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Sweden’s recession eased in the second quarter after government stimulus measures and record low central bank rates helped drag Scandinavia’s largest economy toward recovery.

Gross domestic product contracted an annual, work-day adjusted 6.2 percent, from a decline of 6.5 percent in the previous quarter, Statistics Sweden said in a statement today. The median forecast of 14 economists surveyed by Bloomberg was for a 6.7 percent contraction. GDP was unchanged from the first quarter after contracting 0.9 percent in the first three months.

“Longer term this shows the Swedish economy is stabilizing,” Nordea Bank AB economist Johanna Jeansson said in an e-mail. “We will see early signs of recovery in the second half of the year.” Jeansson expects the krona to gain against the euro in the “medium term.”

Riksbank Governor Stefan Ingves has eased policy more than his counterparts in Norway and Frankfurt, cutting the key rate to a record 0.25 percent as he struggles to jolt the economy out of recession. That’s underpinning the effect of government stimulus measures, with Prime Minister Fredrik Reinfeldt pledging to spend 45 billion kronor ($6 billion) this year to revive growth.

Krona Gain

The krona strengthened the most against the dollar since Oct instant cash advance. 14, gaining as much as 1.25 percent to 7.3211 and to trade at 7.3605 as of 10:35 a.m. in Stockholm. Against the euro, the krona gained the most since Nov. 28, jumping 1 percent.

Exports slumped an annual 18.3 percent while fixed investment sank 18.8 percent, the office said. Household consumption fell 2.2 percent, compared with a 3 percent drop in the first quarter. Imports declined 19.4 percent after dropping 14.8 percent the previous quarter.

Manufacturing returned to growth last month, ending an 11- month contraction, as companies that had trimmed stocks began to build up inventories on the prospect of a return of export demand, a survey of purchasing managers showed on July 1. Consumers also grew less pessimistic in July, with an index measuring household sentiment rising to minus 3.7 this month from minus 9 in June.

The economy will shrink 5.4 percent this year, the central bank estimated on July 2. Exports in June fell 12 percent compared with the same month in 2008, while imports fell 22 percent, trade data showed on July 27.

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Former Bank of England policy maker Stephen Nickell said Britain needs to build more houses than he estimated last year because the recession has hit construction.

At least 237,800 extra homes are required each year until 2031, the National Housing and Planning Advice Unit, of which Nickell is chairman, said in a report published in London today. That’s 3 percent more than the group said would be needed in June 2008.

The deepest economic contraction in at least a generation has exacerbated a housing-market crash after prices tripled in the decade to 2007. Homebuilders such as Barratt Developments Plc and Redrow Plc last year had to dump unsold homes at knock- down prices and halted almost all new developments business card design.

“The recession will have little impact on the number of homes that we need to build over the next 30 years,” Nickell said in a statement. “There are also likely to be increasingly serious wider economic and social consequences if we do not manage to bring the supply and demand for housing back towards balance and start tackling the backlog of unmet demand.”

Nickell’s housing unit, which advises the government, makes its estimates based on affordability and the number of new households it expects will be created.

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The U.S. needs a “First Amendment for the economy” to check excesses in financial markets, said Columbia University President Lee Bollinger.

Bollinger, a constitutional scholar and one of three Federal Reserve Bank of New York directors representing the public, said in an interview yesterday that an independent regulator modeled on the judicial system should issue written rulings and “if it’s wrong, go back and change the precedent.”

Bollinger, 63, who has led New York-based Columbia since 2002 and served on the New York Fed’s board since 2006, called the economic crisis a “huge failure of public regulation.” He cautioned against relying on Congress or “the people who are engaged in the economic act to say, ‘Stop, we’re taking too much risk.’”

The Federal Reserve might be the right body to “stand outside the system” as an independent regulator, said Bollinger in the interview, in New York. In the same way the U.S. Constitution’s First Amendment protects free speech against censorship during wartime, a “First Amendment for the economy” could rein in financial excesses, he said.

President Barack Obama, as part of the overhaul of U.S. financial rules, last month proposed giving the Fed power to supervise all financial firms “whose failure could threaten the stability of the system.”

