Monday, November 02, 2009

Long live the recesssion

The Recession is Over
NEWS that the US economy has broken its recessionary streak and grown in the three months to September 30 have sent a booster through the world’s sharemarkets, including Australia’s.

The benchmark Australian index, the S&P/ASX 200, climbed 68.5 points, or 1.5 per cent, to close at 4643.2.

This followed Wall Street’s Dow Jones Industrial Average soaring by 2.25 per cent on Thursday night, more than winning back the big losses of the previous session.

IG Markets research analyst Ben Potter said the rebound was due to the release overnight of US economic data showing the world’s biggest economy had emerged from recession.

Long live the Recession:

Stocks Fall Deeply as Unease Flares
Stocks fell sharply Friday to cap a volatile week as disappointing economic data and heightened volatility pushed the Dow Jones Industrial Average down nearly 250 points.

Setting off Friday's session was data showing that spending by Americans fell 0.5% in September, the largest drop since December 2008, while consumer confidence in October also slipped.

After a better-than-expected report on third-quarter gross domestic product spurred a sharp gain on Thursday, Friday's slide capped a week in which investors grappled with the fundamental question of the soundness of the global economic recovery. The Dow lost more than 2% for the week.

U.S. employment losses expected to moderate
Economists say October was probably another disappointing month for the labor market, with more job losses, weak wage growth and another increase in the unemployment rate.

That would be the fewest jobs lost in any month since July 2008, but it would be the 22nd consecutive month of falling payrolls, totaling some 8.35 million jobs. At the worst of the recession, the economy was losing 700,000 jobs a month.

Most economists are cautiously optimistic that hiring will resume as the economy continues to improve, but few expect a turnaround before the end of the year.

"With the economy now growing at a solid pace, employment should fall more slowly, especially given the strong productivity growth and rapid layoffs throughout the recession," said Joseph Brusuelas, an economist for Moody's Economy.com.

CIT's Swoon Hits Taxpayers
People familiar with the plan said CIT, a major lender to small businesses, intends to file for bankruptcy-court protection in New York within days, perhaps as early as Sunday or Monday. Financial firms such as CIT have historically been sold off or wound down after a Chapter 11 filing, for fear that customers will draw down lending lines and cause a run on the bank. But CIT expects to have enough creditor support to complete a prepackaged reorganization by year-end, a relatively short period for a bankruptcy case of its size.

In a move smoothing its restructuring, the company said Friday that it had persuaded billionaire investor Carl Icahn to support its prepackaged bankruptcy plan. Mr. Icahn, who wanted to push CIT into liquidation, failed to persuade other bondholders to derail CIT's restructuring plan.

With $71 billion in assets, CIT would have the fifth-largest bankruptcy filing in U.S. history, trailing only those of Lehman Brothers Holdings Inc., Washington Mutual Inc., Worldcom Inc. and General Motors Corp. CIT's Utah bank, which has about $10 billion in assets, wouldn't be part of the bankruptcy filing.

The $2.3 billion in taxpayer money spent to save CIT Group Inc. is likely to be wiped out

A filing could also be a blow to some of the tens of thousands of small- to medium-size businesses that are customers of the century-old lender. Unlike public corporations -- which enjoy access to reinvigorated credit markets -- small borrowers are finding capital remains scarce.

9 banks fail in 1 day; $2.5 billion hit to FDIC insurance fund
Nine banks, all owned by the same troubled Illinois holding company, were closed Friday by regulators, and the Federal Deposit Insurance Corp. said U.S. Bank of Minneapolis would assume their deposits.

The closings brought the 2009 total to 115 in 2009 -- the first year since 1992 that more than 100 banks have gone under.

By number, banks in Georgia account for one-fifth of all U.S. banks closing this year, with 20 failures, followed by Illinois with 19, California with 13, and Florida with nine.

The deposit insurance fund will take an estimated $2.5 billion hit, the FDIC said.

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