In a surprise turnaround, Hank Paulson, America’s treasury secretary, said that the remaining funds in the government’s $700 billion Troubled Asset Relief Programme would be best used to provide capital infusions to distressed companies and tackle consumer debt, rather than buy illiquid mortgage-related assets. (The Treasury has already spent $250 billion on bank recapitalisations.) Congress approved the package a little over a month ago on the basis that the illiquid assets would be bought. Already gloomy investors interpreted the policy negatively and stockmarkets fell sharply. See article
In an attempt to help struggling homeowners in America, the agency that oversees Fannie Mae and Freddie Mac outlined a plan to avoid “preventable” foreclosures. Households that have missed three or more mortgage payments may receive assistance through refinanced mortgages with lower interest rates and longer payment periods of up to 40 years. Home foreclosures have increased by almost 150% over the past two years.
The terms of AIG’s bail-out were renegotiated, resulting in an expanded package worth $153 billion. In September the government took a stake of almost 80% in the insurer and provided it with $85 billion amid the fallout from the collapse of Lehman Brothers. An additional $38 billion was made available in October, but the company is still in trouble; it reported a $24.5 billion net loss for the third quarter and booked more write-downs. See article
AIG’s latest rescue deal brought demands from Democrats for a speedy bail-out of Detroit’s carmakers. General Motors’ share price plummeted to a 65-year low after it made another big loss, though analysts were more concerned at the rate at which GM and Ford were tapping their cash reserves to see them through an adverse market—$6.9 billion in the quarter for GM and $7.7 billion for Ford. See article
You’ve been approved
The Federal Reserve gave American Express the go-ahead to turn itself into a bank. The decision gives America’s only remaining big independent credit-card company greater access to government funding.
UBS confirmed that American prosecutors have charged one of its most senior executives with conspiring to help wealthy clients hide assets from the Internal Revenue Service. Raoul Weil is chairman of the Swiss bank’s global wealth-management business and a member of the executive board. He stepped down from his duties to fight the case. The allegations form part of a long-running investigation by American authorities into the secretive relationships between Swiss banks and their rich customers.
HBOS rebuffed an attempt by two former Scottish banking chief executives to scupper its rescue merger with Lloyds TSB. The rescue is backed by the British government, which waived competition rules to see the deal through. See article
Slow, slow, quick, quick, grow
China unveiled proposals worth 4 trillion yuan (nearly $600 billion) to boost its economy. The measures, some of which have already been made public, boost spending in infrastructure, construction, agriculture and welfare. See article
The World Bank said it would make an additional $100 billion available to developing countries over the next few years. Robert Zoellick, the bank’s president, said that “virtually no country has escaped” the financial and economic crisis, but that poorer countries were particularly vulnerable to a slowdown in the global economy and decline in world trade.
NRG Energy rejected Exelon’s $6.2 billion unsolicited takeover offer partly because of Exelon’s “obvious difficulties on both the debt financing and credit-rating front”.
The price of oil closed below $60 a barrel (and was hurtling towards $55 a barrel) for the first time in 20 months.
Starbucks’s quarterly net profit fell by 97% compared with the same period a year earlier. Before the economic crisis hit consumers’ wallets, the purveyor of coffee was already suffering from overexpansion and is closing many of its ubiquitous stores.
