The G-20 met but little action came from this group -partly because the attending
The financial situation continues to be unsettled and banks are pulling back from lending after getting stung so badly on mortgages and in the face of a downturn of increasing severity. Government injections of capital into banks have helped to ease the sense of worry on the part of banks but it has not emboldened them to lend. An unusual joint statement from the Fed, the FDIC, the OTS and the OCC (see below) http://www.federalreserve.gov/newsevents/press/bcreg/20081112a.htm represents some of the strongest moral suasion the central bank and other regulators can bring to bear to get banks lending again.
That statement warns banks to discharge their responsibility to lend to creditworthy borrowers. It warns them against a payout out of excessive dividends as well as warning on compensation. The statement also urges lenders to work with mortgage borrowers.
The Fed is trying to do all it can. It has even been allowing the funds rate to trade below its 1% target making any call for a further rate cut really a moot point.
The BIG NEWS this past week also has featured discussions about the automakers.
While Congress has been eager to approve money for banks it appears much more reluctant to address the special problems in commerce even for a high-value product like an autos even when banking and financial sector problems seem to be an import reason for the problem in the auto sector. Car and truck sales have been averaging between 16mu to 16.5 mu of sales (saar) until this year when they have suddenly fallen off to 10.5mu. That’s a drop of 36% in the structural pace of sales not in some flakey m/m calculation. Autos need financing the financing arm is broken so why blame the automakers?
This a big issue because one and ten jobs is estimated to be auto-related. These jobs are concentrated in
The G-20 communiqué is a mixture of objectives. In an attempt to convince us they are on top of things, I get the impression that they are spinning their wheels. The ‘mandates’ at the country level are obvious for the most part.
There are no ground-breaking statements of intent in this document. There is nothing ambitious. No country by country tasks are assigned or promises are made. We are impressed that the leaders are full of intent to make things right. We are less impressed that there is anything of real structural significance in the works. We are not surprised at the lack of actual achievement since with the office of the