Lending Declines as Bank Jitters Persist
Summary
U.S. lenders saw loans fall by the largest amount since the government began tracking such data, suggesting that nervousness among banks continues to hamper economic recovery.
The total balance of the loans was 210.4 milliard dollars of the third quarter. It was the greatest decrease since 1984 according to the Federal Deposit Insurance Corp (FDIC).
It’s the second time that there are a lot of bank failures.
Despite the large sums of money the banks get from the government to avoid bankruptcy, they are reluctant to lend.
The large banks, which account for 56% of industry assets and received a large share of the government’s bailout funds, accounted for 75% of the decline.
Credit availability plays an important role in the recovery of the economy. Therefore the banks must give loans especially to business clients.
James Chessen, chief economist at the American Bankers Association, said that there are less credit loans because the lenders run the risk of losing their money. They are reluctant to take the risk. They are more prudent to lend.
FDIC officials don’t disclose the names of banks on the list, in part because it could lead to bank runs.
In spite of the balance financing is negative, they had a reserve of cash. With this cash money they would save their failures.
FDIC officials recently agreed to require banks to prepay three years' worth of government insurance fees, which is expected to bring in an additional $45 billion by the end of the year.
Ms Bair, chairman of the FDIC, said that there wouldn’t be a profit for the fourth quarter because there are more write offs and bad loans before the year-end.
My opinion
Everyone knows there is a financial crisis. Many banks have lost money. Some of them went bankrupt. I find it normal that the remaining banks are reluctant to lend because they have become more prudent. However, the lack of credit availability is bad for the economic recovery. So it is important that this situation doesn’t last.
I think it is a good thing that governments in the US and in other countries have spent hundreds of billions of dollars to help the banks. This creates stability and more security for the banks. I can also understand that despite this financial help, the banks remain prudent to lend money to companies as long as the economic crisis continues. However, there are signs that the economy is stabilizing. In previous articles I learned that there are signs that the crisis is past its peak. Still the banks are not inclined to give more loans. I find that the banks should take up their responsibility as key agents in the economy. If they are not prepared to do so, the economic crisis will go on for a long time. I find that in that case governments must take measures to oblige banks to give more loans to companies.
Greet Annelies
Source: http://online.wsj.com/article/SB125907631604662501.html
zaterdag 28 november 2009
dinsdag 24 november 2009
Annelies: Workers act to avoid business closures
Workers act to avoid business closures
Summary
During the financial crisis a lot of companies have to close. Employers and employees work together to prevent their company from closure. On the one hand employers act to avoid business closures. On the other hand one in three workers has worked longer hours without extra pay.
A survey commissioned by the insolvency trade body R3 has shown that about 15% of the employees have accepted a pay freeze or they haven’t requested a pay rise.
During the financial crisis many companies have tried to save jobs. Employers pay lower salaries. In return they try to limit personnel reductions. It is the first time that employers are aware of the negative effects of massive compulsory reductions. They realize that when you want to keep your workforce happy, you don’t try to dismiss as many people as possible.
In spite of the workers acting to avoid business closures, there still are a lot of discharges. Some companies just don’t have enough money to pay all their employees.
Last week's unemployment figures showed the smallest rise since spring 2008. This result indicates that the worst of the recession may be over. However, the CBI said nearly two-thirds of the employers installed a recruitment freeze. 45% had introduced more flexible working.
Perhaps surprisingly, given the public outcry over bonus payments, the R3 survey has shown that only 10% of eligible workers were not paid a bonus that they would otherwise have expected to receive.
My opinion
I think it is very good that employers and workers work together to avoid business closures. I believe it is good news that especially employers try to limit compulsory reductions as much as possible. This was not the case during the 1990s recession. Employers realize more and more that they must prevent massive staff reductions as much as possible to keep their work force happy. During the financial crisis workers also realize that they have to do overtime and they must accept a pay freeze so that their employer is not forced to dismiss them.
It’s a pity that there still are a lot of employers who have to discharge some of their employees.
I find it odd that some workers still receive bonuses, while at the same time there are people who are discharged because their company can’t pay these people. Bonuses cost money also, don’t they?
Many companies have to be closed because their financial means are insufficient. I think that the companies will learn from this crisis. For some of them it is too late. But other companies will be more careful in the future. They will also try to maintain their workforce as much as possible. At least I hope so.
Great Annelies
Source: http://www.guardian.co.uk/money/2009/nov/19/workers-avoid-business-closures
Summary
During the financial crisis a lot of companies have to close. Employers and employees work together to prevent their company from closure. On the one hand employers act to avoid business closures. On the other hand one in three workers has worked longer hours without extra pay.
