Today’s compendium of notable headlines from the realms of economics, politics, and their impacts on the rest of the planet begins with the latest of Banksters Behaving Badly via Reuters:
Deutsche, Citi feel the heat of widening FX investigation
Global investigations into alleged currency market manipulation intensified on Wednesday as U.S. regulators descended on Citigroup’s London offices and Deutsche Bank suspended several traders in New York, sources told Reuters.
The presence of Federal Reserve and Office of the Comptroller of the Currency officials at Citi’s Canary Wharf office in the east of London this week comes after Citi last week fired its head of European spot foreign exchange trading, Rohan Ramchandani, following a prolonged period on leave, one source familiar with the matter said.
The suspensions of staff at Deutsche Bank in New York and possibly elsewhere in the Americas followed investigations into “communications across number of currencies,” a second source said.
Al Jazeera America reaps gold:
Banks report record profits despite massive legal fees
- Wells Fargo becomes most profitable bank, knocking out JPMorgan from the top spot
The nation’s major banks reported record fourth-quarter profits Wednesday, with Bank of America announcing that its profit jumped to $3.44 billion from $732 million in the same quarter in 2012, and Wells Fargo edging out JPMorgan Chase as the nation’s most profitable bank.
The jump represents a major turnaround for Charlotte, N.C.-based Bank of America, the country’s second-largest bank, which was hit last year by an $11.6 billion settlement with home mortgage giant Fannie Mae.
The settlement is the result of the bank’s involvement in the subprime mortgage crisis of 2007-08, which contributed to the massive financial crisis and subsequent economic recession in the U.S. As a result of the crisis, more than 6 million homeowners have an underwater mortgage, meaning they are paying more than what their houses are worth.
Bloomberg Businessweek reads between the lines:
The Accounting Wizardry Behind Banks’ Strong Earnings
Wells Fargo (WFC) reported a personal-best $5.6 billion in fourth-quarter earnings today, overtaking JPMorgan Chase (JPM) as the most profitable U.S. bank. JPMorgan reported $5.3 billion in fourth-quarter income and $17.9 billion for all of 2013, not too shabby for a year in which the bank spent $23 billion on legal settlements.
Upon further review, however, these profits don’t look quite as robust. More than 31 percent of JPMorgan’s 2013 earnings, or $5.6 billion, and about 10 percent of Wells Fargo’s, $2.2 billion, weren’t really earned last year. That money came instead from the banks’ so-called loan-loss reserves, an accounting accrual that’s kind of like a rainy-day fund.
Lenders set aside that cash during and shortly after the financial crisis to cover future losses in case the U.S. economy got worse and consumers couldn’t pay their credit card bills, mortgages, and other loans. But collections on most consumer loans have never been better—banks tightened lending standards, plus people went back to work—so the banks are using that money to bump up earnings.
Fed Student-Loan Focus Shows Recognition of Growth Risk
Outstanding education debt exceeded $1 trillion in the third quarter of 2013, and the share of loans delinquent 90 days or more rose to 11.8 percent, according to the Federal Reserve Bank of New York. By contrast, delinquencies for mortgage, credit-card and auto debt all have declined from their peaks.
“I’m always made very nervous by a credit market that benefits from government guarantees and is expanding very rapidly,” Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said in response to audience questions after a speech at a Jan. 10 Greater Raleigh Chamber of Commerce event in North Carolina. “That’s what we’re seeing with student loans, and it’s what we saw with housing.”
Economists at the New York Fed are analyzing student debt as part of their quarterly reports on national household credit. That project emerged six years ago as the credit crisis unfolded, when the researchers and their then-boss, Timothy F. Geithner, realized there wasn’t a good way to study total consumer borrowing.
From the Yomiuri Shimbun, futility:
Obama fails in bid to change IMF
Congress has rejected a funding request from the Obama administration that would have overhauled the International Monetary Fund. The action leaves the 188-nation group without additional resources and blocks an increase in voting power for China and other emerging markets.
The proposal was left out of the $1.01 trillion spending bill that congressional negotiators approved Monday. Both the Obama administration and IMF Managing Director Christine Lagarde expressed disappointment but pledged to keep working to win congressional support.
The overhaul was adopted by the IMF’s governing board in 2010. The plan would have doubled the IMF’s lending capacity to about $733 billion.
From Bloomberg, a lack of compassion:
Moms in ‘Survival Mode’ as U.S. Trails World on Benefits
[O]nly 12 percent of workers get paid time off to care for a baby or a sick parent, according to the U.S. Labor Department. Rhode Island this month became the third state to start a paid family leave insurance program, which was initiated by California in 2004 and by New Jersey in 2009.
