Dutch financial group ING said on Monday it will sell its Taiwan life insurance unit to Fubon Financial for $600 million, a day after securing a 10 billion euro ($13.5 billion) government cash injection.
As policy makers around the world pour in billions of dollars of state cash to help stabilize their banks, financial institutions such as ING and U.S. insurance giant AIG have been selling off non-core overseas assets to help shore up their capital positions.
“ING is affected by the global financial crisis, and they need to adjust their asset allocation as a group,” Fubon President Victor Kung told reporters. “That is why we got this chance… We are sure we’ve bought a good company at a very reasonable price.”
The Dutch financial giant announced the deal after it became the latest European bank to seek government funding by agreeing to a government cash injection on Sunday.
Following a weekend of intense talks after its share price was slashed by more than a quarter in the latest trading session and the partial nationalization of rival Forbis two weeks ago, ING was seeking to shore up its financial position pay day advance.
“The market environment has changed over the last two weeks and the expectations for capital levels have changed following massive capital injections in financial institutions worldwide,” ING Chief Executive Michel Tilmant said on Sunday.
“We have accepted the consequences of this situation and welcome the support of the Dutch state,” he told an evening news conference, flanked by Dutch Finance Minister Wouter Bos and central bank president Nout Wellink.
ING will issue 10 billion euros worth of securities to the Dutch state, which will have a position similar to common shareholders. The transaction is designed not to dilute shareholder capital.
The Federal Reserve has agreed to provide insurance giant American International Group with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed income securities from AIG in return for cash collateral. These securities were previously lent by AIG’s insurance company subsidiaries to third parties (faxless payday loan online).
Last month, the Fed provided an $85 billion loan to the company, which was on the brink of bankruptcy.
Architects of a $700 billion bailout plan urged U.S. lawmakers to act swiftly or face dire economic consequences amid growing concern the rescue may be delayed, but markets were heartened by news that Warren Buffett was investing $5 billion in Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz).
In Tokyo, Kyodo news agency reported that Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz), Japan’s third-largest bank, plans to invest several billion dollars in Goldman, with which it has a long relationship.
SMFG said it had no plans at this time to invest in Goldman, whose spokesman Lucas van Praag said he could not confirm the Kyodo report.
Stocks in Asia gained and U.S. Treasury yields rose after news of the Goldman stake purchase by one of the world’s most respected investors http://payday-z.com creditreports cash til payday loan. –>.
The MSCI index of Asian shares outside Japan .MIAPJ0000PUS edged up 0.4 percent, but Tokyo .N225, which was closed on Tuesday for a public holiday, fell 1.2 percent.
Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research, Stock Buzz) <BRKb.
Treasury Secretary Henry Paulson told lawmakers during five hours of hearings on Tuesday that the bailout was “sad” and “embarrassing,” but needed to stave off a deep recession and restore confidence in markets.
Andrew Barrett, managing director and strategist with Citi Private Client Investment in Hong Kong, said there is sufficient political will in Congress to approve the plan.
General Motors Corp. said Friday it intends to draw down $3.5 billion of a $4.5 billion secured revolving credit facility for its restructuring in what it called "uncertain times in the capital markets."
General Motors (GM, Fortune 500) will be using the remainder of the credit facility. The company said it was making the move to have more liquidity while capital markets are under pressure.
The automaker was reacting after a week that brought the bankruptcy of Lehman Brothers Holdings Inc. (LEH, Fortune 500), the sale of Merrill Lynch & Co free credit report without a credit card faxless online payday advances. (MER, Fortune 500) to Bank of America Corp. (BAC, Fortune 500) and a government bailout of insurer American International Group Inc. (AIG, Fortune 500)
General Motors also said in the news release it had completed a $322 million debt to equity exchange.
The company’s shares rose $1.68, or 15%, to close at $13.08 on Friday.
If you thought banks weren’t doling out much dough before, try getting a loan now.
The recent turmoil on Wall Street has frozen lending among banks, sending rates soaring and prompting financial institutions to hoard cash. The situation grew so dire that central banks in the United States, Europe and Japan were forced to inject tens of billions into the system in hopes of greasing the lending wheels.
