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Euro zone finmins to rule on glacial Greek debt talks (NEWS.GNOM.ES)

Filed Under: Insurance News
Jan.23, 2012

BRUSSELS/ATHENS (NEWS.GNOM.ES) – Euro zone finance ministers will decide on Monday what terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens after negotiators for private creditors said they could not improve their offer.

Resolving the issue of a Greek debt swap is key to putting Athens’ debt on a sustainable path and avoiding a chaotic default that could threaten the whole currency bloc.

After several rounds of talks, Greece and its private creditors are converging on a deal in which private bondholders would take a real loss of 65 to 70 percent on their Greek bonds, officials close to the negotiations said.

But some details of the debt restructuring, which will involve swapping existing Greek bonds for new, longer-term bonds to bring Greek debt down to a more sustainable 120 percent of GDP in 2020 from 160 percent now, are unresolved.

“What I am confident of is that our offer, that was delivered to the prime minister, is the maximum offer consistent with a voluntary PSI deal,” Institute of International Finance chief Charles Dallara, who is negotiating on behalf of banks and insurers holding Greek debt, told Antenna TV on Sunday.

“We are at a crossroads and I remain quite hopeful,” said Dallara, who left Athens on Saturday without a deal in place.

Once the guidance from the finance ministers, known as the Eurogroup, is clear, talks on the restructuring could be finalized later in the week.

“It is a very delicate moment,” Greek government spokesman Pantelis Kapsis told Greek state radio.

“The only thing that I can say as a government spokesman is that tonight, there is a very important meeting at the Eurogroup and we hope that serious steps will be made towards a deal.”

Talks on the extent of Private Sector Involvement (PSI) in the Greek debt restructuring are a vital part of a second financing plan for Athens that would keep it funded until 2014.

“We will listen to the report on the negotiations, see how far they have gotten and have the ministers say what is acceptable and what is not in terms of outcome of the negotiations,” one Eurogroup official said.

Without the second bailout from the euro zone and the International Monetary Fund, Greece will not be able to pay back 14.5 billion euros in maturing bonds in March, triggering a messy default that would hurt the whole euro zone economy.

“We are working for a deal in time for the January 30 summit of EU leaders. The restructuring offer needs to be made in the course of February,” the official said.

“Obviously there is a clear link between the PSI and the next program and what we will be focusing on in the Eurogroup is making the next program operational.”

STICKING POINT

There are doubts that even with a new bailout Greece’s mountainous debt can be reduced to a still-painful 120 percent of GDP by 2020.

German Finance Minister Wolfgang Schaeuble said on Sunday the crucial factor was that Athens should have a level of debt that was sustainable by then. “This goal must be achieved,” he told German public broadcaster ARD.

Euro zone leaders agreed in October that the second bailout would total 130 billion euros, if private bondholders forgave half of what Greece owes them in nominal terms.

But Greek economic prospects have deteriorated since then, which means either euro zone governments or investors will have to contribute more than thought. ID:nL1E8CBE7W

The main sticking point is coupon, or interest rate, the new Greek bonds would carry. Officials said the new bonds are likely to be 30 years in maturity and carry a progressively higher coupon, which would average out at around 4 percent.

“The euro zone ministers will examine the proposal and say whether we have a deal. If they say we don’t, we’re back to the negotiating table,” a banking source close to the talks said.

Progress will be presented to euro zone ministers by Greek Finance Minister Evangelos Venizelos.

“We then expect a discussion about the coupon,” a senior Greek banker close to the negotiations told NEWS.GNOM.ES.

“I believe that the private sector can accept a lower coupon than the 4 percent average, but the question then is: will the PSI still be on a voluntary basis?” he said.

The voluntary character of the debt restructuring is important to avoid triggering the pay-out of insurance against a Greek default.

While the sums of such insurance appear relatively small, euro zone officials said, such a “credit event” could trigger a chain reaction of events that would entail rapid and large scale contagion in euro zone debt markets, and is thus best avoided.

NEW RESCUE FUND

After dealing with Greece, euro zone ministers will choose a replacement for European Central Bank Board member Jose Manuel Gonzales Paramo, whose term ends in May.

