By Elena Logutenkova

July 31 (Bloomberg) -- Rising delinquencies among consumer and corporate borrowers are the “next wave” of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann.

“This crisis has consisted of a series of earthquakes, with changing epicenters,” Ackermann said late yesterday at an event in Zurich. “Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this.”

Deutsche Bank, Germany’s biggest lender, said this week it set aside 1 billion euros ($1.4 billion) for risky loans in the second quarter. The seven-fold increase in provisions and below- forecast revenue from trading sent the Frankfurt-based bank’s shares to the biggest decline in four months on July 28.

“We were struck by the 44 percent increase in problem loans in the quarter,” Morgan Stanley analysts Huw van Steenis and Hubert Lam said in a note today, cutting their rating on Deutsche Bank shares to “equal-weight” from “overweight.”

Deutsche Bank fell 1.30 euros, or 2.8 percent, to 45.39 euros in Frankfurt trading, making it the worst performer on the 63-company Bloomberg Europe Banks and Financial Services Index over the past five days with an 11 percent drop.

‘Crisis Not Over’

“The crisis is not over,” Ackermann said. “When one looks at the developments of global economic growth, then it can be expected that starting in the second half of this year we slowly move into the positive territory. But we’re still moving on a low level.”

Banks that were forced to take government aid and are now encouraged to increase domestic lending may be more in danger from rising loan defaults than companies that can expand internationally and diversify risks, Ackermann said.

Deutsche Bank “intentionally” reduced its balance sheet and risk-taking this year, he said.

“We were disciplined in our considerations about what risks which should take,” Ackermann said. “If we had played it out to the full extent, we could have earned significantly more.”

Morgan Stanley analysts lowered their earnings per share estimate for Deutsche Bank this year to 5.88 euros from 6.01 euros because of “increased provisioning in the investment bank and the German retail business and reduced fee income revenues.”

The Swiss-born Ackermann, whose contract extension until 2013 was approved by Deutsche Bank’s supervisory board this week, said German lawmakers had urged him to stay.

Former German Chancellor Gerhard Schroeder “told me already three years ago, ‘Mr. Ackermann you definitely have to stay, we need you,’” he said.

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US gold jumps when dollar falls after U.S. data

NEW YORK, July 31 (Reuters) - New York gold futures
launched a brief rally on Friday after the dollar gave up new
ground to the euro when the U.S. second quarter GDP report and
Chicago manufacturers data came in better than expected,
increasing investor appetite for risk, traders said.

 For the latest detailed report, click on [GOL/].

 GOLD

 * August gold GCQ9 jumped $16.40, or 1.73 percent, to
$941.20 an ounce on the COMEX division of the New York
Mercantile Exchange.

 * Range from $932.0 to $953.60 an ounce.

 * Gold surged as the dollar slipped against the euro -
traders.

 * The euro extended gains by more than 1 percent versus the
dollar, rising above $1.42 amid broad-based weakness in the
U.S. currency. [USD/]

 * The dollar fell across the board, pressured by month-end
flows and following data showing business activity in the U.S.
Midwest improved more than expected in July.

 * Earlier, a second-quarter U.S. GDP report showed the
economy contracted by less than forecast. [ID:nCAT002767]

 * The Institute for Supply Management-Chicago said on
Friday its index of Midwest business activity rose in July to
43.4 from 39.9 in June. [ID:nNAT007035]

 * The initial gold rally sent prices through technical
resistance, triggering automatic buy orders - traders.

 * COMEX estimated 11:00 gold volume at 60,106 lots.

 * Spot gold XAU= advances to $952 an ounce from $933.20
an ounce in late New York business in Thursday.

 * London afternoon gold fix XAUFIX= was set higher at
$939.0 an ounce.

 SILVER

 * September silver SIU9 was up 8.0 cents, or 0.63
percent, at $13.57 an ounce.

 * Inside range reached a two-day peak at $13.67 from a low
of $13.37 an ounce.

 * Silver firmed with gold and other metals - traders.

 * COMEX estimated 1100 a.m. silver volume at 14,876 lots.

 * Spot silver XAG= was higher at $13.64 an ounce compared
with $13.45 an ounce in Thursday's late quote.

 * London silver was fixed XAGFIX= higher at $13.63 an
ounce.

 PLATINUM

 * October platinum PLV9 rose $9.0 to $1,198.0 an ounce.

 * Spot platinum XPT= increased to $1,192 from $1,180.0 an
ounce in late Thursday trade.

 PALLADIUM

 * September palladium PAU9 slipped $0.60 to $258.75 an
ounce.

 * Spot palladium XPD= edged up to $257.50 from $257 an
ounce in late Thursday business.



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gold

Unemployment Lines Have Been Long Before, but No Prior Slump Since World War II Has Hurt So Much on So Many Fronts

By Justin Lahart Peter Ferguson

What makes the current recession so bad? Other downturns have been more painful by some measures, but none since World War II has delivered so many severe blows to the economy at the same time.

Already it is the longest. The nonprofit National Bureau of Economic Research, which determines when the U.S. economy slips into recession, says the downturn began in December 2007, 19 months ago. That makes it longer than the wrenching, 16-month recessions of 1973-75 and 1981-82.

The unemployment rate is approaching the peak seen in the 1981-82 recession and the scope of job losses is the worst since the 1948-49 recession. The decline in gross domestic product is the deepest since the 1957-58 downturn, and Americans haven't seen so much of their wealth evaporate since the Great Depression.

The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months." Among the gauges the organization watches are GDP and employment, as well as income, sales and industrial output. Even if the current recession is, as many economists believe, at or near its end, it looks worse than its postwar predecessors.

With a dwindling number of people who remember the Great Depression, the 1981-82 recession is many Americans' high-water mark for economic pain. To tame the era's rampant inflation, the Federal Reserve pushed short-term interest rates above 20%, slamming the brakes on the economy. Millions lost their jobs, lifting the jobless rate to 10.8%.

Last month, the unemployment rate hit 9.5%. But most economists forecast it will keep climbing even after the recession ends because businesses will remain cautious about hiring. Making matters worse, the economy needs to add some 100,000 jobs a month to keep pace with population growth.

While the unemployment rate isn't yet as high as in the early 1980s, the job losses associated with this recession already have been deeper because the downturn started with a lower unemployment rate than in the 1981-82 slump. Last month, there were 6.7 million fewer Americans working than in December 2007, when employment peaked -- a 4.7% decline, compared with 3.1% in 1981-82.

"In terms of employment, we're now way past 1982 and we're just about to cross the worst postwar recession, which was 1948," says Stanford University economist Bob Hall, who heads the NBER's recession-dating group.

In 1948, the demand that built up during World War II rationing programs had been sated. Companies, left holding more inventory than they could sell, throttled back production and laid off workers. The recession that began that year pushed payrolls down by 5.2%. Jobs recovered quickly, however, after the excess inventory was cleared away.

In contrast, the past two recessions, in 1990-91 and in 2001, saw payrolls decline long after the economy began recovering. That lagging drop is a shift in the way jobs respond to downturns that economists worry will continue.

Recent downturns have also been less abrupt, in part because the manufacturing sector, which responds to trouble by slashing production, is no longer as large a part of the economy. The declines in GDP -- the value of all goods and services produced -- associated with the 1990-91 and 2001 recessions were slight.

That makes this recession's decline in GDP striking. Through the first quarter, GDP was down 3.1% from the peak it reached last year. The only post-World War II recession more severe was in 1958, when the U.S. was a manufacturing powerhouse. After consumer spending cooled in response to Fed rate increases, manufacturers ratcheted back, sending GDP down 3.7%. But the Fed cut rates, and the economy recovered quickly, making the downturn one of the briefest ever.

"A normal postwar recession ends when the Fed thinks it's done enough to fight inflation," says Brad DeLong, an economic historian at the University of California, Berkeley.

