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Stimulas Plan : The US Senate approved the USD 787 billion dollar financial stability plan to boost the ailing economy, sending the emergency stimulus legislation to President Barack Obama, who is expected to sign it into law. The senate voted 60-38 for the Compromise Bill on the same day the House of Representatives also passed it.
The measure, aimed at combating the worst economic crisis since the Great Depression of the 1930s, marks Obama's first major victory in Congress, less than a month after taking office.
The measure, aimed at combating the worst economic crisis since the Great Depression of the 1930s, marks Obama's first major victory in Congress, less than a month after taking office.
Speaking in his weekly radio and Internet address, Obama said, "I will sign this legislation into law shortly, and we'll begin making the immediate investments necessary to put people back to work doing the work America needs done."
At the same time, he cautioned, "The problems that led us into this crisis are deep and widespread, and our response must be equal to the task."
Earlier in the day, the US House of Representatives passed the USD 787 billion Economic Stimulus Bill in a 246 to 183 vote. The bill was passed with no Republican support. The final spending and tax cut mix in the USD 787 package stands at about 64% and 36% respectively.
Majority leaders like Stenny Hoyer accused Republicans of sticking to same policies of the failed eight years of the Bush administration.
Nancy Pelosi, House Speaker (Democrat), said the American people are feeling a great deal of pain. "They have uncertainty about their jobs, about healthcare, about ability to pay for the education of their children and sad to say in our great country even their ability to put food on the table. So, today we have passed legislation that does take that swift action on their behalf."
Senator Chris Dodd, Chairman, Banking Committee, said we are in the deepest economic crisis in the lifetime of any American. "They are worried about their pay. Our system of economy is at risk these days. We'll be judged by history as to whether or not we could respond intelligently to it."
According to some report which aired on news and also on media, Satyam founder and ex-cheif Mr. B Ramalinga Raju had confessed in front of Andhra Pradesh police during custodial interrogation by CBCID Hyderabad.
According to sources, he admitted that he was doing this fraud from last seven years., Raju confessed to manipulating the balance sheet for the past seven years eyeing more business, however, he denied bribing anybody in the process.
Raju was grilled for several hours and is said to have been co-operating with the police, replying most of the questions, police sources said.
- Because of the present global financial situation, disparity shown in the balance sheet became difficult to cover up .
- Things have gone out of control. Since I have been instrumental in starting the company, I wish it to be a leading company and could not bear the thought of it coming down. That is the reason I have money to save the situation.
- Since about seven years, we wanted to show more income in the account to avoid others from involving in company affairs and any other possible hostile takeover situation, and hence, manipulated the balance sheet to attract more business and show unavailable amount as available cash in hand.
- This process continued for the last seven years and margin amount shown got increased much more year after year.
This News is taken from IBNLIVE and from Economics Times , and beleived to be reliable.
On a expected move by Govt. of India , Minister for Corporate Affairs Mr. P C Gupta said the government has elected three members to the board of Satyam: HDFC chief Deepak Parekh, former Nasscom president Kiran Karnik and former Sebi member C Achuthan. Further appointment, Gupta said, will be made subsequently as required.Mr. Deepak Parekh, is chairman and founder of India largest house loan provider Housing Development Finance Corporation ( HDFC ) . Satyam Computer Services Ltd. will have to restate earnings and may be broken up after the company’s founder was arrested in India’s biggest corporate fraud investigation, executives said.
On an unofficial move, the three new directors led by Housing Development Finance Corp. chairman Deepak Parekh will meet in Hyderabad today to take over India’s fourth-largest software exporter after the government replaced its board and detained chairman Ramalinga Raju.
“First we need to go and assess the magnitude of the issue,” Parekh, 64, said in a telephone interview. “Then we have to work on the re-statement of accounts.” - extracted from Bloomberg.com
Raju’s admission that he’d fabricated $1 billion in cash and assets sparked a record plunge in the company’s shares that wiped out $2.2 billion of investor wealth. Splitting Satyam may avoid an exodus of clients and shield potential buyers from lawsuits and regulatory probes.
“The way to salvage the business is to house it in another company and then sell it, there will be takers for it without the liabilities,” said Rajendra Chitale, managing partner at M.P. Chitale & Associates, who worked with Parekh a decade ago on the rescue of India’s biggest mutual fund. “It will be like selling the family jewels and paying off the liabilities.”
