Bailout

Moody’s has trimmed the rating for Greece by 2 notches to Ca Monday which is just one notch before the default status. The ratings agency warned that chance of a default is now “virtually 100 percent.”

Moody’s noted that while the bailout agreed last week by euro zone leaders will help Greece to reduce its debt, the country still faces medium-term solvency challenges and significant implementation risks.

Ireland’s credit rating was cut by Moody’s to junk this week. The ratings agency warned that the country would need a second round of bailout.

Ireland’s downgrade comes a week after Moody’s lowered the rating for Portugal to junk status with a similar advice to get a second bailout. The credit rating agency sees that private investors need to share the pain of helping sinking European nations.

The head of the OECD warned Monday that Europe needs to present a plan to involve private investors into the global effort to help Greece and give Athens time to deal with its problems.

"Time is critical, time is important to avoid a liquidity problem becoming a solvency problem. Time is of the essence also in order to allow for a recovery of everyone," Angel Gurria, head of the Organization for Economic Cooperation and Development, told reporters.

On Tuesday the US President Barack Obama talked to German Chancellor Angela Merkel and urged European countries to prevent a "disastrous" default by Greece. He promised that the United States would also provide its support as it fears the impact of euro crisis on its own economy.

Obama underlined the importance of German "leadership" on the issue. He clearly gave to understand that he expects Berlin to intervene.

The panel that oversights the TARP again accused the US government of supporting the wrong perception of financial firms that the federal authorities will always intervene to prevent big companies from failing.

Presenting its final report on the bank bailout the $700 bailout controlling panel said that the government was not articulating clear goals for its foreclosure prevention program. It also said federal intervention transformed the notion of 'too big to fail' into a stark reality.

European leaders are discussing the possibility to overhaul the euro zone’s 440 billion-euro ($599.1 billion) rescue fund in exchange for some stricter measures and closer surveillance on struggling states, according to a report from the Financial Times.

Citing people familiar with the talks the FT reported that senior leaders are considering "enhanced surveillance" of Spain and Portugal rather than assistance, which would give a European Union stamp of approval on proposed reforms.

Responding to the much criticism poured by the public on the central bank’s action to inject more money into the US economy, Federal Reserve Chairman Ben Bernanke sated that a long period of high unemployment could exact a steep social cost.

Meanwhile, Minneapolis Fed President Narayana Kocherlakota said the Fed's controversial bond purchase program was needed given a "troubling" slowdown in U.S. economic growth and too low inflation and employment.

General Motors has announced its intention to acquire a lender of auto loans AmeriCredit for $3.5 billion. According to company statement this can help it to lease more vehicles and increase sales to consumers with lower credit ratings. 

According to David Roche, global strategist at Independent Strategy it is the euro that will replace the US dollar as the next reserve currency as long as Europe has a better growth strategy than the US.

He says that the fact the German economy has recorded its fastest post-war contraction, at 5 percent in 2009, with exports falling by 14.7 percent, alongside investment, though paradoxically will bring opportunities for private investors.

After the reports that the Obama administration might impose more than $100 billion charge on banks the stocks in the sector dropped sharply. Major U.S. banks' stock prices saw deeper declines than their regional bank counterparts.

The Obama administration is considering charging the nation's largest banks more than $100 billion to recoup losses from the Troubled Asset Relief Program.

"That's a really big number for the banking industry, particularly the biggest banks, to swallow," said Jefferson Harralson, a Keefe, Bruyette and Woods Inc analyst.

According to WashingtonPost the Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress. 

The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama's current term.

 According to some reports American International Group Inc probed five executives who threatened to resign over federal pay limits. U.S. pay czar Kenneth Feinberg has vowed to limit bonuses at AIG's financial products unit, which produced negative reaction on the part of the insurer’s employees.

Goldman Sachs Group is being sued by an institutional investor who claims the firm is preparing to pay out improper bonuses.

The lawsuit, filed with the New York Supreme Court by the Security Police and Fire Professionals of America Retirement Fund, names chief executive Lloyd Blankfein and other executives and board members as defendants.

Goldman has faced a maelstrom of criticism for setting aside billions for year-end payouts soon after the firm paid back its $10 billion taxpayer bailout.

The projected long-term cost of the US government's bailout of the nation's big banks is going to be at least $200 billion less than previously thought, a Treasury Department official said on Sunday night.

The Obama administration had estimated the cost to taxpayers of the $700-billion Troubled Asset relief Program, or TARP, would be $341 billion but now says it can cut that by $200 billion.

Bank of America Corp said it would repay $45 billion of taxpayer bailout funds, a move that could free the top U.S. lender from pay curbs as it looks to hire a new CEO but also makes it more vulnerable to further economic shocks.

The surprise announcement on Wednesday marks a victory for outgoing Chief Executive Kenneth Lewis, who is expected to retire from his post by the end of the year. Lewis has said that repaying the government was something he wanted to accomplish before stepping down.