Important financial news ( point- wise ) 

1. Tata group's total debt is set to exceed Rs 1,00,000 crore in the current fiscal but it appears comfortable in the liquidity front.Increase of more than Rs 30,000 crore in group's overall outstanding debt position from year-ago level of about Rs 70,000 crore is primarily due to its aggressive capital expenditure plans and past acquisitions.

2. A US-based private equity firm will partner with Phaneesh Murthy’s iGate to bid for Satyam Computer Services.  The unnamed PE firm has funds worth around $5.5 billion under its management.  The firm is partnering with iGate because of the management expertise in running an IT business, Mr Murty ( ceo of Satyam ) said. As per the conditions laid out by the Satyam board, iGate will have to show access to a minimum amount of Rs 1,500 crore on or before March 20, to be eligible for the bidding process. 

3. Effects of recession: The five biggest investment banks in the world (Lehman Brothers et al) have vanished in the financial carnage. The two biggest mortgage companies in the world, Freddie Mac and Fannie Mae, are under government overlordship. The biggest insurance company in the world, AIG, is on government life support. The biggest bank in the world, Citibank, has survived only with massive government help. General Motors, the biggest auto company in the world, is also on life support. The greatest icons of US capitalism are on crutches. 

4.Standard Chartered Bank has appointed Sreeram Iyer as Chief Operating Officer (COO), India.

5.State Bank of India has turned out to be the largest tax payer in the country with a tax outgo ofoutgo of Rs 5,733 crore for the fiscal yearending March 31, 2009. This is a 41% increase over the tax it paid last year. The bank’s tax outgo during the January-March quarter is Rs 1,810 crore.Engineering major Larsen & Toubro is also among the largest tax payers in the country, with a total tax outgo of Rs 802 crore, which is a 47% increase over the previous fiscal year’s collection. L&T’s tax outgo during the January-March 2009 quarter is Rs 245 crore.The all India tax collection until March 15, the last date for advance tax payment, has totalled Rs 2,82,021.60 crore. This is lower against the projected tax collection of Rs 3,95,000 crore for the current fiscal year. 

6.Citigroup Inc awarded Chief Executive Vikram Pandit $10.8 million of compensation in 2008, a year in which the bank required two govt. rescues totalling $45 bn.About $7.7 million of the compensation was a sign-on bonus the bank gave Pandit in January 2008, according to a regulatory filing on Monday. Pandit also received a salary of nearly $1 million and stock options of $1.6 million. Wall Street compensation has come under intense scrutiny recently, particularly at banks that have received government bailouts. Pandit was awarded an amount similar to the $9.9 million that Bank of America awarded to its CEO, Kenneth Lewis. 

Pandit did not receive a regular bonus for 2008. He has said he will accept no incentive pay and will accept base annual pay of $1 until Citigroup returns to profitability.

"IS WARREN BUFFETT CRAZY?"

WARREN BUFFETT called this "a great time to be in banking," talked about the massive "earnings power" of banks like Wells Fargo, and said that the government actually doesn't need to supply most banks with "lots of capital." (Another explanation for Buffett's relatively upbeat forecast was that, in industry parlance, he was just "talking his book," since he has big stakes in banks like Wells Fargo and U.S. Bancorp.) But the truth is that the recent history of U.S. banking suggests there's a chance, at least, that Buffett was right.

The key to understanding Buffett's less-than-apocalyptic take on the banks is the idea of the spread:

- the gap between the interest rate banks can charge for the loans they make and the interest rate they have to pay for the money they borrow -- from depositors or other lenders. When the Federal Reserve slashes interest rates, particularly when they slash them as aggressively as they have in the past year, spreads widen, so that every loan a bank issues becomes more profitable. And that's especially true today, because the risk aversion of investors and financial institutions has meant that the interest rates on loans have fallen less than they normally would have, given the steep decline in the fed funds rate.

Needless to say, the average interest rate it charged the people it was lending to was a lot higher than that. In fact, though it's hard to get exact data on this, it's possible that, as Buffett said, the spreads on loans have "never been wider." And when you combine that with the sheer number of loans these giant banks have on their books, you're talking about individual banks earning tens of billions of dollars on their own.

Does that mean that the banks are fine? Not necessarily. The basic problem the banks face is that they need to recapitalize themselves. One way to do that is by taking their profits and, as it were, banking them. But the banks still have lots of old, bad assets on their books, and it's possible that, as many predict, the value of those assets will fall more than their earnings will rise. And if the economy gets significantly worse, the increase in bad loans will probably cancel out the effect of wider spreads.

So why might most of the banks come out of this okay, without having the government nationalize them? One reason is that since most of these banks have slashed their dividends to pennies, every dollar they earn essentially goes to recapitalization, instead of going out the door to shareholders.

The interesting thing about this prescription is that, in some ways, it's precisely how the U.S. got out of its last big banking crisis, which happened during the recession of 1990-1991. Today's crisis is different in some important respects (in the earlier crisis, banks were able to make easy profits by investing in government debt, while today the profits on such an investment would be quite small). And there are some banks today which may be carrying so many bad loans that even their increased earnings power won't save them.

At the very least, though, history suggests that Buffett has not gone around the bend, and that it's a mistake to think that nationalization is the only plausible solution to our current banking crisis.