Dollar Tumbles As Fed Slashes US Interest Rates

The dollar sank to a two-month low against a basket of currencies on Wednesday after the Federal Reserve cut benchmark interest rates a half percentage point and warned more may be needed to support the faltering U.S. economy.

The move comes just eight days after the U.S. central bank unexpectedly cut its lending rate by three quarters of a point to boost an economy battered by a deep housing slump and a persistent credit crisis.

"The language in the (Fed's) statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy," said Mark Meadows, analyst at Tempus Consulting in Washington, D.C.

Dealers reacted by pushing the New York Board of Trade's U.S. dollar index, which measures the greenback against a basket of six major currencies, to a two-month low.
The euro surged 0.8 percent to $1.4906, not far from its all-time high around $1.4967, according to Reuters data, before easing to $1.4877. Sterling lunged higher by more than a cent and last traded up 0.1 percent at 1.9914.

STRIKING A BALANCE

Some economists have also worried about the inflationary impact of the Fed's aggressive monetary policy easing campaign, especially given the dollar's weakness in recent months.But for now, analysts said the Fed was more concerned with keeping the U.S. economy out of recession.

Some analysts said the Fed's aggressive action puts it ahead of the curve, and the dollar may rebound if the economy starts to gain traction and avoids falling into recession.

Recent U.S. data has been mixed. Figures on home sales and prices have been dismal, and a report on Wednesday showed the economy in 2007 grew at the slowest pace in five years.

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Mukesh Ambani, Vijay Mallya, Shah Rukh Khan Win BCCI's IPL Bids

The high-profile Indian Premier League on Thursday received overwhelming response as India's top industrialists Mukesh Ambani and Vijay Mallya, and film stars Shah Rukh Khan and Preity Zinta won bids to own teams in the Twenty20 venture.

After much suspense, Board of Control for Cricket in India vice-president and IPL governing council chairman Lalit Modi named the winning bidders, who shelled out staggering amounts to become owners of the Mumbai-based teams.

Reliance Industries chief Mukesh Ambani pipped Vijay Mallya in the bid for the Mumbai team for US $111.9 million. The liquor baron, however, won the bid for the Bangalore team for US $111.6 million. Actor Shah Rukh Khan, joining hands with Juhi Chawla and Jay Mehta, won the bid for the Kolkata team for US $75.09 million. Fellow-actor Preity Zinta and her boy friend Ness Wadia won the bid for the Mohali team for US $76 million.

Among others, GMR Holdings was successful in bidding for the Delhi team (US $84 million), while India Cements bagged the Chennai team (US $91 million), Deccan Chronicle the Hyderabad (US $107.01 million) outfit and Emerging Media the Jaipur team for US $67 million.

The bids of ICICI, Sahara, and Futures Group were disqualified, Modi said. "We can say that all the hard work fructified and the IPL is here to stay," Modi said.

Asked if Shah Rukh was bidding just to use cricket as a means to promote his films, Modi replied, "Shah Rukh loves cricket and that's why he invested his money. It has got nothing to do with film promotion. "We have heard a similar complaint in the past but the Board never endorsed those views," he added. He also dismissed suggestions that there was a conflict of interests in Indian Cements, which has BCCI treasurer N Srinivasan as a shareholder, becoming a team owner. "Mr Srinivasan is just a stakeholder there and he is not the owner. So there is no such conflicts of interests," he said.

Modi admitted that some of the contracted international players would skip the twenty20 tournament, which begins on April 18 owing to national commitments, but said the pool of players is big enough. "A team needs only four players from abroad and we already have a huge number of them contracted with us. You will have enough of them from the day one," he said.

In all, 59 matches will be played over 44 days, with ICC umpires officiating the games that will be broadcast live on SET Max.
Schedules and operational guidelines of the league will be announced later. ICC's anti-doping and anti-corruption units will also keep an eye on the Twenty20 league, he added.

Asked if the base price of US $50 million was too high, he replied, "It's up to the bidders to decide if the base price was high. Since the winning bid proved much more than the base price, you can't really say that it was too high."

Stung by the Essel Group-backed Indian Cricket League, the BCCI had announced the IPL to counter the rebel venture, which has left many state teams depleted. New Zealand has also suffered a lot as six Kiwi players joined the ICL and pace spearhead Shane Bond too is ready to take the plunge.

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SocGen Rogue Trader Was Unremarkable, Hardworking

The rogue trader accused of causing a 4.9 billion euros ($7.18 billion) loss to Societe Generale through fraudulent trades was quiet, hardworking and generally unremarkable, people who knew him said on Friday.

