... Financial) - (Updates with closing figures throughout) Stock markets across Asia ended mostly lower Thursday, tracking ... by the stress in the housing market. China led the decline, with the Shanghai Composite down 5.42 percent at 3,411.49. Petrochina, ...
Thursday, March 27, 2008
Asian stocks fall with Wall Street as data revives slowdown fears UPDATE
Oil prices jump close to 103 dollars
... as investors also seek shelter from choppy stock markets. The price of oil has doubled since ... oil producing countries such as Iran and Nigeria. ...
Asian economic and business calendar -- to April 11
... expected to April 11 Friday March 28 -Japan Feb CPI, Tokyo March CPI -Japan Feb unemployment rate -Japan ... inflows -Malaysias Feb external trade -Taiwan end-March forex reserves -Bank Indonesia policy meeting -Indonesias Bank ...
Ithmaar Bank Chairman appointed Co-Chair of the World Economic Forum on the Middle East 2008
... will be held in Sharm El Sheikh, Egypt from May 18 to 20. The annual ... of Bahrain and listed on the Bahrain Stock Exchange ("ITHMR"). It has a paid-up capital of ...
Wednesday, March 26, 2008
USAID program in Iraq tops $150m in micro-loans
... today that its private-sector development program in Iraq, known as Izdihar (prosperity in Arabic), ... ... March 2008 (Voices of Iraq) -- Iraqs Stock Exchange (ISX) index decreased by 0.661 % to ...
Iraq, Five Years In
... Their banks are doing brisk business, their stock market is active and investment in business is ... in the same way that Pakistan and Nigeria and other violent but viable nations seem ...
FirstAlert: 10-11:50 A.M. Investrend / Bestcalls
... economic releases. (By Dr. Joe Duarte) The stock market seems to have decided that for now ... Menachem Begin and Jimmy Carter signed the Israel-Egypt Peace Treaty in Washington, DC in 1979. ...
Egypt editor given six-month sentence for Mubarak rumours
... Egypt editor given six-month sentence for Mubarak rumours ... more than 350 million dollars from the stock exchange. Speculation about Mubarak was widely reported on ...
Stocks lower on financial sector worries, dismal economic data
... slide in financial stocks kept the Toronto stock market slightly lower Wednesday morning amid a prediction ... Rio Doce has halted negotiations to acquire Anglo-Swiss miner Xstrata PLC in a deal that ... were down 75 cents to $35.45. Overseas stock markets were generally slightly down, though the Hong ...
Thomson shareholders approve Reuters deal
... 1851 when Paul Julius Reuter began sending stock market information between London and Paris by carrier ... greater foothold in emerging markets such as China and India, where a rising middle class ...
Volatility dogs Indian equities markets
... Maharashtra, India, 12:00 PM IST Key Indian equities market index Sensex opened weak Wednesday due to ... opening at 8,776.19, losing 74.51 points and Japans Nikkei opening at 12,648.97, dipping by 109.97 ...
Demutualised bourses to play regulatory, commercial role in future
... Division of Securities and Exchange Commission of Pakistan (SECP) has said that the Demutualised stock ... jointly organised by the SECP and Islamabad Stock Exchange (ISE). He said that the demutualised stock ...
Monday, March 24, 2008
South Africa: Besa Sets Record for Bonds
... but Greubel said it would take another couple of months. One source said the JSE was opposed to the recapitalisation of the bond market and thought better market efficiencies ...
Pax Bernankeana
Gold prices managed to add nearly $10 in overnight Asian trading and returned to the $920 value zone after a string of losses for the week the magnitude of which has not been seen since 1990. While some there was some scattered
Commodity Prices may be Down, but not Out
Commodity prices falling almost as fast as they rose this year raise questions again on the wisdom of investing in such markets, but those in the game for long will say its worth it, a market researcher said. Some are asking if commodity prices in general had gone up too high, too fast, leading to a bubble.
Egypts Alcotexa sells 100 tonnes cotton in week
CAIRO (Reuters) - The Alexandria Cotton Exporters Association (Alcotexa) said on Sunday it committed in the week ended March 22 to sell 100 tonnes of cotton for export.
Saturday, March 22, 2008
China banks to face harder times after bumper 2007
HONG KONG (Reuters) - Chinas huge banks are poised to report strong profit growth for 2007, thanks to a surging economy and stock market bull run, but 2008 is set to be a tougher year for the top three Chinese lenders.
