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Thousands facing negative equity
More than 23,200 people who took out 100% mortgages in the year to 31 March could face negative equity, according to figures obtained by the BBC.
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Falling house prices mean the amount borrowed could be greater than the value of their properties.The data from the Council of Mortgage Lenders comes as figures show the housing market is slowing down further.Separate housing figures suggest the number of transactions per estate agent has hit a 30-year low.These figures from the Royal Institution of Chartered Surveyors come as banks are imposing stricter requirements on borrowers, in the wake of the credit crisis.
Turned away
If a house loses its value it is not necessarily a problem unless the owner has to move, or cannot afford to pay the mortgage.In a rising market banks are prepared to lend 100% mortgages as there is little risk of them not getting their money back.But as prices have been falling, the risks have increased and lenders are turning borrowers away if they don't have a deposit.There is a warning that the situation may deteriorate further.
"House prices are down 6% in just the last five months, and the worst of the credit crisis - all that still lies ahead," said Michael Saunders, head economist at Citigroup.He had predicted that house prices would fall by 15% in 2008 and 2009 but now he says that drop could be even greater.
Danger of US downturn 'has faded'
The US economy may have avoided a major decline, US Federal Reserve Chairman Ben Bernanke has said.
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Mr Bernanke said the risk of a substantial downturn had "diminished over the past month or so".
Playing down recent unemployment rises, he said a series of interest rate reductions combined with tax cuts was helping the US offset its difficulties.
Earlier, Democratic presidential candidate Barack Obama attacked his rival John McCain's economic policies.
In his first speech since Hillary Clinton left the presidential race, Mr Obama accused Mr McCain, the Republican party's candidate, of "a full-throated endorsement" of President George W Bush's economic policies.
The McCain camp responded by saying that measures Mr Obama was proposing would weaken the US economy.
Inflation fears
Mr Bernanke gave his assessment of how the US economy was faring at a bankers' conference in Chatham, Massachusetts.He said that "the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so".He added that despite a recent rise in unemployment, which last month saw its biggest jump in 20 years, a series of reductions in interests rates in the last nine months combined with tax cuts had helped to offset the risks threatening the economy.Mr Bernanke did say, however, that rising energy prices - which saw the cost of oil hit a record high on Friday - risked pushing up inflation.
"The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations," he said.
If consumers and businesses believe the record oil prices will continue to rise, they could change their spending habits to make inflation a self-fulfilling prophecy, says the BBC's Jane O'Brien in Washington.
That, and a weak dollar, our correspondent added, could force the Fed to raise rates later this year or next, though Mr Bernanke said that the Fed would be robust in dealing with this issue:
"The Federal Open Market Committee will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilising for growth as well as for inflation," Mr Bernanke said.Our correspondent says that there has been progress in repairing the credit markets that sparked the US housing slump, the Fed has made swinging interest rate cuts and the government is spending $168bn on top of tax rebates to help stimulate recovery.But last week's jump in unemployment rates and record fuel prices rocked already jittery markets, our correspondent says, and for the average American, Mr Bernanke's soothing words may seem hard to believe.
'Different vision'
Polls indicate that the economy has surpassed the war in Iraq as the biggest concern for American voters. Mr Obama hopes that focusing on the economy will persuade undecided voters to support him, correspondents say.
Speaking in Raleigh, North Carolina, Mr Obama launched his Change That Works for You tour - a nationwide schedule of speeches focusing on the economy.
"When it comes to the economy, John McCain and I have a fundamentally different vision of where to take the country, because for all of his talk about independence, the centrepiece of John McCain's economic plan amounts to a full-throated endorsement of George Bush's policies.
"I have a different vision for the future. Instead of spending $12bn a month rebuilding Iraq, I think it's time we invested in our roads and schools and bridges."
Mr Obama pledged "an immediate $50bn" to those hardest hit by the US "downturn".
He also accused Mr McCain of doing nothing to help 1.5m people facing foreclosures across America, "even as he [Mr McCain] supported spending billions to bail out Wall Street".
