U.S. regulators urge Wells Fargo to raise more capital: report

WASHINGTON, May 4 (Xinhua) -- U.S. regulators have urged Wells Fargo to raise more capital after government "stress tests" showed the bank would have trouble surviving a deeper recession, the Associated Press reported on Monday.

The report cited two people familiar with the matter as saying that Wells Fargo is one of several banks that regulators said would need larger buffers to protect them against possible future losses.

The fourth-largest U.S. bank is one of the 19 largest U.S. banks undergoing the government "stress tests," the result of which is expected to be released on Thursday. The initial stress test results were revealed to the banks last month.

Wall Street rises, led by financials and energy stocks

NEW YORK, May 6 (Xinhua) -- Wall Street closed higher on Wednesday, as economic data indicated job losses slowed in April and investors thought the stress tests results of banks may not be as bad as expected.

The ADP employer Services reported that companies in the United States cut an estimated 491,000 jobs in April, fewer than economists' forecast and the fewest since October. The report boosted investors' confidence.

Financials led the big board higher. Citigroup surged 16 percent after a person familiar with the matter said the lender needs about five billion U.S. dollars. Goldman Sachs and Morgan Stanley rose three percent and 6.8 percent, respectively, as people knowing the matter said they don't need more money following the stress tests.

The market was awaiting the results of the government's stress tests of the nation's 19 largest banks, due on Thursday. The report is expected to reveal which banks will need to raise capital.

Concerns about the stress tests briefly intensified in early trading after The New York Times reported on Wednesday that federal regulators have warned that Bank of America Corp. will need to raise about 34 billion U.S. dollars, more than expectations.

Energy stocks also helped the market sentiment, as crude oil rose above 56 dollars a barrel for the first time since November.

The Dow Jones rose 101.63, or 1.21 percent, to 8,512.28. Broader indexes also traded higher. The Standard Poor's 500 index rose 15.73, or 1.74 percent, to 919.53, and the Nasdaq rose 4.98, or 0.28 percent, to 1,759.10.

Banks' stress test does not erase all financial concerns

Special Report: Global Financial Crisis

by Yang Lei, Chen Gang

NEW YORK, May 7 (Xinhua) -- Some investors said the result of the U.S. government's stress tests on major financial institutions does not erase all concerns about the U.S. financial system.

"We still need to be worried about banks," Teddy Weisberg, a trader told Xinhua at the New York Stocks Exchange on Thursday.

"Clearly if we have learned anything well from the past 18 months, I think we learned that we need to be a little cautious and a little worried about a lot of things," he said.

U.S. regulators on Thursday unveiled the long-waited result of the stress tests and urged 10 of the nation's 19 largest banks to raise about 75 billion U.S. dollars in new capital to withstand future losses if the recession worsened.

Among the institutions needing more money, the Bank of America needs to raise 33.9 billion dollars in capital; Wells Forgo, 13.7 billion dollars; and the auto and mortgage lender, GMAC LLC, 11.5 billion dollars.

"We certainly saw with the release of first quarter earnings from the banks that, on the operating basis, clearly with the favorable yield curve, they had no problems making money," Weisberg said.

"But the issue continues to be the toxic waste, or the bad assets, on their books. I don't think the stress tests address these bad assets that continue to be on the books of banks," he said.

Weisberg said although the results of the tests showed the banks need additional money in the worst case scenario, "unfortunately, it is a scenario, and one of the problems with creating the scenario is that now we have this bogy that everybody is going to look at."

"If the economy does not get better or gets worse, a lot worse than we expect, then we have created a whole new set of problems," he said.

The tests found that total credit losses for the 19 banks may reach 600 billion dollars in 2009 and 2010. If the economy performs as badly as the worst case scenario assumed in the tests, the losses of the banks could amount to 950 billion dollars from mid-2007 through 2010.

However, Nouriel Roubini, the NYU Stern School of Business professor, said the stress tests for the 9 major banks were not "stressful enough."

"Even with the recent economic news, the stress tests were not worst case scenarios. In fact, for some of the components, like unemployment, the reality is actually already worse than the more adverse scenario in the tests," Roubini, also known as "Dr Doom," told CNBC.

