• TSX +12.88 as an uptick in bullion prices helped push up gold producers. Strong economic data and a Bank of Canada growth forecast suggested that Canada's recession recovery is on track
• DOW +115.78 By comparison, major U.S. stock indexes advanced more than 1% as investors bet a potential Republican victory in Massachusetts' Senate race could stall President Barack Obama's reform agenda.
• Dollar -.40c to 97.02cUS
• Oil +$1.02 to $79.02US per barrel.
• Gold +$9.60 to $1,139.70USD per ounce
Bank lowers slightly growth forecast for 2009 and 2010, but keeps interest rates unchanged
OTTAWA - The global recovery is under way but expansion of the Canadian economy remains dependent on government support and historically low interest rates, the Bank of Canada said today.
As expected, the central bank again pledged to keep its trendsetting policy rate at the lowest practical level of 0.25 per cent until mid-2010, saying the economy at the moment is performing slightly worse than it projected three months ago.
To reinforce the commitment, the bank said it was extending its emergency lending instruments to April, with maturity dates beyond June, at the low policy rate.
The announcement contained few surprises for markets, but the tweaking of growth rates — although at the margins — was somewhat unexpected.
“Economic growth in Canada resumed in the third quarter of 2009 and is expected to have picked up further in the fourth quarter,” bank governor Mark Carney and his policy-making council said in an accompanying note.
“Nevertheless, considerable excess supply remains, and the bank judges that the economy was operating about 3.25 per cent below its production capacity in the fourth quarter of 2009.”
Carney had been among the most bullish of forecasters for the economy this year, although by historic standards, even Carney was not anticipating a robust recovery.
Now the bank says the economy likely contracted by 2.5 per cent last year, a little worse than the 2.4 per cent it had predicted in October.
As well, it says growth this year will be 2.9 per cent, one-tenth of a point less than it had previously forecast and more in line with the private sector consensus of 2.6 per cent.
The good news is that the economy will make the up ground in 2011, says the bank, with a growth rate of 3.5 per cent. It had earlier pegged next year’s growth at 3.3 per cent.
The bank’s message to Canadians is that although conditions are improving, strengthened by a global economy that is expanding faster than expected, the recovery still is dependent on “exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.”
In Canada, the bank says the private sector won’t become the sole driver of domestic demand until 2011.
As has been the case throughout the recession, Canada’s recovery continues to be hampered by the slow pick-up in U.S. demand for Canadian products and the high Canadian dollar, which makes those exports less competitive.
That means Canada’s internal domestic economy, largely reflected in consumer spending and the hot housing market, will be the main engine of the recovery.
The bank noted that inflation has been rising faster than it anticipated, but appeared not to be overly concerned, especially with the large amount of slack in the economy.
Although economists forecast inflation likely hit 1.6 per cent in December, after being below zero through much of the summer and part of the fall, the bank said it still doesn’t believe inflation will return to the two-per-cent target until the third quarter of 2011, when it expects the economy to be firing on all cylinders.
Wednesday, January 20, 2010
Tuesday, January 19, 2010
Financial Update For Jan. 19, 2010
• TSX +65.17 as energy and materials producers rose on the back of stronger commodity prices. investors will comb through the Bank of Canada's interest rate announcement today and Monetary Policy Report on Thursday for hints on when bank intends to raise rates for the first time since the recession hit.
• DOW U.S. markets closed for the Martin Luther King Jr. holiday.
• Dollar +.28c to 97.42cUS
• Oil +$.25 to $78.25US per barrel.
• Gold +$2.90 to $1,133.40USD per ounce
Record home sales capping 2009 due to supply and demand, not bubble
BY SUNNY FREEMAN, THE CANADIAN PRESS
TORONTO — Record home sales last month are based on low supply and high demand and are more likely to drop off this year than inflate a housing bubble that could threaten a fragile recovery, economists say.
