Throwing money at banks won't solve economic crisis, Ed Balls says - The Guardian Throwing money at banks won't solve economic crisis, Ed Balls says - The Guardian

Friday, June 15, 2012

Throwing money at banks won't solve economic crisis, Ed Balls says - The Guardian

Throwing money at banks won't solve economic crisis, Ed Balls says - The Guardian

Ed Balls has warned that an emergency multibillion-pound package to inject lending into the British economy still fails to address the lack of economic confidence and demand. The shadow chancellor said the Bank of England's thinking still seemed to be driven by Montagu Norman, the governor who led it through the depression of the 1930s.

He said the measures announced on Thursday night at the Mansion House in London by the chancellor, George Osborne, and the bank's governor, Mervyn King, should have been implemented two years ago and would not work if businesses were not investing.

Osborne warned that the "debt storm" on the continent had left the UK and the rest of Europe facing their most serious economic crisis outside wartime. In a joint proposal between the Bank of England and the Treasury, banks will receive cut-price funds, provided they pass on the benefits to their business customers.

This new "funding for lending" scheme could provide an £80bn boost to loans to the private sector within weeks and alleviate growing fears of a second slump since the start of the financial crisis in 2007.

In a second scheme, within the next few days the bank will begin pumping a minimum of £5bn a month into City institutions to improve their liquidity.

Balls told Sky News: "Simply giving the banks billions of pounds doesn't translate into loans to business. If business is not investing and creating jobs and if our economy is not growing, that's the fundamental problem, and I've said consistently for two years that you can't do this simply by throwing money at the banks.

"You've got to accept that the fiscal plans of the chancellor haven't worked, they've backfired, they've taken us back into recession."

Speaking on BBC Radio 4's Today programme, Balls compared the government's fiscal policy to the 1930s depression era: "It failed then and it's failing now".

He said the announcements were a clear sign that the bank was worried. He did not dismiss the injection of cash for lending in principle, but argued that fiscal, as opposed to monetary policy was critical to recovery, pointing out that, apart from Italy, the UK was the only country in the G20 in recession.

The government has described the plans as an attempt to stretch its "plan A" to the limit. There has been concern from some banks that the plan does not change the dynamic as they will be expected to take the risk on the loans.

The treasury minister Mark Hoban told Today that the government's fiscal tightening had had no impact on growth. He said taxpayers' money would not be at risk as a result of the £80bn bank credit scheme.

Conservative MP Andrew Tyrie, chairman of the Commons treasury select committee, welcomed the plans: "The measures look as if they will encourage lending to businesses by ensuring liquidity is more easily available to banks."

Balls said: "The Bank of England's new funding for lending scheme is a significant admission that the government's existing policies have failed. Businesses will be desperately hoping it is more successful than George Osborne's Project Merlin and credit-easing schemes which have actually seen net lending to businesses fall."

He said Osborne's speech was dangerously complacent. "He is sticking with policies that have choked off the recovery, pushed up unemployment and are leading to £150bn of extra borrowing."

Balls also attacked Osborne over his remarks about a possible Greek exit from the eurozone.

"I was at the Mansion House last night and there was a frisson around the room when our chancellor started openly talking about whether Greece should leave the eurozone. I do not think that is a very wise or sensible thing to do," he told BBC Breakfast.

"I think Greece has got to sort out its issues – and that is a matter for Greece. What I am really worried about in the eurozone is that countries like Spain or Italy – which are huge, to which we as a country are very exposed – they have not sorted out their problems.

"Unless we get a global growth plan going, including in the eurozone, you can't turn this round. I am afraid that our government seems to be urging the wrong actions in Europe as it takes the wrong actions here in Britain too."

The shadow chancellor pointed out that Osborne had "snuck out another U-turn" in his speech, in particular to the objectives of the new financial policy committee at the bank.

"Labour and business organisations like the CBI have been calling for the new financial policy committee to have supporting economic growth as one of its key objectives. The chancellor voted against our amendment on this but in the face of an imminent defeat in the House of Lords he has now backed down."

