Taliban on Monday suspended talks with the Pakistani government on the Swat deal to protest against the military operations in Dir, adjoining Swat Valley, in which so far 30 militants and an army officer have been killed.
As the Pakistani forces intensified the operations for second day on Monday, Tehrik-e-Nifaz-e-Shariah Muhammadi spokesman Izzat Khan told reporters that no peace talks would be held with the government unless the security forces halted the operations.
Taliban spokesman Muslim Khan also said the militants will not lay down their arms at any cost.
The Swat peace deal stipulated that the militants would lay down their arms once the demand for enforcing Islamic Sharia law in the once Pakistan's famous tourist resort was implemented.
The security forces continued shelling militant hideouts at several places in Dir district.
Interior Ministry chief Rehman Malik said security forces had killed at least 30 militants during the operations, which was launched in retaliation to efforts by the Taliban to extend their influence outside Swat.
The Taliban confirmed that commander Maulvi Shahid was among the militants killed on Sunday.
Gunship helicopters targeted militant hideouts, killing and injuring a number of them.
Two personnel of the paramilitary Frontier Corps were also killed and a Major was among five personnel injured in an ambush in Maidan, the hometown of TNSM chief Sufi Muhammad.
Army helicopters airlifted Frontier Corps troops to strategic hilltops in Dir while armoured personnel carriers were seen moving towards the area.
An indefinite curfew was imposed in Lal Qila, Islampura, Kal Kot and several other areas in Dir considered to be strongholds of the Taliban.
Security forces on Sunday took control of Lal Qila after clearing the key area of militants.
Reports from Swat on Monday morning morning said the Taliban had occupied a telephone exchange in Bahrain town.
Security forces arrested four militants with heavy weapons at Khwazakhela in Swat.
Militants in Dir have also taken up positions on hilltops to resist the security forces.
The Inter-Services Public Relations said the operation in Dir was launched on the request of the North West Frontier Province government to rid the area of militants who were threatening peace in the area.
The situation in Maidan, the hometown of Sufi Muhammad, worsened after district police chief Khurshid Khan and local mayor Alamzeb Khan were killed and scores of people were kidnapped in the past few weeks.
Monday, April 27, 2009
Mamata campaigns jointly with Sonia, Pran
Congress and Trinamool Congress are campaigning together for the Lok Sabha elections in West Bengal with Sonia Gandhi and Mamata Banerjee sharing the dais after almost 10 years.
Assailing West Bengal's Left Front government for "running a dictatorship", the Congress President expressed concern at the Communist rulers' failure to "improve the lot of the minorities" and the poor.
In a stinging attack on the Left during an election meeting in a remote area of Murshidabad district, she described as a "matter of shame" the state government's inability to provide job cards to hundreds of thousands of poor people under the National Rural Employment Guarantee Act (NREGA).
Referring to the violent incidents in Nandigram and Singur, she said: "These people (the Left) call themselves messiahs and sympathisers of the poor and working classes. We all know how peasants of Nandigram and Singur became victims of violence in their bid to protect their own land. Our Congress party activities had lathis (sticks) rained on them for trying to give a voice to the people."
Addressing the meeting for Minister for External Affairs Pranab Mukherjee, who is contesting from the district's Jangipur constituency, Sonia Gandhi charged the Left Front with running a dictatorship in the name of democracy.
Murshidabad is the only Muslim majority district in the state. Sonia Gandhi gave an account of the welfare schemes launched by the United Progressive Alliance (UPA) Government at the Centre for the minorities, and pilloried the LF for "not doing much" in this regard.
"In West Bengal, what is the social and economic position of the minorities? It is a cause for grave concern. During the long years of Communist Party of India-Marxist (CPI-M) rule, I have a feeling nothing much has been done for minorities," she said, during her 12-minute speech in Hindi.
She said despite the Centre sending thousands of crores for welfare schemes to the state, the Left Front rulers had only used the money for benefit of their party activists.
"Ask the state government why funds allocated by the Centre for welfare schemes are not reaching the people. Had it been given to the people and had this government's intention been good, then there would not have been so many poor people in the state, particularly in this area," she said.