The 64-year-old Parekh was hired by the government to save Unit Trust of India, then the biggest Indian asset-management company, after its largest investment plan, US-64, threatened to sink the stock market in 1998. Parekh headed a panel including Chitale that drafted a plan to revive the fund. Unit Trust was split in 2003 into performing and non-performing assets.
Founder Detained
Raju, Satyam’s 54-year-old founder, his younger brother Rama and Chief Financial Officer Srinivas Vadlamani were remanded to judicial custody until Jan. 23.
The brothers were detained on charges including forgery, breach of trust and criminal conspiracy, Kaumudi said on Jan. 9. Officials have seized documents and the nation’s accounting body is examining auditor PricewaterhouseCoopers LLC’s local unit, Corporate Affairs Minister Prem Chand Gupta said on Jan. 9.
Parekh, chairman of Housing Development, India’s biggest mortgage lender, said his first task is to restore confidence among Satyam’s clients and 53,000 employees who write software and manage computer networks in offices from the U.S. to Brazil.
The new board, including Kiran Karnik, ex-president of the nation’s software industry lobby group, and former regulator C. Achuthan, will need to ascertain exactly how much cash Satyam, which means “truth” in Sanskrit, has to pay wages and complete its contracts.
Of Satyam’s reported cash and bank balances of 53.6 billion rupees ($1.11 billion) on Sept. 30, 50.4 billion rupees was non- existent, Raju said on Jan. 7 when he quit the board. Interim chief executive officer Ram Mynampati said the following day he wasn’t sure if Satyam had enough cash to last the month.
‘Brave Hearts’
“If the company is to be sold as it is, any new owner has to spend a lot of time and energy dealing with the aftermath,” Chitale said. “Unless and until there are brave hearts” Satyam is unlikely to be taken over in its current form, he said.
Satyam, founded in 1987, made its name by helping companies tackle the Year 2000 computer bug. By 2001, the Y2K revenue was substituted by software that helped companies to complete transactions over the Internet.
After the bursting of the dot-com bubble, Raju, who says he’s inspired by physicist Albert Einstein, expanded into software including design engineering programs for General Motors Corp. and medical administration in a venture with General Electric Co.
IGate Corp., a U.S. based computer services provider with operations in India, said it may consider merging with Satyam if the new management seeks a strategic partner.
‘Steady the Ship’
IGate could “help steady the ship,” Chief Executive Officer Phaneesh Murthy said in a telephone interview. “I wouldn’t rule out the concept of a merger if somebody puts forward an interesting enough proposition.”
Satyam was sued by investors in at least three class-action lawsuits in the U.S. following the plunge in its shares after Raju said he falsified accounts for several years.
The company is now worth $332 million after the Bombay Stock Exchange removed Satyam from its Sensitive Index and the National Stock Exchange dropped the stock from the Nifty.
Satyam shareholder Lazard Asset Management LLC said it asked for information from the government about developments in the investigation. Lazard Asset increased its stake in Satyam on Jan. 7 to 5.3 percent from 4.79 percent
Entrepreneur of Year
The fall of Raju, named Ernst & Young Entrepreneur of the Year in 2007, began three weeks ago when Satyam proposed paying $1.6 billion for Maytas Properties Ltd. and Maytas Infra Ltd., both tied to his family. The plan was scrapped 12 hours later after investors called it a “woeful misuse of cash.” Raju said the sale was designed to plug the hole in Satyam’s balance sheet.
“A company without a board is like a headless chicken,” Karnik, former president of the National Association of Software and Service Companies, told Bloomberg before his appointment. “Satyam needs people with credibility, integrity to retain customers and employees. You also need legal protection for those who come on board from future lawsuits.”
Mr. Prem Chand Gupta, Minister of Corporate Affairs, said the government has decided to dissolve the current management of beleaguered tech giant Satyam Computer Services. As a result of the announcement, the crucial January 10 meeting will not take place now.
The Federal Deposit Insurance Corporation said in a statement yesterday, "To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St Cloud, Minnesota, to assume the insured deposits of Alpha Bank & Trust," and added that the cost to its Deposit Insurance Fund would be $158.1 million.
Alpha, with $354.1 million in assets and $346.2 million in deposits, was shut by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corp. (FDIC) was named receiver.
