Latvia faces bankruptcy in three months if it fails to deliver budget cuts required by the International Monetary Fund and the next installment of its bailout is delayed, Premier-designate Valdis Dombrovskis said.
“If we do not continue to receive this international loan, then we go bankrupt in June,” Dombrovskis, 37, said in an interview on March 6.
Latvia, in the grip of the severest crisis since independence in 1991, was granted a 7.5 billion-euro ($9.5 billion) bailout last quarter after the economy shrank 10.5 percent and the state seized its second biggest bank. The government fell on Feb. 20 after agreeing to budget cuts needed to keep the deficit below 5 percent of gross domestic product.
Dombrovskis wants the IMF to approve a deficit of 8 percent of GDP to avoid crippling the economy. Latvia must cut the budget to meet terms of the bailout or get a bigger loan from the IMF- led group and European Commission or it will run out of money.
“It’s hardly possible” to keep to the earlier target, Dombrovskis said. “The previous memorandum of understanding was signed under the assumption of a 5 percent recession, meanwhile the forecast is for 12 percent and it may get worse.”
Latvia faces a deepening contraction as its currency peg to the euro forces it to push through wage cuts to remain competitive. The economic collapse threatens to spread through the whole Baltic region, and there may be need for a broader bailout that includes Lithuania and Estonia, Dombrovskis said online payday loans.
‘Domino Effect’
“In the Baltic region there is a fear of a domino effect, if one country would go, then probably the whole region will go,” he said. Any plan “could talk about all three countries, with a focus on Latvia as its weakest link.”
Last quarter, Estonia’s economy shrank an annual 9.4 percent, the most in at least 15 years, while Lithuanian GDP contracted for the first time in nine years, shrinking 2 percent.
Bankruptcy in Latvia would also affect Sweden, Dombrovskis said. Swedish banks have claims in Latvia, Lithuania and Estoni worth about $75 billion, according to ING Groep NV.
Standard & Poor’s cut Latvia’s credit rating to junk on Feb. 24, lowering the country to BB+ from BBB-. Credit-default swaps for Latvia soared to a record 1,109 basis points on March 3, the highest in the EU.
Dombrovskis’s five-party coalition, which may be confirmed by a parliamentary vote this week, is planning to cut spending by 360 million lati ($642 million) instead of the 700 million lati that would be necessary to keep the deficit under 5 percent.
Full text of the letter:
Dear Mr. Sloan:
Recent events have fatally undermined investor confidence in Bank of America (BAC) Chairman and CEO Kenneth D. Lewis. With BAC’s share price now down 90% in 5 months, we call upon the BAC board of directors to immediately seek the resignation of Chairman and CEO Ken Lewis. Absent prompt action to remove Mr. Lewis, we will have no choice but to call upon BAC shareholders to join us at BAC’s upcoming annual meeting in voting against Mr. Lewis, Thomas Ryan, as chair of the Corporate Governance Committee responsible for CEO succession, and you as lead independent director.
A year ago, we communicated grave concerns with BAC’s failure to manage risk in a February 6, 2008 letter to three members of the board’s Asset Quality Committee. Absent a compelling explanation, we indicated our intent to oppose the directors’ re-election at BAC’s 2008 annual meeting. In response, you invited us to a meeting in Charlotte during which you assured us the board was diligent in its oversight of management and had already taken steps to substantially improve risk management. Based on these assurances, we did not oppose the election of any BAC directors.
The board, however, subsequently allowed Mr. Lewis to take outsized, reckless risks by acquiring Merrill Lynch in the midst of severe financial uncertainty. After hastily arranging the ill-considered acquisition, management then failed to disclose Merrill’s staggering fourth quarter losses prior to the shareholder vote on the merger. In addition, BAC’s senior management was reportedly aware of Merrill Lynch’s intent to distribute nearly $4 billion in bonuses at a time when Merrill Lynch was suffering heavy losses. It also appears that Mr. Lewis had the ability to prevent the payments under a previously undisclosed agreement.
