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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