A survey commissioned by the insolvency trade body R3 has shown that about 15% of the employees have accepted a pay freeze or they haven’t requested a pay rise.
During the financial crisis many companies have tried to save jobs. Employers pay lower salaries. In return they try to limit personnel reductions. It is the first time that employers are aware of the negative effects of massive compulsory reductions. They realize that when you want to keep your workforce happy, you don’t try to dismiss as many people as possible.
In spite of the workers acting to avoid business closures, there still are a lot of discharges. Some companies just don’t have enough money to pay all their employees.
Last week's unemployment figures showed the smallest rise since spring 2008. This result indicates that the worst of the recession may be over. However, the CBI said nearly two-thirds of the employers installed a recruitment freeze. 45% had introduced more flexible working.
Perhaps surprisingly, given the public outcry over bonus payments, the R3 survey has shown that only 10% of eligible workers were not paid a bonus that they would otherwise have expected to receive.
My opinion
I think it is very good that employers and workers work together to avoid business closures. I believe it is good news that especially employers try to limit compulsory reductions as much as possible. This was not the case during the 1990s recession. Employers realize more and more that they must prevent massive staff reductions as much as possible to keep their work force happy. During the financial crisis workers also realize that they have to do overtime and they must accept a pay freeze so that their employer is not forced to dismiss them.
It’s a pity that there still are a lot of employers who have to discharge some of their employees.
I find it odd that some workers still receive bonuses, while at the same time there are people who are discharged because their company can’t pay these people. Bonuses cost money also, don’t they?
Many companies have to be closed because their financial means are insufficient. I think that the companies will learn from this crisis. For some of them it is too late. But other companies will be more careful in the future. They will also try to maintain their workforce as much as possible. At least I hope so.
Great Annelies
Source: http://www.guardian.co.uk/money/2009/nov/19/workers-avoid-business-closures
maandag 23 november 2009
Livine: Accounting irregularities may be on the rise in U.S.
I’ve chosen for an article about the accounting fraud in companies because of the economic crisis.
There come more and more accounting irregularities to the surface in the U.S because of the persistent recession.
The shares of Apollo Group Inc are decreased with 18% after they had announced an informal investigation concerning their revenue recognition. Apollo is just one of many big companies who have published that they have accounting issues lately.
The Internet retailer Overstock.com have also noted that they were investigated by the government regulators related some expenses. The company changed their results in 2006 and 2008.
Statistically, you can see that there is a recession and that there is a higher financial pressure on companies. The employees are also motivated to exaggerate and fiddle with the accounting or to fraud to achieve some objectives, certainly in these difficult economic times.
Almost a third of the corporate executives expects that fraud and misbehavior will increase in companies this year. The most financial adjustments are related to costs, expenses and revenue recognition problems.
Investors usually don’t know that there is something wrong because the information is often vague. Because of this, it has a minimum impact on the share prices until the investors really know what’s going on.
A reason whereby there are more and more accounting irregularities who come to the surface is that it’s almost the end of the year and companies should close their books.
Regulators at het SEC and other government audit institutions can cause an increase of the detection of fraud because they focus on investigating tips.
Unfortunately, there is still too much latitude in the universally accepted accounting principles and companies because there is so much at stake whereby they grip what they can to fix their figures.
I think that the people and companies are so discouraged that they would do anything to ‘safe’ the situation. If you had a company and the figures are suddenly increasing a lot because of the economic crisis, I think that many would be dismayed and would be able to do such stupid things like fiddle with the bookkeeping. This is a normal reaction of many people but not the smartest one and certainly not without consequences.
These things will definitely happen all the time, also in better economic times but there is off cause more and stringent investigation when it goes economically worse and auditors will faster have questions with some figures whereby they double check it and in this way fraud gets detected.
You can read the article on: http://www.reuters.com/article/ousiv/idUSTRE59S01I20091029?pageNumber=2&virtualBrandChannel=0
Greet!
Livine
There come more and more accounting irregularities to the surface in the U.S because of the persistent recession.
The shares of Apollo Group Inc are decreased with 18% after they had announced an informal investigation concerning their revenue recognition. Apollo is just one of many big companies who have published that they have accounting issues lately.
The Internet retailer Overstock.com have also noted that they were investigated by the government regulators related some expenses. The company changed their results in 2006 and 2008.
Statistically, you can see that there is a recession and that there is a higher financial pressure on companies. The employees are also motivated to exaggerate and fiddle with the accounting or to fraud to achieve some objectives, certainly in these difficult economic times.
Almost a third of the corporate executives expects that fraud and misbehavior will increase in companies this year. The most financial adjustments are related to costs, expenses and revenue recognition problems.
Investors usually don’t know that there is something wrong because the information is often vague. Because of this, it has a minimum impact on the share prices until the investors really know what’s going on.
