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									                                                                                                                                                                                                                                                       ARAB TIMES, WEDNESDAY, JULY 21, 2010
    BUSINESS                                                                                                                                                                                                                                                                                                  39


                                              Canada cenbank raises interest rate to 0.75 pct                                                                                                                   Osborne tackles ‘spaghetti bowl’ tax code
    The Bank of Canada on Tuesday raised             come and increased the prospect of                 household debts will temper the pace                    British finance minister George                  “The previous government took a               minister, will head up the body initially.
    its benchmark lending interest rate one          sustainable long-term growth, it is                of growth.                                              Osborne launched an Office for Tax            complex tax system and made it even              John         Whiting,       formerly      of
    quarter of a point to 0.75 percent in            expected to slow the global recovery                  This is the second consecutive                       Simplification on Tuesday with the            worse. A decade of meddling and inter-           PricewaterhouseCoopers and most
    response to the country’s economic               over the projection horizon. In the                month the central bank has hiked                        object of providing the Treasury the          vening has made the tax affairs of mil-          recently at the Chartered Institute of
    recovery from last year’s recession.             United States, private demand is pick-             rates. Canada was the first of the G-7                  best options for unravelling “a spaghet-      lions of families and and businesses             Taxation, will act as director.
       Bank of Canada Governor Mark                  ing up but remains uneven,” the bank               countries to raise rates last month from                ti bowl” of complex laws.                     across the UK extremely complicated,”               The body will be based in the
    Carney said future rate hikes will large-        said in a statement.                               a record-low rate of .25 percent.                          The OTS will not set tax policy but is     Osborne said at the launch.                      Treasury and be staffed with a secre-
    ly depend on developments around the               The bank said given these circum-                Canada withstood the global economic                    rather about creating internal institu-          “It is a spaghetti bowl of reliefs and        tariat of civil servants and private sec-
    world and, in turn, how they may impact          stances, any further reduction of mon-             crisis better than most developed                       tional pressure to simplify the tax sys-      allowances,” he said. I hold out for a           tor secondees.
    Canada’s export-heavy economy.                   etary stimulus would have to be                    countries. There has been no crippling                  tem, Treasury officials said of the latest    dream, a distant dream, that people                 It will initially focus on reviewing the
       “While the policy response to the             weighed carefully against domestic                 mortgage meltdown or banking crisis in                  move by the Conservative/Liberal              actually understand the laws they are            400 or so reliefs in the tax system and
    European sovereign debt crisis has               and global economic developments.                  Canada, where there is greater over-                    Democrat coalition government which           being asked to comply with.” Michael             simplifying taxes for small businesses.
    reduced the risk of an adverse out-              The bank said government, bank and                 sight of mortgages. (AP)                                came to power in May.                         Jack, a former Conservative Treasury             (RTRS)



                                                                                                                    Factory orders balance at two-yr high


UK public borrowing hits June record, above forecast
LONDON, July 20, (RTRS): British govern-            now on a clearly improving trend,” said                                                                                                                                                                     orders rose to its highest in almost two years
ment borrowing was higher last month than           Jonathan Loynes of Capital Economics.                                                                                                                                                                       in July, but export orders weakened and firms
economists had forecast, with one measure
hitting a June record, due to a jump in debt
                                                       The government’s favoured measure of
                                                    public sector net borrowing edged lower in           British budget raised chance of recession: lawmakers                                                                                                   expected output to grow more slowly in the
                                                                                                                                                                                                                                                                months ahead.
interest payments and a slower rise in tax          June to 14.498 billion pounds from 14.725                                                                                                                                                                      The Confederation of British Industry sur-
receipts than earlier in the year. Tuesday’s fig-   billion a year earlier, though it was still above    LONDON, July 20, (RTRS): British                   built a degree of caution into the fiscal        achievement of the fiscal targets.
