World financial news

World stocks rose on the first trading day of the year after a dismal 2008, while the dollar gained. Crude oil and metal prices fell, as did government bonds.

Global stocks as measured by the MSCI world index were up 0.5%, with the pan-European FTSEurofirst 300 gaining 1.1%.

"The unprecedented events of 2008, and continuing fallout into 2009 will see a number of false dawns and continuing volatility throughout the coming year," said a trader at derivatives broker Blue Index in London.

Data still painted a bleak picture for the global economy after factories in China, India and Russia slashed output and jobs at a record pace in December.

Manufacturing activity in the euro zone also sank to a record survey low last month, below an already dire flash reading and the outlook remains grim as new orders also sagged to new lows.

The downturn in activity was accompanied by falling inflationary pressures, clearing the way for the European Central Bank to cut interest rates again when it meets later this month, as it is expected to do.

"The good news about this year is that people have been so pessimistic at the beginning of this year as opposed to being so optimistic at the beginning of last year, they may have overdone the pessimism," said Justin Urquhart Stewart, London-based investment director at Seven Investment Management.

"And that’s quite sensible because there are some huge challenges to face cash advance no fax. The thing people should remember is that equity markets generally recover in a recession but it’s like trying to fight your way through the dust after the explosion’s gone off."

The euro fell 0.3% to $1.395 and the yen also slipped against the dollar, which last year posted its firstly year gain against a basket of currencies since 2005.

As global demand weakened, oil prices remained in the doldrums after reaching their peak of $147 a barrel in July. Crude traded at around $41 a barrel, down more than 7%.

Gold also gave up gains, having started on a firm note in early trade, as the dollar bounced from lows, but expectations of more grim U.S. economic data could still ignite safe-haven buying from investors.

Prices in relatively risk-free government bonds also slipped. Yields in benchmark 10-year U.S. Treasurys ticked up 1 basis point, while the German 10-year Bund yields were 7.3 basis points higher at 3.022%.

Euro zone government bonds had a stellar year in 2008 with two-year yields falling around 50% and 10-year yields by a third as the market rallied due to the credit crunch and resulting economic downturn. 

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GMAC LLC may have applied for up to $6 billion in funds from the government’s financial bailout program, and could potentially sell $17.5 billion in government-backed debt to shore up its capital position, CreditSights said.

The finance company, owned by Cerberus Capital Management (CBS.UL) andGeneral Motors Corp (GM, Fortune 500), on Wednesday won approval to become a bank holding company, giving it access to the government lending program.

GMAC has said without bank holding company status, it would likely have to sell assets and take other extraordinary measures to make good on its obligations. The company, which makes auto loans for GM’s customers, has lost $7.9 billion over the last five quarters.

"While GMAC has not quantified its capital injection request from Troubled Assets Relief Program (TARP), we estimate the company could have applied for up to about $6.3 billion," CreditSights analysts Richard Hofmann and Adam Steer said in a report late on Thursday.

This is based on capital injections being limited to 3 percent of risk-weighed assets, the analysts said quick cash advance.

GMAC may also be eligible to sell up to $17.5 billion in bonds backed by the Federal Deposit Insurance Corp if approved to sell debt under the government’s Temporary Liquidity Guarantee Program (TLGP), CreditSights said.

Issuance under the TLGP is limited to 125 percent of outstanding, unsecured debt that a company issued before Sept 30, 2008, and that matures before June 30, 2009, the analysts said.

GMAC’s bonds surged on the news of the approval of bank holding company status. The company’s 5.625 percent bond due 2009 jumped 27 cents to 94 cents on the dollar, according to MarketAxess.

The cost to insure GMAC’s debt with credit default swaps also plunged to around 24 percent the sum insured, or $2.4 million to insure $10 million for five years, plus annual payments of 5 percent. The swaps had traded at around 47 percent before the news. 

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Manufacturing in the U.S. probably shrank at the fastest pace since 1980 as the deepening global recession forced customers in North America, Europe and Asia to cut back, economists said before reports this week.

The Institute for Supply Management’s December factory index dropped to 35.4, the lowest reading in almost three decades, according to the median estimate of economists surveyed by Bloomberg News. A separate report may show the record drop in home prices accelerated in October.

