Published December 8, 2008
US car giants clear roadblock to their rescue
Legislation in final lap and may go before Congress today
Email this article
Print article
Feedback
(WASHINGTON) US lawmakers worked over the weekend to hammer out details of legislation to bail out ailing car companies that could be presented to Congress as early as today, after reaching an agreement in principle with the Bush administration.
Ms Pelosi: Tapping into US$25b from Energy Dept fund now okay with her
The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on US$25 billion in funds from the Energy Department intended to help carmakers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified.
The chief executives of General Motors Corp and Chrysler LLC testified at hearings last week that they need a combined US$14 billion to keep operating through March 31.
To qualify for aid, carmakers must be prepared to make 'difficult decisions' to ensure their long-term viability, Dana Perino, the White House spokeswoman, said in a statement on Saturday.
The Bush administration has held 'constructive discussions' with members of Congress, Ms Perino said. 'We hope to continue to make progress towards assistance for the automakers', provided that public money can be safeguarded.
'Taxpayers should not be asked to finance assistance for automakers without a strong likelihood that they will be paid back,' Ms Perino said.
A draft proposal from the White House calls for the appointment of a 'financial viability adviser' in the Department of Commerce to work out terms of assistance to car companies. The adviser would be authorised to provide short-term loans to keep carmakers afloat during talks.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said on Saturday in a statement: 'I look forward to reviewing the legislation being drafted to address the difficulties in our auto markets. As we consider this legislation, our first priority must be to protect the hard-earned money of the American taxpayer.'
Democratic leaders in Congress and the Bush administration have been at odds for weeks over the source of money to help the industry.
Ms Pelosi, a California Democrat, had demanded that the Bush administration tap a US$700 billion bailout fund for the financial industry. President George Bush and congressional Republicans refused, saying that the money must come from the US$25 billion in Energy Department funds.
The breakthrough came when Ms Pelosi said that the Energy Department funds could be used to keep the carmakers operating, provided that the money would be 'replenished in a matter of weeks'.
The White House proposal calls for 'strong taxpayer protections' for agreements on longer-term financing for car companies. These include options for ownership stakes for the government, limits on compensation of senior executives and a suspension of dividends.
US President-elect Barack Obama said yesterday that the struggling US car industry could not be allowed to collapse, but that any bailout would require a complete restructuring.
'I don't think its an option to simply allow it to collapse,' Mr Obama said in a taped interview on NBC's Meet the Press programme. 'What we have to do is to provide them with assistance but that assistance is conditioned on them making significant adjustments. They are going to have to restructure and all of their stakeholders are going to have to restructure.'
Senator Bob Corker, a member of the Senate Banking, Housing, and Urban Affairs Committee, said on Saturday that he was disappointed with the draft of the plan being worked on between House Democrats and the White House.
'Based on the outline we've seen so far, we are disappointed,' he said in a statement. He proposes including conditions for bondholders and for the car unions and asks for wage parity with carmakers such as Nissan.
Ms Pelosi said that she expects to bring legislation to the floor this week to provide 'short-term and limited assistance' to the industry. She said that there would be strict oversight on the use of the funds. The House plans to return to work tomorrow and the Senate reconvenes today.
Ms Pelosi spoke directly with White House Chief of Staff Josh Bolten two days ago in an effort to resolve the issue.
The support of the White House is crucial since it removes the threat of a veto and will likely persuade many Senate Republicans to end their opposition. Some senators had argued that the companies should survive or fail on their own.
Nobel economics prize winner Paul Krugman said yesterday that the beleaguered US car industry will likely disappear.
'It will do so because of the geographical forces that me and my colleagues have discussed,' the Princeton University professor and New York Times columnist told reporters in Stockholm. 'It is no longer sustained by the current economy.' - Bloomberg, Reuters, AP
Monday, 8 December 2008
Published December 8, 2008
Get the low-down on home loan top-ups
Banks don't usually ask for fresh valuations despite price slide
By SIOW LI SEN AND ARTHUR SIM
Email this article
Print article
Feedback
(SINGAPORE) With the slide in property prices and a looming long economic downturn, some borrowers may be forgiven if they harbour thoughts of getting calls from their banks to top up their home loans.