The head of France's central bank has called him a "master of fraud" and "a computer genius," but a more mundane picture emerges from those who knew him before the scandal broke.

"He was just an average kind of person. When I arrived in the morning, he was there, and when I left in the evening, he was still there," said one colleague who worked in the same section of the bank as him, which dealt with equity derivatives.

The person declined to be named, saying Societe Generale, France's second-largest listed bank, had banned staff from talking to the media.

Dubbed "the man who blew up the bank" by the daily Le Parisien, a photo of 31 year-old Jerome Kerviel's unsmiling face was splashed across the world's media on Friday, a day after his name was linked with the largest fraud in banking history.

Societe Generale has still not named the dealer, but Kerviel's name surfaced within hours of the announcement on Thursday and was confirmed by banking sources.

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Rogue Trader To Cost SocGen $7bn

French bank Societe Generale says it has uncovered "massive" fraud by a Paris-based trader which resulted in a loss of 4.9bn euros ($7.1bn; £3.7bn). The bank said the fraud was based on simple transactions, but concealed by "sophisticated and varied techniques".

While Societe Generale has yet to name the trader, media reports say he is 31-year-old Frenchman Jerome Kerviel.

The losses are four times greater than those made by Nick Leeson, the rogue trader who brought down Barings Bank. Leeson was sentenced to six-and-a-half years in jail. Speaking to the BBC, Leeson said he was not shocked that the latest fraud had taken place - only its scale. "Rogue trading is probably a daily occurrence within the financial markets," he said. "What shocked me was the size. I never for one moment believed it would get to this degree of magnitude, this degree of loss."

Societe Generale's shares, which were suspended in the morning, ended the day down 4.1%.

According to reports, Mr Kerviel worked at the bank's Delta One products team in Paris. Although Societe Generale has yet to confirm his name, it did say that the trader was a Frenchman in his 30s who joined the bank in 2000 and earned a salary and bonus of less than 100,000 euros. He was responsible for betting on the markets' future performance, bank executives said.

"I'm convinced he acted alone," said Jean-Pierre Mustier, chief executive of the corporate and investment banking division, who interviewed the trader after the fraud was uncovered. Societe Generale said the trader had taken what it called "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority".

Executives said the trader may not have sought personal gain from the fraudulent deals. The fraud is an extraordinary echo of the rogue trader, Nick Leeson, who caused the collapse of Barings Bank in 1995, says BBC business correspondent Nils Blythe. But the losses uncovered by Barings bosses totalled just £860m - about a quarter of the amount lost by Societe Generale.

The bank, one of France's largest, will need to seek 5.5bn euros in new capital to offset the losses. But it said it would still make a profit of 600m to 800m euros for 2007, despite the blow to its balance sheet. The bank said the trader responsible for the fraud had "in-depth knowledge of the control procedures resulting from this former employment in the middle-office". "The transactions which involved the fraud were simple - taking a position on shares rising - but hidden using extremely sophisticated and varied techniques," chief executive Daniel Bouton said in a letter to the bank's customers. The bank said that the trader had confessed to the fraud and was being dismissed. His managers were to leave the bank as well. "I am sorry but I have a hard time buying the fact that a trader was able to set up a 'secret trade' of 4.9 billion without anybody finding out," said Ion-Marc Valhi at Amas Bank.

Frederic Hamm, fund manager at Agilis Gestion, believes that the fraud "impacts the reputation of the bank". Mr Bouton offered his resignation but it was rejected by the board, the bank said. Richard Fuld, the chairman of Lehman Brothers, told BBC News in Davos that "nothing stuns me, nothing really surprises me these days."

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Federal Reserve Cuts Key Interest Rate

The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession in the United States, cut a key interest rate by three-quarters of a percentage point on Tuesday, the biggest one-day move by the central bank in recent memory.

The Fed said it was cutting the federal funds rate, the interest that banks charge each other on overnight loans, to 3.5 percent, down by three-fourths of a percentage point from 4.25 percent.

The Fed decision was taken during an emergency telephone conference with Fed officials on Monday night. Those discussions occurred after global financial markets had plunged Monday as investors grew more concerned about the possibility that the United States, the world's largest economy, could be headed into a recession.

In a brief statement, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth."

The move caught financial markets by surprise. Many had expected the central bank would wait until its meeting next week to make any move in interest rates. The Fed made the move before markets had opened in the United States, hoping that the bold move would limit the decline in U.S. stocks.

Before Tuesday's move, the Fed had cut interest rates three times, beginning in September, the month after a severe credit crunch had roiled Wall Street and global financial markets. The Fed cut the funds rate by a half-point in September and then by smaller quarter-point moves in October and December.