Stocks Add to Gains Amid Stimulus Hopes - CNBC

Stocks extended their gains Friday, lifted by reports that major central banks are preparing coordinated action to provide liquidity after the Greek elections over the weekend and amid growing hopes for action from the Fed in light of some recent disappointing data.

Meanwhile, quadruple witching—contracts for stock index futures, stock index options, stock options and single stock futures all expiring—may bring additional volatility to trading.

The Dow Jones Industrial Average rallied, led by BofA [BAC  Loading...      ()   ] and Chevron [CVX  Loading...      ()   ], after jumping more than 1 percent in the previous session.

The S&P 500 and the Nasdaq also gained. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded near 21.

Stocks have gyrated in a wide range all week, alternating between gains and losses of more than 1 percent for most days. Still, all three major indexes are set to post gains for the week.

All 10 S&P sectors were in positive territory, led by techs and energy.

“[The Greek election] is going to be another kicking the can down the road for a while,” said Art Cashin, director of floor operations at UBS Financial Services. “I’m far more concerned about the election in Egypt…[but] the market has ignored many geopolitical risks out there and we’ve become so obsessed with the Grecian problem that nothing else seems to matter.”

Officials from the G20 nations, whose leaders are meeting in Mexico next week, said that central banks were ready to take steps to stabilize financial markets by providing liquidity and prevent any credit squeeze if severe market strains emerged after Sunday's election. (Read More: Why Joint Central Bank Action Won’t Work)

G20 officials told Reuters the Greek election will not provide "the definitive signal on what happens next" in the euro zone debt crisis.

Britain is expected pump more than 100 billion pounds ($155.43 billion) into its banking system as it looks to improve the amount of credit being fed through to the real economy, according to the governor of the Bank of England.

And the Bank of Japan kept monetary policy steady but pledged to do its utmost to ensure the country's banking system remains stable if a Greek election this weekend ignites fresh global market turmoil.

“Even if New Democracy ends up winning, unless you find a way to help Greece’s economy grow when you abandon austerity, this issue’s going to resurface over and over again, leading to increased volatility throughout the year," said Joseph Tanious, market strategist at JPMorgan Asset Management.

European shares closed higher. Spanish and Italian government bond yields eased, while the euro held firm against the U.S. dollar.

Meanwhile, Moody's slashed its ratings on 11 European banks, warning of further downgrades if Greece ditched the euro.

Brent crude futures rose near $98 a barrel, extending gains after producer group OPEC agreed to keep its output target unchanged for the second half of the year.

Facebook [FB  Loading...      ()   ] is expected to file a motion to consolidate all shareholder lawsuits against the company following the botched IPO last month, according to sources. The social-networking giant's lead underwriters, Morgan Stanley, Goldman Sachs and JPMorgan Chase, are expected to join the motion. Facebook rose to trade near $29 a share.

On the M&A front, business-software company Yammer agreed to a takeover bid from Microsoft [MSFT  Loading...      ()   ] for $1.2 billion, according to reports.

And China granted conditional approval for United Technologies [UTX  Loading...      ()   ] to take over aircraft parts maker Goodrich [GR  Loading...      ()   ] in a deal valued around $16.5 billion, saying Goodrich needed to divest or sell parts of some businesses.

On the economic front, consumer sentiment dipped to 74.1 in June, falling to a six-month low, according to the Thomson Reuters/University of Michigan's preliminary reading.

Manufacturing in New York state fell sharply to 2.3 in June to its lowest level since November, according to the New York Federal Reserve's "Empire State" general business conditions index. And factory production slipped 0.4 percent in May for the second time in three months, while total industrial output fell 0.1 percent, according to the Federal Reserve.