The credit system freeze that followed last year’s Lehman Brothers Holdings Inc.’s bankruptcy and Bear Stearns Cos. collapse ushered in the biggest financial crisis since the 1930s. The government since September has spent billions of dollars bailing out Citigroup Inc., Bank of America Corp., American International Group Inc., General Motors Corp. and housing finance companies Fannie Mae and Freddie Mac.

Lax Regulation

Global financial firms reported more than $1.47 trillion of writedowns and credit losses since 2007. Obama, elected in November, said during his campaign that lax government regulation helped lead to the crisis.

Bollinger criticized former Federal Reserve Chairman Alan Greenspan’s “mystique” and “lack of disclosure.” He praised the more open approach of current chairman Ben Bernanke, citing Bernanke’s July 27 speech at a public meeting in Kansas City, Missouri that was taped for broadcast on PBS television easy payday loan.

Bollinger was dean of the University of Michigan Law School in Ann Arbor from 1987 to 1994 and is on the Columbia Law School faculty in addition to being the university’s president.

Columbia’s endowment declined about 20 percent for the year ended June 30, less than Harvard University and Yale University, and the school will press ahead with a $6.2 billion campus expansion, Bollinger said.

Less Leverage

Columbia, with an endowment of $7.1 billion as of June 30, 2008, “used less leverage” than its peer universities, Bollinger said. Columbia relied less on its endowment for operating costs than Harvard, in Cambridge, Massachusetts, or Yale, in New Haven, Connecticut.

Columbia plans to break ground on its 17-acre Manhattanville campus before the end of the year, Bollinger said. Investment declines of about 25 percent at Yale and about 30 percent at Harvard have forced those schools to curb construction and slash spending. Columbia used its endowment for 13 percent of its operating budget in the fiscal year that ended June 30, while Harvard relied on its endowment for about 35 percent of its annual budget and Yale for about 44 percent, the schools have said.

The Manhattanville project “is unbelievably important to Columbia,” Bollinger said. While Harvard can wait for the economy to improve before resuming its expansion, “We can’t,” he said.

The project, in west Harlem adjacent to Columbia’s campus in the Morningside Heights section of Manhattan, will take more than two decades to complete and will include business, science and arts buildings, said Victoria Benitez, a school spokeswoman.

Columbia, founded in 1754, had 25,459 students including 4,247 undergraduates at Columbia College, during the last academic year, according to the university. Alumni include President Obama, Supreme Court Justice Ruth Bader Ginsburg, and the actress Maggie Gyllenhaal.

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Senate Banking Committee member Bob Corker said he plans to introduce legislation giving regulators authority to wind down large financial companies whose failure poses a risk to the economy.

“I think we could come to a pretty quick agreement on how to deal with the resolution piece in a bipartisan way,” he said in an interview yesterday, after the Federal Reserve, Federal Deposit Insurance Corp. and other regulators testified before the committee.

Corker said there is “not much sympathy” for the Treasury’s proposal that taxpayers fund a resolution of a large institution first and assess fees to the industry later. “That’s not a path many on the committee want to go down,” he said.

Senator Mark Warner, a Democrat from Virginia, will co- sponsor the legislation, said Riki Parikh, a spokesman for Warner.

Fed Governor Daniel Tarullo yesterday told the banking committee that giving the Fed authority to regulate systemic risk “would be an incremental and natural extension” of the central bank’s current role.

In the interview, Corker, a Republican from Tennessee, said the “bloom is off” that idea.

“We need to have an entity to deal with systemic risk,” the senator said fast payday loan no faxing. “But the action Tarullo talked about was rule-making. A council can do that.”

Bair, Schapiro

FDIC Chairman Sheila Bair and Securities and Exchange Commission Chairman Mary Schapiro, who also testified before the committee yesterday, urged Congress to create a regulatory council to monitor firms for risks, breaking with an Obama administration plan giving the power to the Fed.

Corker said he had concerns about the Fed’s independence in creating monetary policy should it take on the role as systemic risk regulator. “I worry about what that does to the integrity of the Fed,” he said.

