Globalization and its effects on the Philippines [Archive] - Page 2

RonnieR

September 8th, 2008, 04:22 AM

WASHINGTON - The Bush administration's seizure of troubled mortgage giants Fannie Mae and Freddie Mac is potentially a $200 billion bet that it will help reverse a prolonged housing and credit crisis.

The historic move announced Sunday won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars. Treasury Secretary Henry Paulson said allowing the companies to fail would have extracted a far higher price on consumers by driving up the cost of home loans and all other types of borrowing because the failures would "create great turmoil in our financial markets here at home and around the globe."

Mark Zandi, chief economist at Moody's Economy.com predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent. That's because investors will be more willing to buy the debt issued by Fannie and Freddie — and at lower rates — since the federal government is now explicitly standing behind that debt.

"Effectively, the federal government has now become the nation's mortgage lender," he said. "This takes a major financial threat off the table."

Futures on all major stock indexes rose about 2 percent in electronic trading Sunday night, another sign of investor relief about the takeover plan

The companies, which together own or guarantee about $5 trillion in home loans, about half the nation's total, have lost $14 billion in the last year and are likely to pile up billions more in losses until the housing market begins to recover.

The Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke, in exchange for senior preferred stock. Treasury will immediately be issued $1 billion of such stock from each company, which will pay 10 percent interest. Further purchases of preferred stock will be triggered if quarterly audits find that the companies' capital cushion is below prudent standards.

The government, which will receive warrants representing ownership stakes of 79.9 percent in each company, is hoping that its moves will reassure nervous investors that they can continue to buy the debt of the two companies.

In a statement, President Bush said, "Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth."

Democratic presidential nominee Barack Obama issued a statement agreeing that some form of intervention was necessary, and promised, "I will be reviewing the details of the Treasury plan and monitoring its impact to determine whether it achieves the key benchmarks I believe are necessary to address this crisis."

Republican presidential nominee John McCain also voiced support while his running mate, Alaska Gov. Sarah Palin, said that Fannie and Freddie "have gotten too big and too expensive to the taxpayers. The McCain-Palin administration will make them smaller and smarter and more effective for homeowners who need help."

The conservatorship will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie, a move taken at the same time that Congress greatly expanded the power of the Treasury Department to make loans to the two companies and purchase their stock.

The executives and board of directors of both institutions are being replaced. Herb Allison, the former head of the TIAA-CREF retirement investment fund, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.

Paulson was careful not to blame Daniel Mudd, the outgoing CEO of Fannie Mae, or Freddie Mac's departing CEO Richard Syron for the companies' current problems. While both men are being removed as the top executives, they have been asked to remain for an unspecified period to help with the transition.

Fannie and Freddie both purchase home loans from banks and then repackage those loans as mortgage-backed securities which they either hold on their own books or sell to investors around the globe. This process provides banks with more money to make more home loans, greatly expanding home ownership.

The impact of the government takeover on existing common and preferred shares, which have slumped in value in the last year, will depend on how investors react to Paulson's assertion that they must absorb the cost of further losses first. Under the plan, dividends on both common and preferred stock would be eliminated, saving about $2 billion a year.

After the Treasury Department's announcement, credit rating agency Standard & Poor's downgraded Fannie and Freddie's preferred stock to junk-bond status, but reaffirmed the U.S. government's triple-A rating.

The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."

The Fed released a letter from Fed Chairman Ben Bernanke to James Lockhart, the director of the Federal Housing Finance Agency, in which the Fed chief said he concurred in Lockhart's decision to take control of Fannie and Freddie saying the action "will help ensure the safe and sound operation of the enterprises."

Analysts were split on how much the takeover could eventually cost taxpayers although they all agreed the up-front costs will be substantial, possibly hitting $100 billion as the Treasury is called upon to bolster the capital cushions at both institutions.

However, if the plan does the trick of stabilizing the housing market and home prices stop falling and rebound, then the assets of both Fannie and Freddie should rise in value and the government should be able to sell off the companies and recoup its investments.

But it could take a long time to work through that process given all the headwinds facing housing at the moment from the plunge in home prices to soaring defaults on mortgages which are dumping more homes on an already glutted market. The weak economy has pushed unemployment to a five-year high of 6.1 percent, further reducing demand for homes.

"I think the government will end up having to put in far more money then they are planning right now (given all the problems facing housing) but the important thing is the agencies have been taken over by the government," said Sung Won Sohn, an economics professor at California State University Channel Islands. "That means there will be less panic in financial markets."

Under government control, the companies will be allowed to expand their support for the mortgage market over the next year by boosting their holdings of mortgage securities they hold on their books from a combined $1.5 trillion to $1.7 trillion. Starting in 2010, though, they are required to drop their holdings by 10 percent annually until they reach a combined $500 billion.

In addition, officials said the Treasury Department plans to purchase $5 billion in mortgage-backed securities issued by the two companies later this month, the first of a series of purchases planned by the government in an effort to bolster for these securities, which was badly shaken a year ago when the credit crisis first erupted with soaring defaults on subprime mortgages.

Paulson said that it would be up to Congress and the next president to figure out the two companies' ultimate structure and the conflicting goals they operated under — maximizing returns for shareholders while also being required to facilitate home buying for low- and moderate-income Americans.

"There is a consensus today ... that they cannot continue in their current form," he said.

Members of Congress will be watching in the coming months to see how the takeover works, but more housing legislation appears unlikely until next year given the few weeks remaining both Congress quits to hit the campaign trail.

Sen. Charles Schumer, D-N.Y. said the intervention was sparked by worries within the Bush administration that foreign governments would stop holding Fannie and Freddie's debt. "This was the prudent course to take," he said.

Senate Banking Committee Chairman Chris Dodd, D-Conn., announced his committee would hold hearings on the takeover to address a number of unanswered questions so that the American people will know "if this unprecedented proposal will help keep mortgages affordable, stabilize the markets and protect taxpayer interests."

Lockhart said that all lobbying activities of both companies would stop immediately. Both companies over the years made extensive efforts to lobby members of Congress in an effort to keep the benefits they enjoyed as government-sponsored enterprises.

Sunday's actions followed a series of meetings Paulson had with Bush and other top administration economic officials with Bush relying heavily on the judgment of Paulson, who was the head of investment giant Goldman Sachs before he joined the Cabinet in 2006.

"It is really an assent to Hank's direction, guidance and judgment," said a senior administration official, who spoke on condition of anonymity to discuss behind-the-scenes deliberations.

___

Lili

September 11th, 2008, 08:51 PM

Luck - A president's best jobs plan
feed://rss.cnn.com/rss/money_news_economy.rss
CNNMoney.com
By Chris Isidore, CNNMoney.com senior writer

A year from now, economists say the economy will be stronger and unemployment lower - regardless of whether John McCain or Barack Obama wins.

NEW YORK (CNNMoney.com) -- Today's troubles in the U.S. economy and labor market could very well turn out to be a lucky break for the next president, no matter who is elected.

Economists say that the current job losses and problem of rising unemployment will come to an end sometime in 2009.

And that will be perfect timing for whoever has moved into the Oval Office.

"Almost no matter what a president does, there should be employment growth during the first part of his term, because when the rate is high, it tends to go back down," said Joel Prakken, chairman of Macroeconomic Advisors. "On the other side of that coin, if you come into the office when the unemployment rate is unusually low, it's likely to go up."

When the Labor Department on Thursday reports the unemployment rate for June, economists are forecasting that employers will have shaved an additional 50,000 jobs from their payrolls, the sixth straight month that the economy will have lost jobs.

And even though the gross domestic product, the broadest measure of the nation's economic activity, was up at a modest 1% annual rate in the first quarter, a growing consensus among economists is that the economy fell into a recession either in late 2007 or early this year.

But post-World War II recessions typically last between eight and 18 months before the business cycle kick ins and spurs economic growth. Most economists, including many of those who now see a recession, believe growth will return later this year. Even most of those who see a longer recession are projecting the economy will turn around in early 2009.

A rash of deep rate cuts by the Federal Reserve over the last nine months, coupled with the expected bottoming out of the battered real estate and home building industries, should help the economy to get back on its feet.

Rising unemployment and job losses are still forecast to continue into 2009, even with a recovery, because employment tends to lag a recovery. But by late 2009 just about every economist is looking for an improving labor market.

Presidents can set the stage

Few economists would argue that a president's economic policies don't have an impact on jobs, income and growth. But most also believe that too much credit or blame is attributed to the president for the economy's performance by the general public.

Broad factors - the business cycle, the strength of economies around the world, monetary policy set by the Federal Reserve and technological advances - all play as great, or greater, a role in the economy's health as does a president's policies.

"Presidents can create an environment conducive to job creation over several years," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. "But when you're talking about the coming year, the president can't do much other than accept blame or credit for job creation as the case may be."

Many economists who praise the policies of Bill Clinton say he doesn't deserve credit for all of the record 23 millions jobs added to U.S. payrolls on his watch. Instead, they credit technological improvements, such as the growth of the Internet and fiber optics, which led to great gains in productivity.

"There's no question that luck and factors outside the president's control are very important," said Jason Furman, the economic policy director for Democrat Barack Obama's campaign.

Short-term vs. the long view

Of course, Furman and his counterparts in the campaign of Republican John McCain are quick to argue that the economy will be stronger and jobs more plentiful if their candidate is elected.

"What the president does is help create the economic conditions that contribute to the private sector creating the jobs," Furman said. "In the short-run, you can help give the economy a kick-start to get it up to its potential. In the long run you can help improve the potential."

Douglas Holtz-Eakin, senior policy advisor for McCain, argues that his candidate would be better for jobs and the economy than would Obama, even if he also acknowledges that, especially in the short-term, the president has limited impact on those issues.

"You don't control directly from the White House hiring decisions or economic decision making. That's a good thing," Holtz-Eakin said. "But you do set the environment. You do decide on the regulatory approach, on tax policy, the kinds of things that ultimately have big impacts on the functioning of the economy."

Not surprisingly, economists are split on which campaigns' policy proposals are the best for jobs and the economy. Yet there is widespread agreement that the number of jobs and the unemployment rate a year from today, or even two or eight years from now, will be only partly due to those policies.

Achuthan said it's a tossup how much a healthy job market can be spurred by presidential policies and how much is the result of timing.

"Let's say 50% is luck and 50% were policies that don't mess up the luck,"

RonnieR

September 15th, 2008, 07:50 AM

Lehman to file for bankruptcy, plans to sell units

Reuters
First Posted 13:25:00 09/15/2008

NEW YORK, United States -- Lehman Brothers Holdings Inc. said it plans to file for bankruptcy protection, but the Chapter 11 filing will not include its broker-dealer operations and other units, including Neuberger Berman.

Lehman is looking at selling its broker-dealer operations, and is still in advanced discussions with a number of potential buyers of its investment management division.

Bankruptcy represents the end of a 158-year old company that survived world wars and the collapse of long-term capital management but could not survive the global credit crunch.

Investors in recent weeks had grown increasingly jittery about Lehman's $46 billion of mortgages and asset-backed securities, as well as its credit rating and its ability to raise capital.

RonnieR

September 15th, 2008, 04:49 PM

A sad day for the world economy....hope the effect on the Philippines would be minimal..

NEW YORK - When Wall Street woke up Monday morning, two more of its storied firms had fallen.

Lehman Brothers, burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed. Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.

The demise of the independent Wall Street institutions came as shock waves from the 14-month-old credit crisis roiled the U.S. financial system six months after the collapse of Bear Stearns.

The world's largest insurance company, American International Group Inc., also was forced into a restructuring.

And a global consortium of banks, working with government officials in New York, announced a $70 billion pool of funds to lend to troubled financial companies.

U.S. stocks were headed for a sharply lower open and Treasury bond prices soared as the market reacted to the news.

The aim of the bank consortium, according to participants who spoke to The Associated Press, was to prevent a worldwide panic on stock and other financial exchanges.

Ten banks — Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS — each agreed to provide $7 billion "to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets."

The Federal Reserve also chipped in with more largesse in its emergency lending program for investment banks. The central bank announced late Sunday that it was broadening the types of collateral that financial institutions can use to obtain loans from the Fed.

Federal Reserve Chairman Ben Bernanke said the discussions had been aimed at identifying "potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses."

The European Central Bank, the Bank of England, and the Swiss central bank also made more short-term credit available to banks. European stocks fell sharply, with the FTSE 100 Index off 3.42 percent in London, the CAC-40 down 4.27 percent in Paris, and Germany's blue-chip DAX 30 falling 3.38 percent. Asian stock markets also tumbled, with India's Sensex sinking more than 3 percent. Japan and Hong Kong were closed for holidays.

Financial stocks were hard hit and the dollar fell against the pound and the euro.

Futures pegged to the Dow Jones industrial average fell more than 250 points in electronic trading Sunday evening, pointing to a sharply lower open for the blue chip index Monday morning. The stunning weekend developments took place as voters, who rank the economy as their top concern, prepare to elect a new president in seven weeks. It likely will spur a much greater focus by presidential candidates — Republican John McCain and Democrat Barack Obama — and members of Congress on the need for stricter financial regulation.

Samuel Hayes, finance professor emeritus at Harvard Business School, said the Bush administration may get a lot of blame for the situation, which could benefit Obama.

"Just the psychological impact of this kind of failure is going to be significant," he said. "It will color people's feelings about their well-being and the integrity of the financial system."

Lehman Brothers' announcement that it is filing for bankruptcy came after all potential buyers walked away. Potential suitors were spooked by the U.S. Treasury's refusal to provide any takeover aid, as it had done six months ago when Bear Stearns faltered and earlier this month when it seized Fannie Mae and Freddie Mac.

In an effort to calm the markets, Lehman pre-announced third-quarter results on Wednesday. In an affidavit filed with the bankruptcy court, Lehman Chief Financial Officer Ian Lowitt said that action "did little to quell the rumors in the markets and the concerns about the viability of the company." He said the uncertainty made it impossible for Lehman to continue.

Employees emerging from Lehman's headquarters near the heart of Times Square Sunday night carried boxes, tote bags and duffel bags, rolling suitcases, framed artwork and spare umbrellas. Many were emblazoned with the Lehman Brothers name.

TV trucks lined Seventh Avenue opposite the building, while barricades at the building's main entrance attempted to keep workers and onlookers from gumming up the steady flow of pedestrians flowing in and out of Times Square.

Some workers had moist eyes while a few others wept and shared hugs. Most who left the building quietly declined interviews.

People snapped pictures with cameras and their phones. Observers pressed up against a police barricade drew the ire of one man who emerged from the building and shouted: "Are you enjoying watching this? You think this is funny?"

Its businesses in Britain were placed in administration Monday, said the administrator, accounting firm PricewaterhouseCoopers, and employees carrying boxes and bags were walking out of Lehman's London offices.

Merrill Lynch, another investment bank laid low by the crisis that was triggered by rising mortgage defaults and plunging home values in the U.S., agreed to be acquired by Bank of America for 0.8595 shares of Bank of America common stock for each Merrill Lynch common share.

That values Merrill at $29 a share, a 70 percent premium over the brokerage's Friday closing price of $17.05, but well below what Merrill was worth at its peak in early 2007, when its shares traded above $98.

Charlotte, N.C.,-based Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest brokerage. A combination of the two would create a global financial giant to rival Citigroup Inc., the biggest U.S. bank in terms of assets.

Strategically, most industry analysts say it's a good fit. If the deal goes according to plan, Bank of America will be able to offer Merrill's retail brokerage services to its huge customer base. There is not a great deal of overlap between the two companies — Bank of America does have an investment bank already, but it has never been terribly strong.

Where there is duplication, however, the combination of the two companies could result in more layoffs. Both Merrill and Bank of America have already cut thousands of investment banking jobs over the past year.

The deal would not come without risks, however. Merrill Lynch, like many of its Wall Street peers, has been struggling with tight credit markets and billions of dollars in assets tied to mortgages that have plunged in value. Merrill has reported four straight quarterly losses.

Bank of America's own finances are far from robust. As consumer credit deteriorates, the bank has seen its profits decline, and the company is still in the midst of absorbing the embattled mortgage lender Countrywide Financial, which it acquired in January.

Insurer AIG, hit hard by deterioration in the credit markets, said Sunday it is reviewing its operations and discussing possible options with outside parties to improve its business after a week when its stock dropped 45 percent amid concerns about the company's financial underpinnings.

The Wall Street Journal and The New York Times both reported early Monday on their Web sites that the American International Group is seeking an additional $40 billion in emergency funds — possibly from the Federal Reserve — to help it avoid a credit rating downgrade, which would make it more expensive for AIG to raise money. The insurer has already raised $20 billion in fresh capital this year.

AIG was working with New York Insurance Superintendent Eric Dinallo and a representative of the governor's office through the weekend to craft a solution that protects policyholders, according to Dinallo's spokesman David Neustadt.

"It's clear we're one step away from a financial meltdown," said Nouriel Roubini, chairman of the consulting firm RGE Monitor.

The meetings that began Friday night were a who's who of financial heavyweights: Treasury Secretary Hank Paulson, Timothy Geithner, president of the New York Fed, Securities and Exchange Commission Chairman Christopher Cox, and a host of CEOs, including Vikram Pandit of Citigroup Inc., Jamie Dimon of JPMorgan Chase & Co., John Mack of Morgan Stanley, Lloyd Blankfein of Goldman Sachs Group Inc., and Merrill Lynch & Co.'s John Thain.

For all their efforts, Lehman had to file for bankruptcy.

The end of Lehman may not stop the financial crisis that has gripped Wall Street for months, analysts said. More investment banks could disappear soon.

The independent broker-dealers "are going the way of the dodo bird," said Bert Ely, an Alexandria, Va.,-based banking consultant.

That's partly because some of the firms, particularly Merrill, made bad bets on real estate. But several analysts said that investment companies will need the deep pockets of commercial banks to survive the next few years.

On Sunday, there was also an emergency trading session being held at the International Swaps and Derivatives Association to "reduce risk associated with a potential Lehman Brothers Holdings Inc. bankruptcy." The ISDA, which arranges trades for derivatives, said it was allowing customers to make trades and unwind positions linked to Lehman.

Roubini said it's difficult to accurately gauge the health of companies like Merrill because their financial health depends on how they value complex securities. As a result, their finances aren't very transparent, he said.

That can lead to a loss of confidence in the financial markets, he said, which can overwhelm an investment bank even if it is financially healthy by some measures.

"Once you lose confidence, the fundamentals matter less," he said.

The common denominator of the financial crisis, analysts said, is the bursting of the housing bubble. Home prices have dropped on average 25 percent so far. Roubini predicted they could drop another 15 percent.

The crisis has begun to slow the broader economy as banks make fewer loans and consumers have begun cutting spending. Many economists are now forecasting that the economy could slip into recession by the end of this year and early next year.

That, in turn, could cause additional losses for commercial banks on credit cards, auto loans and student loans.

The Fed is widely expected to keep interest rates steady at 2 percent, below inflation, when it meets Tuesday. It was possible, however, that the central bank might decide in coming weeks to cut rates if such a move is seen as needed to calm turbulent financial markets.

The International Monetary Fund predicted earlier this year that total losses from the credit crisis could reach almost $1 trillion. So far, banks have only taken about $350 billion in losses.

Commercial banks are also starting to feel the pinch. Eleven have closed so far this year, including Pasadena, Calif.-based IndyMac Bank, which had $32 billion in assets and $19 billion in deposits.

Christopher Whalen, managing director of Institutional Risk Analytics, a research firm, predicts that approximately 110 banks with $850 billion in assets could close by next July. That's out of 8,400 federally insured institutions, he said, which together hold $13 trillion in assets.

Individual customers are starting to get nervous about the financial health of their banks for the first time in generations, he said. Whalen's firm analyzes the safety and soundness of banks for business clients, but began receiving inquiries from individuals in the past two months for the first time, he said.

"If we don't get ahead of this, we are going to face a run on the retail banks by election day," he said.

___

AP Business Writers Madlen Read, Tim Paradis and Stephen Bernard in New York, Martin Crutsinger in Washington, Ieva Augstums in Charlotte and Michael Liedtke in San Francisco contributed to this report.

Weina

September 15th, 2008, 04:56 PM

^^ yeah very bad....what's next JP Morgan??? seems the conspiracy theory is slowly materializing:ohno:

today could be start of new selloff , hay:ohno:

RonnieR

September 15th, 2008, 11:37 PM

^^ really bad news, world stocks plunged. Employees of Lehman brothers are losing their jobs....an icon in the industry for 158 years!

www.telegraph.co.uk

Senator Barack Obama, the Democratic candidate for president, has said the bankruptcy of Lehman Brothers posed a major threat to the American economy.

"The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets," Mr Obama said in a statement.

"This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments," he added.

The Republican presidential candidate John McCain said later that he would revamp America’s financial regulations if elected president. He also said that he was pleased that Lehman Brothers was not bailed out with taxpayer money.

"The McCain-Palin administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street," said Mr McCain.

The November 4 presidential election between Mr Obama and his Republican rival Senator John McCain could hinge upon voters' perceptions of the candidates' ability to improve the economy.

The two men are running almost even in opinion polls weeks after they were officially nominated by their parties' conventions.

Lehman Brothers, a leading Wall Street investment bank, filed for bankruptcy after trying to finance too many risky assets with too little capital, leading to fears about the future of other big firms.

Merril Lynch, one of Lehman's rivals, has agreed to be taken over by Bank of America, while the Insurer American International Group has asked for government help, according to newspapers.

Government sponsored talks had failed to persuade other big companies to buy out Lehman, saving the company.