The real-estate crash has reverberated throughout the world as credit markets seized up, choking off demand for everything from cars and trucks to computers and appliances. President- elect Barack Obama, who takes office Jan. 20, has said his first priority will be to pass an economic stimulus plan that will invest in public works and create or save 3 million jobs.

“Manufacturing is getting it from every direction,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “Domestic demand is falling apart and foreign demand is falling apart.”

The Tempe, Arizona-based ISM’s factory report is due Jan. 2. Readings below 50 indicate contraction.

Regional surveys have already signaled the manufacturing slump persisted this month. The Federal Reserve Bank of New York’s general economic index fell in December to the lowest level since records began in 2001, and the Philadelphia Fed’s index showed industries in that region contracted for the 12th time in 13 months.

Chicago Index

The Institute for Supply Management-Chicago’s U.S. business activity index, due Dec. 30, is projected to decline to 33, the lowest level since 1982, according to the survey median.

The Standard & Poor’s industrial index is down 37 percent this year, compared with a 32 percent drop in the broader 500 index.

Automakers have been among the hardest hit as sales in November dropped to the lowest level in a quarter century, according to industry figures no teletrak payday loan. President George W. Bush announced Dec. 19 that General Motors Corp. and Chrysler LLC will get $13.4 billion in initial government loans to keep operating while they restructure operations to return to profitability.

The U.S. recession has spread overseas and that’s hurting foreign demand for American-made goods.

Pittsburgh-based PPG Industries Inc., the world’s second- biggest coatings maker, on Dec. 22 said fourth-quarter earnings will fall more than analysts estimated because the weak global economy is hurting auto-paint and glass sales.

Global Slowdown

“Market softness seen initially in the U.S. industrial markets is now prevalent on a global basis,” Chief Financial Officer William H. Hernandez said in a statement. “Our businesses that serve these industrial end-markets are experiencing significant volume deterioration.”

Economists surveyed by Bloomberg in the first week of December forecast the world’s largest economy will contract through the first half of 2009. The National Bureau of Economic Research on Dec. 1 announced the U.S. fell into a recession a year ago.

The decline in property values that is at the root of the credit crunch probably deepened, another report due on Dec. 30 may show.

The S&P/Case-Shiller index for the 20 largest metropolitan areas will show that home prices fell 17.8 percent in October from a year earlier, the biggest decline since record keeping began in 2001.

Falling home prices make it harder for homeowners to refinance, leading to a surge in foreclosures and weaker consumer spending. Declining stock and home values caused household net worth to drop by a record $2.8 trillion in the third quarter, according to the Fed.

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Canada will provide roughly $4 billion in aid to its automotive sector, officials announced Saturday, honoring a previous pledge to provide 20 percent of whatever was offered to automakers by the U.S. government.

The 4 billion Canadian dollars equals about $3.3 billion in U.S. dollars.

Some 400,000 residents of Ontario "rely on the auto industry so they can put food on the table and keep a roof over their heads," Ontario Premier Dalton McGuinty, who made the announcement along with Canadian Prime Minister Stephen Harper, told reporters.

"What the prime minister and I are saying today is that those people and their jobs are worth fighting for."

Ontario will provide about $1.3 billion of the total, McGuinty said.

The funds will be given to the Canadian subsidiaries of the U.S. automakers.

Harper insisted the aid was "not a blank check," and that conditions will be attached to the short-term loans.

"The bottom line is that all stakeholders will be expected to make adjustments to ensure that these auto manufacturers are financially competitive" — including management, unions, bond holders and others, he said.

"This is a regrettable but necessary step to protect the Canadian economy," Harper said. The government will not allow the Canadian automotive sector — which is inextricably linked with U.S. automakers — to fail, he said.

On Friday, President Bush announced a rescue plan for General Motors (GM, Fortune 500) and Chrysler LLC that will make $13.4 billion in federal loans available almost immediately. The money will come from the $700 billion fund set aside to bail out Wall Street firms and banks in October payday loans.

GM will get $9.4 billion from the first allocation of federal loan money, and Chrysler will receive the other $4 billion.

With these loans, the U.S. Treasury Department will have committed virtually all of the $350 billion of that fund it can hand out without additional congressional authorization. Once Congress releases the other $350 billion, the two automakers will be able to borrow an additional $4 billion.

