Former Federal Reserve chairman Alan GreenspanKEVIN LAMARQUE
Today's top stories from Report on Business :
Greenspan defends his record
Former Federal Reserve chairman Alan Greenspan sparred today with members of a panel probing the financial crisis, defending his record in the runup to the meltdown. The former central banker, testifying at the Financial Crisis Inquiry Commission in Washington, blamed other groups, and not low interest rates, for the housing bubble, and added he had no authority to regulate the non-bank institutions involved in subprime mortgages. The panel's chairman, Phil Angelides, asked Mr. Greenspan whether there was "a reluctance" to regulate, adding that "you could have, you should have and you didn't."
One of the members, former Commodity Futures Trading Commission chairwoman Brooksley Born, was harsh in her comments, saying the Fed "utterly failed" to head off the crisis."
Mr. Greenspan said there's nothing to suggest that the monetary policy of his time at the Fed played into the housing bubble, saying it was long-term interest rates rather than short-term that fed subprime mortgages. As well, he added, the Fed as a regulator would have been stymied by Congress had it attempted to act. The former central banker agreed he made some mistakes but that "in the business I was in, I was right 70 per cent of the time, but I was wrong 30 per cent of the time. What we tried to do was the best we could with the data that we had."
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Greenspan accepts no responsibility
The lights go out on Greenspan
Probe of crisis puts U.S. rainmakers on the spot
Challenges remain, Bernanke warns
Mr. Greenspan's successor, Ben Bernanke, warned this afternoon that while the U.S. economy is expanding again, challenges remain in the housing and labour markets.
"We are far from being out of the woods," the Federal Reserve chairman said in the text of a speech to be given in Dallas. "Many Americans are still grappling with unemployment or foreclosure or both."
Mr. Bernanke said he also still sees trouble in commercial real estate, and no evidence of a sustained recovery in the housing market.
"The economy has stabilized and is growing again, although we can hardly be satisfied when one out of every 10 U.S. workers is unemployed and family finances remain under great stress," he said. "... Mortgage delinquencies for both subprime and prime loans continue to rise as do foreclosures. The commercial real estate sector remains troubled, which is a concern for communities and for banks holding commercial real estate loans." Read the story
Geithner heading to Beijing
U.S. Treasury Secretary Timothy Geithner plans to meet tomorrow with a top Chinese official amid signs that the currency fight between Washington and Beijing is cooling. Mr. Geithner will meet in Beijing with Wang Qishan, China's vice-premier for economic affairs, a Treasury Department spokesman said today as Mr. Geithner wrapped up two days of meetings in India. It's unclear exactly where this meeting is heading, as there are no details of what the two will discuss, but the development is seen as a welcome one given the fight by the United States and other countries to push China to allow its currency to appreciate. "After a time of disturbance and unpleasantness, Chinese-U.S. relations are entering a track of getting closer to one another," Liu Jiangyong, a professor at the Institute of International Studies at Tsinghua University in Beijing, told The Associated Press. "I hope the Geithner visit could promote understanding."
Tensions over the yuan have eased since Mr. Geithner announced on the weekend he would delay a mid-April decision on whether to label China a "currency manipulator" and China responded yesterday that it would eventually allow the currency to appreciate, but at its own pace. Beijing also rejects the argument that a higher yuan would erase the U.S.-China trade deficit.
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Geithner to visit Beijing amid currency row
China lays ground for yuan shift
Geithner gives China room to move on yuan
Canada to lead G7 economies, OECD says
In a projection that is rosier than most, the OECD forecasts today that Canada's economy will outpace those of other G7 countries by a wide margin in the first half of this year. The outlook by the Organization for Economic Development and Co-operation puts Canada's first-quarter growth at 6.2 per cent on an annualized basis and projects second-quarter growth of 4.5 per cent. While it may paint an even brighter picture than other forecasts, the theme is in line with projections by other groups. There's no doubt the first quarter was "remarkably strong," said BMO Nesbitt Burns economist Robert Kavcic, and that the second quarter will also see significant growth.
Over all, the OECD's forecast suggests growth among all G7 nations will be sluggish in the first half as government stimulus programs run their course and labour markets remain fragile. "Recent high-frequency indicators point to a continued recovery of the world economy, albeit at variable speeds across countries and regions," the OECD said, noting how countries in the group have benefited through trade with major emerging economies such as China, India and Brazil.
"The OECD's interim economic report released overnight further highlighted the uphill battle Europe is facing," noted RBC Dominion Securities senior currency strategist Matthew Strauss. "While economic growth expectations for [the first quarter]were lifted for U.S., Japan and Canada compared to the November outlook, growth projections in Germany, France and Italy were cut quite dramatically. The market is paying more attention to expected growth differentials and amongst the major economies the U.S. is coming out on top."
Separately today, the World Bank projected stronger growth in East Asia this year, forecasting in a semi-annual outlook that those economies could be the best in the world, with economic expansion of 8.7 per cent.
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Canada's growth to lead G7: OECD
Building permits unexpectedly slide
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Japan's outlook brightens
While the OECD forecast put Japan's growth at just 1.1 per cent in the first quarter and 2.3 per cent in the second, the country's central bank itself said today that there are signs of a sustained recovery. The Bank of Japan kept its benchmark lending rate at 0.1 per cent and basically stayed the course on other measures, as it aims to end the country's most recent bout of deflation. Central bank Governor Masaaki Shirakawa told reporters in Tokyo that the economy is moving "in a better direction" than earlier in the year, and that the economy is showing "some signs of a sustained recovery."
Economists noted his more optimistic note. "The signs of recovery are hard to ignore," Adrian Foster, the chief of markets research at Rabobank International in Hong Kong, told Reuters. "I am surprised that he's claiming a sustainable recovery, though." Read the story
Auto makers in three-way deal
Daimler, Renault and Nissan today announced a deal to trade small stakes in each other and work together on small cars and engines. Daimler will take stakes of 3.1 per cent in Renault and Nissan, while they each take interests of 1.55 per cent in their German competitor. They will also work together on development of electric cars and other vehicles, and diesel and gasoline engines. "Right away, we are strengthening our competitiveness in the small and compact car segment and are reducing our CO{-2} footprint," Daimler chief executive officer Dieter Zetsche said. Read the story
Talisman strikes five deals to sell assets
Talisman Energy Inc. said today it is selling several of its non-core Canadian assets in five separate deals worth a total of about $1.9-billion as it moves to focus on its shale gas operations. The Calgary-based energy company said in a statement it was selling about one million net acres of land in regions in Alberta and Ontario, which produce about 42,500 barrels of oil equivalent a day, primarily natural gas. "Although these are excellent assets with a great future, they can't effectively compete for capital within our emerging strategic asset mix," chief executive officer John Manzoni said. "These sales ... will help us focus on, finance and building our growing, low-cost North American shale gas business."
Canadian investors in TSX outperform
Given the strength of the loonie, Canadians who invested in their home stock market over the past year have done better than had they put their money in the U.S. market despite the stronger rebound by the S&P 500 from its lows of the recession, a comparison by BMO Nesbitt Burns economist Robert Kavcic shows.
"In currency-adjusted terms, the TSX has posted about twice the return of the S&P 500, and has outperformed most other major markets," Mr. Kavcic said. "With the loonie piercing parity again, the buy Canada theme is alive and well."
Related: Expecting 10 per cent returns? It's time for a reality check
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