By Jill Fraser for Lending Central

US President Barack Obama announced today his proposal to limit the size and scope of America’s largest and most powerful financial institutions.

Obama, who has just entered his second year of office, spelt out changes that would prohibit banks and bank holding companies from owning or sponsoring a hedge fund or private equity fund and from participating in proprietary trading.

Declaring that America’s biggest banks had almost brought the economy to its knees by taking “huge, reckless risks in pursuit of quick profits and massive bonuses”, Obama says he wants “simple” and “commonsense” reforms.

Referred to by many as a vote-winning populist move, ABC’s AM reporter, Kim Landers describes it as “the latest attempt by the White House to harness popular anger at massive Wall Street bonuses and tight credit markets, as Congress heads to a crucial election year”.
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Westpac points out it’s not the discount airline of banking, but comparing itself instead to a banana smoothie seller has done little to soothe its relationship with the prime minister.

Westpac remains unapologetic over raising its standard variable mortgage rate by nearly double last week’s official cash rate increase.

The nation’s second largest bank told analysts on Monday that it was not the “Jetstar of banking”.

But likening itself to a business selling banana smoothies hit by rising fruit prices after storms decimated banana plantations has not impressed Prime Minister Kevin Rudd.

“A bank is a business that buys and sells something … only in this case that something is money,” Westpac says in a video attachment to an email sent to customers.
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Prime Minister Kevin Rudd wishes retail banks would cut interest rates as quickly as they raise them in response to official cash rate moves.

The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points on Tuesday, its second consecutive monthly increase.

ANZ Bank matched the increase on its standard variable mortgage rate within minutes of the RBA decision, and the other major banks soon followed suit.

“I do note a contrast between, shall I say, the speed which interest rates are brought down on the part of the commercial banks and the speed with which they are put up,” Mr Rudd told Fairfax Radio Network on Wednesday.
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The federal government appears to be leaving the door open to cutting its stimulus spending ahead of what is likely to be improved economic figuring in its mid-year budget review later this year.

The federal opposition again on Tuesday accused the government of “reckless spending” that would put pressure on interest rates, while the author of Labor’s climate change review, Professor Ross Garnaut, called for an easing off in the stimulus program.

But Prime Minister Kevin Rudd said there was already flexibility in the measures.

“Our stimulus strategy already has built into it an acceleration and a de-acceleration,” Mr Rudd told reporters in Hobart on Tuesday.

“That’s the way in which it is planned.”
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Senators heard both sides of the economic divide at an inquiry on Monday to determine whether the federal government’s economic stimulus has worked and whether it should continue.

Quizzing several academic economists, the inquiry heard that the stimulus was a waste of money, that the recession was a normal part of the business cycle and should have been left for the free market to resolve.

It was also argued that the human tragedy would have been far worse without the billions of dollars stimulus, regardless of whether it results in higher interest rates and higher taxes.

Indeed, one economist believed more money should be spent on lifting the unemployment benefit to stimulate the economy further.
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John Howard says an attack on his government’s economic credentials by Prime Minister Kevin Rudd was churlish and lopsided.

The former coalition prime minister said he wasn’t surprised his Labor successor had targeted him.

“It was a very lopsided, partisan attack,” Mr Howard told Macquarie Radio.

“Everyone knows that Mr Rudd inherited an economy stronger than any virtually in the western world.”

Mr Rudd used a book launch on Monday to claim Mr Howard and his government frittered away their time in office, living on the social and economic reforms of the Hawke-Keating period despite not believing in them.
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Malcolm Turnbull has labelled Prime Minister Kevin Rudd a self-styled “philosopher-king” handing down edicts from on high on how the world can be better governed, in an essay published on Saturday.

In the Opposition leader’s response to Mr Rudd’s 6000-word essay published in Fairfax newspapers last weekend, in which the prime minister warned Australians to expect a tough road towards economic recovery, Mr Turnbull said Mr Rudd had created his own “fantasy world” of recent economic history.

In his 2000-word essay, published in the Weekend Australian, Mr Turnbull says Mr Rudd uses media spin to change his message to suit what he believes people want to hear.
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The conference, at Sydney’s Darling Harbour, is the first Labor has had in government for 15 years.

