Tuesday, August 23, 2011
Reinvigorate reforms to improve market access: U.S. official
From The Hindu
A top official of the United States Treasury made a strong pitch for economic reforms that would remove “barriers having to do with market access” that are impeding greater bilateral trade and investment. The official was speaking to the media here a few days ahead of the second round of the U.S.-India-Financial and Economic Partnership (FEP).
While next week's discussions between Finance Minister Pranab Mukherjee and U.S. Treasury Secretary Tim Geithner will focus on the broad pillars of macroeconomic policy, financial sector reforms and infrastructure finance, Under Secretary Lael Brainard, talking to a select group of journalists, spoke about the need for more competition and openness in sectors such as banking, insurance, pension products and, most importantly, multibrand retail.
Responding to a question from The Hindu whether India opening up these sectors too soon might put domestic players and smaller producers at risk from foreign competition, Ms. Brainard said: “If you look at the areas where India made some huge steps forward in previous decades, such as telecoms and IT — look at how competitive your providers are now. Our general theory of the case is that competition leads to world-class competitors and sheltering leads to companies that cannot compete very well on the world stage.”
Ms. Brainard indicated that financing of infrastructure investments was also likely to be at centre stage of the discussions, explaining that besides the question of reforms to remove market barriers in this area too, the two sides would “talk very specifically about municipal bond markets. In this country, we do a lot of infrastructure investment at the municipal level and we have very active bond markets at that level.”
On broader issues such as the controversy over the alleged fall in U.S. visa issuance to Indian IT companies, she said: “My understanding is that in the area of H1-B visas India is the biggest by far — something like 50 per cent more than any other country — beneficiary of the H1-B programme.”
Acknowledging that there were concerns in this area, the Under Secretary, however said, “In fact, Indian access has not changed in any way in the H1-B area. But it is an area that we will continue, obviously, to look at, because we know it is important to you.”
She also spoke of the long-standing and unresolved question of totalisation or the issue of Indian companies in the U.S. that contributed over $1 billion annually towards U.S. social security programmes but did not derive any benefits or refunds from that owing to the short-stay nature of their visas.
Ms. Brainard expressed doubt that there would be many options for resolution in the near future. “On social security equalisation at the moment it is not clear how far we are going to be able to proceed there because our systems are so very different but we are certainly in principle willing to engage in discussions and will continue to do so to see whether there is more potential there.”
Other key themes of the talks that would touch upon social dimensions of economic growth in both countries included anti-corruption measures and inclusive-growth strategies, the official said.
To another question from The Hindu whether the recent corruption scandals in India had fouled the trade and investment climate for foreigners, Ms. Brainard said: “We know from a lot of research and economics that one of the key factors in explaining the health of the investment environment is how much transparency there is and how effective are safeguards against corruption.”
She specifically touched upon anti-money laundering and countering terrorism financing as areas where the U.S. was “very eager to deepen co-operation” with India. “We are looking forward, during the discussions on Tuesday next week, [to] talking further about the challenges both sides are facing” in this regard.
Regarding inclusive growth, Ms. Brainard reflected on her visit earlier this year to India, where she witnessed firsthand the transformations brought about by community banking programmes based on peer monitoring and gradual scaling-up of small business operations.
“There is a lot of innovation that is possible in that area and we look forward to sharing those experiences because we can also learn a great deal.”
Touching on the overall tenor of the FEP talks, the Under Secretary said: “We will talk about the reform agenda on both sides and how we can each participate in each other's growth. We will talk about macroeconomics. We have different challenges but we work closely together on the G20 in particular.”
Labels: Financial and Economic Partnership, H1-B programme, Lael Brainard, United States Treasury
Friday, November 19, 2010
U.S. Treasury offloads GM stake
From The Hindu
The United States Treasury has agreed to sell a significant share of its stake in auto major General Motors through an initial public offering on the New York Stock Exchange. Through the sale of over 358 million shares that it holds in the company, the U.S. government aims to reduce its stake from 60.8 per cent to 36.9 per cent.
Speaking after the IPO was announced President Barack Obama said that it marked a major milestone in the turnaround of an iconic company and the entire American auto industry. After the sell-off the government would have cut its stake in GM by nearly half, he said, “continuing our disciplined commitment to exit this investment while protecting the American taxpayer.”