"Instead of implementing the central schemes with honesty to benefit the people, they used it to benefit their leaders. Despite being in power for 32 years, they have failed to bring electricity to all the rural areas."
Referring to the Left parties's withdrawal of support to the UPA Government on the India-US civilian nuclear deal, Sonia Gandhi said: "We had signed the deal only to bring electricity to your homes".
She said the peasants were not getting a remunerative price for paddy here, due to the apathy of the state government, while industrial activities had stopped in the last decade.
Expressing happiness at the alliance with Trinamool Congress, she said: "I am happy that Mamata is again with us," and appealed to the people to vote on polling day and not remain in their houses "out of fear".
Assailing West Bengal's Left Front government for "running a dictatorship", the Congress President expressed concern at the Communist rulers' failure to "improve the lot of the minorities" and the poor.
In a stinging attack on the Left during an election meeting in a remote area of Murshidabad district, she described as a "matter of shame" the state government's inability to provide job cards to hundreds of thousands of poor people under the National Rural Employment Guarantee Act (NREGA).
Referring to the violent incidents in Nandigram and Singur, she said: "These people (the Left) call themselves messiahs and sympathisers of the poor and working classes. We all know how peasants of Nandigram and Singur became victims of violence in their bid to protect their own land. Our Congress party activities had lathis (sticks) rained on them for trying to give a voice to the people."
Addressing the meeting for Minister for External Affairs Pranab Mukherjee, who is contesting from the district's Jangipur constituency, Sonia Gandhi charged the Left Front with running a dictatorship in the name of democracy.
Murshidabad is the only Muslim majority district in the state. Sonia Gandhi gave an account of the welfare schemes launched by the United Progressive Alliance (UPA) Government at the Centre for the minorities, and pilloried the LF for "not doing much" in this regard.
"In West Bengal, what is the social and economic position of the minorities? It is a cause for grave concern. During the long years of Communist Party of India-Marxist (CPI-M) rule, I have a feeling nothing much has been done for minorities," she said, during her 12-minute speech in Hindi.
She said despite the Centre sending thousands of crores for welfare schemes to the state, the Left Front rulers had only used the money for benefit of their party activists.
"Ask the state government why funds allocated by the Centre for welfare schemes are not reaching the people. Had it been given to the people and had this government's intention been good, then there would not have been so many poor people in the state, particularly in this area," she said.
"Instead of implementing the central schemes with honesty to benefit the people, they used it to benefit their leaders. Despite being in power for 32 years, they have failed to bring electricity to all the rural areas."
Referring to the Left parties's withdrawal of support to the UPA Government on the India-US civilian nuclear deal, Sonia Gandhi said: "We had signed the deal only to bring electricity to your homes".
She said the peasants were not getting a remunerative price for paddy here, due to the apathy of the state government, while industrial activities had stopped in the last decade.
Expressing happiness at the alliance with Trinamool Congress, she said: "I am happy that Mamata is again with us," and appealed to the people to vote on polling day and not remain in their houses "out of fear".
Lanka Tamils vandalise India embassy in London
Sri Lankan Tamil protesters smashed windows of the Indian High Commission and forced their way inside the building during a demonstration on Monday.
The High Commission has sought adequate protection from the British Government.
British police arrested five Sri Lankan Tamils after several demonstrators broke into the Indian High Commission in the middle of the protest outside the building in central London.
A spokesperson for the High Commission said the protest began when a crowd of about 100 to 150 protesters gathered outside India House at 0815 hrs (local time), their numbers swelling to over a thousand later.
The demonstration over the current civil war in Sri Lanka became violent when a few of the protesters forced their way into the building when its door was opened to allow a staff member in.
"The crowd outside have shattered some of the glass windows of the High Commission's premises with heavy objects. Police and security agencies are on duty outside the premises. No one in the High Commission has been injured," the spokesperson said.
She said the British Foreign Office had been informed about the incident, "along with the High Commission's concerns about the security situation and their need for adequate security measures."
The High Commission has sought adequate protection from the British Government.
British police arrested five Sri Lankan Tamils after several demonstrators broke into the Indian High Commission in the middle of the protest outside the building in central London.
A spokesperson for the High Commission said the protest began when a crowd of about 100 to 150 protesters gathered outside India House at 0815 hrs (local time), their numbers swelling to over a thousand later.
