TOPWRAP 7-US shows signs of weakness; euro zone improves 22 May 2009 05:47

* U.S. jobless claims hit record, manufacturing contracts

* S&P downgrades Britain's outlook, AAA rating at risk

* Fears of U.S. ratings cut weigh on stocks, bonds, dollar

* Euro zone PMIs show slowing contraction

* Geithner says U.S. regulatory reforms coming soon

(For full financial crisis coverage, click [nCRISIS])

By Caroline Valetkevitch

NEW YORK, May 21 (Reuters) - Data from the United States on jobless claims and business conditions on Thursday dented hopes of a quick economic rebound but euro zone countries showed that the worst recession in six decades may be easing.

In Britain, prospects were clouded by a warning over government debt and political uncertainty as Standard & Poor's lowered its outlook to "negative" and said it might cut the country's precious triple-A credit rating. [nLL627240]

"This is a reality check for the UK government," said Kenneth Broux, an economist at Lloyds TSB Corporate Markets.

Worries the United States may suffer a cut to its triple-A rating pushed down stocks, bonds and the dollar.

Investors fear the United States is "going the way of the UK," Bill Gross, co-chief investment officer at bond giant Pacific Investment Management, told Reuters. [nN21294698]

All three major U.S. stock indexes [.N] closed down more than 1.5 percent, while European shares <.FTEU3> fell 2.1 percent, breaking five straight sessions of gains. [MKTS/GLOB]

The benchmark 10-year U.S. Treasury note <US10YT=RR> eased and the dollar dropped to its lowest level this year against major currencies <.DXY>.

"No one wants to admit it but there might be investors nervous enough with the extreme levels of indebtedness of the U.S. government so that just the thought of a downgrade would provide an excuse to sell dollars," said Matt Esteve, a trader at Tempus Consulting in Washington.

CHINESE RISKS, U.S. WEAKNESS

Chinese officials highlighted the risks facing the world's third-largest economy -- one of the few still growing.

Vice Premier Li Keqiang said while the government's $585 billion stimulus plan had yielded initial results, it was too early to hail an economic recovery. [nPEK13801]

"The international financial crisis is still spreading and its impact on the real economy is deepening," the official Xinhua news agency quoted Li as saying.

Jobless claims in the United States, the world's biggest economy and epicenter of the global crisis, rose to a record last week while new claims fell by 12,000. [nN21256165]

Other data showed manufacturing in the U.S. Mid-Atlantic area shrank in May for the eighth straight month.

Treasury Secretary Timothy Geithner said the U.S. financial system was steadying from the taxpayer-funded bailout of banks but that care must be taken to ensure normal market forces are allowed to work. [nN21365767]

Broad regulatory reforms should be unveiled in a few weeks, including protection for consumers, Geithner said, as the Obama administration faces the task of "striking the delicate balance between intervention and allowing market participants latitude to operate."

The Conference Board research firm suggested more promise for U.S. growth, with its index of leading indicators for April showing the first rise since June 2008.

In that vein, the Congressional Budget Office said the U.S. economy will likely start growing again in the second half of 2009 but that the jobless rate could peak at more than 10 percent against the current 8.9 percent.

The new reports came a day after the Federal Reserve, in minutes released from its April policy meeting, cut its outlook for U.S. growth over the next three years and said a full recovery could take five or six years.

EUROPE OFFERS PROMISE

Still, the euro zone offered some grounds for cautious optimism.

Markit's Eurozone Flash Services Purchasing Managers Index, a measure of service and manufacturing activity, rose to 44.7 in May from 43.8 last month, beating the consensus estimate.

May was the third month in a row the index picked up and took it to its highest level since October. [nLAG003446]

The PMI index showed France's economy performing more strongly than the euro zone as a whole. Markit said a recovery in France could be earlier than current forecasts of a rebound in the fourth quarter. [nLK37204]

The rate of decline in the private sector in Germany, Europe's largest economy, was its slowest in seven months.

Predictions by some economists of a return to growth as early as the last quarter of this year are tempered with concerns that data may yet obscure more complex underlying weaknesses in the economy.

"It is grounds for hope that things will improve over the next few months," said Peter Dixon, an economist at Commerzbank. "I'm not getting carried away."

Elsewhere, the outlook was mixed.

South Africa, Africa's biggest economy, "faces a sharp cyclical downturn" after a prolonged boom, said Treasury Director-General Lesetja Kganyago, with the government having to manage borrowing carefully to avoid overburdening the country with debt. [nLL944902]

Argentina's economy, Latin America's third biggest, grew a better-than-expected 2.7 percent in March from a year earlier, the government said, but many analysts say official data is downplaying the slowdown. [nN21302995]

Singapore's economy shrank 14.6 percent in the first quarter at an annualized and seasonally adjusted rate, less than forecast, prompting the trade ministry to talk of signs the country's worst recession is bottoming out. [nSP404487]

The small Southeast Asian state, a proxy for global trends due to its heavy exposure to international trade, saw its exports slip back in April after two months of growth, reinforcing a view that there is no clear recovery.

Singapore's April exports to the United States and Europe shrank by more than 30 percent and to China by 15 percent. (Reporting by Reuters correspondents worldwide; Editing by John O'Callaghan)

Blogged with the Flock Browser

China Bank Braces fdor Deflationary Pressures

BEIJING -- China's central bank warned there is growing likelihood of a further downturn in China's economy, and that "relatively large" deflationary pressures loom.

In its annual monetary policy report published Monday, the People's Bank of China reiterated that it remains committed to keeping its yuan exchange rate at a balanced level. The report said the central bank also plans to use interest rates and banks' reserve requirement ratio to manage liquidity in the banking system.

Given "the contraction in external demand, excess capacity in some industries, management difficulties at corporations, [and the] increase in urban unemployment, the downward pressure on [China's] economic growth has clearly increased," the report said.

There could be global inflationary pressures in the medium-to-long term, but in the short term, deflation is the greater danger, the bank said.

"The risk of deflation is relatively large" due to falling raw-material prices in the international market and weak external demand causing overcapacity within China, the bank said.

The report didn't appear to signal any policy change was imminent in terms of the central bank's moderately loose monetary policy, but it did say that pushing forward reform of the country's electricity-pricing mechanism is among its tasks for 2009.

The central bank already set out in its December executive summary that it will target a growth rate of about 17% for broad money supply, M2, this year

Buffett says economy fell off cliff, fears inflation

Economy near worst-case scenario, won't recover fast

* Democrats, Republicans should set aside differences

* Banks should "get back to banking"

(Adds Buffett comments throughout)

By Jonathan Stempel

NEW YORK, March 9 (Reuters) - Warren Buffett said on Monday the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s.

Speaking on CNBC television, the 78-year-old billionaire said the country is experiencing a "close to the worst-case" scenario of falling business activity and rising unemployment, causing consumer confidence and spending to tumble.

Buffett called on Democrats and Republican policymakers to set aside partisan differences and unite under the leadership of President Barack Obama to wage an "economic war" that will fix the economy and restore confidence in banking.

He urged policymakers and regulators to communicate their efforts better to the public, though he stopped short of major, specific policy recommendations.

"People are confused and scared," he said. "People can't be worried about banks, and a lot of them are."