Inflation-proof your portfolio
Think of inflation as a menace you can manage -- if you take the right steps. Here are three things to consider to help ensure your money will last as long as you do.
Dow falls 293 as commodities slump
Gold falls under $1,000; crude oil drops 4.5%. Concerns about more write-downs at Merrill Lynch hit financial stocks. Visa shares jump 29% on the companys first day of trading. Morgan Stanley profits are better than expected.
Wednesday, March 19, 2008
S.Africa manufacturing confidence at 4-1/2 year low
JOHANNESBURG (Reuters) - Confidence in South Africas manufacturing sector plunged to a 4-1/2 year low in the first quarter of 2008, hit by slowing consumer demand, higher input prices and power shortages, a new survey showed on Monday.
S.Africa finmin Manuel warns on current account, market turmoil
PRETORIA (Reuters) - South Africas large current account deficit is a major chink in its armour given a low savings rate and global financial market turmoil, Finance Minister Trevor Manuel said on Monday.
Wednesday, March 12, 2008
New arrest in SocGen trading scandal
(Reuters) - Police arrested another employee of Societe Generale on Wednesday as they probe the world's biggest rogue trading scandal, Paris prosecutors said.
In January, France's second-biggest listed bank SocGen unveiled 4.9 billion euros ($7.53 billion) of losses which it blamed on rogue deals carried out by Jerome Kerviel, a 31-year old junior trader at the bank.
The losses have made SocGen a possible bid target.
The Paris prosecutor's office identified the latest person being held as a trader from a subsidiary of SocGen.
A source close to the matter said the person being held works for SG Securities, the bank's share brokerage arm.
SocGen declined to identify the person or the division.
House's Frank Says Muni-Bond Ratings Are `Ridiculous'
Bloomberg) -- U.S. Representative Barney Frank said it is ``ridiculous'' that bond-rating companies apply tougher standards to local government debt as he prepares to hold a hearing on the soaring interest costs of municipalities.
California Treasurer Bill Lockyer and other state officials are calling for Standard & Poor's, Moody's Investors Service, and Fitch Ratings to change a system they say costs taxpayers by exaggerating the risk that states and cities will default on their debts. Every state except Louisiana would be AAA if measured by the scale used for corporate borrowers, according to research by Moody's Investors Service.
``This notion of having a separate standard for the municipals because they would do too well on the other standard is ridiculous,'' Frank, the Democrat who chairs the House Financial Services Committee, told reporters in Washington yesterday.
Frank's committee today opens a hearing into how states, local governments and other tax-exempt borrowers, which have $2.6 trillion of debt outstanding, are being hurt by the crisis in confidence in U.S. financial markets. The interest costs on auction-rate securities, a type of debt used by municipalities, has almost doubled since January and investors have also demanded higher yields on tax-exempt bonds backed by insurers that are struggling to maintain their own credit ratings.
Insurers' Investments
``The bad investments they have made have dragged down the value of the municipal issuers and cost money for people who want to build schools and roads,'' Frank said in a Bloomberg Television interview today.
Lockyer at today's hearing plans to ask Congress to pressure the rating companies to change their system, spokesman Tom Dresslar said. Other witnesses set to testify include Ajit Jain, the chairman of Berkshire Hathaway Assurance Corp., Laura Levenstein, a senior managing director for Moody's, and New York's superintendent of insurance, Eric Dinallo.
``The current system makes no sense,'' said Dresslar. ``Taxpayers wind up paying billions of dollars in higher interest rates and insurance premiums.''
Because ratings are typically lower on the municipal scale, local governments have paid insurance companies to back their bonds with AAA ratings, seeking to reduce borrowers' costs. With insurers' ratings under pressure because of losses on mortgage debts, states, cities and hospitals have faced higher interest costs on floating-rate bonds backed by the guarantors as investors shun the debt.
Dollar Falls to Record Low on Concern Fed Package Won't Succeed
(Bloomberg) -- The dollar fell to a record below $1.55 per euro on concern that the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses.
The U.S. currency erased more than half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would extend $200 billion of credit to financial institutions to spur lending. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged.
``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
The dollar fell to $1.5504 per euro, the weakest since the euro's 1999 debut, and traded at $1.5492 at 10:12 a.m. in New York, from $1.5338 yesterday. The previous historic low was set yesterday. It dropped to 102.32 yen from 103.42, within one yen of an eight-year low. The euro traded at 158.59 yen from 158.61.
