Fed`s Yellen: slow recovery to start in late 2009

(YELLEN, INFLATION, SEVERAL, YEARS, ECONOMY, MARKET)

By Ros Krasny
SAN FRANCISCO (Reuters) - The recession is likely to end later in 2009, ushering in a "frustratingly slow" recovery marked by continued high unemployment, a top Federal Reserve official said on Tuesday.
Janet Yellen, president of the San Francisco Fed, looked for inflation to stay low for several years, and hinted that the central bank should be in no hurry to raise interest rates even once growth turns positive.
"I am not optimistic that the economy will spring back to normal anytime soon," Yellen told the Commonwealth Club of California in San Francisco.
The U.S. jobless rate is likely to rise from its current level, and it could take several years to return to full employment, Yellen said -- a period that could intensify downward pressure on wages and prices.
In her first extended remarks on the economy since early May, Yellen said that undesirably low inflation was the biggest issue on the medium-term horizon.
"I`ll put my cards on the table right away. I think the predominant risk is that inflation will be too low, not too high, over the next several years," she said.
"I expect core inflation will dip to about 1 percent over the next year and remain below 2 percent for several years."
Further, "if the economy fails to recover soon, it is conceivable that this very low inflation could turn into outright deflation." Still, Yellen said the risk of a "devastating spiral" of deflation was unlikely.
Yellen is a voting member of the Federal Open Market Committee in 2009.
The FOMC lowered its benchmark lending rate to a range of zero to 0.25 percent in December in an attempt to shore up the economy.
Financial markets assess a reasonable chance the Fed will start to raise rates by late 2009 or early 2010, but seem to be at odds with Yellen`s focus on deflation.
The Fed "certainly has the means to unwind the stimulus when the time is right," she said, adding that many of the bank`s special credit programs are tapering off as market conditions improve.
Even so, "I`m more concerned that we will be tempted to tighten policy too soon, thereby aborting recovery," Yellen said, citing the notorious blunders of the Fed committed in the 1930s.
"I do not believe that there is a real threat of high inflation in the current situation."
She said financial markets continued to show more confidence after a time when the Fed`s programs succeeded "in averting a full-blown meltdown."  Continued...
Original article

Crisis far from over: World Bank chief

(WORLD, ZOELLICK, MARKETS, DEVELOPING, COUNTRIES, THERE)

By Lesley Wroughton
WASHINGTON (Reuters) - World Bank President Robert Zoellick said on Tuesday that financial markets are showing signs of stabilization, but warned that the global crisis was far from over in developing countries.
Speaking to reporters ahead of a meeting of finance ministers from Latin America, Zoellick said developing countries were only now feeling the full force of the global economic and financial crisis, which could quickly return to advanced economies where it began.
He said demand for World Bank financing was high and growing as credit markets remained shut to many developing market clients.
"There seems some opportunities for improvement on the financial market side, but there is still great uncertainty about the scope and timing of recovery," Zoellick told reporters on a conference call
"There are risks that could threaten the turnaround and I have emphasized the world needs to recognize that dangers will come in waves," he said. Zoellick was speaking ahead of a meeting of finance ministers from Latin America in Chile on July 2.
"A number of developing countries remain under significant stress," he added.
Zoellick said the strength of the recovery and the potential for setbacks depends a lot on how policy-makers cope with risks, including in banking systems, protectionism and financing of rollover debt of private-sector companies.
The World Bank estimated in March that well over $1 trillion in emerging market corporate debt and $2-3 trillion in total emerging market debt will mature in 2009, the majority of which reflects claims of major global banks extended across borders or through affiliates in emerging markets.
Zoellick said developing countries faced a total financing shortfall in the range of $350 billion to $635 billion, of which $178 is in Latin America.
He said demand for financing from the World Bank was increasing in part because developed countries have guaranteed so much debt that it is crowding out "good developing country" debt.
"Even if they can go to the markets and go sometimes to their domestic markets, it will crowd out their private sector," Zoellick said, "So, I remain quite cautious about the overall state of the recovery. I don`t think we`re remotely through this.
"We remain in a situation where we have to be very alert to dangers because there are significant risks out there, and we are finding that the demand for our resources from all of our different instruments ... remains high and growing," he added.
Zoellick said he would discuss with Latin American finance ministers ways to bolster the World Bank`s capital base. This could include possible early replenishment of money for the Bank`s facility that provides low-cost loans and grants to 78 of the world`s poorest countries, 39 of which are in Africa.
(Reporting by Lesley Wroughton; Editing by Dan Grebler)
Original article