But this downturn was set off by a housing and credit collapse, making Fed rate cuts less effective in spurring growth. Economists believe Friday's GDP report will show the economy contracted again in the second quarter and that, in combination with downward government data revisions, could make this recession's GDP drop even larger than 1958's.

The good news: This recession's drop in household income hasn't been nearly as severe as one of its predecessors. That is partly because many states have extended unemployment benefits. It also is because workers haven't seen their earning power eaten up by rising prices.

That wasn't the case in the recession that stretched from 1973 to 1975, when food and energy costs jumped. Adjusting for inflation, U.S. household income fell 5.3% during that period. In the current recession, it has fallen by 3%.

But this recession has eaten away at Americans' wealth like never before. Falling home prices have decreased the equity the U.S. households have in their homes -- that is, the value of their homes minus what they owe on them -- by $5.1 trillion, a 41% drop. They also have lost trillions of dollars in the stock market. No other episode of wealth destruction since the 1930s comes close.

As households work to rebuild the stores of wealth they lost, they spend less. Although spending has recovered a bit, it is still an inflation-adjusted 1.9% below its peak 2008 levels.

Only two other downturns have had comparable spending drops. In the 1953-54 recession, when Congress added to the Fed's inflation-fighting efforts by extending an unpopular tax on corporate profits, spending fell by as much as 3.3%. That drop was matched in 1980, after President Jimmy Carter, in an attempt to rein in inflation, persuaded the Fed to introduce stringent controls on the use of credit.

Reversing those policies, and getting spending moving again, was relatively easy. But reversing the drop in wealth isn't. That means that tepid consumer spending could be a drag on the economy for years to come.

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By Claudia Carpenter

July 24 (Bloomberg) -- Gold, little changed today in New York and London, may rise on speculation a drop in the dollar will spur demand for the metal as an alternative investment.

Bullion for immediate delivery has added 1.5 percent this week, heading for a second weekly climb, as the dollar has dropped against the euro. The metal surged to an 11-month high in February as investors sought to protect their wealth during the worst global recession since World War II. The U.S. currency declined as much as 0.8 percent against the euro today.

“Short-term drivers such as the dollar, oil and inflation expectations are becoming more important again,” said     Suki cooper, an analyst at Barclays Capital in London. “Currency movements are becoming key.”

Gold futures for August delivery slipped $2.80, or 0.3 percent, to $952 an ounce by 8:39 a.m. on the New York Mercantile Exchange’s Comex division, rebounding from a slide of as much as 0.9 percent. Immediate-delivery gold added $2.88, or 0.3 percent, to $952.03 an ounce in London.

Investment demand for gold exceeded usage by jewelers in the first quarter for the first time since at least 2004, according to the World Gold Council. In India, the world’s largest gold buyer last year, jewelry purchases were the lowest in at least 20 years and Chinese demand was six times that of India, the council said in May.

China to Pass India?

“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. The displacement may take closer to five years, John Reade, an analyst at UBS AG in London, said in an e-mailed report today.

The dollar’s negative correlation to gold has increased to about 0.8 in the past month and has been above 0.5 over the past three months, Cooper said. A reading of 1 would indicate the two always move in lockstep. Bullion and the greenback tend to move inversely.

“Our expectations are for the dollar to strengthen over the next month,” Cooper said.

Investors sold a net 9 metric tons of gold out of 15 exchange-traded funds tracked by Barclays Capital this month, heading for the biggest monthly outflow since August, Cooper said. That’s left the market more influenced by speculative traders, and “in the short term, we could see a bit more volatility” as a result, she said.

ETF Holdings

Investment in ETF Securities Ltd.’s exchange-traded gold products fell 0.1 percent to about 7.5 million ounces, the second consecutive decline and the lowest since May 28, according to figures from the company's website.

Gold was little changed at $949.75 an ounce in the morning “fixing” in London, used by some mining companies to sell production, from yesterday’s afternoon fixing of $950. Platinum was fixed at $1,180 an ounce, compared with $1,176 yesterday afternoon.

Platinum for immediate delivery rose 0.5 percent to $1,184.50 an ounce, palladium gained 0.1 percent to $258.80 an ounce and silver added 0.6 percent to $13.80 an ounce.

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By Halia Pavliva and Nicholas Larkin

July 23, 2009 (Bloomberg) -- Gold prices rose to the highest in five weeks as the dollar retreated, supporting demand for the precious metal as an alternative investment. Silver also gained.

Gold has climbed 2 percent this week as the dollar dropped 1.2 percent against the euro. Earlier, the metal reached $956.90 an ounce, the highest since June 12.

“Gold is in a range and probably has limited upside in the short term, but is also well supported on the downside,” Patrick Chidley, an analyst at Barnard Jacobs Mellet LLC, said in an e-mail. “There are good reasons to believe the dollar should weaken, and in that case, gold will be a beneficiary, but it’s not necessarily going to occur overnight.”

Gold futures for August delivery rose $2.50, or 0.3 percent, to $955.80 at 11:30 a.m. on the Comex division of the New York Mercantile Exchange. Bullion for immediate delivery rose $4.11, or 0.4 percent, to $955.51.

Silver for September delivery added 14 cents, or 1 percent, to $13.84 an ounce.

U.S. stocks rose, sending the Dow Jones Industrial Average above 9,000 for the first time since January, after some companies reported earnings that topped analysts’ estimates and home resales increased more than forecast.

“Earlier this month, economic worries encouraged investors to buy the dollar and Treasuries,” Pradeep Unni, an analyst at Richcomm Global Services in Dubai, said in a report. “Appetite for other assets, including gold and equities, seems to be returning.”

Before today, gold rose 7.8 percent this year, and silver gained 21 percent

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FDIC’s Bair Seeks Fund to Wind Down Finance Firms

By Alison Vekshin and Jesse Westbrook

July 23 (Bloomberg) -- Federal Deposit Insurance Corp. Chairman Sheila Bari urged U.S. lawmakers to impose fees on the nation’s largest financial firms to keep the government from having to prop up companies deemed too large to fail.

Congress should create an industry-supported Financial Company Resolution Fund to provide working capital and cover unanticipated losses when government steps in to unwind a failed firm, Bair said today in testimony at the Senate Banking Committee.

The U.S. should impose “assessments on large or complex institutions that recognize their potential risks to the financial system,” Bair said. “This system also could provide an economic incentive for an institution not to grow too large.”

Bair’s proposal is aimed at preventing the government from having to bail out or arrange an acquisition for a firm whose failure would disrupt the financial system. In the past two years, the U.S. has rescued, taken over or helped sell Bear Stearns Cos., Merrill Lynch & Co., American International Group Inc., IndyMac Bancorp Inc., Fannie Mae and Freddie Mac.

Bair said the proposed reserve would be similar to the FDIC deposit insurance fund, which backs consumer accounts at U.S. banks that pay fees to support the fund.

“In a properly functioning market economy there will be winners and losers, and when firms -- through their own mismanagement and excessive risk taking -- are no longer viable, they should fail,” Bair said.

She urged creating a mechanism to wind down “large, systemically important financial firms” with no cost to taxpayers similar to the system in place at the FDIC for shutting failed commercial banks and thrifts.

‘Costly, Ad Hoc’

“Without a new comprehensive resolution regime, we will be forced to repeat the costly, ad hoc responses of the last year,” Bair said.

Bair joined Securities and Exchange Commission Chairman Mary Schapiro and Fed Governor Daniel Tarullo in discussing an Obama administration proposal to give the Federal Reserve authority over firms that pose a systemic risk to the economy.

Schapiro said a council of agencies with the Treasury Department, the SEC and the FDIC should oversee “systemically important institutions.” Bair endorsed the idea.

The council should “prevent the creation” of companies deemed too large to fail, rather than just regulating such companies, Schapiro said. It should have authority to identify firms it deems systemically risky, Schapiro said.