He promised to introduce a windfall tax on the profits of American oil companies.The McCain camp hit back by portraying Mr Obama as a tax-and-spend liberal.
"While hardworking families are hurting and employers are vulnerable, Barack Obama has promised higher income taxes, social security taxes, capital gains taxes, dividend taxes, and tax hikes on job creating businesses," campaign spokesman Tucker Bounds said.
On Monday, Mr McCain was holding fundraising events in Virginia and in the capital, Washington.
Spain holds lottery scam suspects
Spanish police have arrested 87 Nigerians suspected of defrauding at least 1,500 people in a postal and internet lottery scam.
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The arrests were made in and around Madrid in an operation co-ordinated with the FBI.Police said millions of euros were taken from the victims, most of them in the United States and European Union.Those targeted were wrongly told they had won a lottery and asked to send a payment before prize money could sent.Thousands of letters and e-mails, most in ungrammatical English, were sent out to prospective victims every day, police said.The faked documents asked them to make an initial payment of 900 euros ($1,400, £720) in taxes or administrative costs.The scam is estimated to have netted around 20 million euros, but the actual sum could be many times that, say police.
Anglican bishop
Police said the number of those defrauded could run into many thousands, as most of them probably failed to report the crime out of embarrassment.Police estimate that only one in 1,000 recipients of the letters needed to fall for the fraud for it to make a profit. An Anglican bishop was among those duped, according to Spanish officials.The operation to track down the gang began in May 2007 when a huge number of identical letters destined for addresses in the US was discovered at Madrid's Barajas airport.Police confiscated hundreds of computers, mobile phones and 60,000 letters in a raid on more than 30 homes and businesses.Law enforcement officers also seized a suitcase full of fake $100 notes which they say was used to convince some victims who came to Spain in person to collect their "prize money".
Oil shares drag down Wall Street
Wall Street shares fell on Wednesday as weakening commodity prices hit some of the biggest US companies.
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Exxon Mobil fell 4.0% and Chevron lost 4.6% after crude oil fell by more than $6 a barrel on worries about the outlook for the US economy.But bank shares were higher, lifted by better-than-expected results from investment bank Morgan Stanley.The Dow Jones closed down 2.4% or 294.8 points at 12,097.9 while the Nasdaq fell 2.6% to 2,210.1.London's FTSE 100 index was down 1%, Frankfurt's Dax was down 0.3% and in Paris the Cac 40 was down 0.5%.
Additional funds
Despite Morgan reporting a 42% drop in first-quarter profits, analysts had expected much worse from the bank. Analysts said US investor confidence was further lifted by US Treasury Secretary Henry Paulson's announcement that changes to government-backed mortgage providers Fannie Mae and Freddie Mac would release an additional $200bn (£100bn) for the financing of home loans.
US stocks were also helped by Tuesday's latest interest rate cut from the Federal Reserve.Yet despite the rises, analysts said market turbulence could continue for some time.The UK stocks news was dominated by sharp losses to banking stocks, led by HBOS.The declines led to the UK market watchdog, the Financial Services Authority, announcing that it was looking into whether rumours had been deliberately spread to undermine bank shares.
Officials at the Bank of England denied that any UK banks were in trouble.Concerns about the financial strength of banks were strengthened last week when the fourth-largest corporate lender in the US, Bear Stearns, needed emergency funds before being bought by rival JP Morgan Chase.
Botswana gems to sparkle at home
A new diamond-processing plant, The Diamond Trading Company, has opened in Botswana, creating about 3,000 jobs.
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Until now, diamonds from Botswana have been sent abroad to be polished, marketed and sold. The $83m plant, jointly owned by the government and diamond giant De Beers, will become a processing centre for diamonds from De Beers mines worldwide. Botswana is the world's largest producer of diamonds and one of Africa's most stable countries. The presence of the new advanced diamond sorting facility in the capital, Gaborone, is expected to create further jobs in the finance, security and telecommunications sectors.
