SATURDAY, APRIL 3, 2010
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ECONOMY BUSINESS
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What should Tim Geithner say to Indian officials during his two-day trip?
by Howard Schneider
that have become important trading partners and strategic allies as well, with a common interest in stabilizing a volatile part of the world. India is a key emerging economy, with more than 1.1 billion people and a strong technology sector. The United States runs an annual trade deficit with India that has reached as much as $12 billion, but foreign direct investment between the two countries was about even last year, at roughly $11 billion each. India is a potentially important market for
T
reasury Secretary Timothy F. Geithner departs for India on Sun- day for his first visit to the country as a Cabinet member. A host of issues are at stake between the nations: two large democracies
U.S. companies but retains significant restrictions on business owner- ship and the control of capital. It is also a possible partner with the United States in discussions over China’s economic policies but has been hesitant to criticize its large and economically influential neigh- bor.
Treasury officials spoke in general terms this week about the issues
that are likely to come up as Geithner launches what is being billed as the “U.S.-India economic and financial partnership.” What should the treasury secretary say to Indian officials during his two-day trip? Here are four opinions:
Arvind Subramanian, senior fellow, the Peterson Institute for International Economics and the Center for Global Development:
The Chinese are the competition — don’t forget it
CHINA
“The fact that the visit is tak- ing place at all is important. This is the Obama administration’s ef- fort to elevate the relationship. India is not the economic power- house that China is, but this sig- nals that India is getting there. “For both sides it is important.
For the U.S., one can detect a kind of frustration with China.” The India trip “is not neces- sarily a deliberate playing off, but it is good to have a balance. And
Ron Somers, president, the U.S.-India Business Council:
Open more markets to U.S. companies
“India has articulated the need
INDIA
for $1 trillion in infrastructure buildout — 20,000 kilometers of new roads, a dozen ports. They have 25 airports, which need to be upgraded, and they want to develop 25 new airports. “This is a trillion-dollar oppor-
tunity for U.S. companies. India needs to be mindful that the competition for capital will be fierce in the near term and the years ahead. Indian policies need
for India, it does not want to be seen as playing second fiddle on everything to China.” Subramanian said the United
States could find a natural part- ner in India if it wanted to build a coalition to encourage China to let its currency appreciate, a move that would make China’s goods more expensive and help alter some of the trade imbalanc- es around the world. “In the developing world,
there is huge overlap,” among the types of goods produced, making countries such as India and China direct competitors and making the Chinese curren- cy issue “a global, multilateral is- sue, not a U.S. issue alone. The Chinese have trapped the whole region. My advice to Geithner is be skillful and try to tap this and convert it into something that af- fects the global economy.”
DIGEST
HOUSING
U.S. easing rules for foreclosure program
The federal government said it is relaxing some rules to make it easier for communities to spend funds on redeveloping aban- doned and foreclosed properties. Changes announced Friday to a $4 billion program will allow communities to spend money on properties in mortgage default and uninhabitable homes with lingering code violations. The Department of Housing
and Urban Development said the changes allow more properties to
SAFETY
qualify for the program. Some officials say they have had trouble with confusing and ever-changing federal rules for the money, awarded in the midst of the nation’s foreclosure crisis. A recent report shows that a
year after the Neighborhood Sta- bilization Program started, about a third of more than 300 local governments given the help have barely made a dent in using their funds.
— Associated Press
S
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to be calibrated to attract its fair share. “We have been slogging away for years for India to increase foreign ownership in its insur- ance sector from 26 percent to 49 percent. Insurance companies like to buy long-term debt, and this would enable them to create a long-term debt market — and then you can start bond financ- ing” of infrastructure projects. Somers said that the council
Shuja Nawaz, director of the South Asia Center at the Atlantic Council:
India-Pakistan trade could help calm the region
“Total trade between India and
INDIA
Pakistan is about $2 billion a year. A pittance. If you look at in- direct trade that is run through Dubai, it is on the order of $3 bil- lion. And there is another amount through Singapore, which is the long and wrong way to do trade. You trade most with your immediate neighbors. Be- fore partition [Pakistan was cre- ated by the division of some prov- inces of western India in 1947], 70 percent of the areas that are
would like to see ownership rules lifted for the defense industry and banks as well and that “we’d like to see an opening in the retail sector. India’s social safety net- work is the mom-and-pop shops that line the roadways, so we un- derstand the sensitivity. But as much as 40 percent of some har- vests spoil on the way to market. “Liberalizing the retail sector would improve those inefficien- cies.”
