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Monthly Archives: May 2012

On the desperation scale, the plea by Mario Draghi to European lawmakers Thursday was not on the same level as the genuflection to congressional leaders in 2008 by the U.S. Treasury secretary at the time, Henry M. Paulson Jr., who was begging them to approve a huge bank bailout.

But the note of frustration and urgency in Mr. Draghi’s voice made clear that he was aware of the problems in the euro zone that he said only the member nations’ politicians could now solve.

There have been many spikes in the euro zone’s crisis fever in the past, of course, with a bailout here or a stopgap measure there seeming to calm things for a while. But this time, Europe may have reached a moment when the currency union’s survival depends on a powerful, convincing response.

Greece, progenitor of the debt debacle, is in political turmoil once again, and this time it is in danger of dropping out of the euro zone altogether. Spain, with one of the region’s largest economies, is in the grip of a banking crisis, and there is a growing sense that the danger to Spanish banks is of an entirely different order of magnitude from that in suffering but small Greece.

The clearest danger signal may be the euro currency itself. It is at a two-year low against the dollar, as investors who can do so are pulling money out of the euro region.

U.S. officials are also displaying increasing concern. President Barack Obama spoke with European leaders by video conference this week and the U.S. Treasury Department dispatched a senior official, the under secretary for international affairs, Lael Brainard, to Berlin and other European capitals to get the message across.

Mr. Draghi, in what may have been his bluntest criticism of political leaders since he took office in November, said Thursday that half-measures and delays had made the euro zone crisis worse. He said the leaders needed to decide what kind of euro zone they wanted, and fast.

“Dispel this fog,” he said.

Mr. Draghi, a dignified Italian and economist by training, is not the type to go down on bended knee. But even if he were, whom would he beseech for action? At least Mr. Paulson, as head of a national treasury within a single government, knew whom to convince. The euro zone has 17 heads of government and 17 parliaments, not to mention the relatively powerless European Union executive branch and the E.U. Parliament that was Mr. Draghi’s audience Thursday.

Mr. Draghi, in other words, was underscoring the differences between the European and U.S. financial systems that might explain why the United States was able to recover, however feebly, from its crisis by the end of 2009, while Europe’s has no end in sight.

In some ways, in fact, Mr. Draghi may be the single most powerful figure in the euro zone drama, as head of the only institution with both huge financial resources and an ability to make decisions without a laborious political process. Government leaders, wary of the political cost, have looked time and again to the E.C.B. to deliver relief.

But Mr. Draghi said Thursday that the crisis now demanded solutions that could only come from political leaders — like creation of a Europe-wide bank deposit insurance program. Such a system, like the deposit insurance in the United States, would reassure bank customers that their money was equally safe in any euro zone country, and that might very well prevent the sort of money flight that is now sapping Spain. He also backed calls by European Commission leaders on Wednesday for a more unified banking system. But only the lawmakers of the euro zone countries could together create such a deposit insurance system.

“From the E.C.B.’s perspective, the next iteration of crisis management largely falls on the shoulders of member states,” said Mujtaba Rahman, a euro zone analyst at the Eurasia Group. “Arguably all the incremental plays have been exhausted.”

PARIS — President Barack Obama is putting increasing pressure on European officials to resolve the euro crisis, talking with the leaders of Germany, France and Italy to help lay the groundwork for action before a Group of 20 summit meeting to be held in June in Mexico.

Mr. Obama discussed the recent developments in Europe in video conference calls with the European leaders on Wednesday. Mr. Obama was following up on discussions he held at the recent Group of 8 meeting at Camp David with the German chancellor, Angela Merkel, the French president, François Hollande and Mario Monti, the Italian prime minister.

“Leaders agreed to continue to consult closely as they prepare to meet at the G-20 summit in Mexico next month,” the White House said in a statement. The meeting will be held June 18-19, beginning just a day after a Greek election that is being seen as a de facto referendum on that country’s euro membership.

The White House has also dispatched Lael Brainard, a Treasury under secretary, to Europe this week for talks with officials in Greece, Germany, Spain and France.

“The U.S. has doubts about its own pace of growth, it sees China slowing, and Europe is confronting a recession,” Hervé Goulletquer, head of fixed-income market research at Crédit Agricole, said. “If there is a deeper crisis in Europe, it will be an impediment for growth in the U.S., it will be a big issue for the country and for Obama as a candidate.”

Washington, is “pushing for more action in Europe,” Mr. Goulletquer said, “but I think everyone in Europe knows something has to be done.”

