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US Banks See Gains; ‘Stress Test’ Findings Due May 4

September 10th, 2009 at 03:28am Under Economy Report

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This is the VOA Special English Economics Report.

American officials say they will publish results on May fourth from a special examination of banks. The purpose was to see if the country’s nineteen largest banks could survive losses in the event that the recession got even worse.

The Obama administration announced the so-called stress tests in February as part of efforts to rebuild the trust of investors. If banks are told they need more capital, they will have six months to raise the money from private markets or the government.

Some experts think banks have seen the worst of their losses and that the worst of the financial crisis may already have passed. On Thursday JPMorgan Chase rep

JPMorgan Chase is among banks that have reported strong results

orted more than two billion dollars in profit for the first three months of this year. That was better than expected. Earlier, Goldman Sachs and Wells Fargo also reported strong results.

But the same is not true for the housing market. The Commerce Department reported Thursday that the building of new homes fell in March to the second-lowest level on record.

President Obama warned in a speech on Tuesday that economic pain will continue through this year and that losses of jobs and homes will not end soon.

BARACK OBAMA: “But from where we stand, for the very first time, we are beginning to see glimmers of hope.”

The president suggested that the economy could have reached the beginnings of a recovery.

One sign is that the Standard & Poor’s list of five hundred stocks has risen more than twenty-five percent in the past five weeks. The S&P hit a twelve-year low in early March. Financial stocks have had some of the largest gains.

All nineteen banks are expected to pass the stress tests. But how the results will be presented is not clear. There is debate over whether releasing too much information might cause more harm than good. Some people might rush to withdraw money from weaker banks.

Yet some small banks have already paid back aid from the government.

The eight largest banks in the country have received about one hundred sixty-five billion dollars in aid. Goldman Sachs received ten billion last October from the Troubled Asset Relief Program. Now it wants to pay that back.

On Tuesday, the bank sold more than five billion dollars in common stock in an effort to pay back the government. That was a day after it announced better-than-expected earnings. By returning the aid, Goldman Sachs could free itself from government limits on pay for top employees.

And that’s the VOA Special English Economics Report, written by Mario Ritter. For more business news, go to voaspecialenglish.com.

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International Monetary Fund Says World Economy Will Shrink This Year

September 1st, 2009 at 03:22am Under Economy Report

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This is the VOA Special English Economics Report.

The World Bank and the International Monetary Fund will meet in Washington, D.C.  Saturday and Sunday. One subject for discussion will be falling expectations for world economic growth.

A new report by the I.M.F. estimates that the world economy will shrink by one and three-tenths percent this year. That would be the worst performance in more than sixty years.  Three months ago, the I.M.F. predicted a small growth for this year.

I.M.F. Chief Economist Olivier Blanchard, left, speaking in Washington Wednesday

Major industrialized economies are expected to see the biggest decreases, shrinking by almost four percent. The I.M.F. predicts developing countries will continue to grow for the year, but only by about one and one-half percent.

The I.M.F. says the world will slowly return to growth of almost two percent next year. But the lending organization warns that strong policies to supervise and support the financial system are needed if the world economy is to fully recovery.

Olivier Blanchard is the chief economist for the I.M.F.  He has said that banks are still in the process of rebuilding their financial positions. He added that securities markets are still operating poorly.

Economic experts believe the world financial industry is moving towards recovery but with more losses to come. In all, the I.M.F. says worldwide financial losses could be as high as four trillion dollars by the end of next year.  World trade is expected to drop eleven percent this year, after expanding by three percent last year.

The I.M.F. report says international lending may not fully recover until two thousand eleven. The financial crisis has made the I.M.F. more important than ever. The world’s largest economies promised to increase the size of the fund by about five hundred billion dollars. They did so at the G-Twenty meeting in London earlier this month. This week, President Obama proposed that the United States lend the I.M.F. one hundred billion dollars as part of that promise.

Last week, Mexico became the first nation to borrow from the I.M.F. under a new program to provide emergency credit to nations with strong economies. Mexico received a forty-seven billion dollar line of credit for one year. Poland and Colombia are also seeking loans from the program.

And that’s the VOA Special English Economics Report, written by Mario Ritter.  You can find more financial news, plus transcripts and archives of our programs at voaspecialenglish.com. I’m Steve Ember.

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