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First challenge for G-20 is to not make things worse
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G20 summit: Leaders target bankers
World leaders will agree unprecedented global restrictions on pay and bonuses for bankers at the G20 summit in London.
In future, bankers will be prevented from receiving multi-million pound cash bonuses for speculating on the stock market.
Their remuneration will instead be based on the risks they take over the long term. Bankers deemed to be making risky investment decisions will only be paid in shares that can be cashed in after several years.
The multi-million-pound bonuses paid to bankers have been blamed for encouraging them to take the "reckless" decisions that triggered the global financial crisis.
The Daily Telegraph has learnt that the remuneration deal was thrashed out over the past few days following intensive diplomatic efforts by Nicolas Sarkozy, the French President, and Angela Merkel, the German Chancellor. The measure did not appear in a draft communiqué that was leaked at the weekend.
The European leaders were understood to have pushed for an exact monetary limit on banking pay but were prepared to sign up to the new, strongly-worded agreement.
Regulators in each of the G20 countries will impose the new restrictions, which cover both private banks and those owned both wholly and partially by the state.
Citi CDS costs hit fresh high ahead of FASB vote
NEW YORK, April 1 (Reuters) - Debt protection costs on Citigroup Inc (C.N) hit record highs on Wednesday, ahead of a vote on a proposal to give banks more leeway on how they should apply mark-to-market accounting standards.
The accounting, in which assets are marked to their current market value, has been criticized for exacerbating market woes as extreme illiquidity in markets depressed debt prices.
The Financial Accounting Standards Board (FASB) plans to vote on Thursday on the guidance.
Credit default swaps insuring Citigroup's debt jumped over 700 basis points in intraday trading on Wednesday, or $700,000 per year for five years to insure $10 million in debt, said an analyst.
The swaps had closed on Tuesday at 635 basis points, according to data provider Markit.
Bank of America's (BAC.N) debt protection costs also rose to around 400 basis points, up from 395 basis points on Tuesday, according to Markit.
Some analysts view modifications to mark-to-market accounting as risky as it will allow banks to create their own values for securities, which could increase distrust over assets held on their balance sheets.
"We still know the 'stuff' is on the balance sheets and if the financials are actually allowed to adjust capital based on unreal marks then who will ever buy financials again," Tim Backshall, chief strategist at research firm Credit Derivatives Research said in a report.
Changes to mark-to-market accounting will either "make PPIP irrelevant, make the stress test irrelevant, increase uncertainty in financial balance sheets, provide no benefit for mark-to-model positions, extend the recessionary period and drive a bigger wedge between market transaction levels and bank marks," he said.
The U.S. government's Public-Private Investment Program (PPIP) is designed to help banks unload toxic assets from their balance sheets by helping private investors looking to buy loans and securities from banks.
Urgent: Mack calls on Obama to demand UAW Chief to resign
Per Pergram-Capitol Hill
* Statement from Rep. Connie Mack (R-FL). This comes on the heels of the President calling for GM's Rick Wagoner to step down.
MACK CALLS ON OBAMA TO FORCE UAW CHIEF'S RESIGNATION
WASHINGTON - Congressman Connie Mack (FL-14), a staunch and vocal critic of Washington's mind-numbing efforts to bailout and nationalize businesses, today called on President Obama to be even-handed in his handling of the nation's automobile industry and to demand the resignation of United Auto Workers President Ron Gettelfinger.
For decades, U.S. automobile executives have made one bad choice after another and led their companies down the path toward ruin. But at the same time, union bosses share equal blame for failing to act responsibly to achieve long-term stability and prosperity for their members, consumers and the auto industry as a whole.
United Auto Workers President Ron Gettelfinger deserves particular blame for his failures to modernize the UAW, for organizing and threatening labor strikes that have heavily contributed to the demise of the U.S. auto industry, and for refusing long-term concessions that would help General Motors, Chrysler and Ford create cost-savings and preserve jobs.
If President Obama is willing to fire the CEO of General Motors because of his failures, then he should be even-handed in demanding Ron Gettelfinger's resignation for his equally egregious failures.
Sadly, the Obama Administration, like the Bush Administration before, will instead do all it can to pick America's winners and losers regardless of the consequences to the free market and the American way of life.
I urge the President to stop and look both ways before he continues down this dangerous road. I would hope that President Obama would instead decide that freedom matters, that freedom works and that the path to renewed prosperity is not by destroying the very ideals that made our nation great."
U.S. seen facing danger of 2nd recession next year
NEW YORK (Reuters) - Although the U.S. economy is expected return to growth later this year, there is a danger of a second recession if monetary easing and a weak dollar leads to increased inflation expectations, a report said on Wednesday.
Massive stimulus spending and moves by the Federal Reserve to fuel economic activity is expected to jump-start the anemic U.S. economy in the last quarter of this year after it contracted 6.3 percent in fourth quarter of 2008.
But the Fed's moves to boost the economy by slashing interest rates and buying up billions in government debt could have undesired consequences, The Conference Board, a private research group, said in the report.
"If the United States experiences a too-rapid recovery, there may be a risk of another recession in 2010," said Bart van Ark, vice president and chief economist of The Conference Board.
"It may fuel expectations for a return to inflation, adding to the uncertainty concerning the pattern and path of economic recovery," he said.
The U.S. economy has the potential for a "double-dip" recession, Van Ark noted, similar to 1980 and 1982, as commodity prices rise on the back of a falling dollar and monetary easing.
He added, however, that the likelihood of this scenario taking place is small as deflation risks are great, while government stimulus spending should stem further economic decline and ease the flow of job losses.
The U.S. economy could contract by 2.6 percent in 2009, the largest annual decline since 1946, the Conference Board said.
U.S. House backs new pay curbs at bailed-out banks
WASHINGTON (Reuters) - The House
on Wednesday approved legislation to curb
employee pay at financial firms that receive government bailout
funds, a measure that could supplant an earlier effort to
heavily tax executive bonuses.
The bill, which passed on a 247-171 vote, would give the
U.S. Treasury broad powers to prohibit "unreasonable and
excessive" compensation and bonuses that are not based on
The Pay for Performance Act is among a number of efforts by
Congress to claw back bonuses and curb pay in the wake of
public anger over executive bonuses at insurer American
International Group, which has received a bailout worth
up to $180 billion.