In Ireland, voters were going to the polls Thursday for a referendum on the European Union fiscal treaty for fostering budgetary discipline and growth. While polls have shown a small majority favoring the treaty, the Irish are already resentful of painful austerity measures, and success is not certain. A failure to back the agreement could mean that Ireland was unable to draw on European Union financing after 2013 if it needs another bailout and could further encourage anti-euro sentiment in Europe.

Final results will be known only on Friday.

The main concern on investors’ radar remains Spain, which is searching for a way to recapitalize its struggling financial sector. The government had to nationalize Bankia, a foundering mortgage lender, in May, and the bank said Friday that it would need 19 billion euros, or almost $24 billion, in new rescue funds. The austerity-strapped government has little in its arsenal to help other troubled lenders, and borrowing in the market has become prohibitively expensive, at around 6.5 percent for 10-year debt.

The situation has led to increasing capital flight, with the E.C.B. reporting that deposits in Spanish banks in April declined by 31.5 billion euros. Amadeu Altafaj, a spokesman for the European Commission, said the government in Madrid needed to move quickly to reassure investors.

“What you cannot do is maintain this uncertainty, which is what is dragging down market confidence,” The Associated Press quoted him as saying on Spanish National Radio.

“Spain is ‘too big to fail’ as far as the euro is concerned,” Charles Diebel, head of market strategy at Lloyds Banking in London, wrote in a research note. “And the funding issues and lack of viable bank resolution are causing an investor flight as seen before, but the numbers and magnitude are on a different level from anything seen thus far. We could be fast approaching a situation where the sanguine outlook maintained by some politicians in core countries cannot be sustained.”

Fitch Ratings on Thursday cut its ratings on eight Spanish regions, including Madrid and Catalonia, to one notch above junk, and said the outlook for all the regions was negative. Fitch said the action reflected “the negative economic and market environment in Spain, which has resulted in depressed fiscal revenues, and the structural fiscal deficits of the regional administrations, which will require considerable additional efforts to be reduced, and also the difficulties in accessing long-term funding.”

The Spanish deputy prime minister, Soraya Saenz de Santamaria, was in Washington on Thursday for talks with Treasury Secretary Timothy F. Geithner and the International Monetary Fund managing director, Christine Lagarde. Ms. Lagarde called her meeting with the Spanish official “very productive” and told reporters, as an I.M.F. spokesman in Washington had earlier, that Spain had not requested any financial assistance from the fund. “We are not doing any work in relation to any financial support,” Ms. Lagarde said.

Jack Ewing contributed reporting from Frankfurt.

This article has been revised to reflect the following correction:

Correction: May 31, 2012

An earlier version of this article misstated the dates of the Group of 20 meeting. It is being held June 18-19, not June 17-18.

“The configuration we had for 10 years, which was considered sustainable, has been shown now to be unsustainable unless further steps are undertaken,” Mr. Draghi told a committee of the European Parliament in Brussels.

In what may have been his bluntest criticism of political leaders since taking office in November, Mr. Draghi said that half-measures and delays by political leaders have made the euro zone crisis worse. He said they need to decide what kind of euro zone they want.

“The next step is for our leaders to clarify what is the vision for a certain number of years from now,” he said. “The sooner this has been specified, the better. Dispel this fog.”

Mr. Draghi, appearing before the Economic and Monetary Affairs Committee of the European Parliament, also delivered a bit of good news. He said that the E.C.B. has resumed normal lending to Greece’s four largest banks after they received fresh capital, easing fears of bank failures in the country that is at the center of the euro zone crisis.

As deposits flow out of Greece and Spain and fears of a bank run rise, Mr. Draghi underscored the E.C.B.’s determination to make sure that solvent banks do not fail because they are temporarily short of funds.

“The E.C.B. will continue lending to solvent banks,” Mr. Draghi told the committee. “We will avoid bank runs by solvent banks.”

But Mr. Draghi warned that the E.C.B.’s ability to prop up the euro zone banking system was close to its limits, and that it was up to political leaders to do more.

Mr. Draghi’s comments reflected the E.C.B.’s frustration with political leaders who have often tried to shift responsibility for fighting the crisis to the central bank, which is relatively immune to voter wrath.

While the E.C.B. can make sure that banks have enough money to operate from day to day, Mr. Draghi said, it cannot replenish depleted capital reserves. Nor can it solve the problem of excessive government debt or the inability of countries like Greece to compete in international export markets, he said.

“Can the E.C.B. fill the vacuum left by lack of euro area governance?” he asked. “The answer is no.”