Even if consumers have no direct dealings with the now-bankrupt Lehman Brothers or the now-bailed out American International Group, they may very well feel the ripple effects. The most evident impacts are rising mortgage rates and instability in once-safe money market funds. But the tensions on Wall Street will make it even harder for people - even those with good credit - to get a loan.
Consumers won’t be the only ones hurt. Businesses will also find it tough to get financing.
"The price of money has increased and the availability of financing has been impacted," said Keith Gumbinger, vice president of HSH Associates, which tracks mortgage rates. "It’s pure volatility right now. There’s no way to know on any given day what’s going to happen in any given market."
Mortgage rates jumped sharply on Wednesday, after falling more than a half-point after the federal government took over Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) on Sept. 7. Rates spiked to 6.11% Wednesday, up from 5.87% the day before, Gumbinger said.
In the wake of the government’s $85 billion rescue of crumbling insurer AIG, investors fled to the safety of Treasurys, freezing out mortgage-backed securities and sending rates soaring.
While rates remain below their summer highs, the spike is troubling. The economy needs low mortgage rates to stabilize the housing market, Gumbinger said. Higher rates make it harder for people to buy a home or to refinance into more affordable mortgages.
The demise of Lehman Brothers and troubles at AIG (AIG, Fortune 500) have put stress on many money market funds, which invest in short-term debt issued by the federal government or by companies.
Putting money in these funds was thought to be as safe as money in the bank, and many people stash their extra cash in them.
But unlike money in the bank, these funds can lose value cash till payday payday loan payday loans. –>. Traditionally, financial institutions make sure that money market funds maintain their $1 per share value, but with this week’s turmoil, fund companies found themselves scrambling. Investors withdrew nearly $80 billion from money market funds on Wednesday alone, according to Peter Crane, founder of Crane Data, which tracks money market funds.
The Reserve Fund announced Tuesday that it had to cut the price of shares in its primary fund to 97 cents and investors who wanted to withdraw money would have to wait a week for the proceeds. Under siege from redemptions, Putnam Investments said Thursday it would close its institutional prime money market fund and return all proceeds to investors at $1 a share.
Meanwhile, other fund companies - including Wachovia’s Evergreen Investments and Frank Russell Funds - announced Wednesday that their parent companies would have to inject money into the accounts to maintain their $1-a-share value.
Most money market fund investors, particularly those whose holdings are at larger institutions, will not suffer losses, said Christine Benz, director of personal finance at Morningstar. Companies will step in to prop up the funds.
"Many firms that offer money market funds would face huge reputational risk if they allow them to break a buck," she said.
While financial institutions are stepping in to prop up their funds now, they can’t do this indefinitely. Also, they may have to think twice about acting if the funds’ values fall too steeply.
Some people think they have money market funds, when they actually hold short-term bond funds. The value of these investments can fluctuate since they put their money in riskier assets.
But even true money market funds vary in their investments. Those that invest in safer Treasurys offer lower rates, while those in short-term corporate commercial paper have higher yields but are more likely to stumble, said Hildy Richelson, co-author of "Bonds: The Unbeaten Path to Secure Investment Growth."
"If your money market fund is yielding more than others, then they are reaching in some way," Richelson said.
With the Federal Reserve stepping in to rescue global insurance giant AIG (AIG.N: Quote, Profile, Research, Stock Buzz) this week, one title must have looked particularly prescient to judges drawing up a shortlist for the Financial Times/Goldman Sachs Business Book of the Year Award.
“When Markets Collide: Investment Strategies for the Age of Global Economic Change” (McGraw-Hill), by Mohamed El-Erian, contends that the world financial system is in a period of deep change, as emerging economies like China and India bump up against the United States and Europe.
The result is market turmoil, leading to such events as the rescue of AIG and U.S. mortgage giants Fannie Mae and Freddie Mac, and the bankruptcy of Lehman Brothers Holdings Inc.
“This bumpy process is nothing less than a collision of markets, where the markets of yesterday collide with those of tomorrow,” writes El-Erian, co-CEO of PIMCO, which runs the world’s biggest bond fund.
