02/05/2014 World Business Report


02/05/2014

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latest headlines from BBC World News. Now for the latest financial

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news with Alice Baxter and World Business Report.

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Poor credit, no problem. Subprime lending is booming again, but are

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the banks storing up another crisis? Plus, have US employers put the

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bleak winter behind them? Markets await the latest jobs numbers.

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Welcome to World Business Report I'm Alice Baxter. Brazil tries to drag

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its airports into the 21st century, but will they be ready for the World

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Cup? But first, not so long ago "subprime" was a word to strike fear

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into the hearts of bankers everywhere. Risky mortgage lending

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to people with poor credit ratings ` who eventually defaulted on their

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debt `was the main trigger of the 2008 financial crisis. But are the

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banks back to their old ways? Subprime lending is booming once

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again in the US ` not for home loans, but for cars. According to

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the credit agency Experian, the total amount owed on car finance in

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the US had risen to $750 billion by late last year An estimated 36% of

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those loans have been made to subprime borrowers. So are the banks

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storing up serious trouble for the future ` and maybe even another

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financial crisis? Michelle Fleury reports from New York.

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This is the famous baseball stitch. This man owns multiple Karsh

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dealerships in New Jersey. He has been in the business for nearly four

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decades. Sales in 2014 are at great pace `` multiple car dealerships.

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There is the easy availability of finance now, thanks to the return of

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sub`prime lending. That is loans to people with poor credit. Loans to

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car buyers with sub`prime credit scores of 650 points or below have

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been rising significantly since the recession. In 2013, they accounted

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for more than a quarter of new car financing. Loans to people with

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credit scores below 450, so`called deep prime, have been on the

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increase, and Steve, it a mixed blessing. I am quite happy, but

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long`term, if something is not good, it is not good. We saw that with the

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housing crisis. Are we at that point yet? We are quite a distance from

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that point in time where the alarm bells had to go off, but we should

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be turning up the volume a bit more and listening. It was mortgage

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lending to people at higher risk of not repaying their debt that nearly

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dished Drogba financial system in 2007. Why is something considered by

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some as toxic making a comeback? One factor is low interest rates.

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Investors need higher returns, one area to find that is lending money,

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with people with lower credit scores. In this situation, Wall

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Street packages are sold to investors, who can make more money

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down the road and are willing to take more of a risk. In many parts

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of the country, a car is vital to get around. As the economy

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recovers, auto shows are retracting huge numbers of eager buyers, who in

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turn, are attracting huge amounts of risky loans. What could possibly go

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wrong? What indeed? Meanwhile the big

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question for financial markets this Friday, how strongly is the US

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economy recovering, after the severe winter weather brought growth to a

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halt? Optimistic comments from the Federal Reserve pushed US shares to

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new records earlier this week. So investors will be looking for signs

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of Spring in the latest monthly employment numbers, known as the

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non`farm payrolls. Employers are expected to have created 210,000 new

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jobs in April, according to economists polled by Reuters. That

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would be the best month since November, and enough to bring down

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America's jobless rate to 6.6 per cent. Those figures are out at 0830

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Eastern Time or 12.30 GMT and we will bring you them as soon as they

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are published. Well, here copied who? Apple and Samsung could get the

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verdict on their patent cases as early as this weekend. They have

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been battling it out in the Californian court over the past

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month. It is the battle of the titans. Let's get the details from

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Singapore. Can you remind us of the background to all of this? You would

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not want to be the judge in this case. For the non` technology

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expert, it is a classic he says, she says. There are a lot of

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technological arguments underpinning the claims and counterclaims. Last

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time these two clashed, the focus was on the look of the iPhone, Apple

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accused Samsung of copying the look. It is not the outside of the phone

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but inside the phone this time. Apple claims that Samsung made

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themselves a top player in smart phones by copying feature of the

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feature of the iPhone. It says ten Samsung devices in French of its

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patents last `` in French ten of its patents. That is worth $2 billion.

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Samsung says that you cannot copy something that is not there. ``

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infringed. Samsung also say that for Apple devices, including the iPhone

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five, in fumes to have its patents. `` in French. One thing that we can

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save sure is that whatever happens in this case, they will probably

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take their case to another court in another country and it will not

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over. ``infringe. I think it will not be over for some time! Thank

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you. All this week we've been looking at the challenges facing

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Brazil's economy as it prepares to host the World Cup. With more than

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600,000 fans expected to head to the tournament in just over a month's

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time, it'll be Brazil's airports that will give visitors their first

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taste of the country ` for good or bad. There has been major investment

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` but has it all been left too late? Katy Watson reports in the last of

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her series. The corporate video proudly shows

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off what the new international passenger terminal will look like at

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Brazil's busiest airport. This is the reality just a couple of weeks

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ago. People working around the clock to finish the terminal by the middle

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of May. The airport is adamant it will be ready but the capacity will

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be a fraction of the 12 million people it promises in the end. Just

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a few airlines will be using this during the World Cup. Delays like

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this are not uncommon. Some airports have announced they will be using

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temporary facilities during the tournament. Long before Brazil was

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awarded the World Cup, outdated airports in this country were a huge

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problem. Passenger growth has soared in the past few years. In 2007, when

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Brazil made the winning bid, big promises were made to upgrade

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airports around the country, but that was seven years ago, and people

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asking why, the last minute, so much work has to be done? This man this

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airport was one of the first to be handed over to a private company.

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The problem has been that the recent government has seen Private

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investment in infrastructure as a necessary evil. Therefore,

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concessions have been granted, very slowly. Much slower than they should

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have been. That has an impact on people travelling through airports

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already at full capacity. Some are a bit fed up. TRANSLATION: The apples

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and Brazil are rubbish. `` airports in Brazil. They are chaotic, we are

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approaching the World Cup, the Apple II Brio is like one in a small town.

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They have been building for some time and nothing works. `` the

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airport in Rio. But it is believed there can be one glimmer of hope for

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passengers. There will be less people flying at that time. Why? 70%

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of the traffic in the Brazilian industry is related to business.

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People fly because the business and events, meetings, and so on. This

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activity is going to vanished in the games. If that happens, it will be a

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welcome relief, and then, once the fans leave the airport, they will

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have to battle with the roads to the stadiums, in some places, they also

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work in progress. Katie Watson, BBC News. In other news, Pfizer is

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preparing to raise its takeover bid for UK rival AstraZeneca to more

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than 63 billion pounds, or $106 billion, according to a report by

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Bloomberg. A deal would be the biggest ever in the drugs industry `

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and the biggest foreign takeover of a UK firm. Royal Bank of Scotland is

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expected to report a quarterly profit later this morning. RBS is 81

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per cent owned by the UK taxpayer after a massive bailout during the

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2008 crisis. It has racked up some 46 billion pounds in losses since

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then. Let's have a look at the markets

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around the world, open today after being shot for Labour day yesterday.

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From me and the team, goodbye for now.

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School children have been asked to cook a meal that's out of this world

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for British astronaut Tim Peake. The UK Space Agency is looking for

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pupils to come up with the best British dish for his mission to the

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International Space Station next year. Celebrity chef Heston

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Blumenthal will help turn the winning ideas

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