Both Mr Obama and Mr McCain have said they did not want taxpayers to bail out the failing Wall Street firm.

The Democratic candidate has called for changes in financial regulations, saying the subprime housing crisis was partly a result of low transparency and accountability.

"The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren't minding the store," Mr Obama said. "For years, I have consistently called for modernizing the rules of the road to suit a 21st century market - rules that would protect American investors and consumers."

RonnieR

September 15th, 2008, 11:48 PM

By Kristina Cooke
NEW YORK, Sept 15 (Reuters) - Wall Street had its worst day since markets reopened after the September 11 attacks as fears about the U.S. financial system's stability surged on Monday after Lehman Brothers filed for bankruptcy and insurer AIG struggled for survival.
The day followed one of Wall Street's most agonizing weekends ever, which saw the demise of Lehman Brothers and forced Merrill Lynch to accept a takeover by Bank of America Corp.
But Sunday's barrage of shocking news was no exorcism for anxious investors and traders. As concerns about American International Group's scramble for capital mounted, the Wall Street Journal reported that the U.S. government has asked Goldman Sachs and JPMorgan Chase to lead a lending facility of $70 billion to $75 billion for the insurer.
Financial services companies' shares led a broad and steep decline in major indexes as investors worried about the impact of the latest twists in the credit crisis on the economy and the outlook for profits.
"The turmoil continues," said Robert Francello, head of equity trading for Apex Capital, a San Francisco hedge fund.
"And it seems to be people underestimated the impact of AIG and what the fallout of that could be."
The benchmark Standard & Poor's 500 index fell 59.00 points, or 4.71 percent, to 1,192.70 -- posting its biggest percentage drop since the day that markets reopened after the September 11 attacks in 2001.
The S&P 500 also tumbled to its lowest close since October 2005, taking out a key technical support level as it fell.
The Dow Jones industrial average slid 504.48 points, or 4.42 percent, to 10,917.51 -- its biggest one-day point drop since September 2001.
The Nasdaq Composite Index dropped 81.36 points, or 3.60 percent, to 2,179.91.
Lehman, weighed down by losses spawned by the U.S. mortgage crisis, sought bankruptcy protection on Monday following a scramble over the weekend in which it failed to find a buyer.
Merrill Lynch, meanwhile, agreed to be bought by Bank of America Corp, the No. 2 U.S. bank. Merrill's stock closed just 0.1 percent higher at $17.06, but Bank of America's shares dropped 21.3 percent to $26.55.

Maxxclip

September 16th, 2008, 01:45 AM

NEW YORK - When Wall Street woke up Monday morning, two more of its storied firms had fallen.

Lehman Brothers, burdened by $60 billion in soured real-estate holdings, filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court after attempts to rescue the 158-year-old firm failed. Bank of America Corp. said it is snapping up Merrill Lynch & Co. Inc. in a $50 billion all-stock transaction.

this is terrible, the "great wall of america" is crumbling one-by-one

DoggMann

September 16th, 2008, 02:48 AM

... WW3 ??? ...
... kailangan maghanap ng gyera ... economic equalizer ... :nuts:

http://wiki.answers.com/Q/How_did_World_War_2_affect_the_US_economy

How did World War 2 affect the US economy?
I
WWII and the US Economy

* From what I understand in my history classes, the war was one of the reasons the Great Depression ended. World War Two gave jobs to thousands, if not millions, of people in the U.S. Soldiers were paid and some sent money home, men too old to be in the army replaced the men that were at war, and women worked in factories to build airplanes, ships, tanks, etc.

* WWII created much needed jobs in factories involving the production of war supplies. It jump started us out of the Great Depression and boosted the stock market.The second world war helped us become the strongest country we are today. By mobilizing the unemployed, we aided our economy.

* Although war is a time of hardships and usually poverty, World War 2 had many positive effects for America. One point of prosper was economy. Some said that the Second World War put an end to the Great Depression. Many of America�s products went overseas and by 1943, half of the country�s production went overseas. Americans were then forced to buy less of such products, but soon spent there money on things such as newspapers, movies, and promotion toward the war because of the shortage of supplies. From 1941-1944 newspapers sold daily increased four folds. Hollywood made over 2,500 motion pictures during the war also. In 1942, the War Advertising Council was formed. It conducted more than 100 campaigns to sell war bonds, secure blood donations, conserve food, and inspire enlistments. And with the change of spending money also came the change of earning money. Farmers made $20 billion in 1944 unlike the late 1930s, which had an average of only $8 billion. The war also caused a shortage of employees. This raised the annual earnings to $44 billion compared to 1939�s $13 billion. With the men gone at war, women would soon fill in those empty jobs to support their families. Government propaganda encouraged women to do their patriotic duty by leaving their homes and entering the workplace. At the wartime peak in July 1944, 19 million women were employed. But women workers weren�t the only group that enlarged during the war, but also child labor increased over two folds. Because of these factors, the average family income rose over 25% from 1941-1945. In the beginning of the war, 1941, the national income was around $95 billion dollars, but by 1944 it rose to $150 billion.

* World War 2 greatly improved our economy. Women got the taste of working outside the home, the stock market was on the uprising again. People were starting to make money and become prosperous. The government used ads to help boost liberty bonds, blood donations,reserving supplies for the troops and the entertainment industry. America proved to other nations that we are a strong country.

* Germany was really on the back hand of the U.S.A 's stock market plunge. After the hyperinflation in Germany the u.s.a gave out billions of marks worth of loans to help rebuild the economy. When the stock markets fell in the US the US demanded all there loans payed back ASAP. then Germany was back to were it started.

* It helped. Since people had saved up money, they could not spend it due to rationing, one sees the raise of exsesive buying. This increase in purchessing lead to more factory jobs, etc... Also now more and more women were joining the work force - again incressing production. Furthurmore the idea of the shopping mall spread from eight at the end of the WWII to 3,840 but 1960.

* The U.S. was in large part lifted out of the great depression by selling strategic goods and materials like tools, machinery, petroleum, metals, and grain to both sides since we were neutral at first. Once we were sucked in by the bombing of Pearl Harbor, the economy shifted into overdrive and measures had to be taken to keep inflation from soaring out of control. After the war was over, the seeds of our modern "Consumer based" economy had been sown and grew like wildfire. Technology had taken great leaps forward. Before the war women rarely worked outside the home and only in limited professions. Afterwards the women who had worked to support the war and replace men in the Services liked the money and independence their own jobs gave them and they stayed in the workforce. Finally, we shifted in a massive way from mostly farming to mostly manufacturing jobs and services. Europe was devastated by the war but the U.S. emerged more militarily and economically powerful than ever.

* Economists of the Keynesian school propagated this idea that World War 2 was good for the US economy. In particular, a government economist who did central planning and price fixing during the war named Paul Samuelson wrote economics textbooks that became widely used in schools. Most modern economists these days are not Keynesian. Destruction is never productive. War does not boost an economy. The benefits are short-lived and shallow. Many economists believed that FDR prolonged the depression for many years with his "New Deal" policies and therefore the depression lasted into World War 2. The war did not end the depression. The end of the war ended the depression.

Bomb bomb bomb, bomb bomb Iran
o-zoPgv_nYg

or russia?
uflMj7cD3QY

http://www.navytimes.com/news/2008/09/navy_veneuela_russia_090808w/
... Putin and Russian military commanders have spoken aggressively about the NATO surface group, which has entered what they consider their sphere of influence. In late August, Russian Adm. Eduard Baltin told a state news agency the European and U.S. ships were “not battle-worthy” and that Russia’s Black Sea Fleet could sink the NATO group “in 20 minutes....

... buti na lang umatras mga pakialamero ... or else ...
... this will be the end... :nuts:

3cr

September 16th, 2008, 04:35 AM

Meltdown in US finance system pummels stock market
Yahoo News
http://news.yahoo.com/story/ap/financial_meltdown;_ylt=ApxgWHrWpW7iKVTEVEGAGM6b.HQA

AP – Elizabeth Rose, a specialist with Lehman Brothers MarketMakers, works her post on the trading floor of … NEW YORK – The upheaval in the American financial system sent shock waves through the stock market Monday, producing the worst day on Wall Street in seven years as investors digested the failure of one of its most venerable banks and wondered which domino would be next to fall.

The Dow Jones industrial average lost more than 500 points, more than 4 percent, its steepest point drop since the day the stock market reopened after the Sept. 11, 2001, attacks. About $700 billion evaporated from retirement plans, government pension funds and other investment portfolios.

The carnage capped a tumultuous 24 hours that redrew U.S. finance. Lehman Brothers, an investment bank that predates the Civil War and weathered the Great Depression, filed the largest bankruptcy in American history. A second storied bank, Merrill Lynch, fled into the arms of Bank of America.

It was by far the most stomach-churning single day since a financial crisis began to bubble up from billions of dollars in rotten mortgage loans that have crippled the balance sheets of one bank after another and landed mortgage giants Fannie Mae and Freddie Mac under the control of the federal government.

"We are in the middle of a deep, dark recession, and it won't end soon. Here it is, and it is pretty nasty," said Barry Ritholtz, who writes the popular financial blog The Big Picture and is CEO of research firm FusionIQ.

And the fallout was far from over. American International Group, the world's largest insurer, was fighting for its very survival: New York Gov. David Paterson moved to allow the company to tap one of its subsidiaries for an emergency loan to stay above water.

"AIG still remains financially sound," Paterson said, even as the company's stock tumbled almost 60 percent. Almost $20 billion was wiped off AIG's balance sheet on Monday.

In Washington, Treasury Secretary Henry Paulson, who refused to toss a financial lifeline to Lehman, was unapologetic as the Bush administration signaled strongly that Wall Street shouldn't expect more rescues from Washington.

The American people should remain confident in the "soundness and resilience in the American financial system," Paulson told reporters at the White House.

Six months ago, Paulson moved to prevent the collapse of Bear Stearns, brokering a deal for JP Morgan Chase & Co. to buy the firm at a fire-sale price with Federal Reserve backing. Earlier this month, he stepped in to help the government seize Fannie and Freddie in hopes of reversing the housing and credit crises.

But Monday, Paulson said he "never once" considered it appropriate to put taxpayer money at risk to resolve the problems at Lehman Brothers, which was saddled with $60 billion worth of soured real estate holdings.

The result was one of the most momentous days in Wall Street history since legendary banker J. Pierpont Morgan helped broker the rescue of financial markets during the Panic of 1907.

The Dow industrials dropped 504.48 points to close at 10,917.51, the first time since July they have finished under 11,000. It was the sixth-largest point drop ever and the worst since Sept. 17, 2001, when the average fell 684.81 points on the first day of trading after the terror attacks.

In percentage terms, the fall for the Dow on Monday was its worst since the summer of 2002. The index has shed nearly a quarter of its value since its record high last October.

Broader stock indicators also fell. The Standard & Poor's 500 index lost more than 4 1/2 percent, and the Nasdaq composite index lost more than 3 1/2 percent.

Financial stocks fell as investors worried about the strength of banks' balance sheets. Washington Mutual Inc. 27 percent to $2 a share, while Wachovia Corp. fell 25 percent to $10.71.

While Lehman Brothers was filing for Chapter 11 and AIG was scurrying to find financing to stay afloat, Merrill Lynch was avoiding a similar fate with a $50 billion transaction to become part of Bank of America Corp.

The deal would create a financial giant rivaling Citigroup Inc., the biggest U.S. bank in terms of assets. Bank of America has the most deposits of any U.S. bank, while Merrill Lynch is the world's largest and most widely recognized brokerage.

"It was an opportunity of a lifetime," said Ken Lewis, Bank of America's chairman and CEO.

Lewis made the announcement at a news conference where he was flanked by a smiling John Thain, Merrill's chief executive. The two put the deal together in 48 hours, while they were taking part in marathon discussions at the New York Federal Reserve over the weekend to save Lehman Brothers. Merrill stock rose a penny Monday.

One huge concern is that the Lehman bankruptcy will probably trigger even tighter credit — making it more difficult for everyone from large companies to small businesses to American homebuyers to borrow money.

It was a dark day for Lehman workers, too. Many of them brought gym bags, shopping totes and Lehman travel bags to cart home personal files and pictures from their desks at the company's midtown Manhattan headquarters. Gawkers lined up behind metal barricades, and bystanders took pictures with their cell phones.

The failure of Lehman and probable job losses at Merrill are also a blow to the New York City economy, which is still trying to absorb a blow from shrunken tax revenues after the collapse of Bear Stearns in March. The city and its outlying suburbs rely heavily on taxes paid by workers in the financial services industry.

In marathon sessions Friday night, Saturday and Sunday, government officials and the chief executives of major U.S. and foreign banks huddled at the New York Fed's fortress-like building in downtown Manhattan, trying to work out a way to save Lehman.

They failed at that. But a group of 10 banks that includes JPMorgan, Goldman Sachs and Citigroup formed a $70 billion pool that banks or brokerages can tap to cover short-term funding needs.

There were also worries that Lehman's problems would infect other financial companies and spread to global stock markets, further harming the U.S. and global economies.

The Fed meets Tuesday to decide interest rate policy. It's widely expected to keep rates at 2 percent, but some economists believe it could lower them to soothe Wall Street's frazzled nerves.

The financial turbulence could also further derail consumer confidence in the economy just as stores prepare for the critical holiday shopping season. The upheaval in the financial system also means that those consumers with marginal credit history will have an even harder time getting loans, cutting into consumer spending.

"The backdrop even without this was tough. This certainly adds to the worry level," said Michael P. Niemira, chief economist at The International Council of Shopping Centers.

Republican presidential nominee Sen. John McCain assailed "greed and corruption" on Wall Street and promised to clean it up, while his Democratic opponent, Sen. Barack Obama, blamed White House policies and said his opponent would only deliver more of the same.

Obama called it "the most serious financial crisis since the Great Depression." McCain declared in a new TV ad that "our economy is in crisis" and that only he and his running mate, Alaska Gov. Sarah Palin, could fix it. McCain also told voters in Jacksonville, Fla., "The fundamentals of our economy are strong."

Maxxclip

September 16th, 2008, 04:43 AM

^^calling all super friends!!!:lol:

RonnieR

September 16th, 2008, 04:51 AM

this is terrible, the "great wall of america" is crumbling one-by-one

yeah, worldwide effect eto except the oil rich countries.....

Maxxclip

September 16th, 2008, 04:59 AM

^^parang gulong lang yan;) kapag naubos na ang langis, wala na:dunno:

ang dapat gawin ng US, mag-focus sa alternative energy to sustain their increasing demand of fuel:)

DoggMann

September 16th, 2008, 07:55 AM

Dollar Collapse - America, A Country Living On IOU's - Peter Schiff
x1V5iu715rc

6DMgAc_RX3o

...

jbkayaker12

September 16th, 2008, 08:27 AM

Asian markets sink on Lehman, Merrill woes By TOMOKO A. HOSAKA, Associated Press Writer
1 hour, 12 minutes ago

TOKYO - Asian stock markets tumbled Tuesday amid growing fears of a global financial crisis as investors reacted to the demise of two of Wall Street's biggest names, Lehman Brothers and Merrill Lynch.

ADVERTISEMENT

Japan's benchmark Nikkei 225 index was down 5.3 percent to 11,560.66 in mid-afternoon trading, while Hong Kong's blue-chip Hang Seng Index shed 5.7 percent. Both markets — Asia's two biggest — had been closed for holidays on Monday, when news first broke about the dramatic events on Wall Street.

Across the region, markets were all deep in the red. South Korea's Kospi was down 5.4 percent, Taiwan's benchmark was off 4.7 percent and China's Shanghai index was down 3.2 percent.

Japan's central bank on Tuesday injected 2.5 trillion yen ($24 billion) into money markets and issued a statement vowing to take measures to maintain stability in the country's financial markets. Cabinet ministers, along with the central bank chief, were also holding an emergency meeting.

"The Bank of Japan will carefully monitor recent situations surrounding the U.S. financial institutions and their influences, and will continue to strive to ensure smooth settlement of funds and maintain stability in financial markets through measures such as appropriate money market operations," central bank Gov. Masaaki Shirakawa said.

The dollar also got hit, falling to 104.43 yen early Tuesday afternoon in Asia from mid-107 yen levels before the weekend.

In Tokyo, the Japanese unit of Lehman Brothers Holdings Inc. requested bankruptcy protection at a Tokyo court after the 158-year-old firm filed for Chapter 11 bankruptcy in New York on Monday.

The storied New York investment bank, crippled by $60 billion in soured real-estate holdings, was unable to find an investment partner to throw it a lifeline despite a flurry of last-minute negotiations over the weekend.

Investors were further shaken by the equally stunning news that Merrill Lynch, one of the world's most famous brokerages, sought to avoid a similar fate with a $50 billion transaction to become part of Bank of America Corp.

The crisis appeared to be far from over. American Insurance Group, the world's largest insurer, was fighting for its survival after downgrades from major credit rating firms, adding pressure to AIG as it seeks billions of dollars to strengthen its balance sheet.

Seichi Miura, strategist at Mitsubishi UFJ Securities in Tokyo, said already weak investor sentiment has been badly shaken by Lehman. He predicted extremely volatile markets ahead.

"The market just hasn't been able to shake off an overall downward trend," he said.

On Wall Street Monday, the Dow Jones industrial average fell more than 500 points, or 4.4 percent, to 10,917.51 — its worst point drop since after the September 11, 2001, terror attacks.

European markets also sank Monday, with Britain's FTSE-100 share index falling 3.9 percent and France's CAC-40 down 3.7 percent.

The Tokyo Stock Exchange halted securities and derivatives trading by Lehman Brothers a day after Japan's financial watchdog ordered its local unit to suspend operations.

South Korea's financial regulator also said it had suspended some operations of two local units of Lehman Brothers.

Share prices in Tokyo fell across the board, with banking issues taking a particularly hard hit in the wake of Lehman's collapse. Investors unloaded shares in major Japanese banks listed as some of the biggest lenders, including Aozora Bank, Mizuho Financial Group and Shinsei Bank.

Aozora, a midsize Tokyo-based bank, lost more than 19 percent, even as the company in a statement sought to reassure markets that its net exposure could be reduced to less than $25 million compared with the widely reported figure of $463 million.

Mizuho Financial Group, Inc., with a $289 million loan to Lehman, fell more than 10 percent. Shinsei was down almost 16 percent.

Australia's banks, including Commonwealth Bank of Australia, ANZ Banking Group and National Australia Bank Ltd., were all hit hard.

In Seoul, South Korean banks extended losses. Top lender Kookmin Bank shares declined 8 percent while Hana Financial Group shares fell 10 percent.

In Hong Kong, major bank HSBC lost 4.4 percent, and leading mainland Chinese lender ICBC plummeted 7.7 percent.

Hong Kong government officials said they were keeping a close eye on the markets.

"We know Hong Kong has a good monitoring system in place. I believe all monitoring agencies will make sure trading is conducted smoothly today," said Chan Ka-keung, secretary for financial services and treasury.

___

Associated Press writers Kelly Olsen in Seoul, South Korea, Ray Lilley in Wellington, New Zealand, Rohan Sullivan in Sydney, Australia, and Mari Yamaguchi in Tokyo contributed to this report.

Email Story IM Story Printable View Yahoo! Buzz RECOMMEND THIS STORY

-----------------------------

Just when you think you're country is safe think again. The Philippines is so insignificant in the financial world, goodluck when the big one finally hits. No more financial aid from the USA going to the Philippines. Be careful what you wish for. Hehehehe!

RonnieR

September 16th, 2008, 08:34 AM

^^ [/quote]Just when you think you're country is safe think again. The Philippines is so insignificant in the financial world, goodluck when the big one finally hits. No more financial aid from the USA going to the Philippines. Be careful what you wish for. Hehehehe![/QUOTE]

Poor brown Filipino este American ! hehehehe

jbkayaker12

September 16th, 2008, 08:38 AM

^^^^^^^

Hahahahahaha someone cannot handle a dose of his own medicine.:lol:

------

Peso, stocks tumble on Lehman’s collapse

Stock index falls 4.15%; peso at 47.095 to $1

By Doris Dumlao, Elizabeth Sanchez-Lacson
Philippine Daily Inquirer
First Posted 00:29:00 09/16/2008

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Close this The bloodbath among iconic investment banks on Wall Street pounded heavily on Philippine financial markets Monday as offshore investors pulled funds out of emerging markets to hedge against uncertainties across global markets.

The peso faltered to 47.095 to the dollar, closing at its intraday low and shedding 0.235 from Friday’s finish, as risk aversion soared on news that troubled US investment banking giant Lehman Brothers would file for bankruptcy and another, hemorrhaging peer, Merrill Lynch, would be acquired by Bank of America.

Currency dealers said that while the dollar weakened against a basket of major global currencies on expectations that the US Federal Reserve might be prompted to slash interest rates this week to ease the confidence crisis in Wall Street, this did not benefit assets from emerging markets like the Philippines.

“A lot of people are nervous so there’s a flight to safety—to cash and US treasury bonds,” a currency dealer said.

Sentiment was weak across financial markets in the region due to shock waves from the US, the epicenter of a global credit crunch triggered by the downturn in its property sector. These woes also sent the Philippine main-share stock index tumbling by a hefty 4.15 percent Monday.

Dealers said there was very little, if any, intervention from the central bank on the currency spot market. The volume of trading amounted to $608.64 million, slightly thinner than Friday’s $630.02 million.

Dealers said the rate of 47.10 to the dollar appeared to offer a strong barrier to the dollar’s further rise in the short term.