A similarly stern warning came from Olli Rehn, vice president of the European Commission, who is responsible for economic and monetary affairs and the euro. Euro zone members must find ways to prevent the crisis from spreading from one country to another and hold down borrowing costs “if we want to avoid a disintegration of the euro zone,” Mr. Rehn said, according to a text of a speech to a conference in Brussels.

Mr. Draghi called on the European Union to establish a deposit insurance fund to reassure citizens that money in European banks is safe, as well as to regulate big banks at a European rather than national level.

“Greater centralization of supervision is essential,” Mr. Draghi said. “Bankia and other cases show this,” he added, referring to the troubled Spanish bank that is at the center of renewed euro zone tensions.

He cited Bankia as an example of how dithering by political leaders has made the crisis worse. It took too long for Spanish authorities to deal with the problems at Bankia, he said.

“Everybody winds up doing the right thing at the highest possible cost and price,” Mr. Draghi said.

Earlier this month, the E.C.B. cut Greek banks off from normal lines of credit because they had exhausted their capital reserves and were no longer eligible to receive the credit under the central bank’s rules. The Greek banks continued to receive money from the European system of central banks, but through a separate program known as Emergency Liquidity Assistance.

While the switch from one source of credit to another was largely technical, it confirmed that Greek banks were severely undercapitalized and came during a period of heightened tensions when almost any negative news can rattle markets.

On Monday, after a delay of several weeks, the Greek government provided the country’s four largest commercial banks with €18 billion, or $22.5 billion, in capital from the European Union, clearing the way for them to qualify again for E.C.B. loans.

The banks are National Bank of Greece, Alpha Bank, EFG Eurobank and Piraeus Bank.

PARIS — President Barack Obama is putting increasing pressure on European officials to resolve the euro crisis, talking with the leaders of Germany, France and Italy to help lay the groundwork for action before a Group of 20 summit meeting to be held in June in Mexico.

Mr. Obama discussed the recent developments in Europe in video conference calls with the European leaders on Wednesday. Mr. Obama was following up on discussions he held at the recent Group of 8 meeting at Camp David with the German chancellor, Angela Merkel, the French president, François Hollande and Mario Monti, the Italian prime minister.

“Leaders agreed to continue to consult closely as they prepare to meet at the G-20 summit in Mexico
next month,” the White House said in a statement. The meeting will be held June 18-19, beginning just a day after a Greek election that is being seen as a de facto referendum on that country’s euro membership.

The White House has also dispatched Lael Brainard, a Treasury under secretary, to Europe this week for talks with officials in Greece, Germany, Spain and France.

“The U.S. has doubts about its own pace of growth, it sees China slowing, and Europe is confronting a recession,” Hervé Goulletquer, head of fixed-income market research at Crédit Agricole, said. “If there is a deeper crisis in Europe, it will be an impediment for growth in the U.S., it will be a big issue for the country and for Obama as a candidate.”

Washington, is “pushing for more action in Europe,” Mr. Goulletquer said, “but I think everyone in Europe knows something has to be done.”

In Ireland, voters were going to the polls Thursday for a referendum on the European Union fiscal treaty
for fostering budgetary discipline and growth. While polls have shown a small majority favoring the treaty, the Irish are already resentful of painful austerity measures, and success is not certain. A failure to back the agreement could mean that Ireland was unable to draw on European Union financing after 2013 if it needs another bailout and could further encourage anti-euro sentiment in Europe.

Final results will be known only on Friday.

The main concern on investors’ radar remains Spain, which is searching for a way to recapitalize its struggling financial sector. The government had to nationalize Bankia, a foundering mortgage lender, in May, and the bank said Friday that it would need 19 billion euros, or almost $24 billion, in new rescue funds. The austerity-strapped government has little in its arsenal to help other troubled lenders, and borrowing in the market has become prohibitively expensive, at around 6.5 percent for 10-year debt.

The situation has led to increasing capital flight, with the E.C.B. reporting that deposits in Spanish banks in April declined by 31.5 billion euros. Amadeu Altafaj, a spokesman for the European Commission, said the government in Madrid needed to move quickly to reassure investors.

“What you cannot do is maintain this uncertainty, which is what is dragging down market confidence,” The Associated Press quoted him as saying on Spanish National Radio.

“Spain is ‘too big to fail’ as far as the euro is concerned,” Charles Diebel, head of market strategy at Lloyds Banking in London, wrote in a research note. “And the funding issues and lack of viable bank resolution are causing an investor flight as seen before, but the numbers and magnitude are on a different level from anything seen thus far. We could be fast approaching a situation where the sanguine outlook maintained by some politicians in core countries cannot be sustained.”

