WASHINGTON — For the second time in two years, European debt troubles threaten to slow the momentum of the fragile recovery in the United States.
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Tracking Europe’s Debt Crisis
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Italy and Greece Act With More Force on the Debt Crisis
(November 12, 2011)
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(November 12, 2011)
Times Topic:
European Debt Crisis
Although American financial institutions have taken steps to protect themselves from Europe’s long-simmering problems, the likely slowdown in Europe could damage consumer and business confidence in America and strengthen the dollar, making United States exports less competitive.
“Financial contagion can lead to the very rapid global spread of recession,” said Chris Varvares, senior managing director for Macroeconomic Advisers, a forecasting company. “If trouble intensifies and spills over to equities and other U.S. risk assets, we could see a soft patch.”
Economists say Europe’s troubles would need to worsen significantly before putting the United States economy, which has been strengthening lately, at risk of a new recession.
The European Union and United States economies are the two biggest in the world and their financial institutions are deeply intertwined. They have the single largest bilateral trade relationship, together accounting for nearly a third of global trade flows.
On Thursday, the European Commission announced that it foresaw little or no growth in the European Union in the fourth quarter of the year, and a slight 0.1 percent contraction for the euro zone, the 17 countries using the euro currency. It forecast a scant 0.5 percent annual growth in 2012 for the union and warned that the Continent might be slipping into a “deep and prolonged” recession. As recently as this spring, the commission forecast that Europe would grow 1.75 percent for 2012.
Speaking on Thursday at the Asia-Pacific Economic Cooperation summit meeting in Hawaii, the Treasury secretary, Timothy F. Geithner, said: “The crisis in Europe remains the central challenge to global growth. It is crucial that Europe move quickly to put in place a strong plan to restore financial stability.”
He added, “We are all directly affected by the crisis in Europe.”
United States financial institutions have tried to inoculate themselves by drastically cutting risk to the euro zone debt markets, partly in response to urging from policy makers. For instance, prime money-market funds — a common and higher-yielding alternative to bank deposits, and the site of a freeze in the financial markets in October 2008 — have reduced their exposure to euro zone banks by more than half since May, according to a JPMorgan analysis released this week. “Most prime fund managers are allowing existing euro zone exposures to run off,” the analysts wrote.
But these measures may not be enough in the event of a bank failure or bond market panic, which could have broad and unpredictable effects on global markets.
“I don’t think we’d be able to escape the consequences of a blow-up in Europe,” Ben S. Bernanke, the chairman of the Federal Reserve, said Thursday in Texas while answering questions after a speech.
Even with the recent moves, the United States financial system still has billions at risk to European institutions.
In an extensive report to lawmakers in September, the Congressional Research Service estimated that the exposure of banks to Greece, Ireland, Italy, Portugal, and Spain — some of the most heavily indebted euro zone economies — amounted to $641 billion. It added, “a collapse of a major European bank could produce similar problems in U.S. institutions.”
It further estimated American banks’ exposure to German and French banks at in “excess of” $1.2 trillion, equivalent to about 10 percent of total commercial banking assets in the United States. Similarly, the Bank for International Settlements reports that at midyear banks in the United States had $757 billion in derivatives contracts and $650 billion in credit commitments from European banks.
“Europe is very clearly in a Bear Stearns environment,” said Stephen Wood, chief market strategist at Russell Investments, referring to the investment bank that collapsed in early 2008 without setting off broader financial panic.
“The question is: ‘Do they get to a Lehman environment?’ They’re not there yet, but the dark clouds are beginning to gather. Right now, we’re seeing the U.S. dollar and U.S. markets benefiting, relatively, as safe havens,” Mr. Wood said. “But that wild card, that sword of Damocles, is going to be what the capital market implications are if there is a major credit event in Europe.”
Because Europe’s troubles have been developing for more than two years, financial firms have had more time to prepare than they did for the 2008 crisis, when the collapse of Lehman Brothers almost caused credit markets to freeze. This preparation could prevent a repeat of the 2008 global crisis, even if the European troubles deepen.
Still, the woes in the euro zone will probably weigh on the broader American economy, economists say. Consumer confidence has nearly returned to its lows during the worst of the recession and financial crisis, in late 2008 and early 2009.
(Updates with ex-State Street Executives in Courts; and MF Global Special Section in Compliance Action.)
Nov. 1 (Bloomberg) — U.S. financial regulators are examining the rising use of loans to state and local governments that allow public officials to take on added debt without disclosing it to municipal-bond investors.
