Six Khairlanji Dalit murder convicts sentenced to death
24 Sep, 2008, 1331 hrs IST, IANS
BHANDARA: A court on Wednesday sentenced to death six of the eight people convicted of killing four members of a Dalit family in Maharashtra’s Khairlanji village. Two were given life imprisonment.
On Sep 20, eight people were convicted of killing four Dalits in Khairlanji village of Maharashtra.
The first ad-hoc sessions judge, S.S. Dass, who Monday convicted eight of the 11 accused in the case for murder of four members of a family in Khairlanji of Bhandara district, had heard that day the arguments of prosecution and defence on the quantum of punishment and had fixed Sep 24 for his pronouncement.
Special public prosecutor Ujjwal Nikam had made a forceful plea for capital punishment to all the convicts who killed the wife and three children of Bhaiyyalal Bhotmange, a farmer, Sep 29, 2006.
Defence lawyers Sudip Jaiswal and Neeraj Khandewale pleaded for leniency in view of the act committed in the heat of the moment and clean past record of the convicts.
Hindu - 4 hours ago
Jalandhar (PTI): Condemning the attacks on Christians and churches in Orissa and Karnataka, Congress leader Rahul Gandhi on Wednesday said the people who attack religious places should be dealt with a stern hand.
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Senate panel nod to Indo-US nuclear deal
Financial Express - 33 minutes ago
The powerful Senate Foreign Relations Committee on Wednesday approved the landmark Indo-US civil-nuclear deal. However, the suspense continues on whether Prime Minister Manmohan Singh and President George W Bush will be able to sign the agreement when …
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Chandrayaan is all set to make history; taking India to the moon
Techtree.com - 22 Sep 2008
If everything goes as planned, any of the days starting October 19th to 28th would be remembered as a red-letter day for us Indians.
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Hidden Transactions creating Deep Depression!
What you see!
What you see all about the Super power to be!
Dr. Manmohan Singh has landed in Washington to sign the Nuke Deal! Newly elected Pak President also present there. Despite the US Military Operations in Pak Territory without prior information, the Pak President is humble enough to be submissive enough to implement the Post Modern Manusmriti Apartheid Agenda of the Global Hindu Zionist White Ruling Hegemony!
We know all about the Nuke Opera in Indian parliament and we also know about the hidden transaction in between Washington and New Delhi!
Indiscriminate Industrialisation and Urbanisation leads Indian State Power to Land Acquisition most barbaric. The People`s resistance is reflected in Singur and Nandigram Insurrections!
In United states of America, we witness with horror how the Ruling Republican Hegemony manages national revenue in the best interest of the Corporates!
Just see how a key Senate panel’s approval for the India-US civil nuclear agreement came amid hectic efforts by Indian American community leaders on Capitol Hill to get the deal done before lawmakers break for the Nov 4 elections!
Community leaders from across America gathered here on Tuesday for “A Day of Advocacy” organised by the US-India Friendship Council, an umbrella group of all of the community’s political, social and professional organisations.
The credit markets grew more tense on Tuesday, boosting demand late in the day for both short- and long-term government maturities as doubts heightened on Wall Street about Washington’s ability to solidify plans for a $700 billion bailout of U.S. banks. Meanwhile, Resentment is growing on both sides of the US political divide over a plan to use $700 billion of taxpayer money to bail out Wall Street firms with bad mortgage debt. The disquiet comes from many voters on the left who see hypocrisy in the rush to help some of the world’s richest firms when the government says there is insufficient money to spend on other priorities. It also comes from some on the right, from people who say the bailout violates the principle that government should aim to limit its role in the economic life of the country and citizens, and that corporations should take responsibility for their actions.
Tata Motors and Marxist government of West Bengal, India struck a secret Deal for Monopolistic Auto International market to open the Third World Monopoly market for the Indian Inc. West Bengal Governor Gopal Krishna Gandhi did everything possible with his Gandhigiri but could not solve Singur Stand Off Puzzle. he had to cry against insensitivity on the part of the government while implementing land acquisition! A democratic People`s movement against the Capitalist ways of Marxist Government is being subverted by Money and Muscle power!
What happens in United states on the other hand?
The most powerful people in this Universe has no right to know all about the hidden transaction which led their economy deliver a Global financial crisis!
A Cluster of US Banks submerged the US Economy in quest of infinite Money. The Secretary of the Treasury, the Federal Bank and the omnipotent US President jumped in the fray to bail out the Defaulters! Now general US Tax Payers have to pump Seven Hundred billion Dollars in the Sub Prime Crisis struck recession economy without any return!
What was the result?
Demand for safe, short-term Treasury was high most of the day, as investors noticed scant signs of recovery in the squeezed credit markets. And an afternoon slide in the stock market, which brought the Dow Jones industrial average down more than 160 points, gave even the less attractive long-term Treasury bonds a lift.
What happens in Kolkata, India?
Ruling CPI(M) on Wednesday expressed dismay over the delay in execution of the Tata Motors small car project in Singur and said the chance of its commissioning would be remote.
“The more the project is delayed, the prospect of its coming up becomes bleaker” CPI(M) General Secretary, Prakash Karat told reporters at the airport in Kolkata. He said the Singur project was important for the industrialisation of the state. The project is currently suspended following demand of the opposition parties for 400 acres of land for the farmers evicted from the area.
And just have a taste of the Hidden Transaction!
US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke on Tuesday urged Congress to act swiftly to put in place a $700 billion financial system bailout, warning delay would put the economy at risk.
Testifying before a sometimes-skeptical Senate Banking Committee, they said financial markets were in serious stress and needed to be stabilized quickly by cleansing them of illiquid assets.
Paulson wants lawmakers to approve a massive war chest, funded by taxpayers, to buy distressed debt from financial institutions to try to keep credit markets from choking up.
Lawmakers have vowed to move without delay, but also are insisting on changes. These include more protections for taxpayers and limits on compensation for executives of firms that would be offloading their bad assets onto the government
Not a word about the transaction!
Not a word about the secret deal!
Why a Marxist party and its government have to identify the future of a nation with a Corporate house, it is the basic question? Why the opposition, UPA as well as NDA isolate Ms Mamata Bannerjee and support the Rulers! Entire Indian Polity rallies behind the Tatas and the Tatas becomes saviour of the Shining sensex India!
No Industrialist may not pose unaware of the risks involved!
Then why should the common masses have to suffer for their Money Making game?
It is the same story in India as well as in United states of America!
The capitalist system tries socialism to bail out AIG! Why?
President Bush tries nationalisation Unprecedented with his hands full of Blood!
Why?
White lies are in vogue! Blind nationalism in Indian subcontinent justifies Wars and Civil Wars! Persecution and Repression infinite! It overlaps injustice and inequality practiced against the majority enslaved Population comprising of SC, ST, OBC and minorities.
In America, Americanism justifies the most planned and scientific system of Mass destruction. The super Power may not save its interests at home and launches war against the rest of this Galaxy! It has been since the proclamation of Star Wars by Ronald Reagan. The rise of Barack Obama and Martin Luther King`s dream do not seem to be the right answer to this complex question of Shakespearean soliloquy, To Be Or Not to Be!
Economics has become Jugglery thanks to slave economists and politics has turned out to be the most hated Red Light Area!
How the NRI Indians rally behind the Nuclear deal to revamp US War and Weapon Economy!
“This is part of our Washington Chalo campaign on behalf of the nuclear deal, which is similar to what we did two years ago before the vote on (US enabling law) the Hyde Amendment,” said the group’s coordinator Swadesh Chatterjee.
The community also took out a full-page advertisement in the Capitol Hill newspaper Roll Call, urging the US Congress to join 2.3 million “proud Americans of Indian origin – and India and other billion-person economy – in bringing an end to India’s civil nuclear isolation”.
“Ratification of the US-India 123 Agreement will unite the world’s largest and oldest democracies, laying a foundation of mutual trust and respect, and advancing a strong partnership-in commerce, international security, and more,” it said.
Declaring that “the US and India are natural partners – as beacons of multicultural democracy, as free markets, and as the largest English speaking nations on earth”, the advertisement asked lawmakers to “schedule the vote in this Congress, clinch a vital partnership with India”.
The coalition has also sent out a draft letter to Indian Americans around the country to be faxed to their respective senators and representatives, urging them to vote for the nuclear deal.