Buffett spoke nine days after his insurance and investment company Berkshire Hathaway Inc <BRKa.N> <BRKb.N> said quarterly profit fell 96 percent, largely from losses on derivatives contracts. Berkshire's book value per share fell 9.6 percent in 2008, the worst year since Buffett took over in 1965.

RECOVERY COULD TRIGGER MORE INFLATION

Buffett said Americans, including himself, did not predict the severity of home price declines, which led to problems with securitizations and other debt whose value depended on home prices continuing to rise, or at least not plummet.

"It was like some kids saying the emperor has no clothes, and then after he says that, he says now that the emperor doesn't have any underwear either," Buffett said. "We want to err on the side next time of not allowing big institutions to get as unchecked on leverage as we have allowed them to do."

He said, though, that efforts to stimulate the economy could trigger higher inflation once demand rebounds.

"We are certainly doing things that could lead to a lot of inflation," he said. "In economics there is no free lunch."

The stock of Omaha, Nebraska-based Berkshire has fallen by half since September, with growth in some units such as auto insurer Geico Corp offset by weakness elsewhere, including jewelry retailers that Buffett said have "gotten killed."

Buffett said Berkshire will write less catastrophe insurance this year after investing roughly one-third of its cash in high-yielding securities issued by General Electric Co <GE.N>, Goldman Sachs Group Inc <GS.N> and other companies.

He also said the economy had been mere hours away from collapse last September when credit markets seized up, Lehman Brothers Holdings Inc <LEHMQ.PK> went bankrupt and insurer American International Group Inc <AIG.N> got its first bailout. "The world almost did come to a stop," he said.

While acknowledging that the economy "can't turn around on a dime," Buffett said it will be "running fine" in five years. "This country will work fine even if we screw it up," he said.

In morning trading, Berkshire Class A shares were down $1,705, or 2.3 percent, at $71,490. Their 52-week high is $147,000, set last Sept. 19, Reuters data show.

BANKS SHOULD "GET BACK TO BANKING"

Buffett called on banks to "get back to banking" and said an overwhelmingly number would "earn their way out" of the recession, even if stockholders don't go along for the ride.

Saying that "a bank that's going to go broke should be allowed to go broke," Buffett nevertheless added that the "paralysis of confidence" in the sector is "silly" because of safeguards such as deposit insurance.

He said Wells Fargo & Co <WFC.N> and U.S. Bancorp <USB.N>, two large Berkshire holdings, should appear "better than ever" three years from now, while the ailing Citigroup Inc <C.N>, which Berkshire does not own, would probably keep shrinking.

Consumers, meanwhile, should reduce their dependence on credit cards, he said. "I can't make money borrowing money at 18 or 20 percent," said Buffett, whom Forbes magazine in October said was the second-richest American. "I'd go broke."

He said he still expects Berkshire's derivatives contracts, whose value depends on where four stock indexes trade a decade and more from now, to be profitable.

He said that over 10 years, "you will do considerably better owning a group of equities" than U.S. Treasuries.

Buffett also defended his imperfectly timed October opinion piece for The New York Times, where he said he was moving non-Berkshire holdings in his personal account to stocks.

"I stand by the article," he said. "I just wish I had written it a few months later." (Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; Editing by Lisa Von Ahn and John Wallace) Keywords: BUFFETT/

