Banking System Like South Sea Bubble: Senior Bank of England Official

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Returns on banking shares relative to the wider market

‘Banking became the goose laying the golden eggs. There is no period in recent UK financial history which bears comparison,’ says executive director for financial stability, Andy Haldane

A senior Bank of England official today compared the banking system over the last 20 years to the South Sea bubble of the early 18th century and said bankers had merely “resorted to the roulette wheel” to keep up with each other.

The Bank’s executive director for financial stability, Andy Haldane, said in a speech in Chicago that having been stable over much of the 20th century, returns in the banking system relative to the wider stockmarket shot up after 1986 until 2006.

“Banking became the goose laying the golden eggs. There is no period in recent UK financial history which bears comparison,” he said.

He said bankers and policymakers became seduced by the excess returns available: “Banks appeared to have discovered a money machine, albeit one whose workings were sometimes impossible to understand.

“One of the South Sea stocks was memorably ‘a company for carrying out an undertaking of great advantage, but nobody to know what it is’. Banking became the 21st-century equivalent.”

Read moreBanking System Like South Sea Bubble: Senior Bank of England Official

Helen Thomas slams White House for lack of transparency

At the White House presser on Wednesday, several correspondents questioned the way the Oval Office selected questions from the public for today’s virtual town hall.

President Barack Obama answered pre-selected questions Wednesday afternoon about health care sent in from emails, Facebook and Twitter. CBS’ Chip Reid and columnist Helen Thomas thought this reflected a lack of transparency at the White House.

“It feels like the concept of a town hall, I think, is to have an open public forum. And this sounds like a very tightly controlled audience and list of questions. Why do it that way?” asked Reid.

White House press secretary Robert Gibbs deflected the question, but that only raised the ire of Helen Thomas, UPI’s veteran correspondent who has long been at the top of the White House press corps totem pole.

“We have never had that in the White House,” Thomas said, referring to the degree that press events are pre-scripted in the Obama administration. “I’m amazed, I’m amazed at you people who called for openness and transparency…”

That’s when things got testy, and Gibbs looked very uncomfortable as Reid and Thomas took turns attacking his evasive answers.

“Calling reporters the night before, telling them they’re going to be called on – that’s shocking,” Thomas said, referring to an incident last week when Huffington Post blogger Nico Pitney was given advance warning that he would be called on to ask a question on behalf of the Iranian public.

This video is from C-SPAN, broadcast July 1, 2009.

Read moreHelen Thomas slams White House for lack of transparency

Official: US government will pull out of GM if no deal by July 10

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A sign hangs in the window of a General Motors dealership in Chicago

The US government will pull its support from General Motors if the automaker does not get court permission for a speedy exit from bankruptcy protection by July 10, an official testified on Wednesday.

“We cannot make an open-ended commitment,” Henry Wilson, a member of President Barack Obama’s automotive task force, told the New York court.

GM is seeking court permission to sell its best assets to a new company in which the US government will get a majority stake.

Should the plan be approved in time, Wilson said the government could begin to sell its stake as early as 2010, once the new company is ready to launch a public stock offering.

Officials have said the Obama administration has no intention of nationalizing General Motors over the long term and will not be participating in its day-to-day operations.

Read moreOfficial: US government will pull out of GM if no deal by July 10

After China, Brazil Eyes Non-Dollar Trade With India

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SAO PAULO (Dow Jones)–Brazil is considering using its own currency when conducting trade with India, the local Estado de Sao Paulo newspaper said Monday.

Central Bank President Henrique Meirelles met with Indian banking officials in Europe at the Bank for International Settlements meeting over the weekend to discuss the move away from the dollar in trade between the nations, Estado reported.

Brazil and China are also conducting studies on how to shed the dollar in trade, according to Estado.

Read moreAfter China, Brazil Eyes Non-Dollar Trade With India

Schwarzenegger declares fiscal emergency; California issues IOUs

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California is inventing its own currency

AFTER weeks of trying to fix California’s budget, Governor Arnold Schwarzenegger and state legislators have fought one another to a standstill.

A day after the state Senate failed in a late-night bid to close part of a deficit now projected at $US26.3 billion ($A32.6 billion), California Controller John Chiang took steps to begin issuing IOUs to tens of thousands of companies and individuals owed millions of dollars by the state.

