recession2010

UK economy emerges from recession

nathanblakeley — Tue, 26 Jan 2010 09:50:16 +0000

The UK economy has come out of recession, after figures showed the economy had grown by 0.1% in the last three months of 2009.

The economy had previously contracted for six consecutive quarters – the longest period since quarterly figures were first recorded in 1955.

There have been recent recovery signs – last week UK unemployment fell for the first time in 18 months.

The UK’s had been one of the last major economies still in recession.

Europe’s two biggest economies – Germany and France – came out of recession last summer. Japan and the US also exited recession last year.

The UK recession began in the April-to-June quarter of 2008.

During 18 months of recession, public borrowing increased to an estimated £178bn, while output slumped by 6%.

First estimates of how the economy has performed are made with about 40% of the data available, and Investec economist David Page has warned there is “plenty of room for surprises” in the figures.

sourced from the BBC

Iceland approves new Icesave deal

nathanblakeley — Thu, 31 Dec 2009 11:30:12 +0000

Iceland’s parliament has approved plans to repay 3.8bn euros (£3.4bn) to savers in the UK and the Netherlands.

Icesave collapsed last October

The money will go to the British and Dutch governments, who partially compensated savers when the Icesave online bank failed.

More than 320,000 savers lost out when the bank collapsed in 2008.

A bill on the measure, narrowly approved against strong opposition, was seen as crucial to Iceland’s bid to join the EU and rebuild its economy.

The bill was passed by 33 votes to 30. The Icelandic government had threatened to resign if the measure was rejected.

“Approving the bill is the better option and will avoid even more economic damage,” Finance Minister Steingrimur Sigfusson said during the debate.

“History will show that we are doing the right thing.”

But the bill’s opponents argue ordinary Icelanders should not have to pay and say the compensation amounts to some 12,000 euros for each citizen on the island nation of 320,000.

A poll taken in August suggests that 70% of Icelanders were against the Icesave deal.

An original agreement – negotiated with the British and Dutch governments – was approved in August.

But subsequent amendments negotiated by the prime minister were rejected in both countries, forcing a fresh vote.

Under the new deal the money – which represents 40% of the country’s gross domestic product – will be repaid gradually, staggered until 2024.

sourced from The BBC

In White House meeting, Obama calls on banks to increase lending

nathanblakeley — Sun, 20 Dec 2009 09:09:29 +0000

sourced from The Washington Post

By Binyamin Appelbaum and Michael A. Fletcher

Washington Post Staff Writer
Tuesday, December 15, 2009

President Obama exhorted the nation’s biggest banks on Monday to make “extraordinary” efforts to increase lending, even as some of those firms are racing to distance themselves from government control.

The nation’s most powerful bankers sat in the Roosevelt Room at the White House and nodded as the president spoke, but some executives and industry officials said afterward that increasing lending is largely beyond their ability.

Meanwhile, Citigroup and Wells Fargo announced plans Monday to spend billions of dollars — not on lending, but to repay federal aid. Citigroup chief executive Vikram Pandit missed the White House meeting to rally investor support.

Bank executives say they itch to make profitable loans, as many as possible, but are struggling to find qualified borrowers. They also say that the administration is asking for increased lending even as it pursues financial reforms that will limit the ability of banks to make loans.

Some note that a recession caused by an orgy of lending must be solved in part through greater restraint.

Obama has come under increasing pressure to demonstrate his concern for the plight of Americans caught in a rising tide of joblessness, even as the larger economy appears headed to recovery. The White House portrayed Monday’s meeting as a chance for the president to channel the anger of Americans who think federal programs intended to revive the broader economy have succeeded only in restoring Wall Street’s profitability.

“America’s banks received extraordinary assistance from American taxpayers to rebuild their industry,” the president said after the meeting. “And now that they’re back on their feet, we expect an extraordinary commitment from them to help rebuild our economy.”

Obama added that he expects not just effort but “results.”

Some administration officials privately conceded that borrowing always declines during recessions, and that they are struggling to find effective ways of spurring new lending. Furthermore, the administration’s options continued to be constrained by the belief of many officials that meddling in the details of banking is counterproductive.

The administration also is surrendering a measure of leverage over the industry as banks repay federal aid provided under the Troubled Assets Relief Program — although officials are eager to shed the political baggage of aiding big Wall Street firms. With the announcements Monday by Citigroup and Wells Fargo that they would repay federal aid, all of the nine major banks that got money late last year will be on track to pay it back.