A bill introduced last month in Congress would create a similar model nationally. That would make more women eligible for a benefit usually offered in the U.S. only at large companies such as Bank of America Corp. or Goldman Sachs Group Inc.
Papua New Guinea is the only other nation that doesn’t provide or require a paid maternity leave, according to information on 185 countries compiled by the United Nations’ International Labor Organization. It recommends 14 weeks off at a level no lower than two-thirds of previous earnings.
And more bad news for California’s Fourth Estate from LA Observed:
Register to lay off 39 more at Riverside P-E
A second round of layoffs at the Riverside Press-Enterprise since the purchase last fall by Freedom Communications includes 39 back-office, newsroom, information technology and production workers, the OC Register reports. The story explains that the newsroom losses involve “eight full-time and four part-time copy editor/designers,” but that some expected hiring of new reporters will even it out with “no net loss of jobs in the newsroom.”
Last month, the new Freedom management team in Riverside laid off 42 employees as part of the paper’s restructuring. That reduction included some newsroom positions.
Meanwhile, the nation heads further down the neoliberal road charted by the Reagan administration, with Obama even emulating the Gipper’s so-ca;;ed “enterprise zones.” From The Jacobin:
President Obama’s “Promise Zones” anti-poverty program is a Trojan horse for deregulation.
Last week, President Obama announced the creation of a handful of “Promise Zones” in deprived areas of the United States. While the policy sounds like a euphemism from a forty-year-old sex ed pamphlet, it is in fact the administration’s most recent attempt to tackle poverty in the country.
Obama has promised more than twenty such zones before the end of his term — the first five in Los Angeles, Philadelphia, San Antonio, the Choctaw Nation in Oklahoma, and eight counties in Kentucky. Residents of the zones can expect a bundle of deregulatory measures designed to speed up their access to pre-existing programs and encourage capital investment. These areas will be given bonus points when competing with other locales for aid from various federal programs, and businesses will be given tax breaks as incentives for moving to “Promise Zones.” Some of the locations will receive a handful of AmeriCorps volunteers as part of the program. The policy will also remove “financial deterrents to marriage” for couples on a low income as part of an attempt to “strengthen families.”
Crucially, no new federal money will be allocated.
Big boxing from The Guardian:
US files complaint against Walmart for allegedly violating workers’ rights
- Board points to disciplinary action against striking employees
- Walmart fired 19 workers who took part in protests
US officials filed a formal complaint Wednesday charging that Walmart violated the rights of workers who took part in protests and strikes against the company.
The National Labor Relations Board says Walmart illegally fired, disciplined or threatened more than 60 employees in 14 states for participating in legally protected activities to complain about wages and working conditions at the nation’s largest retailer.
In These Times tallies trade pact costs:
NAFTA’s Trail of Destruction
Twenty years after NAFTA, income inequality and the trade deficit have skyrocketed.
That giant sucking sound predicted by Ross Perot commenced 20 years ago last week. It is the North American Free Trade Agreement (NAFTA) vacuuming up U.S. jobs and depositing them in Mexico.
Independent presidential candidate Perot was right. NAFTA swept U.S. industry south of the border. It made Wall Street happy. It made multi-national corporations obscenely profitable. But it destroyed the lives of hundreds of thousands of American workers.
NAFTA’s backers promised it would create American jobs, just as promoters of the Korean and Chinese trade arrangements said they would and advocates of the proposed Trans-Pacific Partnership (TPP) deal contend it will. They were—and still are—brutally wrong. NAFTA, the Korean deal and China’s entry into the World Trade Organization killed American jobs. They lowered wages. They diminished what America cherishes: opportunity. They contributed to the very ill that President Obama is crusading against: income inequality. There is no evidence the TPP would be any different. American workers need a new trade philosophy, one that protects them and puts people first, not corporations.
Canada next, and a depreciation from CBC News:
Loonie expected to spiral lower in 2014
- Exporters happy, but travellers and shoppers may pay
The Canadian dollar is expected to spiral lower throughout 2014, after a 3.1 per cent slide in the first two weeks of the year has taken the loonie to its lowest levels since 2009.
On Wednesday, the loonie was down 0.07 to 91.27 US before recovering to 91.42 at midday.
The stronger U.S. economy is putting pressure on the loonie, with earnings from bellwether stock Bank of America rising and U.S. job numbers in recovery. A report from the World Bank showing a recovering global economy also reflects badly on Canada.