“If this is breached, the next resistance will already be at 49 to one [dollar],” one trader said.

Other dealers said the local financial markets would continue to take the cue from developments in the US markets. Whereas the US Fed was earlier expected to keep its key interest rates on hold or even raise rates in the near future, the market now sees the possibility of interest rate cuts, thereby weakening the dollar.

Stock, bond and currency markets across the Asia’s emerging markets were battered Monday by continuing financial woes in Wall Street.

Investors in the Philippine stock market pressed the panic button Monday and sold down blue-chip shares ahead of Wall Street’s anticipated sharp sell-off overnight because of the collapse of investment banking giant Lehman Brothers, stockbrokers said.

The Philippine Stock Exchange index plummeted 109.96 points to 2,536.16 Monday, its lowest since July 30, when it slid to 2,583.83. With editing by INQUIRER.net

Christendom

September 16th, 2008, 12:00 PM

forget not that all communistic regimes must shortly collapse, as much all capitalistic systems world-wide...why is this? the conspirator government system is to be controlled by business ruling a restructured world, controlled by a synthesis of communism & capitalism

remember at all times, the hegelian dialect-
thesis - south korea - capitalism
antithesis - north korea - communism
systhesis - new world order

with the US spiritually, morally bankrupted, w/ our industrial base destroyed throwing million people out of work, w/ our big cities ghastly cesspool of every imaginable crime, w/ a murder rate almost 3 times higher than any other country, w/ a million homeless, w/ corruption in government reading endemic proportions, who will gainsay that the US is ready to collapse from within (the fact it has already happened), into the waiting arms of the New Dark Age invisible government...this is not the end...this is only the beginning,,,watch out to the next presidents

leechtat

September 16th, 2008, 06:08 PM

^^ yay! the bilderberg group wins! new world order ensues! :lol:

jbkayaker12

September 16th, 2008, 08:49 PM

With the US spiritually, morally bankrupted, w/ our industrial base destroyed throwing million people out of work, w/ our big cities ghastly cesspool of every imaginable crime, w/ a murder rate almost 3 times higher than any other country, w/ a million homeless, w/ corruption in government reading endemic proportions, who will gainsay that the US is ready to collapse from within (the fact it has already happened

......and yet people by the millions come and wish to live and fullfill their dreams in the land of the United States.

Something is definitely wrong when someone thinks the United States is spritually, morally and financially bankrupt and yet people from all over the world to this day wish to seek a better life in the United States.:ohno:

bariQ

September 16th, 2008, 09:18 PM

they like to financially squeeze every $$$ they can get! and what next? mexico annexes california, texas and new mexico! i guess i better sharpen up my spanish...

como estas senyor?! LOL

jbkayaker12

September 16th, 2008, 10:41 PM

^^^^^Hehehe that is what I like about life in general, wishful thinking and it's free! Hahahaha!

lazybum

September 17th, 2008, 01:52 AM

Maxxclip

September 17th, 2008, 03:14 AM

^^malakas ang loob ng federal BofA kase madaming tax payers ang pwedeng magpuno sa nagastos nila.

Lili

September 17th, 2008, 05:07 AM

^^ Bank of America is not a federal bank. It's a private commercial bank. Its CEO Kenneth D. Lewis has been making some major deals and acquisitions lately. It first bought the mortgage crisis plagued Countrywide bank at stunningly low price ($4billion) and structured the deal so that it isn't legally obligated repay Countrywide's debt, which was assumed by the subsidiary, Red Oak Merger Corp. (since renamed Countrywide Financial).

Now, it made another strategic deal with the acquisition of Merrill Lynch (with a portfolio still more viable than Lehman brothers.) This makes it now a banking behemoth covering savings and commercial banking, mortgage lending and investment banking.

It's a good thing that the US Treasury chose not to underwrite Lehman Brothers' debt.

It has already bailed out Bear Sterns when it made the terms favourable for JP Morgan Chase to buy it by extending credit and agreed to take its mortgage related assets as collateral.

Moreover, US government is also underwriting the beleaguered Fannie Mae, Freddie Mac, and Indy Mac.

So, the US tax payer is already being put at risk of shouldering the burden of potentially billions of dollars of losses. The US treasury cannot anymore bail out these banks by using public moneys.

The further downside is that with the closure of these big investment banks, there will be an even larger number of unemployed asking for unemployment benefits. And less taxpayers and taxes to pay for such. And with this war going on, where is the government going to expect to get the funds?

We are in dire fiscal exigency. Let's get the Clintons back when the U.S. had revenue surplus. If we can only do so.

-TC-

September 17th, 2008, 05:20 AM

Fed has just given a loan package worth $85B to AIG.

^^ Bank of America is not a federal bank. It's a private commercial bank. Its CEO Kenneth D. Lewis has been making some major deals and acquisitions lately. It first bought the mortgage crisis plagued Countrywide bank at stunningly low price ($4billion) and structured the deal so that it isn't legally obligated repay Countrywide's debt, which was assumed by the subsidiary, Red Oak Merger Corp. (since renamed Countrywide Financial).

Now, it made another strategic deal with the acquisition of Merrill Lynch (with a portfolio still more viable than Lehman brothers.) This makes it now a banking behemoth covering savings and commercial banking, mortgage lending and investment banking.

It's a good thing that the US Treasury chose not to underwrite Lehman Brothers' debt.

It has already bailed out Bear Sterns when it made the terms favourable for JP Morgan Chase to buy it by extending credit and agreed to take its mortgage related assets as collateral.

Moreover, US government is also underwriting the beleaguered Fannie Mae, Freddie Mac, and Indy Mac.

So, the US tax payer is already being put at risk of shouldering the burden of potentially billions of dollars of losses. The US treasury cannot anymore bail out these banks by using public moneys.

The further downside is that with the closure of these big investment banks, there will be an even larger number of unemployed asking for unemployment benefits. And less taxpayers and taxes to pay for such. And with this war going on, where is the government going to expect to get the funds?

We are in dire fiscal exigency. Let's get the Clintons back when the U.S. had revenue surplus. If we can only do so.

-TC-

September 17th, 2008, 05:22 AM

Here is the afterhours news:

http://biz.yahoo.com/ap/080916/aig.html

Government announces $85 billion loan to save AIG
Tuesday September 16, 10:57 pm ET
Government announces $85 billion loan to rescue AIG to stave off further financial turmoil

WASHINGTON (AP) -- In a bid to save financial markets and economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion emergency loan to rescue the huge insurer AIG.

The Federal Reserve said in a statement it determined that a disorderly failure of AIG could hurt the already delicate financial markets and the economy.

It also could "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said."The President supports the agreement announced this evening by the Federal Reserve," said White House spokesman Tony Fratto. "These steps are taken in the interest of promoting stability in financial markets and limiting damage to the broader economy."

Treasury Secretary Henry Paulson said the administration was working closely with the Fed, the Securities and Exchange Commission and other government regulators to "enhance the stability and orderliness of our financial markets and minimize the disruption to our economy."

"I support the steps taken by the Federal Reserve tonight to assist AIG in continuing to meet its obligations, mitigate broader disruptions and at the same time protect taxpayers," Paulson said in a statement.

The Fed said in return for the loan, the government will receive a 79.9 percent equity stake in AIG.

Earlier, Fed chairman Bernanke and Paulson met with Sen. Christopher Dodd, D-Conn., Majority Leader Harry Reid, D-Nev., and House Republican leader John Boehner of Ohio, to brief them on the government's option.

"At the administration's request, I met this evening with Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. They expressed the administration's views on the deepening economic turmoil and shared with us their latest proposals regarding AIG," Reid told reporters. "The Treasury and the Fed have promised to provide more details in the near future, which I believe must address the broader, underlying structural issues in the financial markets."

On Tuesday, shares of the insurance company swung violently as rumors of potential deals involving the government or private parties emerged and were dashed. By late Tuesday, its shares had closed down 20 percent -- and another 45 percent after hours. Still, no deal emerged.

The problems at AIG stemmed from its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a greater threat to the U.S. financial system than this week's collapse of the investment bank Lehman Brothers.

The worries were triggered after Moody's Investor Service and Standard and Poor's lowered AIG's credit ratings, forcing AIG to seek more money for collateral against its insurance contracts. Without that money, AIG would have defaulted on its obligations and the buyers of its insurance -- such as banks and other financial companies -- would have found themselves without protection against losses on the debt they hold.

"It might not just bring down other financial institutions in the U.S. It could bring down overseas financial institutions," said Timothy Canova, a professor of international economic law at Chapman University School of Law. "If Lehman Brother's failure could help trigger AIG's going down, who knows who AIG's failure could trigger next."

New York-based AIG operates an insurance and financial services businesses ranging from property, casualty, auto and life insurance to annuity and investment services. Those traditional insurance operations are considered healthy and the National Association of Insurance Commissioners said "they are solvent and have the capability to pay claims."

Lili

September 17th, 2008, 05:31 AM

^^ I guess when they weighed the ramifications, they decided that it will stave off further devastation if they keep AIG afloat. AIG, the world's largest insurance company, has ties in both domestic and international markets that could affect industries far and wide.

RonnieR

September 17th, 2008, 05:33 AM

^^ I still have faith that the US government will pass this financial turmoil. They cannot prolong the crisis as this has dire/adverse consequences on millions of Americans and other countries as well. The US is the 2nd largest export market of RP.

I'm sure other countries are laughing at the US now....they are waiting for this to happen.

RonnieR

September 17th, 2008, 05:41 AM

Philamlife, whose parent company is AIG, is the biggest insurance company in RP....

Maxxclip

September 17th, 2008, 05:58 AM

^^ Bank of America is not a federal bank. It's a private commercial bank.

my bad, thanks Ms. Lili:)

The further downside is that with the closure of these big investment banks, there will be an even larger number of unemployed asking for unemployment benefits. And less taxpayers and taxes to pay for such.

ka-malas naman ng mahahalal na pangulo, ang daming problema na sasalubong sa kanya sa White House:lol:

Lili

September 17th, 2008, 06:14 AM

^^ but if things are worst, they can only get better and he can claim credit years down the road.

I'm just watching Charlie Rose with Hank Greenberg, former CEO of AIG as guest. Mr. Greenberg said that AIG had assisted the Philippines, among other nations, in investment loans. He agreed that the Federal Reserve should extend a bridge loan to AIG. He said that insolvency is not really the problem but liquidity as AIG is faces this dilemma. He said that he can also tap into wealth funds that other nations might be willing to extend. He has extensive connections. He does not want AIG which he saw grew to eventually go down the drain.

Lili

September 17th, 2008, 06:16 AM

Philamlife, whose parent company is AIG, is the biggest insurance company in RP....

There you go. No wonder Hank Greenberg mentioned the Philippines.

Maxxclip

September 17th, 2008, 06:28 AM

Lili

September 17th, 2008, 06:40 AM

^ but where to go?

Maxxclip

September 17th, 2008, 06:50 AM

^^i have no idea. perhaps go back to our motherland and join our kababayan eating kamoteng kahoy :lol:

DoggMann

September 17th, 2008, 02:48 PM

^^
... four months too late ...

KZ2EXw3G3XU

jbkayaker12

September 17th, 2008, 08:23 PM

I want the noble US Government to pay for my family's mortgages. If it is generous enough to bail out irresponsible people and pvt companies, it can surely afford to pay the remaining years out of my family's mortgages.

My family are working hard being responsible taxpayers and many more Americans are doing the same thing so we can live and pursue the American dream. There should be an incentive for being RESPONSIBLE American taxpayers. If the government can bail out these IRRESPONSIBLE TAXPAYERS and these IRRESPONSIBLE PRIVATE CORPORATIONS who bit up more than they can chew then by all means lend a helping hand to the rest of us.

leechtat

September 17th, 2008, 08:39 PM

^^ good argument..

see this.. a clipping from aaron russo film, "america freedom to fascism".

http://img153.imageshack.us/img153/1883/vlcsnap62840na2.png

^^ i can't help but wonder if this is all related to the credit crunch happening today in the US.. possibly a master plan of the federal reserve owners? something is cooking in the oven..

jbkayaker12

September 17th, 2008, 10:33 PM

^^^^No one to blame but the people and corporations who got into this mess, they went in over their head. Plain and simple no need to have an elaborate scheme meant to shock the whole world, hahahaahahahahaha. My tax money being used to bail them out instead of being spent on education, health care, seniors and social security.

Ladies and Gentlemen, please rise for the Chief Executive Officer of the United States of America, hahahahaha!

DoggMann

September 17th, 2008, 10:46 PM

^^

h5tS4REPGxI

one of the comment reads:
Good advice. Forget paying the cards and use the money to stock up on food, water and ammo.
:D

jbkayaker12

September 17th, 2008, 11:12 PM

Forget paying the cards and use the money to stock up on food, water and ammo.

Hahahahhahahahaha, heck I'll pay my credit card bills so that I can charge more when it pleases me. Hahahaha.

DoggMann

September 18th, 2008, 04:14 AM

_N8BPKCJv9Y

Economist recounts talk with Fed chairman (http://www.chicagotribune.com/business/chi-wed_oilsep17,0,4833605.story)

By Joshua Boak | Chicago Tribune reporter
September 17, 2008

NAPLES, Fla. — Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

The problem with that approach is that the value of the dollar plunged against foreign currencies, causing crude oil prices to skyrocket because oil is pegged to the dollar. It affected food prices, gasoline and family budgets.

"Ben, you are playing a very unique role in world economic history," Hale recalled telling Bernanke, an expert in the Great Depression. "You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices."

Bernanke could hypothetically limit inflation in commodities by raising interest rates, a policy that would restrict the flow of money but potentially lead to an avalanche of bank failures. At a financial conference in Florida on Tuesday, Hale, a Chicago-based economist for investment managers, hedge funds and multinational companies, paraphrased the Fed chairman's response.

"We have lost control," said Hale, quoting Bernanke. "We cannot stabilize the dollar. We cannot control commodity prices."

If efforts to stop a recession sent commodities to record levels through July, then the realization that a recession could be imminent has sunk oil prices by almost 40 percent during the past two months. For all the debate about foreign demand and financial speculators, one overlooked aspect of commodity prices is the health of the American economy.

With investment banks collapsing under the weight of subprime mortgages and the recent government bailout of Fannie Mae and Freddie Mac, commodity prices have retreated as the market predicts demand for oil will fall. October futures closed down $4.56 Tuesday, at $91.15 a barrel. And in response to inflationary concerns, the Federal Reserve responded Tuesday by holding the overnight federal funds rate steady at 2 percent as it has since April.

Hale believes the recessionary turns could keep oil below $100 a barrel, a consensus shared by many analysts who see oil staying in the $80 to $100 range.

But a problem for America is that much of the power it wields over oil prices is based on the strength of the dollar and economic demand. Russia, Venezuela, Ecuador and others have nationalized their reserves, stripping ownership rights away from private firms and complicating the global market for oil.

"While every other country is practicing natural resource nationalism, this country still pretends there is a free market in energy when, in fact, there is not," said John Hofmeister, the head of Citizens for Affordable Energy and the former president of Shell Oil Co.

If there is any relief for American consumers to come from global markets, it might emerge from China, a country that has successfully wrestled down inflation. China insulates its population from the market price of oil, a policy shared by Malaysia, Thailand and India.

As inflation in China dropped to 5 percent from 8 percent, the government has begun to pass actual commodity costs onto the public, said James McGregor, a consultant and author of the book "One Billion Customers: Lessons From the Front Lines of Doing Business in China."

"I think you're going to see them squeeze down subsidies," McGregor said. "They don't like them either because they distort the economy."

DoggMann

September 18th, 2008, 04:31 AM

Treasury Sells Billions Of Bills (http://news.sky.com/skynews/Home/Business/US-Treasury-Auctions-Billions-Of-Bills/Article/200809315101906?lpos=Business_First_Buisness_Article_Teaser_Region_0&lid=ARTICLE_15101906_US_Treasury_Auctions_Billions_Of_Bills_)

1:46am UK, Thursday September 18, 2008

Sally Arthy, US news editor
The US Treasury is to auction $30bn in 76-day bills later today in an effort to help the Federal Reserve lend money to stricken financial institutions.
US Dollar

US banking institutions have suffered unprecedented turbulence

It comes as US stocks nose-dived again as investors remained worried about chaos in the markets even after the government forged an extraordinary $85bn rescue of insurance giant AIG.

There are fears a failure of AIG would set off even more financial turmoil than the collapse of Lehman Brothers earlier this week.

"People are scared to death," said Bill Stone, chief investment strategist for PNC Wealth Management.

"Who would have imagined that AIG would have gotten into this position?"

The two Wall Street investment banks left standing - Goldman Sachs and Morgan Stanley - also remain under pressure to survive the ongoing credit crisis.

"We must not bailout the management and speculators who created this mess. They had months of warnings following the Bear Stearns debacle, and they failed to act."

Republican Presidential Candidate, John McCain

Morgan Stanley and Wachovia Corp are reported to be in talks about a possible deal.

And the troubles in the banking sector could exacerbate problems elsewhere.

The US Commerce Department said new house builds fell by 6.2% in August to the slowest pace since January 1991.

AIG, a company little known off Wall Street, does business with almost every financial institution in the world and insures $88bn worth of assets including mortgages and corporate loans.

The White House has defended the takeover, framing it as another move to protect the economy, and declined to rule out further bailouts.

"You have a government that is willing to lead, act where appropriate, and govern to make sure that we limit broader financial harm to the economy," said White House press secretary Dana Perino.

The state of the economy is also centre stage in the race to succeed President Bush.

Both Senators John McCain and Barack Obama have advocated cracking down on Wall Street practices and called for tough new regulations on financial institutions.

The economy is the key issue in this election cycle as millions of Americans feel the pinch of high fuel and food prices and thousands default on mortgage payments.

DoggMann

September 18th, 2008, 04:39 AM

Who can you trust? (http://business.theage.com.au/business/who-can-you-trust-20080918-4j12.html?page=fullpage#contentSwap2)

* Michael West
* September 18, 2008 - 12:27PM
*
A good part of the reason the financial world is in turmoil at the moment is because there has been a collapse in trust.

Not only has the trust of the public in their financial institutions failed but trust between the banks and financial institutions themselves has gone, strangling liquidity and confidence in any transaction. That leaves regulators having to step into the breach.

Governments and regulators however can, in good part, blame themselves for their present predicament. Their job is to regulate. They allowed Wall Street and powerful financial lobbies around the world to believe they had things in hand, that they did not need regulation.

Such was the complexity of all the structured finance deals and assorted high-finance transactions that the corporate watchdogs, the world over, simply went missing in the action. They could not cope. Cowed by the apparent brilliance of the investment banking fraternity, they did not even try.

Such is the crisis of confidence now - and locally with Macquarie shares smacked into the $20 range amid concerns over its massive debt load - that it would be likely ASIC and the disturbingly low-profile prudential regulator APRA must be at least thinking about having to broker a deal for the likes of Commonwealth Bank to ride to Macquarie's rescue. Essential infrastructure assets are at stake. The mind boggles.

As the financial engineers fall apart in Australia and corporate regulator ASIC uselessly chases rumour-mongers it reckons are destabilising Babcock & Brown and Macquarie Group - shutting the gate well and truly after the horse has bolted - some new research from corporate governance consultant RiskMetrics Group drills to the heart of the problem - neglect.

ASIC and ASX let these paper-shufflers and their fast imitators Allco, MFS, Centro, and so on get away with whatever they wanted in pursuit of their fast buck . They granted myriad waivers from normal disclosure and even as financial stocks began to collapse have refused to force them to produce management agreements over their satellite stocks.

In a study released in April 2007, commissioned by the Australian Council of Super Investors RiskMetrics found externally-managed entities (satellite stocks such as Macquarie Airports, MIG, Babcock & Brown Infrastructure etc) accounted for 14.3% of all waivers granted in the study period (July 2005 to December 2006).

Macquarie and Babcock entities accounted for 10.4% of all waivers granted. The top 10 waiver seekers during the period of the study included: Macquarie Media Group (1), Spark Infrastructure (2), Challenger Infrastructure Fund (4), DUET Group (6), Babcock & Brown (9), Babcock & Brown Wind Partners (10).

In new research to be released today, RiskMetrics shines the torch on the regulators' failure to demand disclosure of pre-emptive rights over the underlying assets controlled by the financial magicians, the constitutions which are fundamental to shareholders' rights, and information on how a manager can be removed - including the impact on debt covenants.

One example in the report is Babcock & Brown Infrastructure (BBI). Its price is 24.5 cents a unit versus NTA (net tangible assets) of $1.28 per security. In a normal situation where the regulatory largesse of myriad waivers had not occurred, a takeover bidder could come on the scene and restore BBI's price.

Had the regulator insisted that no special conditions applied, the unit prices of these sorts of things would have been sustained at higher levels simply on the prospect of a takeover. No such luxury for investors, sadly.

The latest RiskMetrics report, amid a detailed examination of all the waivers and new work on the pre-emptive rights over the underlying assets, notes for instance that the Macquarie satellites MAP, MIG, MCQ, MMG and MCG all required waivers from ASX Listing Rules 6.8 and 6.9 (the `one share, one vote' Listing Rules) as all six entities incorporate special voting shares giving the manager the right to appoint a majority of the directors of the companies within the structure.

One share, one vote is essential to the efficient functioning of markets but it seems the ASX was more interested in appeasing the investment banks who promoted these schemes because it delivered large turnover to the Exchange and therefore profit. Despite the concern in the corporate governance community and in some parts of the press, ASIC (Macquarie's tenant at One Martin Place in the heart of Sydney's CBD) did nothing.

