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Archive for November 29th, 2009

Huge Dubai debt shock rattles world markets

Posted by truthpills on 2009/11/29

Published: 2009/11/27 06:34:17 AM
EDWARD WEST

DEBT problems in Dubai struck financial markets hard yesterday, sinking global stocks, lifting safe- haven bonds and driving the dollar higher.

European shares had their worst daily loss in seven months. Gold climbed to a new record high but fell back as the dollar rose.

Banking stocks came under particular pressure because of potential exposure to any bad debt in the Gulf, as did shares in European car companies, some of which are part-owned by sovereign wealth funds from the region.

Markets traded without much input from the US bourses, closed for the Thanksgiving holiday.

Dubai said on Wednesday it wanted creditors of Dubai World and property group Nakheel to agree to a debt standstill as it restructured Dubai World, the conglomerate that spearheaded the emirate’s breakneck growth.

The announcement triggered widespread concern about the Gulf region’s financial health. The worries also fed into nervousness in financial markets about the real state of the world economy.
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FDIC reports biggest drop for business loans on record

Posted by truthpills on 2009/11/29

By Paul Wiseman and Pallavi Gogoi, USA TODAY

U.S. banks are earning money again, but they’re writing fewer business loans, threatening a fragile economic recovery.

The Federal Deposit Insurance Corp. reported Tuesday that U.S. bank loans fell by $210.4 billion or 2.8% during the third quarter – the biggest drop since the FDIC started keeping records in 1984. Banks booked $2.8 billion in third-quarter profits, reversing a second-quarter loss of $4.3 billion. “We need to see banks making more loans to their business customers,” says FDIC Chairman Sheila Bair. “This is especially true for small businesses.”

Loans to businesses fell 6.5%, and real estate loans plummeted 8.1%.

“Until small businesses are able to borrow, we can’t have a robust economy, because that’s your largest source of jobs,” says Richard Posner, a law professor at the University of Chicago and a federal circuit judge. The Small Business Administration has said that small businesses created 64% of new jobs in the past 15 years.

Banks are reluctant to make new loans until they’ve cleared off the bad ones they made during the housing boom. Back then, they paid “insufficient attention to certain kinds of risky loans,” says Edward Kane, finance professor at Boston College. “You can’t expect them to turn around and turn the lending machine back on.”
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