And a global headline from the Associated Press:
IMF head urges caution to avoid harming recovery
The head of the International Monetary Fund warned policymakers on Wednesday to avoid mistakes that could derail a fragile global recovery.
IMF Managing Director Christine Lagarde said that Congress should promptly increase the U.S. government’s borrowing limit and the Federal Reserve should avoid withdrawing its financial support too rapidly.
Lagarde noted that the world economy is still feeling the impact of the Great Recession and 2008 financial crisis.
Europe next, and beyond the pale from Spiegel:
Green Fade-Out: Europe to Ditch Climate Protection Goals
Europe may be backing away from its ambitious climate protection goals.
The EU’s reputation as a model of environmental responsibility may soon be history. The European Commission wants to forgo ambitious climate protection goals and pave the way for fracking — jeopardizing Germany’s touted energy revolution in the process.
The climate between Brussels and Berlin is polluted, something European Commission officials attribute, among other things, to the “reckless” way German Chancellor Angela Merkel blocked stricter exhaust emissions during her re-election campaign to placate domestic automotive manufacturers like Daimler and BMW. This kind of blatant self-interest, officials complained at the time, is poisoning the climate.
But now it seems that the climate is no longer of much importance to the European Commission, the EU’s executive branch, either. Commission sources have long been hinting that the body intends to move away from ambitious climate protection goals. On Tuesday, the Süddeutsche Zeitung reported as much.
On to Britain and a declaration from EUobserver:
‘Reform or we leave EU,’ warns British chancellor
The UK will leave the European Union if the bloc refuses to reform, the country’s chancellor George Osborne said on Wednesday (15 January).
Speaking at the start of a two day conference on EU reform organised by the Open Europe think tank, Osborne said that the EU had to decide whether to “reform or decline”.
“It is the status quo which condemns the people of Europe to an ongoing economic crisis and continuing decline,” he added.
Contra-bluster from EUobserver:
UK to benefit from Bulgarian and Romanian migrants, study says
A Swedish economist has said Bulgarians and Romanians who work in other EU states are likely to contribute more to the economy than they take out in benefits.
A study published last week by Joakim Ruist, a research fellow at Sweden’s University of Gothenburg, found that the UK and Ireland stand to benefit the most from the net contributions.
“The UK and Ireland seem to be two countries in which there are good reasons to expect even more positive results,” Ruist told this website on Wednesday (15 January).
The Independent gets real:
UK immigration: Fewer than 30 Romanian arrivals since border restrictions lifted, says country’s ambassador to Britain
Diplomat also says ten UK companies had been in touch with his embassy, wanting to employ Romanians
Fewer than 30 Romanians have arrived in the UK since the lifting of border restrictions on New Year’s Day, the country’s ambassador to Britain estimates.
Ion Jinga offered the estimate in a comment piece in the Telgraph, insisting that the restictions’ lifting was “the beginning of a win-win game” for both countries.
On 1 January this year, people from Romania and Bulgaria gained the same working rights as other European Union citizens in eight countries, including the UK, Germany, Austria and France. It was hyped in some sections of the press as the day floods of migrants would sweep the country, further encumbering the welfare state.
But Mr Jinga wrote that these floods never materialised, though exact numbers aren’t available. In the UK, new arrivals aren’t made to register with local authorities, but he inferred the numbers from those arriving in the Netherlands, where registration is required.
Sky News offers bounties:
Vouchers For Officials Who Block Asylum Cases
The reward scheme has been set up to encourage Home Office staff to get failed asylum seekers removed from the UK.
Gift vouchers, holiday days and cash bonuses are being offered to Home Office staff who stop failed asylum seekers staying in Britain.
High street shopping vouchers worth up to £50 are dished out to immigration officers who win appeals against Government decisions that the asylum seekers should leave the country.
The incentives are offered as part of a Home Office reward scheme under which all the Whitehall department’s staff are able to win the perks.
Norway next, and business as usual from TheLocal.no:
Yara fined for ‘extraordinary corruption’
Norwegian fertiliser giant Yara International has been fined 295 million kroner ($50m) for bribing high-ranking government officials in Libya and India after an investigation by Norway’s economic crime agency Økokrim.
“It is an extraordinarily serious case of corruption,” Økokrim said in a statement. “The company bribed the oil minister in Gaddafi’s government in Libya, and a senior government official in India. The use of bribes was not a one-time event, but was used in three different countries and for contracts running over many years.”
EurActiv backs off:
Norway backpedals on EU single market compliance pledge
Though Norway promised in November it would live up to its obligations under the EU single market, the Liberal Party which supports the Norwegian government has changed its mind and said it would forge ahead with punitive taxes on imported EU goods.
