It is the turn of JP Morgan Chase this week, to raise new capital through issue of fresh shares. The company has raised five billion dollars through issue of 142 million shares at around 35 dollars each, which is a 2% discount to the current market price.
The new capital will help the bank, which is ranked number two in terms of deposits, to return part of the funds received from the government, few months back. There are more banks lining up to capitalize on the improved market conditions.
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China was not even in the top 10 largest investors list ten years back, for US. But everything has changed drastically in the last five years. China has been recorded record trade surplus month after month, and has invested huge amount in US treasuries.
Now China is the largest investor in US treasuries and holds over 1.3 trillion dollars worth of US papers, and the US cannot afford to lose further investments from China. But China has been fearing depletion of US dollar value since 2008 beginning, and has started reducing its investment in US treasuries drastically.
This is expected to hurt US more than China, and hence the US treasury secretary Timothy Geithner has gone to China to handle the ticklish issue.
The number of banks with problems in US jumped to a 15 year high in the first quarter of 2009, with 305 banks reporting problem. The profits of the banks , in the meanwhile, jumped to nearly 7 billion dollars, which is 61% lower than the profits recorded in the same quarter last year.
The US banks have been hit by mortgage defaults and also due to credit card defaults. The latest legislation which tightens the credit card interest rate changes by banks, might hurt the profits more in the coming quarters.
The stress-test on banks by the US FED asked Bank of America to raise 33 billion dollars of new capital from the market before June 2009. Bank of America has already raised 26 billion dollars from the market through three tranches in the last three weeks.
It has now to raise another 7 billion dollars, which seems to be within reach.
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Every Australian is becoming richer by 700 dollars this week, without any effort from their end. Yes, the Australian government is on a mass stimulus dosage effort, wherein every australian will get around 700 dollars of cash credited to their account.
The Government has requested the citizens to liberally spend this amount, without saving it, in order to keep the economy running and avoid further job losses. The Australian economy was running at break neck speed in 2006 and 2007 when iron ore and coal prices were reaching new highs every month. But with the crash in the price of these items in the global market in the last one year, the Australian economy has gone into a tail spin , which the government is working hard to recover.
The latest stimulus action, is expected to cost the government a massive 33 billion US dollars.
BankUnited Financial, filed for Chapter 11 Bankruptcy protection in a Florida court, after the goverment authorities seized the bank and few private investors agreed to buy the operations of the bank on a running basis.
The bank has around 13 billion dollars of assets as per FDIC, which guarantees the deposits of all failed banks. The leading creditors for the bank includes US Bank, Wilmington trust and the Bank of New York. Over the coming months, there could be acceleration in the number of bankruptcy filings, as per experts.
The US FDIC, which guarantees the depositors of failed banks, has seen the fund go into negative zone in the last one year, due to over 25 banks going under. The FDIC has now approved a new levy on all the banks, which is equal to around 4 cents for every 100 dollars of deposits they get, in order to shore up the FDIC fund.
The FDIC is badly in need of shoring up the funds, since few more bank failures are likely in the coming months and it cannot seek fund support from the US government which is already running on huge deficits.
The levy structure was revised yesterday, which is likely to increase the load on bigger banks and reduce the contribution ratio of smaller banks, after protests from smaller banks.
The Federal agency that guarantees pension to over 44 million Americans, has seen its deficit zoom by a massive 33 billion dollars in the last six months, due to more companies becoming bankrupt. The agency takes over the pension responsibilities of all the bankrupt companies and hence the deficit has zoomed by mad amount.
The Pension Benefit Guaranty Corporation, saw the deficit at 11 billion dollars as of October last year, but the lowering of interest rates and more companies becoming bankrupt across US, has resulted in the deficit zoom to 33 billion dollars.
The US government might be forced to bail out this company anytime, since pension payments have to happen to the millions of US pensioners.
