24 March: Freddie Mac and Fannie Mae to get a makeover too
- Branko Brkic
- 24 Mar 2010 06:00 (South Africa)
Also today: Japanese exports rocket; Trial ends, but no verdict yet for Rio Tinto execs in China; Germans slip around on Greece; Wall Street orders extreme image makeover; Businesses keen to use iPad; World’s largest steelmaker seeks to own more inputs; Malaysian rubber glove makers bounce on Obama healthcare bill.
Freddie Mac and Fannie Mae to get a makeover too
US treasury secretary Tim Geithner told a congressional panel considering the futures of mortgage financiers, Fannie Mae and Freddie Mac, that the Obama administration would try to keep what works for the entities, while overhauling the moribund home-financing market. Both institutions needed more than $125 billion in taxpayer money to stay afloat after the subprime mortgage crisis triggered a dramatic rise in mortgage delinquencies and foreclosures in the US. Geithner said Fannie and Freddie were in many ways once the envy of the world, but no more - so regulators will now seek to retain what was good in the system, discarding the rest. That means the shareholder-owned companies which had the implicit backing of taxpayers would undergo fundamental change to be made clear shortly. Geithner said the Obama administration would continue to advocate some form of taxpayer guarantee to ensure borrowers of different means can get home loans.
Photo: U.S. Treasury Secretary Tim Geithner testifies before the Senate Budget Committee on the President's Fiscal Year 2011 Budget on Capitol Hill in Washington, February 4, 2010
Japanese exports rocket
Japan’s showing signs of trade growth similar to those of China, which means that green shoots really are starting to appear. Japanese exports rose 45% in February compared with the same period last year, while exports to Asia, which make up more than 50% of the country’s total exports, rose more than 55% in the same time. Despite Toyota’s woes, Japanese car shipments to the US more than doubled, giving Japan a current account surplus of more than $7billion for the month -- bigger than expected. But compared with January, Japan's exports in February fell 1.7% when seasonally adjusted, which means Japanese consumers aren’t likely to take up the slack if export demand crumbles.
Trial ends, but no verdict yet for Rio Tinto execs in China
The trial of four executives from mining giant Rio Tinto charged with bribery and the theft of state secrets has ended without a verdict. But these things take some time in China, so Australian citizen Stern Hu and his three Chinese colleagues still have to worry about lengthy jail terms. Reports say Hu and his associates admitted to some of the bribery charges, but disputed the amounts involved. Hu was Rio Tinto's lead negotiator in talks with Chinese steel mills over iron ore prices. Along with Google’s row with China over hacking and censorship, the high-profile case has led foreign companies to reassess the costs of working in China. However, Australia and China just signed a multibillion-dollar energy deal, so it’s business as usual.
Germans slip around on Greece
Germany’s done another flip-flop over Greek debt, saying it might agree to an aid package for the cash-strapped country, financed in part by eurozone members. But it says this is a last resort and subject to tough conditions. Germany’s the biggest economy in Europe, and the EU central bank is based there, so the Germans have made it clear that Greece must first tighten its belt and exhaust its borrowing options before it gets any aid. The Germans now want to include the International Monetary Fund in any debt relief, a step the EU had earlier rejected as an embarrassment for the eurozone, and which Greece had said was a choice it would prefer not to have to make. Germany’s opposition to a bailout has stymied EU action on the crisis, with France saying Greece needs more public spending to get itself out of hock. But the cost of borrowing has risen on the back of some $410 billion of debt, with Greece saying it won’t meet its targets for spending cuts unless the EU offers more reasonable lending rates. It’s tricky stuff.
Wall Street orders extreme image makeover
The financial services roundtable, which represents the 150 largest banks and insurance companies in the US, is starting a campaign to improve the image of the country’s financial industry, after it was battered by the October 2008 market crash. Bloomberg says the public relations and image makeover is timed to coincide with mid-term US elections, and in time-honoured American fashion, includes a public relations firm, a polling company and an advertising agency. “The financial services industry is dedicated to earning back the trust of the American people and is engaging in a comprehensive effort to communicate directly with them,” the group told PR experts in a letter calling for quotes for “reputation enhancement” work. While the roundtable says it hasn’t sorted out the specifics of the campaign yet, it’ll start by setting up a website, and will use Twitter and maybe Facebook to help get back into the public’s good books. Expect to feel nauseous.
Businesses keen to use iPad
Entrepreneurs and smaller businesses expect Apple’s iPad will have more uses than for reading books, playing digital games and watching videos. Instead, they’ll be able to check emails on the go and take notes on their clients’ needs. Pre-orders for the tablet computer, due to launch next month, show many companies and employees are buying iPads to use as business-related communications tools. Analysts say demand appears to be far more diverse than originally expected, which makes it clear that, although notepads, BlackBerries and iPhones can do nearly all these jobs already, people just love a new and sexy product.
World’s largest steelmaker seeks to own more inputs
As metals prices soar, ArcelorMittal wants to increase iron ore production by 67% come 2015 by expanding its existing raw materials supplies, and by buying up mines and new resources. The Luxembourg-based company is the biggest steelmaker in the world and by raising capacity from 60 million metric tons to 100 million tons, it hopes to expand its search for raw materials into countries including Liberia, Senegal and Mauritania. That’ll be good for the general African mining scene as global steel firms purchase or expand mines to cut costs and Chinese demand reduces global supplies of iron ore. Brazil’s Vale, the world’s biggest iron-ore producer, wants shorter sales contracts to lift prices of raw material by up to 90%, making conditions very volatile for steelmakers. South Korea’s Posco, the world’s second largest steelmaker, says it’ll aggressively pursue investments in mines.
Malaysian rubber glove makers bounce on Obama healthcare bill
The future looks bright for Malaysian rubber glove makers, reports Bloomberg. They speculate US President Barack Obama’s healthcare bill will stretch their sales. Top Glove, the world’s biggest maker of gloves widely used in medical care, saw its share price hop 1.7% to a record for the company on the Kuala Lumpur stock exchange, followed by Kossan Rubber Industries and others. The nearly $1 trillion overhaul of US healthcare coverage for uninsured Americans, meaning there might be higher demand for medical gloves when some 30 million more Americans start to visit healthcare centres.