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US Banks See Gains; 'Stress Test' Findings Due May 4

Financial stocks have been rising since early March. Now, government officials plan to announce results of their examinations of 19 big banks.Transcript of radio broadcast: 
 16 April 2009

  

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 reported 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.

 

IMF Chief Calls 2009 'Awful Year' for World Economy
 

The head of the International Monetary Fund, Dominique Strauss-Kahn, said Thursday that 2009 is essentially a lost year for the world economy, with millions of people at risk of being thrown back into poverty.

Strauss-Kahn told an audience at Washington's National Press Club that there are signs that the free-fall in the global economy may be starting to abate. But despite that, he said 2009 will not be a good year.

"2009 will be an awful year. No matter what happens now, it's already done. Global growth will be deeply negative. And the idea that we are now really facing the first global crisis, I think, is well understood by all," he said.

The former French finance minister said a recovery depends on the effectiveness of policies implemented in the main economies. The semi-annual IMF economic forecast, which is due to be released next week, says that the current recession will likely be unusually long and severe.

Strauss-Kahn said the recent Group of 20 meeting in London, which he attended, was exceptionally successful, mainly because leaders committed themselves to taking all actions necessary to pull the global economy out of its first synchronized, post-World War II downturn. He said that government spending programs to boost demand are unlikely to succeed until credit flows normally.

"So, the effectiveness of the stimulus itself will rely on the way the [credit] system will defreeze. And depending on that, the need [for more stimulus] for 2010 will be totally different. So it is impossible today to say that we will need more stimulus in 2010," he said.

Strauss-Kahn expressed worry that the global slowdown imperils poor people in developing countries, threatening to push millions back into poverty. He said the G-20 agreement to provide more money to the IMF means that the lending agency will have the tools necessary to help countries in financial distress.