A Canadian Real Estate Association report released Friday said December and the 2009 fourth quarter were the best periods on record for home resales, while prices also rose sharply from their year-earlier levels.
Meanwhile, strong demand continued to deplete the number of homes for sale and the estimated 5.6 months it would take to sell a house through the Multiple Listing Service in December was less than half the 12.3 months it would have taken a year earlier.
The number of total listings fell 22 per cent in December from the same 2008 period and 12.6 per cent for the year.
The imbalance in supply and demand drove the national average price of homes to $337,410 in December, 19 per cent higher than in December 2008, but slightly lower than the 2009 average of $348,840.
Douglas Porter, deputy chief economist at BMO Capital Markets said while high prices caused by strong demand and weak supply could pose a risk to the fragile recovery, he is not willing to jump on the “bubble bandwagon” yet.
A bubble occurs when prices increase without any sound underlying fundamentals, he explained, and that’s not the case in Canada’s housing market, which is closely tied to changing interest rates and economic fundamentals.
“We still do have a relatively tight supply situation and exceptionally low interest rates and a mild recovery in the economy, so there are a lot of good reasons why home prices are rising.”
“What we’re seeing is almost textbook recovery,” he said. “The speed of the recovery is mind-boggling, the fact that housing is leading the recovery is really not a surprise... it’s exactly what you’d expect to happen.”
Finance Minister Jim Flaherty said Friday he does not see a housing bubble yet, but he noted the government has many tools at its disposal — from raising down payment requirements on insured mortgages, to lowering amortization periods and urging the banks to be more cautious in their lending — to prevent such a thing from happening.
“We don’t want to have a group of house purchasers who purchased houses now at insured mortgages at relatively low rates who would not be able to manage them if rates were to increase later on,” Flaherty said in an interview with Business News Network, a cable TV business channel in Toronto.
“I’ve looked at the numbers with CMHC,” he added. “We’re monitoring it. I do not see evidence of a bubble right now, but we’re going to keep watching it. There are some steps we can take that we will take if it’s necessary.”
The association said 27,744 units were sold across Canada in December, up 72 per cent from the same month in 2008. The year-earlier period saw the lowest sales in a decade in the wake of a global credit crunch and the start of the recession in Canada.
The Kitchener-Waterloo Real Estate Board set a record in December with 356 sales. The Real Estate Board of Cambridge recorded 150 sales, up 60 per cent from the same month a year earlier.
December also marked the end of the strongest quarterly sales volume ever measured by CREA, with 137,957 homes sold over three months on a seasonally adjusted basis — up 2.6 per cent from the previous record set in the first quarter of 2007.
“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said the association’s chief economist Gregory Klump. “(But) cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”
The 59 per cent year-over-year fourth quarter gain drove last year’s annual sales volume above 2008 levels, but the number of transactions last year was 10.7 per cent below the peak reached in 2007.
“The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” said Klump.
Klump believes the market will balance out in 2010 because consumer demand will be met with a supply side rise as the number of new homes increases and cautious homeowners become confident about selling, which will add more homes on the market and help drive prices down.
Porter said Friday’s report signals that Canadians have regained their confidence in the economy and the surge in demand is beginning to be met with a serious supply response, citing a notable uptick in December housing starts.
“Builders had been very cautious and they’re only now starting to crank up their output again, but even so, the comeback in new housing starts has been much more modest than the rebound we’ve seen in sales,” he said. “And people who own homes have also been a little reluctant to put their house up for sale because of the broader uncertainty that we’ve seen.”
He said that the demand in housing was most pronounced in B.C. and Ontario, where home buyers might be hoping to beat the introduction of the HST, the harmonized sales tax which is set to replace provincial taxes in those provinces later this year.
The Bank of Canada indicated last week that it was premature to be talking about a housing bubble in Canada and said recent house price increases are in line with supply and demand fundamentals.
The bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates.