For more than a year, the European Commission has complained that Norway, a country which is not an EU member state but has access to the single market via its membership of the European Economic Area (EEA), has put extra taxes on imported goods from the EU and failed to implement more than 400 directives, effectively obstructing the EU’s single market.
On 1 January 2013, Norway introduced a tax on certain imported goods, bringing the price of imported EU cheese up by 277% and the the price of imported hydrangea flowers by 72%.
Bernt Reitan, Yara’s chairman, said that the company’s own investigations backed up the bribery charge.
On to Germany, feebly, with BBC News:
German economic growth weaker than expected
Porsche cars ready for export Improvements in the eurozone and US economies are expected to boost German exports this year
Germany’s economy grew by a weaker-than-expected 0.4% in 2013 according to the first official estimates. That is down from the 0.7% growth Europe’s largest economy saw in 2012.
The preliminary figure from the German statistics agency suggests Germany saw little or no growth in the final three months of the year. However, most economists expect the economy to bounce back in 2014 with growth of up to 2%. The government is forecasting 1.7%.
Knockin’ at the door with Spiegel:
Welfare for Immigrants: EU Wants Fortress Germany to Open Up
Brussels is demanding that even foreigners who have never worked in Germany should have access to the country’s unemployment benefits if they hail from an EU member state. The EU is firing Germany’s already overheated immigration debate.
Officials with the Commission, the EU’s executive body, said last week they in no way want to water down “clauses designed to protect against benefit tourism.” At the same time, they also reiterated that they consider one of the central provisions of German social security law to be illegal. The idea that Germany can reject social support to EU nationals without a job runs counter to current EU law, they argue.
On to France with a neoliberal endorsement from the London Telegraph:
Francois Hollande vows ‘supply-side’ assault on French state, doubles down on EMU austerity agenda
French leader Francois Hollande stuns left-wing of his own Socialist Party by calling for a new economic strategy based on “supply-side” policies
French president François Hollande has vowed an “electro-shock” to lift the French economy out of deep slump, promising to shrink the elephantine state and push through a raft of pro-business reforms.
The embattled French leader stunned the left-wing of his own Socialist Party by calling for a new economic strategy based on “supply-side” policies, accompanied by €30bn of fresh spending cuts by 2017 to pave the way for lower taxes and charges on companies.
Endorsement, from EUbusiness:
Hollande measures ‘right direction’ for French economy: EU
Measures announced by French President Francois Hollande to cut public spending and business costs go “in the right direction” and will help the economy, the European Commission said Wednesday.
The steps “are in line with recommendations we made last year … they will boost competitiveness … and have a positive effect on growth and jobs in France,” Commission spokesman Olivier Bailly said.
“We share (President Hollande’s) position that substantial savings have to be found … we are happy to see these measures going … in the right direction,” Bailly said.
Another endorsement from RFI:
Germany welcomes Hollande’s turn to austerity
German Chancellor Angela Merkel’s right-wing party, the CDU, has welcomed French President François Hollande’s announcement of budget cuts and help to business at a much-publicised press conference on Tuesday. The French right has given the package a mixed reception.
“What the French president presented yesterday is, firstly, courageous,” Foreign Affairs Minister Frank-Walter Steinmeier told reporters. “That seems to me to be the right way, not only for France, but it can also be a contribution that brings Europe as a whole a bit stronger” out of the region’s financial crisis.
And that old hard times intolerance, as administered with socialist [snicker] Hollandaise sauce by GlobalPost:
France evicted record 19,000 Roma migrants in 2013
France forcibly evicted a record 19,380 Roma migrants in 2013, more than double the figure the previous year, two rights groups said in a joint report on Tuesday.
“In comparison 9,404 Roma were forcibly evicted by authorities in 2012 and 8,455 in 2011,” the Human Rights League (LDH) and the European Roma Rights Centre (ERRC) said.
“Forced evictions continued almost everywhere without credible alternative housing solutions or social support,” they said.
TheLocal.fr finds a parallel:
Big business and Europe hail ‘France’s Tony Blair’
The French President François Hollande’s planned reforms to cut labour costs for businesses by €30 billion were hailed by big business, European finance chiefs, and even his enemies on the right on Wednesday and led many to conclude that France had found its own Tony Blair.
Business leaders, European finance chiefs, the Germans and even his sworn enemies on the Right of French politics were all happy. However, there were few smiles on the Left .