Bank of America accused of anti-consumer practices

(CONSUMER, AMERICA, THEIR, WORKERS, CUSTOMERS, COMPLAINED)

By Jonathan Stempel
NEW YORK (Reuters) - Consumer and labor groups demanded Bank of America Corp and other lenders reform their sales practices so that workers under pressure to meet sales quotas do not saddle customers with costly and unnecessary products.
The whistleblowing campaign was announced Tuesday as the U.S. Treasury Department unveiled legislation to create a Consumer Financial Protection Agency, as part of the Obama administration financial regulation overhaul.
People, who said they were former Bank of America employees, alleged that their supervisors drove them to burden consumers with needless debt and fees, to fatten the bank`s earnings and the paychecks of senior executives, and threatened to retaliate if they complained. Some complained their salaries had been too low and that they had to hit quotas to earn needed bonuses.
"This is the kind of information that really needs to get out," said Representative Keith Ellison, a Minnesota Democrat who sits on the House Financial Services Committee. "Without a strong whistleblower law, we simply are not doing the things we need to do in order to manage risk properly."
He suggested that lending standards could be compromised by "the urgency to sell, sell, sell, sell, sell."
Groups conducting the campaign include the Service Employees International Union, which is trying to organize Bank of America workers; the National Association of Consumer Advocates, and the U.S. Public Interest Research Group.
Bank of America spokeswoman Anne Pace rejected the allegations, saying the SEIU misrepresented the largest U.S. bank`s relationship with its customers and associates.
She said the Charlotte, North Carolina-based bank is "pro-associate and believes that managers are well-equipped to respond to associates` needs," and is committed to ensuring that customer fees are "transparent and predictable."
Christopher Feener, who said he used to work in the bank`s credit card unit, was among the former workers who spoke out.
He complained that the bank regularly violated the Fair Debt Collection Practices Act, and sometimes pushed workers to falsely threaten legal action against customers. He said his team was sometimes pushed to call customers` neighbors about delinquent accounts, "to embarrass the customer and actually encourage the neighbor to bring over a message."
Shares of Bank of America rose 5 cents to $13.24 in early afternoon trading on the New York Stock Exchange.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)
Original article

Soros predicts "stop-go" economy and higher rates

(SOROS, RATES, MARKETS, BUBBLE, REGULATORS, GOVERNMENT)

By Joseph A. Giannone and Jennifer Ablan
NEW YORK (Reuters) - Billionaire investor George Soros on Tuesday predicted a "stop-go" economy for the United States, saying fears of inflation will drive up interest rates and choke off growth.
Soros, one of the world`s most successful hedge fund managers who was speaking at a breakfast hosted by the Wall Street Journal, said borrowing costs are the major headwinds for the economy.
"As markets revive, fear of inflation will drive up interest rates, which will choke off recovery," he said.
Rising U.S. Treasury yields have driven mortgage rates back up, threatening a recovery in the housing market and a refinancing boom that has helped preserve the still-fragile health of recession-weary households and the banks that lend to them.
The rise in bond yields and mortgage rates may also act to check the huge recent rally in global stock markets of the past three months, with the Federal Reserve trying to end an 18-month recession and yet not spur inflation.
Soros went back into retirement earlier this year after leading his self-named firm through the 2008 crisis. He made about $1.1 billion last year, according to Institutional Investor`s Alpha Magazine.
SOROS ON `SUPER BUBBLE`
Soros, who made his fortune targeting currencies in tightly controlled markets, said international financial markets need global regulation, even while being critical of regulators and calling for minimal government intervention.
"The idea of self-correcting markets is a misconception," he said. What governments need to do, he said, is recognize they cannot prevent bubbles but instead try to control them from getting bigger.
"You cannot prevent bubbles from forming but prevent them from self-reinforcement," Soros said.
Soros, who has retired from active fund management, acknowledged that getting regulation right is not easy as he argued both for and against stricter supervision.
"The regulators will always be wrong," he said. "They should interfere as little as possible."
Regulators, he said, typically try to control money supply and then let free markets take care of everything else, but that is a fallacy.
By the same token, Soros said that efforts by regulators and governments to stop bubbles bursting for more than 25 years gave rise to the most recent "super bubble."
Soros cautioned that the U.S. government may be making some serious missteps in dealing with the current credit crunch and recession. Massive stimulus spending and bank bailouts have pumped up the U.S. government`s own balance sheet.  Continued...
Original article