Euro gains were limited after Luxembourg Finance Minister Jean-Claude Juncker said he is ``very vigilant'' on the euro in current circumstances and that exchange rates should reflect fundamentals. He spoke to reporters in Brussels.
Gulf Pegs
The yen climbed against major currencies, including a 1.3 percent rally versus South Africa's rand, as a government report showed Japan's economy grew an annualized 3.5 percent last quarter, faster than the 2.3 percent median forecast of economists surveyed by Bloomberg News.
Forward contracts to buy United Arab Emirates dirhams rose the most in two weeks after Economy Minister Sultan Bin Saeed Al Mansouri said the dirham's dollar peg is ``contributing'' to record inflation.
A Qatari official denied in a telephone interview that Gulf central bankers will consider dropping the dollar peg when they meet next week. Gulf countries are under pressure to revalue their currencies or drop dollar pegs after the U.S. currency fell 10 percent against the euro last year and the Fed cut rates. The weaker dollar boosts the cost of imports from Europe, while Gulf states have to follow rate cuts, stoking inflation.
The euro extended its gains against the dollar earlier after a European Union report showed industrial production in the region increased for the first time in three months in January. It rose 0.9 percent from the prior month, more than twice the rate forecast by economists surveyed by Bloomberg.
`Stay Short Dollars'
The euro also rose on speculation ECB President Jean-Claude Trichet will highlight inflation risks today at a press conference. ECB council member Axel Weber yesterday said that he sees ``no room'' to lower rates.
The ECB's main rate is 1 percentage point above the Fed's 3 percent target rate for overnight loans between banks.
Policy makers in the U.S., U.K., Canada, Switzerland and the euro region agreed yesterday on a second round of emergency- loans to curb rising money-market rates. The Fed said it will lend Treasuries through a new lending tool and widen the collateral it accepts to include mortgage-backed securities.
``Read the need for such new measures as being a symptom of what ails the world and not a panacea for its problems,'' said David Simmonds, the London-based global head of currency research at Royal Bank of Scotland Plc, the world's fourth- biggest foreign-exchange trader. ``Stay short dollars.''
Monday, March 10, 2008
TIPS' Yields Show Fed Has Lost Control of Inflation
(Bloomberg) -- Bond investors have never been so sure that the Federal Reserve will lose control of inflation. They're so convinced that they're giving up yields just to buy debt securities that protect against rising consumer prices.
The yield on the five-year Treasury Inflation-Protected Security due in 2012 has been negative since Feb. 29, and traded today at minus 0.17 percent. The notes, which were first sold in 1997, have never before traded below zero. Even so, firms from Deutsche Asset Management to Vanguard Group Inc., the second- biggest U.S. mutual fund company, say TIPS are a bargain.
For the first time in a generation, money managers must come to grips with a central bank that's more intent on spurring the economy than restraining price increases. With oil above $100 a barrel, gold approaching $1,000 an ounce and the dollar at a record low against the euro, TIPS show investors aren't convinced Fed Chairman Ben S. Bernanke will be able to tame inflation once policy makers stop cutting interest rates.
``The way TIPS are trading now, investors believe headline inflation will stay lofty and are willing to give up the real yield for that,'' said Brian Brennan, a money manager who helps oversee $11 billion in fixed-income assets at T. Rowe Price Group Inc. based in Baltimore. Prices for the securities indicate ``a real concern of a recession and high headline inflation,'' he said.
Because TIPS pay a principal amount that rises in tandem with the consumer price index, buyers accept lower yields in a bet the inflation adjustment will make up the difference.
Volcker Fed
Investors typically determine what they are willing to receive in interest by deducting the rate of inflation expected over the life of the securities from the rate on a comparable Treasury. Investors can still earn money from TIPS with sub-zero rates because the principal rises with the CPI.
Five-year TIPS yielded 2.36 percentage points less than similar-maturity Treasuries as of 9:14 a.m. in New York. The so- called breakeven rate has risen from a four-and-a-half-month low of 1.89 percent on Jan. 23, the day after policy makers cut their target lending rate by three-quarters of a point to 3.50 percent in an emergency move.
The last time investors were so worried about faster inflation amid slowing growth, Paul A. Volcker presided over a Fed that would raise rates as high as 20 percent to end the stagflation crisis of the 1970s, according to Seth Plunkett, a bond fund manager at American Century Investment Management in Mountain View, California. The firm manages $20 billion.
Fed Forecast
Inflation ``is going to be higher than the Fed's targeted area,'' said Plunkett, whose fund owns a greater percentage of TIPS than contained in the index he uses to measure performance.
