Australian business investment unexpectedly fell in the first quarter after the central bank raised borrowing costs to the highest in almost 12 years, prompting companies to scrap spending plans.
Capital spending fell 2.5 percent from the fourth quarter, when it climbed a revised 7.3 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for a 3 percent gain.
Falling investment suggests Australia's 17-year economic expansion may cool as companies spend less on machinery and construction. Central bank Governor Glenn Stevens, who raised the benchmark interest rate in March for the fourth time in seven months, aims to slow the economy enough to bring inflation back within his target range of between 2 percent and 3 percent by 2010.
“We're starting to see the first signs of a slowdown in business investment going forward,'' said Shane Oliver, chief economist at AMP Capital in Sydney. “Business confidence has taken a big hit, the cost of funding is still high, and the outlook for economic conditions has deteriorated.''
The Australian dollar dropped to 96.19 U.S. cents at 12:07 a.m. in Sydney from 96.35 cents before the report was released. The yield on the two-year government bond slipped 2 basis points, or 0.02 percentage point, to 6.89 percent.
Spending on buildings and structures fell 0.8 percent and company investment in new plant and equipment declined 2.6 percent in the first quarter, today's report showed.
Companies forecast investment of A$87 billion ($84 billion) in the year ending June 30. That was 1.3 percent more than they estimated three months ago.
They plan A$84.84 billion of new investment in the year through June 2009, which is 6.9 percent more than they estimated three months ago and 19.5 percent more than the corresponding forecast last year.
Today's report supports the central bank's view that the domestic economy will slow this year and next. The Reserve Bank cut its forecast this month for annual economic growth to June 2009 to 2.75 percent from the 3 percent it predicted three months earlier. First-quarter GDP figures will be published on June 4.
Consumer confidence held close to the lowest in 15 years in May, companies were pessimistic for a fourth consecutive month in April, and home-loan approvals fell in March to the lowest level in almost three years, reports this month showed.
Cooling domestic demand “will help to reduce inflation over time,'' the Reserve Bank said on May 9. “Wage pressures are likely to ease in due course as the rate of unemployment is forecast to increase, in line with slower growth.''
Businesses boosted spending last year as surging demand from China for iron ore and coal spurred mining companies, including Rio Tinto Group, to expand ports, railways and mines, pushing the nation's unemployment rate close to the lowest since 1974.
Rio Tinto, the world's third-largest mining company, may spend $10.2 billion to expand output by 26 percent at its Queensland alumina refinery amid forecasts that Chinese demand for the metal will rise 15 percent a year through 2015, Dick Evans, chief executive officer of the aluminum unit, said on April 30.
The booming mining sector, which is forecast to boost Australia's terms of trade, a measure of export income, by 20 percent this year, is among reasons the Reserve Bank increased the benchmark official cash rate target to 7.25 percent in March. It also raised borrowing costs in February, November and August.
Policy makers spent “considerable time'' discussing the case for a further rate increase when they met on May 6, according to minutes of the meeting published last week.
“In the great scheme of things, today's report adds to broad-based evidence the economy is starting to slow,'' AMP's Oliver said. “That will enable the Reserve Bank to leave rates on hold.''
InBev (INTB.BR: Quote, Profile, Research) has not yet begun merger talks with Anheuser-Busch Cos Inc (BUD.N: Quote, Profile, Research) but is still weighing an acquisition of the U.S. brewer, a source familiar with the situation said on Tuesday.
The source also said the board of directors for Belgian brewer InBev has not yet voted on whether it will proceed with an overture to Anheuser, the No. 1 brewer in the United States with brands like Budweiser and Michelob.
InBev has not yet decided, the source said, whether it would look at acquiring other companies in the event an Anheuser deal falls through, as was reported over the weekend by the Financial Times.
Citing a person familiar with the situation, FT reported that InBev and SABMiller Plc (SAB.L: Quote, Profile, Research) have been holding informal discussions about a tie-up, but that the progress of those talks was stalled by SABMiller’s plans to merge its U.S http://pay-day-home.com. operations with those of Molson Coors Brewing Co (TAP.N: Quote, Profile, Research).