An even bigger figure in the financial markets is the subject of another of the six books on the shortlist http://payday-faxless.com cash advance loan. Warren Buffett has never written a memoir, but he has given former insurance industry analyst Alice Schroeder unprecedented access to write “The Snowball: Warren Buffett and the Business of Life” (Bantam).
“Life is like a snowball,” Schroeder writes, quoting the Oracle of Omaha’s famous homespun wisdom. “The important thing is finding wet snow and a really long hill.”
“Cold Steel: The Multibillion Dollar Battle for a Global Industry” (Little Brown), by Tim Bouquet and Byron Ousey, chronicles how Lakshmi Mittal fought for control of Arcelor and transformed the global steel industry through consolidation.
Journalist and historian Misha Glenny spent three years following gun runners in Ukraine, money launderers in Dubai, drug syndicates in Canada, cyber-criminals in Brazil and others to write “McMafia: A Journey Through the Global Criminal Underworld” (Knopf), a tale of the growing shadow economy.
Food distributor Sysco Corp. said Monday its fourth-quarter profit jumped 10%, helped by managing costs and a boost in sales.
For the quarter ended June 28, net income rose to $334.1 million, or 55 cents per share, from $303.4 million, or 49 cents per share in the prior year quarter.
Analysts polled by Thomson Financial expected profit of 52 cents per share.
The company said it was able to grow its profit because it effectively managed costs in the quarter.
Revenue rose 5% to $9.73 billion from $9.23 billion in the fourth quarter of 2007. Analysts predicted revenue of $9.87 billion.
For the year, net income climbed nearly 11% to $1.11 billion, or $1.81 per share, from $1 billion, or $1.60 per share in 2007.
Revenue jumped 7% to $37.52 billion from $35.04 billion.
Sysco (SYY, Fortune 500) sells and distributes food products to restaurants, health care facilities, schools and hotels faxless payday advance. The company also distributes equipment and supplies.
The FDIC has gone out of its way to stress that most banks are safe. But how safe is the FDIC?
Shelia Bair, the chairman of the Federal Deposit Insurance Corp., said last week that she believes the takeover of the bank IndyMac, which the FDIC seized on July 11, will cost between $4 billion and $8 billion.
The FDIC currently has a record $53 billion at its disposal in a fund to payoff customers of failed banks like IndyMac.
Bair said the premiums that banks pay into this fund will have to be raised due to the hit it is taking from IndyMac. But she said there is no reason for taxpayers or bank customers to worry about the soundness of the FDIC.
"There will be increased failures, but it will be within range of what we can handle," Bair said. "People should not worry."
Most financial experts agree that the FDIC is well positioned to weather the expected increase in failures.
"Most of the banks likely to fail are smaller institutions that will cost the FDIC very little to resolve," said Jaret Seiberg, financial services analyst for policy research firm Stanford Group.
But knowing what bank could fall apart next is difficult if not impossible to predict, said William Isaac, the FDIC chairman from 1981 to 1985.
"When we made projections on failures at the start of the year, we usually had the total number about right, but we had the institutions all wrong," he said.
To that end, he points out that IndyMac probably wasn’t even on the FDIC’s watch list of problem banks as of the end of March.
The agency releases the number of banks on that watch list, along with their combined assets. But it keeps the names of the institutions secret so as not to cause a loss of customer confidence and a run on deposits.
According to the first quarter report, the 90 banks on the problem list had total assets of $26 billion. But IndyMac had assets of $32 billion at the time it failed, which implies it wasn’t considered at risk of failure only a few months ago.
"What I worry about is if you have a prolonged downturn, you have banks all over the country, large and once strong institutions, going down," said Isaac. "That’s what we saw in the 1980s."
The widespread failures of hundreds of thrifts during the savings and loan crisis of the late 1980s and early 1990s ended up costing taxpayers about $250 billion in today’s dollars, according to some estimates. That’s because an FDIC-like fund in place to insure thrift deposits was overwhelmed at the time.