Officials with the Municipal Securities Rulemaking Board, which writes regulations for the $2.9 trillion tax-exempt bond market, have discussed the issue with the Securities and Exchange Commission, Alan Polsky, chairman of the MSRB, said on a conference call with reporters yesterday. Polsky said the board and the agency are concerned about bank loans.
Standard & Poor’s in July estimated that municipalities may borrow as much as $75 billion from banks this year, while Fitch Ratings has also said localities should disclose information about such direct deals with banks. The MSRB, based in Alexandria, Virginia, said in August that loans could fall under some securities rules. It is urging the SEC to weigh in on the matter.
The loans may leave investors unaware about rising debt obligations that could affect their credit ratings, Polsky said.
Compliance Policy
CFTC Approves Private-Fund Risk Reporting in Joint Rule With SEC
The Commodity Futures Trading Commission approved a final rule requiring certain advisers to private funds dually registered with the Securities and Exchange Commission to report information for use by the Financial Stability Oversight Council in monitoring risks to the U.S. financial system.
The CFTC announced its approval of the rule, passed by the SEC on Oct. 26, in a statement yesterday.
G-20 to Focus on 29 Biggest Banks, German Official Says
Global regulators will call for capital surcharges on 29 of the biggest banks to reduce risks to the financial system, a German government official said.
The list of so-called systemically relevant banks affected by the rules will be published at the end of the Group of 20 summit in France this week, the official told reporters in Berlin yesterday on condition of anonymity because the negotiations are private. He declined to reveal the banks’ names.
G-20 governments had previously considered naming as many as 50 banks as systemically important to the global economy and in need of extra capital, two officials from member nations said Oct. 16. Regulators have clashed with some institutions over the additional capital rules.
Leaders of the G-20 will discuss improved supervision and ways to ensure that such banks can be restructured or wound down without causing shocks to the financial system, the German official said. Regulators will designate systemically relevant insurers later, he said.
The goal is to phase in the surcharges, drafted by the Basel Committee on Banking Supervision, in 2016 and reach the new capital levels by 2019, according to the official. The additional capital buffer requirement will range from 1 percentage point to 2.5 percentage points on top of expanded core capital requirements set by the Basel group last year.
For more, click here, and click here.
Compliance Action
Credit-Rating Firms to Be Supervised by EU Markets Regulator
The three main credit-ratings companies face direct supervision from a single European Union market regulator for the first time, after registering with the European Securities and Markets Authority.
Moody’s Investors Service, Standard & Poor’s and Fitch Ratings could face on-site inspections from ESMA to assess how well they comply with rules on “governance, conflicts of interest and transparency,” the agency said in an e-mailed statement.
Steven Maijoor, ESMA chairman, said in an e-mailed statement yesterday that the supervision will “contribute” to the quality of ratings and keep markets functioning well.
The European Commission, the EU’s executive arm, proposed that credit-ratings companies should be directly regulated by ESMA in May last year. Scrutiny of the firms, which analyze debt-default risk, intensified after Greece’s rating was cut to junk status by Standard & Poor’s in 2010.
“Our registration reflects the robust standards, policies and processes that S&P has put in place worldwide,” Martin Winn, a spokesman for S&P, said in an e-mailed comment.
ESMA also gave non-EU rating companies that issue reports on corporate and sovereign debt in Europe an extension until Jan. 31, to a deadline requiring them to comply with the rules.
Nigeria Seeks Emerging-Index Addition to Increase Volumes
Nigeria is aiming for inclusion into emerging-market indexes by introducing measures and new listings to increase trading volumes, U.S. Securities and Exchange Commission Director General Arunma Oteh said.
The regulator and the Nigerian Stock Exchange plan talks next year with index providers such as Morgan Stanley and JPMorgan Chase & Co., Oteh said in an Oct. 28 interview in her office in Abuja, the capital. Sub-Saharan Africa’s second- biggest economy will increase market depth to boost its prospects of inclusion by introducing securities lending, short- selling and changes to market-making rules, she said.
The SEC approved securities lending and short selling and the exchange is working on introducing them, Oteh said. The regulator expects the exchange to submit new rules by year-end to encourage market-making, she said. The bourse aims to introduce its first exchange-traded fund next year as well as options and financial futures within five years, Nigerian Stock Exchange Chief Executive Office Oscar Onyema said yesterday at a conference in Abuja.
The Nigerian Stock Exchange, whose index is sub-Saharan Africa’s second-worst performer this year after Kenya, is targeting a market value of $1 trillion by 2016.
For more, click here.