A CIBC forecast released Thursday indicated that the hot housing market will continue to drive economic growth during the first half of 2010, but will come to a screeching halt in the second half of the year, when interest rates are expected to rise.
The Canadian Press
Canada to press G7 finance ministers to reform financial system
BY JULIAN BELTRAME
OTTAWA — Canada believes time is running out for meaningful reforms to the world financial system to avert future economic meltdowns and will push for movement on the issue at next month’s G7 finance ministers meeting in Iqaluit.
Canadian officials briefing reporters on what is likely to be the most unusual G7 meeting ever say signs of hubris are again apparent among many of the global financiers blamed for plunging the world into recession.
Finance Minister Jim Flaherty is hoping that holding the meeting in isolated Iqaluit in the middle of winter will concentrate minds and lead to a renewed commitment to implement reforms.
The officials, speaking on background, said Monday that Flaherty is concerned that the momentum for reform of the world’s financial and banking sectors is waning as the economic crisis recedes.
The United Kingdom has imposed a punitive tax on executive bonuses, and the United States is also proposing to tax its largest banks. But system reform, such as ensuring risk is properly assessed, still remains to be implemented.
Canada believes the G7 countries have the primary responsibility for ensuring abuses are not repeated since the crisis originated within the world’s leading economies, the officials said.
The Iqaluit meeting in early February will be the first since the larger Group of 20 forum was declared the pre-eminent body for dealing with the world’s economic and financial problems.
And it will be unusual not just for its location, but also for its form.
Unlike past meetings, there will be no final communique issued of policies adopted in principle by the ministers and central bank governors.
By making the meetings more informal, the officials say Flaherty hopes they will be more frank and useful and prove that the G7 club is worth preserving.
One official said the necessity of producing a communique, or final concluding text, tends to concentrate discussions along producing unanimity. Freed of the need to produce a text, ministers and governors can engage in a more freewheeling, frank and political discussion.
One of those discussions will actually be held by a roaring fire, the official said.
The future of the G7, whether it will remain as a separate institution or becomes a subgrouping of the larger G20, remains up in the air and will be an issue before the ministers and governors in Iqaluit.
One reason it’s important to Canada that the G7 remain an influential institution is that collapsing the group into the larger G20 dilutes the country’s influence at the top table.
The officials say the Feb. 5-6 meeting in Iqaluit will tackle the gamut of issues dealing with the global economy, including ensuring the recovery is sustainable, exit strategies from government stimulus spending, global imbalances, currency exchange rates and trade.
One agenda item was added in the past week — Haiti — since the G7 countries are the biggest donors to the earthquake-devastated nation’s relief effort.
Flaherty has indicated that with relief efforts underway, the G7 meeting would be an ideal time to begin exploring how countries can help Haiti reconstruct and recover from the disaster.
The meeting’s unusual location, above the treeline in the middle of winter, has also necessitated contingency plans in case of inclement weather.
Should Iqaluit become inaccessible from air for the Feb. 5-6 meeting, the conference will be switched to Ottawa, officials said.
• DOW U.S. markets closed for the Martin Luther King Jr. holiday.
• Dollar +.28c to 97.42cUS
• Oil +$.25 to $78.25US per barrel.
• Gold +$2.90 to $1,133.40USD per ounce
Record home sales capping 2009 due to supply and demand, not bubble
BY SUNNY FREEMAN, THE CANADIAN PRESS
TORONTO — Record home sales last month are based on low supply and high demand and are more likely to drop off this year than inflate a housing bubble that could threaten a fragile recovery, economists say.
A Canadian Real Estate Association report released Friday said December and the 2009 fourth quarter were the best periods on record for home resales, while prices also rose sharply from their year-earlier levels.
Meanwhile, strong demand continued to deplete the number of homes for sale and the estimated 5.6 months it would take to sell a house through the Multiple Listing Service in December was less than half the 12.3 months it would have taken a year earlier.
The number of total listings fell 22 per cent in December from the same 2008 period and 12.6 per cent for the year.
