Geithner Calls For Regulatory Reform; Fed President Sees 2009 Rebound; Bank of China Posts 59% 4Q Profit Drop; Goldman Plans to Repay TARP money quickly; U.K. Inflation up 3.2% in February; Major Exchanges Want New Curbs on Short-Selling; Lloyd's Says Insurance Rates to Rise; Copper Prices Take Breather After Rising 30% on China Demand; Mexico's Inflation Holds Up Rate Cut
Treasury Secretary Timothy Geithner said the U.S. regulatory system must impose constraints on companies using risky strategies that could cause them to collapse, posing danger to the financial system. In prepared testimony for the House Financial Services Committee, Geithner said rules must be in place to keep companies from causing "grave damage" to the economy, citing the failure to rein in excesses at American International Group Inc. (AIG) and other companies.
Chicago Federal Reserve President Charles Evans said the U.S. economy should start growing by the end of the 2009 and that unemployment will begin reversing course in 2010, Reuters reported. Evans also said regulation will be closely studied after the crisis is over.
The Bank of China posted a 59% drop in fourth-quarter profit, taking losses from U.S. mortgage investment write-downs and higher bad-loan provisions. "People knew Bank of China would underperform peers in 2008 because of the investment loss, but we are still surprised by how much it missed the estimate," Liu Yinghua, a Shenzhen-based analyst at Ping An Securities Ltd. who plans to maintain her "neutral" rating on the stock, told Bloomberg. "There's a silver lining though: it has a clean slate to start in 2009."
Goldman Sachs Group, Inc. (GS) said it plans to quickly pay back the $10 billion in TARP money it was given last October, an unnamed company source told The New York Times. Goldman was the largest recipient of TARP money and is paying a 5% interest to taxpayers for it.
Inflation in the United Kingdom unexpectedly rose 3.2% in February from the year earlier. Food prices rose despite recession, but Bank of England Governor Mervyn King said the increase will likely be followed by a "sharp decline,"Bloomberg reported.
The New York Stock Exchange, the Nasdaq Stock Market and BATS Exchange want regulators to adopt a "modified uptick rule" to curb abusive short selling. The top three U.S. exchanges said in a joint letter yesterday (Tuesday) to SEC Chairwoman Mary Schapiro, that the old uptick rule -- which was removed in 2007-likely wouldn't work in today's fast-moving markets, Reuters reported. Instead, they are pushing for a new rule that would only allow shorting at a price above the highest available bid. The old rule allowed short sales anytime the last sale price was higher than the previous price.
Lloyd's of London Banking Group Plc (ADR:LYG), the world's biggest insurance market, said insurers are poised to raise prices in 2009, as declining investment yields on U.S. Treasuries pressure results. Clients with windstorm damages, owners of airplanes and bank executives can expect to see higher rates as insurance companies were squeezed last year by the costliest hurricane season since 2005 and declines in the value of bonds held to back policies."There will be a move in rates to make sure that underwriting in 2009 is profitable so that insurers have the funds to pay claims,"Chief Executive Officer Richard Ward, told Bloomberg in an interview yesterday (Tuesday).
Copper futures ended lower yesterday (Tuesday) amid profit-taking from a rally that has seen prices climb more than 30% this year and hit their highest levels since early November. On Monday, data showed China's implied copper demand surged almost 44% in February from January on the back of record high imports, fueled by both commercial and strategic stockpiling, Reuters reported. Copper for May delivery shed 3.5 cents, or 1.9%, to close at $1.806 a pound in trading on the New York Mercantile Exchange's COMEX.
Mexico's inflation rate slowed in early March, after consumer prices rose 6.25% in the 12 months through mid-February, the central bank said yesterday (Tuesday). The government has frozen or trimmed some energy prices, including electricity rates, since January to shield households and businesses from the global economic slowdown. The government is hoping reducing inflation will give the central bank more room to cut interest rates in order to boost the flagging economy, Reuters reported.