New Crisis Threatens Healthy Banks Increasing struggles by consumers and businesses to make payments on a variety of loans, not just mortgages, are setting off a new wave of trouble in the financial sector that is battering even institutions that had steered clear of the subprime-home-loan debacle. Late payments on home-equity loans are at a record high, according to fresh data from the Federal Deposit Insurance Corp. The delinquency rates on loans for cars, small businesses and construction are spiking to levels not seen in a decade or more. Unlike last year, when soaring mortgage defaults sparked a crisis of confidence in the financial system, the root of these problems is the downturn in the broader economy. Simply put, consumers and businesses are strapped for cash with job losses growing and retail sales falling, economists said.
Happy Birthday Subprime Crisis, Oil Price up 96% "Oil prices are up 96% since the semi-official beginning of the subprime crisis one year ago this week." What the Saudis give, the Nigerians take away. There was a big oil summit in the Saudi city of Jeddah this weekend. Men in suits from 36 countries, 7 international organisations, and 25 oil companies gathered to solve the world's energy crisis, or at least look like they were doing something. In a statement released at the end of the summit, the group said, "The transparency and regulation of financial markets should be improved through measures to capture more data on index fund activity and to examine cross-exchange interactions in the crude market."That doesn't sound like it's going to make oil any cheaper, does it?
Nakheel chief Chris O'Donnell says US real estate yet to hit the bottom The head of Nakheel, the $80 billion Dubai property business, gave warning yesterday that the real-estate recession in America is far from over and will deteriorate rapidly should the price of oil reach $200 a barrel. Chris O'Donnell, chief executive of Nakheel, said that the US property market had never had to cope with the combined impact of a sub-prime mortgage crisis and a surging oil price. “We have not hit the bottom yet,” he said. Mr O'Donnell, whose Dubai Golden Mile development of flats and offices has begun selling for record prices, also said that while commodity prices had risen sharply, the cost of labour across the United Arab Emirates had also increased about 25 per cent. Companies such as Nakheel had benefited from a cheap Indian labour force, but over the past few years the booming economy in India has pushed wages up, making these immigrant workers more difficult to attract.
Inflation risk overtakes credit crisis as focus of central bankers Now that everyone agrees that it's inflation, not a lingering credit crisis, that poses the gravest risk to the world economy, it's time to think again about central bankers' focus. While policy makers have grown increasingly shrill in their warnings about the danger of $135-plus oil, there's very little they can do as long as growth, particularly in the developed economies of the United States and Europe, remains sluggish. With banks still struggling to shore up their balance sheets and consumer confidence deteriorating on both sides of the Atlantic and in Japan, resorting to higher interest rates to counter inflation may do more harm than good. "The Federal Reserve and the European Central Bank cannot control commodity prices," said David Kelly, chief market strategist at JP Morgan Funds in New York. "Every time we have a bubble, we say we'll raise interest rates. But that's like trying to swat a fly with a sledgehammer - you miss the target but cause a lot of collateral damage."
Citigroup's global investment bank braces for layoffs Citigroup is swinging the corporate axe across its global investment bank this week. Hundreds of investment bankers and traders, including many senior employees, are expected to begin losing their jobs as soon as Monday as the bank moves aggressively to complete the 2,000 layoffs that it announced last March. Bankers in the mergers-and-acquisitions division are expected to face large cuts after surviving prior rounds of layoffs earlier this year. Traders on desks that have been hard hit by the credit crisis are also expected to be casualties. And unlike prior rounds of job reductions that focused on junior and mid-level employees who generated nominal revenue for the firm, more managing directors are expected to be dismissed this time around. The 2,000 layoffs, on top of about 4,200 announced in January, will bring job cuts at Citigroup's investment bank to 6,000, or about 10 percent of that unit's work force. Over all, Citigroup has more than 350,000 employees worldwide.
Order restored on Vliet St. Milwaukee police said they have restored order but will remain outside of the Marcia P. Coggs Human Services Center after a crowd awaiting free food vouchers became unruly this morning. Department spokeswoman Anne E. Schwartz said Vliet St., between N. 12th and N. 13th streets, is blocked and barricades have been installed so people are able to line up around the block of the building at 1220 W. Vliet St. "That line is pretty huge," Schwartz said. "We are going to be here for the duration. We have a pretty good number." Police responded to the building about 7 a.m. after 2,500 people lined up on the sidewalk and eventually began to block traffic in the street. A number of people had rushed the door, and some people became caught in the crush; however, there were no serious injuries, according to Schwartz.
State, city layoffs: 45,000 and counting A squeeze on tax revenues could force local leaders to cut tens of thousands of more jobs. That could add to the nation's economic woes. The latest hit to the economy could come from state houses and city halls across the nation, which are in their worst budget crisis in years. With falling revenue from sales and income taxes, and property-tax declines looming, states, cities and towns have already laid off tens of thousands of government employees. Many expect more job cuts ahead as public officials struggle to balance their budgets. The American Federation of State, County and Municipal Employees, a public employees union, says about 45,000 government layoffs have been announced this year.
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