Canada is taking a "holistic approach along the supply chain," Harper said, and will take two additional measures besides the short-term loans — extending additional accounts-receivable insurance, and creating a new facility to support access to consumer credit.

And strings are attached, much like the U.S. loans.

The Canadian loans will stay in place beyond March 31 only if the automakers can demonstrate they have solid restructuring plans in place, McGuinty said.

Canadian officials acknowledged there is risk involved. Come March 31, there is a "real possibility" the automakers will seek more funds, McGuinty said. Officials will deal with that if and when necessary, he said. "For the time being, we choose to act to keep these companies afloat."

"Our hope will be to recoup much, if not all, of this money," Harper said.

"We cannot afford, either in the United States or Canada, a catastrophic short-term collapse. The automakers must change the way they are doing business in a very serious way." 

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Japan logged a trade deficit for the longest period in nearly 30 years in November as a global economic slump and a surging yen led to a record fall in exports, tearing into earnings at big companies such as Toyota.

With shipments to the United States and China wilting, the mood among Japan’s export-reliant manufacturers hit an all-time low and deteriorated at the fastest pace on record in December, a Reuters poll showed on Monday.

Underscoring the deepening gloom, Toyota Motor Corp (), the world’s biggest automaker, on Monday forecast its first ever group operating loss due to a relentless global slide in car sales and a crippling rise in the yen.

“Exports will probably be weak at least until the end of this fiscal year,” said Maiko Noguchi, senior economist at Daiwa Securities SMBC.

“After that, there will be some help from fiscal spending (by other countries) but it’s still not clear the economy could recover sustainably.”

A record 26.7 percent plunge in exports, bigger than a 14.4 percent fall in imports, pushed Japan’s once politically sensitive trade balance into a deficit of 223.4 billion yen ($2.48 billion) in November.

That was smaller than a median market forecast of 257.5 billion yen but the second straight month in the red.

Japan last recorded a trade deficit for two months in a row in 1980, when it was locked in a trade dispute with the United States and its currency appreciated to 200 yen to the dollar from more than 300 yen in the 1970s health insurance quotes.

The Bank of Japan cut interest rates to 0.1 percent last week. Mounting trouble in the world’s second-largest economy has strengthened expectations that the BOJ might return to a quantitative easing policy of flooding markets with excess cash dropped just two years ago, a Reuters poll showed.

BOJ Governor Masaaki Shirakawa said on Monday that with Japanese rates already low, the key issue for monetary policy would be how to facilitate corporate funding by making money more easily available at a lower cost.

“The world economy is in a very severe condition it has not experienced for a long time, I’d even say, a crisis. Extinguishing the fire from the crisis is our priority for now and we are doing all we can,” Shirakawa said in a speech to business leaders.

U.S., ASIAN DEMAND SLUMPS

The yen has surged around 20 percent against the dollar this year as investors, spooked by the global financial crisis, bailed out of risky assets and brought funds home.

The deepening economic gloom at home and abroad is triggering output cuts by major Japanese companies such as Toyota, which slashed its annual profit forecasts in its second profit warning in less than seven weeks.

Automakers around the world face the toughest business environment in recent memory, caught in a sharp reversal of demand as credit dries up and consumers close their wallets. 

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President-elect Obama on Thursday kept up his blistering pace of naming top officials by announcing three people he will nominate as financial regulators.

During a press conference in Chicago, he said that "creating a regulatory structure that prevents broad systemic risk" will be a top priority in his administration.

"We have been asleep at the switch," Obama said, referring to the failure of regulators, lawmakers and White House officials to foresee the systemic meltdown that has battered the economy and financial markets.

One of his administration’s early initiatives, Obama said, would be to streamline regulatory agencies and reform financial to better address 21st century developments in the financial markets.

Obama promised to "restore a sense of responsibility" to Wall Street and Washington so traders, regulators, shareholders and others "operate out of a sense for the common good," while at the same time ensuring conditions are conducive for both Wall Street and Main Street to prosper.

To help him execute his regulatory goals, Obama named Mary Schapiro to head the Securities and Exchange Commission, which regulates companies with publicly traded securities. Schapiro currently is chief executive of the Financial Industry Regulatory Authority, the largest non-government regulator for securities firms that do business with the U.S. public.