The beer industry is experiencing a wave of consolidation, with Scottish & Newcastle agreeing to be broken up by Carlsberg A/S (CARLb.CO: Quote, Profile, Research) and Heineken NV (HEIN.AS: Quote, Profile, Research).
InBev, formed from the 2004 merger of Belgium’s Interbrew with Brazil’s AmBev, has a fraction of the U.S. market but has mature businesses in western Europe.
It is also present in growth markets in eastern Europe, Asia and Latin America, notably in the key market of Brazil.
SABMiller shares closed Tuesday up 6.9 percent at 13.08 pounds in London, its highest close since January. Anheuser shares closed up 0.3 percent at $56.75 on the New York Stock Exchange.
German companies increased construction spending and investment in machinery the first quarter, fueling the fastest economic expansion in 12 years.
Construction spending rose 4.5 percent from the fourth quarter, the Federal Statistics Office in Wiesbaden said today. Investment in plant and machinery gained 4 percent in the period. Gross domestic product grew 1.5 percent from the previous quarter, when it increased 0.3 percent, the office said, confirming a preliminary estimate published on May 15.
Companies in Europe's largest economy stepped up investment and hiring as an unusually mild winter kept construction sites open in the first three months of the year. Germany's DIW institute this month forecast the economy will cool as a stronger euro hurts exports and record oil prices sap purchasing power.
“Let's cherish the last good GDP figure,'' said Andreas Rees, chief German economist at Unicredit Markets and Investment Banking in Munich. “In our view, a strong setback in the second quarter is a done deal.''
The economy may expand 0.5 percent in the current quarter from the first and cool further in coming months, the Berlin-based DIW institute said on May 16. The BDB banking association said on May 22 the second quarter will show a “correction'' in growth. In the year, the economy may grow between 2.25 percent and 2.5 percent after 2.5 percent expansion in 2007, BDB said.
In the economy of the 15 euro nations, growth accelerated to 0.7 percent in the first quarter from 0.4 percent in the previous three months. The French economy also expanded at a faster-than- expected pace in the first quarter of 0.6 percent.
In Germany, inventory building added 0.7 percentage point to growth in the first quarter. Consumer spending contributed 0.2 percentage point and construction 0.4 percentage point.
German builders benefited from an “exceptionally mild'' and sunny winter, with temperatures 2.7 degrees Celsius above the long-term average, according to the German weather service. That's the sixth warmest since 1901.
Hochtief AG, Germany's largest construction company, said May 15 that first-quarter profit more than tripled. While the Essen- based company expects higher sales in 2008, pretax profit will be flat as the euro's appreciation hampers orders.
The euro has appreciated 8 percent against the dollar this year, making European exports less competitive payday advance lenders. The single currency reached an all-time high of $1.6019 on April 22.
Imports Exceed Exports
In the first quarter, imports grew 3.5 percent, exceeding export growth of 2.4 percent, today's report showed. Net trade reduced growth by 0.2 percentage point.
At the same time, surging oil prices are driving up inflation, eroding the spending power of both consumers and companies. Crude oil reached a record $135.09 a barrel on May 22.
German consumer spending rose 0.3 percent in the first quarter from the previous three months, when it fell 0.8 percent, the statistics office said. The household savings rate increased to 14.8 percent from 14.4 percent a year earlier.
Companies are also grappling with the collapse of the U.S. subprime mortgage market, which triggered more than $382 billion in losses and writedowns, boosted lending costs and pushed the world's largest economy to the brink of a recession.
Still, German business confidence unexpectedly rose in May and unemployment declined in April for a 27th month.
Economy Minister Michael Glos said May 23 that while there are “dark clouds on the horizon,'' the German economy is coping well. Bundesbank board member Hermann Remsperger said on May 16 that he's still “rather optimistic'' about the outlook.
German companies are expanding in faster-growing markets to boost earnings. Volkswagen AG, Europe's largest carmaker based in Wolfsburg, Germany, said May 23 it sold 11 percent more cars and commercial vehicles in April as faster growth in China and Brazil offset a drop in North America.
