Week - 01-11-09

Barack Obama nominated Ben Bernanke for a second term as chairman of the Federal Reserve. George Bush appointed Mr Bernanke in 2006, and there had been some speculation that Mr Obama might remove him. Several Democrats in Congress have criticised Mr Bernanke for being too timid in his response to the financial crisis, though a recent Bloomberg poll found that 75% of investors worldwide approved of his handling of it.

The White House released its mid-year budget review. It reduced its estimate for this fiscal year’s deficit by $262 billion, to $1.58 trillion (mostly because some money set aside for bailing out financial companies is no longer required), but increased its projection for the total deficit over the next ten years by $2 trillion. Unemployment was forecast to hit 10% by the end of 2010; the economy was predicted to grow by 2% next year.

The key to the economy

Sales of previously owned homes in America rose by 7.2% in July compared with June, the biggest jump since 1999, as buyers took advantage of cheaper prices and a glut of foreclosed properties. Sales of new homes increased by 9.6%, the fourth consecutive monthly advance.

At a hearing in New York, a federal judge pushed the Securities and Exchange Commission for an explanation of why it had not pursued Bank of America over allegations that BofA misled investors about bonuses paid to executives at Merrill Lynch around the time it took over the investment bank. The SEC has reached a settlement with BofA, under which it is fined $33m but neither admits nor denies wrongdoing. The judge found this “puzzling”.

Nicolas Sarkozy and France’s biggest banks announced new rules on the way traders are paid as part of a wider clampdown on bonuses in the financial sector. The French president said he would not unilaterally cap bonuses as it would put France at a disadvantage when attracting talent, but warned bankers not to expect their pay to be “a game where you always win”. Meanwhile, Lord Turner, the head of Britain’s financial regulator, said he (unofficially) supported the idea of a global tax on financial transactions to help curb excessive salaries.

Spain’s Banco Santander offered to buy back €16.5 billion ($22.5 billion) worth of mortgage- and asset-backed securities, a huge boost to Europe’s securitised-bond markets.

The German government pressed General Motors to reach a decision on the future of Opel, the carmaker’s European arm, which employs 25,000 workers in Germany. It supports a proposal to sell a majority stake in Opel to Magna International, an Austrian-Canadian car-parts supplier, with strong provisions attached that protect German jobs.

Heading for the scrapyard

The month-long “cash-for-clunkers” programme ended in America. Just over 690,000 old, gas-guzzling cars were traded in under the scheme, which cost $2.9 billion of public money. The Toyota Corolla was the most popular new car purchase; the Ford Explorer four-wheel drive topped the list of models traded in.

TeliaSonera, the largest telecoms operator in the Nordic region, tightened its grip on its assets by offering to buy the remaining shares in two subsidiaries in which it has stakes in Estonia and Lithuania. The deal is a fillip for the Baltic countries, which have seen their economies slump.

A.P. Moller-Maersk delivered a gloomy forecast about its prospects for the rest of the year. The Danish shipping line, the world’s biggest, recorded a first-half loss as freight rates fell sharply. Separately, a measure of world trade volumes compiled by a Dutch agency grew by 2.5% in June compared with May, the largest increase in a year.

Procter & Gamble decided to sell its pharmaceuticals division in a $3.1 billion deal, and so refocus its consumer-health business on non-prescription drugs. The buyer is Warner Chilcott, which makes birth-control pills among other things, and recently moved its registered country of residence to Ireland.

A group of bondholders at Tribune, America’s second-biggest newspaper publisher, and counts the Los Angeles Times among its titles, took the first legal steps to investigate Sam Zell’s buy-out of the company, which, they argue, eventually caused it to seek bankruptcy protection.

Christmas presence

Sony unveiled its Daily Reader, a device it hopes will challenge Amazon’s Kindle in the electronic-book market. Sony’s gadget will go on sale in America in December, at a price of $399