A reason whereby there are more and more accounting irregularities who come to the surface is that it’s almost the end of the year and companies should close their books.
Regulators at het SEC and other government audit institutions can cause an increase of the detection of fraud because they focus on investigating tips.
Unfortunately, there is still too much latitude in the universally accepted accounting principles and companies because there is so much at stake whereby they grip what they can to fix their figures.
I think that the people and companies are so discouraged that they would do anything to ‘safe’ the situation. If you had a company and the figures are suddenly increasing a lot because of the economic crisis, I think that many would be dismayed and would be able to do such stupid things like fiddle with the bookkeeping. This is a normal reaction of many people but not the smartest one and certainly not without consequences.
These things will definitely happen all the time, also in better economic times but there is off cause more and stringent investigation when it goes economically worse and auditors will faster have questions with some figures whereby they double check it and in this way fraud gets detected.
You can read the article on: http://www.reuters.com/article/ousiv/idUSTRE59S01I20091029?pageNumber=2&virtualBrandChannel=0
Greet!
Livine
Lien:"Companies' share buybacks may hit a wall"
When I was browsing the web in search of a topic for this week’s blog, I came across an Indian site: economictimes.indiatimes.com. It’s an economic site, mostly covering the Indian and global economic events. I read an article about a very interesting phenomenon that is progressing in the Indian economy. Many listed Indian companies are trying to buy back the shares they’d initially offered on the share market.
As a cause of the bad financial time the economy has had to endure the last few months, the share prices on the Indian stock market have also dropped a lot. By buying a part of these shares back, the companies want to diminish the number of shares on the market and keep control of the majority of the shares.
Another reason for this buyback may also be that the company isn’t interested in the shares at all, but that they just want to bring up the share prices by announcing that they will buy back shares. Because of the announcement and people’s reaction to it, share prices might go up.
The buybacks are mostly not a success at all, because the price that the companies offer to buy back the shares, lays mostly lower than the price of the shares on the market at that time. India Inc for instance had announced 62 buybacks, of which 40 have already been dismissed because of a lack of success.
I was actually surprised to read such an article, because you might think that in a time of crisis, or especially in a recovery period, companies are looking for fresh capital to bring into their businesses and to re-launch their business practices to the fullest. In one of my first blogs, I already wrote about a capital increase by which the company planned to raise more money to invest in new ideas, but here, it is just the other way around.
I do understand that when share prices are low that companies might do such a thing as described in the article, because otherwise another company might step in a buy a majority of the shares at a cheap price. A company doesn’t want to lose its independence. Again, a very interesting article, because I hadn’t yet considered the risks of the share prices being so low.
It was also kind of nice to read for once about another country’s economy instead of the large economies, like the American economy, that mostly dominate the news.
Bye!
Lien Vanneder
Article: “Companies’ share buybacks may hit a wall”
Source: economictimes.indiatimes.com
http://economictimes.indiatimes.com/markets/stocks/market-news/Companies-share-buybacks-may-hit-a-wall/articleshow/5248931.cms
Date: 20th November 2009
As a cause of the bad financial time the economy has had to endure the last few months, the share prices on the Indian stock market have also dropped a lot. By buying a part of these shares back, the companies want to diminish the number of shares on the market and keep control of the majority of the shares.
Another reason for this buyback may also be that the company isn’t interested in the shares at all, but that they just want to bring up the share prices by announcing that they will buy back shares. Because of the announcement and people’s reaction to it, share prices might go up.
The buybacks are mostly not a success at all, because the price that the companies offer to buy back the shares, lays mostly lower than the price of the shares on the market at that time. India Inc for instance had announced 62 buybacks, of which 40 have already been dismissed because of a lack of success.
I was actually surprised to read such an article, because you might think that in a time of crisis, or especially in a recovery period, companies are looking for fresh capital to bring into their businesses and to re-launch their business practices to the fullest. In one of my first blogs, I already wrote about a capital increase by which the company planned to raise more money to invest in new ideas, but here, it is just the other way around.
I do understand that when share prices are low that companies might do such a thing as described in the article, because otherwise another company might step in a buy a majority of the shares at a cheap price. A company doesn’t want to lose its independence. Again, a very interesting article, because I hadn’t yet considered the risks of the share prices being so low.
It was also kind of nice to read for once about another country’s economy instead of the large economies, like the American economy, that mostly dominate the news.
Bye!
Lien Vanneder
Article: “Companies’ share buybacks may hit a wall”
Source: economictimes.indiatimes.com
http://economictimes.indiatimes.com/markets/stocks/market-news/Companies-share-buybacks-may-hit-a-wall/articleshow/5248931.cms
Date: 20th November 2009
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