As a result, while the White House has raised the temperature of its rhetoric in recent weeks, policy measures have not followed.

Some activists are calling on the president to do more. Just after leaving an Atlanta meeting Monday with ministers and others, some of whom are facing foreclosure on their churches and homes, the Rev. Jesse Jackson called on Obama to use federal fair-lending laws to force the banks to help struggling communities.

“Banks got federal money at zero interest, but homeowners and churches are paying pre-TARP prices for their loans,” Jackson said. “The banking system must be made accountable. The attorney general should have been in that meeting.”

The Congressional Black Caucus and other Democrats, who are concerned that administration efforts to slow foreclosures have come nowhere near meeting their stated goals, have also been pressing for additional steps to help distressed homeowners.

The banking industry has reduced lending for five consecutive quarters, even as it has regained profitability thanks to vast public aid. The amount of money on loan from banks fell by about $600 billion, or 7.2 percent, from September 2008 to September 2009, according to the Federal Deposit Insurance Corp.

The White House initially portrayed the meeting with bankers as an opportunity to discuss strategies for increasing lending. But the president set a sterner tone over the weekend, telling the CBS show “60 Minutes”: “I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street.”

One day later, the president was more temperate, saying that he did not intend to “vilify” any company or industry and that he appreciated existing efforts to increase lending, such as reviewing rejected applications to see whether loans can be approved. The president suggested Monday that banks should review applications three and four times if necessary.

Bankers also emerged from the meeting in a conciliatory mood, saying they share the administration’s goals.

“Every bank in that room talked about adding many, many small-business originators and setting very aggressive goals for small-business lending next year,” said Richard Davis, chief executive of US Bancorp.

Bank of America plans to increase small-business lending by $5 billion next year. J.P. Morgan Chase has committed to an increase of $4 billion.

“This is simply what a bank should do,” J.P. Morgan chief executive Jamie Dimon said in a statement released before the meeting.

This is the second time the president has convened bank executives to urge increased lending. The first meeting, in March, did little to slow the slide. The president said Monday that he continues to get “too many letters from small businesses who explain that they are creditworthy and banks that they’ve had a long-term relationship with are still having problems giving them loans.” But the White House on Monday defended the value of the rhetoric.

“I think that the bully pulpit can be a powerful thing,” said press secretary Robert Gibbs.

Obama said he also discussed the need for financial reform, urging the bank executives not to lobby against proposals such as the creation of an agency to protect borrowers from lending abuses. And the president said he once again urged moderation in executive compensation.

“I made it clear that it is both in the country’s interest and ultimately in the financial industry’s interest to have updated rules of the road to prevent abuse and excess,” Obama said afterward. “I have no intention of letting their lobbyists thwart reforms.”

Bank executives, however, say that they strongly favor reform — they just differ with the administration about some of the particulars.

The guest list for the meeting included the top executives of 12 of the nation’s largest banks, but there were three late scratches. Goldman Sachs’s Lloyd C. Blankfein, John Mack of Morgan Stanley and Citigroup’s Richard Parsons participated in the meeting by telephone because the flight all three had planned to take from New York to Washington was delayed by fog.

sourced from The Washington Post

London 'damaged' by bonus tax, Barclays chief says

nathanblakeley — Sun, 20 Dec 2009 08:44:30 +0000

London’s role as a leading financial hub may be “damaged” by the new bonus tax, Barclays chief John Varley has told the BBC.

Mr Varley is the first senior British banker to attack the one-off 50% tax on large bonuses for bankers recently announced by the government.

“I think that London could well be damaged by this,” he said.

The Barclays chief executive also criticised Labour for not ensuring a “predictable tax environment”.

The bonus levy applies to bonuses of more than £25,000, and lasts until April next year. France has announced similar plans.

The tax is payable by banks, with bankers still having to pay income tax on any bonus they receive as usual.

Mr Darling predicted in his pre-Budget report that the tax would raise £550m, though banks have claimed it would raise far more.

‘Laments’ bonus tax

“Banks are competing globally – this bank, Barclays, competes with banks all around the world and we have to be able to compete on a level playing field,” Mr Varley told the BBC.

“The United Kingdom and France have gone in that direction (the bonus tax) and I lament that,” he added.