Mr Schwarzenegger declared a fiscal emergency, ordering state workers to take a third unpaid day off each month.

A meeting between Mr Schwarzenegger and the state’s top four legislative leaders ended abruptly within half an hour. Assembly Speaker Karen Bass, a Democrat from Los Angeles, charged out of the Governor’s office, clearly distraught, and walked briskly down the hall.

Related articles:
State’s budget gap deepens $2 billion overnight (San Francisco Chronicle)
Schwarzenegger declares emergency in California (AFP)
Schwarzenegger to shut state offices to save money (Sydney Morning Herald)
Governor dumps plan to build prison hospitals (San Francisco Chronicle)

“He broke it. He should fix it,” Ms Bass said tersely, alluding to Mr Schwarzenegger’s refusal to accept a budget deal that would have averted IOUs but not closed the entire deficit. “Nothing more to say.”

Read moreSchwarzenegger declares fiscal emergency; California issues IOUs

US economy sheds another 467,000 jobs

The US economy shed another 467,000 jobs last month, signalling aggressive government stimulus measures are failing to unshackle the labour force from the grips of the recession, official figures showed on Thursday.

The result was worse than economists predicted and pushed the unemployment rate from 9.4 per cent to 9.5 per cent, slightly better than expected but still a 26-year high. Thursday’s figure shows further erosion from the previous month’s decline of a revised 322,000 drop and knocked wind from the notion that the pace of job losses might be slowing.

Read moreUS economy sheds another 467,000 jobs

UK: Economy shrinks at fastest rate for 50 years

The UK economy shrank by 2.4 per cent in the first quarter at the fastest rate in more than 50 years and far worse than expected, according to official figures today.

Revised figures from the Office for National Statistics (ONS) showed that, between January and March, the economy contracted by its fastest pace since 1958. The ONS revised down its initial estimate, showing a contraction of 1.9 per cent.

Analysts had predicted that the revised numbers would show a 2.1 per cent fall in GDP.

Today’s shock data is in part due to a change in methodology in the way that the ONS calculates construction and services output, but will do nothing to boost Alistair Darling’s hopes of a recovery by the end of the year.

Construction output was revised down from -2.4 per cent to -6.9 per cent in the first quarter, but there was also a bigger than expected drop in output from the services sector, that accounts for more than two thirds of the economy, which was revised down from 1.2 per cent to 1.6 per cent.

Industrial output was revised up slightly to -5.1 per cent, from the initial estimate of -5.3 per cent.

Read moreUK: Economy shrinks at fastest rate for 50 years

Britain dropped plans for compulsory ID cards

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File photo showing Home Secretary Jacqui Smith holding a sample identity card at a news conference in London September 25, 2008. (REUTERS)

LONDON (Reuters) – Britain said on Tuesday it was dropping plans to bring in compulsory biometric identity cards for airport workers and that the multi-billion pound scheme would remain voluntary for all Britons.

Home Secretary Alan Johnson said the government was going ahead with the introduction of the 30 pound cards, which contain personal details, fingerprints and a facial image, but ruled out making them compulsory.

Civil rights campaigners and opposition politicians have long opposed the project, saying it was unnecessary, expensive and an intrusion into private life.

Read moreBritain dropped plans for compulsory ID cards

Harvard professor: The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one

Sterling Crisis Looms as U.K. Unraveling Points to Budget Cuts

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June 30 (Bloomberg) — The state of the U.K. economy fills British financial historian Niall Ferguson with foreboding.

“The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one,” the Harvard University professor says.

Ferguson’s concern stems from the deterioration in the U.K.’s public finances, which prompted Standard & Poor’s to warn on May 21 that the country could lose its AAA debt rating. The firm estimated the cost of propping up Britain’s banks at 100 billion pounds ($166 billion) to 145 billion pounds and said government debts could double to almost 100 percent of gross domestic product by 2013.

Chancellor of the Exchequer Alistair Darling said on April 22 that this year’s government deficit would hit 12.4 percent of GDP. Alan Clarke, a London-based economist at BNP Paribas SA, expects it to reach 17 percent of GDP in 2010.

Read moreHarvard professor: The probability of a real sterling crisis is around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one