Roubini Puts The Cloak & Dagger Away
NEW YORK (Reuters) – The United States may need a second fiscal stimulus worth $200-250 billion around the end of the year, but the worst of the economic and the financial crisis is already behind us, leading economist Nouriel Roubini of RGE Global Monitor said on Thursday.
Roubini, one of the few economists who foretold much of the current financial turmoil, said a second stimulus would be necessary to boost a deteriorating labor market.
The stimulus “can not be too small, but it can not be too large,” Roubini said, or financial markets will become too worried about the sustainability of the U.S. debt
Foreclosures Rise 15% For the First Half of ’09
Total foreclosures were up 15% through the first half of 2009 according to RealtyTrac. The number is getting all kinds of attention today, though anyone who’s been paying attention knows this year is much worse than last year, in terms of sheer numbers.
What’s more significant is the June number, which confirms that things are still getting worse right now:
Foreclosure filings were reported on 336,173 U.S. properties in June, the fourth straight monthly total exceeding 300,000 and helping to boost the second quarter total to the highest quarterly total since RealtyTrac began issuing its report in the first quarter of 2005. Foreclosure filings were reported on 889,829 U.S. properties in the second quarter, an increase of nearly 11 percent from the previous quarter and a 20 percent increase from the second quarter of 2008.
“In spite of the industry-wide moratorium earlier this year, along with local, state and national legislative action and increased levels of loan modification activity, foreclosure activity continues to increase to record levels,” noted James J. Saccacio, chief executive officer of RealtyTrac. “Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes’ are now worth represent a potentially significant future risk. Stemming the tide of foreclosures is a critical component to stabilizing the housing market, so it is imperative that the lending industry and the government work in tandem to find new approaches to address this issue.”
Drilling down, all the states that have been so weak, continue to lead the pack in terms of carnage:
More than 6 percent of Nevada housing units (one in 16) received at least one foreclosure filing in the first half of 2009, giving it the nation’s highest foreclosure rate during the six-month period. A total of 68,708 Nevada properties received a foreclosure filing from January to June, an increase of 23 percent from the previous six months and an increase of 61 percent from the first half of 2008.
Arizona registered the nation’s second highest state foreclosure rate in the first half of 2009, with 3.37 percent of its housing units (one in 30) receiving at least one foreclosure filing, and Florida registered the nation’s third highest state foreclosure rate, with 3.08 percent of its housing units (one in 33) receiving at least one foreclosure filing.
Other states with foreclosure rates ranking among the nation’s 10 highest were California (2.94 percent), Utah (1.46 percent), Georgia (1.42 percent), Michigan (1.34 percent), Illinois (1.31 percent), Idaho (1.26 percent) and Colorado (1.25 percent).
New York is still only 36th. Not bad!
By DAN FITZPATRICK
Bank of America Corp. is operating under a secret regulatory sanction that requires it to overhaul its board and address perceived problems with risk and liquidity management, according to people familiar with the situation.
Rarely disclosed publicly, the so-called memorandum of understanding gives banks a chance to work out their problems without the glare of outside attention. Financial institutions that fail to address deficiencies can be slapped with harsher penalties that include a publicly announced cease-and-desist order.
The order was imposed in early May, shortly after shareholders of the Charlotte, N.C., bank stripped Chief Executive Kenneth Lewis of his duties as chairman. Bank of America faces a series of deadlines, some at the end of July and others in August, these people said.
The company might get more time to complete some of the steps it is taking, such as reconstituting its board with a majority of new directors. Since early June, Bank of America has named four directors to its 16-person board, leaving the bank considerably short of the government’s requirement.
The MOU is the most serious procedural action taken against Bank of America by federal regulators since the financial crisis erupted…..
CA Budget Talks End Up Going Nowhere
Jim Christie
SACRAMENTO, California (Reuters) – California Governor Arnold Schwarzenegger and lawmakers failed on Wednesday night to agree to balance the state’s budget by closing a $26.3 billion deficit, but officials said talks would continue.
The budget talks, which have lasted weeks, have stalled over a part of the governor’s plan to suspend a law on school funding, Karen Bass, the speaker of the state assembly, and California Senate President Darrell Steinberg told reporters.
The legislature’s two top Democrats said budget talks would resume on Thursday.
Schwarzenegger, a Republican, had said earlier on Wednesday he was hopeful a deal to resolve the lengthy budget crisis was near and might be reached by the end of the day.