Obama’s announcement comes on the heels of growing criticism that the SEC failed to act on information it had that could have prevented one of the largest investment fraud cases in history.

"We’ll ensure openness, accountability and transparency in our markets," Obama said at a press conference in Chicago. "And instead of appointing people with disdain for regulation, I will ensure that our regulatory agencies are led by individuals who are ready and willing to enforce the law."

Schapiro has a long track record as a financial regulator during the Reagan, Bush and Clinton administrations. She headed the Commodity Futures Trading Commission during the Clinton administration and the National Association of Securities Dealers in 2006 quick pay day loan. She also briefly served as the SEC’s acting chair in 1993, and had been a commissioner there for six years before that.

Obama also tapped Gary Gensler to chair the Commodities Futures Trading Commission, which regulates the futures and options markets and ensures fair trading practices.

Gensler, a former partner at Goldman Sachs, was the Treasury’s assistant secretary for financial markets during the Clinton administration. He also served as an adviser to Hillary Clinton’s presidential exploratory committee and before that was senior adviser to Sen. Paul Sarbanes, chairman of the Senate Banking Committee who was instrumental in getting a law passed in the wake of the Enron scandal to create more transparency in corporate accounting.

Co-author of "The Great Mutual Fund Trap," Gensler was a vocal critic of mutual funds’ fees and the undisclosed incentives brokers had to sell them. He blamed the SEC for lax oversight of the industry.

Earlier this year, the CFTC was blasted by Democratic lawmakers and others for not taking a stronger hand with oil speculators and for brushing aside the theory that oil speculation unduly pushing oil prices to record highs earlier this year.

Finally, Obama named Georgetown law professor Dan Tarullo to fill a vacant seat on the Federal Reserve Board of Governors, which among other things determines monetary policy for the country and is making unprecedented moves to curtail the country’s financial crisis.

Tarullo, whose specialty is international economics and banking, held several senior posts in the Clinton administration, ultimately becoming the assistant to the president for international economic policy. He also served as an economic adviser during Obama’s election campaign.

During his term, Obama will have the opportunity to make at least two more appointments to the Fed’s seven-member board.

CNNMoney.com senior writer Tami Luhby contributed to this report. 

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Package delivery giant FedEx Corp reported a higher profit for its fiscal second quarter, meeting expectations, but announced a 20 percent pay cut for CEO Fred Smith and said it was suspending retirement plan contributions as the U.S. economy’s outlook looks bleak.

FedEx said it has a hiring freeze in place and has cut staff levels at its FedEx Freight and FedEx Office units.

FedEx said new measures include a 20 percent base salary decrease for Smith and pay cuts of between 7.5 and 10 percent for other senior executives as of January 1. All other U.S. salaried personnel will have a 5 percent pay cut.

According to a company filing with the U.S. Securities and Exchange Commission in July, Smith’s base salary for the company’s fiscal 2009 year was set at around $1.48 million.

The company also announced the suspension of matching contributions to FedEx’s 401(k) retirement plan for a minimum of one year as of February 1.

FedEx said the cost-cutting measures would reduce expenses by $800 million by the end of its fiscal 2010 year.

“Our financial performance is increasingly being challenged by some of the worst economic conditions in the company’s 35-year operating history,” Smith said in a statement.

FedEx also gave a broad earnings outlook range for the second half of its fiscal 2009 year and said it would not provide an outlook for the third quarter because of “significant economic uncertainty faxless pay day loans.”

“It’s tough, but it’s a sign of the times,” Al Meyers, portfolio manager of the AHA Diversified Equity Fund, which owns FedEx shares, said of the pay cuts. “The fact that executives including Fred Smith are taking pay cuts sends a message to employees that ‘we’re all in the same boat,’ which is a positive.”

“As long as we have confidence in the management at FedEx and in the overall business model, we’ll stick with them,” he added.

The Memphis, Tennessee-based company, which like United Parcel Service Inc is considered a bellwether of U.S. economic health, reported that net income for its fiscal second quarter ended November 30 rose to $493 million, or $1.58 per share.

That compared with the $479 million, or $1.54 per share, the company reported a year earlier.