Back to the BBI example. BBI and another leveraged and over-structured play, Asciano, have both been caned for having too much debt. BBI however has external management (the fees to the Babcock mothership are higher this way) and a raft of pre-emptive rights at the asset level which means that anyone crazy enough to bob along and make a takeover bid would face enormous uncertainty in unlocking value.

For its part, the parent Babcock which controls BBI (another conflict) struck this protection with the connivance of the regulators precisely because it sought to keep control at all costs and make it impossible for anyone else to wrest the assets away from the Babcock empire. The problem is that the assets are essential infrastructure, so a blinding government policy headache has been thrown up.

The assets are run solely for the benefit of the promoters and their executive pay-cheques, not for the public and not even for the unitholders in the trusts.

Last year, BBI paid $140 million in advisory fees to Babcock. The floor or the safety net in an efficient market is that a company can be taken over if its share price falls too far. In the case of the financial engineers, insolvency it would seem would come before takeover.

BBI owns the Dalrymple Bay coal loading terminal in Queensland and was found to be underinvested in capacity to the tune of $1 billion at the height of the coal boom. Ships were queued up for days and weeks waiting to be loaded. Greed and regulatory oversight had cost the whole nation.

In an efficient and efficiently-regulated market this would not have happened. Management of the asset could have been contested. BBI could have been taken over. Capacity would have been built.

As RM says, the low security prices of externally-managed listed asset vehicles should have created considerable opportunity for corporate activity.

"However ... the governance features of these vehicles have made corporate activity as it is usually understood - including hostile proposals aimed at unlocking under-valued assets - difficult to implement. Instead, investors in these funds are forced to rely on the manager's ability to restore the security price through asset sales or agreeing to have their management agreements bought out to facilitate corporate activity.''

Further, the plight of the satellite stocks of Babcock and Macquarie is now feeding through to the parent companies whose stock prices are in freefall. Less income from base fees from the "Macquarie Model'' (fees are struck on gross asset values which have been savaged) means less income for the parents and, as Macquarie prepares to roll $45 billion in debts to fund its business, its cost of funding is now rocketing. Hence the share price is falling.

RM argues the best way of protecting investors is to ensure that the position of the manager, and the likely impact of proposals on the manager, are known prior to proposals for capital raisings being made.

"A model for this kind of disclosure already exists: In 2003, when Centro's bid for AMP Shopping Centre Trust revealed the existence of pre-emptive rights allowing another AMP entity to acquire the trust's assets should Centro's bid be successful, the ASX required all listed property trusts to make detailed disclosure to the market of any pre-emptive rights agreements triggered by a change in control.''

Instead of chasing shadows - in the form of rumour-mongers - the regulators should be taking drastic action. They should have taken drastic action already. Heads should roll.

Some excerpts from the Risk Metrics report:

- Pre-emptive rights at the asset level: Many (although not all) assets held by listed asset vehicles are part-owned, and in most cases the part-owners have pre-emptive rights to acquire the share of assets held by the listed vehicles. In some cases, these rights can be triggered by the removal of the external manager of the listed entity. In cases where assets are co-owned with related parties of the manager this creates an obstacle for any third party seeking to gain control over a fund or acquire its portfolio of assets.

- Debt covenants at the asset level: In many cases debt covenants were negotiated prior to the onset of the credit crisis and any change to the manager as a result of corporate activity may trigger mandatory repayment clauses. These make third party bids or winding up proposals difficult. Debt repayment clauses on a change of control are a standard feature of many commercial agreements.

- Fee structures and management agreements: Long term management agreements that are difficult to terminate (as is the case with all Babcock & Brown listed funds) pose costly obstacles to third party proposals and fee structures at other funds may lead to windfall gains for managers in the event of corporate activity. Challenger Infrastructure Fund for example warned any winding up proposal may lead to it paying a substantial performance fee to its external manager.

- 'Priority' protocols: `Priority' protocols between listed asset vehicles and their founding sponsors may preference related entities in the event of asset sales.

Many of the impediments to third party proposals for listed asset vehicles only became apparent after corporate activity began. This indicates a systemic disclosure failure. To address this information shortfall, the ASX, as market supervisor, should:

- Require all listed vehicles with external management agreements to disclose the full text of these agreements to the market, as is the case in other jurisdictions such as the US and with other documents fundamental to securityholder rights such as constitutions.

- Require all listed vehicles to disclose to the market the full impact of pre-emptive rights.

- Require all listed asset vehicles with external managers to detail the impact of the removal of the manager or a winding up proposal on portfolio assets, including the likely impact on debt covenants and shareholder agreements.

Finally, the recent corporate activity in the sector has also revealed that many of the negative features of externally managed listed asset vehicles - especially major barriers to removal of the manager - also apparently exist in unlisted funds.

mwest@fairfax.com.au

3cr

September 18th, 2008, 04:48 AM

How We Got Here: It's Housing, Stupid
Chris Isidore
Yahoo News
http://finance.yahoo.com/banking-budgeting/article/105782/How-We-Got-Here-It-Is-Housing-Stupid

The Wall Street crisis has been caused by plunging housing prices. So despite the billions of dollars being thrown at the problem, experts say more trouble lies ahead.

The nation's financial system is in the midst of a massive shakeup and many on Wall Street and in Washington are pointing fingers and looking for someone to blame.

But in the end, it all comes back to one issue - housing.

Earlier this decade, it was much easier to get a mortgage. Home prices soared about 85% from 1996 through 2006 in inflation-adjusted dollars, creating a bubble.

Then the bubble popped. And the fallout isn't over yet, experts say.

In the past two weeks, the government took over Fannie Mae and Freddie Mac, Lehman Brothers filed for bankruptcy and Merrill Lynch sold itself to Bank of America.

If all that weren't enough, the Federal Reserve announced late Tuesday night that it was loaning $85 billion to insurer American International Group.

None of this would have happened if the housing market had not imploded, leaving all these firms with staggering losses from their investments tied to mortgages.

"These institutions, which weathered all kinds of calamities before, including depressions, are being knocked out," said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. "It's a testament to the significance of the problem we have here."

Thus, experts agree that there are likely to be future shocks to the financial system until the housing market finally hits bottom.

Even Treasury Secretary Henry Paulson, the administration's point man in the many rescue discussions of the past month, admits this.

"The housing correction poses the biggest risk to our economy," Paulson said the day he announced the Fannie and Freddie seizure. "Our economy and our markets will not recover until the bulk of this housing correction is behind us."

The Problem of Falling Home Prices

But because of the depth of the housing problems, it may take a long time before real estate prices head higher again. Here's why.

Home prices, while sharply off from the 2006 peaks, are still high in comparison to long-term gains in income, rents or overall prices, suggesting that they still have a way to fall, according to experts.

The reason housing is wreaking havoc even on insurers like AIG and big investment banks, who do not make mortgage loans, is that during the boom, trillions of dollars of mortgages were packaged together into securities that promised to pay investors with the proceeds of those loan payments.

Those securities paid better rates than other types of assets during the boom years. So many investors from around the globe poured as much money as they could into those securities.

Faced with this demand, lenders starting making more loans to riskier borrowers, including people who might not be able to afford their mortgage payments in the future and even many with no proof of income.

When prices were rising, this wasn't a problem. The risk of loan foreclosure or default was limited because many homeowners were able to sell their house for more than they owed and make a profit.

But once prices topped out and began falling, loan defaults and foreclosures started shooting higher as homeowners found it more difficult to sell their house. This created problems not just for subprime borrowers but even for those with good credit and income.

When foreclosures rose, the value of the various types of securities tied to mortgages started to fall, causing huge losses up and down Wall Street. It also made banks less eager to extend credit because of the risks involved.

A Downward Spiral

This credit crunch in of itself slowed the economy, leading to job losses and more defaults, feeding a downward spiral that has been difficult to stop.

"A really bad situation -- a home price bubble bursting -- was made significantly worse when the recession began," said Achuthan. "Now we have to let this thing play out."

Some experts even argue that the steps being taken to rescue firms like AIG could make a recovery in housing and the broader economy more difficult, as financial firms and investors become more reluctant to lend money.

"We are certainly taking credit and squeezing it tighter and tighter," said Kevin Giddis, managing director of investment bank Morgan Keegan. "Housing needs buyers. Buyers need credit."

Achuthan said that even though rates for mortgages and other types of loans have fallen in the last two weeks, those loans are becoming more difficult for many consumers and businesses to get because banks are severely tightening their lending standards.

And if housing prices do fall further, that will only cause more losses in the financial sector and perhaps more failures of banks, insurers and securities firms.

"I would hesitate to say the worst is behind us," Achuthan said.

So even with perhaps hundreds of billions of tax dollars going to AIG, Fannie and Freddie, one expert said the only real solution to the housing problem is for the correction in housing to finish running its course.

"We want home prices to return to normal," said Barry Ritholtz, CEO of Fusion IQ and author of the upcoming book "Bailout Nation."

"Until that happens, you can throw as much money at the market as you want at the situation....and it ain't going to make any difference," Ritholtz said.

jbkayaker12

September 18th, 2008, 05:32 AM

^^^^^^^The housing mess and the financial institutions that fed into the greed are root causes of all these financial mess currently facing the US Economy. People hoping to make a quick buck by purchasing homes then hoping to cash in after a few years and the financial institutions that easily loaned the money for the purchase of these homes were the ones at fault.

Weina

September 18th, 2008, 06:04 AM

more financial houses are rumoured to collapse...From Lehman, AIG, next Goldman, Morgan Stanley...MS is rumoured as courting either Citi China group or HSBC...

ALso Russia's market was down 10% and rumoured that more brokerage are failing their obligations. P6 is bloody read again today. My Taiex is of course again bleeding. Hay small investors like me are becoming poorer each day. Thanks to the US and their warmongers and greedy citizens everyone in the world is paying a high price for their selfish acts:bash:.

Good news however if you're a short seller. As you are the KING right now. And you spread more negative rumours about the market and you benefit more from all this chaos. I hope though the gov't can do something about this.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8Cb5Vh8bfjU&refer=home
http://www.bloomberg.com/apps/news?pid=20601087&sid=a8Cb5Vh8bfjU&refer=home

LordCarnal

September 18th, 2008, 07:54 AM

I do not understand.

If the US Economy is doing good, the dollar rises..

If the US Economy goes down, the dollar rises..

It seems like we Filipinos are always on the losing end. We're just being made fools by these capitalists.

Sometimes if we lend an honest hear to the leftists and communists, they have a solution that really works. Sa economic theory lang ha, although I don't subscribe to the martial-law type of government.

..

Maxxclip

September 18th, 2008, 09:34 AM

^^ganito ang pagkaka-alam ko:)

If the US Economy is doing good, the dollar rises..

kapag maganda ang performance ng US markets, malaki ang demand sa US$ ng mga bansa na gustong makapag-invest/ trade sa US market

If the US Economy goes down, the dollar rises..

kapag mahina naman ang US market, humihina ang mga padala ng mga kababayan nating pinoy na nagtatrabaho sa US kase mahirap ang buhay at patuloy din naman ang malakas ding demand ng US$ ng mga importers natin sa dolyar.

jbkayaker12

September 18th, 2008, 11:30 AM

more financial houses are rumoured to collapse...From Lehman, AIG, next Goldman, Morgan Stanley...MS is rumoured as courting either Citi China group or HSBC...

ALso Russia's market was down 10% and rumoured that more brokerage are failing their obligations. P6 is bloody read again today. My Taiex is of course again bleeding. Hay small investors like me are becoming poorer each day. Thanks to the US and their warmongers and greedy citizens everyone in the world is paying a high price for their selfish acts:bash:.

Good news however if you're a short seller. As you are the KING right now. And you spread more negative rumours about the market and you benefit more from all this chaos. I hope though the gov't can do something about this.

With the United States govt bail out of these financial institutions it has helped avert a global economic dowturn worse than what is going on at the moment. The global reach of these financial giants are way beyond the shores of the United States. As much as I am against such use of taxpayers money in the long run I just hope it'll be for the greater good of all Americans and perhaps others overseas. Once again the noble United States government thinking of others aside from the Americans.

crappypants

September 18th, 2008, 02:29 PM

oh m y god , this is so scary , all hell's breaking loooose..

-TC-

September 18th, 2008, 03:33 PM

:okay:

http://biz.yahoo.com/ap/080918/eu_central_banks.html

Fed, ECB pump billions into money markets
September 18, 7:58 am ET
By Matt Moore, AP Business Writer

Federal Reserve, other central banks to pump billions more dollars into money markets

FRANKFURT, Germany (AP) -- The world's major central banks banded together on Thursday to inject as much as $180 billion into money markets in a bid to stave off the growing global financial crisis.The Federal Reserve joined with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank to pump more short-term dollar liquidity into the financial system.

Credit markets have tightened since Monday after the weekend collapse of investment house Lehman Brothers Holdings Inc., and central banks already provided billions Monday and Tuesday in hopes of turning the tide and to keep fearful banks from hoarding cash. The hope is that that would help stabilize world financial markerts which have been reeling.In its statement, the Fed said it had authorized a $180 billion expansion of swap lines, or reciprocal currency arrangements, with the other central banks, including amounts up to $110 billion by the ECB and up to $27 billion by the Swiss National Bank.

The Fed also said new swap facilities had been authorized with the Bank of Japan for as much as $60 billion; $40 billion for the Bank of England and $10 billion for the Bank of Canada. The Bank of Canada said it was "not neccesary" to draw on the swap facility at the moment.

"These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets. The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures," the Fed said in a statement on its Web site.

Michael Schubert, analyst with Commerzbank AG, said the move was done in part to help banks that may not have direct access to the Fed.

"Firstly, some euro-area banks have no direct access to the Fed. Secondly, euro-area auctions for (U.S. dollars) provide better timing for euro-area banks," he said.

The ECB, which oversees the 15-nation euro zone, said it plans to provide as much as $40 billion to cash-starved banks, money that is being provided to it by the Federal Reserve swap line. The one-day operation opened for bids Thursday morning. The bank is also going to increase a 28-day tender operation the to $25 billion and an 84-day tender to $15 billion.

"Overall, the dollar funding operations conducted by the Eurosystem could reach an outstanding amount of $110 billion," the ECB said in a statement.

The Bank of England said it would inject $40 billion as part of the coordinated effort. So far, the London-based bank has provided a total of 25 billion pounds ($44.8 billion) to markets since Monday.
In Tokyo, the Bank of Japan said Thursday it has also concluded a U.S. dollar swap agreement worth $60 billion with the Federal Reserve to supply U.S. dollar funds to market participants in Japan. "The bank will continue to strive to maintain market stability through money market operations," it said in a statement.

In Washington, the Fed has pumped $70 billion into the nation's financial system to help ease credit stresses. In emergency sessions over the weekend, the Fed expanded its loan programs to Wall Street firms, part of an ongoing effort to get credit flowing more freely. On Wednesday, the U.S. Treasury Department said that in an effort to help the Fed deal with unprecedented borrowing needs resulting from the current credit crisis, it will begin auctioning debt for the central bank.

Federal Reserve: http://www.federalreserve.gov (http://www.federalreserve.gov/)

Bank of Canada: http://www.bank-banque-canada.ca (http://www.bank-banque-canada.ca/)

Bank of England: http://www.bankofengland.co.uk (http://www.bankofengland.co.uk/)

Bank of Japan: http://www.boj.or.jp (http://www.boj.or.jp/)

Swiss National Bank: http://www.snb.ch (http://www.snb.ch/)

eonynx

September 18th, 2008, 03:47 PM

more financial houses are rumoured to collapse...From Lehman, AIG, next Goldman, Morgan Stanley...MS is rumoured as courting either Citi China group or HSBC...

&refer=home[/url]

the possibility is that the lehman and merril lynch type scenarios wont be the last.

eonynx

September 18th, 2008, 03:56 PM

In the middle of all the carnage, what the critics are failing to say is my often repeated mantra that the modern American economy is strong and resilient. Look, the U.S. did go belly up given the events of the last couple of days. Yes the market lost 500 points yesterday but the market did not crash...matter of fact, the market closed in the green today. More importantly, the greenback is stable. When a U.S. financial institution like a BofA can buy an investment giant like Lehman, it only proves that capitalism is alive and well in America.

in multiple aspects-yes-the american economy is actually strong. i just hope the permeating crisis in confidence won't undermine it to absurd proportions.

3cr

September 19th, 2008, 12:48 AM

^^ Personally I don't know if I would actually decsribe the US economy as being strong at this point in time but probably more so one that is "damaged" and "fragile" but still quite "resilient" and "holding on". Question is how long will it be able to hold on and stay afloat? Hopefully all these Gov't/Central Bank/Fed intervention efforts will prove to be the "game changer" and start help ease what seems to be an endless downward spiral of the US economy. Guess we'll just have to wait and see what the future will bring. Let's keep our fingers crossed!

3cr

September 19th, 2008, 02:43 AM

Wall Street crisis is culmination of 28 years of deregulation
By David Lightman
http://www.mcclatchydc.com/242/story/52559.html

WASHINGTON — No one cog in the federal government's machine of financial regulation let down the country by failing to prevent the latest shakeout on Wall Street. The entire system did.

"They just haven't done a particularly good job," said James Barth, a senior finance fellow at the Milken Institute, a nonpartisan research group based in Los Angeles.

Kathleen Day, a spokeswoman for the Center for Responsible Lending, a consumer-oriented research group, explained the regulatory lapses more starkly: "The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly," she said. "Instead, they let everyone drink as much as they wanted and then handed them the car keys."

Analysts and politicians are raising serious questions about the nation's financial regulatory system, which dates to the New Deal era.

On Monday, one Wall Street bank, Lehman Brothers, filed for bankruptcy protection and another, Merrill Lynch, sought comfort by selling itself to Bank of America for $50 billion. Earlier this year, the government helped enable the sale of faltering investment bank Bear Stearns to J.P. Morgan Chase, and more recently took over mortgage giants Fannie Mae and Freddie Mac.

Such troubles were supposed to have been prevented, or at least mitigated, by regulatory systems that the nation began to put in place after the banking system collapsed at the start of the Great Depression.

Many banks at the time were badly wounded by their personal and financial ties to securities trading. The 1933 Glass-Steagall Act, and later the 1956 Bank Holding Company Act, mandated the separation of banks, insurance companies and securities firms.

Those and many other federal laws stabilized the banking and securities markets, but by the 1970s, a stumbling U.S. economy led to a change in America's political-economic values. Ronald Reagan led a movement that came to power in 1980 proclaiming faith in free markets and mistrust of government. That conservative philosophy has dominated America for the past 28 years.

Even after taxpayers had to rescue deregulated savings and loans, or S&Ls, with a $200 billion bailout in the late 1980s, the push to loosen regulation paused only briefly.

In 1999, President Clinton signed the Financial Services Modernization Act, which tore down Glass-Steagall's reforms by removing the walls separating banks, securities firms and insurers.

Under President Clinton and his successor, the government became eager to promote home ownership. Interest rates were low, the market grew for loans to borrowers with weak credit and private-sector mortgage bonds boomed. About 38 percent of those bonds were backed by subprime loans. They are at the root of today's financial crisis.

A generation ago, banks, credit unions and S&Ls issued home mortgages that they retained on their books as an asset. The lenders had a stake in receiving full repayment of the loans from creditworthy borrowers.

But in recent years, mortgages began to be sold to firms that cobbled the loans together to create mortgage-backed securities, or mortgage bonds. Loans to the least creditworthy borrowers carried the highest risk but gave the highest returns, so banks and other institutional investors bought loads of them. Except no one was policing the creditworthiness of the borrowers.

The process helped more people buy homes, and a booming mortgage-bond market, led by investment banks, was in full swing by 2005.

When borrowers who had secured loans with adjustable interest rates, however, found their rates going up, many were unable to pay. That meant that holders of bonds backed by these mortgages were stuck with securities worth much less than their face value — or nothing at all. That created a solvency crisis for the banks that loaded up on them — and virtually all of them had.

Some regulatory agencies issued warnings, but credit-rating agencies still said that the bonds — and the banks that issued and bought them — were safe. It turns out, of course, that many were not.

"There was a view that the secondary market excesses could be prevented by the broader application of risk-evaluation models by the investment firms," said Barry Bosworth, senior fellow in economic studies at the Brookings Institution, a Washington think tank. "In fact, risk evaluation is more of an art than a science, and the (private-sector) institutions fooled themselves," said Bosworth, a former adviser to President Jimmy Carter.

With Congress eager to expand home-ownership, regulators felt pressure to deal lightly with mortgage loans to low-income households, and virtually no one proposed national regulation of non-bank lenders or mortgage brokers.

Had regulators questioned sub-prime lending, they would have been harshly criticized, said Edward Kane, a professor of finance at Boston College.

"Imagine what congressional committees would have said," Kane said. "They would have asked about affordable housing. It was a no-win situation for regulators,"

Warning signs began to appear. At least nine federal agencies oversee some part of the mortgage market, and from 2004 to 2007, at least three had issued warnings about risky loans.

Still, none was willing to end the financial revelry.

"It was another example of an asset bubble that appears periodically. An economy will disregard risk, and when people see another investor making money by investing in an asset, others will throw caution to the wind," explained Nicolas Bollen, professor in finance at Vanderbilt University's Owen Graduate School of Management in Nashville, Tenn.

In such an environment, said Day, of the Center for Responsible Lending: "No one wanted to kill the goose that laid the golden egg."

