IMF warns that banks have yet to reveal their losses

The Financial Times quotes the International Monetary Fund (IMF) in announcing that banks around the world still have to reveal about half their likely losses resulting from the financial and economic crisis, warning there was still a "significant" risk of another downward lurch in the global recession.

The IMF in its Global Financial Stability Report wrote: "US domiciled banks have recognized about 60 per cent of anticipated writedowns, while euro area and UK domiciled banks have recognized about 40 per cent."

A failure to reveal the true scale of the losses they are likely to face ...would undermine the economies of the US, the UK and the euro zone and could generate a renewed vicious spiral, the IMF said.

Losses are likely to prove largest in the US and UK - where banks held more toxic assets and the downturn in commercial property has been greatest.

Head of World Bank sees Dollar’s role diminishing

The president of the World Bank, Robert B. Zoellick, announced that America’s days as an unchallenged economic superpower might be numbered and that the dollar was likely to lose its favored position as the euro and the Chinese renminbi assume bigger roles.

Mr. Zoellick, who previously served as the United States trade representative and as deputy secretary of state under President George W. Bush, said that the euro provided a “respectable alternative” for financing international transactions and that there was “every reason to believe that the euro’s acceptability could grow.”

Mr. Zoellick argued that the United States and a handful of other rich nations could no longer dominate the world economy and suggested that America was losing its clout.

[New York Times]

Stiglitz says banking problems are now bigger than pre-Lehman Brothers

Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system.

“In the U.S. and many other countries …” Stiglitz said in an interview in Paris, “The problems are worse than they were in 2007 before the crisis.”

Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”

Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods”.

“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said.

The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government. “The question then is who is going to finance the U.S. government,” Stiglitz said.

Bloomberg

Federal Reserve makes $14 billion profit on economic crisis

The Financial Times reports that the Federal Reserve has made a $14billion profit on loan programs that have provided hundreds of billions of dollars in liquidity to the financial system since the start of the crisis two years ago, according to Fed officials.

The central bank earned about $19 billion in income from charging interest and fees to financial institutions and investors that tapped the new facilities to obtain much-needed funds during the turmoil. The interest the Fed would have earned by investing the same amount in T-bills was an estimated $5 billion, leaving a $14billion gain since August 2007.

Some politicians have criticized the Fed for using billions of dollars of public funds to support the market and stricken groups such as AIG and Bear Stearns. A recent Gallup Poll found the Fed had the worst public approval rating of nine government agencies, even lower than the tax authorities.