Jun 11th 2009
From The Economist print edition
A significant point was reached in the American Treasury’s bank-rescue plan when it let ten financial companies repay a combined total of $68 billion in loans they had received under the Troubled Asset Relief Programme. The ten include JPMorgan Chase, Goldman Sachs, Morgan Stanley and American Express. Timothy Geithner, the treasury secretary, said the repayments were encouraging, but warned that the crisis in the banking industry was not over yet.
Citigroup (which was not among the ten) launched a capital-raising scheme in which it will convert $58 billion in preferred stock to common equity. The share exchange was put forward in February as part of Citi’s third bail-out. It is rumoured that the offer was delayed because of growing unease at the Federal Deposit Insurance Corporation, a regulator, with Citi’s management.
Lloyds Banking Group repaid £2.3 billion ($3.8 billion) of the money it received from the British Treasury after raising funds through an open offer of shares. Lloyds meanwhile continued its restructuring process, and said its Cheltenham & Gloucester-branded bank branches would close.
The Obama administration laid out proposals on executive pay, but said it would not seek caps on salaries. It also appointed a “special master” to monitor pay at companies that have received the most government aid. Kenneth Feinberg is a prominent lawyer who has mediated in notable cases, including assessing compensation for the lives of those killed in the September 11th 2001 attacks.
The European Central Bank lent €3 billion ($4.2 billion) to Sweden’s central bank as part of an effort to avoid a meltdown in the Baltic region triggered by Latvia’s potential currency devaluation. Swedish banks dominate the Baltic financial sector.
America’s Supreme Court cleared the way for Chrysler to leave bankruptcy protection when it declined to hear an appeal from a group of pension funds claiming the government was overlooking their rights as Chrysler’s senior creditors. Soon after the Court’s decision Fiat sealed its alliance with Chrysler, in which it is buying most of the Detroit carmaker’s assets.
General Motors said Edward Whitacre will be its new chairman when it leaves bankruptcy protection sometime over the summer. Mr Whitacre used to run AT&T, and is credited with turning a dinosaur into a fleet-footed telecoms company. Although he has never been in charge of a manufacturing company, the 67-year-old Mr Whitacre promised to “learn about cars”.
Arcandor, a German retailing and tourism group, filed for insolvency after Germany’s government refused its request for a bail-out. With thousands of jobs at risk, Metro, a competitor, revived its offer to take over Arcandor’s Karstadt department-store chain.
China’s national steel association joined industry groups in Europe and Japan objecting to the merger of BHP Billiton’s and Rio Tinto’s operations in Western Australia, which would create the world’s biggest producer of iron ore. The Chinese said the agreement had a “strong monopolistic colour”. The deal was announced on June 5th, the same day Rio made a dramatic reversal and abandoned its controversial deal with Chinalco, in which it would have got a $19.5 billion investment from China’s state aluminium company. Rio will instead raise capital through a share issue.