The demonstration over the current civil war in Sri Lanka became violent when a few of the protesters forced their way into the building when its door was opened to allow a staff member in.
"The crowd outside have shattered some of the glass windows of the High Commission's premises with heavy objects. Police and security agencies are on duty outside the premises. No one in the High Commission has been injured," the spokesperson said.
She said the British Foreign Office had been informed about the incident, "along with the High Commission's concerns about the security situation and their need for adequate security measures."
Probe Narendra Modi's role in Gujarat riots: SC
The Supreme Court on Monday asked a special probe panel formed by it to look into the allegations that Gujarat Chief Minister Narendra Modi along with over 50 other politicians and government officials had aided and abetted statewide communal riots in 2002.
A bench of Justices Arijit Pasayat and Asok Kumar Ganguly directed the panel headed by former Central Bureau of Investigation (CBI) director R K Raghavan to particularly look into the allegations that Modi was involved in the killing of an MP in Ahmedabad's Gulbarga Society arson case.
The panel was asked to file its report within three months.
A bench of Justices Arijit Pasayat and Asok Kumar Ganguly directed the panel headed by former Central Bureau of Investigation (CBI) director R K Raghavan to particularly look into the allegations that Modi was involved in the killing of an MP in Ahmedabad's Gulbarga Society arson case.
The panel was asked to file its report within three months.
Pakistan president pulls out of press conference with Gordon Brown
Deepening divisions between Pakistan and Britain were exposed today when President Asif Ali Zardari pulled out of a planned press conference with Gordon Brown.
Downing Street played down talk of a snub, insisting it was happy that the Pakistan prime minister, Yusuf Raza Gilani, took part in the press conference instead.
"It is entirely appropriate that he has a press conference with his counterpart," a No 10 spokesman said. However, on his last visit to Pakistan in December, Brown and Zardari did stage a joint press conference.
Zardari and Brown met for a private meeting after the press conference. But his absence from the press conference comes as the Pakistanis chide British officials for overly hasty conduct after the arrest of 11 Pakistani students a fortnight ago. The Home Office refused to share any information about the arrests with Pakistan.
At the press conference, Brown defended the arrests.
"I think we have got to recognise that we have both got problems that are affecting both the security of our citizens and the sentiments in our country, with terrorist plots that have been planned and some people are trying to execute. We want to work together with Pakistan to deal with these issues and to tackle terrorism at its roots."
Brown flew into Islamabad after a whistlestop visit to Kabul and Helmand province in Afghanistan.
The Pakistani press had predicted that the prime minister would receive short shrift from Pakistani officials after the prime minister's condemnation of 11 Pakistani nationals who were arrested on terror charges in the UK.
At the time, Brown said UK intelligence services had foiled a "very big plot" before all were released without charge. Senior Pakistani defence officials have said the British authorities failed to consult them adequately, and greater cooperation would have avoided "embarrassing mistakes" for the British government.
In the days after the arrest of the Pakistani students, the government maintained its criticism of Pakistan with the immigration minister, Phil Woolas, saying that the allocation of student visas to young Pakistanis – between 2004 and 2008, 42,000 were issued – was the "biggest loophole in British border controls".
A memorandum of understanding had been presented to the Pakistanis under which the UK government was to have the right to deport any Pakistani on the grounds that he or she had become a threat to national security without having to follow due process.
In an interview with the Guardian on Saturday, the Pakistani deputy high commissioner, Asif Durrani, said he regarded constant British briefing that Pakistan was a hot bed of terrorism to be "vindictive" and "slurs".
Today Brown repeated his assertion last made on his December visit four months ago that three-quarters of Islamic terror threats originate in the border region between the UK and Pakistan
Downing Street played down talk of a snub, insisting it was happy that the Pakistan prime minister, Yusuf Raza Gilani, took part in the press conference instead.
"It is entirely appropriate that he has a press conference with his counterpart," a No 10 spokesman said. However, on his last visit to Pakistan in December, Brown and Zardari did stage a joint press conference.
Zardari and Brown met for a private meeting after the press conference. But his absence from the press conference comes as the Pakistanis chide British officials for overly hasty conduct after the arrest of 11 Pakistani students a fortnight ago. The Home Office refused to share any information about the arrests with Pakistan.