The imbalance in supply and demand drove the national average price of homes to $337,410 in December, 19 per cent higher than in December 2008, but slightly lower than the 2009 average of $348,840.
Douglas Porter, deputy chief economist at BMO Capital Markets said while high prices caused by strong demand and weak supply could pose a risk to the fragile recovery, he is not willing to jump on the “bubble bandwagon” yet.
A bubble occurs when prices increase without any sound underlying fundamentals, he explained, and that’s not the case in Canada’s housing market, which is closely tied to changing interest rates and economic fundamentals.
“We still do have a relatively tight supply situation and exceptionally low interest rates and a mild recovery in the economy, so there are a lot of good reasons why home prices are rising.”
“What we’re seeing is almost textbook recovery,” he said. “The speed of the recovery is mind-boggling, the fact that housing is leading the recovery is really not a surprise... it’s exactly what you’d expect to happen.”
Finance Minister Jim Flaherty said Friday he does not see a housing bubble yet, but he noted the government has many tools at its disposal — from raising down payment requirements on insured mortgages, to lowering amortization periods and urging the banks to be more cautious in their lending — to prevent such a thing from happening.
“We don’t want to have a group of house purchasers who purchased houses now at insured mortgages at relatively low rates who would not be able to manage them if rates were to increase later on,” Flaherty said in an interview with Business News Network, a cable TV business channel in Toronto.
“I’ve looked at the numbers with CMHC,” he added. “We’re monitoring it. I do not see evidence of a bubble right now, but we’re going to keep watching it. There are some steps we can take that we will take if it’s necessary.”
The association said 27,744 units were sold across Canada in December, up 72 per cent from the same month in 2008. The year-earlier period saw the lowest sales in a decade in the wake of a global credit crunch and the start of the recession in Canada.
The Kitchener-Waterloo Real Estate Board set a record in December with 356 sales. The Real Estate Board of Cambridge recorded 150 sales, up 60 per cent from the same month a year earlier.
December also marked the end of the strongest quarterly sales volume ever measured by CREA, with 137,957 homes sold over three months on a seasonally adjusted basis — up 2.6 per cent from the previous record set in the first quarter of 2007.
“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said the association’s chief economist Gregory Klump. “(But) cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”
The 59 per cent year-over-year fourth quarter gain drove last year’s annual sales volume above 2008 levels, but the number of transactions last year was 10.7 per cent below the peak reached in 2007.
“The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” said Klump.
Klump believes the market will balance out in 2010 because consumer demand will be met with a supply side rise as the number of new homes increases and cautious homeowners become confident about selling, which will add more homes on the market and help drive prices down.
Porter said Friday’s report signals that Canadians have regained their confidence in the economy and the surge in demand is beginning to be met with a serious supply response, citing a notable uptick in December housing starts.
“Builders had been very cautious and they’re only now starting to crank up their output again, but even so, the comeback in new housing starts has been much more modest than the rebound we’ve seen in sales,” he said. “And people who own homes have also been a little reluctant to put their house up for sale because of the broader uncertainty that we’ve seen.”
He said that the demand in housing was most pronounced in B.C. and Ontario, where home buyers might be hoping to beat the introduction of the HST, the harmonized sales tax which is set to replace provincial taxes in those provinces later this year.
The Bank of Canada indicated last week that it was premature to be talking about a housing bubble in Canada and said recent house price increases are in line with supply and demand fundamentals.
The bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates.
A CIBC forecast released Thursday indicated that the hot housing market will continue to drive economic growth during the first half of 2010, but will come to a screeching halt in the second half of the year, when interest rates are expected to rise.
The Canadian Press
Canada to press G7 finance ministers to reform financial system
BY JULIAN BELTRAME
OTTAWA — Canada believes time is running out for meaningful reforms to the world financial system to avert future economic meltdowns and will push for movement on the issue at next month’s G7 finance ministers meeting in Iqaluit.
