EU-Digest:: special report on the US economy - data collected from recent media reports

EU-Digest

EU-Digest: special report on the US economy - data collected from recent media reports

Nine large banks in the US have been asked by the Government Office of the Controller of the Currency to provide detailed information on mortgage delinquencies every month to a federal regulator. It is requiring this information initially from Citigroup Inc.; Bank of America Corp; Wells Fargo&co; JPMorgan Chase & Co;US Bancorp; National City Corp; HSBC PLC and First Horizon National Corp. The agency said it is looking at all loans, not just sub-prime loans made to borrowers with poor credit. Information will also include detailed reports on loan modifications, credit scores, foreclosures and delinquencies. Fannie (FNM), the largest buyer and backer of U.S. home loans, said Wednesday it lost nearly $3.6 billion in the fourth quarter of 2007, and $2.1 billion for the year, amid mounting home-loan delinquencies and soured bets on interest rates. "This loss exceeded our expectations and represents a significant deterioration of surplus regulatory capital," Moody's said in a statement. Moody's said it expects Fannie to have sizable losses in the first half of 2008 and possibly a net loss for the year due to the continued deterioration in the residential mortgage sector.FNM also said it has received a subpoena from New York's attorney general seeking information about the types of loans the company offers. Some financial resources are now also indicating that several smaller banks with limited capital reserves could be going under as a result of mortgage delinquencies and bad loans.

On Tuesday: a government report showed wholesale prices climbed 7.4 percent in the past year. That was the biggest annual leap since 1981. People have started cutting back on their spending as they are stung by rising prices and shriveling wages. Businesses, also socked by rising costs and declining demand from customers are clamping down on their hiring and capital investment. Some economists, like Mark Zandi, chief economist at Moody Economy believe the economy already fell in a recession in December.

Can we expect the powerful globe-spanning multi-national US corporate giants to come to the rescue of the U.S. economy and if necessary the world economy? Don't count on it. The top 150 U.S-based non financial multinationals, which include Hewlett-Packard (HPQ) , Pfizer (PFE) , eBay (EBAY), and Sara Lee (SLE), had more than $500 billion in cash and short-term investments at the end of 2007, but they are not spending it in the US. Multi-national corporations probably do not need to worry about this political rhetoric. It is pretty sure, neither one of them, or whoever eventually wins the election for President is unlikely to keep their promise to the voters to renegotiate NAFTA. Politicians never bite the hands which feed them.

Figures collected by the Bureau of Economic Analysis suggest the multinational sector has in some ways been a drag on the U.S. economy since 2000. From 2000 to 2005, the last year for which full data are available, U.S multinationals cut more than 2 million jobs in the US, even as employment in the rest of the private sector grew and there is no sign the trend has significantly reversed. U.S. multinationals have been decoupling from the U.S. economy in the past decade. They still have their headquarters in America, they're still listed on U.S. stock exchanges, and most of their shareholders are still American. But their expansion has been mainly overseas.The US as a whole is not benefiting from the much heralded Global marketplace. Multi-National companies have been given the freedom by the political establishment to shift their tax payments to low tax countries driving up their net profits, which in most cases they are not investing at their original home base. Since 2001, gas prices are up 109 percent, and home heating prices are up 222 percent. Over the same time period, oil company profits are up 313 percent. In fact, the big five Multi-National oil companies recently reported record profits for 2007, with ExxonMobil earning $40.6 billion — the largest corporate profit in American historyAn economics professor at the Harvard Business School said: "Greed seems to be common denominator of the slippery multi-national corporate community."

Today, March one, the price of crude oil stands at: 101.79 per barrel and one euro equals US$ 1.51.52. The average price of gas at the pump is US$ 3.39 per gallon.