He expressed support for the plan put forth by Bair, which calls for an industry-supported fund that would eliminate the need for taxpayer money in winding down non-bank financial companies.

“Generally speaking, I think there’s a lot of support for the viewpoint that Sheila Bair has been putting forth, on both sides of the aisle. There’s a lot of recognition of the prudence of that,” he said.

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South Korea’s economy expanded at the fastest pace in almost six years last quarter as exports and household spending jumped.

Gross domestic product rose 2.3 percent from the first quarter, when the nation skirted a recession by growing 0.1 percent, the Bank of Korea said today in Seoul. That was better than the 2.2 percent growth estimated by economists.

Samsung Electronics Co. today joined exporters Hyundai Motor Co. and LG Electronics Inc. in reporting profit surged last quarter, helped by a weaker currency and demand fed by $2.2 trillion in stimulus worldwide. Consumer spending climbed 3.3 percent from the first quarter, the most in seven years, fueled by interest rates at a record-low 2 percent.

“Exports have improved more than expected while domestic demand got a big boost from the fiscal and monetary policy steps,” said Lee Sang Jae, economist at Hyundai Securities Co. in Seoul. “I expect Korea to remain on a recovery path” even after the boost from the stimulus measures wanes, he said.

The Kospi stock index rose 0.5 percent at 12:20 p.m. in Seoul, taking the year’s gains to 34 percent after a 41 percent drop in 2008. The won rose 0.2 percent to 1,246.45 per dollar.

Last quarter’s expansion was the fastest since the economy grew 2.6 percent in the last three months of 2003. Exports gained 14.7 percent, also the biggest advance in almost six years. From a year earlier, GDP shrank 2.5 percent.

China, Singapore

South Korea joins China and Singapore in leading a regional rebound, marking a turnaround for an economy whose currency tumbled 26 percent last year on concern companies would be unable to repay foreign debt.

President Lee Myung Bak’s approval rating plunged by more than half in the wake of the financial turmoil. To counter the crisis, in January he sacked his finance minister and created an economic war room in an underground bunker.

He also pumped money into the banking system, boosted fiscal spending by 67 trillion won ($54 billion) and set up funds to replenish banks’ capital. The central bank formed a dollar-swap agreement with the U.S. and cut interest rates.

“The economy got help from various stimulus measures and the second-quarter numbers show the steps worked,” said Kim Seung Hyun, head of research at Taurus Investment Securities Co life insurance quotes. in Seoul. “A weaker currency helped the nation’s exporters gain competitiveness.”

Samsung’s Profit

Samsung Electronics, which alone accounts for 15 percent of the country’s exports, today reported net income rose 5.2 percent to 2.25 trillion won in the three months ended June, the biggest quarterly profit in more than two years.

Hyundai Motor, South Korea’s largest automaker, yesterday said net income climbed to an unprecedented 811.9 billion won. LG, the world’s third-largest maker of liquid-crystal-display televisions, also reported record quarterly profit this week.

The revival of demand is prompting companies to spend more. Corporate investment in factories and equipment climbed 8.4 percent, today’s report showed. Government spending gained 1 percent and construction investment advanced 0.4 percent.

The central bank pared the benchmark interest rate by 3.25 percentage points between October and February, the most aggressive easing in a decade.

The rate reductions helped to fuel a real-estate boom that Bank of Korea Governor Lee Seong Tae said this month he’s monitoring. The government will act to quell property-market speculation within “two to three weeks,” Land Minister Chung Jong Hwan said on July 22.

Ailing Job Market

“Growth in the second quarter was helped much by policy measures” including a sales-tax cut on auto purchases, Kim Myung Kee, director general of the central bank’s statistics department, told reporters in Seoul. “Domestic demand probably won’t be able to rise as fast as the second quarter in coming months unless the job market improves quickly.”

Not all indicators point to a solid recovery. The jobless rate rose to an eight-year high of 4 percent in June, and the impetus from the government’s stimulus will eventually fade.

“Second-quarter growth got a temporary boost from stimulus measures, but it’s hard to say whether that will continue to push growth,” said Chun Chong Woo, an economist at Samsung Securities Co. in Seoul. “The key to sustained economic growth in the second half will be whether consumers and companies increase spending.”