Vast pit
Diamonds are a finite resource, but they still make up 80% of Botswana's foreign earnings. For quarter of a century, diamonds have been dug from Jwaneng Mine - the richest diamond mine in the world.
Jwaneng means "the place of small stones". Its vast open pit yields the bedrock of Botswana's economy, and looks to do so for decades to come, guaranteeing continued growth.The mine's general manager, Balisi Bonyongo, argues that development in Botswana "really took off" when Jwaneng Mine was discovered, and when it started operating in 1982. "We have seen wealth creation in this country," he said.
"We have seen a lot of opportunities being created, for employment, for infrastructure, hospitals, health services - on the back of the discovery of this great operation - Jwaneng Mine." Previously, mined diamonds were exported straight to London to be processed. But with the rough gems now being sorted at the Diamond Trading Company, the production process will be centred in Botswana. That will eventually benefit thousands of local workers.
Last Updated: Wednesday, 19 March 2008, 04:29 GMT
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Botswana gems to sparkle at home
Peter Biles
BBC News, Gaborone
Diamonds
Diamonds account for 80% of Botswana's foreign earnings
A new diamond-processing plant, The Diamond Trading Company, has opened in Botswana, creating about 3,000 jobs.
Until now, diamonds from Botswana have been sent abroad to be polished, marketed and sold.
The $83m plant, jointly owned by the government and diamond giant De Beers, will become a processing centre for diamonds from De Beers mines worldwide.
Botswana is the world's largest producer of diamonds and one of Africa's most stable countries.
The presence of the new advanced diamond sorting facility in the capital, Gaborone, is expected to create further jobs in the finance, security and telecommunications sectors.
Vast pit
Diamonds are a finite resource, but they still make up 80% of Botswana's foreign earnings.
Balisi Bonyongo, general manager of Jwaneng mine
We have seen a lot of opportunities being created... on the back of the discovery of this great operation
Balisi Bonyongo
General manager, Jwaneng mine
For quarter of a century, diamonds have been dug from Jwaneng Mine - the richest diamond mine in the world.
Jwaneng means "the place of small stones".
Its vast open pit yields the bedrock of Botswana's economy, and looks to do so for decades to come, guaranteeing continued growth.
The mine's general manager, Balisi Bonyongo, argues that development in Botswana "really took off" when Jwaneng Mine was discovered, and when it started operating in 1982.
"We have seen wealth creation in this country," he said.
"We have seen a lot of opportunities being created, for employment, for infrastructure, hospitals, health services - on the back of the discovery of this great operation - Jwaneng Mine." Previously, mined diamonds were exported straight to London to be processed.But with the rough gems now being sorted at the Diamond Trading Company, the production process will be centred in Botswana.That will eventually benefit thousands of local workers.
Long-term investment
De Beers, which has been operating in Botswana for more half a century, says it makes economic sense to move the technology and skills to the country. Botswana's reputation as a stable country is attractive to investors, argue the firm's management.
"Mining is a long term investment," said Sheila Khama, Chief Executive Officer of De Beers Botswana."And one of the pre-requisites to investing in mining, is political and economic stability... of the country in which the investor puts their money."Botswana's successful beneficiation ensures Botswana's economic stability."Ms Khama accepts that concerns remain about the finite nature of the diamond industry."We know diamonds are a finite resource and over 50 years, we spent $93m in Botswana searching for diamonds," she said.
"We need to find other deposits."
Stiff competition
Delphinah Kehathilwe, a local diamond sorter, knew nothing about diamonds before she underwent six months of training. "They say diamonds are a lady's friend, but before I didn't see much in a diamond. But touching them on a daily basis, I began to like them," she said. Cutting and polishing facilities are also being moved to Africa, with 16 different manufacturers agreeing to start operations in the country. While this diversification will face stiff competition from the traditional centres in China and India, the developments are important ones for Botswana.The transfer of skills from abroad should put the country on the map as never before, and change the face of its diamond industry.
Federal Reserve slashes US rates
The Federal Reserve has cut US interest rates sharply in an attempt to restore confidence to nervous financial markets and boost the ailing economy.