Reflecting on his administration's actions to intervene in the auto market at the height of the recession Mr. Obama said that supporting the U.S. auto industry “required tough decisions and shared sacrifices, but it helped save jobs, rescue an industry at the heart of America's manufacturing sector, and make it more competitive for the future.”
The Department of the Treasury said that it had agreed to sell its common stock in GM at $33 per share, as part of GM's initial public offering and if the underwriters' over-allotment option was exercised in full, “the aggregate gross proceeds to Treasury from the offering are expected to be about $13.6 billion, before giving effect to any fees associated with the offering.”
Treasury Secretary Tim Geithner said that the GM IPO was “an important step in the turnaround of the company and for our work to recover taxpayer dollars and exit this investment as soon as practicable.”
At the end of October the Treasury noted that the cumulative return to taxpayers from the sale of GM stock had reached $9.5 billion, in particular, including the GM's repurchase of $2.1 billion of the Series-A preferred stock issued under the Trouble Asset Relief Programme.
Market commentators said that since General Motors had shown that it could be profitable, “a complete exit by the government could happen even within the next two years.”
Labels: General Motors, New York Stock Exchange, United States Treasury
Sunday, June 20, 2010
More sanctions on Iran
From The Hindu
U.S. Treasury clamps down on its finances
In a swift follow-up move after the passage of the United Nations Security Council sanctions resolution against Iran earlier this month, the United States Treasury announced the first set of sanctions designations “targeting Iran's nuclear and missile programmes”.
The Treasury said the sanctions it had announced targeted in particular “Iran's use of its financial sector, shipping industry and Islamic Revolutionary Guards Corps to carry out and mask its proliferation activities.”
The Treasury said that under Executive Order 13382 of UNSCR 1929, which permitted the freezing of assets of Iran, it had designated the following Iranian institutions: Post Bank of Iran for its links to Bank Sepah; Islamic Revolutionary Guard Corps (IRGC) entities and individuals; the IRGC Air Force and IRGC Missile Command (both of which were alleged to have ties to Iran's ballistic missile programme); Rah Sahel and Sepanir Oil and Gas Engineering Co. for alleged ties to previously designated Khatam al-Anbiya Construction Headquarters; five Islamic Republic of Iran Shipping Lines (IRISL) front companies; and numerous individuals for their roles in the IRGC and in Iran's alleged weapons programmes.
The Treasury said that it had also 27 vessels blocked because of their connection to IRISL and updated the entries for 71 already-blocked IRISL vessels to identify new names given to these vessels as part of IRISL's efforts to evade sanctions.
Further, it identified 22 entities in the insurance, petroleum and petrochemicals industries determined to be owned or controlled by the Government of Iran by adding them to Appendix A of the Iranian Transactions Regulations (ITR). The ITR prohibit transactions between U.S. persons and the Government of Iran. As a result of these designations, the Treasury said, “all transactions involving any of the designees and any U.S. person are prohibited, and any assets the designees may have under U.S. jurisdiction are frozen.”
U.S. Treasury clamps down on its finances
In a swift follow-up move after the passage of the United Nations Security Council sanctions resolution against Iran earlier this month, the United States Treasury announced the first set of sanctions designations “targeting Iran's nuclear and missile programmes”.
The Treasury said the sanctions it had announced targeted in particular “Iran's use of its financial sector, shipping industry and Islamic Revolutionary Guards Corps to carry out and mask its proliferation activities.”
The Treasury said that under Executive Order 13382 of UNSCR 1929, which permitted the freezing of assets of Iran, it had designated the following Iranian institutions: Post Bank of Iran for its links to Bank Sepah; Islamic Revolutionary Guard Corps (IRGC) entities and individuals; the IRGC Air Force and IRGC Missile Command (both of which were alleged to have ties to Iran's ballistic missile programme); Rah Sahel and Sepanir Oil and Gas Engineering Co. for alleged ties to previously designated Khatam al-Anbiya Construction Headquarters; five Islamic Republic of Iran Shipping Lines (IRISL) front companies; and numerous individuals for their roles in the IRGC and in Iran's alleged weapons programmes.
The Treasury said that it had also 27 vessels blocked because of their connection to IRISL and updated the entries for 71 already-blocked IRISL vessels to identify new names given to these vessels as part of IRISL's efforts to evade sanctions.