AIG says risk declining, new CEO likely soon

(GOVERNMENT, STAKE, WHICH, MEETING, LIDDY, COMPANY)

By Lilla Zuill and Paritosh Bansal
NEW YORK (Reuters) - American International Group Inc`s (AIG.N) chief executive said the government may never relinquish its 79.9 percent stake in the insurer, which has been rescued by $180 billion of federal bailouts.
Speaking at AIG`s annual meeting on Tuesday, CEO Edward Liddy nevertheless expressed optimism the insurer will be able to repay government loans as it tries to rebound from punishing losses tied to derivatives.
AIG lost $99 billion last year, largely because of its exposure to credit default swaps, and has been pilloried for bonuses awarded in its financial products unit, the source of much of its losses.
The bailouts have left the government with a 79.9 percent stake in the company, which is trying to sell assets to help repay $83 billion of government loans.
"I can give you no assurances that it will ever change," Liddy, installed as AIG`s chief executive by the government last September, said of the government stake. But he said there was "an excellent chance" the government will be repaid.
Last week, AIG said it planned to give the Federal Reserve Bank of New York stakes in two large life insurance units and eventually spin those units off, reducing debt to the government by about $25 billion.
On Tuesday, the company said it would sell its credit card business in Taiwan to Far Eastern International Bank. Liddy said AIG is trying to decide what to do with its aircraft leasing unit, International Lease Finance Corp.
Liddy said the financial products unit has nearly halved its derivatives exposure, to $1.4 trillion from $2.7 trillion, and by year-end "our risk will have been reduced substantially from its current status."
Shares of AIG, once the world`s largest insurer by market value, have traded below $2 nearly all year. In morning trading they were down 20 cents at $1.13.
RATS FLEEING SINKING SHIP
AIG held its annual meeting in a company building next door to its Wall Street headquarters, both of which it is selling.
It was the first public opportunity for shareholders to vent frustration since AIG`s financial implosion.
Even so, fewer than 200 people attended, a far lower number than a year earlier, and the meeting lasted less than an hour.
All of the company`s proposals were approved, except for one relating to the number of authorized shares; all shareholder proposals were rejected.
AIG had delayed its annual meeting, usually held in May, to give it more time to shuffle its board, which has been almost entirely reconstituted over the last year.  Continued...
Original article

Treasury sets wide scope for new consumer agency

(TREASURY, AGENCY, CONSUMER, PROTECTION, FINANCIAL, PRACTICES)

WASHINGTON (Reuters) - The U.S. Treasury on Tuesday sent Congress proposed legislation to create a new regulatory agency with sweeping powers to write and enforce tough new consumer protection rules for banks and other financial institutions.
The legislative language fleshes out plans for widespread changes to U.S. financial regulations the Obama administration released on June 17.
The proposed Consumer Financial Protection Agency aims to protect Americans from abusive practices widely employed during the recent housing and credit boom, such as deceptive and undocumented mortgage lending, poor loan disclosures, and unfair interest rate increases and "fee traps" on credit cards.
The Treasury`s proposal would consolidate consumer protection power in a single agency, giving the CFPA exclusive supervisory and examination authority for consumer compliance among banking institutions.
These responsibilities are now split among several agencies, including the Federal Reserve, which has taken criticism for failing to impose tougher restrictions on mortgage lenders.
"Consumer protection will have an impendent seat at the table in our regulatory system. By consolidating accountability in one place, we will reduce gaps in federal supervision and enforcement," U.S. Treasury Secretary Timothy Geithner said in a statement.
The new agency will have powers to write rules and enforce them, and can issue subpoenas, hold hearings and seek court orders to halt abusive practices for both banks and non-banks -- including mortgage lenders, which often fell through regulatory gaps in the current structure.
The Treasury said the agency could impose new rules on montage brokers to eliminate conflicts of interest and promote best practices, and ban unfair practices such as "yield spread premiums" -- side payments from lenders to brokers to push consumers into higher priced loans.
(Reporting by David Lawder; Editing by Padraic Cassidy)
Original article