Blogged with the Flock Browser

Participants in Government Investment Plan

28-Oct-08	Citigroup Inc***	New York	$25000	Completed
28-Oct-08	J.P. Morgan Chase & Co	New York	$25000	Completed
28-Oct-08	Wells Fargo & Co	California	$25000	Completed
28-Oct-08	Bank of America Corp	North Carolina	$15000	Completed
09-Jan-09	Bank of America Corp**	North Carolina	$10000	Completed
28-Oct-08	Goldman Sachs Group Inc	New York	$10000	Completed
28-Oct-08	Morgan Stanley	New York	$10000	Completed
12-Dec-08	The PNC Financial Services Group Inc	Pennsylvania	$7579	Completed
14-Nov-08	U.S. Bancorp	Minnesota	$6599	Completed
14-Nov-08	Capital One	Virginia	$3555	Completed
14-Nov-08	Regions Financial Corp	Alabama	$3500	Completed
14-Nov-08	SunTrust Banks Inc	Georgia	$3500	Completed
12-Dec-08	Fifth Third Bancorp	Ohio	$3408	Completed
09-Jan-09	American Express Company	New York	$3389	Completed
14-Nov-08	BB&T	North Carolina	$3134	Completed
28-Oct-08	Bank of New York Mellon Corp	New York	$3000	Completed
14-Nov-08	KeyCorp	Ohio	$2500	Completed
12-Dec-08	CIT Group Inc.	New York	$2330	Completed
14-Nov-08	Comerica	Texas	$2250	Completed
28-Oct-08	State Street Corp	Massachusetts	$2000	Completed
14-Nov-08	Marshall & Ilsley Corp	Wisconsin	$1715	Completed
14-Nov-08	Northern Trust	Illinois	$1576	Completed
14-Nov-08	Zions Bancorporation	Utah	$1400	Completed
14-Nov-08	Huntington Bancshares Inc	Ohio	$1398	Completed
12-Dec-08	SunTrust Banks Inc	Georgia	$1350	Completed
19-Dec-08	Synovus Financial Corp	Georgia	$968	Completed
05-Dec-08	Popular Inc	Puerto Rico	$935	Completed
14-Nov-08	First Horizon National Corp.	Tennessee	$867	Completed
23-Dec-08	M&T Bank Corp	New York	$600	Completed
21-Nov-08	Associated Banc-Corp	Wisconsin	$525	Completed
21-Nov-08	City National Corp	California	$400	Completed
21-Nov-08	Webster Financial Corp.	Connecticut	$400	Completed
23-Dec-08	Fulton Financial Corp.	Pennsylvania	$377	Completed
14-Nov-08	TCF Financial	Minnesota	$361	Completed
05-Dec-08	South Financial Group Inc	South Carolina	$347	Completed
12-Dec-08	Wilmington Trust Corp.	Delaware	$330	Completed
05-Dec-08	East West Bancorp Inc	California	$306	Completed
05-Dec-08	Sterling Financial Corp	Washington	$303	Completed
21-Nov-08	Whitney Holding Corp	Louisiana	$301	Completed
12-Dec-08	Citizens Republic Bancorp Inc	Michigan	$300	Completed
12-Dec-08	Susquehanna Bancshares Inc	Pennsylvania	$300	Completed
14-Nov-08	Valley National Bancorp	New Jersey	$300	Completed
14-Nov-08	UCBH Holdings Inc	California	$299	Completed
12-Dec-08	First Banks, Inc.	Missouri	$295	Completed
09-Jan-09	New York Private Bank & Trust Corporation	New York	$267	Completed
05-Dec-08	Cathay General Bancorp	California	$258	Completed
19-Dec-08	Wintrust Financial Corp	Illinois	$250	Completed
12-Dec-08	SVB Financial Group	California	$235	Completed
23-Dec-08	International Bancshares Corp	Texas	$216	Completed
21-Nov-08	Trustmark Corp	Mississippi	$215	Completed
14-Nov-08	Umpqua Holdings Corp.	Oregon	$214	Completed
14-Nov-08	Washington Federal	Washington	$200	Completed
05-Dec-08	MB Financial Inc	Illinois	$196	Completed
05-Dec-08	First Midwest Bancorp Inc	Illinois	$193	Completed
21-Nov-08	First Niagara	New York	$184	Completed
21-Nov-08	Pacific Capital Bancorp	California	$181	Completed
05-Dec-08	United Community Banks Inc	Georgia	$180	Completed
21-Nov-08	Boston Private Financial Holdings	Massachusetts	$154	Completed
14-Nov-08	Provident Bankshares Corp	New York	$152	Completed
12-Dec-08	National Penn Bancshares Inc	Pennsylvania	$150	Completed
21-Nov-08	Western Alliance	Nevada	$140	Completed
09-Jan-09	Central Pacific Financial Corp.	Hawaii	$135	Completed
05-Dec-08	CVB Financial Corp	California	$130	Completed
09-Jan-09	FirstMerit Corp.	Ohio	$125	Completed
12-Dec-08	Sterling Bancshares Inc	Texas	$125	Completed
21-Nov-08	Banner Corporation	Washington	$124	Completed
12-Dec-08	Signature Bank	New York	$120	Completed
21-Nov-08	Taylor Capital Group Inc	Illinois	$105	Completed
09-Jan-09	F.N.B. Corporation	Pennsylvania	$100	Completed
12-Dec-08	Old National Bancorp	Indiana	$100	Completed
25-Nov-08	Park National Corp	Ohio	$100	Completed
12-Dec-08	Pinnacle Financial Partners Inc	Tennessee	$95	Completed
05-Dec-08	Iberiabank Corp	Louisiana	$90	Completed
09-Jan-09	Sun Bancorp, Inc	New Jersey	$89	Completed
19-Dec-08	Plains Capital Corp.	Texas	$88	Completed
05-Dec-08	Midwest Banc Holdings Inc	Illinois	$85	Completed
05-Dec-08	Sandy Spring Bancorp Inc	Maryland	$83	Completed
19-Dec-08	Heartland Financial USA Inc.	Iowa	$82	Completed
12-Dec-08	Hampton Roads Bankshares, Inc.	Virginia	$80	Completed
05-Dec-08	First Financial Bancorp	California	$80	Completed
09-Jan-09	Independent Bank Corp.	Massachusetts	$78	Completed
21-Nov-08	Columbia Banking System Inc	Washington	$77	Completed
12-Dec-08	TowneBank	Virginia	$76	Completed
12-Dec-08	Bank of the Ozarks Inc	Arkansas	$75	Completed
05-Dec-08	WesBanco, Inc	West Virginia	$75	Completed
12-Dec-08	Independent Bank Corp	Michigan	$72	Completed
25-Nov-08	Green Bankshares Inc	Tennessee	$72	Completed
12-Dec-08	Virginia Commerce Bancorp Inc	Virginia	$71	Completed
19-Dec-08	Flushing Financial Corp	New York	$70	Completed
05-Dec-08	Southwest Bancorp Inc	Oklahoma	$70	Completed
05-Dec-08	Superior Bancorp	Alabama	$69	Completed
21-Nov-08	Nara Bancorp	California	$67	Completed
09-Jan-09	First Bancorp	North Carolina	$65	Completed
05-Dec-08	First Financial Holdings Inc	South Carolina	$65	Completed
12-Dec-08	Wilshire Bancorp Inc	California	$62	Completed
19-Dec-08	Union Bankshares Corp.	Virginia	$59	Completed
05-Dec-08	Great Southern Bancorp Inc	Missouri	$58	Completed
12-Dec-08	Center Financial Corp	California	$55	Completed
19-Dec-08	CoBiz Financial Inc.	Colorado	$54	Completed
12-Dec-08	NewBridge Bancorp	North Carolina	$52	Completed
21-Nov-08	Ameris Bancorp	Georgia	$52	Completed
19-Dec-08	BancTrust Financial Group, Inc.	Alabama	$50	Completed
19-Dec-08	Seacoast Banking Corp.	Florida	$50	Completed
19-Dec-08	Fidelity Southern Corp	Georgia	$48	Completed
12-Dec-08	The Bancorp	Delaware	$45	Completed
09-Jan-09	Cadence Financial Corporation	Mississippi	$44	Completed
19-Dec-08	Exchange Bank	California	$43	Completed
12-Dec-08	Capital Bank Corp	North Carolina	$43	Completed
05-Dec-08	Southern Community Financial	North Carolina	$43	Completed
23-Dec-08	Sterling Bancorp	New York	$42	Completed
21-Nov-08	First Community Bankshares	Virginia	$42	Completed
19-Dec-08	Berkshire Hills Bancorp Inc.	Massachusetts	$40	Completed
21-Nov-08	Heritage Commerce Corp	California	$40	Completed
