(CEP News) • Bernanke Calls for Regulatory Reforms • U.S. Wholesale Inventories Fall 0.7% • U.S. Economic Optimism ReboundsU.S. Treasury Secretary Says Banks will be Capitalized and Protected
U.S. Treasury Secretary Timothy Geithner pledged to protect the United States' top 20 banks on Tuesday, and said some banks are going to need "significant" capital. Speaking in a PBS interview with Charlie Rose to be aired Tuesday night, he said the government cannot just let the crisis "burn itself out," and that it is essential to stabilize the banking system. "It is our obligation to clean it up and to fix it," he said. "We're going to keep at it."
Geithner said the government is going to act as a catalyst to attract private funding. Once the banks have funding, more private investors will return, he said. However, Geithner noted the government's intervention in the crisis is "short-lived," and that the government should not pay inflated prices for toxic assets.
Fed's Bernanke Says Banking Needs Reform
Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions. Speaking in Washington, D.C., Bernanke said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said. In a question and answer session following his speech, Bernanke said he thinks bank capital has been well used and has reduced the deleveraging process.
Going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
U.S Wholesale Inventories Slide Less Than Expected
U.S. wholesale inventories continued their downward trend in January, falling for the fifth consecutive month. Wholesale inventories fell 0.7% compared to expectations for a 1.0% decline, while the December data was revised down to a 1.5% fall from a previously reported 1.4% contraction, according to a report released Tuesday by the Department of Commerce.
Since January 2008, inventories have increased by 1.0%, compared to the prior month's annual advance of 6.8%. Durable goods inventories posted a 1.3% decline following the previous month's 1.5% drop, while non-durables increased by 0.2% in the month, after falling by 1.5% in December.
IBD/TIPP Economic Optimism Index Unexpectedly Rebounds
Economic sentiment in the United States unexpectedly rebounded in March compared to February, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence.
The IBD/TIPP index of economic optimism rose to 45.3 from the 44.6 reading in February. Economists had expected a reading of 43.0. The economic outlook index declined to 40.2 from the previous month's reading of 42.6, while the personal outlook index rebounded to 51.1 from 50.2 and the federal policies index advanced 3.7 points to 44.7.
U.S. Retail Sales Rise Slightly from Previous Week
U.S. retailers noted some respite in chain store sales for the week ending March 7, according to a survey from ICSC that pointed to more spending compared to the previous week. The ICSC-Goldman Sachs survey reported that chain store sales fell by an annual pace of 0.9%, compared to the previous week's 0.8% contraction. But on a weekly basis, sales rose 0.2%, partially reversing the previous week's 0.6% decrease.
Meanwhile, the Johnson Redbook retail survey recorded a 1.4% decline in the week compared to the same period last year. In addition, sales-to-date in March were down 0.2% compared to February.
Canada's Harper Says $20 Billion Will be Pumped into Economy by April
Canadian Prime Minister Stephen Harper said Tuesday that the bulk of stimulus funding, $20 billion, will hit the economy by April 1, with the rest being delivered within the next five months.
Speaking in Brampton, Ont., Harper said Canada will not experience a prolonged period of deficits, and that his Conservative government will ensure the recession does not hit Canada as hard as in other developed economies. Nevertheless, he said Canada will not emerge from recession until the United States fixes its financial sector.
Harper also said Canada is committed to strict bank regulation and that the country is not going to drift towards nationalizing banks and micro managing them, as has been done in the United States.
Regulators to Focus on Bank Compensation Packages, Canadian Official Says
Executive compensation packages withing the financial sector will be the focus of global regulators, who will also work to limit excessive risk-taking, the head of Canada's banking regulator said on Tuesday.
According to a report by Reuters, Julie Dickson, head of the Office of the Superintendent of Financial Institutions, said, "The G20 has yet to meet to talk about this issue but regulators, in focusing very narrowly on risk, have agreed that we should be looking at compensation programs of international institutions ... to see whether they do create incentives to take risk."
G20 Will Look to Canada for Help on Financial Reforms
A senior Canadian finance ministry official said Canada will share its secrets with the G20 on March 14 as to how its banking system has shown resilience in face of the financial crisis. The official said "it's no coincidence" that Canada was asked to lead one of the four working groups on financial reform at the meeting in Horsham, United Kingdom.
Canada has weathered the recession well because it has higher capital requirements for banks than the minimal international standard and a cap on leverage, he said. The official said the general emphasis of the meeting will be on the actual implementation of financial reform, and assuring that international agencies, such as the International Monetary Fund and World Bank, have the necessary resources to aid countries in need.
By Ernest Hoffman, ehoffman@economicnews.ca and Stephen Huebl, shuebl@economicnews.ca, with contributions from Erik Kevin Franco, efranco@economicnews.ca and Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
U.S. Treasury Secretary Timothy Geithner pledged to protect the United States' top 20 banks on Tuesday, and said some banks are going to need "significant" capital. Speaking in a PBS interview with Charlie Rose to be aired Tuesday night, he said the government cannot just let the crisis "burn itself out," and that it is essential to stabilize the banking system. "It is our obligation to clean it up and to fix it," he said. "We're going to keep at it."