Canadian officials briefing reporters on what is likely to be the most unusual G7 meeting ever say signs of hubris are again apparent among many of the global financiers blamed for plunging the world into recession.
Finance Minister Jim Flaherty is hoping that holding the meeting in isolated Iqaluit in the middle of winter will concentrate minds and lead to a renewed commitment to implement reforms.
The officials, speaking on background, said Monday that Flaherty is concerned that the momentum for reform of the world’s financial and banking sectors is waning as the economic crisis recedes.
The United Kingdom has imposed a punitive tax on executive bonuses, and the United States is also proposing to tax its largest banks. But system reform, such as ensuring risk is properly assessed, still remains to be implemented.
Canada believes the G7 countries have the primary responsibility for ensuring abuses are not repeated since the crisis originated within the world’s leading economies, the officials said.
The Iqaluit meeting in early February will be the first since the larger Group of 20 forum was declared the pre-eminent body for dealing with the world’s economic and financial problems.
And it will be unusual not just for its location, but also for its form.
Unlike past meetings, there will be no final communique issued of policies adopted in principle by the ministers and central bank governors.
By making the meetings more informal, the officials say Flaherty hopes they will be more frank and useful and prove that the G7 club is worth preserving.
One official said the necessity of producing a communique, or final concluding text, tends to concentrate discussions along producing unanimity. Freed of the need to produce a text, ministers and governors can engage in a more freewheeling, frank and political discussion.
One of those discussions will actually be held by a roaring fire, the official said.
The future of the G7, whether it will remain as a separate institution or becomes a subgrouping of the larger G20, remains up in the air and will be an issue before the ministers and governors in Iqaluit.
One reason it’s important to Canada that the G7 remain an influential institution is that collapsing the group into the larger G20 dilutes the country’s influence at the top table.
The officials say the Feb. 5-6 meeting in Iqaluit will tackle the gamut of issues dealing with the global economy, including ensuring the recovery is sustainable, exit strategies from government stimulus spending, global imbalances, currency exchange rates and trade.
One agenda item was added in the past week — Haiti — since the G7 countries are the biggest donors to the earthquake-devastated nation’s relief effort.
Flaherty has indicated that with relief efforts underway, the G7 meeting would be an ideal time to begin exploring how countries can help Haiti reconstruct and recover from the disaster.
The meeting’s unusual location, above the treeline in the middle of winter, has also necessitated contingency plans in case of inclement weather.
Should Iqaluit become inaccessible from air for the Feb. 5-6 meeting, the conference will be switched to Ottawa, officials said.
Friday, January 15, 2010
Financial Update For Jan. 15, 2010
• TSX -49.18 hurt by weakening oil prices and after the U.S. futures regulator said it would review possible position limits on gold and silver
• DOW +29.78 as Intel Corp., the world's biggest chip maker by volume, surpassed analyst estimates of 30cs a share. Earnings came in at 40c a share, a big improvement from 4c a share a year ago. Investors see the chip maker's earnings as a sign of business and consumer demand in the overall economy
• Dollar +.68c to 97.71cUS
• Oil -$.26 to $79.39US per barrel. as weak U.S. economic signals and high inventories spurred fears of a sluggish rebound in demand in the world's largest energy consumer. Also hurting prices was a proposal by the U.S. regulator to limit how many energy contracts hedge funds, investment banks and other speculators can control.
• Gold +$6.20 to $1,142.60USD per ounce
Ontario's battered economy picked up in 3rd quarter, 1st gain since recession
THE CANADIAN PRESS, 2010
TORONTO - Ontario's battered economy picked up in the third quarter of 2009, the first gain since it sputtered into recession.
The province's real gross domestic product increased 0.5 per cent from July to August, largely due to improvements in the auto sector, Ontario's Ministry of Finance reported Thursday.
That surpassed Canada's real GDP, which rose 0.1 per cent in the same period. The U.S. economy rose 0.6 per cent in the third quarter.