At the press conference, Brown defended the arrests.
"I think we have got to recognise that we have both got problems that are affecting both the security of our citizens and the sentiments in our country, with terrorist plots that have been planned and some people are trying to execute. We want to work together with Pakistan to deal with these issues and to tackle terrorism at its roots."
Brown flew into Islamabad after a whistlestop visit to Kabul and Helmand province in Afghanistan.
The Pakistani press had predicted that the prime minister would receive short shrift from Pakistani officials after the prime minister's condemnation of 11 Pakistani nationals who were arrested on terror charges in the UK.
At the time, Brown said UK intelligence services had foiled a "very big plot" before all were released without charge. Senior Pakistani defence officials have said the British authorities failed to consult them adequately, and greater cooperation would have avoided "embarrassing mistakes" for the British government.
In the days after the arrest of the Pakistani students, the government maintained its criticism of Pakistan with the immigration minister, Phil Woolas, saying that the allocation of student visas to young Pakistanis – between 2004 and 2008, 42,000 were issued – was the "biggest loophole in British border controls".
A memorandum of understanding had been presented to the Pakistanis under which the UK government was to have the right to deport any Pakistani on the grounds that he or she had become a threat to national security without having to follow due process.
In an interview with the Guardian on Saturday, the Pakistani deputy high commissioner, Asif Durrani, said he regarded constant British briefing that Pakistan was a hot bed of terrorism to be "vindictive" and "slurs".
Today Brown repeated his assertion last made on his December visit four months ago that three-quarters of Islamic terror threats originate in the border region between the UK and Pakistan
U.S. toxic-asset plan stirs fears
The Obama administration's impending effort to buy about $1 trillion in toxic assets in partnership with private investors -- aimed at solving the most intractable part of the credit crisis -- is now generating widespread fear that it is vulnerable to manipulation and carries sharp risks for taxpayers.
The program represents the biggest gamble yet in the federal bailout, but its still-hazy details have prompted bankers, economists, federal investigators and politicians to question whether it will solve the financial crisis. More than 400 written comments were recently submitted to the Treasury Department, many of them sharply negative.
The program is trying to create an artificial market for assets that have no known value, something that has never been done before on this scale. The only way to accomplish that is for the government to accept a mountain of risk.
In the process, critics fear that the banking system could be further damaged and the program subjected to a boom in fraud.
Nobel Prize-winning economist Joseph Stiglitz of Columbia University said the program violated so many laws of economics that it was little more than an "empty box."
The toxic assets are a multitrillion-dollar collection of mortgage loans, commercial loans and a variety of complex debt securities, in which many borrowers have stopped making payments and the value of the underlying properties have tumbled. There is so much uncertainty about the value of those loans -- held both by banks and by big institutional investors -- that they have become a black hole in the financial system.
Critics say the government's effort to engineer a solution is creating risks similar to the ones that created the financial crisis in the first place.
"We are repeating all the mistakes that the mortgage guys made," Stiglitz said. "In the worst case, the national debt goes up by $1 trillion."
Supporters of the program say that the economy would face bigger risks if nothing is done to solve the problem. The program, they say, represents a bold move by the government to unfreeze the financial markets. In the process, taxpayers could reap multibillion-dollar profits from the partnerships.
Indeed, when the program was unveiled one month ago, it was met by such euphoria that the Dow Jones industrial average shot up 500 points in a day.
The program, called the Public-Private Investment Program, is still being formed and basic answers about how it will work are being hammered out by officials at the Treasury Department, the Federal Deposit Insurance Corp. and the Federal Reserve.
The goal of the program is to create a market for the toxic assets that are now clogging the system. They sit on balance sheets, tying up funds and obscuring the condition of financial institutions.
The loans and debt securities are not worthless. In some cases, individual loans within complex bundles have not gone bad. And even in the cases of loans that have gone bad, the underlying homes or other assets still have some value. But because nobody knows how to value these loans and debt securities, nobody is willing to trade them.
If the program can help set prices for those assets and create markets for their sale, banks will more quickly regain healthy balance sheets and financial markets that trade in debt securities will regain their footing.