Removing Mr. Lewis is now a necessary prerequisite to restoring BAC’s credibility with shareholders, regulators and the public. If the board fails to remove Mr. Lewis prior to filing its 2009 annual meeting proxy this month, we will urge shareholders to join us in opposing Mr. Lewis’ re-election and that of the independent directors most culpable for his continued employment.
The CtW Investment Group works with pension funds sponsored by unions affiliated with Change to Win, a coalition of unions representing 6 million members, to enhance long-term shareholder value through active ownership. These funds, together with public pension funds in which CtW union members participate, are substantial long-term Bank of America shareholders.
At the time of our March 2008 meeting to discuss BAC’s risk management failures, BAC had lost approximately 30% of its market capitalization over the previous year, in significant part due to liquidity support agreements included in the terms of CDOs BAC had issued since 2005. At that meeting, we were assured by you and BAC’s risk management team that the company understood the mistakes it had made, and had already taken steps to substantially improve its risk management process going forward, including a commitment to seeking outside opinions concerning future developments in the financial markets.
Subsequent events suggest that neither the board nor management put adequate risk management practices in place: despite serious concerns with the Merrill acquisition voiced by numerous outside observers, the board supported Mr. Lewis’ gamble, with devastating results. Whereas BAC had entered the September-October meltdown in relatively strong shape compared to peer institutions - having lost only about 40% of its January 2007 market capitalization at the time Lehman Brothers collapsed - the board’s acquiescence to the Merrill Lynch acquisition has since precipitated a 90% fall in BAC’s share price free 3-in-1 credit report.
Shareholders’ loss of confidence in BAC stems from the announcement on January 16 that Merrill Lynch had lost an additional $15.3 billion - and over $19 billion in shareholders’ equity - in the fourth quarter of 2008, essentially doubling its losses for the year.
BAC shareholders could have avoided these devastating losses had BAC either exercised its rights under the Material Adverse Effects clause or disclosed the losses to its shareholders prior to our voting on the merger. Mr. Thain has reportedly indicated that BAC had ongoing access to Merrill Lynch’s daily profit and loss reports. Nevertheless, Mr. Lewis claims that he and his team were unaware of the scale of Merrill’s losses until after the December 5 shareholder vote. At that time, Mr. Lewis requested and received considerable further taxpayer support in the form of additional preferred equity and a partial guarantee of the value of approximately $118 billion in assets. But despite apparently recognizing the severity of Merrill’s condition and the damage a merger would do to BAC, Mr. Lewis neither informed shareholders of the scale of Merrill’s fourth quarter losses nor invoked BAC’s contractual rights under the merger agreement’s Material Adverse Effects clause.
More recently, shareholders have learned that at essentially the same time as the merger agreement, BAC and Merrill Lynch entered into a previously undisclosed agreement according to which Merrill was able to issue bonuses from a pool of approximately $5.8 billion, and that the bonuses “shall be determined by the company (Merrill) in consultation with the parent (Bank of America).” Indeed, it appears that BAC used its authority to influence Merrill’s bonus awards to reduce the size of the available pool from $5.8 billion to “under $4 billion.” As a consequence of BAC’s failure to disallow bonus payments by Merrill Lynch, the company is now under investigation by the New York Attorney General.
These decisions have prompted shareholder litigation alleging breach of fiduciary duty. At minimum, they represent a failure of judgment on Mr. Lewis’ part. Any one of these actions alone would justify Mr. Lewis’ removal: he either knew the scale of Merrill’s losses and failed to inform shareholders of them, or he was grossly negligent in failing to keep abreast of Merrill’s deteriorating performance. Moreover, in allowing Merrill executives to extract $3.6 billion from the company even while BAC recorded over $15 billion in losses and was seeking further taxpayer support, Mr. Lewis endangered the solvency of BAC and severely tarnished its public image and reputation.
While we believe shareholders are entitled to a full explanation of what the board knew, when it knew it, and whether it approved of Mr. Lewis’ disastrous decisions, it is more important in our view that the board do what is necessary to restore investor confidence. Removing Mr. Lewis as Chairman and CEO is necessary first step in this challenging process.
Thank you for your timely consideration.