“There’s no nastiness in the discussions, no blowups,” he said at a press conference. “There’s none of that, so I think we have a good shot of getting the budget done today.”
The state government began its fiscal year on July 1 facing a historic budget gap and a severe cash crisis.
California, which would be the world’s eighth largest economy if it were an independent nation, has issued IOUs to vendors as well as taxpayers owed refunds to save cash for servicing of state bonds and other priorities payments.
Among sticking points in negotiations are Schwarzenegger’s demands for a budget deal including changes to rules he says will prevent fraud in welfare programs.
He has also proposed paring education spending by suspending a voter-approved measure that locks in funding levels for public schools. Democrats oppose both ideas and are especially concerned about education spending cuts…..
European Stocks Rise As U.S. Futures Pair Gains
By Justin Carrigan and Daniel Hauck
July 16 (Bloomberg) — Stocks in Europe and Asia advanced and U.S. index futures pared declines as JPMorgan Chase & Co. posted results that exceeded analysts’ estimates. The yen strengthened against higher-yielding currencies after CIT Group Inc. said it probably won’t get federal aid.
Europe’s Dow Jones Stoxx 600 Index climbed for a fourth day, gaining 0.4 percent at 12:24 p.m. in London, while futures on the Standard & Poor’s 500 Index slipped 0.2 percent after earlier falling 0.7 percent. The yen rose more than 0.8 percent against the Swedish krona and the New Zealand dollar.
CIT’s distress signaled more pain for financial companies that have already reported almost $1.5 trillion in losses and credit-market writedowns since the start of 2007. Stocks rallied after China said its economy expanded 7.9 percent in the second quarter and JPMorgan posted a 36 percent increase in profit as investment-banking fees rose to a record.
JPMorgan “is a positive signal,” said Lionel Heurtin, a fund manager at Ofi Asset Management in Paris, which oversees $24 billion. “Banks are heavyweights in the indexes and the economy, so JPMorgan’s report has reassured investors.”
Treasuries pared their advance on the earnings report. Bonds had earlier climbed after New York-based CIT, which took $2.33 billion of aid in December, said yesterday that talks with regulators have broken off and “there is no appreciable likelihood of additional government support.”
Google, IBM
JPMorgan added 0.9 percent at $36.60 in pre-market New York trading. The second-largest U.S. bank said second-quarter earnings increased to $2.7 billion, or 28 cents a share. The average estimate of 14 analysts surveyed by Bloomberg was 5 cents a share, including costs to repay government bailout funds and an assessment by the Federal Deposit Insurance Corp.
The S&P 500 has surged 6.1 percent this week as companies from Goldman Sachs Group Inc. to Johnson & Johnson reported profits that beat analysts’ estimates and Intel Corp. forecast sales that exceeded projections. Google Inc. and International Business Machines Corp. will post earnings today after the U.S. market’s close.
Data on U.S. jobless claims may show the number of Americans filing for unemployment benefits fell to 553,000 last week, according to the median estimate of 41 economists surveyed by Bloomberg. That would be the lowest level since January.
Nokia Oyj, the world’s biggest maker of mobile phones, tumbled 9.7 percent after saying market share will be flat this year. Electrolux AB rallied 9.2 percent after the world’s second-largest appliance maker posted profit that beat analysts’ estimates.
China GDP
Developing-nation stocks rose, sending the MSCI Emerging Markets Index to its best three-day gain in almost two months, as China’s report on gross domestic product boosted industrial companies. The MSCI index climbed 0.7 percent.
The Dubai Financial Market General Index added 1.5 percent after the United Arab Emirates central bank said it may buy more bonds from Dubai.
Crude oil for August delivery fell 1.1 percent to $60.89 a barrel on the New York Mercantile Exchange, after surging 3.4 percent yesterday.
The New Zealand dollar dropped 0.8 percent against the dollar, the most in more than a week, after Fitch downgraded the outlook on the country’s debt rating to “negative,” citing the nation’s current account deficit.
Credit-default swaps rose for the first day this week, signaling deteriorating perceptions of credit quality, with the high-yield Markit iTraxx Crossover Index climbing 18 basis points to 732, according to JPMorgan prices.
The derivatives, which are used to hedge against losses and speculate on companies’ credit, contributed to the failures last year of Lehman Brothers Holdings Inc. and American International Group Inc. and the seizure in credit markets.
