Capital markets with a conscience

THE old debate about whether, or to what extent, financial markets are a force for social good has taken on a new urgency in the aftermath of last year’s market meltdown. Plunging the world into recession is, after all, as clear an example as any of anti-social behaviour. As around 800 people gather in San Francisco this week at the SOCAP09 conference, to map out the future of what they call “social capital markets”, they have the wind at their backs.

The first SOCAP conference took place in the middle of the meltdown a year ago. There was a surge of registrations in the days after the collapse of Lehman Brothers, as some people disgusted by the traditional capital markets, and others who had lost their jobs and sought a new outlet for their skills, decided that social capital markets were worth a look. The event proved long on optimism but rather short on coherence. A year on, the thinking is more rigorous—if no less idealistic—and is increasingly being put into practice.
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Indian economy continues to grow

India’s economy grew 6.1% in the second three months of the year compared with the same period last year, which was slightly better than had been expected.

The official gross domestic product figure was down from the 7.8% growth seen in the second quarter of 2008.

Although growth has slowed from last year, the economy is still expanding faster than most other countries.

Indian economists said weakness in agriculture could be offset by growth in manufacturing later in the year.
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Japan’s Exports Tumbled 35.7% in July Amid Weak Global Demand

Aug. 26 (Bloomberg) — Japan’s exports fell for a tenth straight month in July as demand from all of the nation’s major markets deteriorated.

Shipments abroad tumbled 36.5 percent from a year earlier, steeper than June’s 35.7 percent drop, the Finance Ministry said today in Tokyo. The median estimate of 23 economists surveyed by Bloomberg News was for a 38.4 percent decrease.

Manufacturers are still reeling from plunging sales of cars and electronics even as the economy emerges from its worst postwar recession. Toyota Motor Corp., Japan’s largest carmaker, said today it will cut domestic production by 220,000 vehicles.
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US deficit to soar towards $1.6tn

The US budget deficit will soar to almost $1.6 trillion (£978bn) this year, the highest on record, both the White House and Congress have warned.

Fuelled by President Obama’s $787bn stimulus package and reduced tax revenues due to the recession, it compares with a $455bn deficit in 2008.

The White House says the deficit will grow further, predicting it will hit a cumulative $9tn from 2010-2019.

However, it continues to expect the US economy to start to recover this year.

The White House expects US unemployment to pass 10% this year, before slowly declining in 2010. The most recent official figures showed the rate at 9.4% in July.
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Whatever Happened to Buying American?

The cash for clunkers program turbo-boosted auto sales — just not for Detroit.

When Julia Reusch of Blue Bell, Pa., decided to trade in her 1999 Ford Explorer as part of the cash-for-clunkers program, she nixed the idea of purchasing another Ford product. “I didn’t feel compelled to buy American, given my experience with the Ford,” says the 28-year-old who noted that her Explorer was problematic even when it was new. Instead, she opted for a Toyota Prius. After only a week, she’s hooked. “It’s wonderful. I love it,” she says.

That’s great news for Toyota, but it’s hardly the kind of sentiment Detroit’s automakers were banking on when the clunkers program launched at the end of July. The program was originally designed to boost the economy in general and the nation’s auto industry in particular. But the latest Department of Transportation statistics, released last week, show that American cars represented a total of 42 percent of vehicles purchased under the $3 billion U.S. government-funded program. Only two U.S. models–the Ford Focus and Ford Escape–were among the top 10 cars sold; Toyota and Honda together hold six of those spots. Even though final sales data isn’t yet available, those figures are unlikely to change much now that the program is set to end on Monday, Aug. 24.
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US agrees Swiss tax deal over UBS

The US and Switzerland have signed an agreement designed to end a tax evasion dispute surrounding UBS’s US customers.

The Swiss banking giant will now give the US tax authorities the details of 4,450 accounts, US officials said.

Internal Revenue Service Commissioner Doug Shulman said the accounts held $18bn in assets at one time, and many have since been closed.

Hours after the deal was agreed the Swiss government said it was putting its 9% stake in UBS up for sale.
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Unemployment Spike Compounds Foreclosure Crisis

The country’s growing unemployment is overtaking subprime mortgages as the main driver of foreclosures, according to bankers and economists, threatening to send even higher the number of borrowers who will lose their homes and making the foreclosure crisis far more complicated to unwind.

Economists estimate that 1.8 million borrowers will lose their homes this year, up from 1.4 million last year, according to Moody’s Economy.com. And the government, which has already committed billions of dollars to foreclosure-prevention efforts, has found it far more difficult to help people who have lost their paychecks than those whose mortgage payments became unaffordable because of an interest-rate increase.

“It’s a much harder nut to crack, unemployment,” said Mark A. Calabria, director of financial regulation studies at the Cato Institute. “It’s much easier to bash lenders than to create jobs.”
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Japan emerges from recession

TOKYO, Japan (CNN) — Japan has joined the growing number of major economies that are back in black.

Japan’s economy grew 3.7 percent on an annualized basis from April to June this year, the first time the world’s second largest economy has seen positive growth in 15 months.

The announcement of preliminary figures by Japan’s Cabinet Office comes after France and Germany surprised economists last week by posting 0.3 percent growth for the second quarter of the year.

The news that Japan has rebounded — the hardest hit of the major economies because of its reliance on exports — gives economists cautious optimism that the worst of the global recession is over.
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Japan economy set to show growth

Japan’s economy is tipped to show growth for the three months to June, after showing four consecutive quarter-on-quarter contractions.

Analysts predict growth of 1% during the quarter, after shrinkage of 3.8% in the previous three-month period.

The data, released on Monday, could mean the recession is over in Japan.

Recent figures have shown other nations are also coming out of the recession, including Germany, France and Hong Kong, a sign the slowdown is easing.
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Colonial BancGroup, 4 Other Banks Shut

Regulators on Friday shut down Colonial BancGroup Inc., a lender in real estate development, in the biggest U.S. bank failure this year, and also closed four banks in Arizona, Nevada and Pennsylvania.

The closures boosted to 77 the number of federally insured banks that have failed in 2009.

The Federal Deposit Insurance Corp. was appointed receiver of the banks: Montgomery, Ala.-based Colonial, with about $25 billion in assets; Community Bank of Arizona, based in Phoenix; Union Bank, based in Gilbert, Ariz.; Community Bank of Nevada, based in Las Vegas; and Dwelling House Savings and Loan Association, located in Pittsburgh.
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