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Tue, Jan 22, 2008
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Iranian Facts
Subprime Fallout Response
China Getting Tough on Corruption
All Fall Down?
Citi’s Kitchen-Sink Moment

Iranian Facts
The new factbook by the World Bank has provided a snapshot of migration and remittances for all countries, including Iran, as well as regions and income groups of the world, compiled from available data from various sources.
The latest figures and remittances data for Iran are as follows:

Latest Figures
Population (millions, 2006): 69
Surface Area (1,000 sq. km, 2006): 1,648
Population Growth (avg. annual percent, 1997Ð2006): 1.4
GNI ($ billions, 2006): 221
Population Density (people per sq. km, 2006): 42
GNI Per Capita, Atlas Method ($, 2006): 3,000
Labor Force (millions, 2006): 29
GDP Growth (avg. annual percent, 2002Ð2006): 6
Urban Population (percent of pop., 2006): 67.4
Age Dependency Ratio: 0.47
Poverty Headcount Ratio at National Poverty Line (percent of pop., 2004): 0.1
Emigration (2005)
Stock of Emigrants: 969,920
Stock of Emigrants as Percentage of Population: 1.4 percent
Top Destination Countries: US, Germany, Canada, Sweden, UK, Netherlands, France, Australia, Austria.

Skilled Emigration (2000)
Emigration Rate of Tertiary Educated: 13.1 percent
Emigration of Physicians: 4,354 or 6.1 percent of physicians trained in the country

Immigration (2005)
Stock of Immigrants: 1,958,703
Stock of Immigrants as Percentage of Population: 2.8 percent
Female as Percentage of Immigrants: 39.7 percent
Refugees as Percentage of Immigrants: 55.0 percent
Top Source Countries: Afghanistan, Iraq, Pakistan, Azerbaijan, Turkey, Armenia, Turkmenistan.

Subprime Fallout Response
092910.jpg
IMF's priority is to help its member countries address
their economic and financial vulnerabilities in this new, volatile environment, even if these vulnerabilities are not directly
related to the subprime crisis.
Following the recent subprime mortgage crisis in the United States and the resulting global market turmoil, the IMF has recalibrated its work program and launched a number of initiatives with the aim of developing policy proposals both to deal with the present crisis and to improve the Fund’s capacity to spot potential trouble spots.
The crisis, which erupted in mid-2007, has had far-reaching and still evolving consequences. The shock has forced significant writedowns at some of the world’s largest financial institutions and required, in some cases, significant capital injections from existing and new shareholders, including sovereign wealth funds.
Notwithstanding these responses, the impact of the crisis is likely to be protracted and most forecasters have scaled back their estimates of growth for this year.

Focusing on Member Countries
To better understand the complex interactions between financial markets, the IMF has ramped up its work, both in-house and with its member countries and other international institutions, to analyze the causes of the crisis, its spillovers to the world economy, and the possible policy responses.
The IMF’s first priority is to help its member countries address their economic and financial vulnerabilities in this new, volatile environment, even if these vulnerabilities are not directly related to the subprime crisis.
At the bilateral level, the preparation and delivery of country assessments and updates under the joint IMF-World Bank Financial Sector Assessment Program (FSAPs) to member countries, which was already on the rise, was stepped up further following the crisis, as national authorities are becoming more aware of the critical linkages between the financial sector and the macroeconomy.

Analytical Tools
The IMF’s Monetary and Capital Markets Department (MCM) has speeded up the development of tools to test for vulnerabilities and for the risk of contagion, and to probe the resilience of the financial system at the national and the global level.
A new generation of stress tests and macrofinancial risk modeling is being gradually rolled out that aims to capture the highly complex interactions between the macroeconomy and financial markets, second-round effects of shocks, liquidity risks, and the possible impact of “extreme events“.
The emphasis is on creating practical, user-friendly tools that can be used easily by IMF teams and country authorities to assess and monitor risks.

Key Areas
In addition to these activities, last October the IMF’s policy-guidance body, the International Monetary and Financial Committee, asked the Fund to investigate the implications of the subprime meltdown. In response, the IMF’s MCM Department set up five working groups, each focusing on an area related to the recent crisis:
-Risk management practices related to complex financial products, including in the biggest financial institutions;
-Treatment of complex products by rating agencies and their impact on investor behavior;
-Basic principles of prudential oversight for regulated financial entities;
-Valuation and accounting for off-balance-sheet instruments;
-Liquidity management.
In this effort, the IMF is working in close cooperation with national authorities, supervisors, international standard setters, the Financial Stability Forum and the private sector among others.
In short, several factors had a bearing on the effectiveness of the central banks’ response to the liquidity crisis, in particular the range of collateral they were prepared to accept, the ability to interact directly with a large number of counterparties, and the extent to which reserves are remunerated.
Needless to say, this experience also highlighted the need for closer coordination of their activities in turbulent times.