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The central bank lowered rates to 2.25% from 3%, but the cut was smaller than financial markets had expected.Many economists believe the US economy is already in a recession.The Fed has taken strong action this week to avert a financial panic after investment bank Bear Stearns was forced into a fire sale to avoid collapse.US Treasury Secretary Henry Paulson admitted earlier on Tuesday that the economy was facing a "sharp decline" at the moment, but hoped for a recovery later in the year.
Aggressive action
The Fed has now lowered rates six times since mid-September, with the economy reeling from the credit crisis that was triggered by a slump in the US housing market."Today's policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity," the Federal Reserve said.
US shares initially trimmed gains after the Fed's announcement but the benchmark Dow Jones industrial average later resumed its ascent.Wall Street rallied earlier after two leading investment banks, Goldman Sachs and Lehman Brothers, reported smaller falls in profits than analysts had been expecting.The dollar, which has been hitting record lows against the euro, gained ground.
Recession fears
The Fed is hoping its actions will stave off both a recession in the wider economy and go some way to ease unprecedented conditions in the financial system."The Fed's action is yet another forceful move in its attempts to alleviate the liquidity crunch and to shore up a rapidly weakening economy," said Arun Raha, senior economist at Swiss Re.As the economy worsens, banks and financial institutions are calling in loans and becoming increasingly reluctant to lend money, particularly to borrowers considered to be high risk.Bear Stearns got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis."There can be no health in the economy until the banking system is working properly," said K Daniel Libby at Sands Brother Select Access Fund.
Inflation concerns
The Fed expressed some concern about inflation in the statement that accompanied the interest decision. Analysts said this could signal that an end to the current cycle of rate cut cycle was fast approaching.
"The economy is in, or close to, a recession, but increasing oil prices have kept inflationary pressures from abating, complicating the Fed's task," said Mr Raha.US producer prices, released on Tuesday, rose by 0.3% in February compared to the month before, but a key measure of producer core inflation rose by 0.5%, the fastest pace in well over a year.There were also signs of opposition inside the Fed to the aggressive moves.Two members of the central bank's rate-setting Federal Open Market Committee voted for a smaller cut in rates."By cutting 75 points rather than 100 points, the Fed sought to restore leadership over the market and indicate that its actions would not be entirely dictated by market expectations," the Bank of New York said.
JPMorgan to acquire Bear Stearns
JPMorgan Chase has said it is to buy Wall Street's fifth-largest investment bank, Bear Stearns, for $2 a share - a fraction of its previous value.
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The deal values the bank, which as been at the centre of the US mortgage debt crisis, at about $236m (£116m).The news comes as the Federal Reserve cut its lending rate to banks to 3.25% from 3.50%, and created a new lending facility for big investment banks.Japan's Nikkei stock index dropped 4.2% in morning trading, following the news.Under the deal, which emerged on Sunday, the Federal Reserve will fund up to $30 billion of Bear Stearns's less liquid assets.The ailing bank's shares fell 46% to $30 (£15) after emergency funding for it was announced on Friday.
Withdrawn funds
Friday's news of emergency funding for the bank raised fears that one of the biggest names on Wall Street was on the verge of collapse.JPMorgan Chase was to provide the money to Bear Stearns for 28 days with the Federal Reserve of New York's backing.Bear Stearns's problems stem from the global credit crunch and the worry is that other lenders may also have major funding problems, analysts said.Recently, speculation had intensified that the bank was struggling to fund its daily business.BBC business editor Robert Peston said Bear Stearns was taken to the brink of insolvency last week by a sudden collapse in confidence on the part of its hedge fund clients.As a result, these clients rushed to withdraw their assets.
'Other banks'
The credit crunch was caused because banks became less willing to lend to each other after they suffered large losses on investments linked to the US housing market, and the sub-prime sector in particular. Sub-prime lenders focus on clients with poor or non-existent credit histories, and a record number of borrowers have defaulted on loans.