Geithner said the government is going to act as a catalyst to attract private funding. Once the banks have funding, more private investors will return, he said. However, Geithner noted the government's intervention in the crisis is "short-lived," and that the government should not pay inflated prices for toxic assets.
Fed's Bernanke Says Banking Needs Reform
Federal Reserve Chairman Ben Bernanke stressed the need to overhaul operating rules for "too big to fail" institutions. Speaking in Washington, D.C., Bernanke said the U.S. government remains committed to ensuring major banks have the capital necessary to weather the recession and to meet their commitments.
"Government assistance to avoid the failures of major financial institutions has been necessary to avoid a further serious destabilization of the financial system, and our commitment to avoiding such a failure remains firm," he said. In a question and answer session following his speech, Bernanke said he thinks bank capital has been well used and has reduced the deleveraging process.
Going forward, Bernanke said the U.S. government needs to consider creating an authority whose main responsibility is to oversee and prevent systemic risks in the financial structure, and called on Congress to create such a regulatory body.
U.S Wholesale Inventories Slide Less Than Expected
U.S. wholesale inventories continued their downward trend in January, falling for the fifth consecutive month. Wholesale inventories fell 0.7% compared to expectations for a 1.0% decline, while the December data was revised down to a 1.5% fall from a previously reported 1.4% contraction, according to a report released Tuesday by the Department of Commerce.
Since January 2008, inventories have increased by 1.0%, compared to the prior month's annual advance of 6.8%. Durable goods inventories posted a 1.3% decline following the previous month's 1.5% drop, while non-durables increased by 0.2% in the month, after falling by 1.5% in December.
IBD/TIPP Economic Optimism Index Unexpectedly Rebounds
Economic sentiment in the United States unexpectedly rebounded in March compared to February, according to a report from Investor's Business Daily and TechnoMetrica Market Intelligence.
The IBD/TIPP index of economic optimism rose to 45.3 from the 44.6 reading in February. Economists had expected a reading of 43.0. The economic outlook index declined to 40.2 from the previous month's reading of 42.6, while the personal outlook index rebounded to 51.1 from 50.2 and the federal policies index advanced 3.7 points to 44.7.
U.S. Retail Sales Rise Slightly from Previous Week
U.S. retailers noted some respite in chain store sales for the week ending March 7, according to a survey from ICSC that pointed to more spending compared to the previous week. The ICSC-Goldman Sachs survey reported that chain store sales fell by an annual pace of 0.9%, compared to the previous week's 0.8% contraction. But on a weekly basis, sales rose 0.2%, partially reversing the previous week's 0.6% decrease.
Meanwhile, the Johnson Redbook retail survey recorded a 1.4% decline in the week compared to the same period last year. In addition, sales-to-date in March were down 0.2% compared to February.
Canada's Harper Says $20 Billion Will be Pumped into Economy by April
Canadian Prime Minister Stephen Harper said Tuesday that the bulk of stimulus funding, $20 billion, will hit the economy by April 1, with the rest being delivered within the next five months.
Speaking in Brampton, Ont., Harper said Canada will not experience a prolonged period of deficits, and that his Conservative government will ensure the recession does not hit Canada as hard as in other developed economies. Nevertheless, he said Canada will not emerge from recession until the United States fixes its financial sector.
Harper also said Canada is committed to strict bank regulation and that the country is not going to drift towards nationalizing banks and micro managing them, as has been done in the United States.
Regulators to Focus on Bank Compensation Packages, Canadian Official Says
Executive compensation packages withing the financial sector will be the focus of global regulators, who will also work to limit excessive risk-taking, the head of Canada's banking regulator said on Tuesday.
According to a report by Reuters, Julie Dickson, head of the Office of the Superintendent of Financial Institutions, said, "The G20 has yet to meet to talk about this issue but regulators, in focusing very narrowly on risk, have agreed that we should be looking at compensation programs of international institutions ... to see whether they do create incentives to take risk."
G20 Will Look to Canada for Help on Financial Reforms
A senior Canadian finance ministry official said Canada will share its secrets with the G20 on March 14 as to how its banking system has shown resilience in face of the financial crisis. The official said "it's no coincidence" that Canada was asked to lead one of the four working groups on financial reform at the meeting in Horsham, United Kingdom.
Canada has weathered the recession well because it has higher capital requirements for banks than the minimal international standard and a cap on leverage, he said. The official said the general emphasis of the meeting will be on the actual implementation of financial reform, and assuring that international agencies, such as the International Monetary Fund and World Bank, have the necessary resources to aid countries in need.
By Ernest Hoffman, ehoffman@economicnews.ca and Stephen Huebl, shuebl@economicnews.ca, with contributions from Erik Kevin Franco, efranco@economicnews.ca and Megan Ainscow, mainscow@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca
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