Fitch Ratings on Thursday cut its ratings on eight Spanish regions, including Madrid and Catalonia, to one notch above junk, and said the outlook for all the regions was negative. Fitch said the action reflected “the negative economic and market environment in Spain, which has resulted in depressed fiscal revenues, and the structural fiscal deficits of the regional administrations, which will require considerable additional efforts to be reduced, and also the difficulties in accessing long-term funding.”

The Spanish deputy prime minister, Soraya Saenz de Santamaria, was scheduled to meet later Thursday with Treasury Secretary Timothy F. Geithner and the International Monetary Fund managing director, Christine Lagarde, in Washington. An I.M.F. spokesman in Washington said Spain had not requested any financial support from the fund.

This article has been revised to reflect the following correction:

Correction: May 31, 2012

An earlier version of this article misstated the dates of the Group of 20 meeting as June 17 and 18.

By setting weaker and weaker daily “fixings” for the renminbi against the dollar at the start of each day’s trading, China’s central bank has pushed down the renminbi 0.9 percent against the dollar in the past month. The decline in the daily fixings coincides with signs that the Chinese domestic economy is slowing sharply this spring and may need help from stronger exports.

A cheaper renminbi makes Chinese exports more competitive in overseas markets, while making foreign goods more costly and less affordable in China. The Obama administration has been pressing China for the past three years to allow faster appreciation in the renminbi, not depreciation, as a way to narrow the U.S. trade deficit with China, which reached a record $295.46 billion last year.

The U.S. Treasury Department issued a report last Friday criticizing China’s management of its exchange rate and calling for the first time for China to release data on the scale of its foreign exchange market interventions. But the report stopped short of labeling China a currency manipulator, a label that Chinese leaders have indicated they would bitterly resent and oppose.

The Chinese central bank pushed the renminbi up slightly on Monday, the first trading day after the Treasury report, but has let it slide further each of the past three trading days. The Treasury declined on Thursday to comment on the renminbi’s depreciation while the Chinese central bank, the People’s Bank of China, has stayed silent this spring on currency policy.

Mitt Romney, who clinched the Republican presidential nominee this week, said last autumn that if he were elected president, he would label China a currency manipulator during his first day in office. One of his television ads appearing in recent days in the United States predicts what Mr. Romney’s first day in office would be like, with the narrator saying that through the day, “President Romney stands up to China on trade, and demands they play by the rules.”

Bankers and economists say that there have been some hints that foreign investors and Chinese citizens alike have been moving money out of China in recent weeks, which could have contributed to the fall in the renminbi. Money managers around the world have become more risk averse as the European and Chinese economies have deteriorated this spring, setting off a decline in many emerging markets’ currencies.

China has also been beset with political worries this spring associated with the purge of Bo Xilai, who was suspended from the Politburo in April.

But with more than $3.3 trillion in foreign exchange reserves, combined with very tight regulatory controls on the Shanghai currency market and some lingering controls on the movement of money in and out of China, Beijing still has great discretion in deciding the daily value of the renminbi. While Chinese officials have been silent about currency policy in recent weeks, few economists doubt that the recent decline in the renminbi represents anything other than an attempt to stimulate exports.

“During a difficult period of slowing growth and weak export demand, the government is taking the opportunity afforded by an apparent net outflow of capital to guide the value of the renminbi lower against the dollar to help support exports,” said Eswar S. Prasad, a former China division chief at the International Monetary Fund.

The Chinese economy is suffering this spring from the slowest fixed-asset investment in a decade, steadily declining foreign investment, weakening retail sales and a rapidly deflating real estate bubble. China could benefit considerably from the jobs and wealth that would be created by ramping up exports and supplying a larger share of the world’s demand in markets ranging from shoes and garments to flat-panel displays and auto parts.

But a surge in Chinese exports in the middle of a global economic slowdown could also ruin the livelihoods of large numbers of workers in other developing countries that compete with China to supply the same goods.

China is also shifting its exports toward higher-technology products like telecommunications gear and power plant turbines. So an expansion in Chinese exports could also displace sizable numbers of workers in the United States, Europe and Japan who produce goods similar to those from China.

China may have another motive in allowing the renminbi to decline against the dollar in the past month: the dollar’s strength. The euro has been sliding against the dollar this spring, and because the renminbi is effectively linked to the dollar, the euro has also been very weak this spring against the renminbi.

This has hurt the competitiveness of Chinese exports to Europe — and China exports slightly more to Europe than to the United States. Even with the renminbi’s decline against the dollar in May, the renminbi still rose 5.5 percent against the euro during the month.