—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)

On Tap Next Week:

MONDAY: Housing market index, G20 summit
TUESDAY: Housing starts, FOMC meeting begins, Groupon shareholders mtg; Earnings from FedEx, Discover Financial, Adobe Systems
WEDNESDAY: Weekly mortgage apps, oil inventories, FOMG mtg announcement, FOMC forecasts, Bernanke press conference; Earnings from Bed, Bath & Beyond
THURSDAY: Jobless claims, PMI manufacturing index flash, existing home sales, Philadelphia Fed survey, FHFA home price index, leading indicators, Best Buy shareholders mtg, Google shareholders mtg; Earnings from ConAgra, Rite Aid, Oracle
FRIDAY: Earnings from Darden Restaurants

More From

GLOBAL MARKETS-World stocks rise on talk of G20 action - Reuters UK

Fri Jun 15, 2012 8:29pm BST

* Fear of Greek election results hangs over markets

* Bond prices rise, but euro rebounds as some concerns ease

* Nagging signs of slowing U.S. economy drive safe-havens (Adds settlement prices for oil, updates prices)

By Herbert Lash

NEW YORK, June 15 (Reuters) - World equity markets rose on F riday as investor fears of euro zone turmoil following Greek elections this weekend were offset by talk the world's major central banks stand ready to make a coordinated response to ease any market dislocation.

The euro rebounded and U.S. stocks shrugged off a new batch of weak factory data, while U.S. consumer sentiment fell in early June to a six-month low, according to a survey.

But anxiety that Greece could fail to form a government after Sunday's elections led investors to raise their safe-haven bond holdings, driving up U.S. government debt prices.

A measure of market fear in the equities market, the CBOE Volatility Index, was up 2.2 percent at 22.16, after rising above 23.

"Ahead of Sunday's election in Greece, central bankers stand ready, again," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

"With all the water central banks have expended out of their fire hoses over the past few years in their attempt to 'do something,' I can only think of magic candles. Those candles you blow out that only flare up again immediately after."

Central banks from Tokyo to London prepared for any turmoil following Greece's election, with the European Central Bank hinting at an interest rate cut and Britain set to open its coffers.

Officials from the Group of 20 major industrial and emerging nations told Reuters on Thursday that the top central banks stand ready to stabilize markets by providing liquidity if the election result causes financial upheaval.

G20 leaders meet in Mexico on Monday and Tuesday as the results of the Greek vote and market reactions emerge.

On Wall Street, the Dow Jones industrial average was up 93.35 points, or 0.74 percent, at 12,745.26. The Standard & Poor's 500 Index was up 10.99 points, or 0.83 percent, at 1,340.09. The Nasdaq Composite Index was up 29.05 points, or 1.02 percent, at 2,865.38.

In Europe, the FTSE Eurofirst 300 index of top European shares closed up almost 1.0 percent, with European bank stocks climbing 1.8 percent.

MSCI's all-country world equity index rose 1.0 percent to 305.34, and emerging markets gained 1.2 percent.

Disappointing data showed a worsening U.S. economy that increases the chance the Federal Reserve will announce an extension of its Operation Twist program, or launch a new quantitative easing program, when it meets next week.

"There are a lot of concerns going into the weekend with the Greek election," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago.

Yields on the 10-year U.S. Treasury note fell at one point to 1.564 percent, the lowest in about 10 days. The note later traded to yield 1.5891 percent, with prices up 15/32.

German Bund futures, another traditional safe haven, extended gains, accelerating their rise after the release of the U.S. economic data. Bund futures rose to 142.27, up 44 ticks on the day.

U.S. manufacturing output contracted in May for the second time in three months, the Fed said, and the New York Fed's "Empire State" index fell in June to the lowest level since last November. The Thomson Reuters/University of Michigan's index on consumer sentiment fell to 74.1 in June.

The euro hit a session low of $1.2590 against the dollar, but then rebounded to be up 0.1 percent at $1.2642.

The U.S. dollar index fell 0.5 percent to 81.595.

Brent crude edged up in thin trade, while U.S. crude seesawed near flat for most of the session. A weaker dollar, along with gains on Wall Street, lent some support to oil.

Brent crude settled 44 cents higher at $97.61 a barrel. U.S. crude rose 12 cents to settle at $84.03 a barrel.