Salzgitter AG, Germany's second-largest steelmaker, on May 21 reiterated its full-year 2008 earnings target. “Despite rising commodities prices at the beginning of this year, the outlook for 2008 is good in all the company's divisions,'' Chief Executive Officer Wolfgang Leese said.
The European Central Bank this month kept its key rate at a six-year high of 4 percent, saying the euro-area economy is “sound'' and inflation remains a bigger concern. The ECB's 21- member Governing Council is scheduled to hold its next monetary assessment on June 5 in Frankfurt.
LG Electronics (066570.KS: Quote, Profile, Research), the world’s No.4 handset maker, is closely watching rival Nokia (NOK1V.HE: Quote, Profile, Research) amid talk the top-ranked mobile phone maker may cut its prices and re-enter the South Korean market later this year.
Shares in LG Electronics tumbled more than 8 percent on Monday as investors gauged the impact of potential price cuts by Nokia. But an LG executive said the firm was generally positive about the industry this year.
“We are interested in the Korean market and investigating it, but we have not unveiled any products for that market,” said Nokia spokesman Kari Tuutti, declining comment on future pricing.
LG shares ended down 3.8 percent, while Samsung Electronics (005930.KS: Quote, Profile, Research), the world’s No.2 handset maker, closed down 4 percent http://payday-badcredit.com. The main Korean market fell 1.5 percent.
“We are carefully watching Nokia,” Chang Ma, LG’s vice president for marketing strategy, told Reuters in an interview.
Analysts were split on the impact of a Nokia move.
“Nokia’s handset price cuts, if they actually happen, will certainly not be applied universally to all its models,” said Lee Sung-june, an analyst at SK Securities.
“Besides, Nokia and LG’s handset strategies are different in that while Nokia is more about offering cheaper models, LG is more focused on technologically advanced models.”
Energy stocks led the way to a lower session on the Toronto stock market yesterday even as oil prices continued to head higher.
Costly oil and dismal housing data sent New York markets down sharply.
Toronto’s S&P/TSX composite index fell 69 points to 14,723.36.
The Toronto market’s main index shed 260.84 points, or 1.75 per cent, this week after closing above 15,000 for the first time on Tuesday.
But markets started to lose ground at mid-week after the U.S. Federal Reserve warned of higher-than expected-inflation and lower economic growth.
Rally losing steam
And investors started to wonder if the meteoric rise in the TSX – about 20 per cent from the lows of late January, largely on the back of higher oil prices – had just about run out of steam.
"People are saying it’s great to have oil from an investing point of view at $133 a barrel – but can this last?" said Adrian Mastracci, portfolio manager at KCM Wealth Management in Vancouver. "I think it’s time to take some money off the table – not all of it, I wouldn’t want to be not part of it, but I don’t think you would want to load up on it."
The TSX Venture Exchange climbed 26.04 points to 2,706.37 while the Canadian dollar shed 0.24 of a cent to 101.19 cents (U.S.).
New York’s Dow Jones industrials tumbled 145.99 points to 12,479.63, shedding 506 points, or 3.8 per cent, this past week.
The Nasdaq composite index slid 19.91 to 2,444.67 while the S&P 500 index moved down 18.42 to 1,375.93 after the National Association of Realtors said single-family home sales dropped 1 per cent in April from May.
The TSX energy sector lost early gains to move down 0.48 per cent while the June crude contract in New York climbed $1.38 to $132.19 a barrel.
Petro-Canada lost 82 cents to $59.18 (Canadian), while Canadian Natural Resources fell $1.48 to $100.62.
Crude had tumbled $2.36 (U.S.) Thursday as investors took profits after the huge recent run-up, but analysts expect prices to move even higher.
Oil weighs on materials
"The market is really structurally tight .. no teletrak payday loans. and we’ve got investors – speculators – empowered to continue to power money into oil," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
However, Shum added: "The reality is, the faster it goes up for no apparent reason, when it comes down, it will be just as fast."
