and guarantees, the government’s latest stimulus plan will total 57 trillion yen, Aso said at a press conference in Tokyo yesterday. His third package since taking office in September would take total spending to 25 trillion yen.
“Additional bond issuance stemming from the compilation of new pump-priming measures exceeds my expectations,” said Makoto Yamashita, chief Japan interest-rate strategist at Deutsche Securities Inc. in Tokyo.
Deutsche Bank raised its 10-year yield forecast for the next three months to a range from 1.2 to 1.6 percent, from an earlier prediction of between 1 percent and 1.5 percent, Yamashita said.
Aso’s Stimulus Plan May Spur Economy at ‘Massive’ Future Cost
April 11 (Bloomberg) -- Japan’s record 15.4 trillion ($153 billion) stimulus package may give a short-term boost to the nation’s economy, while leaving it saddled with a debt burden that will smother future growth, economists said.
The plan unveiled yesterday by Prime Minister Taro Aso, who faces elections this year, is aimed at creating jobs in an economy heading for the worst recession since 1945. Equal to 3 percent of gross domestic product, the measures will add to debt that the OECD already forecasts will rise to 197 percent of gross domestic product next year.
“The stimulus will probably prevent Japan from falling apart in the short term, but it will leave a massive bill for the future,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “The package doesn’t do anything to promote a sustainable economic recovery.”
The plan does little to address the nation’s liabilities, give its aging citizens confidence in their pension system, or encourage them to spend some of their 1,400 trillion yen in financial assets, according to Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“The fiscal situation of the government is deteriorating faster than anyone imagined,” Daley said in an interview with Bloomberg Television. The government needs to address its debt “so the Japanese consumer feels comfortable that their pension system is viable. They will then start to unlock those savings,” he said.
Financing Package
Finance Minister Kaoru Yosano said the government will sell more than 10 trillion yen of debt to fund the spending on top of 33.3 trillion yen of bonds to be issued this fiscal year. That would take total liabilities to more than 800 trillion yen by March 2010, excluding short-term debt that the Organization for Economic Cooperation and Development uses to calculate its ratio.
The debt burden will be borne by a shrinking population that will be hard pressed to keep the economy growing fast enough in years to come, said John Richards, head debt-market strategist for the Asia-Pacific region at Royal Bank of Scotland Plc in Tokyo.
“The burden of this debt is going to be felt and it’s going to be much worse than people thought,” Richards said. “It’s going to result in higher interest rates and slower growth than Japan can otherwise achieve.”
Weighing Tax Increase
Aso, 68, said the government will consider raising the consumption tax from the current 5 percent once the economy recovers “in order to not leave a huge debt to our children.”
Bond yields are already rising, climbing to the highest in almost five months on April 9 on speculation the supply of debt will keep increasing as the government tries to spend its way out of the recession.
“Yields may rise as the government fails to give confidence that the stimulus package will improve jobs and consumption and boost tax revenue,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “Higher government bond yields may lead to higher borrowing costs for companies,” stunting investment and economic growth, Morita said.
Aso pledged to create up to 2 million jobs in the next three years and boost demand by between 40 trillion yen and 60 trillion yen by focusing on industries such as solar power, electric cars and energy-saving consumer electronics.
That compares with the 3.5 million jobs U.S. President Barack Obama pledged to save or create with his $787 billion stimulus package. The 25 trillion yen in total spending announced by Aso since he became prime minister in September is about 5 percent of GDP, a ratio comparable to the U.S. stimulus.
Boost Demand
“Aso is very optimistic” on that jobs creation number when you compare it with Obama’s plan, Daley said. “When you throw $150 billion at an economy in one year, you will see an effect. It will not be long term, nor sustainable.”
The Nikkei 225 Stock Average erased its losses for the year, climbing 2.5 percent for the week after details of the stimulus were leaked by ruling party officials. Economists said the plan would help moderate the economy’s deterioration later this year.
“This new package likely will significantly boost domestic demand, mainly in private consumption and government investment, from the third quarter,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo.
Analysts said that fixing the country’s long-term fiscal problems is the key to stimulating domestic consumption and weaning the country off its export dependence.
Japan’s older generation is reluctant to spend after the government revealed two years ago that it had lost pension records for 50 million people, or more than a third of the entire population. Younger people are growing concerned that the system will have run out of money by the time they retire.
