RBS faces class action
A New York law firm announced on Saturday it had filed a class action complaint in US court against the Royal Bank of Scotland (RBS) for allegedly issuing false statements that exposed shareholders to risky subprime loans. The law firm Murray, Frank & Sailer said it was acting on behalf of shareholders over two separate public offerings made in May 2006 and September 2007. The shares closed at US$5 and US$5.70 on Friday, a fraction of their original offering price of US$25. The lawyers said RBS “failed to disclose risks that RBS’ exposure to the subprime mortgage market was understated,” that “RBS would be forced to take write-downs” that “would substantially decrease RBS’ capital levels,” which “would force RBS to accept a bailout by the British government.” RBS is now 70 percent owned by the British government. The bank has forecast it would make a British corporate record annual loss of up to £28 billion (US$41 billion).
Fiat aid package imminent
A bank loan totaling 3 billion euro (US$3.9 billion) to help struggling Italian carmaker Fiat is “almost ready,” ANSA news agency reported on Saturday. The funds are “almost ready and only the technical details are being worked out,” ANSA quoted Enrico Salza, the executive board chairman of Italy’s biggest bank Intesa Sanpaolo, as saying. Last Monday, Fiat chief executive Sergio Marchionne said he expects this year to be the company’s toughest year to date, while also warning that the country’s auto sector could shed 60,000 jobs unless the state comes to the rescue. The massive bank loan comes less than two weeks after Fiat announced a major tie-up with Chrysler, slashed its forecast for this year and said it would cut production this month and next month.
Stiglitz gives advice
The US fiscal stimulus plan of more than US$800 billion should contain tax cuts focused more on investment than consumption, Nobel Prize-winning economist Joseph Stiglitz said. “We really need more investment,” Stiglitz, a Columbia University economist, told Bloomberg last Wednesday. “Too much of it is on the side of tax reductions” for consumers. “We know that those tax reductions are not likely to be very effective,” Stiglitz said, adding that the tax benefits for businesses “are not as linked as I would like them to be to investment.”
Union extends talks
The United Steelworkers Union said on Saturday it would extend by 24 hours talks for a new labor contract for US refinery workers, delaying a possible strike that could affect over half of US refining capacity. “Sufficient progress has been made in our deliberations today to warrant a rolling 24-hour extension at all locations,” USW spokeswoman Lynne Baker said in a statement. “Discussions are continuing.” A spokesman for lead refiner negotiator Shell Oil Co said the company expected a successful conclusion to the talks. “Shell is committed to resolving the remaining issues at the negotiating table,” Shell spokesman Stan Mays said. “We are optimistic that a mutually satisfactory agreement can be reached with the USW.” The existing three-year contract was set to expire yesterday morning shortly after midnight. After that, as many as 24,000 workers at US refineries, chemical plants and pipelines could have begun walking off their jobs. Union and industry negotiators meeting in Austin, Texas, had to reach a deal yesterday or face a possible strike.