Spot gold prices rose $4.07 to $1,626.90 an ounce.

European Stocks Gain on Stimulus Optimism; RBS Advances - Bloomberg

European stocks rose to the highest this month after the Bank of England announced credit-easing measures, boosting optimism central banks will take steps to stimulate the global economy.

Royal Bank of Scotland Group Plc (RBS) and Barclays Plc (BARC) led a gauge of lenders higher. Carrefour SA (CA) advanced 5.9 percent after agreeing to sell its stake in a Greek joint venture. Imagination Technologies Group Plc (IMG), a U.K. chip designer in which Apple Inc. holds a minority stake, jumped 14 percent.

The Stoxx Europe 600 Index (SXXP) climbed 1 percent to 244.21 in London, the highest since May 29. The benchmark gauge has still declined 10 percent from its high on March 16 amid growing concern that Greece may be forced to leave the euro currency union after the elections on June 17.

“The Greek elections won’t add more clarity for the markets, but a clear positive is that investors increasingly believe that central banks are ready to act after the elections -- whatever the outcome may be,” said Lars Knudsen, a portfolio manager who manages about $95 million at LGT Capital Management in Pfaeffikon, Switzerland. “Markets see a decreasing likelihood of contagion to the euro zone.”

The Stoxx 600 dropped yesterday after Moody’s downgraded Spain and Cyprus, while Switzerland’s central bank said Credit Suisse Group AG must boost its capital this year. European stocks may be more volatile than usual today as futures and options contracts on equity indexes expire in a process known as quadruple witching.

Funding for Lending

BOE Governor Mervyn King said in a speech late yesterday that the case for more stimulus in the U.K. is growing. He also unveiled two plans to improve cash supply to the banking system.

A “funding-for-lending” program will allow banks to swap assets with the BOE for money to be loaned their customers. The central bank will also activate an unused facility to inject at least 5 billion pounds ($7.8 billion) a month into the system at a minimum rate of 25 basis points more than the benchmark interest rate, now at a record low of 0.5 percent.

U.S. stocks extended gains in the final hour of trading yesterday after Reuters reported that central banks will coordinate action, if needed, to boost cash availability in financial markets. The news agency cited officials linked to the Group of 20 nations.

Spokesmen at the European Central Bank, BOE, Bundesbank, Swiss National Bank and Bank of France declined to comment when contacted by Bloomberg News on the prospects for emergency coordinated action.

National benchmark indexes advanced in all of the 18 western-European markets except Iceland. The U.K.’s FTSE 100 added 0.2 percent and Germany’s DAX rallied 1.5 percent. France’s CAC 40 climbed 1.8 percent.

Greek Elections

On June 17, almost 10 million Greeks will vote for the second time in six weeks after a May 6 ballot failed to result in a government. The constitution permits a third election too. Exit polls will be released when voting ends at 7 p.m. in Athens.

“It’s not because the elections will have passed that the problem will be resolved,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “What will happen then? If there is a clear coalition of the traditional parties, that will have a positive impact on the market. But we remain cautious.”

European Union leaders will press for new efforts to boost the economy and improve lending conditions, according to a draft document prepared for a June 28-29 summit in Brussels. They will endorse the European Commission’s recommendations on national governments’ budget, employment and other economic policies, the document obtained by Bloomberg showed.

U.S. Economy

In the U.S., a report showed that industrial production unexpectedly fell in May for the second time in three months.

Output at factories, mines and utilities decreased 0.1 percent last month after a revised 1 percent gain in April, the Federal Reserve said. Economists forecast a 0.1 percent advance, according to the Bloomberg News survey median. Manufacturing, which makes up about 75 percent of total production, dropped 0.4 percent last month.

An earlier report showed manufacturing in the New York region expanded in June at the slowest pace in seven months.

RBS and Barclays rallied 7.9 percent to 247.6 pence and 4.2 percent to 200.8 pence, respectively. A gauge of European lenders was among the best performers among the 19 industry groups in the Stoxx 600. Lloyds Banking Group Plc (LLOY) gained 5.2 percent to 31.30 pence.