                                                                                                         finance minister George Osborne’s aus-             mandate by seeking to achieve it a year             The committee said forecasts from the           vey’s total order book balance rose to -16
ures disappointed analysts who had hoped an         the 13.1 billion forecast by economists.             tere emergency budget last month has               early,” the report said.                         quasi-independent Office for Budget
improvement in Britain’s budget deficit in             PSNB smooths some monthly swings in                                                                                                                                                                      from this month from -23 in June, above the
                                                                                                         raised the probability of renewed reces-              “We welcome this as a signal that if          Responsibility published before and after          long-term average and the highest since
April and May would have gained strength,           spending and tax revenue, and excludes a             sion in the short term, a cross-party leg-         economic conditions demand it he may             the June 22 budget, showed a higher risk
and raised the prospect that the government         one-off profit on the government’s stake in                                                                                                                                                                 August 2008. A quarterly poll showed output
                                                                                                         islative committee said on Tuesday.                be prepared to take measures to stimu-           of recession, despite being hard to com-           rose at its fastest pace in 15-years in the three
might overshoot its borrowing target for this       Lloyds Banking Group which flattered last               Members of parliament on the House              late the economy, even if these delay the        pare because of different underlying
year.                                               June’s PSNCR figure by more than 2 billion           of Commons’ Treasury Committee also                current plans for cutting the deficit,” the      assumptions.
                                                                                                                                                                                                                                                                months to July, suggesting manufacturing
   The Office for National Statistics said the      pounds.                                              leaned on Osborne to rein back fiscal              report concluded.                                   “It appears that there has been a slight        will make a strong contribution to second
public sector posted a net cash requirement of         In the last financial year, public sector net     tightening if the economy does worsen                 Osborne told the committee that mone-         increase in the chance of near-term neg-           quarter GDP growth.
20.905 billion pounds ($32 billion) in June,        borrowing totalled 10.25 percent of GDP, the         by offering an interpretation of his               tary policy was a more powerful tool to          ative growth and an increased likelihood              However, the forward-looking indicators
up from 20.213 billion last year and well           highest since records began in the 1954/55           remarks at odds with that of some other            support the economy than fiscal policy,          of positive growth in the outer years,” the        were weaker and the quarterly business situa-
above economists’ forecasts for a fall to 15        tax year.                                            observers.                                         and that the “degree of caution” was             lower house of parliament’s treasury com-          tion balance fell to +10 from +24 in April, the
billion pounds.                                        Under pressure from ratings agencies,                “The Chancellor told us that he had             aimed at giving extra certainty to the           mittee said in a report.                           lowest since October 2009.
   This was the highest PSNCR reading for           which have a close eye on Britain’s triple-A                                                                                                                                                                   “Although the headline total orders bal-
the month of June since records began in            debt rating, last month Britain’s new coalition      149 billion pounds this fiscal year from 154.7     the OBR’s Budget forecast,” Loynes said.         speaking on U.S. radio after the data was          ance showed a 7-point improvement, the
April 1984, and sterling fell to a session low      of Conservatives and Liberal Democrats set           billion in 2009/10. For the first three months     “With the budget forecasts still relying on a    released, said his country could not delay cut-    quarterly section of July’s survey indicated
against the euro and weakened versus the dol-       out an austere budget aimed at eliminating the       of the fiscal year, PSNB was just 659 million      solid recovery in the economy over the next      ting its deficit.                                  that the third quarter could prove to be
lar on the news.                                    cyclically-adjusted budget deficit over the          pounds lower than last year.                       year or two, worries about the UK’s fiscal                                                          more challenging for manufacturers,” said
   “June’s UK public finance figures put a bit      next 5 years.                                           “Extrapolating this forward points to a full-   outlook have certainly not evaporated.”                               Also:                         Varun Bhabha, UK economist at Barclays
of a dent in hopes that the fiscal position is         The budget forecast that PSNB will fall to        year deficit ... about 3 billion pounds above        British Prime Minister David Cameron,          LONDON: A key index of British factory             Capital.




                     Goldman exec denies ‘fraud’
                                                                                                         US home construction sinks as
    SEC chairman points to
    beefed-up enforcement                                                                                building permit applications rise
    WASHINGTON,              July      20,          mony that the coming months for
    (Agencies): The head of the                     the SEC will be dominated by rule-                                                               More than 40% leave Obama mortgage-aid program
    Securities        and       Exchange            writing for the new legislation. The
    Commission said Tuesday the                     agency is charged with writing near-
    agency has stepped up enforcement               ly 100 new rules.                                    WASHINGTON, July 20, (AP): Home construction plunged last                                     in building permit applications, which is a sign of future activity. They rose 2.1 percent
                                                                                                         month to the lowest level in the US since October as the economy                              from a month earlier to an annual rate of 586,000. Still, the slumping job market and com-
    in the wake of the financial crisis                The SEC chief also is discussing                                                                                                                petition from foreclosed properties have forced builders to limit construction, especially
    and past agency failures.                       the agency’s response to the May 6                   remained weak and demand for housing plummeted.                                               after tax credits that spurred sales expired at the end of April.
