Saturday, October 9, 2010

"We want peace not war..."

These were the words of French Finance Minister, Christine Legarde as the International Monetary Fund's (IMF) annual conference took off in Washington.

The issue they are all talking about is "currency wars"and specifically the efforts to boost exports by embracing weaker currencies. Many have argued this will lead to protectionism and trade imbalances when economic growth is at its most vulnerable.

The Chinese "undervalued" yuan was at the forefront of the argument as foreign officials have called for the currency's speedy appreciation. China has said it wants to avoid "shock therapy" and the yuan will have a "gradual" rise.

However IMF Managing Director, Dominique Strauss-Kahn said using currencies as a means to dictate economic policy would lead to "very bad situations."

The fear amidst it all is a relapse into the recession....

Saturday, June 26, 2010

Cogs Are Turning

It has been a while – sorry for the delay, but the last year has been hectic and amazing. I don’t have to tell you that politics is the same, we are seeing some movements in the financial crisis and the US is through to the next stage in the World Cup in South Africa!

On a serious note, 2010 is bringing some renewed excitement in business. I know we are not out of the woods just yet, but those cogs are turning and this machine is beginning to shift. I am steadfast in my prediction – I said in my first ever blog in May 2009 that the “recent financial crisis will demand the consolidation of our financial industry over the next five to seven years” – I stick by that statement!

Watch this space. I promise I won’t leave it this long next time.

Thursday, September 3, 2009

Who is the FDIC? The Next step for banks

What you need to know about the agency that is assuming the vast majority of bank losses

The Federal Deposit Insurance Corporation (FDIC) is the Government agency providing insurance, which guarantees the safety of deposits in member banks.
Americans are hearing more and more about this once quiet agency, which was set up in 1933 to maintain consumer confidence.

In the last 12 months, the insurance fund that secures banks has seen a huge knock in its value. It fell by 20% to $10.4 Billion in the second quarter, as banks across the US collapsed at a combined cost of $3.7Billion. With 109 banks failing this year, the federal fund is at its lowest since the Savings & Loans Crisis of 1992.

With this current situation, economists believe that the agency may have to tap into Government money or worse - taxpayer dollars – to cover future bank losses.

It’s not a pretty picture, especially as the FDIC estimates that bank failures will cost the fund $70 billion through to 2013. This year with over one hundred banks collapsing, analysts have predicted there will be hundreds more that follow, especially as we still haven’t seen the effect of the real estate crash.

To top that the FDIC has made a pact with firms – many equity firms – that they will take on mortgage losses for companies that take over failed banks. They believe this is a cheaper option than letting banks liquidate their assets.

The prospect of easing losses or at least giving the FDIC more time, these pacts with firms could provide some protection for the agency fund. James Wigand, deputy director of the FDIC's division of resolutions and receivership's said: “It's a great opportunity for banks........It's a great opportunity for us."

The flipside to Mr Wigand’s optimism is if the economy doesn’t recover as quickly and effectively as we would like, then the FDIC will carry this burden for a long time and ultimately it could cost the taxpayer – because we are the ones paying for the losses now.

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