The government hopes to jump-start a market. Private investors would be enticed to join and, by competing against one another, finally set a price for the assets.
The Bush administration last fall had planned to simply buy all the toxic assets on its own, but there were concerns that it would end up overpaying and it didn't have enough money. With private investors involved, there is the hope that their competition and desire for profit will ensure that prices aren't set too high.
The government does not have to buy every bad asset, Treasury officials said, but simply get enough activity going so that buyers and sellers could begin to set prices on their own.
There are two separate pieces to the program -- one operated by the FDIC to auction bundles of troubled bank loans and another operated by the Treasury Department to buy securities without auctions from hedge funds, investment firms and others.
The money to operate these programs is coming from the $750-billion Troubled Asset Relief Program that was enacted last fall, along with additional lending by the Federal Reserve.
Under the Treasury plan, five so-called fund managers would raise a pool of private money, matched equally by the government. Then, the Fed would double that pool with loans or loan guarantees. Thus, the government would be putting up 75% of all the money.
The fund managers would negotiate to buy the toxic securities based on an analysis of the investments and a bit of educated guessing.
The FDIC program would rely on even more government-backed debt. A variety of partnership funds would be created with private investors kicking in 7.5% of the money and the government providing a matching 7.5%. The government would then provide the remaining 85% in loans or loan guarantees.
The partnerships would bid against one another in an auction.
Although the two plans address different parts of the credit crisis and use different methods, critics see many of the same vulnerabilities.
Stiglitz, along with others, believes the market will be far from perfect. Since the government is putting in so much more money, it would lead private investors to take on riskier investments. And the burden of that increased risk would fall almost entirely on the government, even though the government would share only half the potential profit.
The FDIC has said that if it faces too many defaults, it may have to assess new fees -- which are already increasing -- on the entire banking industry, a scary prospect for smaller banks.
Although the FDIC has downplayed the risk of such defaults, other experts are not so sure.
"We are in an economic climate that is still filled with a tremendous amount of uncertainty," said Rodney K. Brown, the president of the California Bankers Assn.
Brown said if the Treasury plan tanks and the FDIC has to increase insurance fees, it could saddle many small banks with losses.
Small banks are worried about such potential fees, said Jerry Cavanaugh, counsel to the Community Bankers Assn. of Illinois.
"These megabanks are receiving the lion's share of the Treasury loot, while community banks are called upon to restore the FDIC's financial position through increased premiums and special assessments."
Then, there is the criminal problem. The potential for manipulation, price fixing, collusion and other forms of fraud were outlined recently by special inspector general Neil Barofsky, who released a lengthy report that cited serious problems with the program. Barofsky said that collusion between investors or banks could result in kickbacks among bidders or sellers. For example, a bank could create a phony subsidiary to bid up the value of its own troubled loans. Or a network of banks could conspire to bid up one another's assets, kicking back profits to one another.
Other experts are not so sure the entire program will even help banks.
If banks have to sell troubled loans at too low a price, it could force them to take additional losses. Aaron Deer, a bank analyst at financial research firm Sandler O'Neill & Partners, said one potential risk was that low prices for loans at one bank could force other banks to mark down the value of similar loans that they had no intention of selling. On the other hand, if the loans are offered at too high a price, private investors will see no profit.
"We are hoping to hit somewhere in the middle," FDIC spokesman Andrew Williams said.
Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents large financial institutions, said that though his group supports the program, its biggest challenge would be determining prices for the assets. He predicted a reluctance to participate if that is not clarified.
Pressure for major changes in the program is growing.
"We expect that Treasury, the Fed, the FDIC and other regulators will take their concerns into account and incorporate any additional necessary taxpayer protections as they refine these programs," Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in a statement Friday.
The program represents the biggest gamble yet in the federal bailout, but its still-hazy details have prompted bankers, economists, federal investigators and politicians to question whether it will solve the financial crisis. More than 400 written comments were recently submitted to the Treasury Department, many of them sharply negative.
The program is trying to create an artificial market for assets that have no known value, something that has never been done before on this scale. The only way to accomplish that is for the government to accept a mountain of risk.
In the process, critics fear that the banking system could be further damaged and the program subjected to a boom in fraud.