Argentina Creates Approval System for Foreign Exchange Purchases
Argentina created an online verification system for individuals seeking to purchase foreign exchange that takes effect yesterday, according to a statement in the Official Gazette.
All foreign exchange transactions must be checked online to ensure that the individual making the purchase has the financial means to do so, yesterday’s statement said. The program is intended to aid in the fight against money laundering, the statement said.
OCBC Reprimanded for Failure of Its Online, Branch Systems
Oversea-Chinese Banking Corp. was reprimanded by the Monetary Authority of Singapore for the failure of its automated-teller machine, Internet and credit card banking networks on Sept. 13.
The regulator directed the bank to review its network, its monitoring systems and all supporting vendors, according to an e-mailed statement yesterday.
Italian Lenders Penalized by EBA Capital Rules, Guzzetti Says
Italian banks are penalized by European Banking Authority capital requirements that reflect the interests of France and Germany, according to Giuseppe Guzzetti, head of Italy’s national banking foundations’ group.
Italian banks “are not responsible for the financial disorders” of the last few years and didn’t receive state aid like some of their peers in France and Germany, Guzzetti said yesterday in a speech in Rome.
Italy’s non-profit foundations hold stakes in the country’s biggest lenders. Guzzetti is chairman of the Cariplo banking foundation, one of the largest shareholders in Intesa Sanpaolo SpA, Italy’s second-biggest lender.
Italy’s top five lenders have to boost capital by 14.8 billion euros ($20.6 billion), the third-highest amount after Greece and Spain, to meet an EBA requirement for banks to hold 9 percent in core capital after sovereign-debt writedowns by the middle of next year. French banks require 8.8 billion euros of capital and German lenders 5.2 billion euros.
SEC Judge Clears Two Ex-State Street Executives of Civil Fraud
The chief administrative law judge at the U.S. Securities and Exchange Commission dismissed the case against two former executives of State Street Bank & Trust Co.
Judge Brenda Murray in a written decision Oct. 28 dismissed charges against John Flannery and James Hopkins. The two had been charged with civil fraud in connection with subprime mortgage investments in 2007.
“I find that neither Flannery nor Hopkins was responsible for, or had ultimate authority over, allegedly false and materially misleading documents,” Murray wrote.
Boston-based State Street agreed to repay investors about $300 million in February 2010 to settle charges by the SEC and Massachusetts regulators related to the bond fund. State Street also has paid around $340 million to investors to settle private lawsuits, according to a report of the dismissal yesterday by the Associated Press.
The case is In the Matter of John P. Flannery and James D. Hopkins, Before the U.S. Securities and Exchange Commission, 3-14081 (Oct. 28, 2011).
Special Section: MF Global
MF Global Probe Said to Involve Hundreds of Millions in Funds
U.S. regulators are investigating whether hundreds of millions of dollars are missing from client accounts at MF Global Holdings Ltd., according to two people with knowledge of the matter.
The firm, which filed for bankruptcy protection yesterday, was ordered by the enforcement division of the Commodity Futures Trading Commission to preserve records for the review, one of the people said.
MF Global, the holding company for the broker-dealer run by former New Jersey governor and ex-Goldman Sachs Group Inc. co- Chairman Jon Corzine, told regulators yesterday about deficiencies in accounts that it managed for clients in the futures market, the CFTC and Securities and Exchange Commission said in an e-mailed statement.
Corzine, 64, now faces a regulatory probe as well as a bankruptcy. He wagered $6.3 billion of the firm’s own money on sovereign European debt in a bid to increase profits. Instead, the firm reported a $191.6 million quarterly loss on Oct. 25 as Europe’s debt crisis led to demands from regulators to boost capital, as well as credit downgrades and margin calls, MF Global President Bradley Abelow said.
Under CFTC regulations, futures brokers that trade on exchanges are required to keep their clients’ collateral, often cash or securities, separate from their own accounts. The segregated collateral is meant to reduce risk in futures trades. MF Global had almost $7.3 billion in customer funds in segregated accounts as of Aug. 31, according to the most recent CFTC data.
According to a joint e-mailed statement from regulators, they have been “closely monitoring” developments at MF Global Inc. for several days “in anticipation of a transaction that would include the transfer of customer accounts to another firm.”
“Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm,” the regulators said yesterday in the e-mail.
The regulators said they determined that a bankruptcy proceeding “would be the safest and most prudent course of action to protect customer accounts.”
Diana DeSocio, an MF Global spokeswoman in New York, didn’t immediately reply to a phone call and an e-mail from Bloomberg News requesting comment.
MF Global Holdings, the holding company for the broker- dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection yesterday. Its broker- dealer unit, MF Global Inc., faces liquidation.