Sirius XM Satellite Radio Inc. said Tuesday it will accept a much-needed loan from DirecTV’s parent Liberty Media Corp.
The cable giant will, in turn, get a 40 percent equity stake in the New York-based satellite radio company that was on the brink of bankruptcy.
The first part of the investment will consist of a $280-million loan, $250 million of which will be funded immediately on Tuesday to mostly repay maturing debt, according to a statement from Sirius XM.
The second part consists of a $150-million loan for its XM Satellite Radio subsidiary.
Liberty (NASDAQ: LCAPA) will also offer to buy up to $100 million in XM’s outstanding loans.
In addition, Liberty will receive seats on the board proportionate to its equity ownership 30 day payday loans. It is expected that John Malone, chairman of Liberty, and Greg Maffei, Liberty’s president and chief executive, will join Sirius’s board.
The infusion saves the satellite radio company from a Tuesday, Feb. 17, debt deadline. Missing the deadline could have caused Sirius (NASDAQ: SIRI) to go into Chapter 11 bankruptcy protection. Sirius shares were up 63 percent late morning trading to 17 cents per share.
Washington, D.C.-based XM Satellite Radio Holdings Inc. became a wholly owned subsidiary of Sirius XM after a $3.3 billion merger last year.
Anyone who has checked a career counseling site is numbingly aware of the plethora of lists intended to illuminate applicants on job interview preparation and etiquette.
Now, courtesy of the Toronto Star, add another to the list: Should someone stab you or if you have otherwise incurred an injury serious enough to cause unstanched bleeding in the hours leading up to the interview, it is perfectly acceptable to cancel your appointment.
Credit a 16-year-old job hopeful in Toronto for raising the, um, red flag.
The Star reports that the teen, stabbed during an incident at his high school one morning last week, nonetheless showed up right on time for a 1 p.m. interview with a Toronto veterinary clinic.
The appointment ended abruptly when a clinic employee noticed blood gushing onto the leg of the applicant’s pants and made arrangements to have the student taken to a local hospital where, according to the Star, he was treated for minor injuries no credit check payday loan.
"He did really well on the interview, and we were very proud of him for sticking to the appointment," veterinarian Kent Ackerman told the Star.
Ackerman, the paper said, declined to say whether the clinic offered the student a job.
sgiegerich@post-dispatch.com
314-340-8172
WASHINGTON – The Securities and Exchange Commission today announced an agreement with disgraced money manager Bernard Madoff that could eventually force him to pay a civil fine and return money raised from investors.
The partial judgment must be approved by the judge overseeing the Madoff case in federal court in Manhattan.
The civil proceeding is separate from the criminal case against the prominent Wall Street figure, who is accused of bilking $50 billion from investors in what may be the largest Ponzi scheme in history. Madoff was arrested in December after allegedly confessing to his sons that he had stolen from investors for years.
Federal prosecutors have asked a judge to revoke the bail of Madoff, who has been confined to his Manhattan penthouse under house arrest. Madoff, who has not been indicted, is widely expected to eventually enter into a criminal plea deal with prosecutors.
The agreement with the SEC says the agency’s civil fraud allegations cannot be contested by Madoff and that possible civil fines and restitution will be decided "at a later time."
The allegations, as laid out in the SEC’s civil lawsuit filed Dec. 11, are that Madoff committed a $50 billion fraud and told his sons his investment business was a sham. Madoff told them he had “absolutely nothing," that "it’s all just one big lie," and was “basically, a giant Ponzi scheme," according to the SEC suit low interest payday loans.
The fallout from the Madoff affair has been massive and has rocked a Wall Street already churning from the financial crisis. Thousands of victims who lost money investing with Madoff have been identified – including ordinary people and Hollywood celebrities – as well as big hedge funds, international banks and charities in the United States, Europe and Asia.
The scandal also has brought disgrace to the SEC, which repeatedly ignored credible allegations about Madoff’s operations brought to it over the course of decade. Congress and the agency’s inspector general are investigating what caused the regulatory failure over Madoff and why SEC inspections of his business failed to detect the improprieties.
Meanwhile, the SEC has announced the resignation of its enforcement director.