The materials sector was down as Potash Corp. lost $2.40 (Canadian) to $194.40, Sherritt International gave back 42 cents to $15 and Ivanhoe Mines lost 46 cents to $9.13.
High oil prices also affected transport stocks as Canadian National Railway fell $1.07 to $54.61 and Canadian Pacific lost $2.16 to $70.42.
TSX financials fell 0.46 per cent with Royal Bank of Canada down 58 cents to $49.82 and CIBC $1.26 lower to $72.25.
The market found some support from BCE Inc., which rose 96 cents to $33.60 following a 12 per cent loss Thursday after the Quebec Court of Appeal upended the proposed $52 billion takeover of the Bell Canada parent company by a group led by the Ontario Teachers’ Pension Plan.
Elsewhere in the telecom sector, Telus Corp. ran ahead 56 cents to $48.24.
The TSX gold sector was down slightly as the June bullion contract on the Nymex climbed $7.50 to $925.80 an ounce (U.S.). Barrick Gold Corp. faded 42 cents to $41.53 (Canadian).
Alaska favours pipeline
Elsewhere, TransCanada Corp. shares fell 44 cents to $39.48 after Alaska Governor Sarah Palin came out in favour of the company’s proposal for a natural gas pipeline from Alaska’s North Slope to a hub in Alberta.
General Motors Corp.’s stock dropped 83 cents to $17.60 (U.S.) after the company reported strikes at some of its own plants and parts supplier American Axle will cost the automaker about $2 billion before taxes in the second quarter.
On the TSX, declines beat advances 790 to 774 with 228 unchanged as 352.7 million shares traded worth $7.2 billion (Canadian).
The Canadian Press
French Finance Minister Christine Lagarde said she wants policy makers to seek a stronger U.S. dollar and Chinese yuan against the euro.
“I would arm twist whoever is holding these strings to pull the dollar up,'' Lagarde said in an interview with Bloomberg News in Chicago. “I would like to do that for the yuan as well.''
European officials including Lagarde are concerned that the strength of the euro against the dollar and the yuan would hurt the competitiveness of their exporters. Even after the dollar tumbled around 17 percent versus the euro in the past 12 months, Europe's economy has shown resilience to the U.S. housing recession that pushed up borrowing costs worldwide.
“It's difficult to say the dollar and the yuan are causing Europe extreme pain, because European economies are doing fairly well and a strong euro does help contain inflation,'' said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. “Some European officials may prefer a weaker euro and lower commodity prices, but that's unlikely to happen soon.''
The dollar traded at $1.5728 as of 12:10 p.m. in Tokyo and touched a record low of $1.6019 on April 22.
Gross domestic product in the 15 euro countries increased 0.7 percent from the fourth quarter, more than economists expected. France, the euro region's second-largest economy, is set to grow between 1.7 percent and 2 percent this year after expanding faster than economists expected in the first quarter.
Group of Eight
The Group of Eight finance ministers, who meet next month in Osaka, Japan, are “determined'' to stabilize financial markets by the end of the year, and to be better prepared to avert future crises, Lagarde, 52, said. There is a “joint determination'' among policy makers to avoid too much volatility in currency markets, she said cash advance today.
On May 14, when the euro was trading at $1.55, Lagarde said the European currency was “still at 10 percent, 15 percent, 20 percent above the appropriate fundamentals.''
“Lagarde's point over the last couple of days is she's realizing that the euro is strong not just against the U.S. dollar but also against the yuan, so it's a double whammy,'' said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney.
The yuan has fallen 6 percent versus the euro in the past year and traded at 10.9154 against the single European currency at 11:14 a.m. in Shanghai. In the past month it has gained 1.8 percent against the euro.
China is being more responsive than ever to European concerns about trade imbalances, EU trade chief Peter Mandelson said on April 25 after talks in Beijing. China is allowing the yuan to move more with reference to a basket of major currencies including the euro to fend off criticism from Europe, its top trading partner, according to Merrill Lynch & Co.
There's “good news'' about France's economy despite record low consumer confidence and protests today over a government plan to toughen pension rules, Lagarde said.