Nobel Prize-winning economist Joseph Stiglitz of Columbia University said the program violated so many laws of economics that it was little more than an "empty box."
The toxic assets are a multitrillion-dollar collection of mortgage loans, commercial loans and a variety of complex debt securities, in which many borrowers have stopped making payments and the value of the underlying properties have tumbled. There is so much uncertainty about the value of those loans -- held both by banks and by big institutional investors -- that they have become a black hole in the financial system.
Critics say the government's effort to engineer a solution is creating risks similar to the ones that created the financial crisis in the first place.
"We are repeating all the mistakes that the mortgage guys made," Stiglitz said. "In the worst case, the national debt goes up by $1 trillion."
Supporters of the program say that the economy would face bigger risks if nothing is done to solve the problem. The program, they say, represents a bold move by the government to unfreeze the financial markets. In the process, taxpayers could reap multibillion-dollar profits from the partnerships.
Indeed, when the program was unveiled one month ago, it was met by such euphoria that the Dow Jones industrial average shot up 500 points in a day.
The program, called the Public-Private Investment Program, is still being formed and basic answers about how it will work are being hammered out by officials at the Treasury Department, the Federal Deposit Insurance Corp. and the Federal Reserve.
The goal of the program is to create a market for the toxic assets that are now clogging the system. They sit on balance sheets, tying up funds and obscuring the condition of financial institutions.
The loans and debt securities are not worthless. In some cases, individual loans within complex bundles have not gone bad. And even in the cases of loans that have gone bad, the underlying homes or other assets still have some value. But because nobody knows how to value these loans and debt securities, nobody is willing to trade them.
If the program can help set prices for those assets and create markets for their sale, banks will more quickly regain healthy balance sheets and financial markets that trade in debt securities will regain their footing.
The government hopes to jump-start a market. Private investors would be enticed to join and, by competing against one another, finally set a price for the assets.
The Bush administration last fall had planned to simply buy all the toxic assets on its own, but there were concerns that it would end up overpaying and it didn't have enough money. With private investors involved, there is the hope that their competition and desire for profit will ensure that prices aren't set too high.
The government does not have to buy every bad asset, Treasury officials said, but simply get enough activity going so that buyers and sellers could begin to set prices on their own.
There are two separate pieces to the program -- one operated by the FDIC to auction bundles of troubled bank loans and another operated by the Treasury Department to buy securities without auctions from hedge funds, investment firms and others.
The money to operate these programs is coming from the $750-billion Troubled Asset Relief Program that was enacted last fall, along with additional lending by the Federal Reserve.
Under the Treasury plan, five so-called fund managers would raise a pool of private money, matched equally by the government. Then, the Fed would double that pool with loans or loan guarantees. Thus, the government would be putting up 75% of all the money.
The fund managers would negotiate to buy the toxic securities based on an analysis of the investments and a bit of educated guessing.
The FDIC program would rely on even more government-backed debt. A variety of partnership funds would be created with private investors kicking in 7.5% of the money and the government providing a matching 7.5%. The government would then provide the remaining 85% in loans or loan guarantees.
The partnerships would bid against one another in an auction.
Although the two plans address different parts of the credit crisis and use different methods, critics see many of the same vulnerabilities.
Stiglitz, along with others, believes the market will be far from perfect. Since the government is putting in so much more money, it would lead private investors to take on riskier investments. And the burden of that increased risk would fall almost entirely on the government, even though the government would share only half the potential profit.
The FDIC has said that if it faces too many defaults, it may have to assess new fees -- which are already increasing -- on the entire banking industry, a scary prospect for smaller banks.
Although the FDIC has downplayed the risk of such defaults, other experts are not so sure.
"We are in an economic climate that is still filled with a tremendous amount of uncertainty," said Rodney K. Brown, the president of the California Bankers Assn.
Brown said if the Treasury plan tanks and the FDIC has to increase insurance fees, it could saddle many small banks with losses.
Small banks are worried about such potential fees, said Jerry Cavanaugh, counsel to the Community Bankers Assn. of Illinois.
"These megabanks are receiving the lion's share of the Treasury loot, while community banks are called upon to restore the FDIC's financial position through increased premiums and special assessments."
