The US Federal Reserve said Wednesday 16 December that the US economy is improving, and in the hours that followed the US dollar gained against most other major currencies. It was up 0.9 percent against the euro, a three-month high. The Fed said it wants to keep interest rates “extremely low” but that figures on jobs and consumer spending are showing positive signs.

Links to other sites: Bloomberg, Financial Times, Time Magazine

The US Senate banking committee has proposed a significant change to the US bank regulatory system, calling for a single body to regulate banks. The move would diminish the powerful role of the Federal Reserve in this area and would replace overlapping regulation by several groups, including the Federal Deposit Insurance Corporation and smaller regulators, with one new agency. The proposed legislation would also create a consumer financial protection agency. The powerful banking committee, under the direction of Senator Chris Dodd of Connecticut, has pushed into the open a struggle that has been going on behind the scenes to reform the US banking system: Dodd Tuesday 10 November presented the committee’s reform proposal, which goes substantially further than President Barack Obama’s suggested reforms. Initial reactions indicate that opposition from several corners, but especially from the Federal Reserve, will make it a tough fight.

Links to other sites: Financial Times, New York Times, NPR, US Senate banking committee site

Ben Bernanke, chairman of the US central bank the Federal Reserve, said 15 September that the recession in the US was probably technically over, but that unemployment would continue to undermine any recovery. A recession is officially no or negative economic growth for two consecutive quarters. Latest data about US employment indicates that the unemployment rate is at its highest since 1983, at 9.7 percent. US consumer confidence was up significantly, according to a survey published 15 September by Investor’s Business Daily/Technometrica market Intelligence. BBC, Reuters

Shares in Asia fell dramatically Tuesday after Wall Street’s worst day on Monday since the aftermath of 11 September 2001: in Hong Kong and Tokyo shares opened 5-7% down. Financial Times and Reuters More bad financial news: AIG, an insurer at the heart of the financial system, was given a $20 billion “lifeline” by the US government after its credit rating slipped, and the Federal Reserve is holding emergency meetings. FT