Further, it identified 22 entities in the insurance, petroleum and petrochemicals industries determined to be owned or controlled by the Government of Iran by adding them to Appendix A of the Iranian Transactions Regulations (ITR). The ITR prohibit transactions between U.S. persons and the Government of Iran. As a result of these designations, the Treasury said, “all transactions involving any of the designees and any U.S. person are prohibited, and any assets the designees may have under U.S. jurisdiction are frozen.”
Labels: missile programmes, sanctions resolution, United Nations Security Council, United States Treasury
Tuesday, March 30, 2010
U.S. Treasury seeks to offload Citi stake
From The Hindu
Amidst signs of better performance by financial services companies, the United States Treasury on Monday announced that it plans to dispose of its 7.7 billion shares (27 percent stake) in banking major Citigroup Inc.. It will sell shares into the market through various means “in an orderly and measured fashion.”
In a statement the Treasury on Monday said it would sell off its common stock in Citigroup over the course of 2010 and subject to market conditions. At its most recent closing price the sale would fetch Citigroup anywhere between $7.5 billion to $8 billion in profits to the American taxpayer, a potential political victory for President Obama.
According to reports the government planned to initiate the sale of its Citigroup assets last year, but when the bank’s share price dropped below $3.20 in December it delayed those plans amid fears that it might lose money on the investment.
The Treasury received these shares of common stock following a June 2009 Exchange Agreement with Citigroup. The Treasury explained that this agreement provided for the exchange into common shares of the preferred stock that Treasury purchased in connection with Citigroup's participation in the Capital Purchase Program.
Morgan Stanley has been engaged as the Treasury’s capital markets advisor in connection with its Citigroup position. The manner, amount and timing of the stock sales would be “dependent upon a number of factors,” the Treasury statement noted.
However this planned disposition of common stock would not affect the Treasury's holdings of Citigroup trust preferred securities or warrants for its common stock.
Citigroup, one of the worst hit of high street banks in the U.S., posted more than $100 billion in write-downs over the last two years. Following these catastrophic losses Citigroup received $45bn in bailout funds via the Troubled Asset Relief Programme (TARP). Of this the bank repaid $20bn last December.
Earlier this month, Vikram Pandit CEO of Citigroup said before a Congressional Oversight Panel that “Citi owes a large debt of gratitude to American taxpayers… everything we have been doing is to ensure that Citi never again needs the assistance of the American taxpayer.”
However he added that as a result of the government's response to the crisis the bank was now “in a far different and much healthier position.
Labels: Citigroup, United States Treasury, Vikram Pandit
Saturday, March 27, 2010
New measures to revive U.S. housing market: Treasury
From The Hindu
In an attempt to directly reach “millions of responsible, middle-class American families struggling to stay in their homes” the United States Treasury announced adjustments to the Home Affordable Modification Program (HAMP) and the Federal Housing Administration (FHA) programmes on Friday.
According to the Treasury the adjustments to these programmes “will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.” They aim to provide greater flexibility for mortgage servicers and originators to assist more unemployed homeowners and those owing more on their mortgage than the value of their home.
The adjustments will, the Administration hopes, reach 3 to 4 million struggling homeowners by the end of 2012. The federal costs of the support programme will be funded through the $50 billion allocation for housing programmes under the Troubled Asset Relief Program (TARP). The private sector will also share a part of the total costs, according to the Treasury.
However the adjustments came under fire from some Democrats for its limited coverage: “The central issue we need to understand is why fewer than 200,000 homeowners have obtained so-called 'permanent' modifications...and what we can do to increase that number,” Representative Edolphus Towns was reported to have said at a hearing on Capitol Hill.
Republicans and other constituents levelled further criticism at the schemes: according to reports Republican Darrell Issa of California said HAMP was a “failure,” and John Taylor of the National Community Reinvestment Coalition “blasted Treasury for not showing the same urgency to help homeowners as it has for the banking industry.”
Further reports cited Neil Barofsky, special inspector general for the TARP programme, as saying that the Treasury's metric for measuring the success of the programme is “essentially meaningless.”
"Absent a thorough review...the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway," Mr. Barofsky's office reportedly said.