       SEC Chairman Mary Schapiro                   “flash crash,” a panicked disruption                    Construction of new homes and apartments in June fell 5 percent from a month ear-             “The housing market remains the Achilles’ heel of the recovery,” said M. Cary Leahey,
    was appearing at a House subcom-                that saw the Dow Jones industrials                   lier to a seasonally adjusted annual rate of 549,000, the Commerce Department said a senior economist at Decision Economics. “It is hard to imagine confidence recovering to
    mittee hearing, in her first public             lose nearly 1,000 points in less than                Tuesday. May’s figure was revised downward to 578,000.                                        healthy levels until the housing market experience much less distress.”
    testimony since the passage of                  a half-hour. Under a new system of                      Driving the June decline was a more than 20 percent drop in the volatile condominium          In a typical economic recovery, the construction sector provides much of the fuel. Not
    sweeping financial regulation that              “circuit breakers” for individual                    and apartment market. Construction of single-family homes, the biggest part of the mar- this time. While developers have cut back on construction and the number of new homes
    gives the agency new powers. Her                stocks put in last month by the SEC,                 ket, was down slightly. It dropped 0.7 percent. One bright area of the report was an increase on the market has fallen dramatically, they still must compete against foreclosed homes
    comments also are coming after the              US stock exchanges must briefly                                                                                                                                                                      selling at deep discounts.
    agency agreed to let Wall Street                halt trading of major stocks that                                                                                                                                                                       Builders may be turning their attention
    giant Goldman Sachs Group Inc pay               mark big swings. Trading of any                                                                                                                                                                      away from new projects to complete those
    $550 million to settle civil fraud              Standard & Poor’s 500 index stock                                                                                                                                                                    already in progress. Housing completions
    charges.                                        that rises or falls 10 percent or more                                                                                                                                                               rose 26.2 percent in June, noted John
       “We worked to reform the ways                                                                                                                                                                                                                     Ryding and Conrad DeQuadros, econo-
                                                    in a five-minute span must be halted                                                                                                                                                                 mists at RDQ Economics. That could be a
    we operate. We began modernizing                for an additional five minutes.                                                                                                                                                                      positive sign for future activity.
    our systems,” Schapiro said in testi-              In addition, the SEC put forward                                                                                                                                                                     “Our best guess is that housing construc-
    mony prepared for the hearing.                  proposed new rules spelling out                                                                                                                                                                      tion activity continues to bottom out at low
       She said the agency has been                 when and at what prices stock trades                                                                                                                                                                 levels and that we will see some very mod-
    revamping itself, strengthening                 deemed erroneous would be can-                                                                                                                                                                       est growth in the second half of the year in
    enforcement efforts and taking                  celed.                                                                                                                                                                                               new housing construction,” they said in a
    measures to protect investors in the                              Also:                                                                                                                                                                              note to clients.
    wake of the financial crisis and past                                                                                                                                                                                                                   Still, builders have been feeling increas-
    agency failures.                                NEW YORK: A French executive at                                                                                                                                                                      ingly pessimistic of late. The National
       “We brought in new leaders                   Goldman Sachs accused of mislead-                                                                                                                                                                    Association of Home Builders said
    across the agency. We streamlined               ing investors about risky assets                                                                                                                                                                     Monday that its monthly reading of
    our procedures. We worked to                    ahead of the US housing market                                                                                                                                                                       builders’ sentiment about the housing mar-
    reform the ways we operate. We                  meltdown denied on Monday fraud                                                                                                                                                                      ket sank to 14 — the lowest level since
                                                    charges by securities regulators.                                                                                                                                                                    March 2009. Readings below 50 indicate
    began modernizing our systems,”                                                                                                                                                                                                                      negative sentiment about the market.