KEVIN LEE/BLOOMBERG
A worker stands on top of drywall in Shanghai. About 3,000 U.S. homeowners have reported problems with Chinese-made drywall.
Homes with problem drywall must be gutted
now Pakistan and the adjoining areas of India were trading, and if you got back to that level, you’d be talking about $50 billion. In- dia needs a lot of things that Pa- kistan produces and vice versa. India’s biggest trading partners are the U.S. and China. Why shouldn’t it be Pakistan? “This has security implica- tions. A big hindrance to opening the border is terrorism and the attack on Mumbai. But the divi- dends would create large vested
Lori Wallach, director of Public Citizen’s Global Trade Watch:
We were wrong on financial deregulation — you got it right
“The Indian government was prudent not to implement the ex- treme financial deregulation model adopted by the U.S. and not to lock in financial deregula- tion with its World Trade Organi- zation commitments in the 1990s. Can India join us in lead- ing a new WTO negotiating agenda that would reopen the policy space for countries to re- regulate their financial system and lead to improved rules for
trade expansion that benefit more people?” “They are like a regulated free
market. There are a lot of things now in the private sector that were until recently government run. But it is a mixed model — they picked what they thought were the safeguards they wanted — so they have capital controls, and there are all these things where the private sector is in control, but they are regulated.”
With concern that more wide-
open trade would displace sub- sistence farmers and add to the country’s widespread poverty, “India has been a leader in how you get the benefits of trade but still have safeguards. They have safeguards on financial regula- tion and safeguards for small farmers. [To restart global trade talks] Obama needs a partner, and India is in a good position on finance and food to be part of it.”
interest groups on both sides, and among the general popula- tion on both sides. “At the political level, the Indi- ans are extremely sensitive in any third-party involvement with Pakistan, so Geithner has to be aware of that. But in closed-door meetings, there could be some discussion of regional integra- tion, and what really stands in the way of opening borders for businesses and crossborder in- vestment.”
Thousands of U.S. homes with problems involving Chinese dry- wall should be gutted, according to new guidelines released by the Consumer Product Safety Com- mission. The guidelines say electrical
wiring, outlets, circuit breakers, fire alarm systems, carbon mon- oxide alarms, fire sprinklers, gas pipes and drywall need to be re- moved. “We want families to tear it all out and rebuild the interior of their homes, and they need to start this to get their lives started all over again,” said Inez Tenen- baum, chairwoman of the com- mission.
Facing Facebook
Although Google has the biggest share of the U.S. online search market, it’s no longer the most visited Web site in the country. Facebook, benefiting as advertisers increase spending on social networks at a faster pace than on search engines, has been the most popular site for the past three weeks.
Share of all U.S. Internet visits
8%
New program to help homeowners with short sales
Government incentives for lenders aim to help curb foreclosures
by Renae Merle
As foreclosure prevention ef-
forts struggle to make an impact, the Obama administration will launch a program Monday en- couraging lenders to allow more distressed homeowners to sell their property for less than they owe on their mortgage. Government efforts so far have
focused on mortgage relief that helps borrowers avoid foreclo- sure. But the latest push reflects a growing realization that many troubled homeowners cannot qualify for help or would rather move on. So officials are focusing attention on efforts to ease bor- rowers out of their home without the stigma of a foreclosure. Under the new program, which has been in the works for nearly a year, lenders are paid if they agree to a short sale, which in- volves selling a home for less than the balance on the mort- gage. The lender must forgive the difference, allowing borrowers to walk away from the rest of the debt. This is potentially cheaper and faster for the lender than a foreclosure and keeps distressed properties from lingering on the
market for a long period and bringing down values of neigh- boring homes. “This program will provide an
alternative to homeowners when a modification is not the best op- tion,” said Treasury Department spokeswoman Meg Reilly. But short sales have tradition- ally been a long, cumbersome process with lenders who are sus- picious of lowball offers dragging out negotiations for months. In some cases, borrowers have sec- ond liens on the property and the holders of those liens can block a deal if they don’t like the terms. John Downer is facing many of those issues. Within two weeks of putting his Orlando townhouse on the market as a short sale in late January, a bidder offered $35,000 for the three-bedroom home, which Downer had listed for $50,000. He paid $170,000 for it in 2005. “I am cautiously opti- mistic, but who knows how long it will take,” Downer said. But more than two months lat-
er, Downer is still awaiting word on whether his lender will accept the offer. The bank has warned that the process could take six months to a year, he said. And an- other lender holding his $33,000 second lien has advised that he may still have to pay off that loan if that second bank is not satis- fied with the deal’s terms. “That would be a deal breaker for us,”
Rise in short sales
Percentage of home sales that were short sales in the Washington region.