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Federal Reserve Chairman Ben S. Bernanke sought to cordon off the central bank’s independence on monetary policy from congressional scrutiny as lawmakers challenged its authority on everything from currency swaps to emergency loans.

The 55-year-old Fed chairman yesterday stepped up his defense of the central bank as it faces a bill with 275 legislator-sponsors to repeal immunity from audits of monetary policy. Bernanke told the House Financial Services Committee that Fed actions helped avert a credit “collapse,” and gave Congress its own task: cut “unsustainable” budget deficits.

As lawmakers embark on the biggest financial-regulation overhaul in generations, “everything is up for grabs,” including Fed independence, said Christopher Rupkey, chief financial economist in New York at Bank of Tokyo-Mitsubishi UFJ Ltd. It would “open a Pandora’s box” for Congress’s Government Accountability Office to probe monetary policy, he said.

At stake is the future structure of the 95-year-old central bank, which was conceived to stem financial panics and is charged with achieving stable prices and maximum employment. Bernanke’s remarks yesterday showed he’s open to relinquishing some powers, while retaining autonomy on setting interest rates and oversight of consumer finance.

‘Political Backdrop’

“You definitely have to read this testimony in the context of the political backdrop,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “They said they helped to improve financial conditions and they warned not to tread on their independence or the economy is really going to suffer,” he said, referring to Fed officials.

Bernanke will testify before the Senate Banking Committee today at 10 a.m. in Washington in his second day of semiannual testimony on the economy and monetary policy.

The Fed is more popular with investors and economists than with Congress, polls suggest. Almost 75 percent of investors surveyed in the first Quarterly Bloomberg Global Poll this month said they have a favorable view of Bernanke. By almost a three- to-one margin, they said he has earned another four-year term when his current one expires in January.

Bernanke said in his remarks yesterday that while financial markets “remain stressed,” there have been “notable improvements” in recent months, with many “traced in part to policy actions taken by the Federal Reserve to encourage the flow of credit.”

Lawmaker Criticism

That opening didn’t faze some members of the House panel.

Representative Alan Grayson, a Florida Democrat, questioned what authority the Fed used to lend hundreds of billions of dollars through currency swaps to central banks around the world.

“One of the arrangements is $9 billion for New Zealand — that works out to $3,000 for every single person who lives in New Zealand,” Grayson said. “Wouldn’t it have been better to extend that kind of credit to Americans rather than New Zealanders?”

Bernanke countered that “we are lending to all U.S. financial institutions in exactly the same way” and that “we have a longstanding legal authority to do swaps with other central banks.”

Representative Ron Paul, the Texas Republican who wrote the bill to allow the GAO to audit Fed monetary policy, told Bernanke his proposed legislation “has nothing to do with interference with monetary policy personal loans.”

Rate Policy

Bernanke noted that there are already questions about whether the Fed will be able to raise interest rates from historic lows without political interference.

“If we were to raise interest rates at a meeting and someone in the Congress didn’t like that and said ‘I want the GAO to audit that decision,’ wouldn’t that be viewed as an interference?” he told Paul.

Lawmakers have sought greater scrutiny over the Fed after blaming it for failing to police lending practices during the credit boom that began to burst in 2007, sparking what has become the deepest U.S. recession in at least half a century.

The Obama administration’s proposed revamp of financial regulations would have the Fed stripped of powers over consumer finance, while at the same time make it the new overseer of all financial firms big enough to pose a risk to the system. It would also subject the Fed’s ability to make emergency loans to approval by the Treasury.

Consumer Finance

Bernanke yesterday said the Fed has done a “good job” protecting consumers and ought to keep authority in that area. He indicated he accepts the need for Treasury oversight of extensions of emergency credit.

Neither House Democrats nor Republicans have fully endorsed the administration’s plan. Representative Jeb Hensarling, a Texas Republican, said “the Fed should be focused on monetary policy, pure and simple.”

Representative Barney Frank, the Massachusetts Democrat who chairs the House Financial Services panel, said Bernanke didn’t make a convincing argument to keep consumer protection powers at the Fed.