‘Large, Diverse’

“Insufficient attention has been paid to the risks posed by institutions whose businesses are so large and diverse that they have become, for all intents and purposes, unmanageable,” Schapiro said.

Tarullo said giving the Fed the authority “would be an incremental and natural extension” of the central bank’s current role.

“I hope people are not expecting that anything that the Fed, the SEC, the FDIC or anybody else does is going to eliminate all potential for systemic risk,” Tarullo said.

Senators Christopher Dodd and Richard Shelby, leaders of the banking panel, opposed giving the Fed new powers.

“The Fed hasn’t done a perfect job with the responsibilities it already has,” said Dodd, the chairman and a Connecticut Democrat. “This new authority could compromise the independence the Fed needs to carry out effective monetary policy.”

Shelby, the panel’s leading Republican, said the power would make the Fed “a regulator giant of unprecedented size and scope,” and Congress “should consider every possible alternative to the Fed as the systemic-risk regulator."

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Jul 22, 2009, 2:12 p.m. EST

NEW YORK (MarketWatch) -- Gold futures rose Wednesday to end at the highest level in six weeks, with a falling dollar and rising equity markets boosting gold's investment appeal. August gold futures rose $6.40, or 0.7%, to end at $953.30 an ounce on the Comex division of the New York Mercantile Exchange, the highest settlement for a front-month contract since June 11.

By Vincent Del Giudice

July 17 (Bloomberg) -- The U.S. won’t see a return to “full” employment for another six years, helping to hold down inflation, according to former Federal Reserve Governor Laurence Meyer.

“I think there’s going to be a long legacy of the financial crisis and the deep recession,” Meyer said in an interview today on Bloomberg Radio. Meyer, who served at the Fed from 1996 to 2002, is vice chairman of St. Louis-based Macroeconomic Advisers LLC.

Meyer’s comments echo those of observers including Mohamel El-Erian, the Pacific Investment Management Co. chief executive officer, who foresee an extended period of elevated unemployment. That would follow a decade that is already on course to be the weakest for economic growth in the postwar era.

The economy is “a very, very long way off” from its potential growth rate, Meyer said. While the expansion will probably be “modestly above trend next year” and “significantly above trend in 2011,” that won’t help restore the nation to a “normal” job-market, he said.

“Full” employment -- or a jobless rate around 5 percent -- won’t return until 2015, he said.

“We’re staring in a hole; we’re going to start from a 10 percent unemployment rate,” Meyer said. “The unemployment rate is going to come down very slowly.”

Inflation Call

A weak labor market “brings with it a significant decline in inflation,” below 1 percent next year, and near zero in 2011, Meyer predicted.

“That’s particularly important for the call when the FOMC is likely to exit from a near-zero rate policy,” he said. The consumer price index fell 1.4 percent from a year earlier in June, the weakest performance since January 1950.

In an effort to prevent a depression, the Fed’s Open Market Committee reduced its benchmark interest rate to near zero last year, and has more than doubled the size of its balance sheet in the past year to more than $2 trillion.

U.S. joblessness has increased to 9.5 percent, the highest in more than a quarter century, from an average of 5.3 percent during the six-year economic expansion that ended when the recession began in December 2007. Fed officials’ projections suggest the rate could reach as high as 10.1 percent by the end of this year.

Meyer said that the jobless rate will probably be 9.5 percent to 10 percent by the end of 2010, and 8.5 percent by the end of 2011, Meyer said. “That’s still very high,” he said. “That’s the defining feature of the outlook going forward.”

Employers in the U.S. have cut 6.5 million jobs since the recession began, the most since the end of World War II. GDP contracted at a 5.5 percent annual rate in the first quarter, capping the weakest six-month performance in half a century.

 

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By Kathy Schwiff

July 15, 2009: CIT Group Inc. said late Wednesday it has been told there is "no appreciable likelihood" of government funding in the near term.

The struggling commercial lender said its discussions with government agencies have ended and its board is evaluating alternatives for the company, which is facing a liquidity crisis as its corporate customers drew down hundreds of millions of dollars from their credit lines.

Earlier Wednesday, the White House said President Obama has been briefed on CIT's situation but deferred questions about the troubled lender's potential government-aid package to the Treasury Department.

The financial position at CIT, a lender to almost a million small and midsized businesses, has weakened in recent days and government officials had come under increasing pressure to resolve the looming crisis. News over the weekend the company had hired bankruptcy lawyers to help prepare for a possible bankruptcy filing prompted nervous investors to draw down on credit lines and the company's bonds and shares slumped. People familiar with the matter told The Wall Street Journal the drawdowns were about $500 million on Monday, but by Tuesday had risen to around $750 million.

CIT's shares were halted up 1.9%, or three cents, at $1.64, after trading as low as $1.50. Trading is often stopped when a company is about to announce market-moving news.

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NEW YORK (MarketWatch) -- Gold futures rose Wednesday for a third session, climbing to their highest levels in two weeks, as a weakening dollar and newly released consumer price data raised the metal's investment appeal.

U.S. consumer prices rose in June at the fastest pace in nearly a year, raising inflation worries and gold's value as a protection against rising prices. Meanwhile, the U.S. dollar lost ground against most of its major rivals.

August gold futures rose $15.90, or 1.7%, to $938.70 an ounce on the Comex division of the New York Mercantile Exchange. It rose to $941.70 earlier, the highest intraday level since July 1.

The dollar will "provide further direction to gold," said James Moore, an analyst at TheBullionDesk.com. "Investors are also paying close attention to economic data and Fed statements."

The Federal Reserve will release minutes of its latest meeting later Wednesday, in which the central bank could provide its outlook for inflation and economic growth. Higher inflation outlook tends to push up gold prices, as some investors buy the metal as a hedge against rising prices.

The U.S. consumer prices index rose a seasonally adjusted 0.7% in June, the Labor Department reported Wednesday. That's the biggest increase since July 2008. The core CPI - which excludes often-volatile food and energy prices -- rose a seasonally adjusted 0.2%.

The data came one day after the Labor Department reported the producer price index, a gauge of whole-sale level inflation, jumped 1.8% last month, climbing by the most since November 2007.

In currencies trading Wednesday, the dollar index /quotes/comstock/11j!i1:dx\y (DXY 79.36, -0.83, -1.03%) fell to 79.396, down from above 80 in late trade Tuesday. A weaker greenback tends to push up dollar-denominated commodities prices such as gold and crude.

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Federal budget deficit tops $1 trillion for first time, could reach $2 trillion by fall

By Martin Crutsinger, AP Economics Writer
On Monday July 13, 2009, 9:18 pm EDT

WASHINGTON -- The federal deficit has topped $1 trillion for the first time ever and could grow to nearly $2 trillion by this fall, intensifying fears about higher interest rates, inflation and the strength of the dollar.

The deficit has been widened by the huge sum the government has spent to ease the recession, combined with a sharp decline in tax revenues. The cost of wars in Iraq and Afghanistan also is a major factor.

The soaring deficit is making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could also force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.

"These are mind-boggling numbers," said Sung Won Sohn, an economist at the Smith School of Business at California State University. "Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run."

The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to $1.09 trillion. The administration forecasts that the deficit for the entire year will hit $1.84 trillion in October.

Government spending is on the rise to address the worst financial crisis since the Great Depression and an unemployment rate that has climbed to 9.5 percent.

Congress already approved a $700 billion financial bailout for banks, automakers and other sectors, and a $787 billion economic stimulus package to try to jump-start a recovery. Outlays through the first nine months of this budget year total $2.67 trillion, up 20.5 percent from the same period a year ago.

There is growing talk among some Obama administration officials that a second round of stimulus may eventually be necessary.

That has many Republicans and deficit hawks worried that the U.S. could be setting itself up for more financial pain down the road if interest rates and inflation surge. They also are raising alarms about additional spending the administration is proposing, including its plan to reform health care.