FedEx said falling fuel prices had lifted profits, which offset lower package volumes due to global economic weakness.

“I am very pleased with the results,” said Dan Ortwerth, a research analyst at Edward Jones. “FedEx is getting better and better at managing its cost structure.”

Edward Jones has a “buy” rating for both FedEx and UPS. 

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NEW YORK — A federal judge on Monday threw a lifesaver to investors who may have been duped in one of Wall Street’s biggest alleged frauds, saying they need the protection of a special government reserve fund set up to help investors at failed brokerage firms.

U.S. District Judge Louis L. Stanton ordered that clients of Bernard Madoff’s private investment business seek relief under a federal statute created to rescue cheated investors. Stanton also ordered that the business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process.

Stanton signed the order after the Securities Investor Protection Corp. asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as $50 billion in losses.

The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they have been wiped out, and it is thought many more are yet to come forward.

The list of the funds, firms, foundations and individual investors that have some exposure to the Madoff scandal reads like a Who’s Who. The Royal Bank of Scotland, Steven Spielberg and Sen. Frank Lautenberg are among the victims.

But Madoff’s alleged malfeasance also has affected the less well known.

In Fairfield, Conn., town officials scrambled Monday to get a handle on damage to pension funds held for its police officers and firefighters. The Robert I. Lappin Charitable Foundation, a Salem, Mass., organization that sponsors Jewish educational program is being forced to close it’s doors.

"It’s devastating to people and communities and lives," said Deborah Coltin, executive director of the Lappin Charitable Foundation.

Stanton’s order came just days after federal prosecutors charged Madoff with securities fraud, saying he had admitted to orchestrating a massive Ponzi scheme. Madoff is free on $10 million bail after he was charged with securities fraud last week payday loans for bad credit. Ira Lee Sorkin, Madoff’s lawyer, declined to comment.

Though Stanton’s order could provide some relief to Madoff investors, it will only cover a small percentage of the overall loss they may suffer.

 Stocks stumble amid manufacturing woes

 NICKLAUS: Puny rates may push investors to seek risk

Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000. The figure includes a maximum of up to $100,000 on claims for cash.

The SIPC will oversee the liquidation of the Madoff funds, but how much will come from that is unknown. SIPC President Stephen Harbeck said in a statement that the fund’s task will be harder than in other bankruptcies because of the size of the misappropriation and the condition of the defunct firm’s records.

Harbeck said it would be unlikely that the trustee can transfer the firm’s customer accounts to a solvent brokerage firm. He added that it was impossible at this point to determine what share each investor might hold in any remaining assets.

The impact of Madoff’s arrest wasn’t only felt in the U.S. Among those overseas confirming exposure on Monday, Banco Santander, the largest bank in the euro zone by market capitalization, said its clients have $3.07 billion invested with Madoff, mostly through a fund called Optimal Strategic US Equity.

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In another sign of the grim holiday season, KB Toys filed for bankruptcy protection for the second time in four years on Thursday and plans to begin going-out-of business sales at its stores immediately.

The 86-year-old company said in a filing that its debt is "directly attributable to a sudden and sharp decline in consumer sales" because of the poor economy.

That a toy retailer filed for bankruptcy just before Christmas shows how bleak things have become, since such stores make up to half of their sales during the holidays. But analysts expect toy sales this holiday season to be flat or down slightly from last year’s total of $10.4 billion, according to market research firm NPD Group, because consumers are cutting back amid the recession.

In response, toy retailers, including KB Toys, amped up their discounts.

KB Toys had aggressively cut prices to entice cash-strapped shoppers, offering hundreds of toys for $10 or less. It also expanded its value program, which offers deals on new items each week, and offered "Buy 2, Get 1 Free" promotions.

But the deals weren’t enough. In the filing in U.S. Bankruptcy Court in Delaware, KB Toys said that between Oct. 5 and Dec. 8 sales in stores open at least one year, a key retail metric known as same-store sales, fell nearly 20%.

The company said it considered its alternatives and decided the most viable way to cover its debt was to begin liquidating its stores via immediate going-out-of-business sales. KB Toys also plans to sell its wholesale distribution business, according to the filing.

Filing for Chapter 11 protection rather than Chapter 7 liquidation allows a company to retain more control over selling off assets. Under Chapter 7, the court immediately appoints a trustee to take over the case.