He said the unemployment rate in this year's fall may be already higher than the one assumed in the more adverse scenarios of the tests for 2010.

The International Monetary Fund (IMF) has doubled estimates of aggregate losses for loans and corresponding securities to 2.7 trillion dollars in its latest global financial review.

"These estimates put the financial system on the brink because the financial sector holds half of the losses. Since the 19 largest banks own the vast majority of assets, it therefore follows that they must also be holding the losses," Roubini said.

"Each bank clearly had the incentive to sugarcoat their expected losses to regulators. Nothing good could come from aggressively marking down their books. So while the losses are calibrated to be consistent across all 19 banks, the overall level of the losses will be downward biased.

"This explains why the stress tests don't completely jive with either the market estimates or the stock market drops," he said.

U.S. regulators gave the banks, found to be in need, to raise more capital and one month to come up with a plan. The banks will have until June 8 to develop a detailed capital plan, and until November 9 to implement it.

"The financial sector has been and will continue to be the most important part of the U.S. economy. It was certainly the area that had the most problems, which created most problems for the U.S. economy and the stock market," Weisberg said.

"So, far beyond the results of the stress tests, the financial sector, the big money banks in particular, will continue to be very much in focus for investors and traders for many, many months if not years to come," he said.

Wall Street rises, led by financials and energy stocks

NEW YORK, May 6 (Xinhua) -- Wall Street closed higher on Wednesday, as economic data indicated job losses slowed in April and investors thought the stress tests results of banks may not be as bad as expected.

The ADP employer Services reported that companies in the United States cut an estimated 491,000 jobs in April, fewer than economists' forecast and the fewest since October. The report boosted investors' confidence.

Financials led the big board higher. Citigroup surged 16 percent after a person familiar with the matter said the lender needs about five billion U.S. dollars. Goldman Sachs and Morgan Stanley rose three percent and 6.8 percent, respectively, as people knowing the matter said they don't need more money following the stress tests.

The market was awaiting the results of the government's stress tests of the nation's 19 largest banks, due on Thursday. The report is expected to reveal which banks will need to raise capital.

Concerns about the stress tests briefly intensified in early trading after The New York Times reported on Wednesday that federal regulators have warned that Bank of America Corp. will need to raise about 34 billion U.S. dollars, more than expectations.

Energy stocks also helped the market sentiment, as crude oil rose above 56 dollars a barrel for the first time since November.

The Dow Jones rose 101.63, or 1.21 percent, to 8,512.28. Broader indexes also traded higher. The Standard Poor's 500 index rose 15.73, or 1.74 percent, to 919.53, and the Nasdaq rose 4.98, or 0.28 percent, to 1,759.10.

Wall Street advances as jobs report beats estimates

Special
Report: Global Financial Crisis

NEW YORK, May 6 (Xinhua) -- Wall Street climbed in early trading Tuesday,
as economic data indicated job losses slowed in April.

The ADP employer services reported that companies in the United States cut
an estimated 491,000 workers from payrolls in April, smaller than economists'
forecast and the fewest since October.

The report boosted investors' confidence and offset worries that banks may
need more capital than previously thought.

The market was awaiting the results of the government's stress test of the
nation's 19 largest banks, due Thursday. The report is expected to reveal which
banks will need to raise capital.

Concerns about the stress test intensified after The New York Times
reported Wednesday that federal regulators have warned Bank of America Corp.
that it will need to raise about 34 billion U.S. dollars, more than
expectations.

The Dow Jones rose 89.60 to 8,500.25. Broader indexes also moved higher.
The Standard Poor's 500 index rose 10.07 to 913.87;and the Nasdaq climbed
14.91 to 1,769.03.

Unemployment, a real stress test for U.S. economy

Special Report:Global Financial Crisis

¡¡by Xinhua writer Liu Lina

BEIJING, April 29 (Xinhua) -- The news of further layoffs by big companies and the increasing concern about swine flu are casting new shadows over the U.S. economy. As new college graduates are pouring into the labor market, job creation becomes a real "Stress Test" for the U.S. government.

JOBLESS NEWS KEEPS GOING

According to General Motor's updated viability plan unveiled on Monday, 21,000 hourly workers will be shed by 2010. Salaried employees are also expected to be cut further.