For more, click here, click here.
Separately, Nasdaq OMX Stockholm AB declared MF Global UK Ltd. in default under the exchange’s clearing rules for commodity derivatives.
The Swedish exchange, in an e-mailed statement, cited as a reason a notice from the U.K. Financial Services Authority that MF Global UK Ltd. was placed under a special administration regime.
The company entered the special administration regime, with KPMG LLP’s Richard Fleming, Richard Heis and Mike Pink being named joint special administrators, the Financial Services Authority said in a statement yesterday.
Interviews/Speeches
Barofsky Says Wall Street Will Work Around Volcker Rule
Neil Barofsky, former special inspector general for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, talked about the implementation of the Volcker rule and its impact on financial firms.
Barofsky, speaking with Erik Schatzker and Stephanie Ruhle on Bloomberg Television’s “InsideTrack,” also discussed the outlook for MF Global Holdings Ltd.
For the video, click here.
Bove, Levitt Comment on MF Global; More Oversight Expected
Richard Bove, bank analyst at Rochdale Securities LLC, said the potential failure of MF Global Holdings Ltd. will result in more oversight by the Federal Reserve. Former Securities and Exchange Commission Chairman Arthur Levitt, who advises Goldman Sachs Group Inc., said MF Global’s Jon Corzine “was a risk taker.”
MF Global, the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. co- chairman Jon Corzine, filed for bankruptcy yesterday after making bets on European sovereign debt.
Bove talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”
For the Bove audio, click here.
Levitt talked with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”
For the Levitt audio, click here.
Greenberg Says Investment Banking Still Great Business
Alan “Ace” Greenberg, vice chairman emeritus at JPMorgan Chase & Co. and former chairman and chief executive officer of Bear Stearns Cos., talked about high-frequency trades, the banking industry, financial markets and leadership, among other topics.
He spoke with Bloomberg’s Stephanie Ruhle in New York on Oct. 27.
For the video, click here.
–With assistance from Silla Brush, William Selway and Gregory Mott in Washington; Ben Moshinsky in London; Chiara Vasarri in Rome; Chris Kay in Abuja, Nigeria; Lars Klemming in Singapore; Tony Czuczka in Berlin; Stephen Voss and Edward Evans in London; and Bill Faries in Buenos Aires. Editor: Glenn Holdcraft
MS US<Equity> CN JPM US <Equity> CN GS US <Equity> CN MF US <Equity> CN 3204326Z US <EQUITY> CN 2019103Z LN <EQUITY> CN ISP IM <Equity> CN 9933Z US <Equity> CN OCBC SP <Equity> CN 3899Z US <Equity> CN 4062709Z LN <Equity> CN 8130619Z US <Equity> CN
To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net.
To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net.
WASHINGTON (Reuters) – The US financial system remains susceptible to panics and runs, and policymakers may need to use monetary policy to keep the situation stable, a top Federal Reserve official said on Friday.
John Williams, president of the San Francisco Fed, took issue with the conventional central banking wisdom that only regulatory and supervisory policies should be used to ensure financial stability.
He said the financial crises of recent years suggest central bankers can no longer think of financial stability and macroeconomic performance as two separate spheres.
Although macroprudential policies are the appropriate first line of defense against financial instability, these defenses are not impregnable. In all likelihood, monetary policy will need to play a more active role, Williams told a conference at the International Monetary Fund.
While Williams did not address the current state of the US economy and monetary policy in any detail, his remarks do suggest he might support further monetary easing by the Fed if the crisis currently bubbling up in Europe infects US financial firms or the broader economic outlook.
While recent financial reforms were necessary to prevent the worst excesses that led to the 2008 meltdown in credit markets, they may not be sufficient to forestall another major crisis.
The funding system rooted in the capital markets is inherently at risk for runs, contagions, and panics, Williams said. The risk of runs in financial markets remains a very real concern for financial and macroeconomic stability. (Reporting by Pedro Nicolaci da Costa; Editing by Andrea Ricci)
NEW YORK (AP) — Consumer fury has felled the monthly debit card usage fee.
Regions Financial Corp. and SunTrust Banks Inc. followed their big bank rivals on Monday by doing away with monthly fees for using debit cards.
Regions, based in Birmingham, Ala., had started charging $4 per month in October. Atlanta-based SunTrust began charging new customers $5 per month in June.
The regional banks made their moves after larger banks including JPMorgan Chase & Co. and Wells Fargo & Co. said on Friday they would end testing of similar fees.
Both Regions and SunTrust said they were responding to “feedback” from their customers.
