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Wednesday, October 24, 2012

Fed Pushes Ahead With Stimulus Plan

The U.S. Federal Reserve announced today after a two-day meeting it will maintain its third asset-purchase plan and continue to inject $40 billion a month into the economy. The Fed’s statement did recognize some parts of the American economy were showing signs of improvement, but it vowed to keep its main interest rate near zero until mid-2015 to continue to support the recovery with extraordinary measures. “The committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions,” the statement said. The Fed said the housing construction sector is strengthening, but business investments continue to be weak. To those who who worry the Fed’s third round of quantitative easing will spark inflation, the Fed said it picked up, but mostly due to increasing energy prices. Analysts expect the central bank to review these measures in December.

French Unemployment Rises to Highest Since 1999

Unemployment in France surged 1.6 percent in September to its highest level in over 13 years. This is the 17th consecutive monthly increase, bringing the total number of jobless people to 3.06 million, and the biggest jump since April 2009, at the height of the crisis. This number does not include workers in part-time jobs who are seeking full-time employment, who represent another 1.4 million people. The most affected are young adults, as well as those approaching the end of their careers. Employers continued to favor temporary employment. “This is like a ship at full speed,” said Labor Minister Michel Sapin. He predicted unemployment will continue to rise in the next few months. Since the election of Socialist President François Hollande, the jobless rate rose above 10 percent, although the Labor Ministry did not update this figure today. France has had to face a series of layoffs by major companies such as carmaker PSA Peugeot Citroën, who closed a plant in Aulnay and announced it will eliminate 8,000 jobs. Heads of large companies like EADS have been calling on the government to reform stringent labor laws in order to facilitate investment and employment.

Israeli Bombing Blamed for Fire in Sudan’s Capital, Sudan Threatens to Retaliate

Sudan accused Israel for the bombing and fire of a military arms factory today in south Khartoum, the country’s capital. “We think Israel did the bombing,” Culture and Information Minister Ahmed Bilal Osman said. ”The people have seen it with their eyes – four planes coming from the east, and we have no enemy other than Israel. We reserve the right to react at a place and time we choose.” Undetonated missiles showed proof that Israel was behind the attack, Osman added. He said that Sudan would retaliate, although not with a direct attack on Israel. While Israel hasn’t said anything on the attack, experts believe Sudan is used as a route to smuggle weapons into the Gaza strip for Hamas, considered by western members of the international community as a terrorist group.

Confusion over Greek Deal for 2 Extra Years to Reach Budget Goal

An announcement by Greek officials of a deal with the country’s lenders, the troika (European Central Bank, European Union, and International Monetary Fund) to obtain the next tranches of a bailout package was quickly rebuffed by representatives of the EU today. Greece said that its lenders gave it an extra two years to meet its budget targets, but Simon O’Connor, spokesman for EU Commissioner for Economic Affairs Olli Rehn, replied that the two years had not yet been granted as the troika’s report on Greece’s progress is not ready. Without bailout money, Greece, which has been caught for months in tortuous negotiations on further spending cuts, will be running out money in three weeks, making it impossible to honor its debts and more likely that it could leave the Eurozone. Even if the change in schedule were agreed on, the country would still have to see a parliamentary majority approve the deal.

U.S. Sues Bank of America for $1 Billion on Fraudulent Mortgages

The U.S. Department of Justice announced today it is suing Bank of America Corp. for selling “defective” residential mortgages to government-sponsored companies Fannie Mae and Freddie Mac. The complaint, filed today in Manhattan’s federal court, details how a program to give out loans without checks on wrongdoing that started in 2007 at Countrywide Financial continued until 2009, even after the company was acquired by Bank of America. The bank proceeded to sell those loans to Fannie Mae and Freddie Mac, and the loans went on to defaulting, thereby defrauding the government at the height of the global financial crisis. “The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” said Preet Bharara, the U.S. Attorney in Manhattan. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.” This is the latest in a series of legal issues Bank of America has faced. Last month, it paid $2.4 billion to settle a suit that accused it of hiding important informations from shareholders about its acquisition of Merrill Lynch.

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