But banks told BT that as long as borrowers are current in their monthly loan instalments, they will not ask for fresh valuations which could then lead to a top-up.
A DBS Bank spokeswoman says a key consideration when granting loans is the repayment ability of the customer.
'As such, when the customers are promptly servicing their monthly repayments, the bank will not usually require the customer to top-up the housing loan.'
Even those who took up loans on the deferred payment scheme (DPS) need not worry about the fall in the value of their homes, she says.
'Customers who took up loans on the deferred payment scheme would have had the approval granted based on the valuations at the point of the submission of their loan applications. And likewise, the approval will take into account the repayment ability of the customer.
'By the same token, when the loan is disbursed, as long as the customer can meet the monthly repayment amounts, the bank will not usually take any other course of action against the customer, even if valuations of these properties are now lower than that at the time of purchase.'
In reply of BT queries, a Monetary Authority of Singapore spokeswoman says non-performing housing loans are currently low.
'While we expect these to rise, the increase will not be significant,' she says.
'Banks in Singapore do not generally repossess a property once a loan is in default. Repossession is usually a final step after exhausting other avenues with the borrower, such as restructuring the loan,' she adds.
The MAS, however, does not intervene in such commercial decisions by the banks, she adds.
A United Overseas Bank spokeswoman says it is currently not the bank's practice to require a fresh valuation for DPS properties.
DPS borrowers typically begin paying their instalments some two years after they bought their homes.
Some observers are expecting a rash of defaults on the part of DPS buyers when the properties are completed and loan drawdowns begin.
Vibha Coburn, Citibank's head of secured finance solutions, says it is not the bank's usual practice to ask for top-ups in the case of existing borrowers who are servicing their loans on an ongoing basis.
'While we may conduct valuations on properties held within our loans portfolio, these would form part of our internal portfolio management and due diligence processes,' she says.
The UOB spokeswoman says the bank periodically reviews its mortgage portfolio, including the update of property values.
Get the low-down on home loan top-ups
Banks don't usually ask for fresh valuations despite price slide
By SIOW LI SEN AND ARTHUR SIM
Email this article
Print article
Feedback
(SINGAPORE) With the slide in property prices and a looming long economic downturn, some borrowers may be forgiven if they harbour thoughts of getting calls from their banks to top up their home loans.
But banks told BT that as long as borrowers are current in their monthly loan instalments, they will not ask for fresh valuations which could then lead to a top-up.
A DBS Bank spokeswoman says a key consideration when granting loans is the repayment ability of the customer.
'As such, when the customers are promptly servicing their monthly repayments, the bank will not usually require the customer to top-up the housing loan.'
Even those who took up loans on the deferred payment scheme (DPS) need not worry about the fall in the value of their homes, she says.
'Customers who took up loans on the deferred payment scheme would have had the approval granted based on the valuations at the point of the submission of their loan applications. And likewise, the approval will take into account the repayment ability of the customer.
'By the same token, when the loan is disbursed, as long as the customer can meet the monthly repayment amounts, the bank will not usually take any other course of action against the customer, even if valuations of these properties are now lower than that at the time of purchase.'
In reply of BT queries, a Monetary Authority of Singapore spokeswoman says non-performing housing loans are currently low.
'While we expect these to rise, the increase will not be significant,' she says.
'Banks in Singapore do not generally repossess a property once a loan is in default. Repossession is usually a final step after exhausting other avenues with the borrower, such as restructuring the loan,' she adds.
The MAS, however, does not intervene in such commercial decisions by the banks, she adds.
A United Overseas Bank spokeswoman says it is currently not the bank's practice to require a fresh valuation for DPS properties.