“As one of the 2.6 million Americans who trace their roots to India, I believe that this historic agreement represents a great opportunity for both the United States and India for further strengthening a strategic relationship between the two great democracies,” says the draft letter.
It notes that “this agreement strikes a fine balance between the United States and India in two ways: The agreement provides for India to gain access to technology which allows it to meet its burgeoning energy demand in an environmentally sustainable manner and help in mitigating carbon emissions and global warming”.
“By having India place strict international safeguards on its reactors, the US can continue to support its non-proliferation interests,” it adds. The deal would also “open up new venues for business of US companies with India and tremendously increase trade between the two countries”.
“Today, I believe the US has a unique window of opportunity to send a vote of confidence to India and the Indian Diaspora in America. This vote is Yes for the approval of the US-India Civil Nuclear Agreement,” the draft letter said.
This lobbying follows a similar undertaking by the Indian American community last week under the banner of the Indian American Committee led by Hemant Patel, immediate past president of the Association of American Physicians of Indian Origin (AAPI).
The invitees at a Congressional luncheon as part of this lobbying effort included House Foreign Committee Chairman Howard Berman, who has been holding out on calling a session of his panel to speed up the passage of the accord.
Others joining were House Majority Leader Steny Hoyer and two former co-chairs of the Congressional Caucus on India and Indian Americans, Gary Ackerman and Frank Pallone besides a couple of senior US officials.
The financial crisis and growing pessimism about the US economy is giving Democratic candidate Barack Obama’s White House campaign a lift, polls showed on Wednesday.
The Illinois senator is nine points ahead of his Republican rival John McCain, 52 to 43 per cent, according to a poll of likely voters published on Wednesday.
Only nine percent of those surveyed agreed that the US economy was in good or excellent shape, the first time since 1992 that number has been in the single digits, the Post said.
Just 14 percent said the country is moving in the right direction – the lowest figure since 1973.
Asked who they trust more to handle the economy, 53 per cent chose Obama and 39 per cent, McCain.
In a poll also published Wednesday, 48 per cent of respondents said Obama could do a better job handling the financial crisis, and 35 per cent said McCain could.
The poll surveyed 1,082 people from September 19 to 21 and had a margin of error of plus or minus three per cent, or plus or minus four percent among likely voters.
The poll was conducted over the same three days and included 1,428 people. Its margin of error was three per cent.
Freddie Mac paid monthly fee to McCain aide’s firm!
AGENCIES report from Washington:
The lobbying firm of John McCain’s campaign manager was paid $15,000 a month for several years until last month by one of two housing companies taken over by the federal government, a person familiar with the financial arrangement said Tuesday night.
That money from mortgage giant Freddie Mac to the firm of Rick Davis was on top of more than $30,000 a month that went directly to Davis for five years starting in 2000. The $30,000 a month came from both Freddie Mac and Fannie Mae, the other housing entity now under government control because of the crisis in the financial markets.
All the payments were first reported by media, which posted a story on its Web site Tuesday night revealing the $15,000 a month to the firm of Davis Manafort. Media quoted two people with knowledge of the arrangement.
In response to the disclosure, McCain’s presidential campaign issued a statement saying Davis left the firm and stopped taking a salary in 2006. A person familiar with the contract says the $15,000-a-month in payments from Freddie Mac to Davis’s firm started around the end of 2005 and continued until the last month or so. The person spoke on condition of anonymity.
The connection between Davis and the housing giants that figure so centrally in the global financial crisis emerged after the McCain campaign unleashed a sharp attack on Democratic rival Barack Obama.
McCain has tied Obama to Fannie and Freddie’s troubles and has called on Jim Johnson and Franklin Raines – both Obama supporters and former Fannie Mae executives – to return million-dollar “golden parachute” payments they received from the corporation after leaving. Obama had chosen Johnson to run his vice presidential search committee, but Johnson stepped down after McCain and other Republicans began criticizing his home mortgage deals.
McCain’s campaign recently released a television ad that says Raines is among those advising Obama on housing policy. Obama’s campaign released a statement from Raines, who says he is not an Obama adviser.
Tata Motors has moved equipment key to manufacturing ‘Nano,’ the ultra-cheap car, from its under-construction plant at Singur in West Bengal to another facility in order to meet its roll-out obligation. Sources familiar with the development said that equipment was carted out from the plant and the cargo is believed to have been moved to the company’s plant in Pantnagar in Uttarakhand.
Now the blackmail the people! Just clear the decks for Tata Motors otherwise you have no future!
If Tata Motors as a corporate House has an obligation to supply Nano within a certain deadline, it should be the headache of its management! But it has proved the worst debate in between Democracy and development!
Since Tata motors has to make quick money, indigenous communities should give up their land , life and livelihood without asking a single question! Just accept the package and go!
US Zionist Money makers have put the National economy on stake in quest of monopoly in Global Market and the President has decided to bail out them!
No questions should be asked!
Capitalism does not demand transparency. The Bengali Marxists have proved even Marxism does not demand transparency in transactions! The Ruling Hegemony may decide anything and we the predestined common people, specially the Black Untouchables and indigenous communities have to oblige!
When contacted, a Tata Motors spokesman said: “I have no comments to make.”
The company, which unveiled the Nano in January this year, had committed that the commercial launch of the sub-USD 3,000 car would take place in the October-December quarter.
The FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and insurer American International Group Inc. and their senior executives for potential mortgage fraud, a news channel reported on Tuesday. The FBI did not provide specifics but said the inquiries were part of a broader probe, the channel said. The bureau is trying to determine whether anyone in those financial institutions, including their senior executives, had any responsibility for providing “misinformation,” CNN reported.
In India, it is rather unthinkable! CBI is not going to deal with any mysterious transaction involving the National economy. Defence Deals were probed sometimes and the results we know! it is always eye washing!
FBI results also reflect persecutions much more and FBI itself needs a little bit transparency! Nevertheless,a federal law enforcement official confirmed the FBI is now looking at 26 cases of potential corporate fraud related to the collapse of the US mortgage lending industry.
FBI Director Robert Mueller told the US Congress a week ago that 24 cases of potential corporate fraud were under investigation, up from 21 disclosed by the bureau in July. In testimony before the House of Representatives Judiciary Committee, the FBI chief also vowed to pursue corporate executives if necessary in mortgage fraud cases.
Mueller said the FBI was looking at all levels of the mortgage systems. With respect to the corporate probes, which could result in federal charges, “the allegations would be there were misstatements of assets,” he said.
On the other hand, a nationalisation wave seems to take over United states of America this time! But American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) is cooperating with a large investor group working to thwart a government takeover, a lawyer for investors said. Representatives of the investor group will be briefed by the company on its financial position as early as Tuesday afternoon, said Mickey Kantor, of law firm Mayer Brown.
SC seeks explanation on farmers’ plea
NEW DELHI: The Supreme Court has sought replies from Grasim Industries Ltd and others on a petition by farmers seeking closure of its chemical plant in Ujjain for allegedly polluting water sources and damaging crops.
A bench headed by Chief Justice K G Balakrishnan asked Grasim Industries (chemical division) and the Madhya Pradesh government to respond to the petition alleging that crops had been damaged due to effluents and chemicals released from the factory at Nagda in Ujjain district.
Challenging the Madhya Pradesh High Court ruling, farmers alleged that the court had erred in setting aside the order of a sub-divisional magistrate who ordered closure of the factory on January 27, 2006 under Section 133 of the Criminal Procedure Code.
Even the Madhya Pradesh Pollution Control Board had found the Birla group company plant was polluting water, the petition said. The board said that chloride and salt were much more than the specified standard for drinking water, it added.
The group of five farmers alleged that polluting drinking water was causing threat to human lives and their livelihood.
According to the petition, around 23 farmers of Azimabad Pardi village had moved an application before before the sub-divisional officer of Nagda on January 5, 2005 seeking to stop the release of effluents from the plant as their crops were being burnt and water sources polluted.
After a probe, the village revenue officer said in a report on January 9, 2005 that wheat crops in 28 hectares and gram crops in 27 hectares were destroyed. Besides, acid was found in village wells due to release of chemicals by the factory.
“There was a joint inspection and the report of the State Pollution Board and the Agriculture Department to show that the water has been polluted and the crops have been destroyed because of the chemical released in the water,” said the petition filed through advocate Vikas Upadhaya.