    Schapiro said in her prepared testi-               Lawyers for Fabrice Tourre filed a
                                                    response to the charges by the                                                                                                                                                                          Each new home built creates, on average,
    mony.                                                                                                                                                                                                                                                the equivalent of three jobs for a year and
       Rep. Paul Kanjorski, chairman of             Securities         and       Exchange                                                                                                                                                                generates about $90,000 in taxes paid to
    the Financial Services subcommit-               Commission days after Goldman                                                                                                                                                                        local and federal authorities, according to the
    tee, said Schapiro “has pursued an              agreed to pay a record $550 million                                                                                                                                                                  builders’ trade group. The impact appears in
    ambitious, results-oriented agenda              to settle government fraud charges.                                                                                                                                                                  multiple industries, from makers of faucets
    aimed at protecting investors and                  Tourre, whose case was not part                                                                                                                                                                   and kitchen appliances to lumber yards.
    restoring market confidence.”                   of the settlement, said in the docu-                                                                                                                                                                    The rate of home building is still up
       She also faces hurdles in the com-           ment that he “reasonably relied on                                                                                                                                                                   about 15 percent from the bottom in April
    ing months, particularly in writing             Goldman        Sachs’      institutional                                                                                                                                                             2009, though it’s down 76 percent from the
    new rules to put into action the new            process to ensure adequate legal                                                                                                                                                                     last decade’s peak in January 2006.
    financial overhaul, Kanjorski said.             review and disclosure of material                                                                                                                                                                       New home sales in May dropped 33 per-
                                                    information, and cannot be held                                                                                                                                                                      cent to the slowest pace in the 47 years
       It is Schapiro’s first public                                                                     Unemployed Americans attend a National Career Fair at the Airport Radisson Hotel as they search for work in Los Angeles on
                                                                                                                                                                                                                                                         records have been kept. The drop-off came
    appearance since the $550 million               liable for any alleged failings of that              July 19. New claims for US unemployment benefits fell more than expected last week, hitting levels not seen since August 2008
                                                    process.”                                            as factories canceled summer closures. The number of unemployed fell to 14.6 million in June as 652,000 Americans left the job                  immediately after the tax incentives to sign
    settlement announced Thursday                                                                        market and more than 20,000 took up temporary posts but unemployment is not expected to drop below seven percent before                         a contract on a home ended on April 30.
    with finance powerhouse Goldman                    The civil charges against Tourre                                                             2013, leaving millions of Americans out of work. (AFP)
                                                    stem from the 2007 sale of a com-                                                                                                                                                                                        Also:
    Sachs, the largest against a Wall
    Street firm in SEC history, over alle-          plex investment product called                                                                                                                                                                              WASHINGTON: More than 40 percent of
    gations that the firm misled buyers             Abacus which was backed by mort-                                         Vote to bring relief to 2 million unemployed Americans                                                                             US homeowners seeking help from the
    of mortgage-related investments.                gage securities before the collapse                                                                                                                                                                         Obama administration’s flagship effort to
                                                    of the subprime market.                                                                                                                                                                                     rescue those at risk of foreclosure have
    Lawmakers may question whether
    the settlement is a serious show of
    enforcement muscle by the SEC in
                                                       He was accused of failing to warn
                                                    investors that a hedge fund headed
                                                                                                         Dems ready to extend jobless benefits                                                                                                                  dropped out of the program.
                                                                                                                                                                                                                                                                   The latest report on the program suggests
                                                                                                                                                                                                                                                                foreclosures could rise in the second half of
    the trail of the mortgage meltdown              by investor John Paulson was                                                                                                                                                                                the year and weaken an ailing housing market.
                                                                                                         WASHINGTON, July 20, (RTRS): The                   a quarter of the unemployed have been               Economists think unemployment bene-
    or just a blip for a firm that earned           involved in the selection of the com-                US Senate is expected to approve an                out of work for more than a year.                fits generally get a good bang for the                About 530,000 borrowers have fallen out
    that much in about two weeks last               position of the Abacus, and that                     extension of long-term unemployment                   Democrats are expected to break the           buck because people who are out of work            of the program as of last month, the
    year.                                           Paulson was betting on the fall of                   benefits on Tuesday, bringing relief to            deadlock shortly after the new senator           and scrambling to make ends meet are               Treasury Department said Tuesday. Nearly
       The $550 million Goldman is                  the US housing market.                               roughly 2 million jobless Americans who            from West Virginia, Carte Goodwin, is            likely to quickly spend that money, put-           1.3 million homeowners had enrolled since
    paying also represents nearly half                 Goldman Sachs in its settlement                   have seen help evaporate due to congres-           sworn in, giving them the 60th vote they         ting it into the economy and stimulating           March 2009.