Carrefour, Fiat

Carrefour gained 5.9 percent to 14.49 euros. The world’s second-largest retailer, agreed to sell its stake in a Greek joint venture, reducing its exposure to southern Europe at a cost of 220 million euros ($278 million). Late yesterday, the company announced the purchase of 129 EKI stores in and around the Argentine capital Buenos Aires.

Fiat SpA (F), the Italian carmaker which controls Chrysler Group LLC, jumped 5.5 percent to 3.66 euros. Chief Executive Officer Sergio Marchionne said the company is cutting investments in Europe by 500 million euros ($635 million) on concern the region’s auto market won’t recover in the second half of the year.

Telekom Austria AG (TKA) advanced 1.4 percent to 8.15 euros after America Movil agreed to acquire a 21 percent stake in the company from investor Ronny Pecik. The acquisition is part of America Movil’s strategy to establish a foothold in Europe as the debt crisis lowers the value of telecommunications assets.

Imagination Technologies jumped 14 percent to 499.5 pence, the biggest jump since May 10 and the best performance on the Stoxx 600 today.

SBM Offshore, Neste

SBM Offshore NV (SBMO), the world’s biggest supplier of floating oil and gas platforms, rose 8.2 percent to 10.88 euros as crude oil rose. Neste Oil Oyj (NES1V) gained 4.6 percent to 7.95 euros.

Randgold Resources Ltd. (RRS) climbed 1.4 percent to 5,970 pence as Goldman Sachs Inc. upgraded its recommendation for the stock to neutral, the equivalent of hold, from buy.

Endesa SA (ELE) increased 3.8 percent to 12.87 euros after SSE Plc said it will acquire the Irish power assets of Endesa for 320 million euros.

Roche Holding AG fell 0.4 percent to 156.50 Swiss francs. The company’s Zelboraf skin-cancer treatment failed to win the backing of the U.K.’s health-cost agency, even after the Swiss company offered to cut the drug’s price.

“The longer-term effect on survival was uncertain” because many patients taking an older drug in a study were shifted onto other therapies such as Zelboraf when their disease worsened, making it difficult to compare treatments, the National Institute for Health and Clinical Excellence said.

To contact the reporter on this story: Corinne Gretler in Zurich at

To contact the editor responsible for this story: Andrew Rummer at

Enlarge image European Stocks Gain on Stimulus Optimism

European Stocks Gain on Stimulus Optimism

European Stocks Gain on Stimulus Optimism

Dieter Nagl/Bloomberg

Telekom Austria AG advanced 2.7 percent after America Movil SAB agreed to acquire a stake in the company.

Telekom Austria AG advanced 2.7 percent after America Movil SAB agreed to acquire a stake in the company. Photographer: Dieter Nagl/Bloomberg

Stocks rally before Greek vote - Yahoo! Eurosport

Stocks around the world rallied on Friday despite uncertainty over Greece as investors appeared to bet on fresh stimulus from the United States and Europe (Chicago Options: ^REURUSD - news) to boost growth and fight the eurozone crisis.

Asian markets started the rally, with European markets following and US stocks extending Thursday's gains in early trading.

London's benchmark FTSE 100 (Euronext: VFTSE.NX - news) index closed up 0.22 percent to 5,478.81 points, while in Frankfurt the DAX 30 (Xetra: ^GDAXI - news) rose 1.48 percent to 6,229.41 points, and in Paris the CAC 40 (Paris: ^FCHI - news) climbed 1.82 percent to 3,087.62 points.

Madrid gained 0.34 percent and Milan jumped 2.34 percent after the Italian government adopted growth measures and plans to sell off some state-held companies and property.

In foreign exchange deals, the euro drifted up to $1.2635 from $1.2630 late Thursday in New York (Frankfurt: A0DKRK - news) . Sterling rose against the euro and dollar in afternoon trading after initially dropping following the stimulus news.

The dollar slid against the yen, buying 78.68 yen instead of 79.34 late on Thursday.