I understand the anxiety in the public and in stakeholders in this country about pay in the banking industry

John Varley

The Treasury, in a response to Mr Varley, said it stands by its decision to have a tax.

“The government does not believe the long-term competitiveness of the UK financial services sector will be harmed by this one-off tax,” a Treasury spokesman said.

“Without the significant support that the taxpayer has provided over the last year, some of the banks would have failed, damaging the economy further.

“The bonus tax will ensure banks think twice before paying large bonuses on the back of taxpayer support.

Mr Varley also criticised the government for the changes it had made to the tax system.

In addition to the bonus tax, Mr Darling has implemented a new higher tax rate of 50% that will be applied to incomes over £150,000 a year from April 2010, and high-earners will be taxed on the value of their employers’ pension contributions.

“It is very important that for this economy we have a predictable tax environment, not just for this tax but for all taxes,” Mr Varley said.

“And what business needs and households need is a stable and predictable tax environment and I think that this (the bonus tax) is a demonstration of a lack of stability in the tax environment.”

Shadow chancellor George Osborne has said he does not oppose the bonus tax, but Conservative London Mayor Boris Johnson has warned the tax would “super-penalise” the city.

Competitiveness concerns

Unlike rivals Royal Bank of Scotland and Lloyds Banking Group, Barclays avoided seeking a bail-out from the UK government in the midst of the financial crisis last year.

It instead raised money from the Middle East, though it still benefited from emergency lending measures from the Bank of England to restore confidence to the credit markets.

Mr Varley is the most high-profile banker to hit out at the bonus tax

Mr Varley acknowledged the banking industry’s debt to the taxpayer.

“I know that as a system we had state support when we were on the brink of collapse and we need to acknowledge that in our behaviour,” he said.

“I understand the anxiety in the public and in stakeholders in this country about pay in the banking industry.

“But I also have a responsibility to our shareholders, and in the modern banking environment, talent is mobile. So unless I get the best people I will not be doing my duty to my shareholders.

“We need a level playing field to make sure that we can compete with the best companies in the world,” he added.

He said it was important that the financial services sector stayed competitive because it employs 1.3 million people, generates 15% of corporation tax contributed to the Treasury’s coffers, and accounts for 10% of the total output of the UK economy.

Barclays said recently it made a pre-tax profit of £1.56bn in the three months to 30 September.

Recession2009 is an independent supplier of news

nathanblakeley — Fri, 11 Dec 2009 00:57:43 +0000

Hi if you care about what you have been reading and the future of English politics, please as a comment from Recession2009

VOTE LABOUR. thank you

Darling 'must cut £36bn', IFS think tank says

nathanblakeley — Fri, 11 Dec 2009 00:52:07 +0000

Chancellor Alistair Darling has not revealed all the cuts needed to cut the UK’s deficit, experts have warned.

Alistair Darling says health and education will be ring-fenced

Public spending is facing a £36bn squeeze from 2011 – with £15bn of the cuts needed yet to be identified, the Institute for Fiscal Studies has said.

With health and education protected, the axe would fall on defence, housing, transport and higher education.

Justice Secretary Jack Straw said the IFS had not taken into account savings the government has already made.

‘Political statement’

He told BBC News: “We’ve already spent £4bn less on unemployment benefits and income support for the unemployed than was anticipated.”

Because they are not discussing priorities openly a great deal of damage is being done

Vince Cable, Lib Dem Treasury spokesman

Nick Robinson on the IFS report

Darling denies pre-election ‘con’

The government hoped to make further savings by “moderating the rate of increase of unemployment”, he added.

Mr Darling has continued to face accusations that he is withholding the full extent of the cuts required until after the election.

And BBC political editor Nick Robinson said he understood the Treasury and No 10 have been at odds over the issue of public spending next year.

Gordon Brown had won out, he said, in his insistence that existing commitments to boost spending by £30bn must be maintained.

Philip Hammond, for the Conservatives, said the IFS report “underlines the fact that the PBR… was a political statement designed for electioneering purposes rather than to address the real needs of the country”.

In its report, the IFS estimates the cost to families of paying back the national debt is £2,400 a year for eight years.

This would come from tax increases, such as the 0.5% rise in National Insurance from 2011 announced by Mr Darling in his pre-Budget report on Wednesday, and the impact of spending cuts.