A few Chinese economists are even arguing that the renminbi should now be devalued further. They are largely ignored by mainstream Chinese economists, but are starting to receive a warm reception from some of the more nationalistic media outlets, like The Global Times, which is affiliated with People’s Daily and is stridently critical of the West and most of China’s neighbors, with the exception of North Korea.

Lu Zhengwei, the chief economist of Industrial Bank in Fuzhou, is among the advocates of a weaker Chinese currency. “I personally think the renminbi will be more or less stable this year, but ideally, it should depreciate by at least 3 to 5 percent,” he said.

Mr. Lu said that Chinese exports to the United States, Europe and Japan were growing more slowly than these markets’ overall imports. “Thus sluggish overseas demand is not the only reason behind the slowdown of China’s exports — the appreciation of the renminbi’s effective exchange rate also contributed to it,” he said.

But many Chinese economists are skeptical of this argument, pointing out that a weak currency will keep the country dependent on exports and will keep prices of imported goods high for China’s long-suffering consumers. A lower economic growth rate in China is inevitable because the government is clamping down on the country’s large real estate sector, and should not be offset by government assistance to exporters through the currency market, said a senior Chinese economist who insisted on anonymity because he did not want to become embroiled in the public debate in China over currency policy.

Xu Yan contributed research from Shanghai.

Economic growth in the United States was a bit slower than initially thought in the first quarter, the Commerce Department reported Thursday, as businesses restocked shelves at a moderate pace and government spending declined sharply.

Gross domestic product increased at a 1.9 percent annual rate, down from last month’s 2.2 percent estimate, the government said in its second estimate. The economy grew at a 3.0 percent rate in the fourth quarter of 2011.

The report also showed that after-tax corporate profits dropped for the first time in three years.

A modest downward revision to consumer spending, which accounts for about 70 percent of economic activity, and stronger import growth also accounted for the weaker first-quarter output. Economists polled by Reuters had expected growth would be revised down to a 1.9 percent pace.

Business inventories increased $57.7 billion, instead of $69.5 billion, adding only 0.21 percentage point to G.D.P. growth, compared with 0.59 percentage point in the previous estimate.

While the small inventory buildup held back growth in the January-March quarter, restocking of shelves, retreating gasoline prices and an improving housing market should bolster output in the second quarter.

Growth in the second quarter is currently estimated at a pace of about 2.5 percent.

Excluding inventories, the economy grew at a revised 1.7 percent rate in the first quarter, rather than 1.6 percent and up from 1.1 percent in the fourth quarter.

Consumer spending grew at a 2.7 percent pace instead of the previously reported 2.9 percent. It was still an acceleration from the fourth-quarter’s 2.1 percent pace.

Government spending fell at a much steeper 3.9 percent rate, instead of the previously reported 3.0 percent. Both exports and imports were much stronger than initially estimated.

On the positive side, business spending on equipment and software was revised up to show a much firmer 3.9 percent growth rate instead of the previously reported 1.7 percent.

However, there are signs business spending weakened early in the second quarter.

Residential construction was revised slightly up and the retrenchment in investment on nonresidential structures was not as deep as previously thought.

When measured from the income side the economy expanded at a 2.7 percent rate. Gross domestic income rose at a revised 2.6 percent pace in the fourth quarter, previously reported as a 4.4 percent rate. Real disposable personal income for the fourth quarter was revised down to a 0.2 percent growth rate from 1.7 percent.

For the first quarter, real disposable income rose 0.4 percent.

In a separate report, the Labor Department said on Thursday that new claims for unemployment benefits rose last week for the fourth consecutive week, which could heighten concerns the labor market recovery is softening.

Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 383,000. Economists polled by Reuters had forecast that last week’s claims would be unchanged.

The prior week’s figure was revised up to 373,000 from the previously reported 370,000.

Claims have now risen in seven of the last eight weeks. Most of those increases were marginal and the overall level of claims has held at levels consistent with a modest recovery in the labor market.

But the steady increase could add to the concerns raised by April’s disappointing 115,000 gain in nonfarm payrolls. A Labor Department report due on Friday is expected to show employers added 150,000 jobs in May.

The four-week moving average for new claims, a measure of labor market trends, increased 3,750 to 374,500.

Also on Thursday, the private ADP National Employment Report showed that private employers in the United States created 133,000 jobs in May, fewer than expected.

Economists surveyed by Reuters had forecast a gain of 148,000 jobs. April’s figure was revised down slightly to an increase of 113,000 from the previously reported 119,000.

Jamie Dimon, chairman and chief executive of JPMorgan Chase.Keith Bedford/ReutersJamie Dimon, chairman and chief executive of JPMorgan Chase.

