In the wake of AIG executive bonuses and the resulting uproar, the US congress intends to pass a legislation that allows the federal government to take control of businesses under these giants. The FDIC Chairman Sheila Bair recently told congress that there had to be a replacement of the government’s policy to bail out firms that were considered too big to fail with this new enactment. Currently, FDIC operates under the so-called ‘bridge bank authority’ that allows it to to use government insured deposits to take over a troubled institution. FDIC esentially keeps the bank for a certain period
before an arrangement to have another bank assume control and operation under a pre-arranged buyer-meaning
is negotiation is undertaken.
Posted by Shue on March 31st, 2009 :: Filed under
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The White House and the US Congress are rushing to have a legislation passed that allows the federal
government to take over businesses that are under the control of large financial institutions like Citigroup
and AIG. At the moment, the government can control businesses under the control of commercial banks and
it intends to do likewise for other financial giants. This legislation was originally to be included with
the broader reform package that addresses systemic risk. However, the recent uproar over AIG’s executive bonuses
have prompted the government to consider drafting it as a stand-alone legislation. A source from the
government has confirmed that the President has asked the draft to be fast-tracked and to be ready by
april 6, before the Congress’ spring recess.
Posted by Shue on March 30th, 2009 :: Filed under
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According to Reuters, the troubled banking unit of Citi Holdings has got a new
chairman. Gary Crittenden, former Chief Financial Officer will now work with Mike Corbat who is the
interim chief executive of Citi Holdings as they try to sell some $850 billion worth of assets under the
unit. Edward Kelly was elevated to the position of CFO to replace Gary Crittendem. Crittendem will be
responsible for disposing of Smith Barney brokerage, the Primerica insurance unit and some $300.8 billion
in troubled assets. Citi Holdings is a separate entity from Citicorp, whose assets totalling $1.1 trillion
includes the ratail and investment banking operations that Citigroup intends to keep.
Posted by Shue on March 29th, 2009 :: Filed under
Citygroup
As the fincial crisis continues to loom, british taxpayers may have to foot one extra bill of about $4 million in lost deposit following
a cancellation of a private jet order for Royal Bank of Scotland(RBS) executives. RBs was recently bailed out by the governmeent. Citigroup
has likewise had to cancel a business jet order that was considered wasteful. Dassalt Aviation, the company that had received the order
to manaufacture the jet airliners, said that it had received a cancellation of 3 orders from the former U.S. giant. RBS on the other hand
had made the order 5 years ago, long before the financial crisis could have been envisioned. The cancellation means that the bank, which is
now owned by the British government will have to forego the 10 percent deposit placed on the order.
Posted by Shue on March 28th, 2009 :: Filed under
Citygroup
Citigroup is considering conducting a reverse stock split that is part of an exchange offer
that would make the U.S. government the owner of a 36 percent stake in the bank. This is in line
with the proposed government bailout that would see its $27.5 billion of securities being converted
for common stock. The bank said that the split could take place before June 30, 2010. Citigroup is
the third largest U.S. bank and the reverse split could see its outstanding shares reduce. However,
the move will also help to boost a very low share price. It is expected that the stock exchange offer
could help increase the bank’s 5.5 billion shares to 21 billion.
Posted by Shue on March 27th, 2009 :: Filed under
Citygroup
Citigroup is offering to exchange stock for all of its depository shares that would
ensure that it boosts its measure of capital on which its investors have lately
been foucsing on. Following this move, its tangible common equity ratio(TCE), which is
regarded as the measue of a bank’s financial soundness, would likely rise from $29.1 billion
to about $81 billion. Citigroup said that private holders of preferred securities had
agreed and come to definitive agreements regarding the exchange offer. The offer is to be
launched in early april.
Posted by Shue on March 26th, 2009 :: Filed under
Citygroup
The Reserve Bank of Australia has decided to leave interest rates on hold as a result of a contracting
economy that was experienced in the last quarter running from October to December 2008. The country
experienced a 0.5% economic contraction, bringing it closer to a technical recession. Economic data
highlight the imminent danger of recession in Australia. In fact, some analysts say that if the Australian
economy experienced another consecutive quarter of contraction, then it will have entered a technical
recession. Some analysts however argue that the technical definition is splitting hairs and that the
economy has already entered in a recession.
Posted by Shue on March 25th, 2009 :: Filed under
RBA
In the fallout of the financial crisis, there is increasing pressure to have Switzerland withdraw its
banking secrecy laws. In addition to having banking transparency, around the world, governments as well
as financial institutions are fighting to have their revenue go up and it is likely this could threaten
Switzerland’s dominant position as a wealth management center that has made the country very rich.
However, there is contention over the real reason behind the pressure to have Switzerland review its
banking laws. Is it a challenge towards its dominant position as a wealth management center or is it
to have governments get the taxes they are rightfully owed by individuals with Swiss bank accounts?
Either way, the result is the same.
Posted by Shue on March 24th, 2009 :: Filed under
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The UK-based Cater Allen Private Bank recently announced that it would start offering its customers 2
fixed rate savings bonds; one I a two year savings bond that pays up to 4% AER and the other is a three
year savings bond with up to 4.11% AER payments. Both of the savings bonds will be available to over
GBP5,000 deposits. Head of banking products at Cater Allen, Sally Watts said that these new rates are very
competitive for anyone looking into fixed rates with guaranteed returns on his or her savings and most
high street banks will not be able to offer this kind of a deal. Clearly, their accessibility and
security will be a great incentive to many savers.
Posted by Shue on March 23rd, 2009 :: Filed under
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It seems reasonable that in the coming few months we will see more banks selling their stakes due to financial uncertainty. RBS sold about 4.3% of its Bank of China stakes that are worth 1.6 billion pounds. Swiss bank UBS had earlier done the same by selling a 1.5% stake in Bank of China while Bank of America sold its 2.5% stake in the CCB (China Construction Bank). It is estimated that about 34 billion pounds in Chinese capital investments may be sold by financial groups. The future of Chinese banks is deteriorating as the number of exports experience heavy falls and factories continue to close down.
Posted by Shue on March 22nd, 2009 :: Filed under
Uncategorized