The 17 ministers of the euro zone will then be joined by 10 ministers from the other European Union countries to finalize a treaty setting up the euro zone’s permanent bailout fund – the 500 billion euro European Stability Mechanism (ESM). Its predecessor, the EFSF, is widely viewed as insufficient.

The ESM is another crucial element in the bloc’s efforts to end the sovereign debt crisis that threatens to engulf Spain and Italy after claiming Greece, Ireland and Portugal.

The fund should boost market confidence in euro zone defenses should Spain or Italy need emergency financing. Separately, the IMF has launched a proposal to boost its war chest by $600 billion.

IMF head Christine Lagarde is to discuss this during a meeting with German Chancellor Angela Merkel on Sunday. She will make a speech on Monday in which she is expected to urge euro zone leaders to act quickly while acknowledging it is not merely Europe’s problem because “innocent bystanders” will also be hit by a worsening debt crisis.

The 27 EU finance ministers will also prepare the final draft of another treaty to sharply tighten fiscal discipline in the euro zone, called the fiscal compact, that is designed to ensure another sovereign debt crisis cannot happen in future.

EU leaders are to sign off on both treaties on January 30, allowing the ESM to become operational in July.

To prepare for the January 30 summit, Merkel will meet European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy on Monday evening.

(Additional reporting by Lefteris Papadimas and Ingrid Melander in Athens; Reporting By Jan Strupczewski, editing by Mike Peacock)

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IMF sees euro zone GDP down 0.5 percent in 2012: ANSA (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Jan.19, 2012

MILAN (NEWS.GNOM.ES) – The International Monetary Fund expects the euro zone economy to contract by 0.5 percent this year and warns that tensions arising from the bloc’s debt crisis threaten global growth, Italian news agency ANSA reported on Thursday quoting a draft of the World Economic Outlook (WEO).

The figure is 1.6 percentage points lower compared with the IMF’s September forecast, ANSA said.

The IMF is due to publish next week its latest WEO report.

ANSA said the IMF saw a growth of just 0.3 percent in Germany this year, accelerating to 1.5 percent next year.

Similarly, France was expected to grow by 0.2 percent this year and 1 percent the next.

Both Italy and Spain, according to the draft document, would record two years of negative growth. The Italian economy was expected to shrink by 2.2 percent this year, the Spanish by 1.7 percent.

The GDP contraction should slow to 0.6 percent next year in Italy and to 0.3 percent in Spain, ANSA said.

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AIA sizes up bid for $6 billion ING Asia insurance (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Jan.17, 2012

HONG KONG (NEWS.GNOM.ES) – AIA Group Ltd (1299.HK), Asia’s third-largest insurer, is exploring making an offer for Dutch ING’s (ING.AS) roughly $6 billion Asian insurance operations, sources said, with the planned sale of the business expected to draw heavy interest from rivals.

AIA, about one third owned by American International Group Inc (AIG.N), has invited four banks to pitch for advisory roles for a potential offer, two sources familiar with the process told NEWS.GNOM.ES. The sources declined to be identified as they were not authorized to speak to the media.

An AIA spokeswoman declined comment.

Last week, ING scrapped plans to list its combined Asian and European insurance and investment management businesses, saying it would consider other options as it had received strong interest for its Asian operations.

ING has hired Goldman Sachs (GS.N) and J.P. Morgan (JPM.N) to advise on the sale, sources told NEWS.GNOM.ES.

The prospective sale by the Dutch bancassurer comes as European banks look to offload assets and repair balance sheets battered by the sovereign debt crisis.

Japan’s Sumitomo Mitsui Financial Group (SMFG) (8316.T) and Sumitomo Corp (8053.T) said earlier they would buy Royal Bank of Scotland’s (RBS.L) aircraft leasing business in a deal worth $7.3 billion.

AIA, led by former Prudential Plc (PRU.L) CEO Mark Tucker, is a surprise leader in chasing the ING business, some analysts said, as most of AIA’s business is generated from fast growing Asian markets, while more than three quarters of ING’s new sales are in the maturer South Korean and Japanese markets.

As in any auction, AIA may decided to pursue or back away from the process, the sources said.