Jamie Dimon will soon take the witness seat.

After days of discussions, the chief executive of JPMorgan Chase agreed to testify before the Senate Banking Committee on June 13. Mr. Dimon, who is also expected to appear before a House panel later in the month, will discuss the bank’s recent multibillion-dollar trading loss.

The Senate committee initially invited Mr. Dimon for June 7, but JPMorgan sought more time. The announcement on Thursday that he would testify on June 13 closed the book on a lengthy back-and-forth between the bank and the committee.

“The hearing had previously been announced for June 7; however, June 13 is the only date in June that works for both the Senate Banking Committee and Mr. Dimon,” a committee spokesman, Sean Oblack, said in a statement. Mr. Dimon is expected to be the only witness.

“I expect Mr. Dimon to come prepared to provide the committee a better understanding of this massive trading loss so we can take the implications into account as we continue to conduct our robust oversight over the full implementation of Wall Street reform,” Senator Tim Johnson, Democrat of South Dakota and the committee’s chairman, said in a statement last week.

The hearing is part of a broader Congressional examination of JPMorgan’s trading debacle. On June 6, the Senate committee will host some of the bank’s main regulators, including the Federal Reserve and the Office of the Comptroller of the Currency. Last week, the committee held a hearing with the leaders of the Commodity Futures Trading Commission and Securities and Exchange Commission.

The House Financial Services Committee is also expected to call on Mr. Dimon to testify. The panel’s aim, while preliminary, is to hold a hearing before Congress recesses for the Fourth of July, according to people briefed on the matter.

In the days since the highly anticipated opening of Facebook turned into a flop last week, the impact has become worse as would-be issuers have taken a second look at what they’re getting into.

In one of the latest setbacks, Kayak, a discount travel Web site, didn’t like what it saw and postponed its initial public offering on Wednesday, a person briefed on the matter said. The company’s roadshow for investors, which was expected to begin soon, has been delayed for the time being, this person said.

Another company, Graff Diamonds, a high-end jeweler, said that it was pulling its initial offering in Hong Kong, citing “adverse market conditions” that made attracting potential investors difficult.

Not all initial public offering troubles can be pinned on Facebook. Europe’s economic woes have worsened and investors are seeking safety, not the risk of new stock issues from companies with little public track record.

Still, Facebook, by failing to instill confidence among investors and executives, has made a weak market weaker. No offerings have priced since Facebook’s debut on May 18. And as of Wednesday, only one company, Loyalty Alliance Enterprise, was set to go public anytime in the near future.

“The current market is on hold,” said James Krapfel, an analyst with Morningstar Research. Facebook’s shares have fallen nearly 26 percent since their opening, and that, he added, has “really put a damper on investors’ enthusiasm for I.P.O.’s.”

A senior I.P.O. banker put it more bluntly, saying, “It’s pretty ugly out there.”

Subtract Facebook from the initial public offering data for the year to date, and 2012 is shaping up to be one of the worst years since 2007. So far this year, 73 companies have priced offerings, raising $29.1 billion, according to Thomson Reuters.

Facebook alone accounts for $16 billion of those proceeds, or more than half of the activity for the year to date.

And several companies that successfully brought offerings to market earlier this year, like the private equity firm Carlyle Group, priced below their expected range. Others, like BrightSource Energy and the aluminum products maker Aleris, withdrew their offerings altogether.

The sagging market for new offerings reflects diminished investor confidence in stocks broadly. I.P.O.’s, experts say, are among the riskiest financial offerings one can invest in. Buying into a deal means making a bet on a relatively unproven management team and a company with limited insight into its financial performance.

One traditional way of enticing new investors is to price initial offerings at a small discount. But amid the turmoil of recent weeks, the institutions that buy shares in these deals are demanding progressively more protection against busted offerings. That translates into weaker prices for initial public offerings, creating a gap that sellers are increasingly unwilling to bridge.

“Just because markets have been bad for a month, corporate sellers haven’t come off their views on valuation,” one senior I.P.O. banker said. “But people in the marketplace who feel this every day have certainly stepped back.”

While a number of companies have offerings on file — including Michaels Stores, the arts and crafts retail giant; Fender Musical Instruments; Intelsat, a satellite operator; and Bloomin’ Brands, the owner of the Outback Steakhouse chain — bankers say that their owners are more likely to wait for markets to stabilize than risk selling their holdings for less than their worth.

These sellers include private equity firms that had hoped to sell minority stakes of their portfolio companies, with the aim of eventually cashing out their investments. But unless such owners have a pressing need to go forward soon, they will not risk generating lower-than-expected returns by staging initial public offerings at low prices.