While they didn’t elaborate, consumer feedback on the issue has largely been delivered as outrage that banks would charge their customers to get access to their own money.
It was the news last month that Bank of America planned to charge $5 per month for using debit cards for purchases that galvanized the response. Even President Barack Obama joined in the criticism, as did protesters at “Occupy Wall Street” and its sibling demonstrations around the country.
“I think it was a tipping point for consumer perception, especially in light of what the public has done to bail out large banks,” said Norma Garcia, manager of Consumers Union’s financial services program. Garcia said it was the first time she saw such a widespread reaction to something like bank fees, but she said they came at a difficult moment.
“We’re at a point in history where a $5-a-month fee means a lot to a lot more people,” Garcia said.
The widespread anger helped spark a movement that is encouraging bank customers to move their money to credit unions, community banks or online-only institutions that don’t charge such fees. “Bank Transfer Day” is slated to take place on Saturday, but neighborhood-based institutions around the country have already reported sharp increases in account openings ahead of the movement’s designated date for switching.
Bank of America hinted on Friday that it would modify its plan and drop the fees for customers who use direct deposit or maintain certain balances. But it has made no official announcement detailing the policy shift.
Several larger banks, including Citibank, US Bancorp, PNC Financial and TD Bank, jumped on the issue to highlight that they do not charge debit fees, although they may charge monthly maintenance fees for checking accounts.
Banks pushed the adoption of debit cards in the past few decades in part because it is less expensive to handle transactions made with plastic than with cash or paper checks. Debit quickly became popular, and surpassed credit cards as the most popular form of non-cash payment several years ago. Usage has continued to increase as the economy has continued to struggle.
But a new federal regulation that kicked in Oct. 1 cut in half the fees banks could charge to retailers for processing purchases made with debit cards. That came on top of other recent restrictions for charging overdraft fees — which soared when banks offered automatic overdraft coverage for debit cards — and on top of tighter rules on credit cards. Banks said they were instituting the monthly debit card fees as a way to make up revenue lost to these new rules.
With SunTrust and Regions backing off, that leaves Bank of America the only major regional or national bank left charging the fees.
“I think this is a big moment,” said Sen. Richard Durbin, D-Ill., who wrote the bill limiting the fees banks can charge to merchants. “I cannot remember another time when the banking industry has been humbled by its customers.”
TOKYO — Japan’s Olympus mired in a loss cover-up scandal plans to correct financial statements going back two decades while authorities are set to question former managers, according to media reports.
Olympus plans to submit soon corrections to 20 years of its financial statements to the government’s financial bureau, the Mainichi newspaper reported quoting anonymous sources as saying.
The camera and precision equipment maker admitted on Tuesday that it had covered up investment losses from the 1990s and then tried to conceal them with acquisitions made between 2006 and 2008.
The deals had come under scrutiny due to the size of fees involved.
Its stock was placed on the Tokyo Stock Exchange’s watchlist for possible delisting after the company said it would miss a deadline to report its quarterly results.
The Mainichi said the company’s corrections to past reports could prompt the securities watchdog to take administrative action against Olympus such as fines.
But the Securities and Exchange Surveillance Commission appears to be considering stopping short of seeking a criminal charge against the company itself, the daily said.
The move could give Olympus a chance to maintain its TSE listing if the company keeps a new December 14 deadline for earnings results, it said.
Separately the commission will likely consider launching a probe with prosecutors and police on former Olympus managers who may have been involved in wrongdoing, the daily said.
Olympus shares have lost more than 80 percent of their value since the loss cover-up scandal broke after the company ousted British CEO Michael Woodford on October 14, who alleged overpayments in the acquisition deals.
The Nikkei economic daily on Saturday reported the Olympus case has triggered a rare three-way joint investigation among prosecutors, police and the securities watchdog.
The Tokyo District Public Prosecutors Office’s special investigations unit, the Tokyo Metropolitan Police Department and the securities watchdog have been discussing the details of coordination, it said.
Jiji Press news agency said the Tokyo prosecutors office had reinforced the squad by loaning officials from regional offices and were set to question Olympus officials.