ING’s sale process is expected to attract interest from global insurers, too. AIA, which was the crown jewel in bailed-out insurer AIG’s global business, was floated on the Hong Kong stock exchange in 2010 through a $20.5 billion IPO.

Analysts estimate AIA has about $3 billion in excess capital over regulatory requirements, and would have no problem raising funds if it did go ahead with a complete takeover of ING’s Asian insurance business.

AIA shares gained as much as 1.9 percent to their highest since January 6, while the benchmark Hang Seng share index (.HSI) was up 2.3 percent.

(Reporting by Denny Thomas; Editing by Jonathan Hopfner and Ian Geoghegan)

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Asia stocks end 2011 sharply lower, Europe in focus (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Dec.30, 2011

SINGAPORE (NEWS.GNOM.ES) – Asian stocks were poised to end their first losing year in three on Friday, having shed nearly a fifth of their value as Europe’s debt crisis and financial turmoil took a toll on investors’ risk appetite, driving them to safer assets such as the U.S. dollar and gold.

European stocks were set to edge higher on the last session of a dismal year that saw them tumble about 12 percent, while U.S. futures pointed to a weaker opening on Wall Street later in the day, with the S&P 500 looking set to end the year pretty close to where it began. (.EU)

Safe haven investments and cash are likely to remain in favor early in 2012 as investors closely monitor efforts to contain Europe’s debt crisis and the health of the Chinese economy, which may determine their return to risk.

“The general outlook is that going into next year, there is going to be a lot of negative factors to watch from the European sovereign debt crisis. The market will remain very sensitive to the developments out of Europe in the beginning of the year,” said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

“This year’s popular word was ‘risk-off’ or investors shedding risk. Whether the market can switch back to taking on more risk and come back to equities remains to be seen, and the timing of that change will be in focus next year,” he added.

Japan specifically will benefit from the government spending to fund reconstruction after an earthquake devastated the country in March, he added.

Reflecting the flight from riskier assets, U.S. 10-year Treasuries gave investors a return of about 17 percent in 2011 with German Bunds returning 13 percent and gold around 10 percent. At the other end of the spectrum, copper fell nearly 23 percent on worries about cooling global demand and MSCI emerging equities tumbled some 18 percent.

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The MSCI index of stocks outside Japan (.MIAPJ0000PUS) is down more than 18 percent this year, while Australia’s S&P/ASX 200 index (.AXJO), shed 14.5 percent, recording its first back-to-back loss in 30 years and Japan’s Nikkei (.N225) had a second straight annual drop, losing 17 percent in 2011.

“If you look around at all the asset classes, it really has been a year of safe-haven flows, it is about preserving your capital and returning your equity,” said Chris Weston, institutional dealer at IG Markets in Melbourne.

Investors were spooked in 2011 by an earthquake and tsunami in Japan, which was followed by debt crises in the United States and Europe and floods in Thailand.

On Friday, the mood was cautiously upbeat after U.S. data on Thursday pointed to positive trends for the world’s biggest economy and triggered modest gains in U.S. and European stocks.

The MSCI ex-Japan index was nearly flat, while the Nikkei was up 0.7 percent on the day.

Pending sales of existing U.S. homes surged to a 1-1/2-year high in November and factory activity in the U.S. Midwest grew more than expected in December.

The euro was poised to end a roller-coaster year on a downbeat note, with its break below crucial technical support level boding ill for the year ahead.

Over the past year the euro has shed more than 3 percent on the dollar, adding to a 6.6 percent decline in 2010. On Thursday it broke below support at this year’s low and sank to a 15-month low of $1.2858. It later recovered in Asia to $1.2940.

Against the yen, the euro softened 0.2 percent to 100.37, nearing the 10-year low around 100.01 hit overnight.

The U.S. 10-year Treasury yield inched up in Asia on Friday but was on track for its biggest annual drop since 2008, yet another indicator of how the euro zone’s debt crisis has stoked safe haven demand.

Commodities such as crude oil and gold fared better this year. Brent crude is set to end the year up nearly 14 percent and at a record high annual average, as political tensions in OPEC member states help negate a global economic slowdown that has dampened oil demand growth.

