To accelerate the economic activities and to bring them back on the track at a faster rate, the US President Barack Obama, met the top executives of America’s major banks on Monday, December 14, 2009. He urged the executives to explore every responsible way to accelerate the process of lending.

The agenda of the meet was to exchange ideas and bring out ways to increase lending to Small and medium businesses who are complaining a deprivation of credit from banks.

Speaking at the meeting which took place in the White house, Mr. Obama, expected an extraordinary commitment from the nation’s top bankers and urged them to help administration to revitalize the economy and bring it back on track as soon as possible. He stipulated that banks should find more and more ways to grant loans to creditworthy small and medium enterprises (SME’s), which he thinks are the main source of employment generation in the US.

After the harsh criticism of bankers on a program broadcasted on CBS on Sunday, Mr. Obama looked a bit optimistic and called his session with the leaders of 12 dominant banks, as frank and productive discussion.

However, giving a glimpse of his Sunday’s jibes, Mr. Obama told banks to ‘close the gap’ and support the endeavors of regulatory reforms in the financial-services industry.

The U.S. Bankcorp’s CEO Richard Davis who attended the meeting declared the meeting as productive and denied any kind of disagreement between the Bankers and the Administration. Mr. Davis said that the President, unlike Sunday’s meet didn’t call the bankers with any name. He was primarily referring to President Obama’s ‘fat cats’ moniker, which the President had used to refer to bankers in his Sunday’s interview to CBS.

However, earlier on December 14, 2009, the US banking giant, Citigroup initiated steps to emancipate itself from the clutches of government protection and asserted that it was ready to redeem the $20 billion, which it had last year received as help from the government under the Toxic Assets Relief Program (TARP). By doing this, Citigroup will exit the program under the purview of which the US government would had covered billions of dollars as a part of loan losses.

The Treasury Department stated that it will begin to sell its 34% stake in the Citigroup by selling first of its $5 billion in common stocks and will sell the remaining in the coming 6 to 12 months.

J.P Morgan Chase’s, Mr. Dimon said that J.P. Morgan is taking all the necessary steps to lend a helping hand to small businesses and to accelerate the growth of lending process. He said Chase is doing its part in modifying the mortgages for lashed homeowners and is ready to support some of the regulatory reforms. Furthermore, Chase has also showed its willingness of providing sound bankers’ a compensation. But at the same time, it also raised its concerns over some of the regulatory proposals, which they think can restrict the lending capacity of banks and can also hurt economic growth and job creation in the Country.

The meeting which Mr. Obama had primarily called to push for more lending was attended by several America’s top banking executives of leading banks and was also hosted by some of the most esteemed diplomats from the Obama Administration.

Though Mr. Obama termed his meeting with bankers as candid and productive, there is still a big question mark on whether the President will be able to persuade the bankers to support the regulatory reforms which he thinks can prevent the US economy from experiencing another economic recession in the future.

written by REI Circle (www.reicircle.com)

As more Americans find themselves “upside down” – stuck in homes that are worth less than they owe the bank, they also find themselves with a difficult choice: Is it better to struggle in order to make monthly mortgage payments that may have increased due to an ARM loan, making it even harder to make ends meet, or simply walk away from the home altogether? Many Americans are choosing the latter – giving up the house keys to their lender and downsizing to a rental home instead.

For some this is a devastating change, but for others a welcome one. Former homeowners are now able to enjoy the benefit of some discretionary income while finding themselves free of the stress and worry of home ownership during a troublesome real estate market and challenging economy. That extra cash is instead being for things such as family vacations or other luxury items as Americans abandon homes in record numbers, evidenced by a U.S. home ownership rate at its lowest point in more than 20 years.

These aren’t merely people who cannot make their house payments, either. Many are choosing not to make their mortgage payments and waiting until the bank kicks them out, all the while benefiting from holding on to their monthly mortgage money and using it for other things. These “strategic defaults” as they are called, are on the rise, with industry experts predicting that the number of homeowners who can pay but choose not to will swell to 1 million by the end of 2009 – four times the 2007 level. This is not only bad news for the credit scores of the individuals who choose to purposely default, it’s horrible news for the banks who hold these home mortgages.

So how bad will this situation get? Analysts predict that 21 million American households will owe more on their home mortgages than they are worth by the end of 2010. If 20 percent (1 in 5) of these households defaults on their loans, this would equal a hit to banks and investors of more than $400 billion. There’s an upside to this dilemma, however. The amount of debt that will be lifted from millions of Americans as they allow banks to take their homes will leave these folks better able to handle other financial obligations and a rising unemployment rate.