21-Nov-08	Cascade Financial Corporation	Washington	$39	Completed
23-Dec-08	Financial Institutions, Inc.	New York	$38	Completed
19-Dec-08	Bridgeview Bancorp, Inc.	Illinois	$38	Completed
05-Dec-08	Eagle Bancorp Inc	Maryland	$38	Completed
05-Dec-08	First Defiance Financial Corp	Ohio	$37	Completed
05-Dec-08	State Bancorp Inc	New York	$37	Completed
05-Dec-08	TIB Financial Corp	Florida	$37	Completed
12-Dec-08	West Bancorporation, Inc.	Iowa	$36	Completed
19-Dec-08	Fidelity Financial Corp	Kansas	$36	Completed
19-Dec-08	Marquette National Corp.	Illinois	$36	Completed
19-Dec-08	Enterprise Financial Services Corp.	Missouri	$35	Completed
21-Nov-08	Porter Bancorp	Kentucky	$35	Completed
05-Dec-08	Encore Bancshares Inc	Texas	$34	Completed
09-Jan-09	Centrue Financial Corporation	Missouri	$33	Completed
09-Jan-09	First Security Group, Inc.	Tennessee	$33	Completed
23-Dec-08	MutualFirst Financial	Indiana	$32	Completed
23-Dec-08	Parkvale Financial Corp	Pennsylvania	$32	Completed
05-Dec-08	Bank of North Carolina	North Carolina	$31	Completed
09-Jan-09	Farmers Capital Bank Corporation	Kentucky	$30	Completed
19-Dec-08	Bancorp Rhode Island, Inc.	Rhode Island	$30	Completed
19-Dec-08	Hawthorn Bancshares, Inc.	Missouri	$30	Completed
19-Dec-08	StellarOne Corp.	Virginia	$30	Completed
19-Dec-08	Tennessee Commerce Bancorp	Tennessee	$30	Completed
09-Jan-09	Peapack-Gladstone Financial Corporation	New Jersey	$29	Completed
09-Jan-09	Colony Bankcorp, Inc.	Georgia	$28	Completed
05-Dec-08	Bank of Marin Bancorp	Florida	$28	Completed
21-Nov-08	Centerstate Bank of Florida	Florida	$28	Completed
19-Dec-08	Alliance Financial Corporation	New York	$27	Completed
19-Dec-08	Intermountain Community Bancorp	Idaho	$27	Completed
23-Dec-08	HMN Financial, Inc.	Minnesota	$26	Completed
19-Dec-08	Patriot Bancshares, Inc.	Texas	$26	Completed
09-Jan-09	Crescent Financial Corporation	North Carolina	$25	Completed
09-Jan-09	Shore Bancshares, Inc.	Maryland	$25	Completed
09-Jan-09	The First Bancorp, Inc.	Maine	$25	Completed
23-Dec-08	Intervest Bancshares Corp	New York	$25	Completed
23-Dec-08	Peoples Bancorp of North Carolina Inc.	North Carolina	$25	Completed
19-Dec-08	First California Financial Group, Inc	California	$25	Completed
19-Dec-08	Horizon Bancorp	Indiana	$25	Completed
19-Dec-08	VIST Financial Corp	Pennsylvania	$25	Completed
12-Dec-08	LNB Bancorp Inc	Ohio	$25	Completed
21-Nov-08	HF Financial	South Dakota	$25	Completed
09-Jan-09	Community Trust Financial Corporation	Louisiana	$24	Completed
09-Jan-09	Eastern Virginia Bankshares, Inc.	Virginia	$24	Completed
25-Nov-08	Bridge Capital Holdings	California	$24	Completed
21-Nov-08	Heritage Financial Corporation	Washington	$24	Completed
21-Nov-08	Severn Bancorp	Maryland	$23	Completed
19-Dec-08	Wainwright Bank & Trust Co	Massachusetts	$22	Completed
12-Dec-08	Indiana Community Bancorp	Indiana	$22	Completed
05-Dec-08	Blue Valley Ban Corp	Kansas	$22	Completed
19-Dec-08	AmeriServ Financial, Inc	Pennsylvania	$21	Completed
12-Dec-08	Citizens South Banking Corp	North Carolina	$21	Completed
09-Jan-09	C&F Financial Corporation	Virginia	$20	Completed
09-Jan-09	First Financial Service Corporation	Kentucky	$20	Completed
09-Jan-09	MidSouth Bancorp, Inc.	Louisiana	$20	Completed
05-Dec-08	Unity Bancorp Inc	New Jersey	$20	Completed
21-Nov-08	First PacTrust Bancorp Inc	California	$19	Completed
19-Dec-08	Community Bankers Trust Corp	Virginia	$18	Completed
19-Dec-08	Security Federal Corp	South Carolina	$18	Completed
12-Dec-08	Hopfed Bancorp Inc	Kentucky	$18	Completed
09-Jan-09	Codorus Valley Bancorp, Inc.	Pennsylvania	$17	Completed
23-Dec-08	Timberland Bancorp., Inc.	Washington	$17	Completed
14-Nov-08	Bank of Commerce Holdings	California	$17	Completed
09-Jan-09	Carolina Bank Holdings, Inc.	North Carolina	$16	Completed
19-Dec-08	Community West Bancshares	California	$16	Completed
19-Dec-08	Pacific City Finacial Corp.	California	$16	Completed
19-Dec-08	Tri-County Financial Corp.	Maryland	$16	Completed
12-Dec-08	Valley Financial Corp	Virginia	$16	Completed
14-Nov-08	1st Financial Services Corp	North Carolina	$16	Completed
23-Dec-08	Nicolet Bankshares, Inc.	Wisconsin	$15	Completed
19-Dec-08	Monarch Financial Holdings, Inc.	Virginia	$15	Completed
12-Dec-08	LSB Corp	Massachusetts	$15	Completed
23-Dec-08	Magna Bank	Tennessee	$14	Completed
19-Dec-08	Tidelands Bancshares, Inc	South Carolina	$14	Completed
05-Dec-08	Oak Valley Bancorp	California	$14	Completed
09-Jan-09	LCNB Corp.	Ohio	$13	Completed
19-Dec-08	Community Financial Corp	Virginia	$13	Completed
09-Jan-09	The Queensborough Company	Georgia	$12	Completed
23-Dec-08	1st Constitution Bancorp	New Jersey	$12	Completed
23-Dec-08	Cecil Bancorp, Inc.	Maryland	$12	Completed
23-Dec-08	Pacific Coast Bankers' Bancshares	California	$12	Completed
19-Dec-08	OneUnited Bank	Massachusetts	$12	Completed
23-Dec-08	BCSB Bancorp.	Maryland	$11	Completed
23-Dec-08	Central Jersey Bancorp	New Jersey	$11	Completed
23-Dec-08	First Community Bank Corp of America	Florida	$11	Completed
21-Nov-08	First Community Corp	South Carolina	$11	Completed
09-Jan-09	Center Bancorp, Inc.	New Jersey	$10	Completed
09-Jan-09	North Central Bancshares, Inc.	Iowa	$10	Completed
23-Dec-08	Citizens Bancorp	California	$10	Completed
23-Dec-08	United Bancorporation of Alabama, Inc.	Alabama	$10	Completed
23-Dec-08	Uwharrie Capital Corp.	North Carolina	$10	Completed
19-Dec-08	Mid Penn Bancorp Inc	Pennsylvania	$10	Completed
19-Dec-08	NCAL Bancorp	California	$10	Completed
12-Dec-08	First Litchfield Financial Corp	Connecticut	$10	Completed
05-Dec-08	Central Bancorp	Massachusetts	$10	Completed
05-Dec-08	Coastal Banking Company Inc	Florida	$10	Completed
05-Dec-08	Southern Missouri Bancorp	Missouri	$10	Completed
09-Jan-09	GrandSouth Bancorporation	South Carolina	$9	Completed
19-Dec-08	Citizens First Corporation	Kentucky	$9	Completed
19-Dec-08	FCB Bancorp, Inc.	Kentucky	$9	Completed
19-Dec-08	The Elmira Savings Bank	New York	$9	Completed
14-Nov-08	Broadway Financial Corp.	California	$9	Completed
23-Dec-08	Emclaire Financial Corp.	Pennsylvania	$8	Completed
23-Dec-08	The Little Bank, Incorporated	North Carolina	$8	Completed
09-Jan-09	Security California Bancorp	California	$7	Completed
23-Dec-08	First Sound Bank	Washington	$7	Completed
23-Dec-08	Western Community Bancshares, Inc.	California	$7	Completed
23-Dec-08	Western Illinois Bancshares Inc.	Illinois	$7	Completed
19-Dec-08	FFW Corp.	Indiana	$7	Completed
12-Dec-08	Fidelity Bancorp	Pennsylvania	$7	Completed
12-Dec-08	Pacific International Bancorp	Washington	$7	Completed