Then, there is the criminal problem. The potential for manipulation, price fixing, collusion and other forms of fraud were outlined recently by special inspector general Neil Barofsky, who released a lengthy report that cited serious problems with the program. Barofsky said that collusion between investors or banks could result in kickbacks among bidders or sellers. For example, a bank could create a phony subsidiary to bid up the value of its own troubled loans. Or a network of banks could conspire to bid up one another's assets, kicking back profits to one another.
Other experts are not so sure the entire program will even help banks.
If banks have to sell troubled loans at too low a price, it could force them to take additional losses. Aaron Deer, a bank analyst at financial research firm Sandler O'Neill & Partners, said one potential risk was that low prices for loans at one bank could force other banks to mark down the value of similar loans that they had no intention of selling. On the other hand, if the loans are offered at too high a price, private investors will see no profit.
"We are hoping to hit somewhere in the middle," FDIC spokesman Andrew Williams said.
Scott Talbott, chief lobbyist for the Financial Services Roundtable, which represents large financial institutions, said that though his group supports the program, its biggest challenge would be determining prices for the assets. He predicted a reluctance to participate if that is not clarified.
Pressure for major changes in the program is growing.
"We expect that Treasury, the Fed, the FDIC and other regulators will take their concerns into account and incorporate any additional necessary taxpayer protections as they refine these programs," Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, said in a statement Friday.
Faster Cuts and More Loans Key to G.M. Survival Plan
General Motors said on Monday that it needed $11.6 billion more in government loans and that it planned to file for bankruptcy protection if a debt exchange with its bondholders was unsuccessful.
Skip to next paragraph
Enlarge This Image
Fabrizio Costantini for The New York Times
Fritz Henderson, chief executive of General Motors, at a press conference on Monday at GM world headquarters in Detroit.
G.M. also said that, by 2010, it would phase out its Pontiac brand, eliminate 42 percent of its dealers, close 13 plants and cut 21,000 hourly jobs as part of its revised restructuring plan.
“We need to have a more stable and sustainable business model, because, candidly, we only want to do this once,” G.M.’s chief executive, Fritz Henderson, said at a news conference. “We don’t think that what’s being asked of us is too hard. Our objective here is to create a strategy where we can win, not simply survive.”
G.M. shares rose 25 percent in morning trading on the New York Stock Exchange after the plan was announced.
The cuts outlined on Monday are considerably greater and scheduled to occur sooner than G.M. had outlined in its February restructuring plan. The plan would result in the federal government becoming G.M.’s majority owner.
Since December, G.M. has borrowed $15.4 billion to keep it out of bankruptcy while it tries to restructure. The new request would bring that figure to $27 billion. The company originally said it needed between $22.5 billion and $30 billion to remain solvent.
In the plans announced on Monday, G.M. wants to persuade 2,641 of its 6,246 independently owned dealerships — 500 more than it previously announced — to close four years sooner than it had intended.
By the end of next year, it plans to employ 40,000 hourly workers at 34 plants, down from 61,000 workers at 47 plants. That is at least 7,000 more job cuts and one more plant closure than the February plan called for. An additional 2,000 jobs would be cut in 2011.
G.M. said the additional actions would allow it to break even at industry sales volumes as low as 10 million a year. Sales this year are expected to be slightly higher than that figure.
In addition, the company said it would give bondholders 225 shares, worth $414 as of Friday, for every $1,000 that they hold.
It urged the bondholders, who hold more than $27 billion in G.M. debt, to accept the deal to allow a faster out-of-court restructuring and said their bonds could be worth less or nothing in a bankruptcy filing.
G.M. said the holders of at least 90 percent of its outstanding bonds must agree to the swap by May 26 for the company to avoid bankruptcy.
“We do not intend to seek relief under the U.S. Bankruptcy Code if the exchange offers are consummated,” G.M. said in a regulatory filing.
By exchanging stock for its bonds and by converting its debt to the Treasury Department and to a retiree health care fund for the United Automobile Workers union, G.M. said it can eliminate $44 billion in debt. The Treasury and the U.A.W. would own up to 89 percent of the company’s outstanding shares, while bondholders would hold no more than 10 percent and current shareholders would hold 1 percent.