While another collapse of that magnitude is not being predicted by most experts, some top banking analysts worry about the outlook for some of the nation’s major banks and thrifts, institutions that dwarf IndyMac in size.
Richard Bove, an influential banking analyst with Ladenburg Thalmann, wrote in a note last week that Washington Mutual (WM, Fortune 500), the nation’s largest thrift with assets of $320 billion, is on the edge of the "danger zone."
WaMu and another bank mentioned in his notes, Cleveland-based National City (NCC, Fortune 500), took the unusual step of making statements to assure customers and investors about their continued viability get a free credit report. National City has assets of $155 billion.
Bove later issued a statement clarifying that none of the banks he covers are in immediate danger of failing.
Another influential banking analyst, Oppenheimer’s Meredith Whitney, raised concerns about Wachovia (WB, Fortune 500), the nation’s No. 4 bank with assets of $808 billion. In a note last week, she wrote that Wachovia will face the "greatest reckoning" in the coming quarters due to surging credit costs.
WaMu, National City and Wachovia are all expected to report losses for the second quarter when they release their results this week.
Still, in the unlikely event that one of these giant banks fail, Seiberg and Isaac said that does not necessarily mean they would cost the FDIC more than the IndyMac takeover.
IndyMac specialized in risky mortgage loans to borrowers who were not forced to verify their income. Those loans have little value in the current financial market, making the cost of that failure more expensive than it might be for a more diversified bank.
But even if there are more expensive bank failures, the FDIC will likely be able to handle the cost of them without resorting to taxpayer funds.
Seiberg said banks won’t squawk too loudly about rising FDIC premiums. Just as homeowners feel better about paying insurance at a time there are fires burning through their neighborhood, the banks are likely to be grateful for the assurance the FDIC provides for their customers and business.
"Anything that diverts money from the bottom line is not welcome. But the alternative - having an insurance fund perceived as inadequate - would be far worse," he said.
New Zealand's annual current account deficit narrowed less than economists forecast in the year ended March as payments to foreign investors accelerated, countering a gain in butter and cheese exports.
The gap shrank to NZ$13.79 billion ($10.5 billion) in the 12 months ended March 31 from NZ$13.84 billion in the year through December, Statistics New Zealand said in Wellington today. The median estimate of 12 economists surveyed by Bloomberg News was for a NZ$13.32 billion shortfall.
Prices for dairy products, which make up a fifth of New Zealand's exports, rose 20 percent in the first three months of the year, helping the annual trade deficit narrow to the lowest in almost four years. Economists say the rising cost of imported oil and falling farm production because of a drought may boost the deficit this year, increasing foreign debt.
“In a world of lower risk appetite, New Zealand's current account balance remains uncomfortably high,'' said Jason Wong, director of strategy and research at First NZ Capital Group in Wellington. “The large deficit will continue to remain a source of downward pressure for the currency for some time yet.''
New Zealand's dollar fell to 75.66 U.S. cents at 11:45 a.m. in Wellington from 75.92 cents immediately before the report.
Broadest Measure
The annual deficit narrowed to 7.8 percent of gross domestic product from 7.9 percent in the year through December, the statistics agency said. Economists expected a shortfall equivalent to 7.5 percent of GDP.
By comparison, Australia's current account deficit was 6.5 percent of GDP at March 31.
The Reserve Bank of New Zealand this month forecast the deficit would be 7.6 percent of GDP in the year ended March. It says the gap will widen to 9.4 percent by March 2009.
The current account is the broadest measure of trade because it incorporates tourism and investment income. A large deficit needs to funded by borrowing from overseas, which could cause the nation's currency to fall payday loans application.
The trade deficit narrowed to NZ$1.75 billion in the 12 months March 31 from NZ$2.39 billion in the year through December, today's report showed. That's the smallest gap since the year ended June 30, 2004.
Dairy Exports
First-quarter merchandise exports gained 20 percent from a year earlier and imports rose 12 percent. Dairy exports rose because of higher prices, the statistics agency said. Imports jumped as soaring crude oil prices increased the value of fuel purchases.
While the trade gap narrowed, the deficit on investment income, which makes up most of the current account, widened and the surplus on services, which includes spending by overseas visitors, shrank.