DPS borrowers typically begin paying their instalments some two years after they bought their homes.
Some observers are expecting a rash of defaults on the part of DPS buyers when the properties are completed and loan drawdowns begin.
Vibha Coburn, Citibank's head of secured finance solutions, says it is not the bank's usual practice to ask for top-ups in the case of existing borrowers who are servicing their loans on an ongoing basis.
'While we may conduct valuations on properties held within our loans portfolio, these would form part of our internal portfolio management and due diligence processes,' she says.
The UOB spokeswoman says the bank periodically reviews its mortgage portfolio, including the update of property values.
Saturday, 6 December 2008
Published December 6, 2008
Shocking job numbers rattle Wall St
Sympathetic noises from Congress on rescue for Detroit Three carmakers temper fears
By ANDREW MARKS
NEW YORK CORRESPONDENT
Email this article
Print article
Feedback
FOR the whole of this week, Wall Street had been trying hard to hold on to the little optimism eked out from the most recent wave of government capital injections.
GLOOMY START
Investors reacted to the job data in predictable fashion, with stocks sliding soon after the opening bell
That effort seemingly came to an abrupt end yesterday.
In the face of a shockingly bad November jobs report, the mood of stockmarket investors nosedived as news that the US economy shed 533,000 jobs, the worst single month since 1974, filtered through.
On average, forecasts had expected a loss of about 400,000 jobs. The unemployment rate rose to 6.7 per cent from 6.5 per cent in October. The government added that it was revising its jobs data for September and October, loading on 199,000 more layoffs than previously thought. That brings the total reduction in US non-farm payrolls for the last three months to 1.256 million, with almost two million shed in the year so far.
Investors reacted to the data in predictable fashion. Stocks slid shortly after the opening bell, with the Dow falling 80 points, or one per cent, in the first minutes of trading. That widened to a loss of 220 points by 11.30 in the morning as the blue chip index hit 8,155.
But there is a glimmer of hope. Wall Street seemed encouraged by remarks at the opening to yesterday's Congressional hearings for a bailout for the Big Three carmakers.
Barney Frank, chairman of the House financial services committee, said: 'In the midst of the worst economic situation since the Great Depression, letting the Big Three fail is simply unacceptable. Any effort to resist a rescue of the auto industry in the face of such a massive jobs crisis must fall by the wayside,' he said.
On Thursday afternoon, stocks took a hit in the final hour of trading, as investors pulled money off the table before yesterday's jobs report, not wanting to risk losing all their profits of recent days.
Economist Joel Naroff, president of Naroff Economic Advisors, had anticipated a record layoff number following the Wednesday release of the Institute for Supply Management's Non-Manufacturing index November numbers, which recorded it's largest monthly decline since the survey was begun in 1997.
'This is obviously a bad number, showing how hard a hit the economy is taking. But you have to remember this is a lagging indicator and it appears that businesses are adjusting extremely rapidly to the real time information about the problems. That may be compressing the time it takes to downsize when a recession hits. As a consequence, the data is deteriorating more sharply than we are used to seeing,' he said.
As shocking as the number is, Mr Naroff thinks that the economy could also see an end to the huge losses in jobs and demand sooner than would typically be the case in a severe recession.
'It's like being hit by a hurricane. We have to ride out the intense storm, but the silver lining is we might get good weather sooner than history would indicate,' he said.
It will probably be weeks, if not months before the stock market will agree with Mr Naroff's positive analysis of the collapse in all the data.
Said Joe Battipaglia, investment strategist at Ryan, Beck, 'These awful numbers we're getting could be taken as indicating that the bottom is coming, but at this point, they could also be taken as a sign that we're in even worse shape than we believed.'
'That means stock market sentiment will continue to be highly volatile and subject to change with every new piece of significant data,' he said.
The severity of the jobs report has also raised expectations on Wall Street that Congress and the Treasury will keep GM and Chrysler in business while the debate over how to restructure the car industry gets aired.