In forecasts released last month, the Fed said it expects inflation to accelerate 2.1 percent to 2.4 percent this year, and 1.7 percent to 2 percent in 2009.
TIPS have returned 6.2 percent this year, compared with 3.7 percent from regular Treasuries, according to indexes compiled by Merrill Lynch & Co. Mutual funds that specialize in inflation-linked debt attracted a net $2.87 billion in January, boosting their assets to $47.6 billion, according the latest data available from Financial Research Corp. in Boston. In all of 2007, the funds added a net $3.54 billion.
``TIPS are a really good buy,'' said Bill Chepolis, a money manager who helps oversee $9 billion at Deutsche Asset Management in New York. He bought five-year TIPS in the last six months. ``They're cheap with the Fed continuing to emphasize growth over inflation and inflation continuing to come in higher.''
ECB's Trichet `Concerned' About Euro's Appreciation
(Bloomberg) -- European Central Bank President Jean- Claude Trichet said he's ``concerned'' about the euro's appreciation, intensifying his rhetoric after the currency climbed to a record against the dollar.
``We're concerned about excessive exchange-rate moves in the present circumstances,'' Trichet told reporters in Basel, Switzerland today. It's the first time Trichet has specifically expressed worry about the currency since November, when he opposed ``brutal'' moves.
The euro fell as much as 0.3 percent after the comments before rebounding, as investors decided Trichet's ability to weaken the currency is limited. The strongest European inflation in 14 years is preventing the ECB from cutting interest rates while the Federal Reserve is slashing borrowing costs to stave off recession in the world's largest economy.
``Trichet is making a distinct change in emphasis,'' said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. Still, ``while the ECB is on hold and the Fed is cutting rates, rate differentials will continue to move in support for the euro.''
The euro rose to a record $1.5459 on March 7, a day after Trichet declined to sound a warning following the ECB's decision to leave its key rate unchanged at 4 percent.
`Strong Dollar'
On that occasion Trichet noted only that U.S. authorities support a ``strong dollar,'' an observation he repeated today with ``extreme attention.'' U.S. Treasury Secretary Henry Paulson said March 7 that a strong dollar is ``in our nation's interest.''
Unlike the Fed, which has cut its benchmark interest rate 2.25 percentage points since September, Trichet's ECB has refused to reduce rates with inflation in breach of its 2 percent goal.
By signaling an unwillingness to take action, the ECB is indicating ``tacit support for its record-high euro as it uses currency policy to contain inflationary pressures rather than monetary policy,'' said Ashraf Laidi, a currency analyst at CMC Markets in New York.
ECB Executive Board member Juergen Stark told a conference in Paris on March 7 that the ECB does not target a euro-dollar exchange rate. Currency developments ``should be taken into account by monetary policy only to the extent that they have a medium-term influence'' on inflation, he said.
Thursday, March 6, 2008
Billionaire dreamlist: helipad and private beach
(Reuters Life!) - Credit crunch? What credit crunch?
More billionaire house hunters than ever are scouring the globe in search of the perfect hideaway.
So how about a Parisian mansion with its own ballroom, a forest-fringed estate in Andalusia complete with helipad or maybe a villa in Anguilla with a "feather-topped beach lapped by deep turquoise waters."
Reveling in the purple prose so beloved by estate agents, the glossy magazine Country Life has picked five of the top properties on the market that even the super-rich dream about.
For $95 million, why not snap up Hillandale, an English country-style estate just 50 miles from Manhattan.
Just four minute's drive from the billionaire's playground of Monaco you could put in a bid for the Domain, a Cote d'Azur mansion with its own stud farm, paddocks and dressage arena.
The credit crunch may have hit big spenders in London's City financial district who once happily invested their huge bonuses in property. But the billionaires are not feeling the chill.
Wal-Mart February same-store sales up 2.6 pct
(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research) on Thursday reported a 2.6 percent rise in sales, excluding fuel, at U.S. stores open at least a year in February.
Analysts, on average, were expecting the company to report a rise of 1.1 percent, according to Reuters Estimates, while the company had forecast same-store sales to be between flat and up 2 percent.
Credit Swaps Thwart Fed's Ease as Debt Costs Surge
(Bloomberg) -- Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.