05-Dec-08	Central Federal Corp	Ohio	$7	Completed
05-Dec-08	Old Line Bancshares	Maryland	$7	Completed
09-Jan-09	American State Bancshares, Inc.	Kansas	$6	Completed
09-Jan-09	Rising Sun Bancorp	Maryland	$6	Completed
09-Jan-09	Security Business Bancorp	California	$6	Completed
09-Jan-09	Valley Community Bank	California	$6	Completed
23-Dec-08	Leader Bancorp	Massachusetts	$6	Completed
23-Dec-08	Mission Valley Bancorp	California	$6	Completed
19-Dec-08	Patapsco Bancorp, Inc.	Maryland	$6	Completed
19-Dec-08	Summit State Bank	California	$6	Completed
05-Dec-08	FPB Bancorp	Florida	$6	Completed
09-Jan-09	Commerce National Bank	California	$5	Completed
09-Jan-09	Mission Community Bancorp	California	$5	Completed
23-Dec-08	Cache Valley Banking Company	Utah	$5	Completed
23-Dec-08	Capital Bancorp, Inc.	Maryland	$5	Completed
19-Dec-08	Connecticut Bank & Trust	Connecticut	$5	Completed
19-Dec-08	The Connecticut Bank and Trust Company	Connecticut	$5	Completed
09-Jan-09	Texas National Bancorporation	Texas	$4	Completed
23-Dec-08	Capital Pacific Bancorp	Oregon	$4	Completed
23-Dec-08	Pacific Commerce Bank	California	$4	Completed
19-Dec-08	Santa Lucia Bancorp	California	$4	Completed
12-Dec-08	Northeast Bancorp	Maine	$4	Completed
09-Jan-09	Congaree Bancshares, Inc.	South Carolina	$3	Completed
09-Jan-09	Redwood Financial Inc.	Minnesota	$3	Completed
09-Jan-09	Sound Banking Company	North Carolina	$3	Completed
23-Dec-08	Citizens Community Bank	Virginia	$3	Completed
23-Dec-08	Community Investors Bancorp, Inc.	Ohio	$3	Completed
23-Dec-08	Tennessee Valley Financial Holdings, Inc.	Tennessee	$3	Completed
09-Jan-09	Surrey Bancorp	North Carolina	$2	Completed
23-Dec-08	Saigon National	California	$2	Completed
23-Dec-08	Seacoast Commerce Bank	California	$2	Completed
23-Dec-08	TCNB Financial Corp.	Ohio	$2	Completed
19-Dec-08	Monadnock Bancorp, Inc.	New Hampshire	$2	Completed
05-Dec-08	Manhattan Bancorp	California	$2	Completed
09-Jan-09	Independence Bank	Rhode Island	$1	Completed
16-Jan-09	Yadkin Valley Financial Corporation	North Carolina	$36	Completed
16-Jan-09	Washington Banking Company/ Whidbey Island Bank	Washington	$26	Completed
16-Jan-09	United Financial Banking Companies, Inc.	Virginia	$6	Completed
16-Jan-09	United Bancorp, Inc.	Mississippi	$20	Completed
16-Jan-09	Treaty Oak Bancorp, Inc.	Texas	$3	Completed
16-Jan-09	The Baraboo BanCorporation	Wisconsin	$21	Completed
16-Jan-09	Texas Capital Bancshares, Inc.	Texas	$75	Completed
16-Jan-09	TCB Holding Company	Texas	$12	Completed
16-Jan-09	Syringa Bancorp	Idaho	$8	Completed
16-Jan-09	State Bankshares, Inc.	North Dakota	$50	Completed
16-Jan-09	Southern Bancorp, Inc.	Arkansas	$11	Completed
16-Jan-09	Somerset Hills Bancorp	New Jersey	$7	Completed
16-Jan-09	SCBT Financial Corporation	South Carolina	$65	Completed
16-Jan-09	S&T Bancorp	Pennsylvania	$109	Completed
16-Jan-09	Redwood Capital Bancorp	California	$4	Completed
16-Jan-09	Pulaski Financial Corp	Missouri	$33	Completed
16-Jan-09	Puget Sound Bank Bellevue	Washington	$5	Completed
16-Jan-09	Pacific Coast National Bancorp	California	$4	Completed
16-Jan-09	Old Second Bancorp, Inc.	Illinois	$73	Completed
16-Jan-09	OceanFirst Financial Corp.	New Jersey	$38	Completed
16-Jan-09	New Hampshire Thrift Bancshares, Inc.	New Hampshire	$10	Completed
16-Jan-09	Morrill Bancshares, Inc.	Kansas	$13	Completed
16-Jan-09	MetroCorp Bancshares, Inc.	Texas	$45	Completed
16-Jan-09	MainSource Financial Group, Inc.	Pennsylvania	$57	Completed
16-Jan-09	Idaho Bancorp	Idaho	$7	Completed
16-Jan-09	Home Bancshares, Inc.	Arkansas	$50	Completed
16-Jan-09	First Manitowoc Bancorp, Inc.	Wisconsin	$12	Completed
16-Jan-09	First Bankers Trustshares, Inc.	Illinois	$10	Completed
16-Jan-09	First Bancorp	Puerto Rico	$400	Completed
16-Jan-09	ECB Bancorp, Inc./East Carolina Bank	North Carolina	$18	Completed
16-Jan-09	Dickinson Financial Corporation	Missouri	$146	Completed
16-Jan-09	Community Bank of the Bay	California	$2	Completed
16-Jan-09	Community 1st Bank	California	$3	Completed
16-Jan-09	Citizens & Northern Corporation	Pennsylvania	$26	Completed
16-Jan-09	Centra Financial Holdings, Inc./Centra Bank, Inc.	West Virginia	$15	Completed
16-Jan-09	Carver Bancorp, Inc	New York	$19	Completed
16-Jan-09	BNCCORP, Inc.	North Dakota	$20	Completed
16-Jan-09	Bar Harbor Bankshares/Bar Harbor Bank & Trust	Maine	$19	Completed
16-Jan-09	Bank of Commerce	North Carolina	$3	Completed
23-Jan-09	WSFS Financial Corporation	Delaware	$53	Completed
23-Jan-09	Stonebridge Financial Corp.	Pennsylvania	$11	Completed
23-Jan-09	Southern Illinois Bancorp	Illinois	$5	Completed
23-Jan-09	Seaside National Bank & Trust	Florida	$6	Completed
23-Jan-09	Princeton National Bancorp, Inc.	Illinois	$25	Completed
23-Jan-09	Pierce County Bancorp	Washington	$7	Completed
23-Jan-09	Moscow Bancshares, Inc.	Tennessee	$6	Completed
23-Jan-09	Midland States Bancorp	Illinois	$10	Completed
23-Jan-09	Liberty Bancshares, Inc.	Arkansas	$58	Completed
23-Jan-09	Fresno First Bank	California	$2	Completed
23-Jan-09	FPB Financial Corp.	Louisiana	$3	Completed
23-Jan-09	First ULB Corp.	California	$5	Completed
23-Jan-09	First Citizens Banc Corp ts	Ohio	$23	Completed
23-Jan-09	Farmers Bank	Virginia	$9	Completed
23-Jan-09	Crosstown Holding Company	Minnesota	$11	Completed
23-Jan-09	Commonwealth Business Bank	California	$8	Completed
23-Jan-09	CalWest Bancorp	California	$5	Completed
23-Jan-09	Calvert Financial Corporation s	Missouri	$1	Completed
23-Jan-09	California Oaks State Bank	California	$3	Completed
23-Jan-09	BankFirst Capital Corporation	Mississippi	$16	Completed
23-Jan-09	Alarion Financial Services, Inc.	Florida	$7	Completed
23-Jan-09	AB&T Financial Corporation	North Carolina	$4	Completed
23-Jan-09	1st Source Corporation	Indiana	$111	Completed
30-Jan-09	Peoples Bancorp Inc.	Ohio	$39	Completed
30-Jan-09	Anchor BanCorp Wisconsin Inc.	Wisconsin	$110	Completed
30-Jan-09	Parke Bancorp, Inc.	New Jersey	$16	Completed
30-Jan-09	Central Virginia Bankshares, Inc.	Virginia	$11	Completed
30-Jan-09	Flagstar Bancorp, Inc.	Michigan	$267	Completed
30-Jan-09	Middleburg Financial Corporation	Virginia	$22	Completed
30-Jan-09	Peninsula Bank Holding Co.	California	$6	Completed
30-Jan-09	PrivateBancorp, Inc.	Illinois	$243	Completed
30-Jan-09	Central Valley Community Bancorp	California	$7	Completed
30-Jan-09	Plumas Bancorp	California	$12	Completed
30-Jan-09	Stewardship Financial Corporation	New Jersey	$10	Completed
30-Jan-09	Oak Ridge Financial Services, Inc.	North Carolina	$8	Completed