The subsequent freezing-up of the credit markets created problems for a number of companies which relied on borrowing money to fund their business.In the UK, Northern Rock ran into trouble when its line of relatively cheap credit dried up.At the end of last year, Bear Stearns reported that it had made its first ever quarterly loss after buying investments linked to the US mortgage market.It was one of the first to admit it had problems linked to sub-prime mortgages, after two of its hedge funds had to be bailed out.Robert Peston said that last week's move by JPMorgan and the Fed of New York was essentially a central bank bailout, and described the crisis as "America's Northern Rock".
Recession fears stalk America
It is 0900 as the M-train from Manhattan rattles and squeals its way across the Williamsburg Bridge.
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Below, New York's East River swells and surges grey and cold. The train slows to a halt, and a handful of people get out.The roads from the subway station are lined with old warehouses.Graffiti is scrawled across much of the brickwork.Inside one of the buildings is the Brooklyn Brewery - where they make one of the top draft beers in the city. On the floor by the warehouse doors are some sacks of grain. Malt from England is embossed on the sacks in red ink.The brewery imports the grain, and that is proving expensive these days."There are pressures from every direction. It's a perfect storm. We've got a weak dollar," says Steve Hindy, who helped set up the company in the late 1980s."We've had bad hop and barley crops around the world, and the government here is forcing farmers to grow corn for ethanol. [There are] higher fuel prices. We're being hit from all directions."
R-word
There is a silver lining. The weak dollar does make their beer cheaper to overseas markets, and their exports are growing, but that is a small cushion when you look at the overall picture. Across this country, from the industrial areas to the financial centres, there is one word being heard more and more - recession.
Technically a recession is two quarters of negative growth.So far the US has not even registered one such quarter yet, but the word is being used more frequently because of a deluge of depressing statistics that now seem to come out every week.The latest jobless figures are worse than expected: 63,000 jobs were lost in February. The big losses were in construction, manufacturing and retail.Also this week it was announced that home repossessions are higher than ever.In fact, pick any statistic: house values are falling, retail sales are down and oil has hit record prices, making economic activity more expensive.
Global repercussions
What does it all add up to? Well the man who has just been confirmed as the world's richest person, the billionaire investor Warren Buffett says the US is already in a recession.
Plenty of others agree. "We're definitely in a recession," Nariman Behravesh, chief economist at Boston's Global Insight says.
"The question is, is it a mild recession, or is it something worse than that? Our best bet is that it's a mild recession and that in the first half of the year the economy will contract a little bit, but then by the second half - especially with these tax cuts that are due to come in - we'll see a rebound."That may calm some nerves but, recession or not, most see it getting worse and that is going to affect people far beyond these shores."I think the rest of the world should be very worried," says Mr Behravesh."There was all this sort of nonsense about de-coupling from the US, but the US is too big both in terms of the size of its economy and its impact on financial markets.""As the US goes into recession it will definitely have an impact on the Europe, on Japan, and even on China."
Monetary expansion
Can anything be done to stop the slide? The US central bank, the Federal Reserve, has slashed interest rates recently, and may do so again this month. It is hoping to stimulate borrowing and spending by doing so.It also announced today that it would make more money available to the big banks to ease credit pressures.The president has for some time admitted that he is worried. After the latest job figures came out George W Bush made a quick statement."Losing a job is painful, and I know Americans are concerned about our economy. So am I.""It is clear our economy has slowed, but the good news is we anticipated this and took decisive action to bolster the economy by passing a growth package that will put money into the hands of American workers and businesses."The hope is this will help stave off recession. Like the positive effect of the exchange rate on exporters it may play a cushioning role.Many, though, fear it may come too late to have any real impact on what looks, every day, like an increasingly desperate situation.
Blair helps Rwanda build economy
Tony Blair has agreed to help Rwanda attract private investment as it seeks to build its economy.
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e has made his first visit to the central African country since offering himself as an unpaid adviser to its president, Paul Kagame.Mr Blair will now use his international status to promote the opportunities on offer there to foreign investors.Rwanda has transformed since the 1994 genocide, when more than 800,000 Tutsis were killed by the Hutus.Mr Blair told a press conference in the Rwandan capital, Kigali, that it was an "exciting" time to be engaged with the country's development.