It said Linda Thomsen is leaving to pursue opportunities in the private sector, but did not provide further details. She has been with the agency since May 2005.
Thomsen became a lightning rod for criticism over the SEC’s failure to detect the Madoff fraud, despite red flags raised to the agency staff by outsiders over the course of a decade.
The Bank of England said it may start buying commercial paper next week through its asset purchase facility in measures to improve companies’ access to credit as interest rates approach zero.
The central bank said that from Feb. 13 it expects to acquire debt of companies that make a “material contribution to economic activity in the United Kingdom,” according to a statement today. It may also buy paper of U.K. companies with foreign parents, or of non-bank financial companies.
“The facility may operate for as long as the highly abnormal conditions in corporate credit markets persist and materially impair the financing of real economic activity,” the bank said. Officials are also considering buying corporate bonds in the secondary market, the statement said.
The announcement marks a shift away from the central bank’s conventional use of monetary policy after it cut the benchmark interest rate to a record low of 1 percent yesterday. Britain’s economy may shrink the most since the end of World War II this year as financial institutions ration credit to rebuild their balance sheets.
The bank said that commercial paper issued by non-financial companies will be eligible in principle if it is satisfied that they make a significant contribution to U flexcheck cash advance.K. corporate financing. Paper issued by leveraged investment vehicles won’t qualify. Companies will be eligible to use the facility even if they haven’t issued commercial paper yet.
Buying Power
The U.K. government last week gave the central bank authority to spend 50 billion pounds ($73 billion) on bonds and commercial paper. Chancellor of the Exchequer Alistair Darling directed Bank of England Governor Mervyn King to buy “high quality” securities.
The policy marks a first step toward so-called quantitative easing, raising the money supply to reduce its cost and prevent a downward spiral in the economy.
Commercial paper must have a minimum rating of at least A-3 at Moody’s Investors Service, P-3 at Standard & Poor’s or F-3 from Fitch. The bank is also consulting on buying corporate bonds in the secondary market.
The bank said it will buy from dealers in the primary market for commercial paper and may also buy it from holders of securities in the secondary market.
Japan’s Nikkei is at risk of falling back to a 26-year low as a deep recession and strong yen take a heavy toll on company earnings, overwhelming valuations showing shares at some of the cheapest levels on record.
Even after the Nikkei’s record 42 percent tumble last year, overseas portfolio managers are likely to be slow in embracing Japan again, having dumped about a quarter of their $276 billion in stock purchases made between 2005 and 2007.
“Demand is dropping fiercely for companies,” said Takashi Ito, a senior strategist at Nomura Securities.
But based on analysts’ earnings expectations, Japanese shares are still more expensive than the United States and Europe despite having suffered a bigger slide than those markets.
A corporate culture where firms hold shares in each other is one reason why valuations have been historically higher in Japan than other regions.
In the business year ending in March 2010, the price-to-earnings ratio of the top 500 Japanese companies is seen at 12.25 times compared with 14.13 for the current year, according to Thomson Reuters data.
That is still higher than the 10.88 forward P/E ratio for S&P 500 companies this year, and the single-digit levels some analysts see in European indexes such as Germany’s DAX
The yen’s record surge last year has added to the pain from the global economic downturn for top Japanese exporters such as Toyota Motor Corp, which called the current climate an unprecedented emergency in its 70-year history saving payday loans.
On a trade-weighted basis, the yen soared 25 percent in 2008, shocking Japan’s big companies and taking a big slice out of the value of already tumbling overseas profits.
Electronics giant Sony Corp will likely suffer an operating loss of about $1.1 billion — its first in 14 years — due to sluggish sales and the stronger yen, a source with knowledge of the matter said on Tuesday.
Highlighting how sharply the Nikkei slid, the price-to-book ratio — or much much the market is valuing companies compared to the value of their net assets — remains at just 1 after sliding to 0.87 last October when the stock index hit a low of 6,995.
Such levels are rare, indicating investors are valuing firms at less than what they could theoretically be liquidated for.