30-Jan-09	First United Corporation	Maryland	$30	Completed
30-Jan-09	Community Partners Bancorp	New Jersey	$9	Completed
30-Jan-09	Guaranty Federal Bancshares, Inc.	Missouri	$17	Completed
30-Jan-09	Annapolis Bancorp, Inc.	Maryland	$8	Completed
30-Jan-09	DNB Financial Corporation	Pennsylvania	$12	Completed
30-Jan-09	Firstbank Corporation	Michigan	$33	Completed
30-Jan-09	Valley Commerce Bancorp	California	$8	Completed
30-Jan-09	Greer Bancshares Inc	South Carolina	$10	Completed
30-Jan-09	Ojai Community Bank	California	$2	Completed
30-Jan-09	Adbanc, Inc	Nebraska	$13	Completed
30-Jan-09	Beach Business Bank	California	$6	Completed
30-Jan-09	Legacy Bancorp, Inc.	Wisconsin	$5	Completed
30-Jan-09	First Southern Bancorp, Inc.	Florida	$11	Completed
30-Jan-09	Country Bank Shares, Inc.	Nebraska	$8	Completed
30-Jan-09	Katahdin Bankshares Corp.	Maine	$10	Completed
30-Jan-09	Rogers Bancshares, Inc.	Arkansas	$25	Completed
30-Jan-09	UBT Bancshares, Inc.	Kansas	$9	Completed
30-Jan-09	Bankers' Bank of the West Bancorp, Inc.	Colorado	$13	Completed
30-Jan-09	W.T.B. Financial Corporation	Washington	$110	Completed
30-Jan-09	AMB Financial Corp.	Indiana	$4	Completed
30-Jan-09	Goldwater Bank	Arizona	$3	Completed
30-Jan-09	Equity Bancshares, Inc.	Kansas	$9	Completed
30-Jan-09	WashingtonFirst Bank	Virginia	$7	Completed
30-Jan-09	Central Bancshares, Inc.	Texas	$6	Completed
30-Jan-09	Hilltop Community Bancorp, Inc.	New Jersey	$4	Completed
30-Jan-09	Northway Financial, Inc.	New Hampshire	$10	Completed
30-Jan-09	Monument Bank	Maryland	$5	Completed
30-Jan-09	Metro City Bank	Georgia	$8	Completed
30-Jan-09	F & M Bancshares, Inc.	Tennessee	$5	Completed
30-Jan-09	First Resource Bank	Pennsylvania	$3	Completed
6-Feb-09	MidWest One Financial Group, Inc.	Iowa	$16	Completed
6-Feb-09	Lakeland Bancorp, Inc.	New Jersey	$59	Completed
6-Feb-09	Monarch Community Bancorp, Inc.	Michigan	$7	Completed
6-Feb-09	The First Bancshares, Inc.	Mississippi	$5	Completed
6-Feb-09	Carolina Trust Bank	North Carolina	$4	Completed
6-Feb-09	Alaska Pacific Bancshares, Inc.	Arkansas	$5	Completed
6-Feb-09	PGB Holdings, Inc.	Illinois	$3	Completed
6-Feb-09	The Freeport State Bank	Kansas	$0.3	Completed
6-Feb-09	Stockmens Financial Corporation	South Dakota	$16	Completed
6-Feb-09	US Metro Bank	California	$3	Completed
6-Feb-09	First Express of Nebraska, Inc.	Nebraska	$5	Completed
6-Feb-09	Mercantile Capital Corp.	Massachusetts	$4	Completed
6-Feb-09	Citizens Commerce Bancshares, Inc.	Kentucky	$6	Completed
6-Feb-09	Liberty Financial Services, Inc.	Louisiana	$6	Completed
6-Feb-09	Lone Star Bank	Texas	$3	Completed
6-Feb-09	First Market Bank, FSB	Virginia	$34	Completed
6-Feb-09	Banner County Bank Corporation	Nebraska	$1	Completed
6-Feb-09	Centrix Bank & Trust	New Hampshire	$8	Completed
6-Feb-09	Todd Bancshares, Inc.	Kentucky	$4	Completed
6-Feb-09	Georgia Commerce Bancshares, Inc.	Georgia	$9	Completed
6-Feb-09	First Bank of Charleston, Inc.	West Virginia	$3	Completed
6-Feb-09	F & M Financial Corporation	North Carolina	$17	Completed
6-Feb-09	The Bank of Currituck	North Carolina	$4	Completed
6-Feb-09	CedarStone Bank	Tennessee	$4	Completed
6-Feb-09	Community Holding Company of Florida, Inc.	Florida	$1	Completed
6-Feb-09	Hyperion Bank	Pennsylvania	$2	Completed
6-Feb-09	Pascack Community Bank	New Jersey	$4	Completed
6-Feb-09	First Western Financial, Inc.	Colorado	$9	Completed
13-Feb-09	QCR Holdings, Inc.	Illinois	$38	Completed
13-Feb-09	Westamerica BanCorporation	California	$84	Completed
13-Feb-09	The Bank of Kentucky Financial Corporation	Kentucky	$34	Completed
13-Feb-09	PremierWest Bancorp	Oregon	$41	Completed
13-Feb-09	Carrollton Bancorp	Maryland	$9	Completed
13-Feb-09	FNB United Corp.	North Carolina	$52	Completed
13-Feb-09	First Menasha Bancshares, Inc.	Wisconsin	$5	Completed
13-Feb-09	1st Enterprise Bank	California	$4	Completed
13-Feb-09	DeSoto County Bank	Mississippi	$1	Completed
13-Feb-09	Security Bancshares	Missouri	$2	Completed
13-Feb-09	State Capital Corporation	Mississippi	$15	Completed
13-Feb-09	BankGreenville	South Carolina	$1	Completed
13-Feb-09	Corning Savings and Loan Association	Arkansas	$1	Completed
13-Feb-09	Financial Security Corporation	Wyoming	$5	Completed
13-Feb-09	ColoEast Bankshares, Inc.	Colorado	$10	Completed
13-Feb-09	Santa Clara Valley Bank	California	$3	Completed
13-Feb-09	Reliance Bancshares, Inc.	Missouri	$40	Completed
13-Feb-09	Regional Bankshares, Inc.	South Carolina	$2	Completed
13-Feb-09	Peoples Bancorp	Washington	$18	Completed
13-Feb-09	First Choice Bank	California	$2	Completed
13-Feb-09	Gregg Bancshares, Inc.	Missouri	$1	Completed
13-Feb-09	Hometown Bancshares, Inc.	Kentucky	$2	Completed
13-Feb-09	Midwest Regional Bancorp, Inc.	Missouri	$1	Completed
13-Feb-09	Bern Bancshares, Inc.	Kentucky	$1	Completed
13-Feb-09	Northwest Bancorporation, Inc.	Washington	$11	Completed
13-Feb-09	Liberty Bancshares, Inc.	Missouri	$22	Completed
13-Feb-09	F&M Financial Corporation	Tennessee	$17	Completed
13-Feb-09	Meridian Bank	Pennsylvania	$6	Completed
13-Feb-09	Northwest Commercial Bank	Washington	$2	Completed
20-Feb-09	Royal Bancshares of Pennsylvania, Inc.	Pennsylvania	$30	Completed
20-Feb-09	First Merchants Corporation	Indiana	$116	Completed
20-Feb-09	Northern States Financial Corporation	Illinois	$17	Completed
20-Feb-09	Sonoma Valley Bancorp	California	$9	Completed
20-Feb-09	Guaranty Bancorp, Inc.	New Hampshire	$7	Completed
20-Feb-09	The Private Bank of California	California	$5	Completed
20-Feb-09	Lafayette Bancorp, Inc.	Mississippi	$2	Completed
20-Feb-09	Liberty Shares, Inc.	Georgia	$17	Completed
20-Feb-09	White River Bancshares Company	Arkansas	$17	Completed
20-Feb-09	United American Bank	California	$9	Completed
20-Feb-09	Crazy Woman Creek Bancorp, Inc.	Wyoming	$3	Completed
20-Feb-09	First Priority Financial Corp.	Pennsylvania	$5	Completed
20-Feb-09	Mid-Wisconsin Financial Services, Inc.	Wisconsin	$10	Completed
20-Feb-09	Market BanCorporation	Minnesota	$2	Completed
20-Feb-09	Hometown Bancorp of Alabama, Inc.	Alabama	$3	Completed
20-Feb-09	Security State Bancshares, Inc.	Missouri	$13	Completed
20-Feb-09	CBB Bancorp	Georgia	$3	Completed
20-Feb-09	BancPlus Corporation	Mississippi	$48	Completed
20-Feb-09	Central Community Corporation	Texas	$22	Completed
20-Feb-09	First BancTrust Corporation	Illinois	$7	Completed
20-Feb-09	Premier Service Bank	California	$4	Completed
20-Feb-09	Florida Business BancGroup, Inc.	Florida	$9	Completed
20-Feb-09	Hamilton State Bancshares, Inc.	Georgia	$7	Completed