"The prospect of co-ordinated central bank intervention from central banks next week in the event of turmoil caused by the result of this weekend's Greek elections has given equity markets a boost today, and calmed some rather frayed investor nerves," said Michael Hewson, senior market analyst at CMC Markets.

"The Bank of England took a similar approach by announcing two new stimulus packages to aid worsening economic fears and to give long term supports to UK banks allowing them to borrow loans below market rates," added Khurram Ali, a broker at Valbury Capital.

European Central Bank chief Mario Draghi fuelled speculation of an imminent rate cut or other measures, warning Friday of "serious downside risks" to the euro area economy while inflation saying was no threat.

However, with Spain's borrowing costs pushing to record highs despite a 100 billion-euro bank bailout, traders remain on edge.

The IMF said Friday that Spain will likely miss its budget-cutting deficit target for 2012 and it pushed Madrid to adopt broad reforms as it grabs a rescue line for stricken banks.

Asian markets mostly rose on Friday and US stocks forged higher in midday trade.

At around 1600 GMT, the Dow Jones Industrial Average was up 0.57 percent to 12,724.52 points, the broad-market S&P 500 (SNP: ^GSPC - news) climbed 0.64 percent to 1,337.64 points and the tech-rich Nasdaq Composite (Nasdaq: ^IXIC - news) gained 0.79 percent to 2,858.74 points.

"Place your bets. Yesterday's and today's trading is all about positioning ahead of Sunday's elections in Greece and next week's Federal Reserve policy meeting," said Dick Green at

Green said stocks rallied "because traders are betting that European governments will take action after the election to prevent any adverse credit market impact from the possibility of Greece leaving the eurozone.

The gains followed those on Thursday, as poor jobs data sparked speculation that the US central bank would start a third round of stimulus known as quantitative easing in a bid to kickstart the world's biggest economy.

"Sentiment seemed to strengthen on hopes that underwhelming data might compel the Fed to implement another round of quantitative easing when they meet next week," said

In Britain finance chief George Osborne and Bank of England governor Mervyn King said they would flood banks with billions of pounds in a bid to jump-start lending to households and businesses and fend off a potential storm from Europe.

But while investors absorbed the possibility of fresh cash in the system Europe's troubles tempered sentiment.

The IMF said in a report Friday that as Spain taps a eurozone loan of up to 100 billion euros to restructure the banks, it must also implement "comprehensive" reforms including raising value added tax immediately.

On Thursday the interest rate on Spanish 10-year government bonds soared to 6.9667 percent, the highest since the birth of the single currency in 1999, and close to the danger-zone 7.0 percent considered unsustainable to service debts.

The jump came after Moody's on Wednesday slashed Spain's sovereign debt rating by three notches, saying the bank bailout would put extra strain on the country's already weak finances.

The rate of return for investors on Spanish 10-year bonds slid to 6.838 percent on Friday, but the risk premium -- the difference in the rate between Spanish and safe-haven German 10-year bonds -- hit a new euro-era record of 5.54 percentage points as the yield on German bonds fell more.

Stocks rally as investors hope for stimulus programs - Los Angeles Times
WASHINGTON — Wall Street is betting that the Federal Reserve and other central banks are ready to roll out programs to help protect the global economy from financial market turmoil.

Investors have been piling into the stock market this week on hopes that more stimulus programs might be in the works amid negative U.S. economic snapshots and continued uncertainty in Europe.

Stocks in the U.S. rallied Thursday, with the Dow Jones industrial average charging up 155.53 points, or 1.2%, to 12,651.91. Broader stock benchmarks also jumped higher.

The rally was pinned on reports that central banks are preparing stimulus programs in advance of Greek national elections Sunday that could lead to an exit from the Eurozone. The Bank of England and British Treasury unveiled plans Thursday to boost liquidity to protect its financial markets.

"Everybody's talking about Greece," said Rebecca Rothstein, managing director at Morgan Stanley Smith Barney in Beverly Hills. "Stabilizing would be a welcome relief to whatever the outcome is."