The oil market will end 2011 the same way it started, with fears of a major oil supply disruption in the Middle East and North Africa supporting prices and the uncertainty is expected to continue into the new year as well.

The immediate focus remains on Iran after Tehran again threatened to block traffic through the Strait of Hormuz, a crucial passage for Middle Eastern crude suppliers after the European Union’s decision to tighten sanctions on Iran over its nuclear program. The United States said it would preserve oil shipments in the Gulf.

Gold is still down 19 percent from the year’s peak touched in September, as euro zone worries drove investors towards the dollar, making it expensive for holders of other currencies.

Next year will continue to be dominated by worries over economic growth and sovereign debt, gold analysts say.

(Additional reporting by Dominic Lau, Mari Saito and Antoni Slodkowski in TOKYO and Victoria Thieberger in MELBOURNE; Editing by Kim Coghill)

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From Macy’s to Sears, tales of holiday highs, lows (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Dec.27, 2011

(NEWS.GNOM.ES) – Macy’s Inc (M.N) and Wal-Mart Stores Inc (WMT.N) continue to get high marks from Wall Street as the busy season draws to a close, while Sears Holdings Corp (SHLD.O) proved that it was really not a jolly holiday for all stores.

Sears said it would close dozens of Sears and Kmart stores after sales at its existing locations dropped 5.2 percent from the beginning of the quarter through Christmas. Its shares plunged 26 percent on Tuesday.

The announcement comes two weeks after Best Buy Co Inc (BBY.N) said that the bigger discounts it offered to kick-start the holiday season ate into profits.

Success stories, particularly at Macy’s and Wal-Mart, show that they and other retailers are benefiting from recent overhauls and the right mix of holiday season discounts.

“To sum up the whole season, I would say extremely focused on bargains, that’s where the consumer’s mindset is, and the retailers generally, overall, delivered pretty compelling bargains, they gave the consumer a reason to shop,” said B. Riley & Co senior analyst Jeff Van Sinderen.

While it is too early to tell, analysts said that the season’s promotional prices largely seemed to be in line with what retailers set out to do to entice shoppers.

Macy’s surpassed rivals such as J.C. Penney Co Inc (JCP.N) by opening at midnight on Black Friday and from earlier decisions such as letting regional managers pick merchandise that caters to their clientele. After Macy’s November sales rose more than expected, it said that if such momentum held up, its profit could also be stronger than forecast.

“I see Macy’s as the market-share winner,” said independent retail analyst Brian Sozzi, who said shoppers did not see “slash-and-burn discounting” at the department store chain.

“They are the destination place among department stores,” he said.

For Walmart, this season was a chance to prove that returning to its historic strategy of low prices on a wide variety of goods would bring shoppers back to the world’s largest chain after two tough years.

Realizing that times are tough for its shoppers, many of whom do not have credit cards or bank accounts, Walmart brought back layaway in mid-October. That move hurt competitors.

Layaway sales, where items are put aside for customers until they fully pay for them, fell at Kmart, while Target Corp (TGT.N) saw sales of toys crimped by Wal-Mart’s layaway push even before Thanksgiving.

Retailers are expected to ring up $469.1 billion in holiday season sales, or a rise of 3.8 percent from 2010, according to the National Retail Federation.

Meanwhile, U.S. consumer confidence rose to an eight-month high in December, the Conference Board said, suggesting that Americans have a brighter take on the economy heading into 2012.

The S&P retail index (.RLX) was up modestly on Tuesday, roughly in line with the broader S&P 500 index (.SPX).

TEEN ANGST

In general, analysts said that retailers did a good job of having the right level of inventory in place, which meant there was not a need for major panicked discounting.

But it appeared that few retailers foresaw just how mild the weather would be so far in most parts of the country, leading to a glut of warm coats, sweaters and other such items.

That could put pressure on companies such as winter outerwear makers VF Corp (VFC.N), which makes The North Face line, and Columbia Sportswear Co (COLM.O), said Craig Johnson, president of Customer Growth Partners.

“While the economic tone seems a bit better, the lower-end consumer is still most constrained and thus we think investors are still best positioned in those companies targeting higher-end consumers,” such as Tiffany & Co (TIF.N), True Religion Apparel Inc (TRLG.O) and Nordstrom Inc (JWN.N), said Caris & Company analyst Dorothy Lakner.