“We have got good stories to tell,'' she said. “We are going through such a huge process of reform and major changes to improve the economy of France that it should be more attractive than it has been for the past two years.''
Lagarde is in Chicago to meet investors and promote President Nicolas Sarkozy's economic reform plans.
The International Monetary fund urged Japan's central bank to refrain from raising interest rates, the lowest in the industrialized world, until concern abates about the strength of the economy.
The Bank of Japan's main goal should be to “safeguard the expansion,'' Daniel Citrin, IMF deputy director and mission chief for Japan, said yesterday in Tokyo following meetings with central bank and Finance Ministry officials.
Bank of Japan Governor Masaaki Shirakawa told lawmakers today that economic growth is slowing because of costlier oil and raw materials and the central bank will implement policy flexibly. The bank last month cut its growth forecast and shelved a two-year policy of gradually raising interest rates.
“Bank of Japan officials may characterize their policy stance as a wait-and-see attitude,'' Citrin said. “That is the appropriate stance.''
Economists predict the central bank will keep the overnight lending rate at 0.5 percent for at least the rest of the year. Shirakawa's policy board on April 30 lowered its growth forecast to 1.5 percent from 2.1 percent for the year ending March 2009.
“Rates should be maintained at the current level until concerns about domestic growth and the external environment have diminished,'' Citrin said. “Recent indicators suggest we're headed for a slowdown.''
Shirakawa said rising commodity prices “would mean a drag on corporate profits and a decline in households' purchasing power'' that could force companies and consumers to cut spending. Crude oil exceeded $135 a barrel for the first time today.
The outlook for Japan's economy is “very uncertain'' and “it's not appropriate for the bank to have any predetermined notion about the direction of policy,'' the governor said. At the same time, he added, the central bank expects the world's second-largest economy to eventually resume a moderate expansion.
Exports will keep increasing because demand from emerging economies and commodity-producing countries will remain solid even amid the U.S. slowdown, Shirakawa said, after a report today showed shipments overseas grew at a faster pace last month.
Japan's exports, the main driver of last quarter's expansion, rose 4 percent in April from a year earlier after climbing 2.3 percent in March, the Finance Ministry said.
Meanwhile Citrin also reiterated the IMF's criticism of Japan's government for being too “unambitious'' in tackling its debt. At 1.5 times gross domestic product, Japan's public debt is the largest among developed economies.
Spain faces a 30 percent chance of a recession in the next two years as the global credit shortage exacerbates a real estate slump, a survey of economists showed.
That was the median probability of a recession given in a Bloomberg News survey of 17 economists. A contraction would probably begin in the final quarter of 2008, the survey showed.
Spain's economy expanded at the slowest pace in almost eight years in the first quarter as the global credit shortage exacerbated the country's housing slump. Home sales fell by a quarter in the year to February as mortgage costs rose, banks tightened credit for potential buyers and unemployment surged.
“The bubble in the housing market has now burst, leading to shrinking construction spending and negative wealth effects,'' said Ralph Solveen, an economist at Commerzbank in Frankfurt. A recession in Spain “would have a significant impact on the euro area.''
Spain, which accounts for about 10 percent of the euro- region economy, provided a quarter of the area's new consumer spending during the past four years, according Eurostat, the EU's statistics office. Italy, the region's third-biggest economy, is already on the brink of a recession, and the U.K., the euro zone's biggest export market, faces its slowest expansion since 1992.
The European economy is buffeted by rising costs for credit and commodities and a strong euro. The price of oil doubled in the past year, the euro reached a record against the dollar last month and the yield on the 12-month euribor, the benchmark for most Spanish mortgages, was at the highest in May since 2000.
Changing Economic Cycle
“All this is happening at a time when the economic cycle is changing with the housing adjustment'' in Spain, said Jose Luis Martinez, a strategist at Citigroup Inc. in Madrid. “The more violent that is, the more likely a recession becomes.''
Spanish banks are paying the highest-ever interest rates relative to borrowing benchmarks to lure investors due to concern that the real estate slump may spark losses for lenders. Lenders already have posted losses of $379.2 billion following the collapse of the U.S. subprime mortgage market.