China Getting Tough on Corruption
092913.jpg
Corruption occurs where public power is not subject to effective oversight.
China’s fight against corruption has turned so expansive in recent years that reports of even public servants at the ministerial level being sacked for corruption no longer raises eyebrows.
According to Chinaview.cn, in each of the past years, some bigwigs fall into the net of the disciplinary authorities of the Communist Party of China, on corruption charges.
All this leads to a stronger popular belief that the CPC is getting really tough on the corrupt.
The CPC Central Commission for Discipline Inspection (CCDI), the Party’s and the country’s most effective corruption buster so far, has worked hard and achieved a lot in handling one of the most prominent sources of public indignation. From its toils there is a clear awareness and consistent resolve of the President and CPC General Secretary Hu Jintao cited on Tuesday while addressing a CCDI event.
President Hu made a sensible point calling for awareness of the complexity, difficulty and long-term nature of the fight against corruption. China cannot do away with such an evil in just one stroke. It has to prepare for a long campaign that may be full of twists and turns. And there has to be no turning back.
People hope to see the CCDI apply the toughest blows against corrupt elements. Their existence has not only tarnished the Party’s image and credibility, but greatly discounted its pledge to deliver good governance. But no matter how much more diligent and energetic it is, the CCDI has its limitations.
A more efficient way to do it lies in President Hu’s proposal to restrain powers. Corruption occurs where public power is not subject to effective oversight. The remedy then is to make sure it is placed under scrutiny.
Putting limits to public powers is no doubt a tricky job, especially when vested interests are involved. But it is worth the pains if China is truly after a long-term solution.

All Fall Down?
America’s big bond insurers, which have underwritten some $2.4 trillion of private and public-sector bonds, usually go about their business largely unnoticed. But now they are looking distinctly wobbly.
If one or more of them were to topple over, there will be a huge knock-on effect on banks and other financial institutions that rely on their guarantees. This in turn will further worsen the credit crunch and cause an even bigger headache for policymakers already grappling with a sharp slowdown in the American economy.
As reported by Economist.com, the threat of such a financial domino effect looms large. Moody’s, a credit-rating agency, has signaled that it might downgrade the AAA-ratings of two of the biggest bond insurers, MBIA and Ambac, in the near future.
On Friday January 18th, Ambac said that it had dropped a plan to raise $1 billion of new equity capital to preserve its rating--making further downgrades even likelier. In response, Fitch, another rating firm, cut Ambac’s rating.
MBIA, which recently managed to raise $1 billion of new capital on top of another billion that it received from Warburg Pincus, a private-equity firm, will almost certainly need even more money if it is to preserve its AAA-rating. ACA Financial Guaranty Corporation, another insurer, is in even direr straits. In December its single-A credit rating was cut to junk status. The firm begged its trading partners to give it more time to sort out its problems. But by Friday it had still not come up with a rescue plan. The state insurance regulator of Maryland, where ACA is incorporated, has already assumed responsibility for some of its operations.
Bond insurers in effect “lend“ their top-notch ratings to lower-quality debt, raising its value in the eyes of investors. Any cut in those ratings may make it impossible for the bond insurers to take on new business and would reduce the value of the securities they have already underwritten. Such cuts are now a distinct possibility because the insurers have underwritten billions of dollars of mortgage-backed securities, including those notorious collateralized-debt obligations (CDOs) that have now gone sour.
There are already signs that the insurers’ woes are contagious. Merrill Lynch wrote down $3.1 billion on debt securities that it had hedged with ACA and other bond insurers. Other banks have also made writedowns to reflect their lack of confidence in ACA’s ability to meet its commitments.
The full extent of the “counterparty risk“ banks face in dealing with bond insurers is only now becoming apparent. Jamie Dimon, the boss of JP Morgan Chase, has said that the fallout from the bond-insurer crisis could be “pretty terrible“ for the debt markets.
If a big insurer such as Ambac or MBIA were to take a tumble, that could look like an understatement.

Citi’s Kitchen-Sink Moment
Credit cards and other consumer-finance businesses are deteriorating fast as America’s economy flirts with recession.
Citi reported a $4.1 billion rise in credit costs in its American retail operations for the quarter and indicated that losses will grow. It does not help that a hefty 13 percent of its loans are to subprime borrowers. Corporate lending also looks wobbly. And Citi is on the hook for billions-worth of loans for leveraged buyouts. Since the markets turned, these have proved hard to shift on to other investors, reported AP.
Add further unwanted balance-sheet growth, such as Citi’s forced absorption of $49 billion-worth of off-balance-sheet investment vehicles, and the upshot is severe strain on important ratios.
There is the odd silver lining. Citi still does well in emerging markets, wealth management and its advisory business. As only a mid-ranking player in commercial property, it can expect to do less badly there than some. But it will be galling to see rivals such as Bank of America--which last week bought Countrywide, a big and troubled mortgage lender--snap up potential bargains while Citi puts its own house in order.
Is this really Citi’s kitchen-sink quarter, or might it get even worse? As a new boss, it is in Vikram Pandit’s interest to shove as much bad news as possible into his first set of results, knowing that the blame will go to Chuck Prince, his predecessor. He can then take credit if the write-downs prove too pessimistic, and if the assets are in fact worth more than they seem.
That remains a possibility. Lacking a better benchmark, banks have resorted to using the ABX index of mortgage-related derivatives when working out how much to mark down their investments.