Total: $196,372***

Firms Participating: 442

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HSBC likes High-grade corp debt in HK,Singapore

HONG KONG, Feb 26 (Reuters) - HSBC Global Asset Management investment unit Halbis said it favours investment grade corporate bonds such those from Singapore and Hong Kong because borrowers in these countries have less refinancing needs.

Halbis likes investment-grade corporate bonds issued by non-cyclical telecommunications and utilities sectors, she said.

China has about $2 trillion in foreign exchange reserves, the largest in the world.

Hong Kong, which has long benefited from its close links with the mainland, would also be in better shape than other export-oriented countries in the region, she said.

Even though the region will suffer from further deterioration, Asian countries remain relatively robust on the back of low external debt levels, healthy government fiscal accounts and comfortable foreign exchange coverage ratios, she said.

"These problems faced by Asian countries can be partly offset by the lowering of inflation pressure and stable current account outlook," Chan said.

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Hopes of Quick Rebound in China Strat to Fade

Hopes of Quick Rebound in China Start to Fade

Despite an Increase in Bank Lending, Steel Prices Fall, Demand for Exports Shrinks and Consumers Buy Fewer Foreign Goods

By ANDREW BATSON

BEIJING -- Hopes for an early recovery in China's economy are starting to unravel, undercutting the optimism that has helped to make the country's stock market the world's best performer this year.

Getty Images

A worker carries bottled gas past a ship in China. Despite more credit for industries such as shipbuilding, an early rebound is unlikely.

In recent weeks, some companies and investors had seized on a surge in bank lending and an upturn in steel prices -- a key indicator in China's industry-heavy economy -- as signs that a massive government stimulus program was already taking hold.

But now steel prices are falling again, and closer examination of the recent bank data suggests that many of the loans won't immediately fuel economic growth. Meanwhile, trade has continued to contract, as demand for Chinese exports from the U.S. and Europe wanes, and Chinese companies and consumers, in turn, buy fewer foreign goods.

The upshot is that a real pickup in China's economy could still be several months away, or longer. That's bad news for a global economy in which China is the only major power still growing.

"It would be a mistake to think that China could decouple from the rest of the world, or carry the rest of the world on its shoulders," said Bruce Kasman, chief economist for J.P. Morgan. "A sustained recovery in China is dependent on better news globally."

China's government has put about 230 billion yuan ($34 billion) into stimulus projects so far, with more to come. Many economists think it will take time for that jolt to work its way through the economy, and don't expect major effects to show up until around the second half of this year.

Local companies, more optimistic about the stimulus package, began bidding up steel prices and freight rates in December. Investors did the same with Chinese stocks: The benchmark Shanghai Composite Index at one point this month was up 30% for the year, though it has come down a bit since.

By the beginning of February, steel prices had gained about 15% from November lows. China is the world's largest consumer of the metal, and the run-up in prices got a lot of attention.

But much of that steel was stockpiled, rather than immediately used in factories or construction sites.

Inventories of some steel products rose more than 30% in January from December, the China Iron & Steel Association said in a report last week.

"Recent additions to inventories by dealers and users have led to a rebound in steel market prices ... [but] the steady increase in inventories will affect the stable operation of the steel market later on," it said.

The anticipated demand hasn't yet materialized, and those inventories are weighing on the market.

Average steel prices dropped 6.3% last week, after falling 3.2% the week before, according to Mysteel, a Shanghai-based research firm.

Getting a solid read on the Chinese economy has been particularly difficult in recent weeks because the weeklong Lunar New Year holiday fell earlier this year than in 2007, distorting annual comparisons of key indicators in January.

Other data reinforce the sense that economic activity has yet to revive. Industrial output in the business hub of Shanghai fell 12.7% from a year earlier in January -- even after adjusting for the holiday. Nationwide, industrial statistics haven't yet been published for January.

Also, imports nationwide fell 43.1% in January from a year earlier -- a drop that, allowing for the holiday impact, suggests slowing demand in China.

"Domestic demand for imports is still very weak, as the housing-construction slump continues, and the fiscal stimulus-induced investment demand has yet to come through," said UBS economist Wang Tao.

The huge expansion in lending in January -- banks made 1.62 trillion yuan in new loans, twice as much as last year -- was widely seen as a positive sign.