President Barack Obama and Treasury Secretary Timothy Geithner have said the U.S. is committed to bringing down the deficits once the economy and financial sector recover. The Obama administration has set a goal of cutting the deficit in half by the end of his first term in office.

In the meantime, the U.S. debt now stands at $11.5 trillion. Interest payments on the debt cost $452 billion last year -- the largest federal spending category after Medicare-Medicaid, Social Security and defense.

The overall debt is now slightly more than 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product. During World War II, it briefly rose to 120 percent of GDP.

The debt is largely financed by the sale of Treasury bonds and bills.

Many private economists say the administration had no choice but to take aggressive action during the financial crisis.

"We have a deep recession hammering tax revenues and forcing the government to provide a lot of help to the economy," said Mark Zandi, chief economist at Moody's Economy.com. "But without this help, the downturn would be even more severe."

History shows the dangers of assuming too soon that economic downturns have ended.

President Franklin D. Roosevelt made that mistake in 1936. Believing the Depression largely over, he sought to reduce public spending and to balance the federal budget, but that undermined a fragile recovery, pushing the economy back under water in 1937.

Japanese leaders made a similar mistake in the 1990s when they temporarily withdrew government stimulus spending, prolonging Japan's recession into one that lasted a full decade.

Republicans in Congress are seizing on the deficit -- and the persistence of the recession -- to attack Democrats.

"Washington Democrats keep borrowing and spending money we don't have," said House Republican Leader John Boehner of Ohio.

So far, interest rates have remained low.

This is partly because the Federal Reserve has kept a key short-term rate at a record near zero. Also, all the economic troubles in housing and the rest of the economy have depressed demand for credit by the private sector, meaning the government's borrowing costs are relatively low.

The benchmark 10-year Treasury security has risen by about a percentage point in recent weeks, but analysts note it is still trading at historically low levels of around 3.35 percent.

Geithner travels later this week to Saudi Arabia and the United Arab Emirates, where he is expected to face questions about the U.S. deficit. As he did during a visit to China last month, Geithner will try to reassure investors in the Middle East that their U.S. holdings are safe from a calamitous bout of inflation.

The deficit of $1.09 trillion so far this year compares to an imbalance of $285.85 billion through the same period a year ago. The deficit for the 2008 budget year, which ended Sept. 30, was $454.8 billion, the current record in dollar terms.

Revenues so far this year total $1.59 trillion, down 17.9 percent from a year ago, reflecting higher unemployment, which cuts into payroll taxes and corporate tax receipts.

Under the administration's budget estimates, the $1.84 trillion deficit for this year will be followed by a $1.26 trillion deficit in 2010, and will never dip below $500 billion over the next decade. The administration estimates the deficits will total $7.1 trillion from 2010 to 2019.

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By Jeffrey McCracken and Serena Ng

July 13, 2009

CIT Group Inc., a lender to almost a million mostly small and midsize businesses across the country, is preparing for a possible bankruptcy filing after so far failing to win a government guarantee to help it borrow, said people familiar with the matter.

To prepare for a possible filing, CIT has retained the law firm of Skadden, Arps, Slate, Meagher & Flom LLP, which has a prominent bankruptcy practice, these people said.

The mere hiring of bankruptcy counsel doesn't mean a company will actually make a bankruptcy filing. CIT has been pressing its case "with increased urgency to the government," said a person familiar with the matter, and is hopeful because "the government has not said absolutely no to anything."

CIT has a $1 billion payment due in mid-August and it is unclear the company "will be able to handle that," said this person. The company will give more guidance when it discusses second quarter earnings in two weeks.

CIT declined to comment on whether it was preparing a filing or why it had retained Skadden Arps. But if CIT did file, the consequences could be considerable, because the 101-year-old company, as of March 31, had $68 billion of liabilities.

CIT is registered as a bank holding company and has a bank in Utah with roughly $3.5 billion in deposits. But to get most of its funds to lend, it has historically relied on bonds and the short-term debt market known as commercial paper. It has been largely unable to tap the credit markets since mid 2007 and is trying to raise more money through its bank.

The New York-based lender has been stuck for months in a bureaucratic tangle over government assistance. It received $2.3 billion from the federal Troubled Asset Relief Program in December, after winning approval to become a bank holding company. But CIT has so far been unable to access another federal program, one that helps banks and thrifts sell debt with government guarantees. Access to that program would enable CIT, which has a below-investment-grade, or "junk," credit rating, to sell bonds at a low interest rate.

CIT confirmed Friday that the Federal Deposit Insurance Corp., which oversees the debt guarantee program, has yet to approve its application. CIT said that its application to the FDIC remains outstanding and the company "continues to be in active dialogue with the government."

A bankruptcy filing by CIT could affect thousands of small borrowers, from Dunkin' Donuts franchisees to restaurant owners and clothing retailers. "If CIT were to go away, it would take a financing option away from franchisees who want to buy stores or expand their networks," said Kate Lavelle, chief financial officer of Dunkin' Brands, the which owns Dunkin' Donuts and has had a 50-year relationship with CIT.

On Friday, many CIT bonds slumped on heavy trading, and its stock tumbled to its lowest since the lender went public in 2002, further hurting its chances of raising capital from the private sector without more government aid. CIT bonds that mature in February 2010 were trading at 83.5 cents on the dollar and yielding over 40%, indicating that debt investors think it is unlikely they will be repaid in full. CIT shares sank 33 cents, or 18%, to $1.53, after dipping as low as $1.13 during the day.

The company's most pressing issue, said those familiar with the situation, is that it has a debt payment coming due in August. In all, CIT has about $2.7 billion that comes due this year and $8 billion more due next year.

The FDIC has been considering CIT's application for a federal debt guarantee since January and hasn't reached a decision. The agency is concerned about CIT's deteriorating financial position and operating losses.

A few months ago, CIT hired former Deputy Treasury Secretary Roger Altman and his boutique investment bank Evercore Partners to try to get more TARP funds or find another financial solution with the government, said the people familiar with the matter.

One problem with getting more aid is that the government has made it clear it doesn't see the company as a systemic risk to the financial system. The people familiar with the matter said the government feels that other lenders, such as J.P. Morgan Chase & Co. or Deutsche Bank AG, can handle many of the same loans that CIT specializes in, such as loans to small retailers or rail-car leasing firms.

Meanwhile, competitors like GE Capital Corp. and GMAC LLC have been able to sell debt with the backing of the government's top credit rating.

According to confidential documents reviewed by The Wall Street Journal, CIT has in recent weeks tried to assess the consequences of a failure of the lender on Middle America. Among them: Companies would lose access to $4 billion in untapped credit lines and thousands of manufacturers could run into problems.

CIT competes with the likes of Wells Fargo, Bank of America, General Electric Capital Corp. and regional banks in the sectors in which it is active. But many CIT customers say that the lender is often willing to make loans to businesses and borrowers that most banks typically shun. CIT now ranks 20th among U.S. bank holding companies, with assets of over $75 billion.

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July 13, 2009

By Peter Eavis

Are regulators trying to prove Charles Darwin wrong?

As bank failures mount, hitting 53 this year by Friday, the Federal Deposit Insurance Corp. needs solid financial institutions to assume the assets and liabilities of collapsed lenders. But instead of passing the weaklings' remains to unequivocally strong banks, many of the acquirers are dealing with issues such as high exposure to commercial real estate.

Admittedly, there is no queue of pristine banks right now waiting to buy bust banks. And the FDIC can't hang on to failed institutions forever.

That said, loans and deposits should ideally end up controlled by bankers with proven track records. That sort of Darwinian restructuring benefits the wider economy. But if banks that have made poor choices grab the carcasses, stagnation becomes a danger.

The FDIC recently recognized the importance of proven management when proposing requirements for nonbanks wanting to buy banks. But consider the risky looking positions of some banks that have absorbed the remains of collapsed institutions.