Ontario's growth follows four consecutive quarters of declines, including a drop of 1.0 per cent from April to June.
It's a good start, but Ontario isn't out of the woods yet, said TD economist Derek Burleton.
"Until many of the industries begin to make up a significant amount of the ground lost, it's hard to claim victory," he said.
Job numbers haven't turned around either, he noted.
According to Statistics Canada, Ontario lost an estimated 16,600 jobs in December. It gained 2,000 full-time jobs but lost 18,600 part-time positions. However, the unemployment rate was unchanged at 9.3 per cent.
The job numbers show that unemployment remains at a high level, said Alicia Johnston, a spokeswoman for Ontario Finance Minister Dwight Duncan, who was unavailable for comment.
"While this modest growth in Ontario's economy is encouraging news, our families and businesses are still feeling the effects of the global downturn," she said.
The ministry said Ontario's third-quarter growth reflected gains in all major spending areas, including consumer, business investment and government expenditures.
Consumer spending rose one per cent in the third quarter, as more people purchased vehicles, furniture and appliances, clothing and footwear and natural gas, it said.
Spending on motor vehicles and parts increased 5.7 per cent during the three-month period.
Auto production is still almost 50 per cent below levels posted at the beginning of 2007, the ministry said.
However, auto industry output grew 16.8 per cent in the third quarter, as several assembly lines resumed production following a big market downturn in the second half of 2008.
Business investment on plant and equipment rose 7.6 per cent. Exports also increased 4.2 per cent and imports rose 6.5 per cent following three consecutive quarters of declines.
Residential construction investment spending rose 0.6 per cent, following a 0.8 per cent gain in the second quarter. Spending on new housing construction slipped 11.2 per cent - the seventh consecutive quarterly decline - while renovation activity surged 5.8 per cent.
Obama: Tax banks to recover remaining cost of public’s big bailout; ‘We want our money back’
BY JIM KUHNHENN
WASHINGTON — U.S. President Barack Obama told banks Thursday they should pay a new tax to recoup the cost of bailing out foundering firms at the height of the financial crisis. “We want our money back,” he said.
In a brief appearance with advisers at the White House, Obama branded the latest round of bank bonuses as “obscene.” But he said his goal was to prevent such excesses in the future, not to punish banks for past behaviour.
The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion US over the decade, according to administration estimates. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers,” Obama said.
Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.
The president’s tone was emphatic and populist, capitalizing on public antipathy toward Wall Street. With the sharp words, he also tried to deflect some of the growing skepticism aimed at his own economic policies as unemployment stubbornly hovers around 10 per cent.
The proposed 0.15 per cent tax on the liabilities of large financial institutions would apply only to those companies with assets of more than $50 billion — a group estimated at about 50. Administration officials estimate that 60 per cent of the revenue would come from the 10 biggest ones.
They would have to pay up even though many did not accept any taxpayer assistance and most that did have repaid the infusions.
Obama said big banks had acted irresponsibility, taken reckless risk for short-term profits and plunged into a crisis of their own making. He cast the struggle ahead as one between the finance industry and average people.
“We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses,” Obama said.
He renewed his call for a regulatory overhaul of the industry and scolded bankers for opposing the tighter oversight in legislation moving through Congress.
“What I’d say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I’d suggest you might want to consider simply meeting your responsibility,” Obama said.
At issue is the net cost of the fund initiated by the Bush administration to help financial institutions get rid of soured assets. The $700 billion Troubled Asset Relief Program (TARP) has expanded to help auto companies and homeowners.
Insurer American International Group, the largest beneficiary at nearly $70 billion, would have to pay the tax. But General Motors Co. and Chrysler Group LLC, whose $66 billion in government loans are not expected to be repaid fully, would not.
Administration officials said financial institutions were both a significant cause of the crisis and chief beneficiaries of the rescue efforts, should bear the brunt of the cost.