Lili

September 19th, 2008, 03:17 AM

^ It would seem that President Clinton's move to lift the separation among banking, securities and insurance firms is a double edged sword. It can cut both ways. Without that law, Bank of America and JP Morgan Chase could not have bought Merrill Lynch and Bear Sterns, respectively. And the Federal Reserve could not have rescued AIG. But at the same time, such overlap can also expose savers and investors to huge risks.

In the subprime mess, what caused the adjustable rate to shoot up in the first place? In my opinion, the goal to allow home ownership even to those with low income (and concomittantly low creditworthiness) is laudable. The problem was looking into how much house can that individual afford and what safety net is in place? The bigger problem was when the greedy lenders sold these mortgage notes to even greedier "creative" investment banks and securities traders that lumped them together into mortgage bonds and mortgage-backed securities that caused the interest rates to shoot up, thus, preventing the home-owners to pay off their mortgages.

Moreover, not only are salaries/wages of the people not going up but they are losing their jobs. So, what are they going to use to pay up these huge loans?

So, I think all of these planning in terms of jobs, housing, education, health care, retirement, etc. should have gone hand in hand when envisioning the economic policies of the U.S. They could not approach these on a piece meal basis and just do stop gap measures.

-TC-

September 19th, 2008, 03:25 AM

Dow up 410 pts. :okay:

http://biz.yahoo.com/ap/080918/financial_meltdown.html

Word of possible financial crisis fix lifts stocks
Thursday September 18, 8:15 pm ET
By Patrick Rizzo, Jeannine Aversa and Martin Crutsinger, AP Business Writers

WASHINGTON (AP) -- Wall Street finally found reason to rally Thursday, soaring on a report that the Bush administration was considering setting up a government agency to soak up bad loans and mortgages. But it was far from clear that the government had settled on any solution to the worst crisis on Wall Street in decades.

The Dow Jones industrial average rose 410 points, recording its biggest percentage gain in nearly six years and adding to a week of extraordinary volatility in the American financial system and markets.The rebound also came after an infusion of billions of dollars by the Federal Reserve and world governments aimed at getting nervous banks to stop hoarding money and lend again.

Stocks had fluctuated throughout the day, without severe swings in either direction, until CNBC reported the administration might back a new agency to take bad assets off the books of struggling financial institutions.

But a person with knowledge of the talks told The Associated Press that the idea, patterned after the Resolution Trust Corp. set up in the aftermath of the savings and loan crisis of the 1980s, was just one idea on the table.

The person, speaking on condition of anonymity because of the sensitivity of the discussions, said the talks had not narrowed to a single option, and that the RTC-style solution was not a certainty.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with congressional leaders Thursday night. House Speaker Nancy Pelosi, who participated in the discussions, told President Bush in a letter Congress could work past its scheduled adjournment next week to deal with the crisis.

Before the sun rose on Wall Street, the Fed said it would boost by as much as $180 billion the amount of cash it would supply to foreign counterparts that are short on dollars. For banks in the United States, the Fed supplied $105 billion in short-term loans later in the day.

But, at least initially, those efforts did little to unfreeze the global credit markets. Banks remained extremely reluctant to lend money.

The No. 2 official at the International Monetary Fund, John Lipsky, said the past few days were "searing manifestations of a financial crisis that has expanded to historic proportions." He predicted the turbulence would continue for "some time to come."

British financial regulators also banned short-selling the stock of financial companies listed on the London Stock Exchange. U.S. regulators tightened rules on short-selling Wednesday.

The Fed said it had authorized the expansion of swap lines, the process by which it supplies reserves to other central banks, to include amounts up to $110 billion for the European Central Bank and up to $27 billion for the Swiss National Bank.

The Fed also said new swap facilities had been authorized with the Bank of Japan for as much as $60 billion, $40 billion for the Bank of England and $10 billion for the Bank of Canada.

For more than a year, investors around the world have watched with growing alarm as the U.S. economy, the world's largest, has struggled to right itself amid massive home foreclosures, many of them from mortgages issued to homeowners with bad credit.

The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks -- Bear Stearns, Lehman Brothers and Merrill Lynch -- have either gone out of business or been driven into the arms of another bank.

The Dow's gain of nearly 4 percent on Thursday sent the average back above 11,000 and nearly erased its losses from a day before.

But as the uncertainty wore on, investors continued to flock to Treasury securities, considered a haven in times of crisis, and the price of gold rose yet again. And worries about even the safest investments intensified as Putnam Investments abruptly closed a $15 billion money market fund because institutional investors had pulled their cash.

Bush canceled out-of-town fundraising trips to Alabama and Florida to stay in Washington and huddle with Paulson and the heads of the Fed and the Securities and Exchange Commission.

In an appearance earlier in the day, the president acknowledged "serious challenges" in the markets and said: "The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence."

The credit troubles reverberated around the globe. Asian stocks closed lower. European stocks rose but struggled to hold on to the gains. Russia closed its stock exchanges for a second day, and President Dmitry Medvedev pledged a $20 billion injection into financial markets.

In the United States, investors worried for another day about the health of the banks still standing. Earlier in the week, venerable Lehman Brothers was forced into bankruptcy, and Merrill Lynch was driven into the arms of Bank of America.

On Thursday, Morgan Stanley scrambled to strike a major deal or raise more cash that will reassure investors and prevent more damage to its battered stock. Its CEO, John Mack, reached out to China's Citic Group overnight about a possible investment, according to a person familiar with the talks.

Morgan Stanley is also considering a combination with retail bank Wachovia Corp. and an investment from Singapore Investment Corp., one of the world's biggest sovereign wealth funds, said the person, who spoke on the condition of anonymity because the discussions were still ongoing.

On Capitol Hill, lawmakers in both parties became increasingly vocal about their concerns with the Bush administration's handling of the current crisis.

Administration officials refused to attend a closed-door briefing with House Republicans this morning, leaving their congressional allies in the dark about the government's $85 billion emergency loan to insurer American International Group, House GOP leader John A. Boehner said.

And Sen. Chris Dodd, D-Conn., the Banking Committee chairman, was irritated that Paulson twice canceled appearances he was to have made before the panel this week.

Associated Press Writers Catrina Stewart in Moscow, Matt Moore in Frankfurt, Ellen Simon in New York and Chris Rugaber, Deb Reichmann and Julie Hirschfeld Davis in Washington contributed to this report.

-TC-

September 19th, 2008, 03:43 AM

What was the Resolution Trust Corporation?

The Resolution Trust Corporation was a US Government-owned asset management company charged with liquidating assets (primarily real estate-related assets, including mortgage loans) that had been assets of savings and loan associations ("S&Ls") declared insolvent by the Office of Thrift Supervision, as a consequence of the Savings and Loan crisis of the 1980s.

It also took over the insurance functions of the former Federal Home Loan Bank Board. It was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), adopted in 1989.

In 1995, its duties were transferred to the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation.

Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with total assets of $394 billion.

Dow up 410 pts. :okay:

http://biz.yahoo.com/ap/080918/financial_meltdown.html

Word of possible financial crisis fix lifts stocks
Thursday September 18, 8:15 pm ET
By Patrick Rizzo, Jeannine Aversa and Martin Crutsinger, AP Business Writers

WASHINGTON (AP) -- Wall Street finally found reason to rally Thursday, soaring on a report that the Bush administration was considering setting up a government agency to soak up bad loans and mortgages. But it was far from clear that the government had settled on any solution to the worst crisis on Wall Street in decades.

The Dow Jones industrial average rose 410 points, recording its biggest percentage gain in nearly six years and adding to a week of extraordinary volatility in the American financial system and markets.The rebound also came after an infusion of billions of dollars by the Federal Reserve and world governments aimed at getting nervous banks to stop hoarding money and lend again.

Stocks had fluctuated throughout the day, without severe swings in either direction, until CNBC reported the administration might back a new agency to take bad assets off the books of struggling financial institutions.

But a person with knowledge of the talks told The Associated Press that the idea, patterned after the Resolution Trust Corp. set up in the aftermath of the savings and loan crisis of the 1980s, was just one idea on the table.

The person, speaking on condition of anonymity because of the sensitivity of the discussions, said the talks had not narrowed to a single option, and that the RTC-style solution was not a certainty.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met with congressional leaders Thursday night. House Speaker Nancy Pelosi, who participated in the discussions, told President Bush in a letter Congress could work past its scheduled adjournment next week to deal with the crisis.

Before the sun rose on Wall Street, the Fed said it would boost by as much as $180 billion the amount of cash it would supply to foreign counterparts that are short on dollars. For banks in the United States, the Fed supplied $105 billion in short-term loans later in the day.

But, at least initially, those efforts did little to unfreeze the global credit markets. Banks remained extremely reluctant to lend money.

The No. 2 official at the International Monetary Fund, John Lipsky, said the past few days were "searing manifestations of a financial crisis that has expanded to historic proportions." He predicted the turbulence would continue for "some time to come."

British financial regulators also banned short-selling the stock of financial companies listed on the London Stock Exchange. U.S. regulators tightened rules on short-selling Wednesday.

The Fed said it had authorized the expansion of swap lines, the process by which it supplies reserves to other central banks, to include amounts up to $110 billion for the European Central Bank and up to $27 billion for the Swiss National Bank.

The Fed also said new swap facilities had been authorized with the Bank of Japan for as much as $60 billion, $40 billion for the Bank of England and $10 billion for the Bank of Canada.

For more than a year, investors around the world have watched with growing alarm as the U.S. economy, the world's largest, has struggled to right itself amid massive home foreclosures, many of them from mortgages issued to homeowners with bad credit.

The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks -- Bear Stearns, Lehman Brothers and Merrill Lynch -- have either gone out of business or been driven into the arms of another bank.

The Dow's gain of nearly 4 percent on Thursday sent the average back above 11,000 and nearly erased its losses from a day before.

But as the uncertainty wore on, investors continued to flock to Treasury securities, considered a haven in times of crisis, and the price of gold rose yet again. And worries about even the safest investments intensified as Putnam Investments abruptly closed a $15 billion money market fund because institutional investors had pulled their cash.

Bush canceled out-of-town fundraising trips to Alabama and Florida to stay in Washington and huddle with Paulson and the heads of the Fed and the Securities and Exchange Commission.

In an appearance earlier in the day, the president acknowledged "serious challenges" in the markets and said: "The American people can be sure we will continue to act to strengthen and stabilize our financial markets and improve investor confidence."

The credit troubles reverberated around the globe. Asian stocks closed lower. European stocks rose but struggled to hold on to the gains. Russia closed its stock exchanges for a second day, and President Dmitry Medvedev pledged a $20 billion injection into financial markets.

In the United States, investors worried for another day about the health of the banks still standing. Earlier in the week, venerable Lehman Brothers was forced into bankruptcy, and Merrill Lynch was driven into the arms of Bank of America.

On Thursday, Morgan Stanley scrambled to strike a major deal or raise more cash that will reassure investors and prevent more damage to its battered stock. Its CEO, John Mack, reached out to China's Citic Group overnight about a possible investment, according to a person familiar with the talks.

Morgan Stanley is also considering a combination with retail bank Wachovia Corp. and an investment from Singapore Investment Corp., one of the world's biggest sovereign wealth funds, said the person, who spoke on the condition of anonymity because the discussions were still ongoing.

On Capitol Hill, lawmakers in both parties became increasingly vocal about their concerns with the Bush administration's handling of the current crisis.

Administration officials refused to attend a closed-door briefing with House Republicans this morning, leaving their congressional allies in the dark about the government's $85 billion emergency loan to insurer American International Group, House GOP leader John A. Boehner said.

And Sen. Chris Dodd, D-Conn., the Banking Committee chairman, was irritated that Paulson twice canceled appearances he was to have made before the panel this week.

Associated Press Writers Catrina Stewart in Moscow, Matt Moore in Frankfurt, Ellen Simon in New York and Chris Rugaber, Deb Reichmann and Julie Hirschfeld Davis in Washington contributed to this report.

Weina

September 19th, 2008, 04:59 AM

Dow up 410 pts. :okay:

http://biz.yahoo.com/ap/080918/financial_meltdown.html

let's see if this is not another 1 night stand again since it seems it's the trend of todays market. Today high next day it's low again. hurray to the chupiteros, the vultures & suckers:banana:

bitoy

September 19th, 2008, 05:16 AM

^^ganito ang pagkaka-alam ko:)

kapag maganda ang performance ng US markets, malaki ang demand sa US$ ng mga bansa na gustong makapag-invest/ trade sa US market

kapag mahina naman ang US market, humihina ang mga padala ng mga kababayan nating pinoy na nagtatrabaho sa US kase mahirap ang buhay at patuloy din naman ang malakas ding demand ng US$ ng mga importers natin sa dolyar.

:cheers: You can be my financial advisor from now on. :okay:

Misteryoso talaga yang $dollar na yan....

maka pag imprenta nga uli ng milyon-milyon... :lol:

Maxxclip

September 19th, 2008, 05:54 AM

^^thanks

magandang trabaho yan, magkapera sa pamamagitan ng pamomoroblema kung paano magkapera ang iba

nostalgicbabe

September 19th, 2008, 10:13 AM

According to the BSP, the Philippine banking system remains sound despite the bankruptcy of Lehman Brothers. Domestic banks' exposures to structured products issued by Lehman are well cushioned by the banks' capital base.

-TC-

September 19th, 2008, 10:52 AM

Looks more like an RTC-like entity is already in the works. A temporary ban on short-selling maybe implemented as well. Read the article below:

http://biz.yahoo.com/ap/080919/financial_meltdown.html

Congress promises quick action on bailout package
Friday September 19, 4:08 am ET
By Jeannine Aversa and Julie Hirschfeld Davis, Associated Press Writers

Congress promises quick action on financial crisis bailout plan from Bush administration WASHINGTON

(AP) -- Congress promised quick action on a plan to buy up toxic assets, such as bad mortgages, held by troubled banks and other institutions, hoping to lift the nation out of its worst financial crisis in decades.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are crafting a plan, which they plan to soon deliver to lawmakers, after concluding they need broader powers to combat fallout from a housing and credit market meltdown that has sent shock waves through Wall Street and around the globe. Congressional leaders said they expected to get the plan Friday and act on it before Congress recesses for the election."We hope to move very quickly. Time is of the essence," House Speaker Nancy Pelosi, D-Calif., said after Paulson and Bernanke briefed congressional leaders Thursday night.

Stocks on Wall Street shot up more than 400 points late Thursday on word that a plan was in the works. Fallout from the housing and credit debacles have badly bruised the economy and pushed unemployment to a five-year high.

"I don't say any prudent money manager would say we're out of the woods, but right in this moment it all seems positive and leading toward an upward move for the market going into Friday session," said Scott Fullman, director of derivative investment strategy for New York-based institutional broker WJB Capital Group.

Fullman said the biggest bonus of any potential government plan is that it is being put together to help the banking industry as a whole. Until now, the Treasury and Fed have selectively bailed out institutions that were the most vulnerable.

"This staves off Judgment Day," said Anthony Sabino, professor of law and business at St. John's University. "This is a detox for banks, and will help cleanse themselves of the bad mortgage securities, loans and everything else that has hurt them."

The roots of the current crisis can be traced to lax lending for home mortgages -- especially subprime loans given to borrowers with tarnished credit -- during the housing boom. Lenders and borrowers were counting on home prices to keep zooming upward. But when the housing market went bust, home prices plummeted. Foreclosures spiked as people were left owing more on their mortgage than their home was worth. Rising mortgage rates also clobbered some homeowners.

As financial companies racked up multibillion-dollar losses on soured mortgage investments, and credit problems spread globally, firms hoarded cash and clamped down on lending. That crimped consumer and business spending, dragging down the national economy -- a vicious cycle policymakers have been trying to break.

"The root cause of the stress in the capital markets is the real estate correction," Paulson said, adding he hopes to have a solution "aimed right at the heart of this problem."

Bernanke said a resolution would help "get our economy moving again."

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, discounted the idea of setting up a new agency -- similar to the Resolution Trust Corp. -- established in 1989 to help resolve a savings and loan crisis at a cost to taxpayers of $125 billion.

"It will be the power -- it may not be a new entity. It will be the power to buy up illiquid assets," Frank said. "There is this concern that if you had to wait to set up an entity, it could take too long."

The federal government already has pledged more than $600 billion in the past year to bail out, or help bail out, some of the biggest names in American finance. There was no immediate word on how much the new rescue plan might cost.

Paulson, Fed Chairman Ben Bernanke and other officials planned to work through the weekend on a solution.

Christopher Cox, chairman of the Securities and Exchange Commission, told lawmakers the SEC may put in a temporary emergency ban on all short-selling, not just the aggressive forms it already has targeted, according to a person familiar with the matter, speaking on condition of anonymity because no final decision had been made.

The ban might apply to stocks of selected financial companies, to all financial companies or even possibly to all public companies. Short-selling, which has been practiced on Wall Street for decades, is not illegal per se.

For more than a year, investors around the world have watched with growing alarm as the U.S. economy, the world's largest, has struggled to right itself amid massive home foreclosures, many of them from mortgages issued to homeowners with bad credit.

The turmoil has swallowed some of the most storied names on Wall Street. Three of its five major investment banks -- Bear Stearns, Lehman Brothers and Merrill Lynch -- have either gone out of business or been driven into the arms of another bank.

Associated Press writers Andrew Taylor and Marcy Gordon in Washington and Joe Bel Bruno in New York contributed to this report.

davaob4now

September 19th, 2008, 12:37 PM

RP in better position to face meltdown – IMF
By Des Ferriols
Friday, September 19, 2008
Fiscal reforms have improved the Philippines’ capability to face the global economic meltdown, but more reforms are needed, the International Monetary Fund (IMF) said yesterday.

“The Philippines is in a better position to face this crisis because of fiscal reforms undertaken by the government in 2005-2006,” IMF Resident Representative Reza Baqir told The STAR last night.

“The impact on domestic financial markets of ongoing global financial stress would have been greater if these reforms had not been in place,” Baqir said. “These reforms also provided resources to the government to undertake measures to protect the poor from high food and fuel prices.”

As the local economy braced for the impact of the meltdown in the US market, the IMF official said the government would need more funds and that now is the best time for the government to push for more tax reforms.

Chief among these reforms, according to the IMF, was indexing tobacco and alcohol taxes to inflation in order to generate the revenues needed to finance poverty alleviation programs.

With elections approaching in 2010, the IMF said the window for legislative action would close soon.

Without the economic reforms, the IMF said the damage from the US market meltdown would have been bigger.

The IMF is the biggest supporter of the Arroyo administration’s strategy to undertake targeted and conditional cash transfer program to cushion the impact of the market turmoil and the surge in oil prices.

A reduction or scrapping of the VAT on oil and petroleum products –as pushed by some quarters –would have caused a dramatic erosion in government revenues at a time when public spending is needed more to stimulate the economy.

“The tax effort —tax collections in percent of GDP —remains a key barometer of Philippines’ fiscal health,” Baqir said.

Aside from further reducing Philippine vulnerability, Baqir said reforms would provide sustainable resources for needed spending on infrastructure and social sectors.

“Provision of such public goods is necessary for reducing poverty and raising growth prospects,” Baqir said.

Baqir said the tobacco tax level should be raised then indexed to inflation which, he said, would strengthen the tax effort and bring tobacco taxation in line with other countries.

Baqir said the IMF was also supporting the rationalization of fiscal incentives since it was shown that income tax holidays benefit mostly very profitable firms.

Baqir said measures being supported by the finance department that would replace tax holidays with reduced corporate income tax rate or a low tax on gross receipts, would provide stronger incentives to invest while increasing government revenues.

The IMF said the government should also improve the collection efficiency of Bureau of Internal Revenue and the Bureau of Customs. At the BIR, reforms should cover taxpayer registration, arrears collection, and audits. The BOC also needs to craft and implement a comprehensive reform agenda.

Banks stable
Malacañang assured the public yesterday that there’s no reason to worry about bank closures despite the troubles being experienced by a number of large financial institutions in the US.

Executive Secretary Eduardo Ermita emphasized at a briefing that the banking system is very stable and is capable of fending off external shocks.

Ermita said that insolvency should not be an issue among the local banks which have exposure in the troubled Lehman Brothers.

Bangko Sentral ng Pilipinas deputy governor Nestor Espenilla Jr. noted that the country’s banks, particularly the commercial banks are well capitalized and are well protected from developments in the US.

Espenilla said that a survey of around 60 commercial and thrift banks conducted by the BSP showed that only a handful had accounts with Lehman Brothers.

Espenilla noted that it is the country’s biggest banks that had exposures in Lehman Brothers, three of which already made their disclosures to the Philippine Stock Exchange.

Ermita said that six banks were affected but this would not be confirmed by Espenilla.

Espenilla pointed out that the exposure of the affected banks is far less than their capital bases so that even in a worst-case scenario, they would not be forced to shut down.

He said that the worst that could happen to the affected banks would be a failure to realize their projected incomes.

“It won’t result in negative incomes and we’re not expecting the solvency of the banks to be an issue,” Espenilla said.

“We believe that the banks will be able to hurdle this because of their huge capital base,” he added.

According to Espenilla, the lessons learned during the Asian Financial Crisis in 1997 have buttressed the banking system from problems similar to what is happening in the US.

Since the 1997 crisis, the BSP has required higher capitalization for banks in order to protect the interests of their clients and the entire financial system as a whole.

