5th weekly news


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5th weekly news

  1. 1. Bernanke hopes US not relegated to slow recovery<br />
  2. 2. PRINCETON, NEW JERSEY: Federal Reserve Chairman Ben Bernanke said on Friday it was <br />unclear whether the US economy would be relegated to the type of slow recovery that <br />typically follows a financial crisis. Acknowledging the economy was growing less than the US central bank would like, <br />Bernanke noted that recoveries following financial crises historically have been more <br />sluggish than rebounds from normal recessions. <br />However, he said it was not clear if that was because of the unusual economic <br />headwinds financial crises create or because past policy responses have not been <br />aggressive enough, saying he hoped the current US recovery escapes that fate.<br />
  3. 3. "It could be that financial crises lead to slow recoveries because of the headwinds <br />created by deleveraging, by bad assets, by problems in the banking system and the like <br />and I'm sure there's some of that" in the current US episode, he told a group of scholars <br />at Princeton University. "But it could also be that in some episodes in the past ... maybe governments and <br />policymakers weren't aggressive enough in fixing their financial systems and using <br />monetary and fiscal policy appropriately," he said in answer to a question. "Certainly the Federal Reserve has been quite aggressive ... so we're hopeful to get a <br />better result." Bernanke offered no guidepost to the US central bank's next step, and steered clear of <br />offering his thoughts on the economic outlook. <br />
  4. 4. The Fed said on Tuesday it was prepared to take action to help the recovery and lift <br />inflation. Many analysts expect it to resume buying longer-term government debt later in <br />the year to drive borrowing costs down further. In his prepared remarks to the group, Bernanke acknowledged the economics profession <br />has a lot to answer for after the financial crisis of 2007-2009, including why economists <br />have been unable so far to engineer a healthy recovery. "Although financial markets are for the most part functioning normally now, a concerted <br />policy effort has so far not produced an economic recovery of sufficient vigor to <br />significantly reduce the high level of unemployment," he said. However, Bernanke defended the field of economics. He said the recent crisis reflected a failure to regulate financial institutions, manage risks <br />and anticipate shocks rather than shortcomings in economic theory. <br />
  5. 5. He urged economists to learn more about human behavior, especially under uncertain <br />circumstances, and to learn more about how asset bubbles form and how the ability of <br />financial firms to sell assets can come to a screeching halt in a crisis. <br />
  6. 6. Citigroup gives pay hikes to top execs in stock<br />
  7. 7. NEW YORK: Citigroup, still partly owned by the government after a rescue during the <br />financial meltdown, is giving raises to top executives that could amount to millions of <br />dollars. CEO VikramPandit, who is drawing a salary of $1 for the second year in a row, did not get <br />a raise, but the chairman of the bank hinted it plans a big payout for him next year. The announcement Friday by Citi, which remains weaker than most of the large American <br />banks two years after the meltdown, raised questions among experts on corporate <br />governance. <br />By paying the raises in company stock, not cash, Citi has decided to follow previously <br />issued guidelines that limited salaries to $500,000 for the top 25 executives at financial <br />institutions still receiving large amounts of federal help. <br />
  8. 8. The question is do they deserve higher salaries, and are they evading rules to avoid losing <br />?" asked Charles Elson, director of the Weinberg Center for corporate governance at the <br />University of Delaware. Citi is fighting to keep talented bankers from jumping ship to any of its rivals on Wall Street, <br />all of whom have repaid their federal bailout money and are not under the same kind of <br />compensation restrictions. Edward Skyler, a spokesman for the bank, said the compensation levels "correspond with <br />similarly situated executives in the industry." Citi was the hardest-hit US bank during the credit crisis of 2008, and received $45 billion in <br />government bailout money under the Troubled Asset Relief Program, part of which was <br />converted to stock last year. The government is gradually selling its stake and still owns <br />about 17 per cent of the bank. <br />
  9. 9. Though Citi has posted profits recently, Citi continues to be weighed down by large amounts<br />of bad loans and investments it made in the run-up to the crisis. Pandit, who pledged last year to take a $1 salary until the bank returned to profitability, <br />elected to keep that figure for this year, but he seems set for a big payday in 2011. Citi's<br />chairman, Richard Parsons, said in a statement that beginning next year the bank's board <br />"intends to compensate Vikram commensurate with the job of CEO of Citi." Rolfe Kopelan, a managing partner at search firm Capstone Partnership and an expert on <br />corporate compensation, said $1 still seems appropriate for Pandit. "It's not ridiculous when you're living on public funds, and when you're one of the major <br />causes of the recession," Kopelan said. The biggest raise disclosed in Citi's regulatory filing will go to John Havens, head of the bank's <br />
  10. 10. institutional clients group. He will get a cash salary of $500,000 this year, the maximum<br />under the cap, and $9 million of salary paid in stock<br />That compares with a salary of $975,000 last year for Havens, also in a blend of cash <br />and stock. Including other awards of stock and options last year, Havens' total <br />compensation last year came to $11.2 million. Citibank did not disclose how much Havens might be awarded in other stock grants, <br />but he could be eligible for a bonus this year of up to 50 per cent of his salary, or $4.75 <br />million. Manuel Medina-Mora, head of consumer banking for the Americas, will also get a cash <br />salary of $500,000 and $7.45 million of salary in stock, making him eligible for a bonus <br />of up to $4 million. Last year, Medina-Mora's base salary was $972,000, and his total <br />compensation including other awards of stock and options was $9.8 million. <br />
  11. 11. Chief Financial Officer John Gerspach's salary will be $500,000 in cash and $4.17 million in <br />stock, making him eligible for a bonus of up to $2.3 million. Last year, his cash and stock <br />salary was $3.3 million, and his total compensation including other stock awards was $5 <br />million. Under an amendment to the bank bailout law of 2008, Citi is still subject to the <br />compensation restrictions as long as the government remains a shareholder. That means <br />the top 25 executives cannot receive bonuses exceeding 50 per cent of their salaries. In <br />deciding to give their salary raises in stock, Citi chose to abide by a previous rule that <br />governed the bailout, under which top executives could not receive more than $500,000 of <br />their salary in cash. The Associated Press' calculation for executive pay aims to isolate the value the company's <br />
  12. 12. board placed on the CEO's total compensation package. The figure includes salary, <br />bonus, incentives, perks and the estimated value of stock options and awards. The calculations don't include changes in the present value of pension benefits, and they <br />sometimes differ from the totals companies list with federal regulators. <br />