Bankers did not hide their objections.
“Politics have overtaken the economics,” said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions. “This is a punitive tax on companies that repaid TARP in full or never took TARP.”
Even before details came out, Jamie Dimon, chief executive of JPMorgan Chase & Co., said: “Using tax policy to punish people is a bad idea.”
Obama is trying to accelerate terms that require the president to seek a way to recoup unrecovered money in 2013, five years after the law was enacted.
So far, the Treasury has given $247 billion to more than 700 banks. Of that, $162 billion has been repaid and banks have paid an additional $11 billion in interest and dividends.
In Congress, Democrats embraced Obama’s proposal while Republicans rejected it.
“I think it is entirely reasonable to say that the industry that, A, caused these problems more than any other and, B, benefited from the activity, should be contributing,” said Democratic Rep. Barney Frank of Massachusetts, chair of the House Financial Services Committee.
But Republican Rep. Scott Garrett of New Jersey, who’s on Frank’s committee, called it a “job-killing initiative that will further cripple the economy by increasing fees passed on to consumers and small businesses, while reducing consumer credit.”
The Associated Press
• DOW +29.78 as Intel Corp., the world's biggest chip maker by volume, surpassed analyst estimates of 30cs a share. Earnings came in at 40c a share, a big improvement from 4c a share a year ago. Investors see the chip maker's earnings as a sign of business and consumer demand in the overall economy
• Dollar +.68c to 97.71cUS
• Oil -$.26 to $79.39US per barrel. as weak U.S. economic signals and high inventories spurred fears of a sluggish rebound in demand in the world's largest energy consumer. Also hurting prices was a proposal by the U.S. regulator to limit how many energy contracts hedge funds, investment banks and other speculators can control.
• Gold +$6.20 to $1,142.60USD per ounce
Ontario's battered economy picked up in 3rd quarter, 1st gain since recession
THE CANADIAN PRESS, 2010
TORONTO - Ontario's battered economy picked up in the third quarter of 2009, the first gain since it sputtered into recession.
The province's real gross domestic product increased 0.5 per cent from July to August, largely due to improvements in the auto sector, Ontario's Ministry of Finance reported Thursday.
That surpassed Canada's real GDP, which rose 0.1 per cent in the same period. The U.S. economy rose 0.6 per cent in the third quarter.
Ontario's growth follows four consecutive quarters of declines, including a drop of 1.0 per cent from April to June.
It's a good start, but Ontario isn't out of the woods yet, said TD economist Derek Burleton.
"Until many of the industries begin to make up a significant amount of the ground lost, it's hard to claim victory," he said.
Job numbers haven't turned around either, he noted.
According to Statistics Canada, Ontario lost an estimated 16,600 jobs in December. It gained 2,000 full-time jobs but lost 18,600 part-time positions. However, the unemployment rate was unchanged at 9.3 per cent.
The job numbers show that unemployment remains at a high level, said Alicia Johnston, a spokeswoman for Ontario Finance Minister Dwight Duncan, who was unavailable for comment.
"While this modest growth in Ontario's economy is encouraging news, our families and businesses are still feeling the effects of the global downturn," she said.
The ministry said Ontario's third-quarter growth reflected gains in all major spending areas, including consumer, business investment and government expenditures.
Consumer spending rose one per cent in the third quarter, as more people purchased vehicles, furniture and appliances, clothing and footwear and natural gas, it said.
Spending on motor vehicles and parts increased 5.7 per cent during the three-month period.
Auto production is still almost 50 per cent below levels posted at the beginning of 2007, the ministry said.
However, auto industry output grew 16.8 per cent in the third quarter, as several assembly lines resumed production following a big market downturn in the second half of 2008.
Business investment on plant and equipment rose 7.6 per cent. Exports also increased 4.2 per cent and imports rose 6.5 per cent following three consecutive quarters of declines.