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Washington Mutual Going Way Of Countrywide Financial?

Wall Street is speculating that the bank will go the way of Countrywide Financial and be acquired by a larger player, perhaps JPMorgan Chase.

The pressing issue for WaMu is whether it will remain independent. With Bank of America (BAC) scooping up troubled mortgage lender Countrywide Financial for $4.1 billion, Wall Street speculation is now focused on WaMu, whose shares have fallen nearly as far as Countrywide, from 45 a year ago to 13 on Jan. 16. Last week, CNBC reported that WaMu had held "very preliminary" merger talks with JPMorgan Chase. Both firms declined to comment. WaMu's stock price fell 93 cents, or 7%, to 12.46 on Jan. 17. After markets closed, the company reported a larger-than-expected $1.9 billion loss for the fourth quarter. It was WaMu's first quarterly loss since 1997.

On Jan. 17, WaMu has indicated it will post loan loss reserves of $1.6 billion for the fourth quarter, four times the amount of a year prior. Nonperforming loans were 1.65% of WaMu's assets in last year's third quarter, twice the level in 2006. That compares with 0.88% of assets at Wells Fargo (WFC), 0.63% at Wachovia (WB), and 0.43% at Bank of America—all of which have focused less on home lending.

Some 70% of WaMu's loans are in California and Florida, two states with sinking property values and an abundance of risky loans. WaMu still has about $20 billion in subprime loans, $5.8 billion of which could reset at higher rates over the next three years.

With WaMu's default rates climbing, government investigators are taking a closer look. In November, a lawsuit by New York Attorney General Andrew Cuomo accused WaMu of colluding with First American. The AG contends First American inflated the value of mortgage appraisals so WaMu could increase loan values. First American said the allegations in the complaint had "no foundation in fact or law." After the lawsuit, WaMu severed its relationship with the firm, saying it was "surprised and disappointed by the allegations in the complaint."

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Lehman To Cut 1,300 Mortgage Jobs

Investment bank Lehman Brothers Holdings Inc. on Thursday said it would stop U.S. wholesale mortgage lending because of a continued slump in credit and housing markets, a move that will cut 1,300 jobs and result in a $40 million charge.

Lehman said it will suspend wholesale and correspondent lending at its Aurora Loan Services unit.

As part of the job cuts, Aurora is closing operations centers in Lake Forest, California; Sunrise, Florida, and Florham Park, New Jersey. Lehman also said it will record a charge for severance, technology and facilities exit costs.

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Citigroup Loses $9.8 Billion; Will Cut Jobs

Citigroup announced a steep cut in its stock dividend and another big investment by foreign investors on Tuesday after taking more write-downs related to subprime securities and posting a $9.83 billion loss for the fourth quarter.

Beginning what is expected to be a grim week for financial company earnings, Citigroup said it was writing down $22.2 billion because of soured mortgage-related investments and bad loans. The bank is also cutting its dividend by 41 percent and obtaining a $12.5 billion cash infusion to strengthen its balance sheet, including big investments by its former chairman, Sanford I. Weill, and the Government of Singapore Investment Corporation.

Facing rising expenses and deepening losses, Citigroup is expected to embark on a major cost-cutting campaign that could result in at least 4,000 layoffs. And thousands more could be in the offing in the coming months.

The write-downs caused Citigroup to swing to a loss for the fourth quarter. The fourth-quarter loss translated into $1.99 a share, compared with a profit of $5.1 billion, or $1.03 a share, in the period a year earlier. Revenue fell 70 percent, to $7.22 billion from $23.83 billion.

The write-downs included $18.1 billion from a sharp drop in the value of mortgage-related securities and heavy trading losses. The company also set aside an additional $4.1 billion to cover expected losses from bad loans.

For the full year, Citigroup reported that net income dropped 83 percent, to $3.62 billion, or 72 cents a share, compared with 2006 profit of $21.53 billion, or $4.31 a share. Revenue fell 9 percent, to $81.7 billion in 2007.

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Reliance Power IPO Set To Launch

Indian power producer Reliance Energy plans an initial public offering for its Reliance Power unit, which contributes about 63% of the company’s revenues.

“Reliance Power Limited is pursuing various gas, coal and hydro power generation projects in different parts of the country. The proposed IPO is being undertaken to fund the development of the said power projects,” the company said in a release Sunday after its board approved the move.

Reliance Energy didn’t specify the amount, but media reports pegged it at about $3 billion. That would make for one of the largest ever public offerings by an Indian company. In recent months, India’s ICICI Bank raised $4.9 billion in a follow-on public offering, and real estate business DLF got $2.31 billion in an IPO.