Spanish lenders face “continuing increases in defaults'' as house prices fall and home sales dry up, Bank of Spain Governor Miguel Angel Fernandez Ordonez said on May 14. Residential property prices fell in real terms for the first time in more than a decade during the first quarter.
The Spanish economy grew 0.3 percent in that period compared with 0.8 percent in the previous three months. The government forecasts the economy will expand 2.3 percent in 2008, the slowest since the country's last recession in 1993.
“The Spanish economy has entered a period of adjustment,'' Ordonez said. “We'll need to have less domestic demand and compensate with external demand.''
There is “practically zero'' chance of Spain suffering a recession, he added.
Mexico's central bank kept its benchmark interest rate unchanged for a seventh month and added language to its policy statement that indicates heightened unease about the outlook for inflation.
Inflation pressures will rise “considerably,'' a “growing reason for concern,'' the bank said in a statement today announcing the decision to keep rates at 7.5 percent.
The comments indicate that rising consumer prices will prevent the bank from lowering the benchmark rate and may force an increase later this year, said Gray Newman, chief Latin America economist at Morgan Stanley in New York.
“While I still don't think Banxico wants to raise rates, they seem to be preparing the market that the risks to a hike are growing,'' Newman said.
The decision by Banco de Mexico's five-member board to keep the rate steady matched the forecast of all 21 economists surveyed by Bloomberg.
Mexico's annual inflation accelerated the most in almost three years last month to 4.55 percent, led by costs for housing and foods such as tomatoes and chicken. In April, the bank raised its 2008 inflation forecast, saying prices will climb 4.5 percent to 5 percent on an annual basis in the second and third quarters, and as much as 4.75 percent in the fourth quarter.
The bank targets inflation of no more than 4 percent.
Mexico's peso strengthened to its highest in almost five years on speculation central bankers will raise interest rates later this year to stem inflation.
The peso advanced 0.5 percent to 10.3969 per dollar at 4:47 p.m. New York time. Earlier the currency touched 10.3912, the strongest since July 2003.
Rafael Camarena, an economist in Mexico City at Banco Santander SA, the biggest trader of peso-denominated bonds, estimates central bankers will increase the key rate to 7.75 percent at their June 20 meeting internet payday loans. Policy makers last raised borrowing costs, by a quarter-percentage-point, in October.
The risk of contagion from the U.S. economic downturn has also increased, the bank said in its statement today. Banco de Mexico last month cut its economic growth outlook for this year to no more than 2.9 percent. The central bank expects first- quarter growth was 3 percent.
Alfredo Thorne, head of Latin America research for JPMorgan Chase & Co. in Mexico City, said the bank's statement today was balanced and didn't give a clear signal as to monetary policy in the coming months.
“I don't think they want to push the market into the dovish camp,'' Thorne said. “They would like the market to come to a midpoint.''
Slump in U.S.
Mexico is less affected by a slumping U.S. economy than it was during the U.S. recession of 2001 because of growing exports to other countries, greater domestic consumption and increased investment and public spending, Deputy Finance Minister Alejandro Werner said May 8.
The bank's board may believe increasing rates won't significantly affect inflation because consumer prices are mostly rising due to global food and energy costs, said Rodolfo Navarrete, head of research at brokerage Vector Casa de Bolsa in Mexico City.
“It looks to me like there's no agreement within the Banco de Mexico on which direction to take,'' Navarrete said. “Some are probably saying it's time to act now. Others are advising to wait.''
The median forecast of 25 economists polled by Citigroup Inc.'s Banamex unit in Mexico City on May 6 was for the central bank to not change its benchmark rate until 2009.
Federal Reserve Chairman Ben S. Bernanke lunched on March 11 with a Who's Who of Wall Street leaders, including JPMorgan Chase & Co.'s Jamie Dimon, three days before the central bank rescued Bear Stearns Cos. from bankruptcy.
