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Tuesday, November 17, 2009


Asian markets slip as U.S. dollar continues decline
Concern about weakness of the U.S. dollar and its effect on exporters dragged down most Asian-Pacific markets Tuesday, although mining stocks rose on Monday's record-high price of gold. Japan's Nikkei 225 lost 0.6%, Australia's S&P/ASX 200 fell 0.5% and South Korea's Kospi Composite declined 0.4%. Hong Kong's Hang Seng Index inched down 0.1%, China's Shanghai Composite gained 0.2%, New Zealand's NZX 50 slid 1.3% and Taiwan's Taiex dropped 0.8%. The Wall Street Journal (17 Nov.)

Analysis: Dozens of banks in trouble despite TARP aid
Despite receiving capital injections from the U.S. government's Troubled Asset Relief Program, at least 27 banks have either been seized or threatened by regulators. Government officials knew some of the lenders were on the verge of collapse when they awarded them TARP funds. The situation raises questions about how the $700 billion TARP is being managed. Treasury officials defend the agency's management of the program. The Wall Street Journal (17 Nov.)

Audit faults New York Fed in negotiations with AIG
An audit conducted by Neil Barofsky, special inspector general for the U.S. government's Troubled Asset Relief Program, criticizes negotiations between the Federal Reserve Bank of New York and counterparties of American International Group. The audit says the New York Fed should have used its leverage as supervisor of some of the trading partners to persuade them to accept reduced prices on AIG contracts. The Fed defended its actions, saying its intervention "was designed to prevent a systemwide collapse and achieved that end." The New York Times (16 Nov.)

GMAC delays bailout talks after getting CEO's resignation
GMAC Financial Services was in negotiations with the U.S. Treasury for as much as $5.6 billion in aid, on top of $13.5 billion in bailout funds it already received. But the lender requested and received resignation from CEO Alvaro de Molina, so GMAC asked the Treasury to delay action on a third capital infusion. Molina was replaced by Michael Carpenter, a former executive at a Citigroup unit and other companies. The Washington Post/The Associated Press (17 Nov.)

Developers Diversified's CMBS issue reopens market
Demand was strong for Developers Diversified Realty's commercial-mortgage bonds, the first such deal made via the Federal Reserve's Term Asset-Backed Securities Loan Facility. "The DDR transaction represents a partial crossing of a very long bridge leading toward a healthier commercial real estate market," said Joseph Baksic, a senior analyst at Moody's Investors Service. Analysts and investors warned that problems remain with many mortgages. Financial Times (tiered subscription model) (11/16)

Berkshire Hathaway takes stakes in Exxon, Nestle
Billionaire investor Warren Buffett's Berkshire Hathaway took stakes in oil company Exxon Mobil and food producer Nestle, according to a regulatory filing. Berkshire owns about $95 million in Exxon shares and $161.5 million in Nestle. The company also increased its shares in Wal-Mart Stores. "Berkshire is increasingly looking for companies that are world-leading brands," said Tom Russo, a partner at Gardner Russo & Gardner. Bloomberg (17 Nov.)

*Oh Brother!
BoE official calls end to U.K. recession
Andrew Sentance, a member of the rate-setting committee of the Bank of England, said a number of factors suggest "the U.K. economy has moved on to a recovery track and growth has resumed in the second half of this year." The fact that GDP had shrunk 0.4% in the third quarter was contradicted by other evidence, Sentance said. "A very significant fiscal tightening is necessary to rebalance the U.K. economy ... cutting the government deficit will be a major challenge for the British economy as we move through the coming recovery phase of the economic cycle," he said. The Times (London) (17 Nov.)

Russia to face a stronger EU after Lisbon Treaty process
Russia will face a stronger EU in negotiations once the region is streamlined and modernized by the Lisbon Treaty, analysts and diplomats said. With a permanent president and a foreign-policy chief speaking as a single voice for the EU, Russia will have fewer opportunities to take advantage of differences among member states. The Moscow Times (17 Nov.)

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