Recovery to begin next year - Views on News from Equitymaster

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Recovery to begin next year

Mar 16, 2009

Ben Bernanke believes that economic recovery will begin next year. In an interview with CBS, the US Fed Chairman said, "We'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time." He believes the key to a full recovery is stabilisation of the banking system. Also defending government actions, he said that Lehman could not be saved because it did not have the assets to provide the collateral. In contrast, AIG could sell its insurance operations to repay the government. Mr. Bernanke added "I just have every confidence that as we get through this crisis, that our economy will begin to grow again, and it will remain the most powerful and dynamic economy in the world." Outrage over AIG bonus plan
Speaking of AIG, it recently came in for heavy criticism for its plans to hand out US$ 1 bn in bonuses and retention pay to employees. It may be noted that AIG, has received a bailout package of US $170 billion. In a bid to manage the outrage, the insurer released a list of banks that had taken insurance from the company against the default of risky bonds. A portion of the bailout funds ended up with these banks, including Societe Generale, Deutsche Bank, Goldman Sachs and Merrill Lynch among others. Even so many months after their murky workings first came to light, high finance finds it difficult to mend it ways. As they say, old habits die hard.

Bharti's restructuring on the cards
As per a leading business daily, Bharti Airtel, the country's largest telecom company by number of subscribers, plans to recast its businesses into nine verticals under different CEOs. In a bid to expand into new segments, the company will look at verticals such as mobile commerce, entertainment, media, internet, enterprise services and small & medium businesses. Interestingly, the DTH business will be spun off into a new business. The company will also revamp its reporting structure. Apparently this move will provide opportunities to mid level managers, who might otherwise be poached by rivals. It may be noted that the Bharti effected changes in its top management last week. It is indeed interesting that the company is being reshaped to accommodate its managerial talent. That certainly sets a new precedent.

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