Closer to home, the combination of rising jobless claims and easing consumer prices was giving the Fed more reason to spur economic growth by pumping money into the financial system. The central bank's policy-setting committee meets next week.

Policymakers will be wrangling with the double dose of uninspiring economic data delivered Thursday.

"The Federal Reserve has been quiet about its intentions at next week's meeting, but inflation hawks will have less ground to stand on, given the recent weakness in consumer prices," said James Bohnaker, an analyst at Moody's Analytics.

The Labor Department said new jobless claims rose again last week, marking the fifth increase in the last six weeks. Rising claims for unemployment benefits suggest that layoffs are heading higher, which would be consistent with the spring slowdown in job growth seen in the latest monthly employment reports.

Separately, the department's Bureau of Labor Statistics reported that the consumer price index dropped a larger-than-expected 0.3% in May from the prior month. It was the largest month-over-month decline in this inflation measure since late 2008, and it was driven mostly by a steep 6.8% fall in average gasoline prices.

Although falling energy prices are giving consumers some much-needed relief, Mesirow Financial economist Diane Swonk pointed out that there's a downside to this development.

"We welcome lower prices at the pump," she said in a note to clients, "but not the reason we have them, which is economic weakness and anxiety about the future."

Some have argued that there already were reasons enough for the Fed to pull the trigger on another round of bond purchases or some other stimulus action, with the European debt crisis and fiscal and political uncertainties at home weighing on confidence, hiring and consumer spending.

But Fed Chairman Ben S. Bernanke has said the recent deceleration in job growth may reflect the end of "catch-up hiring" by employers who aggressively slashed payrolls because of the 2007-09 recession.

More important, Bernanke also has said additional monetary stimulus might not help the economy very much, given that interest rates already are at historical lows. The Fed has a dual mandate, to control inflation and maximize employment, and Bernanke's critics and some of his Fed colleagues have expressed concerns that more stimulus could result in runaway inflation in the future.

The Fed's inflation target is 2%. Thursday's report showed that for all goods and services, the change in the consumer price index fell to 1.7% in the 12-month period that ended in May — the lowest rate since early 2011.

Meanwhile, the so-called core inflation rate — the Fed's preferred measure, which excludes the volatile energy and food items — held steady at 2.3% for the third straight month, as prices for used cars, clothes and medical services rose.

"I don't think there's a deflation concern as core inflation is still running at 2.3%, which will worry some policymakers," said Chris Williamson, chief economist at Markit, a financial data services company based in London. "For the same reason, today's data by no means opens the door completely for further Fed stimulus, it's just nudged it a little more open."

But analysts expect core inflation to slide steadily lower to the Fed's target of 2% as lower energy and commodity prices and a weaker economy tamp down inflation for used cars and clothes.

Thursday's jobless claims data showed that new filings for benefits rose by 8,000 last week to a seasonally adjusted 386,000 claims — about 20,000 more than the level earlier this year when the job market seemed to be gaining steam.

Jobless claims data can swing up and down from week to week, but the government reported no special factors such as a holiday for the increase in filings. The less volatile four-week moving average of new jobless claims also rose, to 382,000, the highest level since late April.

"This is disturbing for employment in June, as it suggests that the labor market is further weakening," Swonk said. "This is being noticed by the Federal Reserve."

Lee reported from Washington and Tangel from New York.

Bank stocks raise London stocks higher - Financial Times

Last updated: June 15, 2012 5:10 pm

Stocks rise as markets look to central bank help - AP -

U.S. stocks are rising in midday trading as investors anticipate action by central banks to head off a deeper European debt crisis.

The Dow Jones industrial average rose 68 points to 12,720 shortly before noon Friday. Microsoft was the Dow's leading stock, rising 2 percent, following reports that the company is in talks to buy Yammer, a developer of social networks within companies.

The Standard & Poor's 500 index rose seven points to 1,336. The Nasdaq composite rose 15 to 2,851.