Last month, United Community Banks, of Blairsville, Ga., acquired assets and liabilities of Southern Community Bank, including $224 million of loans, from the FDIC, which provided a loss-sharing agreement. Yet United Community has commercial real-estate exposure equivalent to over 850% of its tangible common equity, or TCE. Such assets are risky as the real-estate market slumps.

Moreover, its Texas ratio, nonperforming assets as a percentage of TCE plus loan-loss reserves, is 55%. That is more than double the 26% median for smaller U.S. banks. United Community points out that its regulatory capital is substantially higher than its TCE.

Then there is Private Bancorp, of Chicago, which this month acquired all the deposits and just over $900 million of assets of Founders Bank. Adjusted for a recent share issue, Private Bancorp's commercial real estate is equivalent to 590% of its TCE. And there are other question marks. Brokered deposits, which have prompted regulatory unease because they can be flighty, are up over 220% since the end of 2007. They helped fund a 326% increase in corporate loans over the same period. Ballooning that loan book ahead of a recession could carry risks.

Next up: Great Southern Bancorp, of Springfield, Mo., which in March acquired certain deposits and $443 million of loans from TeamBank. Great Southern's commercial real estate, which contains a large share of construction loans, is 536% of TCE. Brokered deposits leaped 44% last year. And last year the bank took a $35 million hit, equivalent to 21% of its TCE at the time, after a single loan to another bank went bad. The bank said its capital ratios are strong and that it is comfortable with its level of brokered deposits.

Granted, there are few bank buyers for failed bank assets right now, and the FDIC is wise to be cautious of nonbank purchasers. But transactions like these suggest regulators are going to the not-so-fit. If it becomes the norm, the regional-bank sector may struggle to evolve into a stronger beast.

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CIT Group Says Its Failure Risks Demise of Customers

July 13, 2009 (Bloomberg) -- CIT Group Inc., the century-old lender that hasn’t been able to persuade the government to back its debt sales, says its demise would put 760 manufacturing clients at risk of failure and “precipitate a crisis” for as many as 300,000 retailers.

A collapse would ripple across the “small and medium-sized businesses who rely on CIT to operate -- to pay their vendors, ship goods to their customers and make their payroll,” the New York-based lender said in internal documents obtained by Bloomberg News that make the case for its importance to the U.S. economy. CIT spokesman Curt Ritter declined to comment on the documents.

CIT executives spoke with regulators during the past two days, according to a person familiar with the talks, after its bonds and shares tumbled on concern that the Federal Deposit Insurance Corp. won’t allow the lender into its bond-guarantee program created last year to unfreeze debt markets. CIT may default as soon as April, when a $2.1 billion credit line matures, according to Fitch Ratings.

“A CIT default would create liquidity issues for the corporate sector,” Ed Grebeck, chief executive officer of debt consulting firm Tempus Advisors in Stamford, Connecticut. “If CIT isn’t doing trade finance and lending, its customers will look to other banks for replacement and from what I’ve seen, they aren’t willing to step up.”

Law Firm Hired

A failure of CIT, run by Chief Executive Officer Jeffrey Peek, would be the biggest bank collapse since regulators seized Washington Mutual Inc. in September. CIT reported $75.7 billion in assets and $68.2 billion in liabilities, including $3 billion in deposits, at the end of the first quarter.

The company, which reported more than $3 billion of losses in the past eight quarters, says it’s hired Skadden, Arps, Slate, Meagher & Flom LLP as an adviser.

New York-based Skadden is known for its work in mergers and acquisitions and bankruptcies. The firm represented BHP Biliton Ltd., the world’s largest mining company, in its $150 billion proposed acquisition of Rio Tinto, and advised Circuit City Stores Inc. in its bankruptcy.

“Skadden is one of the principal law firms representing CIT,” Ritter said in an e-mail on July 11. “They represent the firm on a wide variety of corporate matters. CIT will not comment on any specific aspect of their engagement.”

Jay Goffman, co-head of Skadden’s global corporate restructuring group, declined to comment on the firm’s work for CIT.

CIT faces $10 billion of maturing debt through 2010 and hasn’t sold corporate bonds in more than a year, according to data compiled by Bloomberg.

Bonds, Shares Decline

CIT’s $500 million of floating-rate notes due in November 2010 fell 3.5 cents on the dollar last week to 70 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The stock declined 46 cents, or 23 percent, last week to $1.53 in New York Stock Exchange composite trading.

The lender, which says it was the first to offer credit to help consumers nationwide buy Studebaker cars, funds about 1 million businesses from Dunkin’ Brands Inc. in Canton, Massachusetts, to Eddie Bauer Holdings Inc., the bankrupt clothing chain in Bellevue, Washington. CIT says it’s the third- largest U.S. railcar-leasing firm and the world’s third-biggest aircraft financier.

CIT became a bank in December to qualify for a government bailout and received $2.33 billion in funds from the U.S. Treasury.

Risk to Taxpayers

The FDIC is concerned that standing behind CIT debt would put taxpayer money at risk because the company’s credit quality is worsening, people familiar with the regulator’s thinking, who declined to be identified because the talks are private, said last week. Since Nov. 25 the FDIC has backed $274 billion in bond sales under its Temporary Liquidity Guarantee Program, designed to give creditworthy borrowers access to funds after debt markets seized up following the failure of Lehman Brothers Holdings Inc.

The federal agency, run by Chairman Sheila Bair, is in discussions with CIT about how the lender can strengthen its financial position to get approval, including raising capital, said one of the people. CIT’s measures to improve its credit quality, such as by transferring assets to its bank, have been insufficient, the person said.

‘Active Discussions’

CIT is in “active discussions” with regulators on a “series of measures to improve the company’s near-term liquidity position,” it said in a statement distributed by Business Wire today. The talks include CIT’s application for FDIC funds and measures such as the transfer of assets to CIT Bank, it said.

CIT’s internal report outlines the potential effects of a failure on customers to which it’s committed $3.9 billion of bank lines.

A “substantial portion” of clients “would not have easy access to additional revolving credit without CIT,” according to the documents. “This could lead to business failure for those who lack additional liquidity.”

BlueTarp Financial is “one of many small businesses that rely on CIT, and without a player like them there is no one else to turn to,” said Bond Isaacson, CEO of the Charlotte, North Carolina-based provider of trade credit to building contractors.

“We are treading on thin ice if CIT is allowed to fail and with them will go a lot of small businesses,” Isaacson said.

The company has already cut back on arranging new loans and its failure wouldn’t cause widespread problems, said Kathleen Shanley, a Chicago-based bond analyst for Gimme Credit LLC.

“Absent a change of heart on the part of the FDIC, it is difficult to see how CIT can survive,” Shanley said. “Fixed income investors have lost confidence in the viability of CIT’s business model, which will make it extremely difficult for the company to fund its upcoming debt maturities and ongoing operations.”

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By Lyubov Pronina

July 10 (Bloomberg) -- Russian President Dmitry Medvedev illustrated his call for a supranational currency to replace the dollar by pulling from his pocket a sample coin of a “united future world currency.”

“Here it is,” Medvedev told reporters today in L’Aquila, Italy, after a summit of the Group of Eight nations. “You can see it and touch it.”

The coin, which bears the words “unity in diversity,” was minted in Belgium and presented to the heads of G-8 delegations, Medvedev said.

The question of a supranational currency “concerns everyone now, even the mints,” Medvedev said. The test coin “means they’re getting ready. I think it’s a good sign that we understand how interdependent we are.”

Medvedev has repeatedly called for creating a mix of regional reserve currencies as part of the drive to address the global financial crisis, while questioning the U.S. dollar’s future as a global reserve currency. Russia’s proposals for the G-20 meeting in London in April included the creation of a supranational currency.

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By John Parry

Thu Jun 14, 2007 3:06pm EDT

NEW YORK (Reuters) - Treasury yields' recent push to five-year highs is the latest signal that a bear market in bonds may be dawning after a bull market that spanned nearly a quarter century.