The drop to 0.87 was the lowest since 1991, according to figures from Thomson Reuters. Even during Japan’s decade of economic stagnation, deflation and banking crisis, the price-to-book ratio never fell below 1.
But analysts don’t think buyers will be swayed just yet.
“Unless investors can confirm the economy and corporate earnings will likely soon hit the bottom, buying based on those valuations won’t take place,” said Yutaka Miura, a senior technical analyst at Shinko Securities.
The United Auto Workers agreed to work with the embattled U.S. automakers about changes in their labor contract, an important step for the industry’s chance to win up to $34 billion in federal loans.
The announcement was made Wednesday by UAW President Ron Gettelfinger at a news conference after meeting with union officials from plants operated by General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC.
GM has warned it will run out of the money it needs to operate later this month unless it gets assistance from the government. GM said it needs $4 billion before the end of the year. Chrysler said it will run out of cash in the first quarter of next year without help.
The companies all presented plans to Congress Tuesday for how they would use federal loans to return to profitability. The Big Three CEOs and Gettelfinger are due to appear at Senate and House hearings Thursday and Friday seeking support for the loan package.
Gettelfinger said the union will suspend the "jobs bank" at GM. That is a jobs guarantee program that pays laid off auto workers up to 95% of their regular pay online cash advance. He said the union is also open to suspending the jobs bank at Ford and Chrysler. But he said this and other help from the union is not enough to save the automakers from their current crisis.
"To be honest with you, right now if the UAW members went in these facilities and worked for nothing…it would not help the companies that much," he said.
He said the union also is willing to have the companies delay billions in payments to the trust funds that will assume responsibility for retiree health care coverage in 2010, although he said that such a move would require court approval. Those payments are not due until next year.
The shift of those obligations, estimated at about $100 billion, was a major victory for the automakers in the 2007 labor agreement.
CNN correspondent Brooke Baldwin contributed to this report.
Singapore's exports posted the biggest decline in more than six years in October as recession in Japan, Europe and the U.S. hurt demand for the island's electronics and drugs.
Non-oil domestic exports fell 15.3 percent from a year earlier, after contracting 5.7 percent in September, the trade promotion agency said in a statement today. Economists had expected an 8.2 percent drop. Total exports, including oil shipments and re-exports, fell 4.2 percent.
Singapore plans to bring forward its budget announcement, help small and medium-sized companies obtain financing and provide training for retrenched workers amid the global economic slowdown, Prime Minister Lee Hsien Loong said yesterday. The economy fell into its first recession since 2002 in the last quarter, prompting the central bank to end a policy favoring gains in its currency.
Worsening trade “will put additional pressure on the Monetary Authority of Singapore to make an intra-meeting adjustment to its currency band,'' said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. “It also helps justify the government's decision to bring forward the budget to January, where companies, in particular, can look forward to a series of goodies.''
The Singapore dollar fell to as low as S$1.5256 today, the weakest level since September 2007.
Slow Growth
Singapore's recession will last about a year and it may take several years of slow growth before the economy returns to normal, the Straits Times cited Lee as saying in a report today. The government expects overseas shipments to decline as much as 4 percent this year, the worst performance since 2001 freecreditscore.
Exports dropped a seasonally adjusted 7.4 percent last month from September, when they fell a revised 0.9 percent, today's report showed. Economists had expected a 0.5 percent decline.
“Electronics exports have been contracting for about two years and the pace of decline has in fact worsened in recent months,'' said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. “Given the current global economic conditions, the outlook for this sector in Singapore is exceptionally bleak going forward.''
Electronics shipments slipped 15 percent in October from a year earlier, the 21st consecutive drop, following a 10.7 percent decline in September. Sales of electronics products by companies including Chartered Semiconductor Manufacturing Ltd. were worth S$5.64 billion ($3.7 billion) last month.
Singapore's semiconductor shipments fell 7.3 percent from a year earlier in October. Chartered, the world's third-largest maker of customized chips, said last month losses in the current three-month period will mount as demand slumps. The maker of chips for Microsoft Corp.'s Xbox 360 game player has halted overtime work, cut wages and scaled back spending.