The Treasury would own more than half of G.M. on its own and therefore have control over the election of its board and other matters requiring the approval of shareholders.
In a bankruptcy, G.M. said it might separate itself into two companies: a new G.M. composed of desirable assets like the Chevrolet and Cadillac brands, and a collection of its unwanted assets that would then be liquidated.
G.M. has been negotiating with an ad-hoc committee representing large bondholders, but the two sides have been unable to reach a deal. The bondholders committee says G.M. has not been responsive to its requests in more than a month.
The Obama administration’s autos task force gave the automaker until June 1 to develop a more aggressive turnaround plan and to reach deals with its bondholders and the United Automobile Workers union. Talks with the U.A.W., which announced a cost-cutting deal with Chrysler on Sunday, are continuing.
Skip to next paragraph
Enlarge This Image
Fabrizio Costantini for The New York Times
Fritz Henderson, chief executive of General Motors, at a press conference on Monday at GM world headquarters in Detroit.
G.M. also said that, by 2010, it would phase out its Pontiac brand, eliminate 42 percent of its dealers, close 13 plants and cut 21,000 hourly jobs as part of its revised restructuring plan.
“We need to have a more stable and sustainable business model, because, candidly, we only want to do this once,” G.M.’s chief executive, Fritz Henderson, said at a news conference. “We don’t think that what’s being asked of us is too hard. Our objective here is to create a strategy where we can win, not simply survive.”
G.M. shares rose 25 percent in morning trading on the New York Stock Exchange after the plan was announced.
The cuts outlined on Monday are considerably greater and scheduled to occur sooner than G.M. had outlined in its February restructuring plan. The plan would result in the federal government becoming G.M.’s majority owner.
Since December, G.M. has borrowed $15.4 billion to keep it out of bankruptcy while it tries to restructure. The new request would bring that figure to $27 billion. The company originally said it needed between $22.5 billion and $30 billion to remain solvent.
In the plans announced on Monday, G.M. wants to persuade 2,641 of its 6,246 independently owned dealerships — 500 more than it previously announced — to close four years sooner than it had intended.
By the end of next year, it plans to employ 40,000 hourly workers at 34 plants, down from 61,000 workers at 47 plants. That is at least 7,000 more job cuts and one more plant closure than the February plan called for. An additional 2,000 jobs would be cut in 2011.
G.M. said the additional actions would allow it to break even at industry sales volumes as low as 10 million a year. Sales this year are expected to be slightly higher than that figure.
In addition, the company said it would give bondholders 225 shares, worth $414 as of Friday, for every $1,000 that they hold.
It urged the bondholders, who hold more than $27 billion in G.M. debt, to accept the deal to allow a faster out-of-court restructuring and said their bonds could be worth less or nothing in a bankruptcy filing.
G.M. said the holders of at least 90 percent of its outstanding bonds must agree to the swap by May 26 for the company to avoid bankruptcy.
“We do not intend to seek relief under the U.S. Bankruptcy Code if the exchange offers are consummated,” G.M. said in a regulatory filing.
By exchanging stock for its bonds and by converting its debt to the Treasury Department and to a retiree health care fund for the United Automobile Workers union, G.M. said it can eliminate $44 billion in debt. The Treasury and the U.A.W. would own up to 89 percent of the company’s outstanding shares, while bondholders would hold no more than 10 percent and current shareholders would hold 1 percent.
The Treasury would own more than half of G.M. on its own and therefore have control over the election of its board and other matters requiring the approval of shareholders.
In a bankruptcy, G.M. said it might separate itself into two companies: a new G.M. composed of desirable assets like the Chevrolet and Cadillac brands, and a collection of its unwanted assets that would then be liquidated.
G.M. has been negotiating with an ad-hoc committee representing large bondholders, but the two sides have been unable to reach a deal. The bondholders committee says G.M. has not been responsive to its requests in more than a month.
The Obama administration’s autos task force gave the automaker until June 1 to develop a more aggressive turnaround plan and to reach deals with its bondholders and the United Automobile Workers union. Talks with the U.A.W., which announced a cost-cutting deal with Chrysler on Sunday, are continuing.
Subscribe to:
Posts (Atom)