The benchmark 10-year Treasury note's yield's climb of some 60 basis points in a month and move into a trading range between 5.25 percent and 5.50 percent already signals the market is in a downtrend. Still, most argue it has not yet entered a definitively bearish phase.

Nevertheless, a sustained break above the 5.5 percent level on benchmark U.S. Treasury note yields would almost certainly signal the dawn of a long-term bear market for bonds, according to Louise Yamada, founder of Louise Yamada Technical Research Advisors LLC.

Yamada, at this week's Reuters Investment Outlook Summit, said we are probably already in the early stages of a bear market and "but moving gradually into it."

A sustained move of the 10-year Treasury note yield above 5.5 percent would crimp consumers' and companies ability to borrow, further weakening the housing sector and damaging the economy as a whole, strategists said.

The Federal Reserve's campaign to cut interest rates to a four-decade low of 1 percent in 2003 pushed the 10-year yield to a cycle low of about 3.08 percent. In the 1980s, by comparison, long-dated Treasury yields peaked around 15 percent. Bond yields and prices move inversely to each other.

"Over the past 25 years, every backup in yields failed to exceed the previous backup," which was one of the technical hallmarks of the long-term bull market for bonds dating back to the peak in yields in the early 1980s, Yamada said.

Now, however, a composite view of yields on 10-, 20- and 30-year bonds is threatening to push through the 5.33 percent level, she said. "If this Treasury composite goes through 5.33 percent, you will have seen the first backup in rates that does exceed (the previous backup) in the past 26 years."

That would confirm the start of a long-term downtrend for bond prices.

Yet for now, bond market strategists are still debating the reasons for the latest spike in bond yields. Some question whether rising yields have been driven more by long-term factors such as global growth and inflation prospects, or by waves of selling from mortgage players, which strategists reckon have started to abate.

"If 10-year yields are moving north of 5.30 percent and making a new high yield for the cycle, you might argue you were in a bear market," said Richard Gilhooly, senior U.S. bond strategist of BNP Paribas Securities Corp., speaking at the Reuters Investment Outlook Summit on Tuesday.

But thus far, the benchmark yield's surge above 5.30 percent to five-year highs of 5.33 percent on Tuesday, has been fleeting. On Thursday in New York, the 10-year yield traded at 5.22 percent.

"For the time being, what we are seeing is a technical phenomenon," Gilhooly said of the government bond market sell-off earlier this week. "The whole mortgage universe tried to hedge at the same time."

But because worries about global economic growth, inflation and the threat of central bank rate hikes are one catalyst for the climb of bond yields, some analysts worry that the move higher may prove sustained and inflict damage to the world's biggest economy.

"It is kind of hard not to see the 10-year yield going to 5.50 percent, if not by summer's end then by the year's end," said Barry Ritholtz, chief market strategist at Ritholtz Research and Analytics, speaking at the Reuters Investment Outlook Summit on Wednesday.

"It is pretty clear that rates are going higher globally and we (in the United States) are going to be dragged along with them," he said.

Central banks in the UK, the euro zone and Japan are all in policy-tightening mode, while interest rate futures show a slight chance that the Federal Reserve may raise U.S. overnight interest rates by the end of this year.

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By John Detrixhe

July 10 (Bloomberg) -- U.S. corporate bond sales tumbled to a three-month low on concern that the longest recession since the 1930s may extend beyond investors’ earlier expectations.

Borrowers issued at least $11.5 billion of debt this week, a 39 percent decline from the five-year average for the second week of July, and compares with $20.4 billion last week, according to data compiled by Bloomberg. Barclays Bank Plc offered $2.5 billion of notes and utility units of Alliant Energy Corp. sold $550 million of bonds, Bloomberg data show.

Investors are concerned that economic recovery estimates were overly optimistic after unemployment reached a 26-year high in June, said William Larkin, a portfolio manager at Salem, Massachusetts-based Cabot Money Management. Earnings at Standard & Poor’s 500 Index members may decline an average 34 percent in the second quarter compared with a year earlier, according to data compiled by S&P and Bloomberg.

“The monthly employment data sort of spooked the market and put into question the recovery,” Larkin said in a telephone interview. “We keep seeing improvements being on the optimistic side, but the schedule of when things are going to get better keeps getting pushed out.”

Investment-grade yields relative to benchmark rates were unchanged for the week at 330 basis points as of yesterday, matching this year’s low on July 2, according to Merrill Lynch & Co.’s U.S. Corporate Master index. Yields fell 7 basis points to 5.99 percent. A basis point is 0.01 percentage point.

Needs New Data

“The easy money has been made,” said James Hannan, managing director of fixed income strategy at Baltimore-based MTB Investment Advisors Inc., which oversees $14.5 billion in assets. “We’re going to need some new information, either in the way of earnings exceeding to the upside, or some new information that shows the economy doing a little better than what people are expecting.”

U.S. consumer confidence slipped unexpectedly in June, reflecting unemployment that rose to 9.5 percent and wealth destruction triggered partly by a drop in property values. U.S. employers slashed 467,000 jobs last month, and about 6 million jobs have been eliminated since the recession began in December 2007. June’s jobless rate was the highest since August 1983.

The second-quarter earnings barrage began in the U.S. on July 8 with aluminum producer Alcoa Inc., the first member of the Dow Jones Industrial Average to report results. The New York-based company’s loss was smaller than analysts’ estimates after production cuts and workforce reductions helped trim expenses.

Seeking Improvement

“There’s going to be a sensitivity to see consumers turning, and we need to see companies spending,” said Larkin of Cabot Money Management. “That’s why this earnings cycle is going to be important, because we need to see an incremental improvement.”

The Obama administration’s $787 billion stimulus package passed in February was too little to “offset the violence of the slump that was occurring at that time,” James Galbraith, professor of economics at the University of Texas, said in a Bloomberg television interview.

“It was about as much as you could get in that political climate,” Galbraith said. “Right now there’s a kind of general anxiety about whether the economy is going to recover. It’s certainly not going to recover as quickly as the forecasters, the optimists in January thought it would.”

The five-year, 5.2 percent dollar-denominated debt from London-based Barclays priced to yield 287.5 basis points more than similar-maturity Treasuries, Bloomberg data show.

Total Bond Sales

Following the record pace of investment-grade bond sales during the first half of 2009, issuance may fall as borrowers cut back on capital expenditures, Morgan Stanley analyst Rizwan Hussain said in a telephone interview. Borrowers have sold $760.4 billion of bonds this year, compared with $598.6 billion during the same period a year ago, Bloomberg data show.

During the last five years, companies have issued an average of $18.7 billion of debt during the second week of July.

“There isn’t a very active, robust merger and acquisition pipeline right now,” Hussain said. “The uses of debt financing right now, outside of refinancing existing maturities, is relatively low.”

This week, investment-grade borrowers sold at least $11.1 billion of bonds, compared with $16.1 billion the previous week

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Posted Jul 09 2009, 11:10 AM by Catherine Holahan 





Millionaire investor Warren Buffett has joined the chorus of prominent political figures and businessmen calling for a second stimulus.

The CEO of Berkshire Hathaway told ABC's Good Morning America that the first $787 billion stimulus didn't do enough to help the economy and included too many earmarks for politicians' pet projects.

"Our first stimulus bill . . . was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in," Buffett said in the interview, "as if everybody was putting in enough for their own constituents."

The call came after Buffett had praised the Federal Reserve's efforts to pump money into the economy in interviews on CNBC and Bloomberg television.

It also followed comments by officials in President Barack Obama's administration maintaining that the government would continue a second stimulus should the economy continue to deteriorate. However, the administration said it is not currently discussing a second aid package. 

Vice President Joe Biden said earlier this month that the government had misjudged the depth of the recession and that it would be willing to take additional action in the future. World leaders indicated a second stimulus could be called for as well during the G-8 summit in Italy.