General Electric Co. is one of five U.S. companies rated AAA by both Standard & Poor's and Moody's Investors Service, making its ability to repay debt unquestioned. Yet when the Fairfield, Connecticut-based company sold 2.25 billion euros ($3.35 billion) of five-year bonds last week, its annual interest payment was $17 million higher than on a sale nine months ago.
Borrowers from investor Warren Buffett's Berkshire Hathaway Inc. to Germany's HeidelbergCement AG face the same predicament. Yields on $5.12 trillion of corporate bonds tracked by Merrill Lynch & Co. average 2.05 percentage points more than U.S. Treasuries, the most since at least 1997.
The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mortgage crisis. Last month some showed the odds of a default by an investment-grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.
``The credit-default swap market is completely distorting reality,'' said Henner Boettcher, treasurer of HeidelbergCement in Heidelberg, Germany, the country's biggest cement maker. ``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.''
Hedging Losses
The problem started in the second half of last year when subprime mortgage delinquencies started to rise, causing investors to retreat from complex instruments such as synthetic collateralized debt obligations, or packages of credit-default swaps that became hard to value. The swaps are contracts based on bonds and used to speculate on a company's ability to repay debt.
As values of CDOs began to fall, banks that had sold swaps underlying the securities started to buy indexes based on them instead, a method of hedging their losses on portions of the CDOs they owned. The purchases are driving the cost of the contracts higher, raising the perception that company bonds tied to the swaps are suddenly riskier and leading investors to demand higher yields throughout the corporate debt market.
The Markit CDX North America Investment-Grade Index, a gauge of credit-default swaps on 125 companies from Wal-Mart Stores Inc. to Walt Disney Co., more than doubled since the start of the year to a record 171 basis points on March 4. The index, which dropped to a low of 29 in February last year, was at 170.5 basis points at 7:10 a.m. in New York, according to Deutsche Bank AG.
European Stocks, U.S. Index Futures Decline; Asian Shares Rise
(Bloomberg) -- European stocks fell for the third day this week and U.S. index futures declined on concern credit- market losses will widen at financial companies and record oil prices will curb airline earnings.
UBS AG sank to the lowest since 2003 after JPMorgan Chase & Co. said Europe's biggest bank probably sold $24 billion in holdings of mortgage-backed securities in a ``fire sale.'' Aegon NV, the second-largest Dutch insurer, lost the most in three weeks on a 26 percent drop in earnings. British Airways Plc had its steepest decline in a week, saying its profit margin will drop.
A rally in mining companies helped Asian stocks rise for the first time in six days, while U.S. index futures fell before a report that will probably show contracts to buy previously owned homes slipped in January for a third month.
``News from the financial industry brings a negative wind,'' said Laurent Vallee, who helps oversee $6.1 billion at Richelieu Finance in Paris. ``We remain cautious on financial stocks.''
Europe's Dow Jones Stoxx 600 Index lost 0.3 percent to 314.62 as of 12:45 p.m. in London. Futures on the Standard & Poor's 500 Index slipped 0.5 percent, while the MSCI Asia Pacific Index added 1.8 percent.
Stocks maintained their losses after the European Central Bank left its key interest rate unchanged. ECB President Jean- Claude Trichet is scheduled to brief reporters at 2:30 p.m. Frankfurt time. The Bank of England earlier kept its benchmark rate on hold.
The Stoxx 600 has lost 14 percent this year on concern the collapse of subprime mortgages and a slowdown in the U.S. economy will curb profit growth in Europe. UBS may have writedowns of about $18 billion after unloading 25 billion Swiss francs of mortgage-backed securities, according to JPMorgan.
Money Markets
Carlyle Capital Corp., which invests in AAA rated mortgage securities, failed to meet margin calls and said today it received a notice of default, while Thornburg Mortgage Inc., a U.S. specialist in adjustable-rate loans too big to be sold to Fannie Mae and Freddie Mac, also received a default notice on a $320 million loan.
The cost of borrowing euros for three months rose to the highest level in seven weeks, fueling concern a coordinated effort by central banks to limit the fallout from the U.S. housing slump and revive lending is faltering.
UBS dropped 2 percent to 31.6 francs. Europe's biggest bank by assets ``likely'' sold its 25 billion francs ($24 billion) prime Alt-A portfolio in a ``fire sale,'' JPMorgan said as it lifted its ``credit-crisis'' writedown estimate for the bank to 18.5 billion francs.
Tuesday, March 4, 2008
Staples Net Income Falls 1% on Lower Retail Sales
(Bloomberg) -- Staples Inc., the world's largest office-supplies retailer, said fourth-quarter profit fell 1 percent on lower North American retail sales to small companies and consumers.