Credit card industry to remain lucrative: study

(ANALYSTS, FINANCIAL, BANKS, CREDIT, INDUSTRY, INTERCHANGE, EXPRESS)

(Reuters) - The credit card industry will continue to provide one of the most lucrative returns of the asset classes within banks` portfolios even after new U.S. credit card rules are put in place, analysts at Keefe, Bruyette and Woods said.
Congress is mulling regulations on interchange rates -- fees retailers and merchants have to pay to banks that issue credit cards. The legislation would give merchants and retailers more power to negotiate interchange fees with banks.
Analysts Sanjay Sakhrani and Steven Kwok said they expect the industry to be "somewhat smaller" and "less profitable" after the new card laws, but added that lack of growth opportunities in the industry post cycle could drive M&A once banks are better capitalized.
The analysts said Visa Inc (V.N) and MasterCard (MA.N), which do not charge interchange fees, are least directly exposed to the regulations, followed by American Express Co (AXP.N) and Discover Financial Services (DFS.N).
Capital One Financial Corp (COF.N) is relatively more exposed given its reliance on fee income, but will adjust and may even be able to find growth opportunities in the prime segment, they added.
Stocks of credit card issuing companies have risen about 150 percent in the second quarter and have outperformed the industry, despite challenges, KBW analysts` noted.
The brokerage raised Discover Financial Services to "outperform" from "market perform," saying it was a stock to own both based on value and near-term prospects, and increased its price targets on American Express and Capital One Financial.
(Reporting by Archana Shankar in Bangalore; Editing by Aradhana Aravindan)
Original article

JPMorgan CEO warns against too many regulators

CHICAGO (Reuters) - Too many regulators will only increase costs and reduce credit opportunities for consumers, JPMorgan Chase & Co Chief Executive Jamie Dimon warned in a column he wrote in Saturday`s Wall Street Journal.
While praising President Barack Obama`s efforts to reform the U.S. financial system, Dimon said the emphasis should be on strengthening existing regulators over creating new ones.
"Any regulatory overhaul should ensure that governmental oversight of the financial system is efficient," wrote Dimon, who is widely regarded as the top banker to have been least tarnished by the financial crisis. "We should avoid the temptation to have multiple regulators just for the sake of having them.
"Three or four different regulators all looking at (and fighting over) the same issue is not a wise use of taxpayer money," he said. "Companies can`t operate that way. Neither should the government."
Obama last week unveiled a sweeping package of reforms to rewrite the rules for banks and capital markets in response to a severe financial crisis that has dragged down economies worldwide for more than a year.
Dimon said he supports the creation of a single bank regulator, a move he said was long overdue.
Another major Obama goal is to do more to protect consumers by transferring consumer protection dealing with mortgages, credit cards, payday loans and other financial products out of 10 agencies and into a new agency.
Dimon agreed with the need to boost consumer protection but warned regulators must be careful.
"Before creating an entirely new federal bureaucracy, policy makers should first examine ways to strengthen and refocus the authority of existing regulators," he wrote. "Creating duplicative and overlapping functions could increase costs and reduce credit opportunities for the consumers we are trying to protect."
A key catalyst for the financial crisis has been the enormous amount of debt shouldered by Americans during a real estate bubble fueled by subprime mortgages that many borrowers could not afford or understand.
As defaults and foreclosures rose last year, exotic financial instruments backed by shaky mortgages broke down and the capital markets froze for a time amid uncertainty about the condition of banks` balance sheets.
The combined effects helped drag the United States into recession.
Dimon said financial institutions need to clean up their act and earn back the public`s trust.
"Company leadership must foster a culture within their institutions that focuses on integrity, strong execution, quality products, long-term value creation and doing the right thing," he wrote.
"Golden parachutes, special contracts, and unreasonable perks must disappear."
(Reporting by Ben Klayman; Editing by Bill Trott)
Original article