The struggling auto giant is not the only big employer that joined the laying off trend that has worsened since the outbreak of the global financial crisis last September. Leading Internet company Yahoo said on April 21 that it would cut 5 percent of its global workforce following a significant drop in the first quarter results. Apple Inc., the iPod maker was reported by Dow Jones News Agency on April 23 that it secretly dismissed about 1,600 full-time jobs.

"The unemployment rate will worsen. According to our research, the potential unemployment rate, which includes people who were finding jobs a year ago and many part-time workers, is about 15 percent," said John Challenger, CEO of Challenger, Gray Christmas, Inc., the U.S. premier outplacement consulting firm, in a recent interview with Xinhua.

The Labor Department said on April 23 that initial claims for unemployment compensation rose to a seasonally adjusted 640,000, up from a revised 613,000 the previous week. That was slightly above analysts' expectations of 635,000.

In another sign of labor market weakness, the number of people continuing to claim benefits rose to 6.13 million, setting a record for the 12th straight week, and the total jobless benefit rolls are the highest since January 1983.

A double digit unemployment rate in 2010 is widely predicted by economists.

"This summer will be a real hard time for the U.S. economy since nearly 6 million college graduates are entering the work force, inflicting a great pressure on the labor market," said Huang Jing, former senior researcher at the Washington-based Brookings Institute told Xinhua.

ECONOMIC OUTLOOK REMAINS CHALLENGING

In February, the Obama administration predicted that the economy would shrink 1.2 percent in 2009. Again, the forecast would probably fall behind the curve.

OECD projected at the beginning of April that the world economy would contract by 3 percent, and world trade would decrease 13.2 percent.

In the World Economic Outlook report released on April 22, the International Monetary Fund (IMF) projected that the U.S. economy would contract by 2.8 percent in 2009. This is the third consecutive times that the organization lowered its forecast for the U.S. economy within six months.

A latest survey released by the Wall Street Journal showed that economists forecasted that the economy will not be able to recover enough to bring down unemployment until the second half of 2010.

The economists' forecasts indicate that the peak in the unemployment rate is likely to coincide with the midterm elections that will decide which party controls Congress -- possibly bad news for Democrats. Even if the economy is growing, Americans still will be feeling the effects of the recession and could blame the incumbent.

The first-quarter gross domestic product report, due from the Commerce Department on Wednesday, could offer some clues about what a recovery might look like.

Economists think GDP shrank at an annual rate of 4.6 percent in the first quarter, one of the worst since World War II, but not as terrible as the 6.3 percent shrinkage in the fourth quarter of 2008.

¡¡¡¡NEW UNCERTAIN FACTORS ARISE

As people are wondering where the U.S. economy might go following the report of mixed economic index in April, an unexpected epidemic disease brings new uncertain factors to the world economy. The outbreak of swine flu triggers worldwide alert in recent days.

"Fears over swine flu threatened to knock a vulnerable global economy into deeper turmoil, hammering travel and tourism as nervous consumers and businesses delayed spending plans," reported the Wall Street Journal.

Spooked investors dumped airline shares Monday, fearing airline finances might suffer a new blow.

"This certainly could exacerbate the recession," said Sherman Chan, an economist with Moody's in Australia. "The next couple weeks will be crucial. If this (swine flu) persists it could become a more serious concern and really cripple the economy."

In a worst-case scenario, the U.S. economy would shrink by an extra 0.3 percent this year, on top of a predicted 3.5 percent decline, says Brian Bethune, economist at IHS Global Insight.

This will inevitably transmit into the labor market and exert more stress on the spending of consumers.

Although one of the crucial goals of President Obama's New Dealis to create jobs, historically, employment always lags behind the recovery of the economy from a recession.

One of the biggest worries facing economists is what would happen if unemployment rises beyond expectations and unleashes another wave of spending contractions and lower corporate profits.

At present, the world is expecting the final result, due on May4, of the stress test of the big U.S. banks, which seems to be not that positive as the share prices of Bank of America, Citi group and other banks fell Tuesday. However, the news about unemployment might be a bigger concern that deserves close watching.