CIT Debt
The cost of protecting CIT debt from default rose as much as 2 percentage points to 36 percent, or $3.6 million, upfront and $500,000 dollars a year, according to CMA DataVision prices for credit-default swaps. A contract insures $10 million of debt for five years.
A bankruptcy filing by CIT would be the first by a company that took money from the Troubled Asset Relief Program, the Treasury’s $700 billion fund designed to keep lenders solvent by investing the public’s money in the financial industry.
CIT’s collapse would be the biggest bank failure measured by assets since regulators seized Washington Mutual Inc. in September. CIT reported $3 billion in deposits at the end of the first quarter.
CIT Says Government Bailout is Unlikely
By Linda Shen
July 16 (Bloomberg) — CIT Group Inc., the 101-year-old commercial lender running short of cash, said it probably won’t receive a federal bailout, fueling speculation the company is on the verge of bankruptcy.
Talks with regulators have broken off and “there is no appreciable likelihood of additional government support,” the New York-based firm said yesterday in a statement. CIT, once the biggest independent commercial lender, may seek court protection if no U.S. aid emerges, Standard & Poor’s said this week. The company said it is “evaluating alternatives.”
CIT Chief Executive Officer Jeffrey Peek failed to convince regulators that fallout from a collapse would threaten the rest of the financial system. Officials at the Treasury, Federal Reserve and Federal Deposit Insurance Corp. have resisted putting more taxpayer funds at risk, on top of the $2.33 billion granted to CIT in December, to keep the lender afloat.
“Maybe they can put together a last-minute deal and try to sell themselves,” said Adam Steer, an analyst with CreditSights Inc. “The most viable alternative once the government decides to not step in is a trip into bankruptcy.”
Messages to CIT spokesman Curt Ritter weren’t immediately returned. Andrew Gray at the FDIC declined to comment.
“Even during periods of financial stress, we believe that there is a very high threshold for exceptional government assistance to individual companies,” the Treasury said in a statement.
First for TARP?
A bankruptcy filing may be the first by a company that took money from the Troubled Asset Relief Program, the Treasury’s $700 billion fund designed to keep lenders solvent by investing the public’s money in the financial industry.
“We don’t have any prior experience with a bankruptcy filing by a TARP recipient,” said Kathleen Shanley, a Chicago- based bond analyst for Gimme Credit LLC. “It is possible the U.S. TARP investment could be wiped out.”
The lender gained 1.9 percent to $1.64 yesterday before trading was halted by the New York Stock Exchange. The stock, which dropped 64 percent this year, sold for more than $60 in February 2007. Common shareholders typically get little or nothing in a bankruptcy unless creditors are paid first. CIT employed about 4,800 people at the end of March.
CIT has battled cash shortages and faces $1 billion of bonds maturing next month. Liquidity tightened over the weekend after a “run” by customers who used up all their credit lines after hearing CIT might face bankruptcy, Steer said.
Scraping for Capital
The FDIC, led by Chairman Sheila Bair, is concerned that a U.S.-sponsored rescue, such as backing CIT’s debt, would put taxpayer money at risk because the company’s credit quality is worsening, people familiar with the regulator’s thinking said last week. The agency’s main mission is protecting depositors, rather than bank holding companies and their investors…..
C Enters Into Memeorandom of Understanding With The FDIC Over Not Going Insolvent
By DAVID ENRICH
Citigroup Inc. recently has been negotiating with the Federal Deposit Insurance Corp. about entering into a so-called memorandum of understanding with that agency, according to people familiar with the matter. A memorandum of understanding gives banks a chance to work out their problems without the glare of outside attention.
Citigroup has been operating since last year under a similar agreement with the Office of the Comptroller of the Currency, these people say.
The people familiar with the matter say the pact with the FDIC, which relates to the company’s plans to shed assets and improve its governance, among other things, essentially reinforces a strategy already under way at the financial giant.
But some Citigroup officials are hopeful that the agreement, which was negotiated largely by Chairman Richard Parsons, will help thaw the company’s icy relationship with the FDIC.
Spokesmen for Citigroup and the FDIC declined to comment.
Gaming Companies May Get A Lift From States Deficits
BANGALORE (Reuters) – Slot-machine makers such as International Game Technology (IGT.N), Bally Technologies Inc (BYI.N) and WMS Industries (WMS.N) may see a significant boost to their results over the next two years as two U.S. states bet on gaming to help bridge their budget deficits.