Residential construction investment spending rose 0.6 per cent, following a 0.8 per cent gain in the second quarter. Spending on new housing construction slipped 11.2 per cent - the seventh consecutive quarterly decline - while renovation activity surged 5.8 per cent.
Obama: Tax banks to recover remaining cost of public’s big bailout; ‘We want our money back’
BY JIM KUHNHENN
WASHINGTON — U.S. President Barack Obama told banks Thursday they should pay a new tax to recoup the cost of bailing out foundering firms at the height of the financial crisis. “We want our money back,” he said.
In a brief appearance with advisers at the White House, Obama branded the latest round of bank bonuses as “obscene.” But he said his goal was to prevent such excesses in the future, not to punish banks for past behaviour.
The tax, which would require congressional approval, would last at least 10 years and generate about $90 billion US over the decade, according to administration estimates. “If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers,” Obama said.
Advisers believe the administration can make an argument that banks should tap their bonus pools for the fee instead of passing the cost on to consumers.
The president’s tone was emphatic and populist, capitalizing on public antipathy toward Wall Street. With the sharp words, he also tried to deflect some of the growing skepticism aimed at his own economic policies as unemployment stubbornly hovers around 10 per cent.
The proposed 0.15 per cent tax on the liabilities of large financial institutions would apply only to those companies with assets of more than $50 billion — a group estimated at about 50. Administration officials estimate that 60 per cent of the revenue would come from the 10 biggest ones.
They would have to pay up even though many did not accept any taxpayer assistance and most that did have repaid the infusions.
Obama said big banks had acted irresponsibility, taken reckless risk for short-term profits and plunged into a crisis of their own making. He cast the struggle ahead as one between the finance industry and average people.
“We are already hearing a hue and cry from Wall Street, suggesting that this proposed fee is not only unwelcome but unfair, that by some twisted logic, it is more appropriate for the American people to bear the cost of the bailout rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses,” Obama said.
He renewed his call for a regulatory overhaul of the industry and scolded bankers for opposing the tighter oversight in legislation moving through Congress.
“What I’d say to these executives is this: Instead of setting a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I’d suggest you might want to consider simply meeting your responsibility,” Obama said.
At issue is the net cost of the fund initiated by the Bush administration to help financial institutions get rid of soured assets. The $700 billion Troubled Asset Relief Program (TARP) has expanded to help auto companies and homeowners.
Insurer American International Group, the largest beneficiary at nearly $70 billion, would have to pay the tax. But General Motors Co. and Chrysler Group LLC, whose $66 billion in government loans are not expected to be repaid fully, would not.
Administration officials said financial institutions were both a significant cause of the crisis and chief beneficiaries of the rescue efforts, should bear the brunt of the cost.
Bankers did not hide their objections.
“Politics have overtaken the economics,” said Scott Talbott, the chief lobbyist for the Financial Services Roundtable, a group representing large Wall Street institutions. “This is a punitive tax on companies that repaid TARP in full or never took TARP.”
Even before details came out, Jamie Dimon, chief executive of JPMorgan Chase & Co., said: “Using tax policy to punish people is a bad idea.”
Obama is trying to accelerate terms that require the president to seek a way to recoup unrecovered money in 2013, five years after the law was enacted.
So far, the Treasury has given $247 billion to more than 700 banks. Of that, $162 billion has been repaid and banks have paid an additional $11 billion in interest and dividends.
In Congress, Democrats embraced Obama’s proposal while Republicans rejected it.
“I think it is entirely reasonable to say that the industry that, A, caused these problems more than any other and, B, benefited from the activity, should be contributing,” said Democratic Rep. Barney Frank of Massachusetts, chair of the House Financial Services Committee.
But Republican Rep. Scott Garrett of New Jersey, who’s on Frank’s committee, called it a “job-killing initiative that will further cripple the economy by increasing fees passed on to consumers and small businesses, while reducing consumer credit.”
The Associated Press
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