The IFS says whichever party wins the next general election will have to cut 6.4% per year between 2011 and 2014 if they want to protect schools, hospitals and increase overseas aid, as both Labour and the Conservatives say they do.

The think tank predicted “severe cuts” elsewhere, of the kind not seen in Britain since the late 1970s, potentially across departments such as housing, transport, higher education and even defence.

The clampdown could even mean that all of Labour’s increase in public spending since it came to power could be unwound by 2018, the experts warned.

The IFS also estimated that Mr Darling had a 25% chance of missing the government’s own Fiscal Responsibility Bill target, compelling it to halve Britain’s record £178bn budget deficit in four years.

But they were also critical of Conservative plans to tackle the deficit, saying it had a 16% chance of success.

Of the £36bn in public spending cuts needed, the IFS said £12bn will come from efficiency savings – although it warns that the government has fallen short of its previous targets for efficiency savings – and £3.4bn will come from the public sector pay cap announced in the pre-Budget report.

Union anger

A further £1bn will come from cuts to public sector pensions and £5bn from already announced scaling back of spending programmes like IT, legal aid and prison management.

That would leave £15bn of unidentified cuts.

The IFS also warns that debt levels could remain high “for a generation” – at about 60% of national output – without policies to tackle the impact of the ageing population on the UK’s public finances.

Lib Dem Treasury spokesman Vince Cable, who argues that no areas of public spending should be off limits when it comes to cuts, called for a “proper debate” on where the axe should fall.

“Because they are not discussing priorities openly a great deal of damage is being done,” he told BBC News.

TUC General Secretary Brendan Barber called for “radical new thinking” to avoid cuts to services and warned of possible industrial action over the “unfair” public sector pay freeze.

He said there should be a “fairer contribution from the wealthiest” to help pay off Britain’s debts.

But BBC economics editor Stephanie Flanders said the IFS analysis also suggested the tax rises in the pre-Budget report would “overwhelmingly” impact on the top 10% of earners.

“Their income, if nothing else changes, will be cut by 5% by 2012,” she added.

From The BBC

Bank set to hold interest rates

nathanblakeley — Thu, 10 Dec 2009 00:21:32 +0000

The Bank of England is expected to announce no change in policy when it reveals the outcome of its most recent meeting later.

The Bank of England has left interest rates unchanged for eight months

The Bank is likely to hold interest rates at 0.5% and leave its £200bn asset purchase programme unchanged.

Last month, the Bank added £25bn to its quantitative easing programme, which involves printing money to buy assets from firms to stimulate the economy.

It is expected to wait until the scheme runs out before taking further action.

‘Scene set’

In November, the central bank said that the fragile economy and the risk of inflation falling below its target of 2% had led it to extend its quantitative easing scheme, which runs out in January.

But since then, the economic data has been largely positive.

“Last month’s decision set the scene until February, which we expect to be the next focal point for UK monetary policy,” said Philip Shaw, economist at Investec.

“We would be shocked if there were any result other than the Bank rate remaining on hold and the QE target fixed at £200bn.”

On Wednesday, the Chancellor Alistair Darling said the economy would shrink by 4.75% this year and that consumer inflation would rise from 1.5% to about 3% early next year before falling back.

Scourced from the BBC

is this the death of free news

nathanblakeley — Wed, 02 Dec 2009 23:54:44 +0000

Hi all

On the day Google say everyone will have to pay for news, here at recession2009 will try and still supply free news to all.

If you like what you see here we are starting a new website soon.

recessionnow.co.uk

hopefully operating early next year

Happy blogging & free news to all

\Yorkshire and Chelsea building societies agree merger Yorkshire and Chelsea building societies agree merger

nathanblakeley — Wed, 02 Dec 2009 23:46:43 +0000

The Yorkshire and Chelsea building societies have confirmed they will merge to create a large rival to the UK’s biggest society, the Nationwide.

The deal would create a society with 2.7 million members, a network of 178 branches and assets of £35bn.

The merger is considered a rescue for Chelsea, which lost significant sums it had invested in failed Icelandic banks.

The merger needs to be agreed by the societies’ members, who will not receive a windfall from a deal.

The two societies will retain their brand names under the proposals, but the enlarged society will be called the Yorkshire Building Society.

Most of the Chelsea’s head office in Cheltenham will close, with the enlarged society being run from the Yorkshire’s head office in Bradford.