Ohio and Illinois, facing billion-dollar-plus budget deficits and constrained by high unemployment levels, have recently passed new revenue-generating measures such as allowing slot machines in bars and race tracks.
The combined legislative initiatives in the two states could add about 64,500 new slot machines to the gaming market over the next two to three years, Todd Eilers of Roth Capital Partners wrote in a note.
He estimates there are around 940,000 slot machines currently in the United States.
“These (measures) are ways for states to generate additional tax revenue without raising taxes,” Eilers said by phone.
Sterne, Agee & Leach analyst David Bain said, “Different state legislatures are coming to the realization that they just need to find sources of cash, and gaming has worked out as an indirect tax which can be used to fill budgetary coffers.”
Last week, Ohio Governor Ted Strickland signed a bill that will see the introduction of 17,500 new video lottery terminals at seven state race tracks.
He has said the initiative would raise about $933 million over the course of Ohio’s next two budget years.
Ohio, which faces a $3.2 billion budget gap, may also hold a voter referendum in November to decide on allowing four new casinos in the state.
Roth Capital’s Eilers expects about 10,000 new slot machines to be added to the Ohio market over the next couple of years if these casinos come up.
Illinois, which is facing a $9.2 billion deficit for fiscal 2010, expects new gaming initiatives to raise $300 million a year once fully implemented.
On Monday, Illinois Governor Pat Quinn signed into law legislation allowing licensed bars in the state to operate up to five video-gaming devices each.
If all bars were to get five licenses each, the theoretical market opportunity would be about 75,000 machines, Eilers said.
“But most people we talked to suggested that 35,000 is a more realistic figure,” he said.
Bain estimates the bill to add about 20,000 to 25,000 machines to the Illinois market over the next couple of years. Continued…
Fed Sees An End To the Downturn
The US Federal Reserve believes that the recession will end “before long”, but predicts that unemployment will remain at high levels for several years to come.
The federal open market committee raised its forecasts for unemployment, according to minutes from their last meeting three weeks ago, and now expects it to reach between 9.8 and 10.1 per cent in the last quarter of this year. It envisages it will remain at about 9.6 per cent next year and 8.6 per cent in 2011.
“Labour market conditions were of particular concern to meeting participants,” the minutes said, adding that “most participants anticipated that the employment situation was likely to be downbeat for some time”.
But the prospects for the wider economy were brightening, they said. The committee’s members agreed that “the economic contraction was slowing” and predicted that gross domestic product would drop by between 1.5 per cent and 1 per cent this year, more optimistic than their last forecast in April of a 2 to 1.3 per cent contraction.
For next year, they raised growth forecasts to between 2.1 per cent and 3.3 per cent, from a 2 to 3 per cent range. They increased projections for inflation, but they all expect it to remain below 2 per cent through this year and the next.
“The unemployment forecasts . . . are an interesting signal from the Fed’s point of view,” said John Silvia, chief US economist at Wells Fargo. “[It sees] the economy picking up and having a recovery, but with persistent unemployment. It’s not a jobless recovery, but it sure is below average job growth in this sort of environment.”….
A market is set to emerge this week in Californian IOUs as the persistence of the state’s budget crisis is making it increasingly difficult to exchange these emergency instruments for cash.
California is printing $3bn of IOUs for businesses, individual taxpayers and local counties in lieu of cash. It has sent more than $450m of them to court-appointed attorneys, county-run health schemes and taxpayers awaiting rebates, among others.
IOUs will continue to be issued until Arnold Schwarzenegger, California governor, and the state legislature agree a deal to close a $26bn budget deficit. The state began issuing the IOUs early this month.
SecondMarket, a New York firm that trades illiquid assets, launched a platform for trading the IOUs on Wednesday. A decision last week by large banks, such as Wells Fargo and Bank of America, to stop accepting the IOUs has paved the way for some initial trading, although volumes are expected to be very thin.
Citigroup, Bank of the West, credit unions and some community banks still are accepting the IOUs for their customers.
“With several major banks no longer redeeming Californian IOUs, and with some citizens, businesses and municipalities needing liquidity, we felt it was important to launch this market promptly,” said Barry Silbert, SecondMarket chief executive.