Earlier this month, the Journal reported that three years after the global financial crisis, and a year after a US regulatory overhaul, the world economy remains vulnerable to hazards that nearly broke the banking system last time. In a speech today Federal Reserve Vice Chairman Janet Yellen made note of continuing vulnerabilities. The following is an excerpt of her speech:
Less-discernible progress has been made to date, however, in addressing other key vulnerabilities that came to the fore during the financial crisis. Indeed, short-term funding markets remain an important source of structural risk. Despite some significant reforms that enhance liquidity and impose additional restrictions on portfolios, money market funds are still susceptible to liquidity constraints largely because of attributes like their rounded net asset value (NAV) feature and the low risk tolerance of their investors. Options for further reforms being considered by the Securities and Exchange Commission (SEC) include a mandatory floating NAV to mute the incentive for investors to be the first to redeem, capital buffers to allow funds to deal better with actual and potential losses while sustaining a stable NAV, and limits on redemptions both to provide more time for fund managers to address problems and to emphasize to investors that money market funds do not guarantee bank-like liquidity.3
The triparty repurchase agreement (repo) market also continues to exhibit important vulnerabilities. In particular, the settlement process for triparty repo trades continues to rely on massive amounts of intraday credit and, as a result, remains vulnerable to a decision by a clearing bank to withhold funding from a market participant in default or perceived as facing distress. The FSOC has recommended reforms to deal with these problems, and an industry task force has taken some key initial steps in that directionfor example, by coordinating the implementation of a robust confirmation process for triparty trades. But more needs to be done. Indeed, given the centrality of this market to the financial system, taking further steps to reduce its vulnerabilities should be given a high priority.
A new poll shows the growing anxiety baby boomers are feeling about retirement. The Associated Press-LifeGoesStrong.com poll released this week found the majority of baby boomers say the financial hits theyve taken over the past three years have been so substantial, that they now doubt they will be financially prepared to retire.
Financial Crisis Created Retirement Anxiety
The financial crisis of 2008 created a great deal of emotional stress for most workers, whether they were laid off from their jobs or suffered losses to their retirement savings.
As noted in the AP-LifeGoesStrong.com poll, which was conducted October 5-12 by Knowledge Networks of Palo Alto, California and surveyed 1,095 baby boomers online along with 315 additional adults of other age groups, 62 percent of boomers lost money on at least one of four core parts of their retirement savings:
42 percent lost money in their workplace retirement savings, like a 401(k)
41 percent experienced losses in their personal investments outside of an IRA/workplace savings account
32 percent lost in their IRAs (individual retirement accounts)
29 percent saw losses in real estate
While some of the money lost was regained over the years, workers confidence in the market never recovered.
73 Percent of Baby Boomers Plan to Work Past Retirement
The poll found that due to anxiety caused by a loss of savings, 73 percent of baby boomers plan to work past retirement. This number is up from 67 percent this spring.
Even more unsettling was that more than half–53 percent–said they dont feel confident that theyll ever be able to afford a comfortable retirement. This number is up from 44 percent who were concerned about their finances in March.
41 percent said they plan to scale back their lifestyle in some way to afford expenses post-retirement, while 31 percent said they will likely struggle financially. Almost one-quarter polled said they will have to move after they retire to make ends meet.
Baby Boomers are not alone in their concerns regarding retirement as millions of workers face the same uncertainty with reduced savings and a crippled Social Security system to back them up. Asking yourself if youre ready for retirement is the first step of many as you make this deeply personal decision.
Demonstrators showed up in force in two of Germanys major cities to protest against the influence of the global financial markets over the political process. The protests came as the eurozone faces an uncertain future.
ELIZABETH JACKSON: Three years after the collapse of Lehman Brothers set off a domino of falling banks, the bankruptcy of the Italian state is now threatening to do the same thing on a much larger scale.
This time, European sovereign debt has replaced US subprime mortgages as the biggest financial threat.
Now, unless Italy can get its economic act together, global stability is again at risk.
Our Europe correspondent Emma Alberici comes from an Italian background and shes spent a lot of time studying the political and economic climate.
EMMA ALBERICI: In the end, Greece had a well-intentioned prime minister who was let down by a history of entitlement, weak public institutions and a lack of internationally competitive industries.
Italy suffered quite the opposite set of circumstances. A leader in denial about the destructive nature of debt, but a strong underlying economy engaged in the kind of manufacturing that few if any in the developed world can rival – high-end fashion, food and motor vehicle production.
Italian banks didnt buy into the sub-prime story; not the collateralised debt obligations (those fandangled financial products based on individual loans in the United States parcelled up and sold around the world).
Sub-prime lending was anathema to Italys banks whose own lending practices are among the most conservative and rigid in the world. In Italy, youre unlikely to be granted a loan unless you have a minimum of 30 to 40 per cent deposit to commit in cash. Even then, it helps if youre an Italian born male and you happen to know the bank manager.