Lakner’s favorite small and mid-cap stocks are Zumiez Inc (ZUMZ.O) and American Eagle Outfitters Inc (AEO.N), “where specific strategies set them apart,” she said.

Among chains catering to teens, American Eagle appeared to have “better traffic consistently” throughout the season, while Abercrombie & Fitch Co (ANF.N) kept its prices too high, even with discounts, said Sozzi.

American Eagle’s success “has come at the expense of the higher priced Abercrombie, which got hammered,” said Johnson.

Another teen-focused retailer, Aeropostale Inc (ARO.N), struggled without fresh fashion and lost out to competitors such as Forever 21, H&M (HMb.ST) and Fast Retailing’s (9983.T) Uniqlo, he said.

Lakner also called out Children’s Place Retail Stores Inc (PLCE.O) as one of retail’s “best turnaround stories.”

(Reporting by Jessica Wohl in Chicago and Phil Wahba in New York. Editing by Gunna Dickson)

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Olympus ex-CEO to meet panel member next week (NEWS.GNOM.ES)

Filed Under: Insurance News
Nov.08, 2011

TOKYO (NEWS.GNOM.ES) – Olympus Corp’s ousted CEO Michael Woodford said he will meet in London next week with a member of the third-party panel probing past M&A deals at the endoscope maker.

“I will meet the panel member Mr. Katayama in London,” Woodford said in an e-mail to NEWS.GNOM.ES.

Eiji Katayama, a lawyer, is one of six members of a panel headed by retired supreme court justice Tatsuo Kainaka that was appointed by Olympus to investigate a $687 million advisory fee paid in connection with its $2.2 billion acquisition of Britain’s Gyrus in 2008. Fees paid to advisers in M&A deals do not typically exceed 2 percent.

The group will also scrutinize three acquisitions in Japan that were quickly followed by large write-downs.

Woodford told NEWS.GNOM.ES in an interview last week that he wanted to meet investigators appointed to probe the scandal, but believed it would not be safe for him to travel to Japan.

The M&A deals have raised questions about governance at Olympus, with an internal document showing that the company replaced its auditor in 2009 after a disagreement over how to account for the acquisitions.

Olympus shares have lost more than half their value since Woodford was dismissed on October 14 and he went public with his concerns about the M&A deals. On Monday, they fell 7.5 percent to 1,034 yen.

(Reporting by Tim Kelly; Editing by Edmund Klamann)

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Asia shares fall after Greece coalition deal, Italy eyed (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Nov.07, 2011

TOKYO (NEWS.GNOM.ES) – Asian shares struggled on Monday, with investors still nervous despite the formation of a new Greek unity government intent on avoiding imminent debt default.

MSCI’s broadest index of Asia Pacific shares outside Japan was down 0.1 percent, while Japan’s Nikkei stock average (.N225) fell 0.5 percent.

U.S. stock index futures opened higher after Greek Prime Minister George Papandreou and opposition leader Antonis Samaras agreed on a new coalition government to approve the bailout plan, which requires painful fiscal reform, before elections.

Papandreou and Samaras had been scrambling to reach a deal before finance ministers of euro countries meet in Brussels later on Monday, to show that Greece is serious about taking steps needed to stave off bankruptcy.

Political wrangling in Greece had sparked panic in global financial markets on fears that it would fail to save the country from defaulting and to stop the sovereign debt crisis from spreading to other countries in the euro zone.

While Greece has for now managed to stay on track to reduce its huge debt, market jitters remain over a lack of funding to beef up the bailout fund after the euro zone failed to get any concrete pledge for new money at a G20 summit on Friday.

Investors were also shifting their attention to another debt-burdened country, Italy, putting it under pressure to swiftly restore its credibility on financial markets.

“We believe what will matter more for markets in the near term is the relatively disappointing outcome of the G20 meeting, given the lack of progress on backstop facilities,” Barclays Capital analysts said in a report.

“Any further rise in Italian yields and spreads would make us very cautious about cross-market implications for risk assets,” they said.