'Everybody knows now that the automakers will get their loan - there's no choice, and this report also raises the certainty we'll get a huge stimulus programme, probably north of US$500 billion, once Mr Obama is inaugurated in January,' said Jim Awad, managing director of Zephyr Capital Management.
Shocking job numbers rattle Wall St
Sympathetic noises from Congress on rescue for Detroit Three carmakers temper fears
By ANDREW MARKS
NEW YORK CORRESPONDENT
Email this article
Print article
Feedback
FOR the whole of this week, Wall Street had been trying hard to hold on to the little optimism eked out from the most recent wave of government capital injections.
GLOOMY START
Investors reacted to the job data in predictable fashion, with stocks sliding soon after the opening bell
That effort seemingly came to an abrupt end yesterday.
In the face of a shockingly bad November jobs report, the mood of stockmarket investors nosedived as news that the US economy shed 533,000 jobs, the worst single month since 1974, filtered through.
On average, forecasts had expected a loss of about 400,000 jobs. The unemployment rate rose to 6.7 per cent from 6.5 per cent in October. The government added that it was revising its jobs data for September and October, loading on 199,000 more layoffs than previously thought. That brings the total reduction in US non-farm payrolls for the last three months to 1.256 million, with almost two million shed in the year so far.
Investors reacted to the data in predictable fashion. Stocks slid shortly after the opening bell, with the Dow falling 80 points, or one per cent, in the first minutes of trading. That widened to a loss of 220 points by 11.30 in the morning as the blue chip index hit 8,155.
But there is a glimmer of hope. Wall Street seemed encouraged by remarks at the opening to yesterday's Congressional hearings for a bailout for the Big Three carmakers.
Barney Frank, chairman of the House financial services committee, said: 'In the midst of the worst economic situation since the Great Depression, letting the Big Three fail is simply unacceptable. Any effort to resist a rescue of the auto industry in the face of such a massive jobs crisis must fall by the wayside,' he said.
On Thursday afternoon, stocks took a hit in the final hour of trading, as investors pulled money off the table before yesterday's jobs report, not wanting to risk losing all their profits of recent days.
Economist Joel Naroff, president of Naroff Economic Advisors, had anticipated a record layoff number following the Wednesday release of the Institute for Supply Management's Non-Manufacturing index November numbers, which recorded it's largest monthly decline since the survey was begun in 1997.
'This is obviously a bad number, showing how hard a hit the economy is taking. But you have to remember this is a lagging indicator and it appears that businesses are adjusting extremely rapidly to the real time information about the problems. That may be compressing the time it takes to downsize when a recession hits. As a consequence, the data is deteriorating more sharply than we are used to seeing,' he said.
As shocking as the number is, Mr Naroff thinks that the economy could also see an end to the huge losses in jobs and demand sooner than would typically be the case in a severe recession.
'It's like being hit by a hurricane. We have to ride out the intense storm, but the silver lining is we might get good weather sooner than history would indicate,' he said.
It will probably be weeks, if not months before the stock market will agree with Mr Naroff's positive analysis of the collapse in all the data.
Said Joe Battipaglia, investment strategist at Ryan, Beck, 'These awful numbers we're getting could be taken as indicating that the bottom is coming, but at this point, they could also be taken as a sign that we're in even worse shape than we believed.'
'That means stock market sentiment will continue to be highly volatile and subject to change with every new piece of significant data,' he said.
The severity of the jobs report has also raised expectations on Wall Street that Congress and the Treasury will keep GM and Chrysler in business while the debate over how to restructure the car industry gets aired.
'Everybody knows now that the automakers will get their loan - there's no choice, and this report also raises the certainty we'll get a huge stimulus programme, probably north of US$500 billion, once Mr Obama is inaugurated in January,' said Jim Awad, managing director of Zephyr Capital Management.
Subscribe to:
Posts (Atom)