While public debt is high, private debt is relatively low. Unlike its western partners, Italy is a nation of savers; households that is, not government, which has been forced into the international financial markets, because growth has been stubbornly low for the past 15 years – on average just three quarters of 1 per cent. Without growth, debt as a proportion of GDP has been rising to what is now the second biggest public borrowing figure in the world – $2.5 trillion.
There is a lot to celebrate about Italys economy; a robust central bank with strong prudential oversight sets it apart in southern Europe.
But Italys strength under the lira turned out to be its greatest weakness in monetary union. When times are tough, Italy can no longer devalue its currency to make its Fiat cars and Armani coats more affordable on the world market. The euro is a club in which all 17 members interests must be accommodated and they just cant be in its current structure.
Its hard enough for businesses in Italy to thrive; high taxes and a slow, cumbersome regulatory and legal framework mean contracts are opaque and costly to negotiate. Corruption is rampant in most industries and the labour market is dogged by informal arrangements that often compromise productivity. Organised crime is now said to account for at least 20 per cent of economic output.
Trade with Italy can be difficult too, because of the many non-tariff subsidies awarded to local operators.
According to the Wall Street Journals 2011 index of economic freedom, its easier to do business in Uganda, Fiji, Rwanda and Botswana than in Italy, which ranks 87 in a field of 92 relatively free economies. Hong Kong is number one; itll take about $50 and half an hour to set yourself up there. If you want to start making money in Italy, youll wait a year and a half and it will cost you in the order of $7,000. Its not surprising then that direct foreign investment has been stagnant.
The public service in Italy has become a place where you can get a job for life. No-one even bothers applying for those positions anymore; unless you have a close friend or family member on the inside, your prospects are limited.
The result has been a brain drain in Italy the likes of which are unprecedented in the developed world. And in a country where the prime minister is 75 and the president is 86, the workforce is relatively old, predominantly 40 plus, which explains why so many 30 year olds still live at home.
Youth unemployment has passed 30 per cent. The private sector has found ways to exploit the largely unregulated labour market too; apprenticeships are offered but young people, many of them graduates, are working for two years or more without pay. On the flip-side, senior state figures earn more than double the EU average. The teacher wife of one politician managed to retire at 39 years old on a lifetime pension regardless of future income, of 700 euros a month.
The one time cruise ship crooner Silvio Berlusconi blamed everyone from the judiciary to his partners in the European Union but it was Mr Berlusconi himself who promised so much and delivered so little; distracted from the very big job of structural reform, he told the country there was nothing to worry about. But while he was out chasing teenage girls, his countrys economy was on a collision course with disaster.
Now that the partys over, it falls to a government of technocrats led by the respected economist Mario Monti to unpick and restitch the Italian political and economic fabric in a style thats more becoming of the eighth biggest financial power in the world.
Forbes magazine has dubbed Mario Monti the anti-Berlusconi. Currently the head of the prestigious Bocconi University in Milan, in Europe and at the International Monetary Fund hes renowned for his discretion and sharp intellect. In his six years as competition commissioner in Brussels, he won American and worldwide respect for not only daring to bring Microsoft to trial but for winning the case too.
The path to political certainty is unlikely to be a smooth one, with both sides of the ruling centre right coalition fiercely opposed to the appointment of an unelected government. Silvio Berlusconi still has the capacity to destabilise Italy from outside the parliament, where many have long believed his real strength has comes from – from his five or so television networks and his newspaper group.
Economic prosperity may end up being a much easier goal for Italy to score than press freedom.
This is Emma Alberici reporting for Correspondents Report.
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Cain Reports Raising Millions After Harassment Allegations
By Laura Litvan and Jonathan D. Salant
Oct. 21 (Bloomberg) — Senate Democrats, in danger of losing control of the chamber next November, hold a cash advantage a year before the election as each of their most vulnerable incumbents banked at least $1 million and some have far more money on hand.
“At this stage of the fundraising process, to already be into seven figures is not to be dismissed lightly,” said Glenn Totten, a Democratic consultant who has worked on Senate campaigns. “All incumbents are going to have to explain to the public why they are part of the solution and haven’t been part of the problem. And that takes money.”
While the Democrats’ money edge is helpful, there is time for the Republicans to catch up financially, said Jennifer Duffy, Senate editor for the Cook Political Report, a Washington-based publication that rates congressional races.
In addition, outside groups are expected to spend millions of dollars on the most competitive races, cutting into an individual candidate’s financial advantage, she said.
American Crossroads and Crossroads GPS, the two Republican- leaning independent groups organized with help from former White House aide Karl Rove, have said they plan to raise more than $240 million for the 2012 elections. Thus far, those groups have targeted the re-election of President Barack Obama, although in 2010 they took on big roles in Senate races.