Stearns Bank of St. Cloud, Minnesota, which will assume deposits from Alpha, is a strongly capitalised bank with over $1 billion in asets, and $250 million in capital, amounting to 23-per cent capital in its banking system, or three times the average capital of all commercial banks in the United States, and almost 10 times what some troubled investment banks have or had, Stearns CEO Norman C. Skalicky said in a statement on the bank's website. "We have a very sound and diversified asset portfolio in about six different financial products. Also, we have no exposure to sub-prime or Fannie Mae / Freddie Mac equity investments," Skalicky said.
The failed bank's two offices will open on 27 October as branches of Stearns Bank, the FDIC said. Over the weekend, Alpha Bank & Trust customers can access their insured deposits by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.
Founded in 1879 as the banking department of the J F Costopoulos, Alpha Bank is the second largest bank in Greece, and the largest private bank with a branch network of 450. It becam Alpha Bank in Cyprus in 1998 with the acquisition of Lombard Natwest Bank and was later renamed Alpha Bank Cyprus Ltd.
Even as the as the housing market slowed since December 2006, Alpha Bank's construction loan portfolio continued to expand while its rivals started cutting down their loan business - Alpha's real estate construction and development loans rose a phenomenal 1,700 per cent from $12 million on 30 June 2006, to $218 million by 30 June 2007, according to FDIC data and constitute 79 per cent of the bank's total portfolio.
Those loans typically back lot development and other construction projects, which have been hardest hit by the housing market's ongoing collapse, and may be the slowest to recover.
That period coincides with the end of what bankers now call the most speculative and exuberant period in Atlanta residential development lending.
Alpha Bank has grown considerably over the ten years and managed to establish its presence and claim the position of third largest bank in Cyprus. Beyond providing competitive products and services, the Bank's success was reinforced through continuous and pioneering strategic moves.
In 1999 Metropolitan insurance company was acquired by the Alpha Bank Group and began to operate under the name of Alpha Insurance Ltd.
At a press conference in the Treasury's ornate Cash Room, Paulson announced that nine large financial institutions "have already agreed to participate in the program." In this program US government will spent $ 250 bln to get stake in banks. The half of this $250 bln means $125 bln will be invested in country most preffred bank alone and remaning $125 bln, which is the amount of the first tranche Congress authorized Treasury to spend—to be invested quickly in other banks. After that, Treasury would ask Congress to authorize the next $100 billion in funding it approved.
The announcement came the day after Paulson called in the heads of six major banks and pressed them to "voluntarily" back Treasury's plan to devote $250 billion of the $700 billion recently approved by Congress to buy direct equity stakes in financial institutions in return for senior preferred shares."Our goal is to see a wide array of healthy institutions sell preferred shares to the Treasury, and raise additional private capital, so that they can make more loans to businesses and consumers across the nation," Paulson said in the statement. "At a time when events naturally make even the most daring investors more risk-averse, the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it."
Among the firms expected to get funding: JPMorgan Chase (JPM), Citigroup (C), and Bank of America (BAC) were to receive $25 billion apiece; Wells Fargo (WFC) was to get between $20 billion and $25 billion; Goldman Sachs (GS) and Morgan Stanley (MS) were down for $10 billion each, and the Bank of New York (BK) and State Street (STT) were slated for $2 billion to $3 billion apiece. Citigroup and Goldman Sachs declined to comment on this news.
Who's Said What
"We regret having to take these actions. Today's actions are not what we ever wanted to do - but today's actions are what we must do to restore confidence to our financial system." Mr Paulson added: "Government owning a stake in any private US company is objectionable to most Americans - me included.
"Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable.
"When financing isn't available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop."
US President George W Bush said the effort is needed to boost confidence and avert a severe downturn.
This Business news fetched from AFP..
SAN FRANCISCO - Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank became the latest victims of the ongoing financial crisis on Friday, when they folded and their deposits were transferred by the Federal Deposit Insurance Corp. The closures are the 14th and 15th bank failures so far this year. The FDIC said that Meridian Bank had total assets of $39.2 million and $36.9 million in total deposits as of Sep. 25. National Bank will buy roughly $7.6 million of Meridian's assets, while the FDIC will "retain the remaining assets for later disposition," according to its statement. All of Meridian Bank's depositors, "including any with deposits in excess of the FDIC's insurance limits," will automatically become depositors of Hillsboro, Ill.-based National Bank, the FDIC said.
The FDIC said Main Street Bank's failure will cost its insurance fund between $33 million and $39 million, while Meridian's failure will cost the fund between $13 million and $14.5 million.