However, the Additional Sessions Judge at Khachrod on Grasim’s plea had set aside the government’s closure order.
Even the High Court had upheld the decision of the lower court and allowed Grasim to run the factory while observing that “the preliminary prohibitory order for closure of the concerning industries immediately appears to be illegal and that had rightly been set aside.”
However, Grasim had made a statement before the High Court that the company was observing necessary and adequate measures for the treatment of waste water and treated water was being used for watering the plantation.
In United States of america, CEO Edward Liddy and others at AIG “could not be more cooperative,” Kantor added.
AIG declined to comment.
The investor group represents more than a third of all AIG stockholders, including pension funds, and current and retired employees, Kantor said.
“We think it is in the best interest of the company to put some plan in place,” he added.
Former CEO Maurice “Hank” Greenberg, AIG’s largest individual shareholder, has thrown his support behind the investor group, said a spokesman.
Investors have much at stake. AIG’s stock has fallen more than 90 percent over the past year, and will have little chance of recovery if the federal government — which stepped in to keep the insurer from collapse with an $85 billion credit facility — exercises warrants for up to 80 percent ownership.
AIG is to repay the government loan with proceeds from asset sales.
On paper, AIG has a net saleable value of $82 billion — equal to more than $30 a share — Credit Suisse said in a research note on Tuesday.
The net figure assumes AIG will pay in excess of $30 billion to rid its balance sheet of thorny liabilities, including credit default swaps on mortgage-linked derivatives that triggered $18 billion in losses over the past three quarters.
Shares of AIG closed up 6 percent at $5 Tuesday on the New York Stock Exchange.
Still, analyst Tom Gallagher said investors face hurdles in being able to outmaneuver the government taking majority ownership.
“Some hurdles to getting this done would include raising that much cash in a short amount of time … and uncertainty over whether there will be a shareholder vote regarding approval of the terms with government.”
The New York Insurance Department — appointed to oversee AIG’s insurance operations in the wake of the federal bailout — would evaluate any proposal presented, said spokesman David Neustadt.
Broad & co
Eli Broad, a major AIG shareholder and former director, flew into New York with Kantor from Washington D.C. on Monday to meet with other investors.
“There was a unanimity of opinion,” said Kantor, a former U.S. Secretary of Commerce in the Clinton administration, of the tone set in the group’s first formal meeting.
Broad has spoken with Liddy by telephone, Kantor said.
In June, Broad, in concert with fund managers Shelby Davis of Davis Selected Advisors LP and Bill Miller of Legg Mason Inc (LM.N: Quote, Profile, Research, Stock Buzz), were critical of management’s handling of massive mortgage losses, leading to then-chief executive Martin Sullivan’s ouster.
The internal briefing on the company’s financial position, and possible assets for sale, will include several people from AIG, but not new CEO Liddy, Kantor said.
Liddy was in Washington D.C. on Tuesday, along with representatives of the New York Insurance Department, briefing insurance regulators from across the nation on AIG’s situation.
The former Allstate Corp (ALL.N: Quote, Profile, Research, Stock Buzz) chairman took over AIG’s helm last week, replacing former Citigroup executive Robert Willumstad, who had been CEO since June 15.
Liddy has said he expects to unveil what parts of AIG are up for sale within the next week to 10 days.
AIG on Tuesday said it will halt its common stock dividend in a bid to conserve capital.
In WASHINGTON: Treasury Secretary Henry Paulson plans to urge Congress, in testimony on Tuesday, to not weigh down a proposed $700-billion financial system bailout with unrelated provisions that would delay addressing key issues.
“We saw market turmoil reach a new level last week, and spill over into the rest of the economy,” Paulson said in testimony prepared for delivery to the Senate Banking Committee and obtained by Reuters.
“We must now take further, decisive action to fundamentally and comprehensively address the root cause of this turmoil,” he added.
He said removing illiquid assets from markets through the proposed bailout will cost taxpayers less in the long run than having credit markets fail to work.
He said Congress should “avoid slowing it down with other provisions that are unrelated or don’t have broad support.”
Anger over the deal is expressed most sharply by people caught up in the home mortgage crisis and their advocates.
“Hypocritical? Absolutely,” said Gabriel Onofrio, who negotiates on behalf of people in North Carolina who face foreclosure.
“When you have the free market and the privatization of profit but the socialization of the losses, that doesn’t make any sense,” said Onofrio, whose organization, the Neighborhood Assistance Corporation of America, argues that lenders should restructure home mortgages to make them more affordable.
Markets cheered last week when President George W. Bush asked Congress to approve a plan to enable the government to acquire up to $700 billion in home and commercial mortgages to stabilize firms by taking bad assets off their books.
The plan aimed to halt the worst financial crisis since the Great Depression, which has seen global credit markets seize up over concerns about the plummeting value of U.S. housing and securities based on home mortgages.
Architects of the bailout urged Congress on Tuesday to act swiftly or face dire consequences, and it was unclear whether any concerns expressed by voters would hamper its progress.
But lawmakers are sensitive to constituents, particularly in an election year. Republican Sen. Orrin Hatch from the conservative state of Utah said reaction to the plan from his constituents was “all negative.”
That comment was echoed by numerous callers to conservative talk shows and a new website VoteNoBailout.org (http://www.votenobailout.org) also aimed to rally support against the legislation, which it said effectively enabled bankers to take the country hostage.
Meanwhile,The Federal Reserve on Wednesday said that it has set up an additional $30 bn currency swap facility with central banks in Australia and Scandinavia, a move aimed at improving liquidity conditions in the global financial markets.
The Federal Open Market Committee has authorised the establishment of new swap facilities with the Reserve Bank of Australia, the Sveriges Riksbank (Bank of Sweden), the Danmarks Nationalbank (Bank of Denmark), and the Norges Bank (Bank of Norway), Federal Reserve said in a statement.
These new facilities would support the provision of $ dollar liquidity up to $10 bn each by the Reserve Bank of Australia and the Sveriges Riksbank and up to $5 bn each by the Danmarks Nationalbank and the Norges Bank, it said.
The temporary reciprocal currency arrangements (swap lines) has been established to address elevated pressures in US dollar short-term funding markets.
“These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets,” it stated.
Central banks continue to work together during this period of market stress and are prepared to take further steps as the need arises.
Meanwhile, these new facilities represent a $30 bn addition to the $247 bn previously authorised temporary reciprocal currency arrangements with other central banks including European Central Bank ($110 bn), Bank of Japan ($60 bn), Bank of England ($40 bn), Swiss National Bank ($27 bn), and Bank of Canada ($10 bn).
These reciprocal currency arrangements have been authorised through January 30, 2009, it added.
In United nations,World leaders called for international action to combat the global financial crisis, urging cooperation even as the US pressed ahead with unilateral action to stem a credit crunch that has engulfed global markets.The focus on the dismal economic situation in the United States at the annual UN General Assembly ministerial meeting reflected how what began as a mortgage market meltdown in the US has grown to overshadow other issues, such as the threat of terrorism.
French President Nicolas Sarkozy called for the wholesale reform of the global financial system, urging major economic powers to meet before the end of the year to examine the lessons of the crisis.
“Let us rebuild capitalism in which credit agencies are controlled and punished when necessary, where transparency … replaces opaqueness,” Sarkozy said at Tuesday’s meeting. “We can do this on one condition, that we all work together in our globalized world.”
Although Sarkozy and other leaders insisted on this global approach, US President George W Bush – in his last speech before the General Assembly – assured officials his government was aggressively working to contain the credit meltdown some fear will undercut development and poverty-fighting efforts.
The Bush administration is working with Congress to come to quick agreement on a $700 billion bailout bill, in addition to other recent actions he called “bold steps” aimed at stabilizing markets and keeping credit flowing.
Bush said he realizes that other nations are watching how the U.S. deals with the financial crisis, and he expressed confidence that Washington will act “in the urgent timeframe required” to prevent broader problems.
He did not ask for any action by other countries. Sarkozy, who currently heads the European Union – which includes some of Washington’s closest allies – insisted on a global solution.
“What is important is that no country, however powerful it may be, can bring an effective answer to the financial crisis on its own, so it would be logical to have it in the format of the G-8, the major eight economies of the world,” he said.
Brazil’s President Luiz Inacio Lula da Silva, a former labor leader, also called for a global solution to the financial crisis and lashed out at speculators whom he blamed for the “anguish of entire peoples.”