Non-electronics shipments, which include petrochemicals and pharmaceuticals, fell 15.5 percent in October from a year earlier. Pharmaceutical shipments plunged 38.9 percent last month.
Australia's central bank signaled it's prepared to add to the most aggressive interest-rate cuts in 17 years as it tries to ensure the economy sidesteps a looming global recession.
The bank today cut its 2008 economic expansion forecast to 1.5 percent from 2 percent and said it had been forced to make “unusually large'' reductions in the overnight cash rate target in October and November because renewed global turmoil raised the risk growth will stall.
Governor Glenn Stevens has slashed the benchmark lending rate since early September by 200 basis points to 5.25 percent in the biggest round of cuts since a recession in 1991. Australia's weakening economy also means underlying inflation is now reaching a peak and will begin to slow in coming months, the bank said in its quarterly policy statement released in Sydney.
“There is still considerable scope for monetary policy to help the economy over the next 12 to 18 months,'' said Brian Redican, a senior economist at Macquarie Group Ltd. in Sydney. “They are saying the economy will keep expanding, but it will be seriously affected by the global slowdown.''
Traders are betting Reserve Bank policy makers will cut the benchmark rate by three-quarters of a percentage point to 4.5 percent on Dec. 2, according to a Credit Suisse index based on overnight swaps trading. There is a 63 percent chance of a 1 percentage point cut, the index showed at 3:53 p.m. in Sydney.
`Appropriate Balance'
“The board will be seeking to strike the appropriate balance between avoiding an unduly sharp weakening in demand and the need for inflation to fall back'' within its target range of 2 percent to 3 percent “over a reasonable period,'' today's statement said.
The Australian dollar traded at 68.70 U.S. cents at 3:55 p.m. in Sydney from 68.95 cents just before the statement was released. The two-year government bond yield fell 2 basis points to 3.83 percent. A basis point is 0.01 percentage point.
The bank said falling global demand for commodities, with base metals prices down by an average of more than 30 percent this year, means “it's clear that Australia's terms of trade have now peaked.''
Income from foreign sales is “likely to subtract noticeably from national income growth over the year ahead,'' it said.
Growth Forecast
Gross domestic product will rise 1.75 percent in 2009, less than the 2.5 percent expansion forecast by the bank in its August statement. The bank also said GDP will gain 2 pay advance in 24 hour.5 percent in 2010, compared with its previous prediction of 2.75 percent.
“A more rapid unwinding of the resources boom than has been assumed would have significant negative effects throughout the economy, resulting in softer growth in domestic incomes and spending,'' today's statement said.
“A number of resource companies are reconsidering their capital expenditure intentions for 2009, and smaller mining firms in particular are likely to cut back their investment,'' the bank said. That will “flow through into slower activity in other sectors of the economy.''
Australian companies, including builders, are finding it harder to borrow money, the central bank said.
The International Monetary Fund is forecasting that the U.K., Japan, the euro region and the U.K. economies will all contract next year in their first simultaneous recession since World War II.
G-20 Action
The Group of 20 nations said in a statement yesterday following a meeting in Sao Paulo that it's prepared to act “urgently'' to bolster growth and called on governments to cut interest rates and raise spending as the world's leading industrialized economies battle the threat of a recession.
Ongoing stress in financial markets means it is “possible that the deterioration in the external environment could continue,'' the Reserve Bank said. “Even if this did not occur, the effects on domestic activity of the deterioration that has already occurred could be deeper or more persistent than expected in this outlook.''
Australia's economy grew 0.3 percent in the second quarter, the slowest pace in more than three years, as households cut spending for the first time since 1993.
Recent reports showed house prices fell 1.8 percent in the third quarter, the biggest drop since 1978, retail sales tumbled in September by the most in three years and job advertisements slid for a sixth month.
Home-loan approvals fell 2.7 percent in September, the eighth month of declines, a separate report showed today.
Core inflation is likely to remain “around 4.5 percent'' during the year through December 2008 and then “decline gradually'' to 3.25 percent by mid-2010 and 2.5 percent by mid 2011, the bank said.
Three months ago, it forecast inflation would slow to 3 percent by the middle of 2010.
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