The deficit on investment income widened amid increased payments to foreign owners of assets such as the Tui oil field, which began production in July. Tui is 42 percent owned by Sydney-based Australian Worldwide Exploration Ltd. and 35 percent owned by Japan's Mitsui & Co. Foreign investors owned 77 percent of New Zealand government bonds on issue at May 31.
The annual deficit on investment income widened to a record NZ$13.12 billion from NZ$12.44 billion in the year through December. Foreign investors earned more from their local subsidiaries and their holdings of stocks and bonds, outpacing income earned by New Zealanders investing offshore.
About 90 percent of profits earnings by foreigners were paid overseas rather than reinvested in New Zealand, compared with 64 percent in the year to March 2007, the agency said.
Economists prefer to watch a rolling annual current account balance than the quarterly deficit, which can be volatile.
In the three months ended March 31, the current account deficit narrowed to NZ$2.16 billion from NZ$2.21 billion a year earlier. Economists forecast a NZ$1.7 billion gap.
Sometimes a safety issue literally blows up in the face of federal regulators. That was the case last month when an explosion and fire at an Imperial Sugar Co. refinery in Port Wentworth, Ga., likely caused by the ignition of sugar dust, killed 13 workers and left 10 others with serious burns.
The accident on Feb. 7 was the latest of some 300 since 1980 that have killed more than 100 workers and injured 800. The Labor Department’s Occupational Safety and Health Administration ignored a recommendation to create a single dust-control rule, saying it already has 17 regulations warning employers about deadly dust buildups.
An oversight hearing on the subject on March 12 shows how the Democratic-controlled Congress has grown weary of President George W. Bush’s approach to regulatory policy, which stresses partnerships with industry and voluntary efforts to keep workplaces safe.
"I see such an incredible lack of urgency on the part of your agency to protect workers," Rep. George Miller, D-Calif., who heads the House Education and Labor Committee, told OSHA director Edwin Foulke Jr.
"We believe the agency has taken strong measures to prevent combustible dust hazards," Foulke responded. The agency created a Web page with guidance material on combustible dust, he told the committee.
The agency also has sent letters alerting 30,000 employers of their responsibilities to prevent dust buildup. And OSHA is inspecting 300 facilities across the nation for compliance.
"You are clinging to what you have done, and it’s … incredibly ineffective," Miller said.
Dust explosions occur when accumulations of fine particles build up and ignite from a spark or some other heat source. Combustible dust is prevalent in many industries, including chemical, pharmaceutical and recycling operations.
OSHA insists that the current set of 17 rules, which cover housekeeping, emergency plans, ventilation and other issues, can prevent the explosions payday advances.
Members of the committee, especially the Democrats, pointed out that in 2003 three dust-related blasts took 14 lives. The companies involved paid a total of $170,000 in fines. One facility closed and the other two had to be rebuilt.
In 2006, the U.S. Chemical Safety and Hazard Investigation Board, an independent agency, urged OSHA to issue a single rule to address control of the dust, assessment of the hazard and worker training.
"The Chemical Safety Board has concluded that combustible dust explosions are a serious hazard in American industry, and that existing efforts inadequately address this hazard."
William Wright, interim executive of the board, said at the hearing that since OSHA set a grain dust standard in 1987 the agency estimates deaths and injuries from such explosions have dropped 60 percent.
Miller and Rep. Lynn Woolsey, D-Calif., who heads the workplace protections subcommittee, wrote to Labor Secretary Elaine Chao the day after the sugar refinery explosion, asking her to make issuing a standard a "high priority." They have yet to receive an answer.
Miller and Rep. John Barrow, D-Ga., introduced legislation to force OSHA to issue a rule regulating industrial dusts.
Foulke, meanwhile, said that his agency would address any need for a new rule after the sugar refinery investigation is complete and OSHA has finished reviewing other facilities.
He said American workplaces generally are safer than ever.
CINDY SKRZYCKI IS A BLOOMBERG NEWS COLUMNIST.
Powered by WordPress -- XHTML 1.0