U.S. commercial banks see record Q1 trading revenue

NEW YORK (Reuters) - U.S. commercial banks reported record trading revenue in the first quarter of 2009, benefiting from wide trading margins and gains from interest rate products, the Office of the Comptroller of the Currency said on Friday.
Banks generated a record $9.8 billion in revenue from trading derivatives and cash instruments, compared with a loss of $9.2 billion in the fourth quarter of 2008, the OCC said.
Interest rate products, including derivatives, generated the strongest revenue, rising to a record $9.1 billion, compared with a $3.4 billion loss in the previous quarter, the OCC said. Credit trading was the only asset class to generate a loss, of $3.2 billion, trimmed from a fourth-quarter loss of $8.9 billion.
Foreign exchange revenue fell to $2.4 billion from $4.1 billion in the fourth quarter, while equity trading generated $1 billion in trading revenue compared to a fourth quarter loss of $1.2 billion, the OCC said.
Trading revenue were boosted as banks wrote down fewer losses from bad loans and recorded the declining value of their debt as a liability. Banks can book the deteriorating value of their own debt as trading revenue.
"While trading performance was strong even without the liability value changes, this source did add materially to first quarter trading performance," the OCC said.
Notional volumes in all derivatives markets increased by $1.6 trillion in the quarter to $202 trillion, as more derivative contracts were recorded by commercial banks that had formerly been investment banks.
The notional volume does not represent the actual amount of risk as it includes a number of trades that offset each other. Eighty-nine percent of derivatives exposures at commercial banks were eradicated from netting positions in the first quarter, the OCC said.
LARGEST BANKS
JPMorgan Chase & Co(JPM.N), Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N), Citigroup (C.N) and HSBC Bank USA, part of HSBC Holdings (HSBA.L), have the largest derivatives exposures of U.S. commercial banks and account for 96 percent of total exposures, the OCC said.
As of March 31, their notional derivative exposures stood at $81.2 trillion, $39.9 trillion, $38.9 trillion, $29.6 trillion and $3.5 trillion, respectively.
Of these banks, Goldman had by far the largest credit exposure relative to its risk-based capital, at 1,048 percent, the OCC said. HSBC, JPMorgan, Citibank and Bank of America`s ratios stood at 475 percent, 323 percent, 216 percent and 169 percent, respectively.
Goldman also got the largest overall boost from derivatives and cash trading revenue, which represented 69 percent of the bank`s gross revenue in the quarter, the OCC said.
Trading revenue for JPMorgan represented 13 percent of its gross revenue and contributed 8 percent of both Citigroup and Bank of America`s gross revenues. HSBC Bank USA`s gross revenue lost 4 percent from trading revenue.
JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley (MS.N) and Citigroup had the largest derivative exposures of all holding companies, at $81.1 trillion, $77.9 trillion, $47.7 trillion, $39.1 trillion and $31.7 trillion, respectively.
(Reporting by Karen Brettell; Editing by Padraic Cassidy)
Original article

Capital markets save dealmakers` fees as M&A wilts

By Douwe Miedema and Jessica Hall
LONDON/NEW YORK (Reuters) - Dealmakers saw business pick up again in the second quarter as they helped companies raise cash in capital markets, but lucrative mergers and acquisitions (M&A) languished.
Worldwide combined capital markets and M&A fees rose for the first time in a year, Thomson Reuters data showed on Friday, up 29 percent from the first quarter, with share sales -- such as rights offerings -- the most buoyant.
"There`s a shift away from banks being the sole capital source for growth. There are fewer banks in the world and they have less money," David Fass, head of global banking at Deutsche Bank, told Reuters.
Banks are hesitant to lend after the credit crunch depleted their treasure chests, and cash-hungry companies are instead selling bonds and shares to rebuild their balance sheets, refinance maturing debt, or expand.
The year has seen mammoth bond sales to fund mergers, with Pfizer Inc raising more than $23 billion for its purchase of Wyeth, after Roche sold $30 billion in bonds to help buy Genentech.
Banks have embarked on massive rights issues to refill their coffers, with HSBC`s $19 billion share sale in April topping the table of large deals, the second-largest rights issue of all time, according to the data.
"Markets for capital raising have been extremely active, you have seen equity balance sheet repair for the financial sector and increasingly the corporate sector," Enrico Bombieri, head of European investment banking at JP Morgan Chase & Co, said at a media briefing this month.
JP Morgan benefited most from the surge in capital market transactions, topping first-half global league tables in equity capital markets, bonds and syndicated loans.
From underwriting 166 equity issues, the bank earned an estimated $1 billion in fees.
NO MORE LOANS
Global mergers and acquisitions saw the steepest decline since 2001, the data showed, dropping 44.5 percent in the first half of the year from the year-ago period, with companies wary to take on more risk and funding scarce.
Morgan Stanley took the lead in both global and U.S. M&A advisory work, edging aside Goldman Sachs Group Inc in the first half of the year.
Part of the weak deal flow is that banks can no longer support these deals with loans, scared that the recession will cause more bad loans and further toxic assets may come to light, prompting them to reduce their debt levels.
Significantly, syndicated loans -- traditionally the first point of call for acquisition funding in Europe -- all but dried up, hitting their lowest volume in 13 years and dropping 58 percent from the year-ago period.
"Europe has traditionally been a bank-financed market ... fundamentally we`re seeing a shift away from the loan market to the capital markets," Viswas Raghavan, JP Morgan head of international capital markets, said at the briefing.  Continued...
Original article