Espenilla said that the affected banks could even recover part or whole of what they invested in Lehman Brothers now that financial institutions such as British bank Barclays Plc. have decided to buy parts of what used to be a formidable US firm. - With Marvin Sy

-------:):)
Kaya naman pala relax na relax lang si Pres. Arroyo eh...kudos to her and to the people that sorrounds her...:cheers:

-TC-

September 19th, 2008, 12:48 PM

It's official! Short-selling of stocks has been temporarily banned by the US SEC! :applause:

http://biz.yahoo.com/ap/080919/sec_short_selling.html

SEC bans short-selling
Friday September 19, 6:38 am ET
SEC temporarily bans short-selling to boost investor confidence

WASHINGTON (AP) -- The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks.The move, announced on the agency's Web site, may well be unprecedented and a reflection of regulators' concern about the widening scope of the financial crisis as entreaties come from all quarters to stem a swarm of short-selling.

http://us.bc.yahoo.com/b?P=urhaI9FJqz8z_aY7SISOswDAejUYKUjTgakAAhJU&T=1ej8dqju7%2fX%3d1221820841%2fE%3d8988914%2fR%3dfin%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d3827651611%2fH%3dY29udGVudD0icG9saXRpY3MiIGNvYnJhbmQ9IjxhIGhyZWY9aHR0cDovL3VzLnJkLnlhaG9vLmNvbS9maW5hbmNlL25ld3MvYXBmL1NJRz0xMGtmbW9mb2wvKmh0dHA6Ly93d3cuYXAub3JnLz48aW1nIGJvcmRlcj0wIHNyYz1odHRwOi8vdXMuaTEueWltZy5jb20vdXMueWltZy5jb20vaS91cy9maS9nci9wYXJ0bmVyX2xvZ29zL2FwMl8xNzB4MzMuZ2lmIGFsdD1BUD48L2E.IiBjYWNoZWhpbnQ9Ijg5ODg5MTQiIGNhY2hlaGludD0iODk4ODkxNCI-%2fQ%3d-1%2fS%3d1%2fJ%3dFDAA49D1&U=13fpf9gev%2fN%3d.7r8A0LaX94-%2fC%3d658308.12993691.13207512.1435155%2fD%3dLREC%2fB%3d4743079%2fV%3d1In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence."The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."

The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.

A recent wave of the market maneuvers -- where traders seek to profit by selling unowned shares of companies in the anticipation their prices will drop -- has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big companies.

Cox, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke held a closed-door meeting Thursday night with members of Congress.

The SEC said its action calls a time-out to aggressive short-selling in financial stocks and said it would consider measures to address short-selling in other publicly traded companies.

Short-selling, in a normal market, contributes to efficiency while adding liquidity to the markets. But now, the SEC said, it appears that "unbridled" short-selling was contributing to the sudden price declines in the securities of financial institutions.

On Wednesday, New York Sens. Charles Schumer and Hillary Clinton, both Democrats, appealed to the SEC for such a temporary ban, saying the watchdog agency "has the power to take a temporary but important step to help restore a measure of stability to our financial markets."

The California Public Employees' Retirement System, the nation's largest pension fund, said that starting Thursday it is no longer lending out shares of Goldman Sachs Group Inc. and Morgan Stanley, joining a growing number of public pension funds that are attempting to curb short-selling of two investment banks' stocks.

-TC-

September 19th, 2008, 01:37 PM

European markets are surging right now due to the news.

UK's FTSE100 is +7%, French CAC40 +6%, German DAX40 +4%.

It's official! Short-selling of stocks has been temporarily banned by the US SEC! :applause:

http://biz.yahoo.com/ap/080919/sec_short_selling.html

SEC bans short-selling
Friday September 19, 6:38 am ET
SEC temporarily bans short-selling to boost investor confidence

WASHINGTON (AP) -- The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks.The move, announced on the agency's Web site, may well be unprecedented and a reflection of regulators' concern about the widening scope of the financial crisis as entreaties come from all quarters to stem a swarm of short-selling.

http://us.bc.yahoo.com/b?P=urhaI9FJqz8z_aY7SISOswDAejUYKUjTgakAAhJU&T=1ej8dqju7%2fX%3d1221820841%2fE%3d8988914%2fR%3dfin%2fK%3d5%2fV%3d2.1%2fW%3dH%2fY%3dYAHOO%2fF%3d3827651611%2fH%3dY29udGVudD0icG9saXRpY3MiIGNvYnJhbmQ9IjxhIGhyZWY9aHR0cDovL3VzLnJkLnlhaG9vLmNvbS9maW5hbmNlL25ld3MvYXBmL1NJRz0xMGtmbW9mb2wvKmh0dHA6Ly93d3cuYXAub3JnLz48aW1nIGJvcmRlcj0wIHNyYz1odHRwOi8vdXMuaTEueWltZy5jb20vdXMueWltZy5jb20vaS91cy9maS9nci9wYXJ0bmVyX2xvZ29zL2FwMl8xNzB4MzMuZ2lmIGFsdD1BUD48L2E.IiBjYWNoZWhpbnQ9Ijg5ODg5MTQiIGNhY2hlaGludD0iODk4ODkxNCI-%2fQ%3d-1%2fS%3d1%2fJ%3dFDAA49D1&U=13fpf9gev%2fN%3d.7r8A0LaX94-%2fC%3d658308.12993691.13207512.1435155%2fD%3dLREC%2fB%3d4743079%2fV%3d1In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence."The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."

The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.

A recent wave of the market maneuvers -- where traders seek to profit by selling unowned shares of companies in the anticipation their prices will drop -- has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big companies.

Cox, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke held a closed-door meeting Thursday night with members of Congress.

The SEC said its action calls a time-out to aggressive short-selling in financial stocks and said it would consider measures to address short-selling in other publicly traded companies.

Short-selling, in a normal market, contributes to efficiency while adding liquidity to the markets. But now, the SEC said, it appears that "unbridled" short-selling was contributing to the sudden price declines in the securities of financial institutions.

On Wednesday, New York Sens. Charles Schumer and Hillary Clinton, both Democrats, appealed to the SEC for such a temporary ban, saying the watchdog agency "has the power to take a temporary but important step to help restore a measure of stability to our financial markets."

The California Public Employees' Retirement System, the nation's largest pension fund, said that starting Thursday it is no longer lending out shares of Goldman Sachs Group Inc. and Morgan Stanley, joining a growing number of public pension funds that are attempting to curb short-selling of two investment banks' stocks.

crappypants

September 19th, 2008, 02:07 PM

look at how the financial stocks bounced up. i suspect it's the handy work of these short sellers. :ohno: someone made alot of money.

-TC-

September 19th, 2008, 02:21 PM

look at how the financial stocks bounced up. i suspect it's the handy work of these short sellers. :ohno: someone made alot of money.

Yup most financial/banking stocks in Europe are up by 20-30% today.

Honestly we can't blame all the carnage that has happened this week on these short sellers but they definitely played a big part in it. Anyway, the hedgies who went short upto yesterday will now lose a lot of money as they scramble to cover their positions. Ouch!

What has come down must now go up. Way up!

-TC-

September 19th, 2008, 03:02 PM

http://biz.yahoo.com/ap/080919/world_markets.html

World markets soar on possible US rescue package
Friday September 19, 7:54 am ET
By Matt Moore, AP Business Writer

From Tokyo to London, world's markets soar higher in reaction to possible
US financial fix

FRANKFURT, Germany (AP) -- Global stock markets roared higher on Friday after news of a possible U.S. government plan to rescue banks from toxic mortgage debt raised a collective sense of hope amid the world's worst financial crisis in decades.

Europe exchanges, which had spent nearly all of this week drowning in declines responded with ferocity to the possible plan, surging as battered bank stocks rebounding along with them.The news of a likely U.S. lifeline, along with new changes to short-selling in the U.S., Britain and Ireland, also helped push markets higher, analysts said.

Early Friday, the U.S. Securities and Exchange Commission took the dramatic step of temporarily banning the routine practice of betting against company stocks, announcing the move on its Web site.

The commission said it was acting in concert with Britain's Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence.

"The short-term changes to short selling are certainly giving markets and regulators room to breathe," said Keith Bowman, equity analyst Hargreaves Lansdown Stockbrokers. "But there are going to be a significant number of hurdles to overcome for this temporary measure to prove useful at solving the fundamental problems over the long term."

Another factor were moves by the European Central Bank, Swiss National Bank and Bank of England to offer up more cash Friday. The three banks put a combined $90 billion into money markets in a lockstep move.

London's FTSE jumped more than 7 percent, led higher by Lloyds TSB, which gained some 30 percent in trading only a day after sentiment about its financial strength hobbled its appeal.

In Frankfurt, the DAX index sprung more than 4 percent higher with shares of Commerzbank AG and Deutsche Bank AG leaping 18.6 percent and nearly 16 percent, respectively.

The Irish Stock Exchange responded with its biggest burst in Dublin trading history, rising more than 25 percent in the first hour. The financials-heavy index soon settled back on profit-taking, but remained up nearly 12 percent at 4,175 in midmorning trade.

The most dramatic gains were scored by Anglo-Irish Bank, a niche lender that had been heavily targeted by short-sellers in recent weeks, knocking two-thirds off its market capitalization.

Anglo-Irish stock value initially surged by an incredible 120 percent, then settled back, still up more than 35 percent. Allied Irish rose 19.7 percent, Bank of Ireland 28.3 percent, and Irish Life & Permanent 21.6 percent.

Irish regulators also banned short-selling on the stocks of the country's four largest financials: Allied Irish Banks, Bank of Ireland, Irish Life & Permanent and Anglo-Irish Bank Corp.

Russia's leading stock exchanges suspended trading for a second time in several hours after stocks rose too sharply. Earlier Friday, trading was suspended on both the RTS and MICEX within an hour of opening, in line with exchange rules. They reopened after an hour only to close again.

MICEX, where most share trading takes place, was up 25.4 percent since the start of Friday after two-day suspension. The RTS was up 20.2 percent. Both indexes were closed on Wednesday for two days after the MICEX suffered one-day losses on a scale not seen since Russia's 1998 financial collapse. It plunged 25 percent in just 2 1/2 days on the back of tumbling oil prices and Wall Street turmoil, and was down more than 55 percent since its May peak.

Austria's ATX surged past 9 percent in early afternoon trade after opening about 8 percent higher earlier Friday. In Madrid, the SMSI was up nearly 6.2 percent while Swedish shares climbed 6.8 percent higher in Stockholm. In Belgium, shares gained 7.5 percent on the Euronext Bel-20.

Across Asia, similar spikes were seen around the region. Hong Kong's Hang Seng Index surged a stunning 9.6 percent to 19,327.73, while Japan's Nikkei 225 average rose 3.8 percent to 11,920.86.

In China, the Shanghai benchmark jumped 9.5 percent -- its biggest gain ever -- after the government eliminated a tax on share purchases and said it was buying shares in state-owned banks.

The global turnaround came after investors took to heart word that the U.S. government was seeking the power to rescue banks by buying distressed assets at the heart of the financial system turmoil that's brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns.

Details of the plan were still being worked out, but U.S. Treasury Secretary Henry Paulson emerged from a nighttime meeting on Capitol Hill Thursday to say he hoped to have a solution "aimed right at the heart of this problem."

"It definitely gives investors a light at the end of the tunnel," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. "The solution is of such a magnitude that it could eventually fix the problems ... That's hugely important at the moment because that's what markets are focused on."

Oil prices were above $100 a barrel Friday, with light, sweet crude for October delivery rose $2.16 to $100.04 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. Overnight, the contract rose 72 cents to settle at $97.88.

The euro fell to $1.4221 in European trading from the $$1.4247 it bought in New York late Thursday.

The British pound drifted down to $1.8019 from $1.8076, while the dollar rose to 107.40 Japanese yen from 106.19 yen.

AP Business Writers Emily Flynn Vencat in London, Jeremiah Marquez in Hong Kong and Elaine Kurtenbach in Shanghai, and AP Writers Shawn Pogatchnik in Dublin, Veronika Oleksyn in Vienna and Tomoko Hosaka in Tokyo contributed to this report.

TambayBlues

September 19th, 2008, 07:25 PM

Peter Schiff, President of EuroPacific Capital and author of the book "Crash Proof : How to Protect Yourself from the Coming Economic Collapse" views on the economy and the Fed's bailout. Here's a clip of the interview he had with CNN.

Peter Schiff calls Ben Bernanke a Liar
drJ6QxSO5gw

Here's another point of view from different experts with a little debate with Peter Schiff.

Dollar Collapse - Firms Which Underpin Trillions In Home Loans Implode - Bailout Equals Dollar Destruction
u3auIhXJEDw

I've read his book and he really does have good insights on the global economy and the Philippines also merited a mention. In case you guys want to read it here's the download link;

http://rapidshare.com/files/133183021/Crash_Proof.rar

flesh_is_weak

September 19th, 2008, 08:29 PM

TambayBlues

September 20th, 2008, 12:41 AM

Sana nga mag milagro America. Malapit na mag retire ang mga baby boomers sa 2011. Dami na naman nakasahod ke Uncle Sam for their retirement pension, medicare expenses etc. Uncle Sam can just print as much money as it wants but the question is will the value of the Dollar still be the same by then. Lets just keep our fingers crossed and of course hope/pray for the best. Here's a couple of links about this looming problem that nobody wants to talk about;

Fiscal Crisis on the Horizon
http://www.usatoday.com/news/washington/2005-11-14-fiscal-hurricane-cover_x.htm

Greenspan Again Warns Baby Boomers of Retirement Threat
http://seniorjournal.com/NEWS/Boomers/5-12-02-GreenspanWarnsBoomers.htm

Maxxclip

September 20th, 2008, 02:45 AM

the US economy wont collapse...it may appear like it, but it will miraculously recover...

ever heard of the beast recovering from a mortal wound in the Apocalypse? :lol:

then it would team-up with the woman seated on the beast, the EU (Europa sits on a Bull)

have a happy end of the world :lol:

:) OT

9"When the kings of the earth who committed adultery with her and shared her luxury see the smoke of her burning, they will weep and mourn over her. 10Terrified at her torment, they will stand far off and cry:
" 'Woe! Woe, O great city,
O Babylon, city of power!
In one hour your doom has come!'

11"The merchants of the earth will weep and mourn over her because no one buys their cargoes any more— 12cargoes of gold, silver, precious stones and pearls; fine linen, purple, silk and scarlet cloth; every sort of citron wood, and articles of every kind made of ivory, costly wood, bronze, iron and marble; 13cargoes of cinnamon and spice, of incense, myrrh and frankincense, of wine and olive oil, of fine flour and wheat; cattle and sheep; horses and carriages; and bodies and souls of men.

-TC-

September 20th, 2008, 05:00 AM

http://biz.yahoo.com/ap/080919/wall_street.html

Stocks soar as investors bet on gov't rescue plan
Friday September 19, 6:58 pm ET
By Tim Paradis, AP Business Writer

Wall Street extends big rally on bank rescue hopes, temporary ban on short sales of financials

NEW YORK (AP) -- Wall Street had another extraordinary rally Friday as investors stormed back into the market, relieved that the government plans to restore calm to the financial system by rescuing banks from billions of dollars in bad debt. The Dow Jones industrials soared about 370 points, giving them a gain of about 780 over two days, and Treasurys fell as money flowed into equities.

The government's proposal, while still a work in progress, has placated investors who worried that a continuum of bad bets on mortgages would hobble more financial companies and cause further damage to the strained banking system and the overall economy."If a solid plan is put in place, it's definitely going to be a positive in easing the pain," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. He added, though, that the set-up of any plan will determine its success.

A new government ban on short selling, or placing bets that a stock will fall, likely added to the market's gains as traders adjusted their positions. "A big chunk of this is scaring all the shorts to cover their bets," said Joe Battipaglia, market strategist at Stifel, Nicolaus & Co., referring to short sellers.

Treasury Secretary Henry Paulson, speaking about the rescue plan, said a bold approach is needed to remove troubled assets from the books of financial firms. He offered few details, but said he would working through the weekend with congressional leaders to assemble a remedy.

The plan could help neutralize a yearlong credit crisis that intensified this week. Wall Street suffered massive losses Monday and Wednesday, and credit markets essentially seized up following this week's bankruptcy of Lehman Brothers Holdings Inc. and the bailout of teetering insurer American International Group Inc.

Analysts said it was the first government response decisive enough to restore confidence in the markets; in the past, it has relied largely on steps like injecting cash into the banking system that, at least until now, had a limited impact.

"Everything they had done had been a Band-Aid approach, at the margins," said Jay Mueller, economist at Strong Capital Management. "Now we're dealing with the root problem."

The government took other steps Friday to restore stability to the financial system. The Federal Reserve said it will expand its emergency lending and let commercial banks finance purchases of asset-backed paper from money market funds. The Fed injected more money into the U.S. financial system, as it had done earlier in the week. The central bank also said it will buy short-term debt obligations issued by mortgage giants Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

To further ease investors' anxieties and bolster tattered investor confidence, the Treasury Department has decided to use a Depression-era fund to provide guarantees for U.S. money market mutual funds. Money market mutual funds are typically considered safe, but some investors have been fleeing them, fearing that the funds' holdings included souring corporate debt.

And to help limit the freefall in financial stocks, the Securities and Exchange Commission on Friday enacted a ban until next month on the short-selling of nearly 800 financial stocks. Short-selling is the common practice of betting against a stock by borrowing shares and then selling them in the open market. A short-seller's hope is the stock will fall; if it does, the stock can be bought back at the lower price. Those cheaper shares can be returned to the lender, allowing the investor to pocket the profits. Traders can lose, however, if the stock rises.

Wall Street observers have disagreed over the extent to which pressure from all those bets that a stock will fall shaped investor sentiment and strangled some financial stocks, like those of Lehman Brothers last week. Some say the fundamental problems with overleveraged financial companies warranted the pessimism while others say the short selling was a death knell for some financial names.

"The federal government has been petitioned by Wall Street to take evasive action in the money markets, the stock and bond markets, to avoid a complete meltdown of the credit system," said Battipaglia. "Once the credit system melts down, the economy falls. We can hand-wring about if this is the proper thing for the government to do, or if Wall Street pulled the panic button too soon, but that's something for the historians to sort out."

It's difficult to quantify how much of the market's gains reflected short sellers who are forced to step in and cover their bets by buying now rising stocks that had predicted would fall. While that appeared to play some role in the advances Thursday and Friday, the Nasdaq composite index -- dominated by big technology stocks, not financials -- showed big gains along with the Dow and the Standard & Poor's 500 index.

The Dow rose 368.75, or 3.35 percent, to 11,388.44 after having been up as much as 463.36.

Friday was a quarterly "quadruple witching" day, which marks the simultaneous expiration of options contracts, an event that often adds to volatility and heavy volume. Still, much of the market's moves were due to the government's actions Friday.

Broader stock indicators also surged. The S&P 500 index rose 48.57, or 4.03 percent, to 1,255.08, and the Nasdaq composite index rose 74.80, or 3.40 percent, to 2,273.90.

Even with Friday's big gains, stocks didn't end the week with much change after the whipsaw sessions. The Dow slipped 0.29 percent, the S&P 500 rose 0.27 percent and the Nasdaq added 0.56 percent.

Treasury prices dropped as investors poured money back into stocks. The yield on the 3-month Treasury bill -- a safe investment to which investors have rushed this week -- rose to 0.95 percent from 0.07 percent late Thursday. Yields move opposite from price. The yield on the benchmark 10-year Treasury note shot up to 3.81 percent from 3.53 percent late Thursday.

The stock market's enormous swings during the week reveal how anxious investors have been about the tightness in the credit markets the possibility that other financial companies might succumb to the difficulties in the markets.

The only lasting move in a week of intense volatility came late in Thursday's session when reports emerged that the government was considering a plan that would shift soured debt off financials' books. A wobbly market rocketed higher, giving the Dow a 410-point gain for the session, buying that continued through Friday.

The dollar rose against most other major currencies in Friday trading, while gold prices jumped. Light, sweet crude rose $6.67 to settle at $104.55 a barrel on the New York Mercantile Exchange.

Advancing issues outnumbered decliners by about 7 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 9.1 billion shares compared with 10.3 billion shares traded Thursday.

The Russell 2000 index of smaller companies rose 30.06, or 4.15 percent, to 753.74.

Overseas stock markets soared. Japan's Nikkei stock average jumped 3.8 percent, and Hong Kong's Hang Seng index surged 9.61 percent. In Europe, Britain's FTSE 100 jumped 8.84 percent, Germany's DAX index advanced 5.56 percent, and France's CAC-40 rose 9.27 percent.

The Dow Jones industrial average ended the week down 33.55, or 0.29 percent, at 11,388.44. The Standard & Poor's 500 index finished up 3.38, or 0.27 percent, at 1,255.08. The Nasdaq composite index ended the week up 12.63, or 0.56 percent, at 2,273.90.

The Russell 2000 index finished the week up 33.48, or 0.27 percent, at 753.74.

The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended at 12,882.14, up 117.26 points, or 0.92 percent, for the week. A year ago, the index was at 15,371.29.

------------------------------

http://i57.photobucket.com/albums/g227/tcc_0888/Misc/DJIASep15-19.jpg

http://finance.yahoo.com/banking-budgeting/article/105803/The-Week-That-Broke-Wall-Street?mod=weekend

The Week That Broke Wall Street
by David Goldman
Saturday, September 20, 2008

A shocking series of events that forever changed the financial markets

September 14 Sunday - Trouble Brews

News that Lehman Brothers was on the brink of collapse and scrambling for a buyer first surfaced on Friday. But by Sunday, there were still no suitors for the 158-year-old investment bank, and bankruptcy seemed inevitable. Indeed, just after midnight, in Monday's early hours, the firm officially announced its intention to file for Chapter 11.