“He is better at it than Alan Greenspan,” Frank said, referring to the Bernanke predecessor legislators have faulted for failing to employ the Fed’s rule-writing authority on lending practices. “But it is simply not at the center of their concern the way it will be at a separate agency.”

Deficit Message

Bernanke separately urged Congress and the administration to lay out a plan that would bring the budget deficit down to a “sustainable” level of 2 percent to 3 percent of gross domestic product, from a projected ratio of about 13 percent this year. Much of the shortfall stems from the $787 billion fiscal stimulus — which Bernanke said is too soon to judge for its effectiveness — and the Treasury’s financial-rescue efforts.

“Unless we demonstrate a strong commitment to fiscal sustainability, we risk having neither financial stability nor durable economic growth,” the Fed chairman said in his testimony.

Meantime, the Fed chief laid out his own exit strategy from the central bank’s efforts to combat the crisis. The central bank has expanded credit to the economy by $1.1 trillion in the past year through emergency loans and backstops for financial markets. The mixing of monetary policy with what economists call credit policy, or loans to specific organizations or markets, invited the scrutiny of Congress, economists said.

“Bernanke has led the Fed into uncharted waters,” said Gerald O’Driscoll, a senior fellow at the Cato Institute and former vice president at the Dallas Fed. “There is nominal legal independence, but less and less real independence over time.”

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Australia’s economy has survived the most dangerous phase of the global recession and will expand faster than the government forecasts, with fewer people losing their jobs, Access Economics said.

The economy will expand 0.4 percent in the 12 months through June 2010, compared with the Treasury department’s prediction of a 0.5 percent contraction, Chris Richardson, head of the Canberra-based research company said in a report today. Three months ago, Access forecast a 0.2 percent decline.

Consumer and business confidence is rebounding after reports showed Australia was one of the few economies including China and India to grow in the first quarter, helped by the lowest interest rates in half a century and A$12 billion ($9.8 billion) in government cash handouts to households. The government now faces a “budget repair task” as its stimulus package creates budget deficits until fiscal 2013, Access said.

“Australia made it through the most dangerous phase of the global recession with only collateral damage, aided by China’s early bounce and the remarkable resilience of Australia’s mums,” Richardson said. Consumers are spending 6 percent more than when the crisis hit.

China’s economy, Australia’s second-largest trade partner, grew 7.9 percent in the second quarter, making it the first of the major economies to rebound from the global recession, a report showed on July 16.

Still, “China’s bounce is built on sandy soils, and may not guarantee ongoing gains for Australia’s economy by late 2010 and 2011,” Richardson said.

Jobless Rate

Access said Australia’s jobless rate will peak at 7.5 percent, a percentage point lower than the government’s prediction. Access previously forecast a jobless rate of 8 classic car insurance.5 percent.

“That is good news, but it is still putting lipstick on a pig,” Richardson said. “We aren’t out of the woods yet. Consumers will flag from here” as the impact from government handouts fades.

“Similarly, businesses will be winding back spending through 2009-10, and the A$50 billion stripped from coal and iron ore export earnings is yet to hit profits and incomes,” he added.

To cushion Australia against the worst global recession since the Great Depression, central bank Governor Glenn Stevens slashed the benchmark interest rate by a record 4.25 percentage points between September and April to 3 percent.

Inflation Risk

Stevens left the rate unchanged on July 7 for a third month, and said slowing inflation gives policy makers scope to cut again if needed to spur domestic demand.

“The risk is that a world awash in money sees inflation in the recovery,” Richardson said. “Inflation risks are rising, though not as much as markets may fear. Both global and Australian interest rates will therefore lift during 2010 and into 2011.”

Signs are also emerging that the world’s biggest economy may be emerging from recession, with the index of U.S. leading indicators rising in June for a third consecutive month.

The Conference Board’s gauge of the economic outlook for the next three to six months increased 0.7 percent, more than forecast, after a revised 1.3 percent gain in May, the New York- based research group said. It is the first time the index has climbed for three months in a row since 2004.

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Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than $200 billion the government has pumped into U.S. financial institutions, according to a new oversight report.