Lear prepared to file for bankruptcy next week: report

DETROIT (Reuters) - Auto parts supplier Lear Corp (LEA.N) is preparing to file for bankruptcy as soon as next week, the Wall Street Journal reported on Thursday, citing people familiar with the matter.
The news comes as Lear faces a June 30 window, through which its lenders have agreed to waive the existing defaults under its primary credit facility.
Lear, which warned in March it might have to file for bankruptcy, has been exploring alternatives to restructure its debt outside of bankruptcy over the past months.
Lear spokesman Mel Stephens declined to comment.
The Journal reported that Lear had been in talks with banks in recent days for debtor-in-possession loans, the funding companies typically use to finance their stays in bankruptcy court. JPMorgan Chase (JPM.N) and Citigroup (C.N) will provide the bulk of the loan, according to the report.
Shares of Lear closed down 39 percent, or 34 cents, at 54 cents on the New York Stock Exchange before the news.
Southfield, Michigan-based Lear was in breach of its leverage covenants at the end of 2008 after borrowing all of the $1.2 billion available to it under the primary credit facility during the fourth quarter.
It had $3.5 billion of outstanding debt at the end of 2008, according to a filing with the Securities and Exchange Commission.
Lear, which makes seating and electrical equipment for vehicles, has suffered because of steep production cuts by General Motors Corp (GMGMQ.PK) and Ford Motor Co (F.N), which accounted for 42 percent of its global revenue in 2008.
U.S. auto sales fell 36.5 percent in the first five months of 2009 to their lowest level in nearly three decades.
The U.S. auto parts sector, already teetering on the brink of failure, has come under further pressure after Chrysler shut down nearly all of its production for the duration of its bankruptcy reorganization.
GM, which filed for bankruptcy on June 1, has also idled 13 assembly plants in North America for as long as nine weeks starting in mid-May.
(Reporting by Soyoung Kim; Editing Bernard Orr)
Original article

AIG to spin off two units, cut government debt

NEW YORK (Reuters) - American International Group Inc (AIG.N), which received $180 billion of taxpayer bailouts, said it will give the government stakes in two big life insurance units that it plans to spin off.
The embattled insurer said on Thursday it will put the equity of the units, American International Assurance Co (AIA) and American Life Insurance Co (ALICO), into special purpose vehicles, preparing both for initial public offerings.
The Federal Reserve Bank of New York will receive "preferred stakes" of $16 billion in AIA and $9 billion in ALICO, it said.
The transactions will reduce AIG`s debt to the Fed under a credit facility to $15 billion from $40 billion, it said.
Edward Liddy, AIG`s chief executive, said the agreement with the New York Fed "represents a major step toward repaying taxpayers and preserving the value of AIA and ALICO."
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and ALICO transactions are expected to close in the second half of 2009, pending regulatory approvals.
ALICO operates in more than 50 countries but generates more than half its revenue in Japan.
Once the world`s largest insurer by market value, AIG nearly collapsed last year because of soaring losses from credit default swaps, as customers who bought debt protection from the company`s financial products unit boosted their demands for collateral.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts, including roughly $85 billion of loans.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Liddy, a former chief executive at Allstate Corp (ALL.N), last month announced plans to step down as AIG CEO, saying he had planned for his stay to be temporary. He said at the time it might take several years for AIG to repay taxpayers.
AIG shares closed Wednesday at $1.42 on the New York Stock Exchange.
(Reporting by Jonathan Stempel in New York and Sweta Singh in Bangalore; Editing by Dinesh Nair and John Wallace)
Original article