Equally as staggering, just hours after reports surfaced that Bank of America broke off talks to buy Lehman, BofA unleashed the news that it would pay $50 billion to scoop up Merrill Lynch, another iconic Wall Street name.

As if that weren't enough, American International Group, the nation's largest insurer, said that it planned to sell some of its troubled assets in order to raise cash and boost investor confidence.

Concerns about the credit crisis grew increasingly dire, even though the government had already pledged to backstop Fannie Mae and Freddie Mac up to $200 billion just one week ago, and months earlier engineered JP Morgan's purchase of Bear Stearns with a $29 billion guarantee.

But it looked like that wouldn't be enough, so Sunday afternoon the Federal Reserve, along with 10 banks, announced a $70 billion pool of funds to aid troubled financial firms. The U.S. central bank also loosened its lending restrictions.

September 15 Monday - The Collapse

As traders sold off stocks on the weekend's sour news, rumors began to circulate that AIG was struggling to raise enough capital to fend off a downgrade. As a result, New York Governor David Paterson bent intra-corporation lending rules, allowing the company to loan itself $20 billion from a subsidiary.

In the worst day on Wall Street in seven years, the Dow Jones Industrial Average tanked more than 500 points after Lehman Brothers' epic collapse and the buyout of Merrill Lynch.

By Monday night, AIG was in fact hit with a downgrade, as Fitch bumped the insurance group down a notch. With $1.1 trillion in assets and 74 million clients in 130 countries, investors feared AIG's collapse would severely hurt consumers and further tighten already strangled credit.

Also Monday, news cropped up that the nation's largest savings bank, Washington Mutual, was in search of a white knight.

September 16 Tuesday - The Fed Steps In

Stocks saw another sharp drop on Tuesday morning as worries mounted that the financial system was broken beyond repair. Investors poured money into bonds, and the yield on the benchmark 10-year Treasury note fell to a 5-year low.

Next, several rock-solid money market funds began to falter, dipping below the $1 per share benchmark.

Meanwhile the Fed was scheduled to meet on Tuesday afternoon. Wall Street analysts, who just a week ago expected the Fed to hold rates steady, began to anticipate a rate cut. But the central bank chose not to succumb to panic and unanimously decided to hold rates steady at 2%.

Markets cheered the decision, and the Dow jumped 140 points at the close.

After the bell, British bank Barclays agreed to buy up $2 billion worth of Lehman's brokerage assets and real estate holdings, and Morgan Stanley reported better-than-expected earnings.

But the big news came later that night when the government announced that it would stage a staggering $85 billion bailout of AIG, and take an 80% stake in the company.

September 17 Wednesday - Another Free Fall

Investors gave an enormous thumbs-down to the AIG news, sending stocks plummeting, while traders piled funds into safer havens. Gold rose $70, a new record. Oil rose $6, its second-largest jump ever.

And the yield on the three-month Treasury sank to 0.02%, the lowest level since 1940.

The Dow dropped 450 points by the end of the day, dragged down by bank stocks in a tail-spin.

Despite reporting better-than-expected results, Goldman Sachs shares dipped below $100 a share for the first time since 2005. Morgan Stanley took a tumble as well, as rumors circulated that it would merge with troubled bank Wachovia.

Many Wall Street analysts blamed the stock market's collapses on so-called "naked" short sellers, who short stocks without ever buying the security. Subsequently, the U.S. Securities and Exchange Commission stepped in and banned naked short selling.

September 18 Thursday - The Bailout

With a crisis on its hands, the Fed convinced five other central banks around the world to invest a total of $180 billion in global financial markets.

Meanwhile, AIG was tossed out of the Dow Jones Industrial Average and replaced with food giant Kraft.

The stock market soared towards the close of the session, with financial stocks rebounding. The Dow added more than 400 points on rumors that an even more extensive federal bailout of the banking industry was in the making. Investors cheered these early reports that the Treasury would create an independent federal agency to take bad loans off of bank balance sheets.

Late Thursday night, Treasury Secretary Henry Paulson met with Congressional leaders to hammer out the details of a large-scale bailout.

September 19 Friday - The Confidence Boost

As Wall Street eagerly awaited the details of Secretary Paulson's plan, the SEC took what it called "emergency action" Friday morning and temporarily banned investors from short-selling 799 financial companies.

The Treasury also said it would insure up to $50 billion in struggling money market fund investments at financial companies, guaranteeing that the funds' value will not fall below the standard $1 a share.

The Fed also said it would make unlimited funds available to banks to finance purchases of asset-backed commercial paper from money market funds.

In a press conference, Treasury Secretary Paulson outlined the government's plan to put up hundreds of billions of dollars to help stem the crisis, saying "the financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

Later, President Bush held a separate press conference, flanked by Paulson, SEC Commissioner Christopher Cox and Fed chief Ben Bernanke, saying it was "essential" that the government step in to save the economy.

Investors cheered the moves, sending stocks soaring throughout the day.

Although the U.S. government had set various bailouts in motion to the tune of roughly $1 trillion, investors finished the week with renewed confidence that Wall Street may be broken - but not beyond repair.

DoggMann

September 20th, 2008, 06:10 AM

... without short sellers...
... what if this happens ....
... excerpt from the video...

"... you get rid of the short sellers ... then all you got left is people who owns the stock... this would be great except that, those guys can get scared to ... and when they do they go to sell ... what if everybody get scared and no one wants to buy ... "

"... when you get a stock with no bid, there is no price... essentially the stock instantaneously goes down to zero... getting rid of short sellers actually destabilize the market"

ivaXMEB6HzE

DoggMann

September 20th, 2008, 06:49 AM

"A line in the sand was crossed today by Hank Paulson. Every nation that has tried to print its way out of a financial crisis has literally self-destructed." ~ kdenninger

The Potential End Of America's Government
kqtAzRNhTTY

DoggMann

September 20th, 2008, 04:28 PM

http://www.bloomberg.com/apps/news?pid=20601087&sid=aYJKoGmVKr4I&refer=home

Bush Says Rescue Plan Will Ease Pressure on Banks (Update3)

By Roger Runningen and Catherine Dodge
Enlarge Image/Details

Sept. 19 (Bloomberg) -- President George W. Bush said the administration's new rescue plan to revive the credit markets and restore market liquidity will ease pressure on the balance sheets of banks and other financial institutions.

``America's economy is facing unprecedented challenges, and we are responding with unprecedented action,'' Bush said in a statement at the White House, his third of the week.

Bush, calling the current crisis a ``pivotal moment'' for the nation's economy, later lobbied House Speaker Nancy Pelosi and Senate Democratic Leader Harry Reid, as well as top Republicans, for quick legislative action to stabilize financial markets. House Financial Services Committee Chairman Barney Frank said Congress will act quickly.

``There will be ample opportunity to debate the origins of this problem; now is the time to solve it,'' Bush said. ``In our nation's history there have been moments that require us to come together across party lines to address major challenges. This is such a moment.''

The president spoke after U.S. Treasury Secretary Henry Paulson held a press conference to describe a plan that would remove troubled, mortgage-linked assets from the balance sheets of American financial companies. Those bad assets would be placed in a new institution so credit markets can function again.

Stocks surged on Wall Street, as the Dow Jones Industrial Average soared almost 370 366 points.

Hundreds of Billions

The cost of the rescue package will range in the ``hundreds of billions'' of dollars, Keith Hennessey, director of the White House National Economic Council, said at a briefing, citing Paulson's estimates. Some or all of the money could return to the Treasury, if asset values rise.

Paulson and Federal Reserve Chairman Ben Bernanke, joined by other administration officials, planned to work over the weekend to fashion legislation with Congress allowing the Treasury to purchase hard-to-sell securities, Hennessey said.

A final measure, he said, can ``be done quickly if it's done cleanly,'' a warning that the White House prefers no add-ons.

``The risk of not acting would be far higher,'' Bush said, leading to huge jobs losses, depleted investments, further erosion of home values and evaporation of loans for homes, college and cars. ``These are risks that America cannot afford to take,'' he said.

Bulging Deficit

``I think we're talking about a deficit next year between $800 billion and a trillion, depending on exactly the details and whether this gets enacted,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications.

In July, the White House budget office projected a deficit of $482 billion in 2009.

Senator Richard Shelby of Alabama and some other Republicans have criticized the takeovers of AIG, Fannie and Freddie for imposing a potentially high cost on taxpayers.

``This could be the biggest bailout in the history of the country and could ultimately cost $500 billion to $1 trillion,'' Shelby, the top Republican on the Senate Banking Committee, said in a Bloomberg Television interview today. ``Congress is not going to rubber stamp something.''

`A Decisive Step'

``This is a decisive step that will address underlying problems in our financial system,'' Bush said. The measure will allow banks to resume lending ``and get our financial system moving again.''

The U.S. government intervened to halt a credit crunch that triggered possibly the greatest market turmoil since the Great Depression.

Up to $200 billion was made available to mortgage giants Fannie Mae and Freddie Mac when the government took control of them earlier this month. American International Group Inc. was granted an $85 billion loan in exchange for the government's control of an almost 80 percent stake in the company. The government let Lehman Brothers Holdings Inc. file for bankruptcy.

Separately, the Treasury today announced a $50 billion program to insure the holdings of money-market mutual funds for a year. Investors pulled a record $89.2 billion from money-market funds on Sept. 17, a 2.6 percent drop in assets, according to data compiled by the Money Fund Report, a newsletter based in Westborough, Massachusetts.

To contact the reporters on this story: Roger Runningen in Washington, at rrunningen@bloomberg.netCatherine Dodge in Washington at Or cdodge1@bloomberg.net
Last Updated: September 19, 2008 16:13 EDT

DoggMann

September 20th, 2008, 05:19 PM

^^
.... Like playing blackjack in a casino where the dealer says, "I'm out of cash. Reach into your wallet and give me some chips." ... ~donharrold

Rescue Plan for the People
Jen6d8zlVI8

3cr

September 20th, 2008, 11:34 PM

Bush team, Congress negotiate on $700B bailout
By JULIE HIRSCHFELD DAVIS and DEB RIECHMANN, Associated Press Writers
Yahoo News
http://news.yahoo.com/s/ap/20080920/ap_on_bi_ge/financial_meltdown

WASHINGTON - The Bush administration asked Congress on Saturday for the power to buy $700 billion in toxic assets clogging the financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House hoped for a deal with Congress by the time markets opened Monday; top lawmakers say they would push to enact the plan as early as the coming week.

"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing specifics, he said, "This is a big package because it was a big problem."

But lawmakers digesting the eye-popping cost and searching for specifics voiced concerns that the proposal offers no help for struggling homeowners or safeguards for taxpayers' money.

The government must bail out the financial system "because if we don't, it will have a tremendous impact on American consumers, homeowners, taxpayers and the rest," House Speaker Nancy Pelosi, D-Calif., said at a citizens' workshop in San Francisco.

But, she added, "We cannot deal with this unless this bailout helps families stay in their homes."

Sen. Chuck Schumer, D-N.Y., called the plan "a good foundation," but said it was missing "some kind of supervisory authority, and some kind of protection for homeowners and taxpayers."

The proposal would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue.

"The American people are furious that we're in this situation, and so am I," the House's top Republican, Ohio Rep. John A. Boehner, said in a statement. "We need to do everything possible to protect the taxpayers from the consequences of a broken Washington."

Signaling what could erupt into a brutal fight with Democrats over add-on spending, Boehner said "efforts to exploit this crisis for political leverage or partisan quid pro quo will only delay the economic stability that families, seniors, and small businesses deserve."

Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package. ... Over time, we're going to get a lot of the money back."

He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."

Neither presidential candidate took a position on the proposal. GOP nominee John McCain said he was awaiting specifics and any changes by Congress.

Democratic rival Barack Obama used the party's weekly radio address to call for help for Main Street as well as Wall Street.

"We need to help people cope with rising gas and food prices, spark job creation by repairing our schools and our roads, help states avoid painful budget cuts and tax increases, and help homeowners stay in their homes," Obama said. "And we must also ensure that the solution we design doesn't reward particular companies, or irresponsible borrowers or lenders, or CEOs, some of whom helped cause this mess."

Their language reflected a tricky balance that politicians in both parties are trying to strike, just six weeks before Election Day: Back a plan that doles out hundreds of billions to companies that made bad bets and still identify with the plight of middle-class voters.

Besides mortgage help and executive compensation limits, Democrats are considering attaching middle-class assistance to the legislation despite a request from Bush to avoid adding items that could delay action. An expansion of jobless benefits was one possibility.

Bush sidestepped questions about the chances of adding such items, saying that now was not the time for posturing. "I think most leaders would understand we need to get this done quickly, and you know, the cleaner the better," he said about legislation being drafted.

Treasury officials met congressional staff for about two hours on Capitol Hill on Saturday. Discussions centered on how the plan would work, and Democrats proposed adding the executive compensation limits and new foreclosure-prevention measures.

Among the key issues up for negotiation is which financial institutions would be eligible for the help. The proposed legislation doesn't make it clear, leaving open the question of whether hedge funds or pension funds could qualify.

The proposal does not require that the government receive anything from banks in return for unloading their bad assets. But it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

The government could contract with private companies to manage the assets it purchased under the rescue.

Treasury Secretary Henry Paulson says the government would in essence set up reverse auctions, putting up money for a class of distressed assets — such as loans that are delinquent but not in default — and financial institutions would compete for how little they would accept.

If enacted, the plan would give the treasury secretary broad power to buy, manage and sell the mortgage-related investments without any additional involvement by lawmakers. It would, however, require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.

______________________________

Dems want bailout to include homeowners
David Rogers
Yahoo News
http://news.yahoo.com/s/politico/20080920/pl_politico/13676;_ylt=Ani0hbhsXqVoJI6a8odda9WtOrgF

Democrats are drafting a joint House-Senate bill to expedite action on the Treasury Department’s $700 billion rescue plan for the financial markets but want the government to use its new leverage to slow foreclosures and cap compensation for the Wall Street chiefs whose companies are being bailed out.

There will be provisions as well in either the core bill or side deals asking the White House to accept new economic stimulus spending and bankruptcy court relief for homeowners, a legal issue long opposed by bankers yet now championed by leading Senate Democrats as well as Speaker Nancy Pelosi (D-Calif.).

But House Financial Services Committee Chairman Barney Frank (D-Mass.) said he was prepared to move quickly next week in tandem with Senate Banking Committee Chairman Chris Dodd (D-Conn.). And Frank said he has assured Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke that he will publicly support them if they decide that they must take further ad hoc steps before the final package is completed.

“I called Ben and said, 'Just because I’m giving you a new gun, doesn’t mean I don’t want you to use the one in your holster,'” Frank told Politico.

This assurance reflects the immense sensitivity of the political and market situation, given the turmoil of the past week. While not predicting the need for more ad hoc interventions, a Treasury official said “the markets may not wait for Congress to act.” And Paulson, who appears to have encouraged Frank to call Bernanke, is pushing hard for lawmakers to move quickly.

In this spirit, the Treasury draft bill is short and to the point: authorizing purchases of up to $700 billion in mortgage-related assets at any given time and giving the department sweeping authority for at least two years to carry out the enterprise.

Frank will clearly add more to the dozen sections penned by Paulson’s legislative office and delivered to Capitol Hill early Saturday morning. How far he and fellow Democrats can go and not drive off Republican conservatives will be a critical question in the week ahead.

The Massachusetts Democrat said there is a strong sense that the government should use its leverage to prod investors to be more willing to write down mortgages rather than pursue foreclosures. The massive housing bill approved by Congress this summer held out the promise that the Federal Housing Administration could help a homeowner find government-insured refinancing and such write-downs. But the relief will never be realized unless the financing industry is more willing to come forward and negotiate reductions.

Frank, who has been in phone discussions with Paulson, said the secretary appeared receptive to adding some foreclosure-relief language. The second Democratic proposal — to impose compensation limits on Wall Street executives — is meeting more resistance.

“Hank says it’s a poison pill,” Frank said. “I say I don’t think it’s very patriotic for someone to not give up his golden parachute when we’re trying to save the markets.”

As now drafted, the bill increases the U.S. debt ceiling to $11.3 trillion to help accommodate the financing arrangement, but further modifications may be needed to ensure that this extra borrowing authority is dedicated to the rescue plan and not eaten up by other spending.

All of the purchases would be limited to assets held by financial institutions headquartered in the United States. But Treasury officials said Saturday that this would also apply to American subsidiaries of foreign companies, leading Frank to argue that those governments should also share in the financial commitment now being shoulder by U.S. taxpayers.

Apart from the price tag, the bill is striking in the authority that would be vested in the Treasury Department.

Rather than create a separate entity, as some lawmakers have suggested, Paulson clearly feels that he can move faster alone and asks for power to issue such regulations as needed, appoint employees to carry out the authorities and designate “financial institutions as finance agents of the government.”

The secretary would have the authority to manage the mortgage-related assets purchased by the government and may “at any time, upon terms and conditions and at prices determined” by him “ sell or enter into securities loans, repurchase transactions or other financial transactions” in regard to the purchased assets.

The hope remains that, by reselling the assets when the housing and financial markets have recovered, the taxpayers’ exposure will be greatly reduced. And for this reason, the two-year sunset provision does not appear to apply to the department’s authority to hold onto assets after two years, and therefore better manage future sales.

It is possible that Congress could shorten the window for purchases still further in order to prompt banks to come forward faster with their bad debts. But learning from the experience of the Resolution Trust Corporation in the savings and loan crisis in the late 1980s and early '90s, there is general agreement that the government should have flexibility about selling.

Paulson and Bernanke are slated to appear before the House Financial Services Committee on Wednesday, but that schedule may also be moved up given the pressure to move quickly. And the whole process is extraordinary in that the administration wants such quick action on such a large commitment by taxpayers.

Punctuating this is the fact that the bill has a rather delayed schedule of reporting back to Congress. For example, the first report from Treasury need only be “within three months of the first exercise of the purchase authority.” That could mean almost Christmas.

In a conference call with reporters Saturday, Sen. Charles Schumer (D-N.Y.) said there is discussion of creating a “supervisory authority” to report back to Congress on the Treasury bailout program, but he declined to discuss too many details on that effort at this point.

Schumer, who also spoke to Paulson on Saturday, said Congress must move quickly.

“This crisis is very, very serious,” Schumer said. “It not only affects Wall Street but all of America — people with credit cards, auto loans, the whole economy.”

After a dramatic Capitol meeting Thursday night, Paulson and Bernanke won pledges of bipartisan support. And true to this commitment, House Majority Leader Steny Hoyer (D-Md.) predicted Friday the full House will vote by the end of next week.

At the White House, President Bush said Saturday morning it was “necessary to get something done quickly” and predicted that Congress would do so.

"Look, I'm sure there are some of my friends saying, 'I thought this guy was a market guy — what happened to him?'" Bush said. "Well, my first instinct wasn't to, you know, lay out a huge government plan. My first instinct was to let the market work, until I realized, being briefed by the experts of how significant this problem became. And so, I decided to act and act boldly.

“It turns out that there's a lot of interlinks through the financial system. The system had grown to a point where a lot of people were dependent upon each other and a collapse of one part of the system wouldn't just affect a part of the financial markets, it would affect ... capacity to borrow money, to buy a house or to finance a college loan. It'd affect the ability of a small business to get credit. In other words, the systemic risk was significant and it required a significant response. And Congress understands that and we'll work to get things done as quickly as possible.”

Mindful of the huge financial commitment, Hoyer and other Democrats have been careful to underscore the fact that the massive government intervention is very much a “Bush administration” plan that the president and Republicans must own up to politically. And playing to the left in her caucus, Pelosi ended a party conference call Friday with a strong attack on the administration’s economic record.

For Republicans, it may be even more complicated, since just days ago many conservatives were in revolt over the government’s intervention to shore up the ailing insurance giant, AIG, at a price tag of just $85 billion. And Paulson has had his own troubles with the House Republican leadership in the past.

But thus far, House Minority Leader John A. Boehner (R-Ohio) has been supportive, and the more interesting tensions have been between different factions on the right.

Rep. Jeb Hensarling, a Texas conservative with leadership ambitions, has been among those most outspoken, skirmishing with Paulson in a party conference phone call. “My fear is that taxpayers will be left with the mother of all debts, the federal government becomes the lender and guarantor of last resort, and our nation finds itself on the slippery slope to socialism,” Hensarling said Friday.

But other conservatives have tempered their remarks. "What's going on right now is an education process," said Rep. John Campbell (R-Calif.), who is typically outspoken. "We need to take dramatic, complete and immediate action."

jbkayaker12

September 21st, 2008, 06:48 AM

Yup most financial/banking stocks in Europe are up by 20-30% today.

What has come down must now go up. Way up!

Interestingly enough, major financial centers around the world were waiting on what the US government's decision and how it will tackle the current financial mess at Wall Street and as soon as the US government announced it will help bail out these financial institutions which will cost close to a 1 trillion dollars, markets all over the world rebounded. Like a puppet waiting for the master ventriloquist to pull the strings. :)

-TC-

September 21st, 2008, 07:47 AM

Interestingly enough, major financial centers around the world were waiting on what the US government's decision and how it will tackle the current financial mess at Wall Street and as soon as the US government announced it will help bail out these financial institutions which will cost close to a 1 trillion dollars, markets all over the world rebounded. Like a puppet waiting for the master ventriloquist to pull the strings. :)

This whole subprime mess and subsequent market breakdown have their epicenter in the US so naturally, everyone was waiting for what the US government and the Fed were going to do to solve all these. Once they presented a concrete plan to get to the root cause of the problem, everyone naturally cheered.