For example, if you take a look at people who haven’t paid their mortgages for the last three months (4.8 million U.S. households) and add up how much cash this frees up from monthly mortgage payments, you’re looking at an additional $5 billion dollars a month that could be poured back into the U.S. economy at a time when this type of financial stimulus is most needed. The only question is whether the ends justify the means: Is it more important for the banks to keep receiving payments, for Americans to be free from the burden of home debt, or for this additional windfall of funds to be circulating through the economy? And what are the long term effects to the health of U.S. mortgage lenders and individual credit ratings for those who choose to default? Will we be left with a large segment of the population in five years that lack the credit to buy another home or other large ticket items, and how will this hurt manufacturers and retailers of these items, as well as everyone who works in the real estate industry?

Some experts say that the economy will improve more quickly if American shed their mortgage debts and start fresh. Others even say that the banks and mortgage lenders deserve to experience this rash of home loan defaults because they’ve brought this situation upon themselves by allowing easy credit to those who they knew couldn’t pay for expensive homes and through the free-wheeling application of adjustable rate loans that consumers simply didn’t understand when they signed up for them.

Still others blame the government for encouraging this situation in the first place. Regardless of where the blame lies, consumers seem to be taking action into their own hands for the time being while the current administration continues to encourage lenders to cut deals with people to keep them in their homes. Unfortunately these deals often don’t meet with the approval of borrowers because they only reduce their monthly debt burden by a few hundred dollars at best. This can’t compete with the prospect of cutting their debt by a few thousand dollars simply by walking away from their homes and seeking cheaper rental accommodations – which in many cases are actually better than the homes on which they were paying mortgages in the first place. Regulators, politicians and lenders need to ask themselves what they would do if they found themselves “under water” with their home loans, and attack the issue realistically, rather than bury their heads in the sand and hope that the situation will right itself.

written by REI Circle (www.reicircle.com)

From the time recession was formally announced in December 2007, the employment juggernaut has been steadily rolling downhill. And, October saw the worst unemployment rate of 10.2% in the last three decades – it touched a two-digit figure, once thought of as improbable.

But November has come as a breath fresh air in the unemployment scene, reeling under layoffs and unemployment. It recorded the first drop in the jobless rate and clocked 10%, rekindling hopes that the worst is over. The analysts are hailing this as the best finish to the worst year for the American economy.

The Labor Department has confirmed this, saying, November saw the least layoff of 11,000 jobs, since the start of the economic crisis. This relief, though marginal, was enough to bring down the unemployment rate from 10.2% in October to 10% in November. Though the percentage difference is nothing to feel euphoric about, the downward trend itself is an optimistic development in an otherwise bleak environment.

One swallow doesn’t make a summer. Not all concerned are heaving a sigh of relief with this upbeat turn of events. Economists caution that a month’s favorable number cannot be construed as the beginning of the end of recession. Some are even predicting worsening of the scenario with unemployment rate peaking at 10.5% in the first quarter of 2010.

President Barrack Obama is joining the cautious yet optimistic brigade. He said, “The trend line right now is good, the direction is clear. But good trends don’t pay the rent. We’ve got to actually grow jobs.”

The severe drought experienced in the job market is one of the obsessions of the present administration. The political backlash of the problem is pushing it to the forefront, calling for immediate attention from all concerned. There are hints of tax credits on the anvil to small businesses for creating job opportunities. The other incentives in the pipeline are tax reduction for expenditure on new infrastructure development and enhanced financial assistance to local and state governments.

A perusal of sectorial unemployment rates bring in a mixed bag of results. While the service sector is on the upswing for the second straight month, both construction and manufacturing sectors are still going downhill. The most encouraging trends are seen in healthcare, education and some selective business services. Another reassuring fact is that the temporary workforce is growing in strength for the fourth week in a row.

Numerous encouraging stories are doing the rounds, giving hope to thousands of job aspirants. After months of desperate job-hunting and ensuing depression, many have found the means to earn their daily bread and butter that will keep them from keeling over into the abyss.

In spite of the upbeat atmosphere in the employment scene, many employers are embracing the ‘wait and watch’ approach. They are holding out to see whether this trend will last without governmental backing. The projected hiring of many companies for 2009 is less than that of 2007. Most companies did not even spell out any projected figure for 2008 due to the dismal economy.

The industry-watchers are of the opinion that though hiring does not mirror recovery of the employment sector, the economy’s rally is bound to cause ripples in the coming months.

Despite these favorable signals, there is much distance to traverse to negate the setbacks caused by the recession. In November, an estimated 15.4 million Americans are jobless, which is almost double the number at the beginning of economic slowdown.

Nevertheless, the November figures are standing tall like a beacon of hope driving away the enclosing darkness.

written by REI Circle (www.reicircle.com)