“The global nature of this crisis means that the solutions we adopt must also be global,” Silva said.
Philippines President Gloria Macapagal Arroyo said “economic uncertainty has moved like a terrible tsunami around the globe, wiping away gains, erasing progress.”
“Just when we thought the worst had passed, the light at the end of the tunnel became an oncoming train, hurtling forward with new shocks to the global financial system,” she said.
The widespread concerns came on a day when the head of the US central bank, Federal Reserve Chairman Ben Bernanke, warned US lawmakers, that they risk a recession and deepening economic woes if they fail to act on the administration’s plan to bail out the financial industry.
At the UN, the worry about the impact of the credit crisis on the world’s most vulnerable nations and peoples was evident.
Addressing more than 120 world leaders and dozens of government ministers at the opening of the meeting, Secretary-General Ban Ki-moon called for global leadership to restore order to international financial markets, make trade concessions and act on climate change.
Ban said he worried that nations are losing sight of the “new reality” – that there are “new centers of power and leadership in Asia, Latin America and across the newly developed world” – and that “in this new world, our challenges are increasingly those of collaboration rather than confrontation.”
“The global financial crisis endangers all our work – financing for development, social spending in rich nations and poor, the Millennium Development Goals” to improve life for the poorest,” he said.
“If ever there were a call to collective action – a call for global leadership – it is now,” Ban said.
“We need to restore order to the international financial markets,” he said. “We need a new understanding on business ethics and governance, with more compassion and less uncritical faith in the `magic’ of markets. And we must think about how the world economic system should evolve to more fully reflect changing realities of our time.”
He urged world leaders to adopt a new trade deal to help developing countries at the Doha review conference later this year.
PTI reports from NEW YORK: The government has said inflation will return to single digits by the end of the current fiscal and asserted it was not in favour of taking excessive harsh measures to rein in the problem as it will have a harmful impact on the economy.
Talking to reporters accompanying Prime Minister Manmohan Singh on his US visit, the deputy chairperson of the Planning Commission Montek Singh Ahluwalia said the trend of constant rising inflation in India was disappearing.
Maintaining that the financial meltdown in the US has not had a direct impact on India, Ahluwalia said the country had an ample stock of foreign exchange reserves to deal with the temporary meltdown in financial markets.
“The direct impact has been negligible,” he said. He also said that the financial turmoil is not likely to settle quickly and may only end by next year.
“A turnaround in financial markets cannot be expected by the 2009 end,” he said.
From India’s point of view, however, it will be foolish to think that it will not face any economic uncertainties in the future if the turmoil in the financial markets continue, Ahluwalia said.
On the sensitive issue of land acquisition in states for setting up industries, Ahluwalia said state government must create a credible mechanism for purchase of land by industrialists.
REUTERS reports from GENEVA: The financial crisis should not undermine efforts to open up the global economy, the head of the World Trade Organisation (WTO) said on Wednesday.
WTO Director-General Pascal Lamy said the lesson from the Great Depression that followed the 1929 Wall Street Crash was that protectionism made things worse for economies.
“The current hurricane that has hit the financial markets must not distract the international community from pursuing greater economic integration and openness,” Lamy told a public forum at the WTO.
“In a financial crisis and at a time of economic distress, in particular at a time of soaring food prices, what impoverished consumers desperately need is to see their purchasing power enhanced and not reduced,” he said.
The WTO chief said it was important to complete the Doha Round of multilateral trade talks, which began in 2001 and whose stated aim is to open up the world economy and help developing countries export more.
Lamy said diplomats were trying to get an outline deal on farming and industrial tariffs and subsidies, after ministers failed to reach a breakthrough in July. The newest aim was to agree on those two main pillars by the end of the year, he said.
He did not say — as he did last week — that he was ready to bring ministers back to Geneva in the coming weeks to resume a high-level push for an agreement.
Such a meeting would require headway in talks between officials from seven major economies, who have met over the last two weeks to discuss the issue which led to deadlock at the July meeting — a measure to help poor-country farmers cope with import surges.
That issue remains a problem, with rich countries like the United States unwilling to accept a mechanism that could disrupt trade, and developing nations such as India saying they need to be able to help their subsistence farmers quickly in a crisis.
“We unfortunately couldn’t come up with a breakthrough,” said a senior diplomat from one of the seven countries.
The focus of the Doha Round talks now moves to a series of consultations conducted by New Zealand’s WTO ambassador, Crawford Falconer, who will try to narrow gaps in discussions involving small groups of affected countries. WASHINGTON/SYDNEY: The US Federal Reserve on Wednesday moved for the second time within 24 hours to keep the wheels of the financial world turning, this time acting in concert with Australia and Scandinavia to supply money markets with $30 billion in funds.
The European Central Bank, the Bank of England, the Bank of Japan and Australia’s central bank have also once again injected billions of dollars into their banking systems to stop banks from hoarding cash.
The Fed set up currency swaps with central banks in Australia, Denmark, Norway and Sweden, marking its latest bid to ease global credit market strains on top of $247 billion already committed to currency swaps with other big banks.
“These facilities, like those already in place with other central banks, are designed to improve liquidity conditions in global financial markets,” the Fed said.
Once a byword for safety and liquidity, the short-term lending market in which banks lend to each other has repeatedly seized up in the financial crisis because of increasing worries over the creditworthiness of borrowers.
The moves follow a rout in financial markets, gripped by fears of more Wall Street failures after Lehman Brothers filed for bankruptcy, Merrill Lynch lost its independence, insurer AIG was saved in a $85 billion bailout and Morgan Stanley and Goldman Sachs ceased to operate as investment banks.
The ECB and the Bank of England offered up to $40 billion in dollar overnight funds each. The offers followed an earlier Bank of Japan 1.5 trillion yen ($14.2 billion) injection and the Reserve Bank of Australia’s A$815 million ($680 million) cash supply.
As part of a global central bank effort to deal with dollar shortage, Japan’s central bank also offered $30 billion in one-month funds to easy the money market funding squeeze.
STEADY RATES
Overnight dollar rates held steady between 2.5-3.5 percent in light trade in Asia on Wednesday after central bank moves. “I reckon everyone is reducing activity with the market still jittery,” said a trader in Singapore.
The rates came off a about 10 percent hit last week, but still held above the Federal Reserve’s 2 percent target.
On Tuesday, the ECB offered banks $65 billion in liquidity, the Swiss National Bank $18 billion, and the Federal Reserve added $20 billion, subduing U.S. overnight rates even though longer term lending between banks remained fraught with tension.
The moves came as Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson urged the U.S. Congress to act swiftly on a $700 billion bailout plan for U.S. financial firms or face dire economic consequences.
U.S. President George W. Bush, giving his farewell speech to the United Nations, offered assurances of his commitment to stabilising world markets but faced criticism over the excesses of global capitalism that Washington has long pushed as the path to economic prosperity.
The Grand reality show continues!
“We didn’t get any progress being made,” said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC, adding that the market is worried that Congress will take longer than expected to pass the plan, and perhaps even “water it down a little bit.”
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson testified before Congress Tuesday, urging lawmakers to quickly pass the $700 billion financial bailout orchestrated over the weekend. The discussions got heated at times, with many members from both sides of the partisan divide expressing doubts over the magnitude of the proposed plan, and the speed at which Bernanke and Paulson were hoping to enact the plan.
“All investors, especially the professional ones, are jittery about the issue of congressional passage,” said Kevin Giddis, managing director of fixed income at Morgan Keegan. “The market’s tenuous; it’s very fragile right now. If they get wind that this is becoming a political event, we will see a complete disruption again.”
The credit markets seized up nearly a week ago after the bankruptcy filing of Lehman Brothers Holdings Inc. and the government’s emergency bailout of insurer American International Group Inc. raised so much fear that it became virtually impossible to borrow. Investors stormed into Treasury bills, forcing 3-month yields to zero, because they were the safest place to put cash.
News of the bank rescue plan helped the markets ease somewhat, but the uncertainty about the government’s proposal is keeping them on edge. Moreover, concerns that huge borrowing by the government will lead to higher inflation dried up some demand for long-term Treasurys, the bonds most vulnerable to rising prices over time.
Giddis added that because the Treasury will need to keep tapping the credit markets for bailout funding, even if the economy turns around, inflation is indeed apt to rise.