The call for a second stimulus may seem shocking given the amount of money already spent, lent or committed by the White House and the Federal Reserve in an attempt to pull the country from the brink of depression.  An analysis by Bloomberg put the figure at $12.8 trillion.

That amount includes the stimulus package, bank and insurer bailouts, loans to the auto industry, U.S. Treasury purchases, money pledged to buy back bundles of troubled mortgage securities, funds committed to backing up the FDIC, and money earmarked for helping Fannie Mae and Freddie Mac restructure mortgages.

The reason for the incredible call for more public funds is the shocking cuts in consumer spending. Personal consumption has accounted for about 70% of the U.S. gross domestic product in recent years. It is the engine that our economy runs on. But it has stalled as Americans have lost their jobs and massive amounts of wealth.

More than $14 trillion has evaporated from Americans' net worth due to steep declines in property values and market investments during the past two years. That's in addition to the trillions that Americans are no longer earning due to record unemployment and under-employment.

"The consumer is tapped out," said Diane Shand, a director at Standard & Poor's covering retail companies. "They can't access the equity in their homes anymore, and a lot of it really has to do with the unemployment picture."

The unemployment rate is at a 26-year high of 9.5% and is expected to reach 10% before the year's end. More than 14.7 million people are unemployed. The number of folks struggling to find work jumps to 25.5 million after adding all the Americans who have either given up looking for work or are stuck in part-time or temporary jobs due to the unavailability of full-time employment.

Without a recovery in consumer spending, the economy will continue its downward spiral. The GDP declined about 5.5% in the first quarter of this year, due in large part to consumer cutbacks.

The government is hoping that private money will follow its public investments. In theory, funds for stimulus projects should flow to businesses spurring them to increase spending and create more jobs, ultimately leading to a recovery in consumer spending.  But, so far, the economy hasn't seen much in the way of a consumer spending boost ( though private money has flowed to rescued banks).

That's partially because the government hasn't spent much of what it has promised. Only 10% to 15% of the $787 billion stimulus has been put to work. However, even that little amount appears to have spurred some positive sentiment. Consumer spending did rise about 0.3% in May on top of a 0.7% rise in April. That's certainly not a lot. But it wasn't a decline.

The fear is that all that money flowing from the government will ultimately prove insufficient to reverse the economy's negative trajectory. If the government doesn't have a plan in place to commit more funds to truly reverse the economy's course, some argue that any good from the current stimulus will be negated by continued high unemployment and depressed consumer spending.

One problem with pledging more funds is inflation. The more money the government promises to fight the recession, the more it will stoke concerns about inflation or stagflation: a period in which the dollar's value declines despite a lack of real economic growth. The risk of either inflation or stagflation could cause investors to demand higher returns to buy U.S. debt. The U.S. doesn't want to promise to pay even more in the future when the economy's growth is uncertain. The national debt is already at $11.5 trillion -- about $36,532 per person.

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Compared to 24 in all of 2008

Bank Failures in Brief 
Source:  FDIC.gov

---

2009

The list of Bank Failures in Brief is updated through July 2, 2009. 

July

Founders Bank, Worth, Illinois, with approximately $962.5 million in assets, was closed. The PrivateBank and Trust Company, Chicago, Illinois, has agreed to assume all deposits (approximately $848.9 million). (PR-119-2009)

Millennium State Bank of Texas, Dallas, Texas, with approximately $118 million in assets, was closed. State Bank of Texas, Irving, Texas, has agreed to assume all deposits (approximately $115 million). (PR-118-2009)

The First National Bank of Danville, Danville, Illinois, with approximately $166 million in assets, was closed. First Financial Bank, N.A., Terre Haute, Indiana, has agreed to assume all deposits (approximately $147 million). (PR-117-2009)

The Elizabeth State Bank, Elizabeth, Illinois, with approximately $55.5 million in assets, was closed. Galena State Bank and Trust Company, Galena, Illinois, has agreed to assume all deposits (approximately $50.4 million). (PR-116-2009)

Rock River Bank, Oregon, Illinois, with approximately $77 million in assets, was closed. The Harvard State Bank, Harvard, Illinois, has agreed to assume all deposits (approximately $75.8 million). (PR-115-2009)

The First State Bank of Winchester, Winchester, Illinois, with approximately $36 million in assets, was closed. The First National Bank of Beardstown, Beardstown, Illinois, has agreed to assume all deposits (approximately $34 million). (PR-114-2009)

The John Warner Bank, Clinton, Illinois, with approximately $70 million in assets, was closed. State Bank of Lincoln, Lincoln, Illinois, has agreed to assume all deposits (approximately $64 million). (PR-113-2009)

June

Mirae Bank, Los Angeles, California, with approximately $456 million in assets, was closed. Wilshire State Bank, Los Angeles, California, has agreed to assume all deposits (approximately $362 million). (PR-105-2009)

MetroPacific Bank, Irvine, California, with approximately $80 million in assets, was closed. Sunwest Bank, Tustin, California, has agreed to assume all non-brokered deposits (approximately $73 million). (PR-104-2009)

Horizon Bank, Pine City, Minnesota, with approximately $87.6 million in assets, was closed. Stearns Bank N.A., St. Cloud, Minnesota, has agreed to assume all deposits, excluding certain brokered deposits (approximately $69.4 million). (PR-103-2009)

Neighbor Community Bank, Newnan, Georgia, with approximately $221.6 million in assets, was closed. CharterBank, West Point, Georgia, has agreed to assume all deposits (approximately $191.3 million). (PR-102-2009)

Community Bank of West Georgia, Villa Rica, Georgia, with approximately $199.4 million in assets and approximately $182.5 million in deposits was approved for payout by the FDIC Board of Directors. (PR-101-2009)

First National Bank of Anthony, Anthony, Kansas, with approximately $156.9 million in assets, was closed. Bank of Kansas, South Hutchinson, Kansas, has agreed to assume all deposits (approximately $142.5 million). (PR-96-2009)

Cooperative Bank, Wilmington, North Carolina, with approximately $970 million in assets, was closed. First Bank, Troy, North Carolina, has agreed to assume all deposits, excluding certain brokered deposits (approximately $774 million). (PR-95-2009)

Southern Community Bank, Fayetteville, Georgia, with approximately $377 million in assets, was closed. United Community Bank, Blairsville, Georgia, has agreed to assume all deposits (approximately $307 million). (PR-94-2009)

Bank of Lincolnwood, Lincolnwood, Illinois, with approximately $214 million in assets, was closed. Republic Bank of Chicago, Oak Brook, Illinois, has agreed to assume all deposits (approximately $202 million).
(PR-86-2009)

May

Citizens National Bank, Macomb, Illinois, with approximately $437 million in assets, was closed. Morton Community Bank, Morton, Illinois, has agreed to assume all non-brokered deposits (approximately $400 million). (PR-76-2009)

Strategic Capital Bank, Champaign, Illinois, with approximately $537 million in assets, was closed. Midland States Bank, Effingham, Illinois, has agreed to assume all deposits (approximately $471 million).
(PR-75-2009)

BankUnited, FSB, Coral Gables, Florida, with approximately $12.8 billion in assets, was closed. BankUnited, Coral Gables, Florida, has agreed to assume all deposits (approximately $8.6 billion).
(PR-72-2009)

Westsound Bank, Bremerton, Washington, with approximately $334.6 million in assets and $304.5 million in deposits, was closed. Kitsap Bank, Port Orchard, Washington, has agreed to assume all non-brokered deposits. (PR-69-2009)

America West Bank, Layton, Utah, with approximately $299.4 million in assets, was closed. Cache Valley Bank, Logan, Utah, has agreed to assume all deposits (approximately $284.1 million).
(PR-63-2009)