20% Jan. 2010 - 15.1% 15 10 5 0
2008 2009
SOURCE: First American CoreLogic THE WASHINGTON POST
he said. The administration has not provided a price tag for its new program or estimated how many people officials expect to help. But to encourage lenders to com- plete more of these deals, officials announced last week they would increase incentives lenders are offered. Firms can now collect $1,500 if they allow a short sale, up from the $1,000 the govern- ment initially planned to offer. A bank that holds a borrower’s sec- ond lien can receive up to $6,000
’10
for releasing the homeowner from the debt. And to speed up the process, lenders must now agree to a price before the home is put on the market. There are also more incentives under the program for homeown- ers, who can receive $3,000 — up from $1,500 before — to help cov- er relocation expenses. “The bar- riers to short sales include a healthy dose of psychological burden from the homeowner, and sometimes you need that little ex- tra push to get the homeowners to a place where they are ready to let go of their home,” said How- ard Glaser, a housing industry analyst. Short sales already make up a growing part of the market, ac- cording to First American Core- Logic. They were 8 percent of home sales in January, compared with 5 percent in January 2009, according to the research firm. In the Washington region, they grew to about 15 percent of the market in January, compared with 10 percent in January 2009. “I do think it [the new pro-
gram] will help on the margins, but the scale of the mortgage dis- tress is so large, it overwhelms any public policy option,” said Sam Khater, a senior economist for First American CoreLogic. “They keep chipping away at it, but it’s a tough nut to crack.”
merler@washpost.com
2 3 4 5 6 7
1 0
JJ J
2009
SOURCE: Hitwise.com
FM AA
Facebook Google
For the week ended March 27:
7.47%
About 3,000 homeowners, mostly in Florida, Virginia, Mis- sissippi, Alabama and Louisiana, have reported problems with the Chinese-made drywall, which was imported in large quantities during the housing boom and af- ter a string of Gulf Coast hurri- canes. The drywall has been linked to corrosion of wiring, air-condi- tioning units, computers, door- knobs and jewelry, along with possible adverse health effects. Tenenbaum said some samples of the Chinese-made product emit 100 times as much hydrogen sul- fide as drywall made elsewhere.
— Associated Press
7.07%
Year-over-year change for week ended March 27
Facebook
186%
Google
8%
MM
S O N D J F
2010
BLOOMBERG NEWS
ALSO IN BUSINESS
Pilots allowed to take antide-
pressants: The government is lifting a 70-year-old ban on let- ting pilots fly while on anti- depressants, citing improve- ments in the drugs and an un- foreseen side effect of the restriction: Depressed pilots kept flying but kept their conditions secret. The change in policy, which in- cludes a degree of amnesty for pi- lots who lied about their diagno- sis and treatment on medical cer- tification forms, is aimed in part at cluing in the government on how many pilots suffer from a disease whose symptoms can in- clude thoughts of suicide, Feder- al Aviation Administration offi- cials said.
GM’s China sales top those in
U.S. again: General Motors’ sales in China rose to a record in March, surpassing its U.S. deliv- eries for a third straight month and cementing the country’s im- portance as the world’s largest auto market.
GM, the biggest foreign auto-
maker in China, boosted sales 68 percent to 230,048 vehicles last month, it said in a statement. That compares with a 33 percent gain for Japan’s Toyota and a 47 percent jump by South Korea’s Hyundai. GM’s U.S. sales in- creased 21 percent in March to 188,546.
Orbital Sciences completes ac-
quisition: Orbital Sciences said it has completed its $55 million ac- quisition of a General Dynamics subsidiary that specializes in spacecraft and development. The deal, announced a month
ago, puts Dulles-based Orbital Sciences in a better position to sell space systems equipment to the government. The General Dy- namics subsidiary, based in Gil- bert, Ariz., has built a variety of satellites for the Air Force, NASA, the Navy and other government agencies during the past 20 years. About 325 General Dynamics employees will be joining Orbital.
— From news services
U.S. markets were closed for the Good Friday holiday.
PAK.
Trade
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