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Quote of the Day

"Unless the US government decides to inject public funds into resolving the subprime loan issue, fears about the credit crunch may not go away." - Osamu Tamada, a Mizuho Investors Securities strategist. (Forbes, Jan. 22nd)

Global Subprime Fallout

Citibank China: Subprime Has No Impact On China Expansion "Citigroup Inc.'s (NYSE:C) US$9.83 billion fourth- quarter net loss stemming from its exposure to subprime mortgage-related assets has had no impact on its expansion plans in China, Citigroup China CEO Richard Stanley said Tuesday. Stanley, who was speaking at a press briefing in the northeastern coastal city of Dalian on the opening of Citibank (China) Co.'s eight branch in China, said the company plans to open more branches in the country." (CNN Money, Jan. 21st)

Subprime To Sour China Bank Assets: Economist "Zhong Wei, an economics professor at Beijing Normal University: "China's banks will suffer a rise in non-performing assets due to the U.S subprime crisis and domestic credit tightening... With the spreading of the U.S. subprime crisis and a slew of tightening measures to stop economic overheating and rising inflation, the bad assets ratio in the banking industry and the risk of fluctuations in the capital markets is growing." The non-performing loan ratio of major commercial lenders -- the large state lenders plus 12 joint-stock banks -- fell to 6.7% at the end of 2007, down from 7.5% at the end of 2006." (Reuters, Jan. 21st)

8 Norwegian Towns In Crisis After Illegal Subprime Deals –AFP "Eight Norwegian towns plunged into financial crisis after making investments linked to U.S. subprime housing loans... Local officials deemed the transactions illegal, forc[ing] the towns to sell off their investments and rake in hundreds of millions of kroner in losses... The small towns, several clustered near the Arctic Circle, invested anticipated profits from local hydropower plants in high-risk securities linked to the U.S. mortgage market which were created by Citigroup Inc. (C)... A clause in the agreement forced the towns to keep pumping in more money [after losses], pushing some of them to the brink of bankruptcy." (CNN Money, Jan. 21st)

Bank of China to Take Big Hit on Subprime –Paper "South China Morning Post: Bank of China might post a 2007 loss because of a big write-down on billions of dollars of U.S. subprime-related investments. Quoting unidentified sources, [the paper said] Chinese banking regulators had warned the country's leadership that Bank of China and two other state banks would make provisions for all their assets hit by U.S. mortgage defaults." (Reuters, Jan. 21st)

U.K. Home Prices Fall a Third Month, Reviving Buyer Interest "U.K. house prices declined for a third month in January, reviving interest among prospective buyers after a slump in viewings late last year, property website Rightmove Plc said. The average asking price fell 0.8% to £230,428 ($450,300) from December, compared with a 3.2% drop the previous month... While the annual price gain slowed to 3.4%, the lowest since 2005... the average time on the market for a property fell to 95 days in January from a record 98 days in December. Realtors reported greater interest from buyers and Rightmove's Web site received 20% more visitors in the first two weeks of 2008 than in the same period a year ago." (Bloomberg, Jan. 21st)

European Economy Starts to Feel Pinch as U.S. Slowdown Spreads "The European economy may be starting to suffer collateral damage from the U.S. subprime mortgage slump. Banks are making borrowing harder, industrial production is shrinking and investor confidence is waning just as the U.S. skirts recession. With the euro's appreciation to a record hurting exports, more economists are betting the European Central Bank will be forced to lower interest rates. "There is a clear downtrend in the economy now,'' said Michael Schubert, an economist at Commerzbank AG in Frankfurt." (Bloomberg, Jan. 21st)

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