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Walmart to offer banking services June 15 in Canada

The world’s largest retailer, Walmart, has announced it would launch a bank in Canada on June 15 after the U.S.-based retail giant received regulatory approval in Canada.

Walmart firstly applied with the Office of the Superintendent of Financial Institutions (OSFI), among other regulatory bodies, to offer financial services including interest-earning deposits in Canada almost two years ago.

Walmart’s business model has always been to offer lower prices compared to its competitors by moving more volume.

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Greek PM warns investigation could target U.S. banks

The Greek Prime Minister, George Papandreou, today said in a televised Greek broadcast his government is considering launching investigations on major U.S. financial intermediaries to determine their role in the nation’s debt crisis that has fueled deadly protests in the Greek capital of Athens.

Mr. Papandreou also warned he would not rule out possible legal action as an option for recourse for the banks if necessary.

On May 6, the Greek government passed new austerity legislation to lower consumption spending and to increase revenue with higher taxes, in a bid to receive the now confirmed USD $140-billion emergency loan.

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Wells Fargo posts fair Q1 profits as net income falls

The U.S. bank Wells Fargo today reported [PDF] fair quarterly earnings for Q1 2010.

The financial intermediary reported net income for the period of $2.5-billion ($0.45 per share), down significantly from $3.05-billion ($0.56 per share) in Q1 2009.

Total revenue in the quarter was $21.5-billion.

The decline in revenue comes as other U.S. financial intermediaries reported strong quarterly profits, including Morgan Stanley, Citigroup, Goldman Sachs, among other financial intermediaries in the country.

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Citigroup posts material Q4 losses resulting in 2009 loss

Citigroup has posted its Q4 2009 earnings, reporting a massive $7.6-billion loss ($0.33 per share) in the quarter. Compared to Q4 2008, Citigroup reported a $17.3-billion loss ($3.40 per share).

For the fiscal year ended 2009, Citigroup posted a $1.6-billion loss.

Citigroup generated $5.4-billion in total revenue for the quarter, or $15-5-billion excluding direct charges incurred from repayments to the U.S. Treasury’s TARP program.

The U.S. Treasury currently owns 27-percent of Citigroup.

Citigroup CEO Vikram Pandit said today in a statement that the bank had made “enormous progress in 2009,”

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China, Russia call to replace dollar as global reserve currency

Update: President Obama rejected the claims of replacing the dollar as the global reserve currency. Obama said that the United States is considered “the strongest economy in the world with the most stable political system,” and described the dollar as “extraordinarily strong”.

Zhou Xiaochuan, the governor of the Chinese Central Bank, is calling to replace the dollar as the main global reserve currency, citing the dangers of the current economic crisis on heavily relying on one currency essentially controlled by the west.

Zhou said, “A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity.” Read the full story

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Obama administration unveils $1T Public-Private Investment Program for troubled bank assets

The Obama administration today unveiled its new plan the “Public-Private Investment Program”, to buy up to $1 trillion in troubled bank securities including mortgage backed securities, subprime mortgages, and other derivatives. Initially, the plan is to buy up to $500 billion worth of these securities, but the plan earmarks up to an additional $500 million. Announced today, the Obama administration said it would provide up to $100 billion before committing more money pending review.

Treasury Secretary Timothy Geithner today said, “Simply hoping for banks to work legacy assets off over time risks prolonging a financial crisis,”

Under the Public Private Investment Program, the government will use taxpayer money to push partnerships with the private investors who will buy the toxic assets. Essentially, the plan is designed to remove the toxic assets sitting on the banks’ balance sheets.

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Capital One Cuts Dividend by 87%, Paid CEO $250M In Options

capital-oneCapital One has just announced today it will reduce its quarterly dividend by 87% to help conserve cash during this tuff economic time. The company says it will save $500 million annual as part of the reduced dividend to $0.05 per share from $0.375 per share. Capital One also said its Tier 1 capital ratio was 11% as of Feb 28, 2009.  Capital One has been hit hard, with its share price down 75% only in 2009, but the company still managed to grant 3.6 million stock option since 1997 given to Capital One CEO Richard Fairbank worth a record $250 million. In 2007, Fairbank earned $17 million in options. In 2008, he was compensated only about $70,000 for security, health benefits, and insurance, among other things, as the bank cut costs to deal with the global credit downturn.

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Top European Economies Agree IMF Economic Emergency Fund Should Top $500B

Europe’s four largest economies – Germany, Britain, Italy, and France – have just wrapped up an emergency meeting in Berlin to deal with the global economic crisis that is especially hurting eastern-northern European countries. They have collectively agreed that the IMF emergency fund should be doubled, if not more than doubled to at least $500 billion. The move comes to help counter a possible long lasting worldwide depression. British PM Gordon Brown is also preparing to inject the UK’s Northern Rock bank with £14 billion in capital to encourage lending and to help revive the mortgage market in the UK.

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Bill and Melinda Gates Foundation Pledge $12.5M for Mobile Banking in Developing Nations

The Bill and Melinda Gates Foundation has announced support for a new program partnered with the GSM Association that aims to bring affordable and reliable mobile banking to less developed nations. The Bill and Melinda Gates foundation has announced $12.5 million to kick-start the Mobile Money for the Unbanked (MMU) Program.

There are over 1 billion people in emerging markets today who don’t have a bank account but do have a mobile phone,” said Rob Conway, CEO and Member of the Board of the GSMA.

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Exactly How the Financial Crisis Started

Many people don’t understand the fundamental reasons why the US financial system is failing and the reasons behind the day to day volatility. In this post, I try to explain to you how this mess happened.

It all started about a decade ago when banks started redlining urban centers which immediately disqualified people from obtaining mortgages in the hypothetical red areas. The problem began when banks thought the solution to redlining was with sub-prime mortgages. Banks deceitfully offered significantly discounted interest rates that would eventually skyrocket after an initial 2 year term. In some cases, the principal was higher after the two year period! The problem was that loans were being granted to people with very poor credit ratings, including to people with Loan to Value (LTV) ratios of more than 88%, compared to the maximum current cut off of 75% which is arguably also pushing it. Another problem was that people were able to provide their own income which was never verified. If you’re wondering why people would take the loans, we can generalize with these main reasons: the banks deceitfully didn’t disclose the teaser rate wouldn’t last, the loan seemed so affordable it was basically free money, and people wanted to own their homes and didn’t have another alternative to get a mortgage.

So, what did the banks do with all of these loans? They grouped the loans into Mortgage Backed Securities (MBS) which were bought by various investment banks who converted the MBS into new financial instruments called Collateralized Debt Obligations (CDO). The banks originally developed MBS because they are only required to hold 1.6% of capital for mortgage backed securities, compared to 4% to hold a mortgage. The CDO instruments were then setup in the Cayman Islands to avoid taxes where they were then artificially rated by credit agencies who received most of their income from structured finance products. The real problems were for firms that invested in CDO securities based on the artificial ratings. Essentially, as people began to default on their mortgages because of the new high rates after the initial 2 year term and falling home values, the CDOs failed along with the firms heavily invested in these securities. Read the full story

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