Buyers and sellers can list their interest, and SecondMarket expects bids to emerge later in the week. It first needs to verify the listed IOUs with the state. Hedge funds and municipal bond investors are among the interested buyers.
Trading in the IOUs is controversial and drew the eye of regulators after offers from opportunistic individuals popped up on websites such as Craigslist…..
How Did GS Hedge Its Bets With CIT ?
Goldman Sachs has a $3 billion line of credit out to troubled small-business lender CIT Group. News will be coming out later this afternoon about the fate of CIT, whose shares have been halted on the NYSE. But whether or not CIT is bailed out, Goldman probably won’t be hurt very much.
We’ve finally uncovered the answer to the mystery of how Goldman has limited its exposure to CIT. And what we’ve found indicates that Goldman really would have very little exposure to CIT’s failure. What’s more, this risk hasn’t been passed along to others in a way that might create broad ripples if counter-parties on hedges had to pay out following a CIT collapse.
That’s because Goldman’s lending facility is basically a fully-collateralized repo facility. Any money drawn down by CIT is collateralized with physical collateral. That is, not securities of unknown value but things like real estate and aircraft. In addition, Goldman has taken out a small amount of credit default swaps intended to cover any decrease in the value of the collateral.
This is great news, and evidence that the financial system is actually working quite well. Rather than a series of domino hedges that all may topple, Goldman has taken a very conservative approach to limiting its risk from CIT. It also means that if CIT is allowed to fail, we don’t have to worry about some counter-party collapsing because it had sold too much CDS on CIT.
On a day when the S&P is ripping almost 3% higher on the back of Intel’s results it’s curious to note that Yum Brands is slipping 4% on disappointing earnings. Intel saw phenomenal strength in Asia and sees continued strength going forward. But Yum Brands disappointed despite a massive move into Asia over the last few years. Meanwhile, earnings from Dell two days ago were largely ignored even though the PC maker sees no better than low single digit growth in the PC world in the coming 5 years.
All of this has to make you wonder if this isn’t just a case of the analysts being too bearish in one case and too bullish in another case? Is Intel seeing real strength or were the estimates simply slashed too far? Is Dell seeing real weakness or were the analysts overly optimistic? And is China seeing a continued rebound or were the analysts simply too optimistic about Yum’s earnings? More importantly, does the mixed results of these three firms justify a 5% move in the S&P 500? Thoughts and comments are appreciated.
Mobius Speaks of A New Old Crisis
By Bloomberg News
July 15 (Bloomberg) — A new financial crisis will develop from the failure to effectively regulate derivatives and the extra global liquidity from stimulus spending, Templeton Asset Management Ltd.’s Mark Mobius said.
“Political pressure from investment banks and all the people that make money in derivatives” will prevent adequate regulation, said Mobius, who oversees $25 billion as executive chairman of Templeton in Singapore. “Definitely we’re going to have another crisis coming down,” he said in a phone interview from Istanbul on July 13.
Derivatives contributed to almost $1.5 trillion in writedowns and losses at the world’s biggest banks, brokers and insurers since the start of 2007, according to data compiled by Bloomberg. Global share markets lost almost half their value last year, shedding $28.7 trillion as investors became risk averse amid a global recession.
The U.S. Justice Department is investigating the market for credit-default swaps, Markit Group Ltd., the data provider majority-owned by Wall Street’s largest banks, said July 13.
Mobius didn’t explain what he thought was needed for effective regulation of derivatives, which are contracts used to hedge against changes in stocks, bonds, currencies, commodities, interest rates and weather. The Bank for International Settlements estimates outstanding derivatives total $592 trillion, about 10 times global gross domestic product.
Looming Crisis
“Banks make so much money with these things that they don’t want transparency because the spreads are so generous when there’s no transparency,” he said.
A “very bad” crisis may emerge within five to seven years as stimulus money adds to financial volatility, Mobius said. Governments have pledged about $2 trillion in stimulus spending.
The Justice Department’s antitrust division sent civil investigative notices this month to banks that own London-based Markit to determine if they have unfair access to price information, according to three people familiar with the matter.
Treasury Secretary Timothy Geithner last week urged Congress to rein in the derivatives market with new U.S. laws that are “difficult to evade.” He said strong capital requirements were the key.
Geithner repeated President Barack Obama’s call to force “standardized” contracts onto exchanges or regulated trading platforms, and regulate all dealers.
