Financial Headlines

Warrants become key issue as banks look to repay TARP:
Banks are eager to repay the U.S. government for money they received through the Troubled Asset Relief Program and to do so as quickly and inexpensively as possible. The government received warrants from the banks when the financial system was poised for disaster, and those warrants are becoming a sticking point. The New York Times (18 May.)

Hedge fund clients of Madoff sued by liquidating trustee:
The trustee liquidating the investment firm of Bernard Madoff sued hedge funds managed by Fairfield Greenwich Group, demanding the return of $3.2 billion that the funds withdrew from their Madoff accounts. The lawsuit states that the funds received annual returns ranging from 10% to 21% from Madoff, figures that the trustee described as "unrealistically high." The trustee also found evidence of 280 stock trades for the funds that are "clearly fictional," according to court papers. The New York Times (18 May.)

U.S. could struggle 5 years after recovery, Krugman says:
Rising unemployment, which is expected continue after the recession ends, could lock the U.S. into a "depressed economy" for as long as five years, Nobel Prize-winning economist Paul Krugman said at a financial conference in Seoul, South Korea. He said it is possible the U.S. economy will return to GDP growth this summer, with Europe following "a little bit later." Forbes/The Associated Press (19 May.)

Libor indicates credit crunch is over, economists say:
For the first time since May 2007, Libor returned to a normal level, prompting economists to say the credit crunch has ended. "This marks a return to normal territory and gives us hope that we can cope with anything that comes now," said Peter Chatwell, an interest-rate strategist at Credit Agricole's Calyon. "It indicates that the banks are well capitalized, with no more surprises. It gives us hope that we have a functioning banking system and that we can now go about the job of running the broader economy." The Times (London) (19 May.)

Unemployment to linger as recovery begins, Geithner says:
Joblessness will continue to increase, even as evidence emerges that the U.S. economy is stabilizing, Treasury Secretary Timothy Geithner said. Millions of Americans will continue to suffer from the effects of the downturn because hiring lags behind rising economic growth, he said. The Sun (Baltimore)/The Associated Press (18 May.)