Democrats have their own so-called super political action committee raising unlimited donations to help the party retain the Senate.
Most Competitive Races
“In the most competitive races, candidate fundraising doesn’t mean what it used to,” Duffy said.
Democrats hold a 53-47 majority, including two independents, and are defending 23 seats compared to 10 for the Republicans.
Nine Democratic and two Republican-held seats are considered competitive by two Washington-based publications rating congressional races, Cook and the Rothenberg Political Report. A 10th Democratic seat, held by retiring Senator Kent Conrad, is expected to flip to the Republicans, Cook and Rothenberg predict.
Senator John Cornyn of Texas, chairman of the National Republican Senatorial Committee, said some party donors may be waiting until after the nominee is chosen in the primary.
“A lot of people just want to know who the nominee will be and are not necessarily engaged in supporting one candidate or another in a contested primary,” he said. “I don’t think there will be any lack of financial wherewithal.”
Vulnerable Democrats
Senator Bill Nelson of Florida had the most money as of Sept. 30 among vulnerable Democratic incumbents, $7.5 million. He raised $9.1 million in this election cycle. His leading Republican challenger, former Senator George LeMieux, had $1 million in cash and raised $1.4 million.
Senator Claire McCaskill of Missouri, elected in 2006 with 49.6 percent of the vote, had $3.7 million to spend after raising $5.6 million through Sept. 30. McCaskill had more money in the bank than her two Republican challengers combined; Representative Todd Akin had $1.2 million and former state Treasurer Sarah Steelman had $561,950. Akin raised $1.3 million for his Senate race, while Steelman brought in $666,608 and lent her campaign $400,000.
Senator Jon Tester of Montana had $3.1 million in the bank while Republican challenger Dennis Rehberg had $1.8 million. Tester raised $5.1 million, compared with $2.7 million for Rehberg, a U.S. representative.
Nebraska and Ohio
In Nebraska, Senator Ben Nelson reported $3.1 million cash- on-hand, almost double the $1.6 million for state Attorney General Jon Bruning, his top Republican competitor. Nelson raised $4.7 million to $2.4 million for Bruning.
Ohio Democratic Senator Sherrod Brown reported $4.2 million to spend, compared with $3.3 million for his Republican rival, state Treasurer Josh Mandel. Brown took in $8.3 million for his campaign; Mandel raised $3.8 million.
Still, in a sign of the challenges Democratic incumbents face, both Nelson of Nebraska and Brown of Ohio were outraised in the third quarter. Mandel raised $1.5 million to Brown’s $1.3 million from July to September. Bruning raised $586,633 and Nelson took in $442,576.
Among vulnerable Republican incumbents, Scott Brown of Massachusetts amassed the largest re-election account, $10.5 million, and raised $8.3 million. Former White House aide and Harvard University professor Elizabeth Warren, who entered the Democratic primary in September, raised $3.2 million and had a bank balance of $3 million. A Democratic primary competitor, Newton Mayor Setti Warren, had $44,023 in the bank. He raised 227,543 for his campaign.
Berkley, Heller Race
Representative Shelley Berkley of Nevada, who is trying to unseat Republican Senator Dean Heller, had $3.2 million in the bank. Heller, appointed in April to succeed John Ensign, had $2.8 million. Heller raised $3.2 million and Berkley $3.1 million.
Democrats also held fundraising advantages where their incumbents are retiring.
Tim Kaine, the former Democratic National Committee chairman, is running in Virginia to succeed Senator Jim Webb. Kaine raised $3.6 million and had $2.5 million cash on hand. Former Republican Senator George Allen, trying to reclaim the seat he lost to Webb in 2006, brought in $3.5 million and had $1.8 million in the bank.
Representative Tammy Baldwin, a Democrat running in Wisconsin for the seat being vacated by retiring Herb Kohl, had $1.5 million to spend and raised $1.3 million. Former Republican Representative Mark Neumann had $282,169 in cash after raising $302,033 and borrowing $5,725. Former Republican Governor Tommy Thompson filed a statement of candidacy with the FEC on Oct. 3.
In New Mexico, Representative Martin Heinrich reported $1.1 million in the bank in his effort to succeed fellow Democrat Jeff Bingaman in the Senate. He raised $1.5 million. Former Representative Heather Wilson, a Republican who unsuccessfully sought the Senate seat in 2008, had $952,898 on hand. She brought in $1.3 million.
–Editors: Jeanne Cummings, Jim Rubin.
To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net.
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.