Italian Prime Minister Silvio Berlusconi said Italy would welcome quarterly IMF monitoring of pension and labor market reforms and privatizations he had promised to implement.

Leaders of the world’s major economies deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

The euro fell 0.3 percent to below $1.38 against the dollar while safe-haven U.S. Treasury futures trimmed earlier losses as riskier stocks wavered.

A retreat in investor appetite for riskier assets helped safe-haven government bonds, with U.S. Treasury futures down 2.5/32 at 130-05.5/32 from 130-08/32 late on Friday in New York. It was down to around 130 in early Asia on Monday.

Italy is the third largest economy in the euro zone with the biggest government bond market. With debt levels stuck at 120 percent of GDP, the country’s debt problems would pose a much bigger risk to the financial markets than Greece.

Italy’s borrowing costs have been rising sharply over the past several weeks.

Italian 10-year government bond yields hit record highs of around 6.4 percent on Friday, as the spread of Italian 10-year yields over Bunds scaled a new lifetime high.

(Editing by Mark Bendeich)

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BofA considering further stake sale in CCB: report (NEWS.GNOM.ES)

Filed Under: Insurance News
Nov.07, 2011

HONG KONG (NEWS.GNOM.ES) – Bank of America Corp is considering further reducing its stake in China Construction Bank Corp, a newspaper reported said on Monday, after the bank cut its holding by half in August.

BofA officials contacted CCB over the weekend to say that the bank was weighing selling part of its remaining CCB stake to boost its capital, the South China Morning Post reported, citing people familiar with the matter.

BofA and CCB officials declined comment.

In August, BofA sold about half its 10 percent stake in CCB raising about $8.3 billion. BofA’s remaining stake is worth about $9.2 billion based on CCB’s current market value.

CCB’s Hong Kong-listed shares were down 2.8 percent by mid-morning, while the benchmark Hang Seng Index was down 0.16 percent.

(Reporting by Denny Thomas; Additional reporting by Terril Jones; Editing by Chris Lewis)

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China FX rate within reasonable level: Commerce Minister (NEWS.GNOM.ES)

Filed Under: Insurance News
Nov.07, 2011

BEIJING (NEWS.GNOM.ES) – China’s yuan exchange rate is within a “basically reasonable level,” and it is not the root cause of the China-U.S. trade imbalance, Commerce Minister Chen Deming said in remarks published on Monday.

“If China shows an overall trade balance with other countries but only sees a relatively big trade imbalance with one particular country, that means it is not a result of an exchange rate issue,” Chen said in an interview during the G20 Cannes summit.

“Currently, the yuan exchange rate is within a basically reasonable level and our country’s trade surplus is just slightly above one percent of GDP,” he said, according to the People’s Daily, the ruling Communist Party’s mouthpiece.

Chen said China faced difficulty in achieving an overall balance of payments because international calls for yuan appreciation had triggered abnormally large inflows of speculative foreign capital.

He also said that China’s trade surplus in the first 10 months of 2011 had shrunk by 15 percent from a year-earlier period and he expected the full-year surplus to fall further.

China’s trade surplus narrowed in September for a second straight month to $14.5 billion, compared with $17.8 billion in August.

The Administration of Customs is scheduled to publish the October trade figures on Thursday.

China’s trade surplus has fallen as a share of GDP as Beijing has enhanced efforts to boost domestic demand and wean its economy from a reliance on exports.

Chen also said that the U.S. should lift restrictions on exports of high-tech products to China, which he regarded as one of the main reasons behind the big China-U.S. trade imbalance.

He also reiterated Beijing’s official stance that China would support European countries’ actions to cope with the debt crisis and may also consider expanding imports from the euro zone countries.

(Reporting by Aileen Wang and Nick Edwards; Editing by Ken Wills)

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Analysis: U.S. bailout manuals handy if Europe crisis widens (NEWS.GNOM.ES)

Filed Under: Car Insurance, Insurance News, Insurance Tips
Nov.06, 2011

WASHINGTON (NEWS.GNOM.ES) – As the European debt crisis edges closer to a break up of the euro zone, financial regulators may be reaching for emergency manuals that have gathered little dust since the last crisis.