Other guests included Goldman Sachs Group Inc. Chief Executive Lloyd Blankfein, Lehman Brothers Holdings Inc. CEO Richard Fuld, Morgan Stanley President James Gorman, Citigroup Inc.'s Robert Rubin, Blackstone Group CEO Stephen Schwarzman and Merrill Lynch & Co. CEO John Thain. Alan Schwartz, the CEO of Bear Stearns, was not listed among the attendees.
The luncheon at the New York Fed gave Bernanke a chance to hear from chiefs of some of the biggest U.S. financial companies and hedge funds in the middle of his most tumultuous month as central bank chief. The meeting came hours after he announced plans to lend $200 billion of Treasuries in exchange for debt including mortgage-backed securities.
The collapse of the subprime-mortgage market has led to $323 billion in asset writedowns and credit losses at financial institutions since the start of 2007. The situation calls for the Fed chairman to cultivate “increased contacts and understanding with Wall Street,'' said Kenneth Thomas, a lecturer in finance at the Wharton School of the University of Pennsylvania who has researched Bernanke's schedule.
Bernanke also briefed Republican presidential candidate John McCain on the Bear Stearns episode over the phone, according to Bernanke's schedule for March and Douglas Holtz- Eakin, McCain's economic adviser. Bloomberg News obtained the schedule in response to a request under the Freedom of Information Act.
Bernanke and New York Fed President Timothy Geithner, seeking to avoid a financial-market meltdown, orchestrated a $13 billion emergency loan to Bear Stearns on March 14. Two days later, they eased the company's sale to JPMorgan after the Fed agreed to take on $30 billion of mortgage-backed securities and other assets from Bear Stearns.
The chairman's March 11 lunch with financial-industry executives was held at the New York Fed, with Geithner also attending. Bernanke and Geithner told Congress last month that they were informed of Bear Stearns's troubles on March 13.
Dimon, Fuld and a third guest, Stone Point Capital LLC Chairman Stephen Friedman, are on the New York Fed's board of directors.
Other people at the gathering were Citadel Investment Group LLC CEO Kenneth Griffin, American Express Co guaranteed payday loan. CEO Kenneth Chenault, Duquesne Capital Management LLC CEO Stanley Druckenmiller and Caxton Associates LLC Chairman Bruce Kovner.
Two executive vice presidents at the New York Fed also attended: William Dudley, head of open market operations, and Terrence Checki, who oversees emerging markets and international affairs.
The daybook, as released and redacted by the Fed, otherwise contains few new details about the events surrounding deliberations to rescue Bear Stearns and create two emergency- lending programs for Wall Street bond dealers.
Bernanke traveled to New York on March 7 for three meetings, including one over lunch. The Fed blacked out the identities of attendees at all three sessions.
Some information was withheld because it “includes commercial or financial information obtained from a person and privileged or confidential,'' according to a letter to Bloomberg News from the Fed's associate secretary, Margaret McCloskey Shanks.
Call From McCain
McCain, an Arizona senator, called Bernanke on March 24 for a briefing on Bear Stearns, Holtz-Eakin said in an interview. They spoke at noon for about 15 minutes, according to the daybook. Bernanke, who was appointed by Republican President George W. Bush in 2006, called Holtz-Eakin the next day to find out if McCain got what he wanted, Holtz-Eakin said.
The daybook doesn't list any contacts with Senator Hillary Clinton or Senator Barack Obama, who are fighting for the Democratic presidential nomination.
“That's pretty telling that McCain was savvy enough to make a formal inquiry and talk about this,'' Thomas said. “It's good that he was aware of it.''
Other meetings with chief executives included a March 12 session in Washington with Tony Hayward, CEO of BP Plc, Europe's No. 2 oil company; the Semiconductor Industry Association's board of directors on March 13; Fannie Mae CEO Daniel Mudd on March 17; and Freddie Mac CEO Richard Syron on March 28.
On March 28, Bernanke also met with Takatoshi Ito, who was blocked by Japanese lawmakers for deputy governor of that country's central bank, and lunched with former Treasury Secretary Lawrence Summers before traveling a few blocks to see visiting Australian Prime Minister Kevin Rudd at Blair House, across from the White House.
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