Citizens Community Bank, Ridgewood, New Jersey, with approximately $45.1 million in assets, was closed. North Jersey Community Bank, Englewood Cliffs, New Jersey, has agreed to assume all deposits (approximately $43.7 million). (PR-62-2009)

Silverton Bank, N.A., Atlanta, Georgia, with approximately $4.1 billion in assets and $3.3 billion in deposits was closed. The FDIC created a bridge bank, Silverton Bridge Bank, N.A., to take over operations. (PR-61-2009)

April

First Bank of Idaho, Ketchum, Idaho, with approximately $488.9 million in assets, was closed. U.S. Bank, National Association, Minneapolis, MN, has agreed to assume all non-brokered deposits (approximately $374 million). (PR-60-2009)

First Bank of Beverly Hills, Calabasas, California, with approximately $1.5 billion in assets and approximately $1 billion in deposits was approved for payout by the FDIC Board of Directors. (PR-59-2009)

Michigan Heritage Bank, Farmington Hills, Michigan, with approximately $184.6 million in assets, was closed. Level One Bank, Farmington Hills, Michigan, has agreed to assume all deposits (approximately $151.7 million). (PR-58-2009)

American Southern Bank, Kennesaw, Georgia, with approximately $112.3 million in assets and approximately $104.3 in deposits was closed. Bank of North Georgia, Alpharetta, Georgia, has agreed to assume all non-brokered deposits. (PR-57-2009)

Great Basin Bank of Nevada, Elko, Nevada, with approximately $270.9 million in assets, was closed. Nevada State Bank, Las Vegas, Nevada, has agreed to assume all deposits (approximately $241.4 million). (PR-55-2009)

American Sterling Bank, Sugar Creek, Missouri, with approximately $181 million in assets was closed. Metcalf Bank, Lee's Summit, Missouri, has agreed to assume all deposits (approximately $171.9 million).  (PR-54-2009)

New Frontier Bank, Greeley, Colorado, with approximately $2.0 billion in assets and approximately $1.5 billion in deposits was closed. Deposit Insurance National Bank of Greeley, Greeley, Colorado has agreed to assume the non-brokered insured deposits. (PR-53-2009)

Cape Fear Bank, Wilmington, North Carolina, with approximately $492 million in assets, was closed. First Federal Savings and Loan Association, Charleston, South Carolina, has agreed to assume all deposits, excluding certain brokered deposits (approximately $403 million). (PR-52-2009)

March

Omni National Bank, Atlanta, Georgia, with approximately $956.0 million in assets and approximately $796.8 million in deposits was closed. SunTrust Bank, Atlanta, Georgia has agreed to assume the non-brokered insured deposits. (PR-50-2009)

TeamBank, National Association, Paola, Kansas, with approximately $669.8 million in assets, was closed. Great Southern Bank, Springfield, Missouri, has agreed to assume all deposits (approximately $492.8 million). (PR-46-2009)

Colorado National Bank, Colorado Springs, Colorado, with approximately $123.5 million in assets, was closed. Herring Bank, Amarillo, Texas has agreed to assume all deposits (approximately $82.7 million). (PR-45-2009)

FirstCity Bank, Stockbridge, Georgia, with approximately $297.0 million in assets and approximately $278.0 million in deposits was approved for payout by the FDIC Board of Directors. (PR-44-2009)

Freedom Bank of Georgia, Commerce, Georgia, with approximately $173.0 million in assets and approximately $161.0 million in deposits, was closed. Northeast Georgia Bank, Lavonia, Georgia has agreed to assume all deposits. (PR-37-2009)

February

Security Savings Bank, Henderson, Nevada, with approximately $238.3 million in assets, was closed. Bank of Nevada, Las Vegas, NV has agreed to assume all non-brokered deposits (approximately $175.2 million). (PR-32-2009)

Heritage Community Bank, Glenwood, Illinois, with approximately $232.9 million in assets, was closed. The MB Financial Bank, National Association, Chicago, Illinois has agreed to assume all deposits (approximately $218.6 million). (PR-31-2009)

Silver Falls Bank, Silverton, Oregon, with approximately $131.4 million in assets was closed. Citizens Bank, Corvallis, Oregon has agreed to assume all deposits (approximately $116.3 million). (PR-24-2009)

Pinnacle Bank of Oregon, Beaverton, Oregon, with approximately $73.0 million in assets was closed. Washington Trust Bank, Spokane, Washington has agreed to assume all deposits (approximately $64.0 million). (PR-23-2009)

Corn Belt Bank and Trust Company, Pittsfield, Illinois, with approximately $271.8 million in assets and approximately $234.4 million in deposits, was closed. The Carlinville National Bank, Carlinville, Illinois has agreed to assume all non-brokered deposits. (PR-22-2009)

Riverside Bank of the Gulf Coast, Cape Coral, Florida, with approximately $539.0 million in assets and approximately $424.0 million in deposits, was closed. TIB Bank, Naples, Florida has agreed to assume all non-brokered deposits. (PR-21-2009)

Sherman County Bank, Loup City, Nebraska, with approximately $129.8 million in assets was closed. Heritage Bank, Wood River, Nebraska has agreed to assume all deposits (approximately $85.1 million). (PR-20-2009) 

County Bank, Merced, California, with approximately $1.7 billion in assets was closed. Westamerica Bank, San Rafael, California has agreed to assume all deposits (approximately $1.3 billion). (PR-19-2009)

Alliance Bank, Culver City, California, with approximately $1.14 billion in assets and approximately $951.0 million in deposits was closed. California Bank & Trust, San Diego, California has agreed to assume all deposits. (PR-18-2009)

FirstBank Financial Services, McDonough, Georgia, with approximately $337.0 million in assets was closed. Regions Bank, Birmingham, Alabama has agreed to assume all deposits (approximately $279.0 million). (PR-17-2009)

January

Ocala National Bank, Ocala, Florida, with approximately $223.5 million in assets and approximately $205.2 million in deposits, was closed. CenterState Bank of Florida, Winter Haven, Florida has agreed to assume all non-brokered deposits. (PR-14-2009)

Suburban Federal Savings Bank, Crofton, Maryland, with approximately $360.0 million in assets was closed. Bank of Essex, Tappahannock, Virginia has agreed to assume all deposits (approximately $302.0 million). (PR-13-2009)

MagnetBank, Salt Lake City, Utah, with approximately $292.2 million in assets and approximately $282.8 million in deposits was approved for payout by the FDIC Board of Directors. (PR-12-2009)

1st Centennial Bank, Redlands, California, with approximately $803.3 million in assets and approximately $676.9 million in deposits was closed. First California Bank, Westlake Village, California has agreed to assume the non-brokered insured deposits. (PR-7-2009)

Bank of Clark County, Vancouver, Washington, with approximately $446.5 million in assets and approximately $366.5 million in deposits was closed. Umpqua Bank, Roseburg, Oregon has agreed to assume the non-brokered insured deposits. (PR-6-2009)

National Bank of Commerce, Berkeley, Illinois, with approximately $430.9 million in total assets and $402.1 million in total deposits, was closed. In addition to assuming all of the failed bank's deposits, Republic Bank of Chicago, Oak Brook, Illinois agreed to pay a discount of $44.9 million, and will purchase approximately $366.6 million of assets. The FDIC will retain the remaining assets for later disposition. (PR-5-2009)

Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold

Tue Jul 7, 2009 12:21pm EDT

By Stephen Brown

ROME (Reuters) - China, Russia and Brazil will use this week's G8 summit in Italy to push their view that the world needs to start seeking a new global reserve currency as an alternative to the dollar, officials said on Tuesday.

As leaders of the Group of Eight rich nations and the major developing powers traveled to Italy for a three-day summit starting on Wednesday, it seemed unlikely the currency debate would get a specific mention in summit documents.

But both G8 member Russia and emerging power Brazil -- which like China and India is a member of the "G5" that joins the second day of the summit on Thursday -- echoed China's calls for the currency debate to be taken up by world leaders.