Credit Freeze
The plan to regulate the derivatives market is part of a wider overhaul of financial industry rules meant to prevent any possibility of a repeat of last year, when the collapse of Lehman Brothers Holdings Inc. and American International Group Inc. froze credit markets and worsened the global recession.
Cody Quits Weed & Gets Serious
$$$ Cody Willard: “Hey, all you idiot thieving liars at Goldman Sachs – maybe you paid back the $10 billion of welfare money you begged for from the TARP bailouts…but before you pay out a single dollar in bonuses to anybody at your welfare-subsidized institution, how about you pay my sister back the $12 billion in welfare that she sent you through AIG?
And hey, SEC, FINRA and the rest of you worthless regulators who pretend you’re protecting us from frauds like Madoff’s and Goldman Sachs….how about prosecuting Lloyd Blankfein for fraud or gross negligence? I mean, Blankfein signed off on documents that say his firm’s in great financial shape and fully meeting all their capital ratios….when in fact, they had so much junk fraudulently overvalued on their balance sheet that they were actually insolvent and so Blankfein had to go beg for welfare.” [MarketWatch]
$$$ Kanjorski Takes Aim at Pay-for-Ratings System [Dealbook]
$$$ French workers threaten to blow up plant [FT]
$$$ Darin DeMizio, Ex-Morgan Stanley Broker, Gets 38 Months for Kickbacks [Bloomberg]
$$$ The World’s Worst Doorman And Neighbors Watch, Ignore Brawl, At 63 Wall Street [The Awl]
$$$ Apollo to Raise $600 Million for Commercial REIT Fund [Bloomberg]
$$$ “U.S. officials are in advanced talks to aid CIT. The discussions are fluid. It remains unclear if a final deal can be brokered and, if so, how expansive it might be.” [WSJ]
American Express, the global financial services company, has effectively cut the pay of its 6,000 UK staff by stopping payments to its stakeholder pension scheme.
It is the largest company to take such action and pensions experts fear that the decision could trigger a series of copycat announcements.
American Express had been paying between 3 per cent and 9 per cent of salary into its employees’ stakeholder pensions.
Employees had been contributing a minimum of 1 per cent and a maximum of more than 6 per cent.
The cut came into force on July 1 and is part of a cost-saving plan by the American credit card company.
Laith Khalaf, a pensions analyst with Hargreaves Lansdown, the independent financial adviser, said: “This is effectively a pay cut for all the employees in the pension scheme. There is a real possibility that, in the current cash-strapped environment, other companies may be tempted to follow suit.”
Pensions are a form of deferred pay, so any reduction in the contributions a company makes towards an employee’s pension is, in effect, a pay cut.
Mr Khalaf said: “This measure will leave a big hole in many American Express’s employees’ pension pots, especially in cases where they were receiving the maximum 9 per cent contribution from their employer. Someone earning £40,000 a year will lose an annual pension contribution of £3,600.”
American Express said that it would stop payments for a maximum of 18 months to January 1, 2011.
The Government has pledged legislation that is due in 2012 to make it illegal for companies to stop paying into their pension funds.
Staff at the American Express call centre in Brighton were unwilling to talk about the company’s halting of pension contributions.
The TUC said: “This is nothing more or less than a pay cut imposed on staff. This is what happens in non-union workplaces.”
American Express said: “This is just one of a series of cost-cutting measures.” The announcement is the latest in a series of blows to members company pension schemes in the UK.
In April the British subsidiary of Aon Corporation became the first UK-based company since the credit crunch to cut employer contributions to its money purchase scheme.
In the past year a number of well-known names have said that they were closing their final-salary schemes to new or existing members, including BP, Barclays and Wm Morrison.
Stakeholder pensions are low-cost pensions that can be either personal or company schemes.
Companies with more than five members of staff are required to offer them, although at present they are not obliged to make any contribution themselves.
However, the new laws taking effect from 2012 will require companies to make a minimum contribution of 3 per cent into an employee’s company pension.
The move by American Express has led to speculation that the Department for Work and Pensions may bring forward the date when this minimum contribution becomes compulsory.
The DWP said yesterday that it had no plans to do so.
American Express was the fastest-growing credit card company during the credit boom of 2003-07, but it has been hurt by rising delinquencies in the past two years.
Its net income for the first quarter of this year fell by 56 per cent and the amount set aside for credit losses increased by 49 per cent.
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