    the White House’s budget request of             acknowleged that its investment                      sional inaction.                                   need to overcome a Republican procedur-          growth.                                               Treasury officials say few of these bor-
    $1.2 billion for the SEC for the fis-           materials contained incomplete data                     With congressional elections looming            al roadblock in the 100-seat chamber.               Though Democrats likely will be able            rowers will wind up in foreclosure. But
    cal year starting Oct. 1. That would            on Abacus.                                           in November, the Senate has been locked            Goodwin succeeds Robert Byrd, who                to claim victory on this front, much of the        many analysts are concerned that a new
                                                       Goldman agreed to pay 300 mil-                    in a partisan standoff over how to pay for         died last month after 57 years in                rest of their “jobs agenda” in 2010 has            wave of foreclosures could greatly impact
    bring the agency staff to about 4,200                                                                                                                                                                                                                       the struggling housing industry.
    people, to police burgeoning and                lion dollars to the US Treasury and                  extending benefits for those who have              Congress.                                        been sidelined. Due to unified
                                                                                                         been out of work the longest.                         A final vote could come later in the day.     Republican opposition and doubts within               Another 390,000 homeowners, or 30
    sophisticated markets, and some                 250 million to investors in the set-                                                                                                                                                                        percent of those who started the program,
    35,000      registered     companies,           tlement.                                                Democrats, eager to show voters they            The House of Representatives is expected         their own ranks, Democrats have been
                                                                                                                                                                                                                                                                have received permanent loan modifica-
    investment funds and other entities.               Among clients of Goldman’s con-                   are doing all they can to bring down the           to approve the measure later in the week         unable to secure more money to avert               tions and are making payments on time.
       And the overhaul package                     troversial product were German                       9.5 percent unemployment rate, tried to            before sending it to President Barack            teacher layoffs, launch new construction              A major reason so many have fallen out
    approved by Congress last week,                 commercial bank IKB and Britain’s                    extend the benefits when they expired at           Obama to sign into law.                          projects and help states pay their health-         of the program is the Obama administration
    which slaps the stiffest new curbs on           RBS. Goldman claimed that it lost                    the end of May.                                       “It’s time to stop holding workers laid       care bills.                                        initially pressured banks to sign up borrow-
                                                    90 million dollars from its own                         But they were blocked by Republicans            off in this recession hostage to                    Further, the public seems little inclined       ers without insisting first on proof of their
    US banks and financial institutions                                                                  who said the $34 billion price tag should          Washington politics,” Obama said on              to give them credit for the job-creation
    since the Great Depression, adds                investment in the security.                                                                                                                                                                                 income. When banks later moved to collect
                                                                                                         be covered by cuts elsewhere rather than           Monday.                                          measures they have already passed.                 the information, many troubled homeown-
    new powers and responsibilities to                 The type of mortgage-backed                       more borrowing that would add to a tril-              The fight over jobless benefits is the           Last year’s $862 billion stimulus pack-
    the SEC’s plate. Among other                    securities sold by Goldman in the                                                                                                                                                                           ers were disqualified or dropped out.
                                                                                                         lion-dollar budget deficit.                        latest skirmish in a broader debate over         age has saved more than 3 million jobs,               Many borrowers complain of a bureau-
    things, the agency gains oversight of           deal were a key contributor to the                      Nearly half of the 15 million Americans         whether Congress should spend further to         according       to     the      nonpartisan        cratic nightmare. They say banks often lose
    hedge funds and bolstered techno-               financial crisis that peaked in 2008                 out of work have been jobless for more             stimulate the economy or start making the        Congressional Budget Office, but most              their documents and then claim borrowers
    logical capacity.                               because many contained risky mort-                   than six months, the highest level of long-        painful cuts needed to bring down record         people think it has had no impact on the           did not send back the necessary paperwork.
       Schapiro says in her written testi-          gages.                                               term unemployment since the government             budget deficits, which hit 9.9 percent of        economy or actually made it worse,                    The banking industry said borrowers weren’t
                                                                                                         began keeping track in the 1940s. Nearly           GDP in the last fiscal year.                     according to a recent CBS News poll.               sending back the necessary paperwork.

								
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