Some investors have also been nervous that flagging economy and the risky assets the government is planning to take on its balance sheet could dent its credit rating _ although Moody’s Investors Service said Monday that the U.S. government’s AAA rating is not threatened by the current climate. If the U.S. government’s rating fell, it could mean that big buyers of Treasurys like China would scale back their holdings.
The Treasury plans to sell $34 billion in 2-year notes on Wednesday and $24 billion in 5-year notes on Thursday _ unprecedented amounts, Giddis said. Investors will be closely watching to see how strong demand is for those issues, particularly among foreign buyers.
The yield on the 3-month Treasury bill was at 0.79 percent by late Tuesday, down from 0.88 percent late Monday. A month ago, the yield on the 3-month T-bill was 1.69 percent. The discount rate on the 3-month T-bill was 0.78 percent.
“There’s still a really heavy presence of safe-haven demand keeping yields at nearly historic lows,” Rupert said. “It’s just a real fearful atmosphere.”
The 30-year Treasury bond, meanwhile, rose 18/32 to 101 30/32, and its yield fell to 4.38 percent, down from 4.42 percent late Monday.
In other Treasury trading Tuesday, the benchmark 10-year Treasury note rose 12/32 to 101 19/32, and its yield was at 3.80 percent, down from 3.85 percent late Monday.
The 2-year Treasury note rose 5/32 to 100 18/32 and yielded 2.08 percent, down from 2.17 percent late Monday.
Most market participants agree that a government bailout is necessary to prevent a widespread collapse of the global financial system. But they also acknowledge that the prospect of the U.S. government going to the capital markets to get about $700 billion in funding in the coming years could lead to other problems for companies trying to grow their own businesses.
A big worry in the market is that “if we have the government come in at this level, they will crowd out private borrowers,” said Howard Simons, strategist with Bianco Research in Chicago. “In a slowing economy with choked credit, declining job growth, declining economic activity, you can’t suddenly have this designated risk-free borrower … start claiming funds and not have an effect on private borrowers.”
So far, few companies outside the financial sector have been revealing major problems in getting funding or doing business in the congested markets. However, there are signs emerging that they might if current conditions continue.
“If you have a roll of fat around your waist, you’re going to survive a famine better than someone who’s skinny,” Simons said. But “you can’t take the financial system out of the U.S. economy for very long.”
Bank of America Corp. has decided to temporarily freeze extending new lines of credit to McDonald’s Corp. franchisees, according to Wall Street analysts.
The overnight London Interbank Offer Rate, an important bank-to-bank lending rate known as LIBOR, was little changed on Tuesday morning compared to Monday, and well below last week’s peak above 6 percent. However, at just below 3 percent now, it is still much higher than the Fed’s target fed funds rate, another interbank lending rate, of 2 percent. That figure showed that banks are still largely keeping their cash to themselves.
The market for commercial paper _ or the debt that companies issue for short-term cash _ appeared to be a bit tighter Tuesday than on Monday.
The rate for the highest quality 30-day asset-backed commercial paper was at 3.61 percent, up from 3.43 percent on Monday, Simons said. And the rate on 30-day dealer commercial paper was at 3.53 percent, up from 3.2 percent on Monday.
The market for credit default swaps _ or insurance to protect against corporate bond defaults _ also indicated that conditions remain squeezed. A high spread, or difference between a certain company’s credit default swap rate and a benchmark lending rate, shows that the market is factoring in a higher chance of default.
A broad credit default swap market indicator, the Markit CDX North America Investment Grade Index, was at 1.565 percent above LIBOR, up from 1.51 percent above LIBOR late Monday, according to Phoenix Partners Group. The credit default swap rates of Morgan Stanley and Goldman Sachs, the two remaining investment banks that are now becoming commercial banks, rose on Monday as well from Friday’s levels.
EDF launches 12.5 bn pound bid on British Energy
24 Sep, 2008, 1241 hrs IST, REUTERS
PARIS: French utility EDF launched a 12.5 bn pound ($23.14 bn) agreed takeover bid on power producer British Energy, helping to secure Britain’s nuclear future.
EDF, the world’s biggest maker of nuclear energy, said on Wednesday it offered to pay 774 pence per British Energy share.
As an alternative, EDF is also proposing to pay 700 pence in cash plus one nuclear power note, linked to BE’s future performance.
“We are delighted that the British Energy Board has unanimously accepted this offer,” said EDF Chairman Pierre Gadonneix. “This paves the way for investment in the UK.”
EDF and Centrica, which owns British Gas, are in talks about Centrica taking a 25 percent stake in the new British Energy following EDF’s completion of the deal with British Energy.
EDF’s final offer of 774 pence per share represents an increase of 9 pence per share from an original proposal, which was rejected by British Energy on August 1, and values the company at 12.5 bn pounds.
‘Corrupt Asians’ feel vindicated by Wall Street bust
23 Sep, 2008, 2223 hrs IST, REUTERS
KUALA LUMPUR/SEOUL: A decade ago, Federal Reserve Chairman Alan Greenspan declared that Asia would realise that “market capitalism, as practiced in the West, especially in the United States, is the superior model”.
Asia never quite saw it that way. Now the region’s policymakers can feel that the collapse of Wall Street investment banks and Washington’s planned $700 billion bailout vindicated their suspicion of freewheeling capitalism.
The implications for investors in the region are enormous, if not immediately obvious. Governments may slow deregulation, rush to rescue of troubled companies or clampdown more quickly on market ructions.
Greenspan made his comments to U.S. lawmakers to justify a bailout for Asia’s collapsing economies during the 1997/1998 crisis. He is now in the dock, charged by some economists with pursuing a lax monetary policy and loose regulation that helped create the bubble that led to Wall Street’s financial implosion.
Asian policymakers have not forgotten the hectoring they got from the United States and the International Monetary Fund, which dispensed cash in exchange for hiking interest rates, closing banks, slashing spending and opening markets.
“At that time, (IMF and U.S. officials) behaved as if they were treating an owner of a small business just about to go bankrupt,” said Chung Duck-koo, chief South Korean negotiator with the IMF in 1997, when he was a deputy finance minister.
Malaysia, which spurned both the cash and the IMF advice by fixing the value of its ringgit currency and imposing capital controls back in 1998, sees Washington’s rescue efforts as proof it had converted to its way of thinking.
“We are now seeing the West, particularly the U.S., ignoring the standard IMF prescriptions and implementing the same measures that Malaysia had done during the 1997 crisis,” said Nor Mohamed Yackop, a top Malaysian finance ministry official, who in 1998 helped impose capital controls.
BITTER MEDICINE Ten years ago Asia was on its knees as a financial meltdown rocked the region after a series of crises in Latin America that later bankrupted Russia. Despite high growth and low inflation, Asia’s tiger economies succumbed due to overvalued exchange rates, persistent current account deficits, speculation in financial markets and dependence on short term capital.
Most countries applied the IMF’s bitter medicine and consequently South Korea’s economy shrank 7 percent in 1998, Indonesia contracted by 13 percent and Thailand by 10.5 percent, according to the Fund’s data.
But the region recovered quickly, amassing in the process trillions of dollars in foreign currency reserves, first as defence against another crisis and later thanks to windfall profits from the global commodity boom.
Ironically, much of those reserves are invested in U.S. Treasury bonds, bankrolling Washington’s efforts to contain today’s crisis, with the latest plan to buy toxic debt alone earmarked at $700 billion and the total cost estimated at up to $1.8 trillion.
The irony is not lost on nations that took draconian steps in return for $35 billion the IMF initially offered in 1997 to rescue Indonesia, South Korea and Thailand and later topped it up with extra $77 billion.
Critics say the “Washington Consensus”, a term referring to the market liberalisation pursued by the IMF and the U.S. administration, has led to today’s meltdown.
“It was so patronising, first it was the lazy Latinos, then it was the corrupt Asians and their crony capitalists,” said Professor Stephany Griffith-Jones, a leading authority on capital flows and developing economies.
“The lesson is you need to regulate everything. Any deregulated market in developed and developing countries leads to these results,” said Griffith-Jones, Executive Director of the Initiative for Policy Dialogue at New York’s Columbia University.
BUBBLES TO STAY Others, however, say the IMF-bashing goes too far and that the crises that rocked Latin America and Asia were largely of their own making.