The offerings that will price soon are likely to be smaller deals that are valued conservatively, these dealmakers say.

“It’s going to be a slow summer,” Mr. Krapfel of Morningstar said.

Attended by no small amount of hype and hoopla, Facebook’s offering had been seen as the spark that would rev up the market. Instead, the offering now looms large as an example of what could go wrong. The company’s debut was beset by severe trading problems and investor worries that its nearly $105 billion valuation was unjustifiably rich.

The offering broke below its offer price on its second day of trading and has tumbled well below its initial public offering price of $38 since. Shares of the social network fell again on Wednesday, closing at $28.19 after having briefly dipped below $28.

Facebook alone cannot answer for all the problems that companies going public are encountering. Kayak, for instance, first filed for an I.P.O. in the fall of 2010, and as recently as last fall had put its plans on ice because of market volatility. Kayak’s lead underwriting bank happens to be same as Facebook’s — Morgan Stanley.

Persistent questions about the health of European economies, their impact on the United States, and whether the euro monetary union will disband have weighed on the broader markets.

“The $1 trillion drop in the value of U.S. equities since the beginning of May has had a bigger impact on I.P.O. activity than the drop in Facebook,” said Jay Ritter, the Cordell professor of finance at the University of Florida. “Facebook’s fall from a $104 billion valuation is a one-of-a-kind phenomenon.”

In recent years, however, their efforts to woo students have gotten banks and other financial institutions in trouble with regulators. They are now effectively prohibited from providing gifts to students who sign up for credit cards. And the colleges themselves can no longer be paid by the lenders to steer students to student loans.

But many colleges, struggling to offset cuts in state funds and under pressure to keep tuition down, are finding new ways to strike deals with financial institutions, by turning student IDs into debit cards and allowing lenders to take over disbursement of financial aid.

Consumer advocates worry that financial firms are again profiting from unsuspecting students, by charging them fees and even gaining access to their financial aid funds. Now a prominent consumer group has tried to document the extent of the practice.

In a report released on Wednesday, the group, the United States Public Interest Research Group Education Fund, found that nearly 900 colleges and universities have card partnerships with financial institutions; in some instances, the colleges receive hefty payments from banks for the exclusive access to students; in other instances, the schools save money by outsourcing financial functions to banks or other vendors.

The participating schools include many of the nation’s best-known universities and represent two out of every five college students, the report says. The list includes big public universities like the University of Florida and University of Michigan and private schools like the University of Pennsylvania and Northwestern.

Since the financial institution’s logo is often stamped on campus IDs, students may sign up for an account because they believe the university has endorsed the product, the report says. In some instances, students have to open an account if they want to obtain their funds quickly.

“Campus debit cards are wolves in sheep’s clothing,” Rich Williams, higher education advocate for U.S. Public Interest Research Group Education Fund and lead author of the report, said in releasing the report. “Students think they can access their dollars freely, but instead their aid is being eaten up in fees.”

Rohit Chopra, the student loan ombudsman for the Consumer Financial Protection Bureau, said students need to be aware of options other than the financial institution that has struck a deal with their college.

“Students should know their low-cost options to access their student loans and scholarships,” he said. “Because we hear that many students don’t always know that there are alternatives. And we want that to be clear for them.”

Federal financial aid is sent directly to colleges, which take the payments due and disburse the remainder to students. But now, many colleges have hired outside financial institutions to perform those functions and encourage students to keep their money with those institutions. As a result, banks and financial firms have “an unprecedented opportunity to market add-on products — bank accounts, A.T.M./debit cards and even loans and credit cards — to students with virtually no competition,” the report said. Students may also be charged automated teller machine fees to access their financial aid funds.

The biggest player in the field is Higher One, which was started by three Yale undergraduates in 2000 and now has contracts with 520 college campuses, the report says. The company’s fees have prompted complaints at Western Washington University and a handful of other campuses.

But Miles Lasater, one of the co-founders, said his company has provided a valuable service for colleges and universities and a good deal for students. Student accounts are meant to be free, he said, and students are charged only for optional services.

For instance, account holders are charged $29 for overdrawing their account once and $38 for subsequent overdrafts, 50 cents for making a debit transaction using a personal identification number, and $2.50 for using a non-Higher One A.T.M.

“I think the important thing is to compare it to the alternative,” he said. “The alternative for students isn’t somehow magically nothing.”