Lennar loss wider than estimates

(Reuters) - U.S. homebuilder Lennar Corp (LEN.N) posted a wider-than-expected quarterly loss, weighed by falling home deliveries and average home prices, even as the housing market experienced an uptick in new home sales.
"While we are sensing pent-up demand in the market, rising unemployment, increased foreclosures and tighter credit standards continue to present challenges for the industry...," Chief Executive Stuart Miller said in a statement.
This combined with a recent spike in mortgage rates has made it difficult to predict when the market will ultimately turn the corner, he added.
Second-quarter loss was $125.2 million, or 76 cents a share, compared with a loss of $120.9 million, or 76 cents a share a year ago. Revenue fell 21 percent to $891.9 million.
On a comparable basis, analysts were looking for a loss of 70 cents a share on revenue of $599.5 million, according to Reuters Estimates.
The quarterly loss included charges of 38 cents a share related to valuation adjustments and other write-offs, and 27 cents a share on a non-cash deferred tax asset valuation allowance, Lennar said.
New home deliveries fell 16 percent, excluding unconsolidated entities, while average sales price of homes delivered fell 8 percent during the quarter, the company said.
Cancellation rate fell to 15 percent from 22 percent a year ago.
The company ended the quarter with $1.4 billion in cash, helped by cutting down its completed, unsold inventory by 53 percent to 626 homes at February 28.
Lennar shares were down 2 percent at $7.66 in trading before the bell. They had closed at $7.82 Wednesday on the New York Stock Exchange.
(Reporting by Dhanya Ann Thoppil in Bangalore; Editing by Anil D`Silva, Himani Sarkar)
Original article

China influence to grow faster than most expect: Soros

By Edmund Klamann
SHANGHAI (Reuters) - Financier George Soros said on Sunday that China's global influence is set to grow faster than most people expect, with its isolation from the global financial system and a heavy state role in banking aiding a relatively swift economic recovery.
He reiterated his cautious views regarding the surge in global stock markets, although he said it may have further to go given liquidity in the markets and that many investors are still sitting on the sidelines.
"In many ways, Chinese banking has benefited from being isolated from the rest of the world and is in better shape than the international banking system," he told an audience at Shanghai's Fudan University.
China's extensive capital controls have helped to shield its financial institutions from the worst of the global financial crisis.
"The influence of the state is also greater. So when the government says 'lend', banks lend," Soros added. "This puts China in a better position to recover from the recession and that is in fact what has happened."New loans by Chinese banks surged to record levels in the first quarter, spurring optimism over recovery prospects for the world's third-largest economy.
POSITIVE FORCE
"China is going to be a positive force in the world and the market, and as a consequence, its power and influence are likely to grow. Personally, I believe it's going to grow faster than most people currently expect," Soros said.
He acknowledged that some doubts remain over China's economic recovery, however, noting data such as a continued fall in electricity consumption.
He also noted that China's aggressive 4 trillion yuan ($586 billion) economic stimulus program, announced last year, had bolstered the economy.
"If that program proves inadequate, it is in a position to apply additional stimulus. China is also in a position to foster a revival of its exports by extending credit and investing abroad," he said.
He reiterated his view that because China's economy is only one-quarter the size of the U.S. economy, it cannot replace the American consumer as the motor of the global economy, so global growth will be slower than in the past.
He sounded a more upbeat note for China's asset markets than for global markets overall, where he remained wary.
"I'm pretty cautious. Even though I've said prices are cheap, I'm not so optimistic as to put all my money into stocks or assets because I think that the outlook is fairly uncertain.
"I do, however, think that the Chinese economy is a promising economy. I think here it is more a matter of finding the right assets rather than saying that I'm not interested in investing." Continued...
Source: Reuters