It was a low-key start to the conference.

Interest groups gathered in small clusters outside the venue championing their causes.

A man and a woman dressed as a mermaid and King Neptune were among the most colourful as they championed large marine sanctuaries.

Mr Rudd ran through Labor’s achievements since it won government just under two years ago, particularly its economic record during the global recession.
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By Jill Fraser for Lending Central

The Prime Minister Kevin Rudd and economist Dr Steve Keen are on the same page regarding their pessimistic view of Australia’s road to recovery. But that’s where the union ends.

Keen, one of only a handful of economists worldwide who predicted the global downturn refers to the Federal Government’s stimulus packages as fodder for our junkie economy and argues that ultimately it’s just postponing the inevitable.

“They’re dangerous artificial fixes,” he told Lending Central equating the government’s attempt to restart private borrowing by injecting billions of dollars into the economy to a drug overdose.

“Our “neoclassical” economic doctors are trying to bring the patient back to health by administering more of the same drug. It’s a bit like giving a junkie, who has just taken an overdose, more heroin,” he declares.
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Australia’s recovery from the economic downturn will be tough, with rising interest rates and high prices essentials, but the nation’s economy will emerge stronger, Prime Minister Kevin Rudd says.

Mr Rudd has warned the government will have to make some tough budget decisions as the economy recovers in an essay published in The Sydney Morning Herald on Saturday.

“Australia is performing better than most other economies, with the fastest growth, the second-lowest unemployment and the lowest debt and deficit of all the major advanced economies,” Mr Rudd writes.

“And we remain the only advanced economy not to have gone into recession.
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Wayne Swan says reports his position hangs in the balance and that he should resign over the OzCar affair are “ridiculous” and “absurd”.

Opposition Leader Malcolm Turnbull says the treasurer should resign for misleading parliament about trying to help Queensland car dealer John Grant, a friend of Prime Minister Kevin Rudd, get a government backed loan.

“I regard that characteristic as completely completely ridiculous, even absurd,” Mr Swan told the Nine Network in reference to Sunday’s newspaper headlines.

Mr Swan said he stood 100 per cent behind all of the statements he had made to parliament.
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photo credit: WetsunThe economy has avoided a much feared recession on paper, but Prime Minister Kevin Rudd has warned the nation could still experience further periods of negative economic growth in the future.

Exports and household spending helped the economy grow by 0.4 per cent in the first three months of the year, preventing a second consecutive quarter of negative growth that defines a recession.

Mr Rudd welcomed the figures released in Wednesday’s March quarter national accounts, given the global economy is suffering its worst recession in 75 years.

“Among the major advanced economies, Australia has the fastest economic growth, the lowest debt, the lowest deficit and is the only one of the major advanced economies to now not be in recession,” Mr Rudd told parliament.
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Prime Minister Kevin Rudd’s use of the word “billion” to describe projected government debt has provoked a raucous response from opposition MPs in parliament.

Opposition Leader Malcolm Turnbull began question time on Monday by asking Mr Rudd to express “in a sum of money” the maximum amount of government debt the budget would create.

Both Mr Rudd and Treasurer Wayne Swan have been criticised for avoiding the use of “billion” when referring to the debt, preferring to describe it as a percentage of gross domestic product (GDP).

“Gross debt peaks at around about $300 billion,” Mr Rudd replied to cheers from the opposition benches.
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Mortgage broker Loan Market Group has warned the Australian residential property sector faces a major setback if the Federal Government ends the boosted First Home Owners Grant.

Prime Minister Kevin Rudd today indicated the expanded scheme would end as scheduled on June 30 despite widespread calls for it to be extended.

Loan Market Group Executive Director John Kolenda said the decision last October to increase the grant had resulted in the real estate market being one of the few parts of the national economy that was still active.
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Australia will emerge from the global financial crisis more prosperous than it was before, Treasurer Wayne Swan says.

Prime Minister Kevin Rudd and Mr Swan are due to attend the Group of 20 leaders’ summit in London this week.

Mr Swan said Australia’s strong financial system would help the economy withstand the global economic downturn.
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