The report highlighted a deal between Ohio State University and Huntington Bank, which pays the university $25 million in exchange for allowing it to open branches and A.T.M.’s on campus and “exclusive access to directly offer tailored products and services to more than 600,000 students, faculty, staff and alumni,” according to the university. Ohio State has called the partnership an innovative way to raise new revenue, since the state’s contribution to the university budget has sharply declined.

“It is important to note that it does not include marketing loans and credit cards to students,” said a university spokeswoman Shelly Hoffman. “Great care was given to make sure protections for students were built into this agreement.”

Mr. Williams, the report’s author, said some of the deals may, in fact, be good for universities and students but too many lack transparency. The group released a similar report several years ago about credit card marketing on campus, before Congress curbed many of the worst abuses.

Many of the same tactics are now being used by financial institutions to peddle debit cards: using university logos to market products, setting up tables at orientation, even giving free sweatshirts for students who sign up.

“It’s almost the same exact tricks — but it’s totally legal,” he said.

WASHINGTON — Sitting in a corner office high above K Street here, Dennis M. Kelleher, one of the most powerful lobbyists on financial regulatory reform, looks every bit the corporate lawyer and high-ranking Senate aide he formerly was: tailored suit, quick smile, assertive tone.

But Mr. Kelleher does not work for banks. He works against them.

“What is at stake is whether the American people are at risk of another Great Depression,” Mr. Kelleher, who is 54, said in a recent interview. “We exist to fight back against the forces trying to make us forget just how bad it was.”

Mr. Kelleher is the president of Better Markets, a nonprofit organization that pushes for a stringent interpretation of the Dodd-Frank financial regulatory law, which passed in 2010 but whose specific rules and regulations are currently the focus of an intense, complex and expensive behind-the-scenes battle.

Think of Better Markets as Occupy Wall Street’s suit-wearing cousin.

Mr. Kelleher, a Harvard Law School alumnus and a former partner at Skadden, Arps, Slate, Meagher & Flom — is a wisecracking, fast-talking operator who just happens to think that banks would devastate the economy if given the chance.

The financing for the K Street office comes not from small donations but from millions contributed by Michael Masters, an Atlanta-based hedge fund manager who believes that the markets are as imperfect as the people participating in them, and therefore need stricter rules.

Better Markets does not march against banks, or bring loudspeakers to their lobbies. It instead writes detailed comment letters to regulators, meets with them, files friend-of-the-court briefs, puts out studies and testifies before Congress.

The goal, Mr. Kelleher said, was to present an alternative argument to the one made by the banks and their small army of lobbyists. “For a long time, there had been no organization dedicated solely to going to toe-to-toe with the financial industry, on any issue, no matter how complex or obscure,” he said. “That’s what we do.”

Still, Better Markets and the handful of other advocates for the public interest — Americans for Financial Reform, the A.F.L.-C.I.O. and a few think tanks among them — remain seriously outmanned.

Take lobbying on the Volcker Rule, a controversial portion of the Dodd-Frank law that would prevent depository institutions from making certain speculative bets. From July 2010 to October 2011, financial institutions met with federal agencies to discuss it some 351 times, according to an analysis by Kimberly D. Krawiec, a law professor at Duke. Public interest groups, including Better Markets, held just 19.

“It’s David versus Goliath,” said Byron Dorgan, the former North Dakota senator and Mr. Kelleher’s former employer. “But at least David’s there.”

Since JPMorgan Chase announced that it had lost $2 billion or more on a failed hedge, Mr. Kelleher has made an effort to be everywhere: in its crisis, he saw his opportunity to stress that banks need tougher controls.

“Jamie Dimon’s poor fortune is good news for financial reform and taxpayers,” said Mr. Kelleher, referring to the bank’s chief executive. “Because, as it is unendingly noted, he’s the best banker in the world,” he said wryly. “The universe, maybe. It can get intergalactic with the compliments.”

He raced to New York for a television appearance. He spoke with more than two dozen reporters, and corresponded with several more. In Better Markets’ 16 months of existence, Mr. Kelleher has become a favorite source for the media, speaking in long, quotable peals and in a broad-voweled Massachusetts accent.

In his sound bites, the JPMorgan affair is a “debacle.” Investment banks need to remember the “hierarchy of guilt” for the crisis. (They are at the top.) A weak rule on swaps is an “indefensible retreat” from tougher regulation and a “poster child for the pernicious effect of industry’s army of lobbyists.”

He also met with the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

“It’s good to get some balance into the mix,” said Gary S. Gensler, the chairman of the commodities commission. “My mom and your mom don’t usually have somebody who’s going to spend the time reading the detailed rules, and do not necessarily have the same resources or desire to be into the minute details that the large financial interests on the other side of this debate do.”