This will be the first time a company in Anil Ambani’s conglomerate will tap the capital markets since the original Reliance split in 2005, a result of feuding between Anil and his brother Mukesh.

Reliance Energy is believed to be restructuring its business into three vertically integrated units: utility, infrastructure--in which it is expanding aggressively--and real estate.

Market reports said the company is likely to offload a 15% stake, but Reliance officials declined to confirm the number. “In recent months, several of the company’s projects have taken off, and the market response to the offering will be very positive,” said Novonil Guha, senior research analyst at the brokerage Prabhudas Lilladher. He has an “outperform” rating on Reliance Energy.

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Tata Unveils The World's Cheapest Car

The $2,500 Nano, met with extreme enthusiasm, will have lighter steel and innovative distribution. It also could further snarl India's roads.

It's called the Nano, for its high technology and small size. It's cute, compact, and contemporary. It's a complete four-door car with a 623-cc gas engine, gets 50 miles to the gallon, and seats up to five. It meets domestic emissions norms and will soon comply with European standards. It's 8% smaller in outer length than its closest rival, Suzuki's Maruti 800, but has 21% more volume inside. And at $2,500 before taxes (value-added taxes increase the price by about $300), it is the most inexpensive car in the world. Starting this fall, the Nano will roll off the assembly lines at a Tata Motors (TTM) plant in Singur, Bengal, and navigate India's potholed roads.

The Nano, also known as the People's Car, is Ratan Tata's dream come true, and is India's contribution to changing the global auto industry. "The car has put India on the global map," says Fionna Prims, head of business development for Segment Y, a Goa-based automotive consultant for emerging markets. "Tata has done in four years what the Japanese took 30 years to do. It will change the whole industry." Even rivals are gushing. "It's a red letter day for Indian industry, a day India should be proud of," says Venu Srinivasan, chairman of motorcycle maker TVS Motors. "Ratan Tata has the vision to create a new business model and all the naysayers are looking at it with concern. The Nano is a path breaker."

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How Bank Of America's Countrywide Deal Affects You?

CHICAGO -- If you're among the millions of homeowners who are customers of Countrywide Financial Corp., you're probably wondering how the sale of the troubled lender to financial-services giant Bank of America Corp. affects you.

The answer is, not much. Borrowers shouldn't lose sleep over Bank of America's $4 billion deal to acquire Countrywide, both the companies and outside experts say.

"Loans are closing just as usual," said Cari Kerns, spokeswoman for Calabasas, Calif.-based Countrywide, which originated $408 billion worth of mortgages in 2007 and is currently servicing about 9 million loans worth about $1.5 trillion.

Borrowers with a loan in process or a good faith estimate shouldn't be affected by the deal, Kerns said. "Things won't change for the time being and we are committed to communicating relevant changes to our customers as we move forward."

Bank of America said it plans to operate Countrywide separately under the Countrywide brand. Integration of the company likely won't occur until 2009.

Customers likely won't see sweeping changes, said Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage and consumer loan information.

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Bank of America's Countrywide Deal Wins Praise

WASHINGTON - Bank of America's $4.1 billion rescue of Countrywide Financial could help stem economic turmoil by giving investors worldwide more confidence in the battered U.S. mortgage industry.

The acquisition isn't expected to do much - at least right away - for the thousands of Countrywide borrowers struggling to make their mortgage payments. But it's a significant development, and consumer advocates are hopeful that Bank of America will do a better job of setting up loan modifications for struggling borrowers.

"What this demonstrates is the ability of the U.S. financial system to deal with a sizable problem in a manner that represents a relatively clean resolution," said Bert Ely, banking industry consultant in Alexandria, VA.

The deal won immediate praise from Rep. Barney Frank, D-Mass., the powerful chairman of the House Financial Services Committee, who has been pressing for tighter regulation of mortgage lenders in the wake of soaring home-loan defaults among subprime borrowers with poor credit.

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Bank Of America To Acquire Countrywide

CHARLOTTE, N.C. - Bank of America said Friday it will buy Countrywide Financial for $4.1 billion in stock, a deal that rescues the country’s biggest mortgage lender and expands the financial services empire of the nation’s largest consumer bank.

The acquisition will make Charlotte-based Bank of America Corp. the nation’s biggest mortgage lender and loan servicer.

Bank of America said it initially plans to operate Countrywide separately under the Countrywide brand, with integration occurring no sooner than 2009.

The transaction represents a 7.5 percent discount to where Countrywide shares ended Thursday after they soared on news that a rescue plan was in the works. It also effectively leaves Bank of America with a big loss on its $2 billion August investment in Countrywide Financial Corp. during the height of the summer’s global credit crisis.

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