Retirement Worry
A record 84 percent of Japanese are worried about retiring because they say they lack savings, an annual Bank of Japan survey showed in October.
“What households and the elderly need to see in order for them to start spending money is evidence that they don’t have to worry about retirement,” said Shirakawa at Credit Suisse. “The government isn’t providing any relief or convincing plans for the future. It’s all cheap talk by politicians.”
The plan unveiled yesterday by Prime Minister Taro Aso, who faces elections this year, is aimed at creating jobs in an economy heading for the worst recession since 1945. Equal to 3 percent of gross domestic product, the measures will add to debt that the OECD already forecasts will rise to 197 percent of gross domestic product next year.
“The stimulus will probably prevent Japan from falling apart in the short term, but it will leave a massive bill for the future,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “The package doesn’t do anything to promote a sustainable economic recovery.”
The plan does little to address the nation’s liabilities, give its aging citizens confidence in their pension system, or encourage them to spend some of their 1,400 trillion yen in financial assets, according to Kirby Daley, senior strategist at Newedge Group in Hong Kong.
“The fiscal situation of the government is deteriorating faster than anyone imagined,” Daley said in an interview with Bloomberg Television. The government needs to address its debt “so the Japanese consumer feels comfortable that their pension system is viable. They will then start to unlock those savings,” he said.
Financing Package
Finance Minister Kaoru Yosano said the government will sell more than 10 trillion yen of debt to fund the spending on top of 33.3 trillion yen of bonds to be issued this fiscal year. That would take total liabilities to more than 800 trillion yen by March 2010, excluding short-term debt that the Organization for Economic Cooperation and Development uses to calculate its ratio.
The debt burden will be borne by a shrinking population that will be hard pressed to keep the economy growing fast enough in years to come, said John Richards, head debt-market strategist for the Asia-Pacific region at Royal Bank of Scotland Plc in Tokyo.
“The burden of this debt is going to be felt and it’s going to be much worse than people thought,” Richards said. “It’s going to result in higher interest rates and slower growth than Japan can otherwise achieve.”
Weighing Tax Increase
Aso, 68, said the government will consider raising the consumption tax from the current 5 percent once the economy recovers “in order to not leave a huge debt to our children.”
Bond yields are already rising, climbing to the highest in almost five months on April 9 on speculation the supply of debt will keep increasing as the government tries to spend its way out of the recession.
“Yields may rise as the government fails to give confidence that the stimulus package will improve jobs and consumption and boost tax revenue,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “Higher government bond yields may lead to higher borrowing costs for companies,” stunting investment and economic growth, Morita said.
Aso pledged to create up to 2 million jobs in the next three years and boost demand by between 40 trillion yen and 60 trillion yen by focusing on industries such as solar power, electric cars and energy-saving consumer electronics.
That compares with the 3.5 million jobs U.S. President Barack Obama pledged to save or create with his $787 billion stimulus package. The 25 trillion yen in total spending announced by Aso since he became prime minister in September is about 5 percent of GDP, a ratio comparable to the U.S. stimulus.
Boost Demand
“Aso is very optimistic” on that jobs creation number when you compare it with Obama’s plan, Daley said. “When you throw $150 billion at an economy in one year, you will see an effect. It will not be long term, nor sustainable.”
The Nikkei 225 Stock Average erased its losses for the year, climbing 2.5 percent for the week after details of the stimulus were leaked by ruling party officials. Economists said the plan would help moderate the economy’s deterioration later this year.
“This new package likely will significantly boost domestic demand, mainly in private consumption and government investment, from the third quarter,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo.
Analysts said that fixing the country’s long-term fiscal problems is the key to stimulating domestic consumption and weaning the country off its export dependence.
Japan’s older generation is reluctant to spend after the government revealed two years ago that it had lost pension records for 50 million people, or more than a third of the entire population. Younger people are growing concerned that the system will have run out of money by the time they retire.
Retirement Worry
A record 84 percent of Japanese are worried about retiring because they say they lack savings, an annual Bank of Japan survey showed in October.
“What households and the elderly need to see in order for them to start spending money is evidence that they don’t have to worry about retirement,” said Shirakawa at Credit Suisse. “The government isn’t providing any relief or convincing plans for the future. It’s all cheap talk by politicians.”
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