All eyes are on Greece, where an election on Sunday could determine whether the country stays within the euro currency union. The European Central Bank president said the bank would continue its "crucial role" of making sure the financial system has enough cash.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

U.S. targets financial abuse of elderly - Los Angeles Times
WASHINGTON — Federal regulators launched an investigation into the financial abuse of the elderly, citing a new report that advisors, planners, family members and others were ripping off seniors more than ever.

Americans over 60 lost at least $2.9 billion in 2010 to financial exploitation — ranging from simple home repair scams to complex insurance swindles. That figure was up 12% from 2008, according to a study released Thursday by MetLife Mature Market Institute, the National Committee for Prevention of Elder Abuse and Virginia Tech University.

The rise in abusive tactics led the Consumer Financial Protection Bureau to begin looking into the types of scams affecting older Americans and coming up with the best ways to prevent them. A specific focus will be on the credentials of people who tout themselves as financial advisors.

"The silent crime of financially exploiting the elderly is widespread, and it is devastating. It is critical for us to act," Richard Cordray, the agency's director, said at a White House forum Thursday ahead of World Elder Abuse Awareness Day.

"The generation that rebuilt and sustained this nation out of a devastating Depression, the dark hours of World War II and the anxious fears of the Cold War deserve our care now," Cordray said.

Tougher oversight by regulators is needed to prevent financial predators from preying on vulnerable elderly victims, said Patricia L. McGinnis, executive director of California Advocates for Nursing Home Reform, a San Francisco group that often deals with financial abuse.

"The bottom line is, you need to go after the predators. You need to punish them and you need to convict them," she said. "Put them in jail and make an example of them, but more importantly, get the money back for that victim. Make them whole again."

McGinnis described efforts by regulators and advocates to prevent the scamming of older Americans as a game of Whac-A-Mole.

A recent scam enticed senior citizens to put large amounts of savings into deferred annuities, reducing their savings to qualify for a particular federal veterans benefit. The veteran might get $1,000 a month from the benefit, but loses access to the cash for years. Meantime, the annuity salesperson earned a commission of 8% to 12%, she said.

Victims often are reluctant to fight back.

"I can't tell you the times I talk to people and they say, 'It was my own fault,'" McGinnis said. "They are very embarrassed."

The scams have increased as the economy has struggled. Survey results released this week by the nonprofit Investor Protection Trust found that 84% of experts who deal with financial exploitation of the elderly said the problem has worsened.

But there is a lack of comprehensive information on the problem, which the consumer bureau's inquiry could help solve, said Elizabeth Costle, director of the consumer and state affairs team at the AARP Public Policy Institute.

Financial predators often target the elderly because they are viewed as gullible, Cordray said.

"Many seniors have routines, and their predictable patterns make them easier targets for predators," Cordray said. "Abusers often assume that the victim will be too embarrassed or too frail to pursue legal action against them, and unfortunately that assumption is too often proven to be correct."

The agency's inquiry seeks comments from the public on several issues. They include detailing the unfair, deceptive and abusive practices targeted at the elderly, finding the types of financial planning resources, and evaluating the credentials of financial advisors. The agency will be accepting public comments until Aug. 13.

Cordray said that some people who tout themselves as experts on elderly financial issues have had only a few hours of inadequate training.

"We need to distinguish between the true experts and those engaged in predatory conduct," he said.

The qualifications of financial advisors are important as new retirees must decide what to do with lump-sum 401(k) payouts and often must juggle many complex options, Costle said. The ability to understand those options gets more difficult as people age.

"As people get older, particularly up into their 80s ….they're just less able to process financial information," she said. "They're more likely to be trusting of people and they open themselves up to more abuse, which is perpetrated both by strangers and by caregivers and family members who are close to them."

Congress and the White House have increased their focus on the issue.

Lawmakers included the Elder Justice Act in the 2010 healthcare reform law to coordinate federal efforts. As part of the law, Health and Human Services Secretary Kathleen Sebelius on Thursday announced $5.5 million in grants to states to "test ways to prevent elder abuse, neglect and exploitation."

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