KB Toys declined to comment beyond what was in the filing.

The company operates 277 mall-based stores, 40 KB Toy Works stores which are mainly in strip malls, 114 outlet stores and 30 short-term holiday stores. It has 4,400 full-time employees and 6,515 seasonal employees.

KB Toys, which says it has about $480 million in annual sales, said in the filing that it had debts between $100 million and $500 million and total assets in the same range easy payday loan.

Vendors top the list of unsecured creditors. The toy retailer owes Hong Kong-based toy manufacturer Li & Fung about $27.2 million, El Segundo, Calif.-based Mattel Toys (MAT, Fortune 500) $1.3 million and St. Louis-based Energizer Battery more than $728,000. Other creditors are Hasbro Inc. (HAS) and the maker of Legos.

Pittsfield, Mass.-based KB Toys filed for bankruptcy in 2004 and emerged nearly two years later as a subsidiary of investment firm Prentice Capital Management, which owns 90% of the company’s common stock. During that bankruptcy, KB sold its retail Internet operation to eToys Direct Inc., cut the number of retail stores from 1,200 to 650 and closed a distribution center.

Jim Silver, a toy analyst at timetoplaymag.com, said KB had been struggling since emerging from its first bankruptcy protection in 2005.

"Manufacturers were concerned about shipping to them over the last couple of months," he said. "This did not happen all of a sudden."

He said that the timing of the filing was a surprise, however, since he expected it in January. But as manufacturers balked at shipping "hot" holiday toys, their sales dropped off. KB Toys also suffered from deciding not to sell video-game consoles such as the Nintendo Wii, one of the few toy items selling well this year, Silver said.

"Their business model didn’t work," he said. "They’re selling closeouts, today people want the hot toys."

Amid the consumer spending slowdown and recession, KB Toys joins a growing list of retailers filing for bankruptcy protection. Others include Mervyns LLC, The Sharper Image, Steve & Barry’s, Linens ‘N Things and Circuit City Stores Inc. (CC, Fortune 500) 

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The ailing U.S. economy needs more injections of state money to get better and should reform its health care system, a leading international economic organization said Tuesday.

The Organization for Economic Cooperation and Development noted rate cuts and bailout plans have helped the economy, but said that growth will probably deteriorate further before improving and that more fiscal stimulus would be required.

The report by the Paris-based organization was finalized Dec. 5, a day before President-elect Barack Obama said he plans the largest U.S. public works spending program since the creation of the interstate highway system a half-century ago. That could bolster the economy by putting thousands to work building schools and other construction projects.

Obama also said he wants to expand health coverage, although the current recession may make the plan difficult to finance.

The United States has already been in recession for a year and may not be out of it until the spring of 2010 — making for the longest downturn since the Great Depression, many economists say. Recessions in the mid-1970s and early 1980s lasted 16 months.

"Further fiscal stimulus will be desirable if financial conditions and economic prospects do not quickly improve," the OECD said in an economic survey of the United States.

"It is nonetheless likely that activity will get worse before it gets better."

The OECD said "aggressive" cuts in interest rates, large tax rebates and the $700 billion bank bailout plan have provided "crucial support" to the economy car insurance quotes.

But it said that "sharp downside risks to growth continue," pointing to uncertainties on bank solvency and credit supply.

The OECD also highlighted the failure of the U.S. health care system which it said deprives many people of "adequate financial access to medical care."

It recommends replacing the health insurance tax exclusion with subsidies for the individual purchase of insurance, as well as reform of the insurance market.

While backing further spending to ease recession pains, the OECD said the U.S. deficit is unsustainable in the long term and that Obama should give priority to "strong budget consolidation" as soon as possible.

On monetary policy, the OECD said low borrowing costs are needed in the near term but that "interest rates should be raised promptly once the economy revives" to avoid boosting inflation.

Federal Reserve Chairman Ben Bernanke is now expected to ratchet down a key interest rate — near a historic low of 1% — by at least a half-percentage point on Dec. 16 in a bid to breathe life into the moribund economy.

The OECD also said that U.S. housing finance needs to be "fundamentally reformed" and that a "major overhaul" of financial regulation and supervision is needed. 

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