They also argue that it is impossible to staunch the capital flows that finance growth in many developing economies.
“No doubt capital markets have plenty of problems, often they generate these bubbles. The bubble explodes and then there is a financial crisis,” said Domingo Cavallo who was Argentina’s finance minister from 1991-1996.
“So far there has been no recipe for avoiding these problems,” said Cavallo, who was the architect of Argentina’s plan that fixed the dollar-peso exchange rate at parity, crushing inflation and boosting growth and investment.
“We thought it was good for Latin America, it was not an imposition of Washington.”
South Korea’s Chung says rich nations may tighten regulation and see more government intervention, but developing countries can ill-afford to reverse to pre-1997 policies.
“In developing or underdeveloped countries, in which each government has the mission to improve overall welfare and overall income level, there is no choice for them but to continue to accept and pursue globalisation.”
Paul Luke, an investment banker and fund manager who lived through emerging market crises from Brazil in the 1980s to Russia in 1998, says those who ignored the IMF advice, not those who followed it are now at the centre of the global upheaval.
“A lot of the countries that have followed it are countries that have done rather well,” he said.
“It is two countries in the Organisation for Economic Co-Operation and Development, the U.S. and Britain, who haven’t been following the Washington Consensus.”
Auctions may be only option for US bailout
24 Sep, 2008, 2000 hrs IST, REUTERS
NEW YORK: The US government may have little choice but to use an auction process to price up to $700 billion of toxic mortgage debt it is buying from financial institutions, even if the formula has its snags.
The Bush administration sent a proposal for the unprecedented bailout to U.S. lawmakers this weekend to tackle the nation’s worst financial disaster since the Great Depression.
The government has a tightrope to walk. It wants to buy assets cheaply enough to make sure taxpayers don’t lose too much money, and perhaps even make money when markets stabilize, but at a high enough price to avoid hurting banks any more than necessary.
An auction process would make sense, because it would allow the banks with the best information about the securities to determine the price, said Peter Cramton, a professor of economics at University of Maryland who has set up auctions for governments globally. But competition among sellers would prevent banks from setting too high a price.
Cramton believes a “reverse descending clock auction” is ideal in this situation. Through that process, the government would announce a target for how much of a particular security it is seeking to buy in dollar terms, and an initial buying price.
Sellers would indicate how much they would sell at that initial price, and if there were too many sellers, the government would lower its price until the amount of securities that banks are willing to sell equals the government’s target.
“I’ve conducted dozens of these auctions for assets valued at billions of dollars, and they are extremely effective in determining a competitive market price,” Cramton said.
DRAWBACKS
But there are drawbacks. A reverse descending clock auction would work best for securities held by multiple banks, but not as well for securities that are owned by just one or two institutions, Cramton said.
In that case, there would be less competition to sell. The price might be higher than the assets end up being worth, costing the government money.
Banks believe there are differences among their securities. For example, Merrill Lynch & Co Inc agreed in July to sell $30.6 billion of repackaged debt known as collateralized debt obligations at 22 cents on the dollar. That is well below where Citigroup Inc marked its securities in the second quarter. If Citi embraced Merrill’s pricing levels, the bank could have another $7 billion of charges in the third quarter, Deutsche Bank analyst Mike Mayo estimated this summer.
And if auctions do attract a large number of sellers, competition may push prices down to low levels, forcing other banks to write down the value of their mortgage bonds to those prices.
Those write-downs could force banks to seek new capital, which has difficult to raise in the current environment. If raising capital proves too hard, more major banks could fail or get pushed into shotgun marriages, potentially worsening the financial crisis.
“Recognition (of losses) brings capital shortfalls into the open,” wrote Jan Hatzius, an economist at Goldman Sachs, in a note on Saturday.
NEVER BEFORE
Also worrisome is the speed at which this auction will be set up, because of the complexity of the securities being sold.
“Nothing on this scale has ever been done before,” said Eric Maskin, professor at the School of Social Science at the Institute for Advanced Study, who won a 2007 Nobel Prize for economics and has conducted extensive research into auctions.
But even with these concerns, such an auction can likely be done, and there may not be another choice, Maskin said.
Banks must purge bad assets before they can raise the new capital they need, or find other institutions willing to buy them. After the failure of Lehman Brothers Holdings Inc last week, investors have grown increasingly suspicious of U.S. financial institutions.
“You might not like the consequences of an auction, but it seems like the least of all evils,” said Lawrence Ausubel, a professor of economics at University of Maryland.
Bernanke’s testimony to Joint Economic Committee
24 Sep, 2008, 1937 hrs IST, REUTERS
I will now turn to a brief update on the economic situation. Ongoing developments in financial markets are directly affecting the broader economy through several channels, most notably by restricting the availability of credit. Mortgage credit terms have tightened significantly and fees have risen, especially for potential borrowers who lack substantial down payments or who have blemished credit histories.
Mortgages that are ineligible for credit guarantees by Fannie Mae or Freddie Mac–for example, nonconforming jumbo mortgages–cannot be securitized and thus carry much higher interest rates than conforming mortgages. Some lenders have reduced borrowing limits on home equity lines of credit.
Households also appear to be having more difficulty of late in obtaining nonmortgage credit. For example, the Federal Reserve’s Senior Loan Officer Opinion Survey reported that as of July an increasing proportion of banks had tightened standards for credit card and other consumer loans. In the business sector, through August, the financially strongest firms remained able to issue bonds but bond issuance by speculative-grade firms remained very light.
More recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment-grade firms. Financing for commercial real estate projects has also tightened very significantly. When worried lenders tighten credit, then spending, production, and job creation slow.
Real economic activity in the second quarter appears to have been surprisingly resilient, but, more recently, economic activity appears to have decelerated broadly. In the labor market, private payrolls shed another 100,000 jobs in August, bringing the cumulative drop since November to 770,000. New claims for unemployment insurance are at elevated levels and the civilian unemployment rate rose to 6.1 percent in August.
Households’ real disposable income was boosted significantly in the spring by the tax rebate payments, but, excluding those payments, real after-tax income has fallen this year, which partly reflects increases in the prices of energy and food. In recent months, the weakness in real income together with the restraining effects of reduced credit flows and declining financial and housing wealth have begun to show through more clearly to consumer spending.
Real personal consumption expenditures for goods and services declined in June and July, and the retail sales report for August suggests that outlays for consumer goods fell noticeably further last month. Although the retrenchment in household spending has been widespread, purchases of motor vehicles have dropped off particularly sharply.
On a more positive note, oil and gasoline prices–while still at high levels, in part reflecting the effects of Hurricane Ike–have come down substantially from the peaks they reached earlier this summer, contributing to a recent improvement in consumer confidence.
However, the weakness in the fundamentals underlying consumer spending suggest that household expenditures will be sluggish, at best, in the near term. The recent indicators of the demand for new and existing homes hint at some stabilization of sales, and lower mortgage rates are likely to provide some support for demand in coming months.
Moreover, although expectations that house prices will continue to fall have probably dissuaded some potential buyers from entering the market, lower house prices and mortgage interest rates are making housing increasingly affordable over time. Still, homebuilders retain large backlogs of unsold homes, which should continue to restrain the pace of new home construction. Indeed, single-family housing starts and new permit issuance dropped further in August.
At the same time, the continuing decline in house prices reduces homeowners’ equity and puts continuing pressure on the balance sheets of financial institutions, as I have already noted. As of midyear, business investment was holding up reasonably well, with investment in nonresidential structures particularly robust.
Recent moves hint at steady rates in RBI policy review
24 Sep, 2008, 1252 hrs IST, ECONOMICTIMES.COM
MUMBAI: The finance ministry’s latest move to allow companies to issue foreign currency exchangeable bonds (FCEB) has come just a day after it decided to raise the external commercial borrowing limit of infrastructure companies.
The funds raised can be used for direct investment overseas in joint ventures and wholly-owned subsidiaries, or even in group companies. The promoter group company receiving such investments will not be permitted to utilise the proceeds in the capital market or in real estate in India. Minimum maturity of FCEB shall be five years.
On Monday, RBI raised the external commercial borrowing limit of infrastructure companies aimed at helping them meet their huge funding requirements.
This move would be a welcome one especially for construction and realty companies, as the recent monetary tightening by the central bank in lieu of double digit inflation has made it tough for such companies to borrow in domestic markets.