Associated Press

College students wait to enter at a job fair in Wuhan, in central China's Hubei province, Feb. 20, 2009. The once ravenous international appetite for Chinese-made goods is shrinking, leading to increased unemployment in the country.

But other data on deposits suggest companies are hoarding their cash rather than spending it, so those loans may not be immediately fueling economic growth.

Further doubts have been raised by the unusual nature of recent loans. Short-term bills accounted for 42% of new corporate lending in January, or 623.9 billion yuan, three times the already elevated level of November and December, and 10 times October's figure.

Because companies can borrow those bills for a lower interest rate than they earn on deposits, some economists think the surge comes more from financial engineering than actual borrowing.

"Recent monetary and credit data do not reflect real economic demand," said Ha Jiming, chief economist of China International Capital Corp.

Meanwhile, major Chinese port operators are reporting even lower volumes of containers coming through in February than in January, Citigroup analysts Ally Ma and Brian Lam wrote in a report this week.

Based on those data and other indicators, an annual decline of 20% or more in Chinese exports in coming months "seems inevitable," the analysts wrote.

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US stimulus plan just a repeat of past mistakes

US stimulus plan just a repeat of past mistakes

By R SIVANITHY

FORMER British prime minister Winston Churchill once famously said: 'Those who fail to learn from history are doomed to repeat it.'

In trying to repair the damage wrought on the US economy by the sub-prime crisis, the American authorities may end up doing more long-term damage than good because they seem bent on following the same steps taken by their predecessors in the hope that they can engineer a quick return to how things were before the crisis erupted.

Unfortunately, there is plenty of reason to believe that the present US stimulus package could well turn out to be a disastrous mistake.

Although opinions are divided on how best to mend the US economy, there seems to be general agreement over the need to 'fix the financial markets' in order to 'get credit flowing', which will then 'kick-start the economy', as if one follows the other in logical fashion.

But should credit drive the economy, or should the economy drive credit?

In a properly functioning system, credit/money should be viewed as any other product of that economy - a commodity that has prices determined by supply and demand.

Those prices, or interest rates, are set by market forces with minimal intervention from central banks. If economic activity is robust, there will be sufficient competition for credit, which should then ensure money is channelled to its best possible uses.

The present crisis was almost a decade in the making and was founded almost entirely on easy, artificial and non-market-determined credit. It started when former Fed chairman Alan Greenspan slashed interest rates 12 times between 2000 and 2002 to near-zero to try and pump-prime America out of the dotcom recession, and it gained unstoppable momentum when the resultant lax lending then inflated a huge debt bubble whose most visible manifestation was in the property market.

This then attracted millions of low-income or sub-prime borrowers who technically did not qualify for loans but were granted them anyway because they either lied about their finances or got their bankers to lie on their behalf in order to speculate in property.

The collapse in sub-prime debt, however, was only the tip of the iceberg. According to the US Federal Reserve, total US consumer debt, which includes credit card and non-credit card debt but not mortgage debt, reached US$2.55 trillion at the end of 2007 (2008's figures are not available yet).

Savings on the other hand, are poor; in 2006, the average savings rate fell into negative territory for the first time in almost 70 years and although it has now improved slightly, in 2009 is estimated to be no more than 3-5 per cent of income - less than half the 10 per cent level it was in the 1980s.

In short, the American consumer is hugely reliant on debt but has virtually no savings.

Crucially, it is this that is the crux of the problem and arguably not the crashing real estate market; the fall in property prices only precipitated the crisis but it is massive indebtedness with no savings backup that lies at the root of the present US economic mess.

This conclusion is not new. US fund manager Robert Albertson in the Feb 16 issue of US newspaper Barron's spoke about the need for a savings, not stimulus, plan; economics professor Ravi Batra in his 2005 book, Greenspan's Fraud, warned about an impending worldwide collapse from America's over-reliance on debt; while in December 2007, Morgan Stanley's Stephen Roach said that the Fed needs to rethink its 'reckless, bubble-prone policy' and that the only hope of breaking the endless but lethal chain of inflating bubbles is by raising, not lowering, interest rates.

All of these warnings have fallen on deaf ears and instead of addressing the fundamental problem, which is the over-reliance on debt - at the very least by coming up with ways of encouraging people to save and reduce their reliance on borrowed money - the present approach seeks to get people borrowing and spending again, on the assumption that borrowing/lending leads to increased economic activity, when in reality it should be the other way around.

Standard prescription

The fundamental problem is that in the hands of officialdom everywhere (not just the US), monetary and fiscal policies are simply euphemisms for debt creation. So when a crisis strikes, the policy responses always follow the same, standard prescription: cut interest rates and keep cutting until they get to zero; print money; slash taxes; get credit flowing; put money in the pockets of the public so as to get the consumer spending again - pretty much what the present US stimulus plan aims for.

Never mind that it hasn't worked in Japan for many years and never mind that it hasn't worked yet in the US, because eventually if you throw enough money at the economy, things must surely pick up.

The problem is that even if there is a recovery later this year, it might only be a short-term, artificially inflated blip that could very well taper off quickly to be followed by an even worse downturn.

You'd have to wonder if investors know this and are very worried - Wall Street dived immediately after the stimulus package was announced and is now almost 20 per cent down since the beginning of the year.

We believe that all accepted wisdoms have to be jettisoned in favour of different, out-of-the-box solutions.

It might be that interest rates and corporate taxes have to be raised instead of lowered. Perhaps a vast, long-term plan installed to reduce the multi-trillion-dollar deficits and wean everyone off the over-reliance on credit.

Whatever the case, the US should get back to the idea of the economy driving credit, not the other way around. For the measures as they stand are nothing more than plastering over the cracks - they have been used before and failed to yield results. To continue on the same path dooms the US to fail again.

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China warns slowdown could worsen, does not rule out rate cut

China's central bank warned the country's economic slowdown could worsen and the risk of deflation was high, in its latest quarterly report, while not ruling out further interest rate cuts. China's economy will continue "stable and rapid growth" as government stimulus measures kick in but the global economic crisis has hit hard, the People's Bank of China said in its fourth quarter monetary policy report. "(We will) appropriately use various tools, including adjustment of interest rates and banks' reserve requirement ratios, to ensure reasonable monetary and credit growth," the bank said. China cut interest rates five times in the period from September to December, with the benchmark one-year lending rate now standing at 5.31 percent, while the one-year deposit rate is 2.25 percent. The export-dependent Chinese economy , the world's third-largest, expanded by nine percent last year, the first time in six years that it posted single-digit growth. "External demand is shrinking, some sectors have overcapacity, enterprises face operating difficulties and urban unemployment is rising, while the downward pressure on economic growth is increasing," the central bank said. Weak demand means deflation is likely in the short term, but in the medium-to-long term massive injections of liquidity by central banks around the world could fan inflation, it said in the report released late Monday. China's consumer price index, the main gauge of inflation, was up only 1.0 percent in January while producer prices, which measure trends at the wholesale level, fell 3.3 percent, prompting economists to warn deflation was imminent. Deflation is a situation when a continued fall in prices encourages people to postpone buying products as they expect to get a better bargain later, but that in turn only serves to further slow the economy.

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