'Clear vision'
"I think the fascinating thing about Rwanda is that it's a country that has gone through a terrible and traumatic experience, but has rebuilt itself," he said."It stands now in a situation where people want to take it to a new and higher level of development."He added: "The question is how do we build the capability to make that happen, because the vision is one thing and to make it happen is another."The vision is clear and good, but it's doing it - and doing it as we all know is the hard thing. Any help that I can give in that is a privilege."The 1994 genocide only stopped when the Hutu Power extremists were overthrown by Mr Kagame, then a guerrilla leader, and his forces.Its stability and development over the last decade have been held up by the international community as a model for the African continent as it battles with poverty and corruption.Mr Blair has held a number of meetings with the Rwandan president since he left Number 10 last June. The pair are said to be long-standing friends.
Refund of $12 Billion to States
The recent directive by President Umaru Musa Yar'Adua that the $12 billion deducted from the Federation Account be refunded to the states, must have come as a sweet surprise to all well-meaning Nigerians, the chief executives of the states in particular. The $12 billion, according to former President Olusegun Obasanjo, who ordered the deduction, was the contribution of the states to the $18 billion debt re-payment of the Paris Club. The Federal Government bore the balance of $6 billion.
However, the deduction was opposed by the state governors then, although none of them legally challenged the directive, which ran contrary to the practice of federalism.
It was also inexplicable why the then President chose to deduct the money direct from the Federation Account, given that the Paris Club indebtedness was entirely a Federal Government affair.
For one thing, even if the states benefited from the projects which the loans were used for, the contribution to the re-payment should not have been uniformly spread. Some states would have benefited more from the loans than others.
Besides, even if the states were involved in incurring the debts, they would also not have done so uniformly, hence, it would have been wrong to deduct the repayment from the Federation Account.
It is therefore commendable that the Yar'Adua administration has seen the injustice and illegality of the action and has chosen to correct it. We salute his courage because it could have been easily excusable if he acted on the contrary. After all, he was not the one who gave the directive in the first instance. He could safely have been forgiven, but he did not, a development that has made the states $12 billion richer. The refund started December last year.
We must necessarily note that the refund to the states is coming at an auspicious period for the governors, most of who had, upon assumption of office in May 2007, lamented the lean financial status of their treasuries. Some indeed, went public to lampoon their predecessors for profligacy. Perhaps to such governors, the illegality of the initial deduction by the then President, may have been a blessing in disguise. At least, such predecessors did not have the fund to add to their spending spree. Some of them are, of course, facing trial for alleged financial sleaze, money laundering and sundry charges.
Now that the refund has started coming in, the state governors should not see it as a "lost but found" income. It is still a legitimate federal allocation belonging to their states.
In the light of this, governors should ensure that the fund is judiciously utilized towards the development of their states and improvement of their people.
We are minded to make this plea because events around the states appear not to have changed from what they used to be in the past eight years or in the days of the incumbent governors' predecessors.
The signs are visible that nothing is actually happening in the states as the taps are still dry, the roads are still in terrible state of disrepair, the environment dirty and smelly, while schools and hospitals still lack basic facilities to function. The argument that the period is still short to begin to assess the governors does not hold water because available evidence, also shows that some of them have busied themselves with "power personification" than governance.
The other argument that the outstanding issue of election petition tribunal is a distraction to some of the governors, is neither here nor there. This is because some of the governors had also gone ahead to conduct local government elections, despite their pending cases at the tribunals. No doubt, the issue in this matter is where a governor's interest can be located: Good governance or self glorification?
It is therefore our submission and candid advice that the refund must be channelled into the prosecution of tangible projects, viable programmes and resolution of long standing problems that would benefit the people.
We should also challenge citizens of these states to show greater alertness and interest in the conduct of their affairs. For instance, individuals, groups and citizens of the states can and should hold their governors to account for the usage of their fund and indeed, all other allocations to their states. This way, good governance and accountability are entrenched.
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