The Star Online: Business
The Star Online: Business |
- Europe debt crisis shadows US Fed meeting on economy
- Oil steady as worries about Europe continue
- Al Capone's gun to be auctioned in London
| Europe debt crisis shadows US Fed meeting on economy Posted: 20 Jun 2011 06:19 PM PDT WASHINGTON (AP) - If the U.S. economic slowdown weren't enough to deal with, the Federal Reserve this week must consider a new threat: a resurgent European debt crisis that could imperil the global economy. Financial markets have been gripped by fears that Greece will default on its debt. Other European nations with heavy debt burdens, such as Ireland, Portugal, Spain and perhaps Italy, could be at risk, too. When they meet Tuesday and Wednesday, Fed officials will likely discuss what they might do to help shield U.S. banks and a still fragile U.S. economy if Europe's crisis worsened. Some analysts suggest that a panic would cause the Fed to intervene as it did during the 2008 financial crisis, when it lent billions to banks. "The European debt crisis has the potential to have as big an impact as the subprime mortgage crisis did in the United States," said Sung Won Sohn, an economics professor at California State University. "If it spreads to Spain and Italy, then the global economy could be facing huge problems." Once its meeting ends Wednesday afternoon, the Fed will issue a statement that's likely to say it will leave a key interest rate at a record low near zero for "an extended period." Many economists say the U.S. slowdown means the Fed won't start raising rates until the summer of 2012, about six months later than many thought when 2011 began. Later in the afternoon, the Fed will update its economic forecasts. And then Chairman Ben Bernanke will hold a news conference - his second session with reporters under his new policy of holding regular news conferences for the first time in the Fed's history. When the European debt crisis first surfaced in the spring of 2010, Bernanke told Congress that it would likely have only a modest effect on the U.S. economy as long as Wall Street stabilized. He cautioned that the Fed would monitor the developments and their potential effects on the U.S. economy. At the time, the Fed opened a program to ship dollars overseas to pump more cash into the financial system and give European central banks enough dollars to lend to commercial banks. In return, the Fed received European currencies to hold until the dollars were repaid. The Fed could resume that effort if the European crisis worsened. It could also pursue stepped-up lending to financial firms through its emergency loan program, called the discount window. And it could resume the unorthodox loan programs it used during the financial crisis when credit froze up. Former Fed Chairman Alan Greenspan said in a television interview last week that the likelihood of a Greek default is so high "you almost have to say there's no way out." Greenspan suggested that the crisis potentially could push the United Sates into a second recession. Still, economists say they expect no major announcements from the Fed this week. Rather, they think Bernanke will signal that the Fed is following events in Europe and would coordinate a response with the European Central Bank should the crisis deteriorate. Among the unconventional loan programs the Fed could resume, one involves emergency loans that go beyond the discount window. Another is backing for "commercial paper" - the short-term loans that many U.S. companies use to finance needs from salaries to supplies. European banks, through their U.S. subsidiaries, used the Fed's emergency loan programs. Those revelations have sparked criticism in Congress that U.S. taxpayers shouldn't be required to prop up European banks. But others say that to safeguard the global financial system, the Fed must serve as a lender of last resort to any U.S. bank, including branches of foreign banks. They note that U.S. banks in Europe receive the same privileges from European central banks. "The Fed sees the loans as doing its job to protect the U.S. financial system during a credit crisis," said David Jones, head of DMJ Economic Advisors, a Denver-based consulting firm, and author of several books on the Fed. Even before Greece's crisis flared anew, the Fed was concerned about what Bernanke this month called a "frustratingly slow" U.S. economy. Since Fed policymakers last met in late April, the economy has weakened. U.S. employers added only 54,000 jobs in May, the poorest showing in eight months. The unemployment rate is 9.1 percent. Most economists have downgraded their forecasts for hiring and growth for the rest of the year. One step the Fed had taken to try to stimulate the economy is set to end June 30: its $600 billion Treasury bond-buying program. The bond purchases were intended to lower rates on loans, lift stock prices and encourage spending. Despite the new signs of weakness, there's little desire within the Fed to extend the Treasury-buying program. Critics have complained that the bond purchases raised the risk of runaway inflation while doing little to boost growth. Bernanke has countered that creeping inflation from higher oil and food prices is likely temporary. And the updated Fed economic forecast due Wednesday is expected to show inflation under control. Still, the Fed will probably trim its growth forecast for the full year while predicting a slight improvement in the second half of 2011. Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
| Oil steady as worries about Europe continue Posted: 20 Jun 2011 06:16 PM PDT NEW YORK (AP) - Oil leveled off Monday with investors still concerned about the European financial crisis. Benchmark crude for July delivery gained 25 cents to settle at US $93.26 per barrel on the New York Mercantile Exchange. The July contract expires on Tuesday, and most of the trading switched to the August contract, which added 23 cents to settle at $93.63 per barrel. All eyes remain on Greece, which is trying to implement tough new austerity measures necessary to keep international aid coming to deal with its debt crisis. Without that aid, investors worry that Greece's financial troubles could spread to other European countries. Credit ratings agency Moody's has warned that it may downgrade its debt rating on three of France's largest banks because of their exposure to Greek debt. Moody's said Monday that it may reduce Italy's credit rating due to poor growth prospects and high public debt. "The fear is that we end up with a banking crisis like 2008," said Michael Lynch, president of Strategic Energy & Economic Research. "It's a small possibility, but people are reacting to that." Oil stayed just above $93 per barrel on Monday despite rising stock markets. The Dow Jones Industrial Average was up about 60 points in afternoon trading. The Nasdaq and the Standard & Poor's 500 were higher as well. The dollar was fairly steady on Monday. Lynch said he expects it to remain strong until investors are convinced that Greece will go through with plans to cut spending and raise taxes. A stronger dollar usually pushes oil lower. Oil is priced in dollars and tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money. In other Nymex trading for July contracts, heating oil lost 5.1 cents to settle at $2.932 per gallon and gasoline futures dropped 3.5 cents to settle at $2.912 per gallon. Natural gas gave up less than a penny to settle at $4.317 per 1,000 cubic feet. In London, Brent crude fell $1.52 to settle at $111.69 per barrel on the ICE Futures exchange. Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
| Al Capone's gun to be auctioned in London Posted: 20 Jun 2011 06:14 PM PDT LONDON (AP) - A handgun once owned by notorious gangster "Al" Capone will be going up for sale at a London auction this week. Christie's auction house says that the Colt .38 revolver is expected to sell for 50,000 pounds ($80,899) to 70,000 pounds ($113,258). It said Monday the gun is being sold by an unidentified private collector. It says the gun was manufactured in 1929 - the year of the St. Valentine's Day Massacre, in which seven people were murdered slain during clashes in Chicago between Capone's gang and a rival gang. The pistol will be sold along with an original letter from Madeleine Capone Morichetti, the widow of Al Capone's brother Ralph, confirming the gun "previously belonged to and was only used by Al Capone while he was alive." The gun will go under the hammer on Wednesday. Latest business news from AP-Wire Full Feed Generated by Get Full RSS, sponsored by USA Best Price. |
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