Rescue deal

The new larger society will have a wider geographical spread of branches across England, with the societies promising that branches will remain in communities where the societies currently operate.

Since the onset of the ‘credit crunch’ Chelsea has experienced a period of disappointing financial results arising from a range of factors

Chelsea building society statement

Norwich & Peterborough set to close 10 branches

Iain Cornish, chief executive of the Yorkshire, said that there would be no windfall for members because economic conditions were tougher than at the time of previous building society deals.

The merger is likely to be interpreted as a rescue deal for Chelsea, currently the UK’s fifth largest building society , whose new chairman Stuart Bernau has been reviewing the future of the business and whether it should stay independent.

In August, it reported a half-year loss of £26m after setting aside £41m to cover the cost of mortgage frauds.

In 2008, it reported a full-year loss of £39m, the largest yet recorded by a building society, brought on by losing £44m which had been invested in two failed Icelandic banks.

“Since the onset of the ‘credit crunch’ Chelsea has experienced a period of disappointing financial results arising from a range of factors,” the Chelsea said.

“[The merger] will create a larger building society with greater capital strength and deeper financial resources than Chelsea.

“Without the merger… your board believes that Chelsea would not be able to continue to provide the same range of products or good value pricing to its members,” it added.

The Yorkshire said it had also recorded a loss, of £22m, for the first half of 2009.

Details

The aim is for the merger to have taken place by April next year.

There will be an unspecified number of job losses when the merged society cuts duplicated overhead costs.

“The transaction is expected to deliver significant annual savings which are anticipated to be fully realised within 18 months after the merger, creating a more efficient organisation,” the Chelsea said.

Anyone who has savings with both the Chelsea and the Yorkshire will retain their separate £50,000 cover for each society under the Financial Services Compensation Scheme (FSCS), but that dual cover will expire on 30 December 2010.

After that point, savers with money in both societies will only receive £50,000 of cover under the FSCS for their total savings in both the Yorkshire and Chelsea.

Members of both societies will receive voting packs in the next few weeks.

No public money is involved in the deal and there will be no bonuses for officers or directors of either society as a result of the merger going through.

Changing sector

Unlike banks and other stock-market quoted companies, building societies, which are owned by their members, have a limited ability to replenish their reserves if they are drained by losses.

Since the autumn of 2008 there has been a flurry of takeovers of small building societies to rescue them from problems brought on by the financial crisis.

In September last year, the Nationwide agreed to stage a rescue takeover of both the Cheshire and the Derbyshire.

The Yorkshire then took over the Barnsley building society, while the Skipton took over the Scarborough.

In March this year, the Dunfermline building society collapsed, to be taken over by the Nationwide.

This was swiftly followed in June by emergency action by the authorities to ensure that the loss-making West Bromwich could stay afloat.

Meanwhile one of the UK’s largest and strongest building societies, the Britannia, has merged with the Co-op bank.

Sourced from The BBC

Alistair Darling defends secret loans to RBS and HBOS

nathanblakeley — Wed, 25 Nov 2009 14:01:47 +0000

The Chancellor, Alistair Darling, has defended the Bank of England’s secret loans to RBS and HBOS in an emergency statement to parliament.

Mr Darling said that any disclosure or leak of the operations would have seriously jeopardised the financial stability of the system as a whole.

He added that there had been no cost to the taxpayer.

It emerged on Tuesday that the two banks were secretly given £61.6bn last autumn to keep them afloat.

Both banks had repaid the loans by January 2009.

The shadow chancellor, George Osborne, said it was important that the Bank of England was allowed to carry out its function as lender of last resort.

But he added that it “raises the question of how…these banks came so close to collapse in the first place”.

He said it underlined the need for fundamental reform to increase the power held by the Bank of England rather than regulators.

Mr Cable said he agreed in principle with the action but wanted to know why the government had waited so long to announce the details of the loans in public.

FROM THE TODAY PROGRAMME

Listen to the full interview

Earlier, the government’s City minister, Lord Myners, said Lloyds shareholders had been kept fully in the picture about the Bank of England’s actions.

Lloyds was in the process of buying the struggling HBOS at the time.

Mr Myners denied that the “books were cooked”, saying the Bank of England’s accounts were audited and showed the impact of the support.

He added that the European Central Bank and the Federal Reserve had also carried out similar covert operations.

sourced from The BBC