[OPE] Some facets of the credit squeeze

US urges food output boost to avert unrest
By Javier Blas in Cison di Valmarino, Italy
Published: FT April 20 2009

The US agriculture secretary has warned that unless countries take immediate
steps to sharply boost agricultural productivity and food output and reduce
hunger, the world risks fresh social instability. In an interview with the
Financial Times, Tom Vilsack indicated that food security and global
stability were tied, in a sign that Washington's worries about the global
food crisis go well beyond its humanitarian implications. "This is not just
about food security, this is about national security, it is about
environmental security," he said on the sidelines of the first meeting of
the Group of Eight ministers of agriculture. Although the US has in the past
talked about the links, Barack Obama, US president, and his team have made
it a priority, officials said.
Last year's spike in food prices caused riots in about 30 countries, from
Haiti to Bangladesh. Leading agricultural commodity exporters, including
India and Argentina, imposed bans on overseas sales of food products. "I can
figure out there are only three things that could happen if people do not
have food: people could riot, that they have done; people migrate to places
where there is food, which creates additional challenges; or people die,"
said Mr Vilsack.
www.ft.com/foodprices

OECD warns on pensions crisis
By Chris Giles, Economics Editor

Published: FT June 23 2009

Strains in pensions systems, in both private and public provision, threaten
to turn the financial crisis over the past two years into a social crisis
lasting decades, the Organisation for Economic Cooperation and Development
warned on Tuesday.

In its annual analysis of the health of the pensions systems around the
world, the Paris-based international organisation, found that private
pensions plans lost 23 per cent of their value last year while higher
unemployment "leaves little room for more generous public pensions".
http://www.ft.com/cms/s/0/4301d326-5feb-11de-a09b-00144feabdc0.html

Global property lending landscape altered forever
Reuters, Thu Jun 25, 2009

LONDON (Reuters) - The days of easy borrowing and cheap real estate debt are
gone for good, some of the world's top commercial property executives
conceded this week. Speakers at the Reuters Global Real Estate Summit in
London said they had abandoned hopes of ever seeing a return to the halcyon
days of credit that fueled an unprecedented bull run in property prices
following the turn of the millennium. With the world's economy in shreds
after the near collapse of the banking sector, the global property market is
facing a watershed period with grim growth prospects.

Executives are now bracing for permanent changes in the way they fund deals
and lukewarm future relations with nervous lenders and investors, who either
want to minimize escalating property losses or protect huge fortunes reaped
during the boom. "The lending market is basically dead," Ed LaPuma,
president of U.S. real estate financing company W.P Carey said. "There needs
to be a very compelling reason for a lender to lend or else they look at
every loan they have made in the last four years, shake their head and they
say they have lost too much to go in for more," LaPuma said.

Once the darling of investors from Joe Public to national wealth funds and
governments, real estate has suffered a massive fall from grace since
hitting its zenith in 2007. The asset class was pitched as a near-perfect
hybrid between unexciting bonds and volatile equities, but is now broadly
seen as the ultimate investment pariah -- trumping risky hedge funds,
default-prone high-yield bonds and bombed-out stock markets. This new-found
infamy could restrict the volume of so-called big-ticket property deals that
rely on high leverage.

"There was probably 70-80 billion pounds of new debt arranged in the years
2004, 2005, 2006 and 2007 but I can't see more than 25-20 billion pounds
this year and next year," said Max Sinclair, head of UK lending at property
lender Eurohypo. (...) "Underlying the whole problem is $2 trillion dollars
of loss in the financial sector around the whole world," Roger Orf,
president of Citigroup Property Investors said. "In terms of commercial
mortgage losses, it's about $300 billion more, another incredible number. To
cure this is a matter of years, not a matter of months," Orf said.

Some fear the slow rehabilitation of the credit market could curb growth of
emerging property markets in Asia, Africa and Latin America, which rely on
pioneering, debt-driven buyers. "If you look at the banking sector response
to this crisis, it appears that the further east you go, the more demanding
your typical lender becomes," said Mike Sales, the London-based head of
property at Henderson Global Investors. (...) Many investors believe they
will only be able to borrow up to 60 percent of a building purchase price at
best, with triple-digit margins on loans, longer lease demands and higher
income to interest cover ratios.

"Banks have realized this is too risky, and that part of the problem they
are having right now is they have been too accepting of high loan to value
ratios," said Reinhard Kutscher, who chairs the board at Germany's Union
Investment Real Estate. (...) "I had a meeting with someone yesterday who
said that if all banks marked their real estate loans to market, they would
basically be insolvent," LaPuma said. "I don't know whether he's is right or
wrong but I do know that real estate to most of them is a four-letter word."

(Additional reporting by Daryl Loo; Editing by Andy Macdonald)
http://www.reuters.com/article/GlobalRealEstate09/idUSTRE55O3DI20090625?pageNumber=2

DETROIT (Reuters) - General Electric Co Chief Executive Jeff Immelt said on
Friday the United States (...) should work to have
manufacturing represent about 20 percent of employment, more than double its
current level, he said. (...)

The United States need to reduce its reliance on financial services to drive
economic growth, Immelt warned. "While some of America's competitors were
throttling up on manufacturing and R&D, we de-emphasized technology," he
said. "Our economy tilted instead toward the quicker profits of financial
services." That is a lesson GE has learned -- its shares have lost some 58
percent of their value over the past year, largely the result of falling
profit at its GE Capital finance unit. Immelt is restructuring GE so it will
count on finance for just 30 percent of its profit, down from half before
the downturn. "While our financial services business has performed well, I
can't tell you that we were entirely free of these errors," Immelt said. "We
weren't." http://www.reuters.com/article/ousiv/idUSTRE55P4ZT20090626

The lengthy recession has proved discouraging for the swelling ranks of
unemployed Americans, and forced U.S. states obligated to pay them jobless
benefits to pile debt on their already strained budgets. Fifteen states have
depleted their unemployment insurance funds so far, forcing them to borrow
from the U.S. Treasury. A record 30 of the country's 50 states are expected
to have to borrow up to $17 billion by next year, said Rick McHugh of the
National Employment Law Project, a nonpartisan advocacy group
http://www.nelp.org/. "We are setting the stage for big pressures for states
to restrict eligibility and benefit levels," McHugh said. "Those type of
restrictive actions undercut the (Depression-era program's) economic and
social stability purposes." The state-run unemployment insurance programs
are normally financed with payroll taxes paid by employers on each worker.
But the funds' tax revenues are falling at the same time as benefit demands
are rising. Nine million Americans are receiving jobless benefits, triple
the number who got checks at the beginning of the year. Experts predict the
number of recipients will peak sometime this summer as long-term unemployed
run out of benefits, which were recently extended and last for 59 weeks in
most cases.
http://www.reuters.com/article/domesticNews/idUSN2632992220090626

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Received on Sat Jun 27 14:21:28 2009