“The recent stock market meltdown has made it hard for infrastructure companies to source funds from the primary markets,” Sharath Zha, analyst with Raxson Wealth Management.
It is estimated that in next five years infrastructure companies require $500 billion.
Liberalisation of the ECB norms by the RBI also gains importance with India’s core infrastructure sector growth declining to 4.3 per cent in July from 7.2 per cent a year ago. It had slumped to 3.4 per cent earlier month.
“Sectors like capital goods, construction, engineering, telecom and transport are directly tied to the growth of infrastructure. Any investment in infrastructural projects multiplies the positive effect to the other sectors. So, given the slowdown in the global economy, investments in the infrastructure sector hold the key,” said V Theegala, an analyst with a local brokerage.
“Infrastructural bottlenecks, if eliminated, will enhance efficiency of other sectors and thereby reduce costs. China’s robust growth is due to its state of the art infrastructure and consequent low cost structure of the economy,” he added.
The RBI increased the overseas borrowing limit for core sector companies to $500 million from $100 million per financial year. It also raised the upper limit on interest rate by 100 basis points to 450 bps over the London Interbank Offered Rate.
The raising of ECB limit also serves a dual purpose of infusing dollars into the system and supporting the falling rupee. However, there could be more to it than meets the eye.
“Given the rupee deprecation against the US dollar and global liquidity crisis what made Indian government ease the ECB norms? It would seem the RBI is preparing against the impact of global slowdown. Normally, governments give priority to infrastructure development in such situations,” Zha said.
However, companies taking the RBI cue will find it difficult to raise money overseas given the turmoil in the financial markets. Also, it is doubtful if funds raised would be at cheaper rate, considering the LIBOR is 3.50 per cent (it peaked at 5.03% on Sep 17), which makes a borrowing over seven years at 8 per cent or more.
This would likely put a damper on RBI’s plans to support the Indian currency against the US dollar.
Earlier in the month, the Indian central bank announced measures like direct participation in the foreign exchange market, additional liquidity injection and increase in the FCNR and NRE term deposit rates.
But the real reason behind RBI’s recent moves may be its inability to raise interest rates any further when it meets on Oct 24 for the second quarter review of the monetary policy.
Another hike in interest rates would severely impact India’s growth, which slowed to 7.9 per cent in the first quarter ended June 30, from 8.8 per cent in the preceding quarter and 9.2 per cent in the same quarter last year. This is the lowest GDP growth in three years.
In fact, Sunil Sharma, CEO, Haribhakti Group, said, “RBI may cut 25 basis points in CRR in order to pump in money into the system. The government has to take note of liquidity factor.”
Goldman Sachs Group expects the central bank may cut benchmark interest rates in the first quarter of 2009 as inflation and growth slow.
Taking a different view, Shanto Ghosh, director and principal economist, Deloitte Haskins & Sells, said, “Chances are high that interest rates would be raised further in view of forthcoming election next year. Repo or reverse repo rates may be hiked. By hook or by crook, the government will have to control inflation for that matter.”
24 Sep, 2008, 0356 hrs IST, REUTERS
24 Sep, 2008, 0215 hrs IST, REUTERS
24 Sep, 2008, 0349 hrs IST, ET Bureau
Goldman, Morgan woes could trigger more FII exit
23 Sep, 2008, 0650 hrs IST,Pradeep Pandey, ET Bureau
MUMBAI: With the US Federal Reserve approving the conversion of two major global investment firms into bank holding companies, Indian market is likely to witness more pullouts by foreign institutional investors (FIIs), fear BSE traders. The conversion of Goldman Sachs and Morgan Stanley into banks may see more winding down of structured investments vehicles which these entities had built in India and other Asian countries. Now, there could be a curb on their investment portfolios with much tighter regulatory norms, traders said.
Goldman Sachs and Morgan Stanley will now be regulated like any other bank and will have to follow strict ‘dos and don’ts’ of the regulation. P-Notes, exotic structured investments and other such derivatives-based instruments would have to be wound down, a senior official with a leading private securities firm said.
As such, investments would be required to be shifted to some other subsidiaries of the proposed banks. However, on the positive side, they would be able to access public deposits,” he said. Airing a similar view, a financial market specialist with a global financial institution told ET that these entities would now be placed under much tighter regulation by the Fed, including tough capital requirements for investments. In addition, they will have to follow sectoral and group limits under overall banking norms as they will be controlled by the banking regulator, he asserted.
In the backdrop of the global turmoil of the past two weeks, FIIs have been pulling out drastically from the Indian market and have been on a continuous selling mode. In this calendar year so far, FIIs have sold a net of about $ 8.2 billion (Rs 37,000 crore) and have been net sellers for every month since May, according Sebi data.
“It is for the first time since 1994, that FIIs are net sellers for such a long sustained period,” said a technical analyst. Goldman Sachs and Morgan Stanley were granted approval on Sunday to become bank holding companies regulated by the US Federal Reserve.
Under the new set-up, the Federal Reserve becomes the primary regulator of the parent companies though the Securities Exchange Commission (SEC) continues to regulate their US securities businesses. The Federal Reserve’s control over banks is much tighter though Goldman and Morgan would gain long-term access to the Fed’s discount window and be able to access bank deposits insured by the Federal Deposit Insurance Corp.
Indian markets trying to understand Wall Street changes
22 Sep, 2008, 1654 hrs IST, IANS
NEW DELHI: Indian investors are still trying to evaluate the full implications of the biggest financial restructuring in the US since the Great Depression of 1929, analysts said here on Monday.
“What is happening today is similar to what happened after the Great Depression of 1929 when the US federal government set up the Reconstruction Finance Corporation to provide credit to credit crunch-hit companies,” said analyst Jagannadham Thunuguntla.
Thunuguntla is the head of capital markets of India’s fourth largest share brokerage firm, the Delhi-based SMC Group.
He was referring to the various measures that the US central bank, the Federal Reserve Bank and the US government have announced over the last few days.
The US Fed said late Sunday it had agreed to a request by the last two major investment banks – Goldman Sachs and Morgan Stanley – to change their status to bank holding companies.
The decision means that both Goldman and Morgan Stanley will be able not only to set up commercial bank subsidiaries to take deposits, giving them a major resource base, but they will also have the same access as other commercial banks to the Fed’s emergency loan programme.
“The possible downside of this decision is that they (Goldman Sachs and Morgan Stanley) may no more be able to take the kind of risks they used to take and be aggressive investors all over the world,” Thunuguntla said.
US financial crisis has a lesson for India on derivatives: CEA
21 Sep, 2008, 1130 hrs IST, PTI
NEW DELHI: The financial crisis in US, the biggest since the Great Depression, has a lesson for India, exercise caution in opening up derivative products and initially permit only those which are exchange-traded, said a top economic adviser to the government.
“You have to be cautious. Say, for example, when derivatives are mentioned, the implication to me is that you should try and first open up derivatives which are exchange- traded because those are much more transparent,” Chief Economic Adviser Arvind Virmani told media here.
Pointing out that the country should open up where the risks are the least, Virmani said, even if the people make mistakes in exchange-traded products, it can be seen by all and can be a lesson for them.
“People will know that these fellows have bought and lost money,” he said, adding these are far better than the complex, non-transparent private deals, which are causing problems in the US.
“The structure of deals in the US was so layered and complex that you do not know even after a year what has been going on. That I think is the simple but effective lesson that applies also to us,” he said.
According to analysts, the sub-prime crisis turned into a systemic risk in the US as original lenders to sub-prime housing borrowers sold their portfolio to other players, also through complex derivatives. Therefore, it is not clear what would be the size of losses and which other firms would succumb to the financial meltdown.
Last week Merrill Lynch was bought over by Bank of America, Lehman Brothers filed for largest bankruptcy in the US after which Barclays agreed to buy some of its assets for USD 1.75 billion. AIG was given a USD 85 billion package by the US Federal Reserve.
There are two distinct groups of derivative contracts in India — Over-the-counter (OTC) and exchange traded.
OTC derivatives are contracts that are traded directly between two eligible parties, with or without the use of an intermediary and without going through an exchange.
On the other hand, exchange-traded derivatives are traded on an exchange.
The Reserve Bank and market regulator SEBI have recently permitted exchange-traded currency futures, initially in rupee-dollar pare, and are expected to allow exchange-traded interest rate futures by December-January.