Staples dropped in Nasdaq Stock Market trading.
Net income declined to $333.2 million, or 47 cents a share, from $336.5 million, or 46 cents, a year earlier, Staples said today in a statement. Profit met some analysts' estimates. Revenue for the three months ended Feb. 2 rose less than 1 percent to $5.32 billion. Staples cut its full-year forecast.
Sales at U.S. and Canadian stores open at least a year dropped 6 percent. Office-supply retailers' sales slowed as customers concerned about a declining job market and the worst housing slump in a quarter century reduced purchases of copiers and desks. North American sales have also declined at smaller competitors such as Office Depot Inc.
``The environment is hitting everyone pretty hard,'' Walter Todd, who helps manage $800 million for Greenwood Capital Associates LLC in Greenwood, South Carolina, said yesterday in an interview. ``It's all macro-driven.'' The firm held 175,048 Staples shares as of Dec. 31.
The retailer predicted a ``mid single-digit'' percentage increase in sales and ``high single-digit'' percentage growth in earnings per share for the year ending next Jan. 31. Staples said in November that it expects earnings per share this year to increase by a percentage in the ``low teens,'' with ``high single-digit'' sales growth.
Staples Stock
Staples, based in Framingham, Massachusetts, fell 54 cents, or 2.4 percent, to $21.95 at 9:44 a.m. in Nasdaq Stock Market composite trading. The stock lost 2.5 percent of its value this year through yesterday, compared with a 20 percent decline for Office Depot, the second-largest office-supplies retailer.
``In the context of a tough retail environment, we view Staples as relatively stable,'' Jack Murphy, an analyst at William Blair & Co. in Chicago, wrote yesterday in a research note. He rates Staples shares a ``buy.''
Analysts estimated fourth-quarter profit of 47 cents a share, the average projection of 16 analysts surveyed by Bloomberg. Eleven analysts, on average, estimated sales of $5.4 billion.
In November, Staples forecast a ``low double-digit'' sales growth in the fourth quarter, with North American same-store sales unchanged or ``slightly negative.''
Bernanke Urges Banks to Forgive Portion of Mortgages
(Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages for more borrowers whose home values have declined.
``Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,'' Bernanke said in a speech in Orlando, Florida today. ``Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.''
Bernanke's call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank's Feb. 27 report to Congress called for lenders to ``pursue prudent loan workouts'' through means such as modifying mortgage terms and deferring payments.
``Delinquencies and foreclosures likely will continue to rise for a while longer,'' Bernanke said in the comments to the Independent Community Bankers of America. ``Supply-demand imbalances in many housing markets suggest that some further declines in house prices are likely.''
Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. ``Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households.''
`Vigorous Response'
In the past, homeowners could refinance, though that option is now ``largely'' gone because sales of bonds backed by subprime mortgages ``have virtually halted,'' Bernanke said. ``This situation calls for a vigorous response.''
Bernanke didn't comment in his speech text on the outlook for the economy or interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel's next meeting on March 18, based on futures prices.
Bernanke signaled in congressional testimony last week that the Fed is prepared to lower rates again even amid signs of accelerating inflation.
Yesterday, the Fed and other regulators sent letters to institutions they supervise, encouraging the banks to report on their efforts to modify mortgages at risk of default.
``This will make it easier for regulators, the mortgage industry, lawmakers and homeowners to assess the effectiveness of these efforts,'' Fed Governor Randall Kroszner said in a statement yesterday.
Foreclosures Climb
The number of U.S. homeowners entering foreclosure rose 75 percent in 2007, with more than 1 percent in some stage of foreclosure during the year, according to RealtyTrac Inc. of Irvine, California. For the year, more than 2.2 million default notices, auction notices and bank repossessions were reported on about 1.3 million properties.
``Lenders tell us that they are reluctant to write down principal,'' Bernanke said. ``They say that if they were to write down the principal and house prices were to fall further, they could feel pressured to write down principal again.''
The Fed chairman countered that by reducing the amount of the loan, this ``may increase the expected payoff by reducing the risk of default and foreclosure.''
Bernanke spoke in a state that's among the worst affected by the housing collapse. Miami home prices have dropped 17.5 percent in the past year, the most of 20 large U.S. cities, according to the S&P/Case-Shiller index. Foreclosures in Florida jumped at more than double the nationwide pace, rising 158 percent in the past year, according to RealtyTrac.
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