However the Treasury pointed to some positive results of the housing market stabilisation initiatives undertaken thus far, saying that mortgage rates had reached record lows with more than four million homeowners refinancing their mortgages to more affordable levels, helping to save more than $7 billion annually.
“More than one million homeowners are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing,” the Treasury added.
Yet numerous challenges remain, even the Treasury admitted; for example mortgage servicers were slow to implement HAMP, resulting in a slow start for the programme. Further President Obama recently said “We can't stop every foreclosure,” underscoring that government resources would be used assist to only struggling middle class families.
The Treasury reiterated that it would selectively utilise funds for of mortgage-related assistance: “Investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures…”
It further stipulated clear eligibility conditions for homeowners to benefit from the modifications under HAMP. These conditions include the requirement that homeowners “must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship.”
Similarly the FHA refinance options announced will only provide opportunities for lenders to restructure loans to homeowners who owe more than their home is worth and “the population eligible for a FHA refinance must be current on their mortgage.”
In an attempt to directly reach “millions of responsible, middle-class American families struggling to stay in their homes” the United States Treasury announced adjustments to the Home Affordable Modification Program (HAMP) and the Federal Housing Administration (FHA) programmes on Friday.
According to the Treasury the adjustments to these programmes “will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.” They aim to provide greater flexibility for mortgage servicers and originators to assist more unemployed homeowners and those owing more on their mortgage than the value of their home.
The adjustments will, the Administration hopes, reach 3 to 4 million struggling homeowners by the end of 2012. The federal costs of the support programme will be funded through the $50 billion allocation for housing programmes under the Troubled Asset Relief Program (TARP). The private sector will also share a part of the total costs, according to the Treasury.
However the adjustments came under fire from some Democrats for its limited coverage: “The central issue we need to understand is why fewer than 200,000 homeowners have obtained so-called 'permanent' modifications...and what we can do to increase that number,” Representative Edolphus Towns was reported to have said at a hearing on Capitol Hill.
Republicans and other constituents levelled further criticism at the schemes: according to reports Republican Darrell Issa of California said HAMP was a “failure,” and John Taylor of the National Community Reinvestment Coalition “blasted Treasury for not showing the same urgency to help homeowners as it has for the banking industry.”
Further reports cited Neil Barofsky, special inspector general for the TARP programme, as saying that the Treasury's metric for measuring the success of the programme is “essentially meaningless.”
"Absent a thorough review...the program risks helping few, and for the rest, merely spreading out the foreclosure crisis over the course of several years, at significant taxpayer expense and even at the expense of those borrowers who continued to struggle to make modified, but still unaffordable, mortgage payments for months more before succumbing to foreclosure anyway," Mr. Barofsky's office reportedly said.
However the Treasury pointed to some positive results of the housing market stabilisation initiatives undertaken thus far, saying that mortgage rates had reached record lows with more than four million homeowners refinancing their mortgages to more affordable levels, helping to save more than $7 billion annually.
“More than one million homeowners are saving an average of over $500 per month through the Administration's modification program, home equity increased by more than $12,000 for the average homeowner in the last three quarters last year and the economy is growing,” the Treasury added.
Yet numerous challenges remain, even the Treasury admitted; for example mortgage servicers were slow to implement HAMP, resulting in a slow start for the programme. Further President Obama recently said “We can't stop every foreclosure,” underscoring that government resources would be used assist to only struggling middle class families.
The Treasury reiterated that it would selectively utilise funds for of mortgage-related assistance: “Investors and speculators should not be protected under our efforts, nor should Americans living in million dollar homes or defaulters on vacation homes. Some people simply will not be able to afford to stay in their homes because they bought more than they could afford. Instead, the Administration must focus on providing responsible homeowners opportunities to obtain a modification or to refinance and prevent avoidable foreclosures…”
It further stipulated clear eligibility conditions for homeowners to benefit from the modifications under HAMP. These conditions include the requirement that homeowners “must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income) and demonstrate a financial hardship.”
Similarly the FHA refinance options announced will only provide opportunities for lenders to restructure loans to homeowners who owe more than their home is worth and “the population eligible for a FHA refinance must be current on their mortgage.”
Labels: Federal Housing Administration, Home Affordable Modification Program, homeowners, United States Treasury
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