Besides, there exist certain OTC derivatives also in the interest rate futures and currency futures categories.
“What it (the crisis) tells us is what that caution should be. It is an old lesson in a new form. Transparency is almost like a mantra. Then we forget what transparency is. Crisis like this tells you what it means in concrete terms,” Virmani said.
So, this is the old lesson in the new form — caution in opening up, regulatory systems, transparency, good accounting and so on, he said.
He said crisis gives you more information on which are the areas you should be cautious.
“Basically, it is innovation. When there are innovations, you have to be cautious. But you must try to understand that and open up where the risks are the least,” Virmani said.
China to help Pak set up 10 nuke power plants
24 Sep, 2008, 1713 hrs IST, PTI
ISLAMABAD: In an apparent bid to counter the Indo-US civil nuclear deal, Pakistan plans to seek fuel technology from China for 10 new atomic power plants it intends to set up over the next two decades.
During a high-level meeting, Prime Minister Yousuf Raza Gilani approved the construction of two new nuclear plants at Chashma in Punjab province, sources said, adding that these plants are expected to be built with Chinese assistance.
The September 19 meeting attended by top officials of the military and Strategic Plans Division, the body that oversees the country’s nuclear arsenal, had drawn up plans to acquire new nuclear plants and a satellite communications system.
The Chashma complex, located about 200 kilometre southwest of Islamabad, already has two atomic power plants one that is functional and other that is expected to be completed in 2011.
Pakistan plans to build 10 nuclear power plants at six sites across the country in the next 22 years and President Asif Ali Zardari will seek fuel technology from China for future atomic plants during his forthcoming visit to that country, The News daily reported on Wednesday.
The plants are aimed at generating 8,800 MW of nuclear energy in the next two decades, a senior government official said.
The six sites selected for the new plants are Qadirabad-Bulloki link canal near Qadirabad Headworks, Dera Ghazi Khan Canal near Tuansa barrage, Taunsa-Punjnad canal near Multan, Nara canal near Sukkur, Pat feeder canal near Guddu and Kabul River near Nowshera, the report said.
Meira Kumar asks Chidambaram, Ahluwalia to ensure funds for SCs
24 Sep, 2008, 1515 hrs IST, IANS
NEW DELHI: Social Justice and Empowerment Minister Meira Kumar has asked Finance Minister P Chidambaram and Planning Commission Deputy Chairman Montek Singh Ahluwalia to ensure proper allocation of funds for Scheduled Castes (SCs) by all ministries and government departments.
In a letter to Chidambaram and Ahluwalia, Kumar, an influential minister in Prime Minister Manmohan Singh’s government, has sought measures to ensure that from 2009-10, central ministries and departments set aside 15 per cent of total funds for SCs, as per norms.
What has upset Kumar, the daughter of India’s known Dalit icon late Jagjivan Ram, is the nonchalance of ministries and departments despite SCs being one of India’s largest disadvantaged social group, accounting for 16.2 per cent of the country’s bn-plus population as per the 2001 census.
In view of their social, educational and economic backward for decades, India’s central government allocates special funds to all ministries and departments annually to be spent on the development of SCs.
In the letter, Kumar regretted that “none of ministries and departments, for which information is available with us, has started showing the SCSP (schedule caste sub-plan) allocation.”
The SCSP, earlier known as SC plan, was introduced in 1979 to achieve overall development of SCs by raising them above the poverty line.
“Non-earmarking of adequate funds under SCSP by majority of ministries and departments shows laxity in implementing an important mission,” said Mrityunjay Nayak, member, National Commission for Scheduled Castes (NCSC).
“The plan panel must evolve a mechanism to get SCSP funds set aside at the very outset of budgetary allocation, instead of leaving it to the discretion of ministries and departments,” Nayak said.
Since the finance ministry is the nodal ministry for the country’s central budget, Kumar has sought from Chidambaram “urgent necessary instructions” to all ministries and departments to ensure that “at least from 2009-10″ they show an appropriate portion (15 per cent) of the plan budget under the SCSP head.
Funds under SCSP are supposed to be spent on providing basic minimum services to SCs like primary education, health, drinking water, nutrition, rural housing, electrification and link roads.
Since the Planning Commission is to play an equally key role in executing the SCSP, Kumar in her letter has also drawn Ahluwalia’s attention to how the norms are being flouted by the ministries and departments.
The plan had revised the guidelines for SCSP funds utilisation and allocation in December 2006 to make the scheme more effective and result oriented at the grassroots level.
24 Sep, 2008, 1122 hrs IST,
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Economy of the United States
From Wikipedia, the free encyclopedia
| Economy of United States | |
 |
|
| Currency | United States Dollar (USD) |
|---|---|
| Fiscal year | 1 October – 30 September |
| Trade organizations | NAFTA, WTO, OECD and others |
| Statistics | |
| GDP (PPP) | $13.81 trillion (2007)[1] (1st) |
| GDP growth | 2.1% (II quarter 2008, from year ago)[1] |
| GDP per capita | $45,850 (2008) (10th) |
| GDP by sector | agriculture (0.9%), industry (20.6%), services (78.5%) |
| Inflation (CPI) | 5.6%(Jun 2007 to Jun 2008) [1] |
| Population below poverty line |
12.5% (2007)[2] |
| Labor force | 154.5 million (includes unemployed) (May 2008)[2] |
| Labor force by occupation |
managerial and professional (35.5%), technical, sales and administrative support (24.8%), services (16.5%), manufacturing, mining, transportation, and crafts (24%), farming, forestry, and fishing (0.6%) (excludes unemployed) (2007) |
| Unemployment | 6.1% (August 2008)[3] |
| Main industries | petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, consumer goods, lumber, mining, defense |
| External | |
| Exports | $1.149 trillion f.o.b. (2007 est.) |
| Export goods | agricultural products (soybeans, fruit, corn) 9%, industrial supplies (organic chemicals) 27%, capital goods (transistors, aircraft, motor vehicle parts, computers, telecommunications equipment) 49%, consumer goods (automobiles, medicines) 15% (2003) |
| Main export partners | Canada 21%, Mexico 12%, China 6%, Japan 5%, United Kingdom 4%, Germany 4% |
| Imports | $1.985 trillion c.i.f. (2007 est.) |
| Import goods | agricultural products 5%, industrial supplies 33% (crude oil 8%), capital goods 30% (computers, telecommunications equipment, motor vehicle parts, office machines, electric power machinery), consumer goods 32% (automobiles, clothing, medicines, furniture, toys) (2003) |
| Main import partners | China 17%, Canada 16%, Mexico 11%, Japan 7%, Germany 5% |
| Gross External Debt | $13.77 trillion (30 June 2008) |
| Public finances | |
| Public debt | $9.67 trillion (September 2008)[4] |
| Revenues | $2.568 trillion (2007)[5] |
| Expenses | $2.896 trillion (2007)[5][6] |
| Economic aid | ODA $19 billion, 0.2% of GDP (2004) [3] |
| Main data source: CIA World Factbook All values, unless otherwise stated, are in US dollars |
|
The economy of the United States is the largest national economy in the world.[7] Its gross domestic product (GDP) was estimated as $13.8 trillion in 2007.[8] It is a mixed economy in that private firms make the majority of the microeconomic decisions while being regulated by the government. The U.S. economy maintains a high level of output per person (GDP per capita, $46,000 in 2007, ranked at around number ten in the world). The U.S. economy has maintained a stable overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment funded by both national and, because of decreasing saving rates, increasingly by foreign investors. In 2008, seventy-two percent of the economic activity in the U.S. came from consumers.[9]
Major economic concerns in the U.S. include national debt, external debt, entitlement liabilities for retiring baby boomers who have already begun withdrawing from their Social Security accounts, corporate debt, mortgage debt, a low savings rate, falling house prices, a falling currency, and a large current account deficit. As of June 2008, the gross U.S. external debt was over $13 trillion,[10] the most external debt of all countries in the world.[11] The 2007 estimate of the United States public debt was 65% of GDP.[12] As of September 2008, the total U.S. federal debt was approximately $9.7 trillion[13], about $31,700 per capita. Including unfunded Medicaid, Social Security, Medicare, and similar promised obligations, the government liabilities rises to a total of $59.1 trillion, or $516,348 per household.[14]
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Economy of the United States – Wikipedia, the free encyclopedia
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