In doing so, they will be mindful of how bitter the American public remains about the bailouts of Wall Street in 2008-09.

The Federal Reserve and the Obama administration would likely be able to draw on many of the same tools used at the height of the U.S. crisis, should Europe’s sovereign debt woes spiral into a severe credit freeze or worse.

They will have the benefit of the lessons of their recent experience and improved coordination among regulators.

But it is highly unlikely Washington would resort to a new bailout fund like the $700 billion Troubled Asset Relief Program (TARP) that was used to shore up U.S. banks, insurers and automakers three years ago.

Many Americans across the political spectrum remain angry at what they perceive as protection given to Wall Street executives while ordinary people lost their jobs, homes and savings. The popular backlash helped create the Tea Party political movement and is now fueling the “Occupy Wall Street” protests across the country.

“We are more restricted now. The public concluded that the TARP was a terrible program, even though it was a good program,” said Douglas Elliott, a former investment banker who researches financial policy at the Brookings Institution, a Washington think-tank.

“Because the public hated TARP so much, it would be very difficult to put capital into banks again, even if that were the smart thing to do,” he added.

The likelihood of a new full-blown banking crisis in the United States seems less likely given recent actions to strengthen the sector and tougher regulations, but U.S. officials pressed European leaders to erect a strong quarantine around euro zone banks.

U.S. regulators have said American banks have minimal direct exposure to European sovereign debt, although the collapse of Wall Street brokerage MF Global serves as a reminder that crises always expose hidden problems.

Direct exposure is not the main concern. U.S. financial institutions have significant financial ties to European banks, particularly those in France, Germany and Italy.

If the euro zone’s debt woes spur a banking crisis and a deep recession in Europe, the United States would feel some of the pain.

FED TO THE RESCUE?

While a new U.S. bank bailout fund may be too hard to swallow politically, the Federal Reserve could almost certainly widen its safety net.

The Fed would fall back on its role as lender of last resort, offering liquidity against good-quality collateral to ease bank funding pressures. It has already opened swap lines with foreign central banks, providing U.S. dollar liquidity internationally to prevent a dollar funding squeeze.

During the financial crisis of 2007-2009, the Fed invoked emergency powers to take an array of unorthodox steps. They included standing behind the fire sale of Bear Stearns to JPMorgan Chase, and other programs ensured financial firms were always be able to obtain short-term funding.

The Dodd-Frank regulatory overhaul enacted last year with a goal of making a future crisis less likely has restricted the Fed’s emergency powers.

It must now obtain U.S. Treasury approval before putting special measures into motion, and it can no longer assist an individual company. However, there is little doubt the Treasury would sign off on Fed actions if Europe’s crisis washed up on U.S. shores in a menacing fashion.

The Federal Deposit Insurance Corp’s temporary loan guarantee program, which put the government behind bank-to-bank lending and calmed fears of counterparty risk, could also be useful, analysts said.

FSOC SEEN BOOSTING SCRUTINY

One edge authorities would have is institutional. Congress created a super-regulatory agency, the Financial Stability Oversight Council (FSOC), to sniff out potential risks to the broader financial system.

Treasury Secretary Timothy Geithner chairs the council, which has authority to brand large firms as systemically important, requiring them to increase capital holdings.

The FSOC could carefully parse individual firms’ bets on European banks and euro area sovereign debt to identify any concentrations that could cause dominoes to start toppling.

“If I’m Geithner, when I get back from (the Group of 20 summit in) Cannes, I’m calling the regulators, and I’m telling them, ‘Let’s get a serious handle on what the exposure is,’” said Terry Haines, an analyst for the Potomac Research Group.

While memories of the recent bank bailouts are still fresh, and with a U.S. general election looming a year from now, any rescue measures are sure to draw criticism. However, if the financial system begins to exhibit the same strains as at the height of the previous crisis, the public could become more accepting of attempts to keep the financial storm at bay.

“It’s true that the public has little appetite for more intervention, but if financial markets are melting down, the authorities will have little other choice but to act,” said New York University economics professor Mark Gertler.

(Reporting by Mark Felsenthal, Glenn Somerville and David Lawder; Editing by Dan Grebler)

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