When queried, banks are able to explain where the money goes in their businesses, said the report from Neil Barofsky, special inspector general of the Troubled Asset Relief Program, which covers a survey of the banks collected in March.

Barofsky’s survey collected information from 360 banks that have received TARP capital, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The responses, which the inspector general said it didn’t verify independently, showed that 83 percent of banks used TARP money for lending, while 43 percent used funds to add to their capital cushion and 31 percent made new investments.

Existing Treasury surveys of TARP banks’ lending don’t show enough about what the banks are up to, said the report by the independent inspector general, which is scheduled for public release tomorrow.

The Treasury’s approach “fails to recognize that TARP recipients do far more with their TARP funds than simply originating loans: They have also used these funds in a broader array of interrelated activities, as demonstrated in this audit, such as making investments, acquiring other financial institutions and simply maintaining the capital as a cushion against future losses,” the report said no fax payday loan.

The Treasury questioned whether the report’s findings had broad implications for overseeing the TARP program, in an official response to the report that noted most banks don’t manage their TARP money separately from other funds.

“We think caution should be exercised in drawing conditions from this data,” said Herb Allison, the Treasury’s assistant secretary for financial stability. “Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient.”

The report doesn’t include the responses from individual banks. The inspector general’s office said it is reviewing the responses for proprietary information and expects to post the banks’ answers by mid-August.

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China is likely to raise interest rates in 2010 as a recovery strengthens in the world’s third- biggest economy, a Bloomberg News survey shows.

The key one-year lending rate will climb 54 basis points next year to 5.85 percent, according to the median forecast of nine economists. The deposit rate will rise by the same margin to 2.79 percent.

Record new loans of more than $1 trillion in the first half of this year drove a rebound in China’s economic growth to 7.9 percent in the second quarter from a year earlier, government figures showed yesterday. The central bank will keep interest rates unchanged at a four-year low for the rest of this year to cement the recovery, the survey showed.

“Interest-rate hikes can be ruled out for the rest of this year because the global economic situation still isn’t clear and Chinese policy makers need to stay in a cautious mode,” said Sherman Chan, an economist with Moody’s Economy.com in Sydney.

The survey was compiled after the government released second-quarter gross domestic product figures in Beijing yesterday. The first-half economic expansion laid the foundation for meeting the government’s 8 percent growth target for the year, the statistics bureau said.

The central bank is using bill sales to drain cash from the financial system and push up money-market rates, countering record growth in money supply that threatens to create bubbles in stocks and property payday loan online. The Shanghai Composite Index has climbed 75 percent this year.

Failed Debt Sales

The finance ministry didn’t meet its target in a debt sale today, the third failure in two weeks. Demand for debt is cooling after new share sales resumed this month and as investors favor assets that benefit most from the recovery.

Most economists said reserve requirements, which specify the proportion of deposits that lenders must park with the central bank, will increase in 2010 after staying unchanged this year. The ratio is 15.5 percent for big banks and 13.5 percent for small lenders.

A previous Bloomberg News survey this month showed economists were split on whether interest rates would rise in 2010 or stay unchanged. They were also divided then on the outlook for reserve requirements.

While money supply is surging, consumer prices are continuing to fall in China, declining in June for a fifth straight month. “Monetary factors” have yet to add pressure for prices to rise, the statistics bureau said in a commentary published today.

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Japan’s demand for services unexpectedly dropped in May as an unemployment rate at a five- year high discouraged households from spending.

The tertiary index, a gauge of money households and businesses spend on phone calls, power and transportation, fell 0.1 percent from April, when it rose 2.2 percent, the Trade Ministry said today in Tokyo. The median estimate of 20 economists surveyed by Bloomberg News was for a 0.4 percent gain.

Declining profits are forcing companies cut costs and fire workers, which pushed the jobless rate to 5.2 percent in May health insurance quotes. The Bank of Japan yesterday cut its growth forecast for the year ending March 31 and said consumer spending “remains generally weak.”

“The job and income environment remains severe,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo. “They will keep suffering from cost cuts.”

The yen traded at 94.26 per dollar at 8:57 a.m. in Tokyo from 94.32 before the report was published.

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