US seeks to revamp Wall Street, GDP shrinks 6.3 pct

NEW YORK, (Reuters) – U.S. and European officials  proposed strict new financial rules yesterday to stabilize  the economy and curb the type of risk-taking that nearly  wrecked the banking sector and set off a global recession.

U.S. Treasury Secretary Tim Geithner called for a powerful  systemic risk regulator with the authority to probe deep into  non-bank financial enterprises, such as hedge funds and private  equity firms.

“Comprehensive reform” was needed, “not modest repairs at  the margin,” Geithner told a congressional panel.
European Central Bank Governing Council member Nout Wellink  earlier asked for hedge funds to be directly supervised, saying  the sector has been a “blind spot.”

While authorities sought to rewrite financial regulations,  the United States released revised fourth-quarter GDP data  showing the economy shrank at its fastest pace since 1982 in  the fourth quarter and corporate profits plunged a record  $120.1 billion.

The headline figure of a 6.3 percent contraction in the  October-December period was slightly better than the consensus  forecast of negative 6.5 percent in a Reuters survey of  economists.

That helped Wall Street stocks, which also received a boost  from better-than-expected results from consumer electronics  retailer Best Buy, consumer foods business ConAgra and soft  drinks company Dr Pepper Snapple.

The tech-heavy Nasdaq ended 3.8 percent higher to turn  positive for 2009 and the Dow Jones industrials added 2.2  percent, taking its gains over the past 13 sessions to 21  percent.

European shares ended flat and Japan’s Nikkei index closed  up 1.8 percent earlier in the global trading day.
“We are seeing some optimism, we are seeing some return of  risk appetite, both of which we have not seen for a while,”  said Mike Wittner, Societe Generale’s global head of oil  research.

Atlanta Federal Reserve President Dennis Lockhart warned,  however, that one month of improved data does not constitute an  economic recovery and the recession in the United States will  last for at least a few more months.

He was referring to data on Wednesday that showed new  orders for long-lasting U.S.-made goods rose in February for  the first time in seven months and new home sales rebounded.

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