News & Current Affairs

March 29, 2009

Biden appeals to G20 protesters

Biden appeals to G20 protesters

Prime Minister Gordon Brown meets US Vice-President Joe Biden (R) in Chile on Saturday 28 March 2009

Joe Biden (right) asked protesters to give G20 leaders a fair hearing

US Vice-President Joe Biden has called for G20 protesters to give governments a chance to tackle the economic crisis.

At a G20 warm-up meeting in Chile, Mr Biden said heads of state would agree proposals to remedy the crisis at next week’s meeting in London.

As they spoke, tens of thousands of protesters marched in the UK capital and in Germany, France and Italy.

US billionaire George Soros told the news the G20 meeting was “make or break” for the world economy.

“Unless they do something for developing world there will be serious collapse in that part of the world,” Mr Soros said.

Massive security operation

At a news conference in Vina del Mar, Mr Biden said he hoped the protesters would give the politicians a chance.

“Hopefully we can make it clear to them that we’re going to walk away from this G20 meeting with some concrete proposals,” he said.

British Prime Minister Gordon Brown said he understood why people were demonstrating in the UK.

“We will respond to [the protest] at the G20 with measures that will help create jobs, stimulate business and get the economy moving,” he said.

But Brazil’s President Luiz Inacio Lula da Silva told the Chile meeting that everyone was suffering from the recklessness of those who had turned the world economy into “a gigantic casino”.

“We are rejecting blind faith in the markets,” he said.

In London on Saturday, demonstrators demanding action on poverty, jobs and climate change called on G20 leaders to pursue a new kind of global justice.

Police estimated 35,000 marchers took part in the event.

A series of rallies are planned for Wednesday and Thursday by a variety of coalitions and groups campaigning on a range of issues from poverty, inequality and jobs, to war, climate change and capitalism.

There have been reports that banks and other financial institutions could be targeted in violent protests.

British officials have put a huge security operation in place.

‘We won’t pay’

Before the London summit, Mr Brown has been visiting a number of countries trying to rally support for his economic plans.

In Chile on Friday he said people should not be “cynical” about what could be achieved at the summit, saying he was optimistic about the likely outcome.

But in an interview, German Chancellor Angela Merkel dampened expectations of a significant breakthrough.

She said one meeting would not be enough to solve the economic crisis and finish building a new structure for global markets.

In Berlin, thousands of protesters took to the streets on Saturday with a message to the G20 leaders: “We won’t pay for your crisis.”

Another march took place in the city of Frankfurt. The demonstrations attracted as many as 20,000 people.

In the Italian capital, Rome, several thousand protesters took to the streets.

In Paris, around 400 demonstrators dumped sand outside the stock exchange to mock supposed island tax havens.

September 7, 2008

US lenders ‘face state takeover’

US lenders ‘face state takeover’

Home repossessed in US

US mortgage giants Freddie Mac and Fannie Mae are set to be put under government control in an attempt to rescue the firms, media reports say.

Treasury Secretary Henry Paulson will outline government plans at a news conference at 1100 (1600 BST).

The move to shore up the shareholder-owned firms, which hold or guarantee half the US mortgage debt, would be the US’s largest ever financial bail-out.

In July, Congress approved a plan aimed

at offering them more liquidity.

This followed huge losses by the two firms as result of a big increase in defaults and repossessions in the US housing market.

‘Management told’

On Saturday, a senior politician, Barney Frank, chairman of the House Financial Services Committee, said US Treasury Secretary Henry Paulson had told him the government would use its powers to ensure the continued and stable functioning of the companies.

The Washington Post, quoting senior administration sources, said the firms would be put under a legal status known as “conservatorship” which would greatly reduce the value of the two companies’ common stock.

BBC Business Editor Robert Peston
This is an event of profound significance for the global economy
BBC Business Editor Robert Peston

Other securities – including company debt and preferred shares – would be guaranteed by the government, the paper added.

The New York Times reported that senior executives at Freddie Mac and Fannie Mae were informed about the plan on Friday.

The Wall Street Journal said it would include changes in the top management.

There would also be quarterly infusions of cash to keep both firms afloat, the papers say. The total cost to taxpayers is not known but could amount to billions of dollars, they add.

The government was being forced to step in because it was dangerous for the US economy for doubts to persist about the two firms’ viability.

Struggling homeowners

HAVE YOUR SAY

Government control over larger portions of the economy can only end badly

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The two contenders for the US presidency, Barack Obama and John McCain, have been briefed on the takeover by Mr Paulson.

“We’ve got to keep people in their homes,” said the Republican candidate, John McCain.

“There’s got to be restructuring, there’s got to be reorganisation, and there’s got to be some confidence that we’ve stopped this downward spiral,” he added, saying that the takeover of Fannie Mae and Freddie Mac must not benefit executives at the two companies.

The Democratic Party candidate, Barack Obama, said any action should be focused “on whether it will strengthen our economy and help struggling homeowners”.

“We must not allow government intervention to protect investors and speculators who relied on the government to reap massive profits,” he said, adding “we must protect taxpayers, not bail out the shareholders and management of Fannie Mae and Freddie Mac”.

Fragile

On Friday, America’s Mortgage Bankers Association reported that at the end of June, about four million homeowners with a mortgage – representing a record 9% – either were behind in their payments or faced repossession.

In the past year, the financial crisis has taken a heavy toll on both Fannie Mae and Freddie Mac.

The country’s two largest buyers and backers of mortgages lost a combined $3.1bn between April and June.

Both companies say they have the resources to weather the losses, but their shares have fallen sharply on fears that they could go bankrupt as borrowers default.

The rescue plan passed by Congress in July gave the US government the authority to buy shares and offer liquidity to companies to keep them afloat.

Many analysts believe their collapse would be a major shock to the already fragile global financial system.

Together, the two firms own or guarantee about $5.3 trillion worth of home loans – about half the outstanding mortgages in the US.

That is about 25 times as big as the obligations of Northern Rock – which was nationalised by the UK government earlier this year, and twice the size of the UK economy.

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