Banks ignore Gordon Brown’s request to cut its borrowing cost

Even BOE has aggressively cut its interest rate in the two consecutive months by 140bps on November 6 and 100bps yesterday to 2%, as low as at anytime in its 300 years history. But banks as lenders are still not willing to cut its borrowing cost.

British Prime Minister, Gordon Brown, intensively urges banks to cut its borrowing cost but the Gordon Brown’s request is ignored by banks.

Here is from Telegraph:

In lowering rates again following last month's dramatic 1.5 percentage point reduction, the Bank of England itself hinted that base rate cuts were not enough to stop the economy sliding into a prolonged recession. The Bank of England will reduce interest rates even further as the economic downturn continues to bite.

Willem Buiter, of the London School of Economics, a former member of the Bank's Monetary Policy Committee, on Thursday called on the Bank to reduce rates to zero immediately, saying there was little point in "keeping its powder dry."

Roger Bootle, an economic adviser to the accountants Deloitte, said the Bank must cut rates "as far as it can", adding: "It won't be long before interest rates are reduced to 1 per cent, and they may ultimately have to fall all the way to zero."

The Bank is also now considering radical plans to pump cash directly into the economy – the nuclear option for when interest rate cuts fail.

The Government has begun considering contingency plans to nationalize the banking system if lending conditions do not improve soon.

As known, the main problem of the current credit market is evaporating credit confidence that was due to higher risk of credit default. Accordingly, even though the benchmark rate is dramatically reduced to zero percent as Willem Buiter and Roger Bootle saying, I think it would not directly impact on the easing credit tightened. Even, if the government really nationalizes the banking system.

The Government should restore credit confidence by regulating credit market as George Soros proposing on the current financial system reformation along with the bailout moves. If we look back in the past, when economy was very well, credit trust was high and default risk was very low and controllable. How much central banks set interest rate, lenders remained willing to lend, even lenders were totally private holding.

Related Posts :

ECB, BOE & Sweden cut rate; French unveiled a €26bn stimulus packages

Sources :

Telegraph: Banks under pressure to cut borrowing costs after rate cut, December 5, 2008 7:54AM GMT

Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Morgan Stanley widened its Q4 of 2008 loss estimate on Goldman Sachs

After Analysts from Thomson forecasted on December 2, Goldman Sach(GS) will severe about $2 billion of losses in the quarter ended on November 30. Several other analysts, including Morgan Stanley, Fox-Pitt Kelton's David Trone and Merrill Lynch's Moszkowski, have widened their loss view on Goldman Sach today.

Here is from Reuters:

Morgan Stanley widened its fourth-quarter loss estimate on Goldman Sachs Group Inc (GS), citing a fall in equity, credit and real-estate asset values in November, and rising negative marks on the firm's illiquid asset and principal investment portfolios.

Morgan Stanley's Patrick Pinschmidt now expects Goldman to report a loss of $4.45 a share for the quarter, compared with his prior view of a loss of $1.09.

Several other analysts, including Fox-Pitt Kelton's David Trone and Merrill Lynch's Guy Moszkowski, have widened their loss view on the former investment bank this week, reflecting continued price correction across many asset classes through November.

Pinschmidt said negative marks would rise to $7.4 billion from $4.1 billion.
Marks on principal investment portfolio are expected to be at $4.4 billion, hurt by a fall in global equity market valuations and significant erosion in real-estate holdings, he wrote in a note dated December 4.

Pinschmidt also cut his price target on Goldman's stock to $137 from $152, but kept an "overweight" rating.

Fixed-income trading, Goldman's most capital-intensive and lowest return-on-equity business, may be resized to produce better returns, the analyst said.
Shares of Goldman Sachs closed at $67.53 Thursday on the New York Stock Exchange.

Related Posts :

Goldman Sach (GS) could face $2 billion losses in the Q4 of 2008

Sources :

Reuters: Morgan Stanley widens Goldman Sachs loss view, December 5, 2008 5:10am EST

Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.

Starbucks warned its profit could fall below analysts’ expectations

Starbucks(SBUX) warned on December 4 that its profit could fall below analysts’ expectations on concerning recession impacts to retailers’ sales. Here is from The New York Times:

The chief financial officer, Troy Alstead, said that same-store sales deteriorated by 9 percent in the United States since the company’s fiscal first quarter began at the end of September. In its fiscal fourth quarter, the company reported a decline of 8 percent in the United States — a drop that many investors had hoped would be the company’s steepest.

Sales have been particularly dismal in those states hardest hit by foreclosures, most notably in California and Florida, which make up about 30 percent of the company’s store base.

The comments came during an analyst conference that began with Mr. Schultz trying to curb anxiety on Wall Street about the chain’s sliding sales and profit.

He said he had confidence that “when, not if, this environment does get better that Starbucks is going to be a stronger company for having gone through it.”

Related Posts :

Starbucks profit plunges 97% due to a sharp economic downturn

Sources :

The New York Times: Starbucks Issues a Warning on Profit, December 4, 2008

Please Note!

This is generally never true. Before buying or selling any asset you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

You are welcome to republish this article, or any portion thereof.
Please, cite the actual/original source. I would be grateful if you could link back.