This was the general reaction to Hollande’s speech given during a high profile press conference, in which he managed to dodge a grilling about his private life, to announce several planned economic reforms that included cuts to taxes, labour costs and public spending.
And on another note, this from EurActiv:
Defiance against the EU reaches record levels in France: Poll
Trust in national and European institutions has hit a record-low in France, according to a recent poll, leading to a feeling of “gloom” among a growing number of citizens, and perhaps even a rise in support for the reinstatement of the death penalty, EurActiv France reports.
“It’s not a confidence but a defiance poll this time,” said Pascal Perrineau, director of SciencesPo University’s Centre of French Political Studies (CEVIPOF).
Perrineau was addressing the press as he presented the results of a new survey about French people’s confidence in politics, carried out at the end of November among 1,803 citizens.
Since the polls began in 2009, the feeling of exasperation has become more widespread among those surveyed. For the first time, the people surveyed used the word “gloom” to define their current environment.
On to Switzerland with TheLocal.ch and the inevitable suspects:
Swiss scrap social aid for European job seekers
Bern moved on Wednesday to scrap aid for European jobhunters, as rapidly rising immigration to the country fueled fears of “benefits tourism”.
EU citizens as well as those from Iceland, Liechtenstein and Norway “who come to Switzerland to look for work will have no right to social assistance,” the Federal Office for Migration said in a statement.
Those who hold a Swiss residency permit but who have been unemployed for 12 months or more, would also lose the permit after five years in the country, it added.
Foreigners made up almost a quarter of Switzerland’s eight million residents last year — 3.3 percent more than in 2012, according to official data.
Spaon next, with labor news from TheLocal.es:
Spain’s first prostitute union formed in Ibiza
Prostitutes in the Spanish tourist island of Ibiza have formed a sex workers’ cooperative to pay taxes and gain social security benefits — the first such group legally registered in Spain, they say.
Eleven women registered with local authorities as working members of the Sealeer Cooperative providing sexual services, said their spokeswoman, María Josí López.
“We are pioneers,” she told AFP. “We are the first cooperative in Spain that can give legal cover to the girls.”
Europe Online continues deflating:
Spain reports lowest inflation rate in more than 50 years
Spain finished 2013 with an inflation rate of 0.3 per cent, the lowest annual increase in consumer prices since 1961, data released Wednesday by the National Statistics Institute showed.
The rate is a stark contrast to the consumer price increase of the past few years. Spain recorded an annual inflation rate of 2.9 per cent in 2012, preceded by 2.4 in 2011 and 3 per cent in 2010.
Consumer prices in most areas stagnated over the past year, including prices for culture, entertainment and apparel. Only the transportation sector recorded price increases, and a rise in fuel costs contributed to a small bump in the overall index in December.
TheLocal.es states a demand:
‘Spain must step up war on corruption’: EU
Spain needs to ramp up its fight against corruption by introducing key reforms aimed at greater transparency, the Council of Europe’s anti-corruption group said in a new report released on Wednesday.
Corruption in Spain is threatening institutional credibility, said the Council of Europe anti-corruption group (Greco) in its new report.
Citing the numerous corruption scandals in the country and a general lack of public faith in the country’s politicians, the group noted that Spain was slipping in the annual ratings issued by Transparency International.
And more blowback to planned laws to restrict abortions via El País:
Extremadura PP urges government to shelve abortion reform
- Eurodeputies open new front in Brussels in united rejection of “human rights violation”
The voices of opposition to the government’s proposed reform of the Abortion Law within the Popular Party grew to a chorus Wednesday when the conservative group in the Extremadura regional assembly drew up a motion urging Mariano Rajoy’s administration to “open a process of dialogue and debate with other political forces” to seek a less divisive reform “in keeping with today’s plural and educated society, and that is in line with legislation in neighboring countries.”
Regional premier José Antonio Monago, of the PP, also stressed that the government should not push ahead with its reform unilaterally and that the new law must include “the rational combination of time periods with the regulation of specific scenarios such as fetal abnormalities, pregnancy of minors and instances of rape.”
The Portugal News brings theatrical woes:
Box office struggling
Portuguese movie theatres attracted 1.3 million fewer spectators in 2013 than the year before, translating into a year-on-year loss of more than 8.5 million euros.
According to figures from the Cinema and Audiovisual Institute last year’s drop in occupied seats is even more pronounced when compared with 2011.
After jump, the latest from Greece, Russian stagflation, Ukrainian sanctions, Latin American inflation, Aussie dollar woes, Indonesian healthcare, Chinese finances, nuclear power proliferation, GMOs, and Fukushimapocalypse Now! Continue reading