The following is my simple analogy re: relationship of the US and Philippine markets and markets around the world as well:
In normal times, when the US sneezes, the Philippines catches a cold.

In the past week, the US caught the cold and the Philippines got pneumonia.

Looking ahead, if and when the US market recovers and flies to the sky again, the Philippine market could take off for the moon.

DoggMann

September 21st, 2008, 06:48 PM

http://www.moneymorning.com/2008/04/02/credit-default-swaps-a-50-trillion-problem/

Wednesday, April 2nd, 2008

Credit Default Swaps: A $50 Trillion Problem

By Martin Hutchinson
Contributing Editor

Of all the really bad ideas that have infested the finance business in the last 30 years, the most dangerous is probably the credit default swap (CDS).

CDS is almost a brand new investment vehicle, but the market is already 20 times its size in 2000. The principal amount of CDS outstanding equals $50 trillion, or more than three times the U.S. Gross Domestic Product and bigger than all the U.S. credit markets put together. And the CDS has been a huge source of "financial engineering" profits, both for Wall Street and the hedge fund community over the last few years.

The first true credit default swap was carried out as late as 1995, although various types of credit protection derivatives existed earlier. Its structure is similar to an ordinary interest rate or currency swap transaction, and the CDS market is covered by the International Swaps and Derivatives Association Inc.

Story continues below…

Under a CDS, a bank originates loan to a company. A second bank (or other financial institution) can agree to cover the credit risk for the loan, by agreeing to make payment to originating bank if the company defaults on the original loan. The originating bank pays a small insurance premium to the second bank for assuming the risk of the loan.

Typically, payments under a CDS would only be triggered by the company’s failure to pay interest or principal on its debts due to bankruptcy or some other severe liquidity issue. But there are a host of intermediate or special cases that will doubtless provoke lawsuits when something goes wrong (CDS being a new market, it is by no means "recession-proof").

Credit default swaps were sold to the world as hedging transactions. Investors were told that they were simply transfers of risk, so that banks that made loans could transfer credit risks to insurance companies, which did not make loans directly, or to foreign banks that could not easily make loans in the U.S. market.

And if an originating bank sells its loan exposure only once, and sells it to a financial firm of undoubtedly solid credit, the CDS does indeed act as a hedge for the originating bank; it transfers the company’s credit risk from the bank to the financial firm that bought its CDS.

But the product did not work as advertised.
Enter the Traders

Salesmen and traders took over, and expanded the volume far beyond what was required for hedging.

After all, bonuses depend on the volume of business. Therefore, bank traders sold the credit risk of a loan not just once, but as many as 10 times. And they sold it not to solid banks and insurance companies, but to three solid banks, one solid insurance company, three dodgy brokers and three hedge funds. Then the traders went out and sold other CDS products that were not even related to actual loans on the books, but to imaginary indices of credit quality in the "widget" industry.

The credit risk of the system was hugely multiplied.

Instead of one $10 million credit risk loan, there are now ten $10 million credit risks on just one loan.

* Three on solid banks - but will they stay solid?
* One on a solid insurance company - probably OK.
* Three on dodgy brokers - who knows?
* And three on hedge funds - probably not OK in a real downturn.

The total credit risk in the system has been increased from the original $10 million loan to somewhere between $160 million to 200 million, depending on whether the banks and insurance company are financially solid.

Of course, a lot of those credit risks offset each other, so that if the company that took the loan goes bust, the only risk to the bank that sold all those CDS is to the profits it expected to make. But since it probably hedged those positions against others, if the company does go bust, and dodgy brokers and hedge funds stop paying up, the total losses in the system from that company’s credit risk are likely to be a substantial multiple of the original $10 million loan.

But please don’t think I was exaggerating when I said as many as 10 credit default swaps got sold for each loan.

The U.S. commercial loan market is worth about $5 trillion, yet the volume of CDS outstanding is currently no less than $50 trillion. In other words, a huge number of traders, salesmen and quants have been making money off this product, without any real "hedging" rationale at all.

And it all worked fine while the volume of defaults remained low, which is why the market expanded from $2 trillion to $50 trillion between 2000 and 2007.

A Ballooning Problem

There are two reasons reason why the CDS market has been able to expand so much beyond the size of the underlying debt markets:

* Banking regulations and the lack of funding requirements for CDS: Banks are required by law to hold a certain amount of capital for loans they make - about 8 cents for every dollar in principle, but there are a number of loopholes that allow it to be less for certain types of loans. But there are very limited capital requirements for CDS, so banks and other CDS market participants can take on much more credit exposure through CDS than they could directly.

* A loan must be funded: If you lend someone some money, you have to borrow it or use your own capital. However, if you take on the exact same risk through a CDS transaction, there is no need to put up any money, provided your counterparty will accept your credit risk.

For both these reasons, hedge funds have been large participants in the CDS market, because through credit default swaps the funds can take on much more risk (and receive much more in premiums) than their modest cash reserves would normally permit.
Big Defaults, Big Trouble

Suddenly home mortgages along with corporate credit and other types of consumer credit are in question and loss rates, which were very low in 2005-06, are soaring.

That spells big trouble for credit default swaps.

If just 10% of CDS underlying risks go bust, somewhere in the financial system there will be $5 trillion in losses.

Yes, there could well be $5 trillion of profits elsewhere in the system, because derivative transactions theoretically balance out. But once defaults start piling up, it’s possible that many of those losses will become real, while the profits simply won’t.

For example, hedge funds that have offered credit protection on risks far in excess of their current capital will quickly be unable to pay claims. Their counterparties will suffer unexpected losses, even though they thought they were protected by a CDS.

There are two sources of likely loss on CDS:

* Default by the underlying borrowers, the companies that originally took out the loans.

* And default by the banks or other financial firms that bought the credit default swap - counterparties in the endless chain of banks, insurance companies, hedge funds and general riff-raff that have done these deals.

Since the total outstanding balance of the CDS market is $50 trillion, compared with the entire U.S. home mortgage market at about $11 trillion and the subprime part of that market at only $1 trillion, you can see why people are worried.

American International Group Inc. (AIG), the insurance company, lost $7 billion on its CDS portfolio in its fiscal quarter ended November 30, and that was on "super senior" CDS. The losses on this type of investment vehicle can get very big, very quickly. And since CDS are so new, they’re completely untested in a real economic downturn.

The annual cost of credit default swaps based on the Markit CDS Investment Grade North America Index, which had bottomed out at 29 basis points (0.29%) in February 2007, soared to 220 basis points at the time of the Bear Stearns Cos. Inc. (BSC) bailout. The index was recently trading at 147.5 basis points, a significant improvement due to the U.S. Federal Reserve orchestrated rescue of Bear Stearns.

But Bear Stearns CDS were recently trading at 330 basis points, despite the guarantee of its obligations by the first-class credit of acquirer JPMorgan Chase & Co. (JPM), which means that investors are still wary.

If the CDS market itself thinks things are about to go wrong, they almost certainly are.

As Oliver Hardy used to say to Stan Laurel: "Another fine mess you got us into!"

DoggMann

September 21st, 2008, 06:53 PM

^^
http://www.marketoracle.co.uk/Article6335.html

The Market Oracle

The Real Reason for the Global Financial Crisis…the Story No One’s Talking About
Stock-Markets / Credit Crisis 2008 Sep 18, 2008 - 03:44 PM

By: Money_Morning

Shah Gilani writes: Are you shell-shocked? Are you wondering what's really going on in the market? The truth is probably more frightening than even your worst fears. And yet, you won't hear about it anywhere else because “they” can't tell you. “They” are the U.S. Federal Reserve and the U.S. Treasury Department, and they can't tell you what's really going on because there's nothing they can do about it, except what they've been trying to do – add liquidity.

At the exchange rate yesterday (Wednesday), 35 trillion British Pounds was equivalent to U.S. $62 trillion (hence, the 35 trillion Pound gorilla). According to the International Swaps and Derivatives Association , $62 trillion is the notional value of credit default swaps (CDS) out there, somewhere, in the market.

This isn't the first time Money Morning has warned readers about the dangers of credit default swaps. And it won't be the last.
The Genesis of a Derivative Boom

In the mid-1980s, upon arriving in New York from Chicago with an extensive background trading options and futures (the original derivatives), I was offered a job at what was then Citicorp [today's Citigroup Inc. ( C )]. The offer was for an entry-level post in the bank's brand new OTC (over-the-counter, meaning not exchange traded) swaps and derivatives group. When I asked what the economic purpose of swaps was, the answer came back: “To make money for the bank.”

I declined the position.

It used to be that regulators and legislators demanded theoretical, empirical, and quantitative measures of the efficacy of new tradable instruments being proposed by exchanges. What is their purpose? How will they benefit the capital markets and the economy? And, what safeguards will accompany their introduction?

Not any more. In the early 1990s, in order to hedge their loan risks, J. P. Morgan & Co. [now JPMorgan Chase & Co. ( JPM )] bankers devised credit default swaps.

A credit default swap is, essentially, an insurance contract between a protection buyer and a protection seller covering a corporation's, or sovereign's (the “referenced entity”), specific bond or loan. A protection buyer pays an upfront amount and yearly premiums to the protection seller to cover any loss on the face amount of the referenced bond or loan.
Typically, the insurance is for five years.

Credit default swaps are bilateral contracts, meaning they are private contracts between two parties. CDSs are subject only to the collateral and margin agreed to by contract. They are traded over-the-counter, usually by telephone. They are subject to re-sale to another party willing to enter into another contract. Most frighteningly, credit default swaps are subject to “ counterparty risk .”

If the party providing the insurance protection – once it has collected its upfront payment and premiums – doesn't have the money to pay the insured buyer in the case of a default event affecting the referenced bond or loan (think hedge funds), or if the “insurer” goes bankrupt ( Bear Stearns was almost there, and American International Group Inc. ( AIG ) was almost there) the buyer is not covered – period. The premium payments are gone, as is the insurance against default.

Credit default swaps are not standardized instruments. In fact, they technically aren't true securities in the classic sense of the word in that they're not transparent, aren't traded on any exchange, aren't subject to present securities laws, and aren't regulated. They are, however, at risk – all $62 trillion (the best guess by the ISDA) of them.

Fundamentally, this kind of derivative serves a real purpose – as a hedging device. The actual holders, or creditors, of outstanding corporate or sovereign loans and bonds might seek insurance to guarantee that the debts they are owed are repaid. That's the economic purpose of insurance.

What happened, however, is that risk speculators who wanted exposure to certain asset classes, various bonds and loans, or security pools such as residential and commercial mortgage-backed securities (yes, those same subprime mortgage-backed securities that you've been reading about), but didn't actually own the underlying credits, now had a means by which to speculate on them.

If you think XYZ Corp. is in trouble, and won't be able to pay back its bondholders, you can speculate by buying, and paying premiums for, credit default swaps on their bonds, which will pay you the full face amount of the bonds if they do actually default. If, on the other hand, you think that XYZ Corp. is doing just fine, and its bonds are as good as gold, you can offer insurance to a fellow speculator, who holds the opinion opposite yours. That means you'd essentially be speculating that the bonds would not default. You're hoping that you'll collect, and keep, all the premiums, and never have to pay off on the insurance. It's pure speculation.

Credit default swaps are not unlike me being able to insure your house, not with you, but with someone else entirely not connected to your house, so that if your house is washed away in the next hurricane I get paid its value. I'm speculating on an event. I'm making a bet.

The bad news is that there are even worse bets out there. There are credit default swaps written on subprime mortgage securities. It's bad enough that these subprime mortgage pools that banks, investment banks, insurance companies, hedge funds and others bought were over-rated and ended up falling precipitously in value as foreclosures mounted on the underlying mortgages in the pools.

What's even worse, however, is that speculators sold and bought trillions of dollars of insurance that these pools would, or wouldn't, default! The sellers of this insurance (AIG is one example) are getting killed as defaults continue to rise with no end in sight.

And this is only where the story begins.

The Ticking Time Bomb

What is happening in both the stock and credit markets is a direct result of what's playing out in the CDS market. The Fed could not let Bear Stearns enter bankruptcy because – and only because – the trillions of dollars of credit default swaps on its books would be wiped out. All the banks and institutions that had insurance written by Bear would not be able to say that they were insured or hedged anymore and they would have to write-down billions and billions of dollars in losses that they've been carrying at higher values because they could say that they were insured for those losses.

The counterparty risk that all Bear's trading partners were exposed to was so far and wide, and so deep, that if Bear was to enter bankruptcy it would take years to sort out the risk and losses. That was an untenable option.

The Fed had to bail out Bear Stearns.

The same thing has just happened to AIG . Make no mistake about it, there's nothing wrong with AIG's insurance subsidiaries – absolutely nothing. In fact, the Fed just made the best trade in its history by bailing AIG out and getting equity, warrants and charging the insurance giant seven points over the benchmark London Interbank Offered Rate (LIBOR) on that $85 billion loan!

What happened to AIG is simple: AIG got greedy. AIG, as of June 30, had written $441 billion worth of swaps on corporate bonds, and worse, mortgage-backed securities. As the value of these insured-referenced entities fell, AIG had massive write-downs and additionally had to post more collateral. And when its ratings were downgraded on Monday evening, the company had to post even more collateral, which it didn't have.

In short, what happened in one small AIG corporate subsidiary blew apart the largest insurance company in the world.

But there's more – a lot more. These instruments are causing many of the massive write-downs at banks, investment banks and insurance companies. Knowing what all this means for hedge funds, the credit markets and the stock market is the key to understanding where this might end and how.

The rest of the story will be illuminated in the next two installments. Next up: An examination of the AIG collapse, followed by a look at how bad things could get, and what we can do to fix the problem at hand. So stay tuned.

Editor's Note : Contributing Editor R. Shah Gilani has toiled in the trading pits in Chicago, run trading desks in New York, operated as a broker/dealer and managed everything from hedge funds to currency accounts. In his new column, " Inside Wall Street ," Gilani promises to take readers on a journey through the "shadowy back alleys" of the U.S. capital markets - and to conduct us past the "velvet rope" that guards Wall Street's most-valuable secrets - in an ongoing search for the investment ideas with the biggest profit potential. If the whipsaw markets we're experiencing lead to the so-called market “Super Crash” that many analysts fear, shrewd investors won't have to worry. The reason: They will be able to capitalize on the once-in-a-lifetime profit plays that we detail in a new report. For a copy of that report – which includes a free copy of CNBC analyst Peter D. Schiff's New York Times best-seller, " Crash Proof: How to Profit from the Coming Economic Collapse "

bitoy

September 21st, 2008, 07:03 PM

This whole subprime mess and subsequent market breakdown have their epicenter in the US so naturally, everyone was waiting for what the US government and the Fed were going to do to solve all these. Once they presented a concrete plan to get to the root cause of the problem, everyone naturally cheered.

The following is my simple analogy re: relationship of the US and Philippine markets and markets around the world as well:
In normal times, when the US sneezes, the Philippines catches a cold.

In the past week, the US caught the cold and the Philippines got pneumonia.

Looking ahead, if and when the US market recovers and flies to the sky again, the Philippine market could take off for the moon.

The proposed $700 billion bailout package for financial firms seems to have a positive effect on the global market.

Proposal pa lang yun... :D Only those pessimists reacted violently... :lol:

Sobra naman yung ~ "Philippine market could take off for the moon" :lol:

Parang lahat tuloy naka angkas sa likod ng US... ang bigat talaga ng karga ng Amerika.. :D

I always remember my Lola's words on saving up for the coming troubled times. : "Noy', mag ipon ka ng perang marami". :D

Dear lola may(where ever you are) , dai na pong natipon, pulos utang na lang ang madami!

jbkayaker12

September 21st, 2008, 10:29 PM

portludlow

September 22nd, 2008, 12:47 AM

: These gambling bastards wasting my tax money.:ohno:

Why is the US federal government bailing out the banks and the brokerages which are owned by the wealthiest of americans? :ohno: :bash: They are given a free ride and main street is being kick in the azz. Five percent of mortgages have soured then why punish 95% of prudent citizens to help pay for their stupidity.

We better not pay our mortgage and credit cards, the fed will pick the tab anyway. Welcome to socialism....comrade. :) :lol:

DoggMann

September 22nd, 2008, 03:30 AM

^^
... welcome to socialized debt soon to be divided states of america! joke lang ha! :D

... at least ask your govt for your mortgages and credit card to be tax deductable!!! :D
... since part of your taxes goes to these banks! :D :D :D

jbkayaker12

September 22nd, 2008, 04:18 AM

DoggMann

September 22nd, 2008, 05:15 AM

chqi8m4CEEY

Good evening,___ . Allow me first to apologize for this interruption. I do, like many of you, appreciate the comforts of every day routine- the security of the familiar, the tranquility of repetition. I enjoy them as much as any bloke. But in the spirit of commemoration, thereby those important events of the past usually associated with someone's death or the end of some awful bloody struggle, a celebration of a nice holiday, I thought we could mark this November the 5th, a day that is sadly no longer remembered, by taking some time out of our daily lives to sit down and have a little chat.

There are of course those who do not want us to speak. I suspect even now, orders are being shouted into telephones, and men with guns will soon be on their way. Why? Because while the truncheon may be used in lieu of conversation, words will always retain their power. Words offer the means to meaning, and for those who will listen, the enunciation of truth.

And the truth is, there is something terribly wrong with this country, isn't there? Cruelty and injustice, intolerance and oppression. And where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance coercing your conformity and soliciting your submission. How did this happen? Who's to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you're looking for the guilty, you need only look into a mirror.

I know why you did it. I know you were afraid. Who wouldn't be? War, terror, disease.

There were a myriad of problems which conspired to corrupt your reason and rob you of your common sense. Fear got the best of you, and in your panic you turned to the now high chancellor, Adam Sutler.

He promised you order, he promised you peace, and all he demanded in return was your silent, obedient consent.

Last night I sought to end that silence. Last night I destroyed the Old Bailey, to remind this country of what it has forgotten. More than four hundred years ago a great citizen wished to embed the fifth of November forever in our memory. His hope was to remind the world that fairness, justice, and freedom are more than words, they are perspectives.

So if you've seen nothing, if the crimes of this government remain unknown to you then I would suggest you allow the fifth of November to pass unmarked.

But if you see what I see, if you feel as I feel, and if you would seek as I seek, then I ask you to stand beside me one year from tonight, outside the gates of Parliament, and together we shall give them a fifth of November that shall never, ever be forgot.

:D:D:D

DoggMann

September 22nd, 2008, 06:16 AM

bJX4jN2Ld2Y

Paulson's Hyperinflationary Folly! Endless Bailouts. The Current Economic System is Doomed.
0k0zoas7GYg

King Paulson - Hope You Like It
MO6P_yjKFR4

le Reine

September 22nd, 2008, 08:37 AM

Bush plans to buy $700B in bad assets
It’s largest rescue since 1928 crash (http://business.inquirer.net/money/breakingnews/view/20080922-162092/Bush-plans-to-buy-700B-in-bad-assets)

Philippine Daily Inquirer, Associated Press
First Posted 03:35:00 09/22/2008

WASHINGTON—The bush administration has asked Congress for authority to buy $700 billion in toxic assets clogging the US financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad powers to purchase bad mortgage-related assets from US financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

In a fact sheet released on Saturday night, the treasury department said it was seeking latitude for its secretary and the Federal Reserve chair to expand the bailout to non-US companies if they determined it was necessary to stabilize markets, but the original request sent to Congress is limited to firms headquartered in the United States, according to a copy obtained by The Associated Press.

Democrats are pressing that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

Congressional aides and administration officials are working through the weekend to fill in the details of the proposal. The White House is hoping for a deal with Congress by the time markets opened on Monday, but top lawmakers say they would push to enact the plan as early as the coming week.

“We’re going to work with Congress to get a bill done quickly,” President George W. Bush said on Saturday at the White House. Without discussing specifics, he said: “This is a big package because it was a big problem.”

click here (http://business.inquirer.net/money/breakingnews/view/20080922-162092/Bush-plans-to-buy-700B-in-bad-assets) to continue

le Reine

September 22nd, 2008, 08:39 AM

Fed to regulate Goldman, Morgan; bailout takes shape (http://business.inquirer.net/money/breakingnews/view/20080922-162147/Fed-to-regulate-Goldman-Morgan-bailout-takes-shape)
By Mark Felsenthal, Kevin Drawbaugh
Reuters
First Posted 10:13:00 09/22/2008

WASHINGTON, United States -- (UPDATE 2) Goldman Sachs and Morgan Stanley gave up their cherished investment banking status in return for cover under the Fed's wing to survive a financial storm that US authorities aim to tackle with a $700-billion bailout plan.

The Federal Reserve approved the two bank's transformation into bank holding companies regulated by the central bank, effectively ending Wall Street's investment banking model and subjecting the two to much tighter regulation.

In return, it gives Goldman Sachs and Morgan Stanley greater access to central bank funds and makes it easier for them to buy retail banks.

"It creates a perception of greater safety and supervision. It really rationalizes the regulatory system. It should be good for both Goldman Sachs and Morgan Stanley," said Chip MacDonald, mergers partner at law firm Jones Day.

The move is the latest effort by the US authorities to restore calm to chaotic financial markets follows frantic weekend talks between the Bush administration and the Congress on the bailout scheme to prevent further financial market turmoil from hurtling the economy into a severe recession.

The largest-ever bank rescue would give sweeping powers to the US Treasury to buy up toxic mortgage-related debt from financial firms, including US subsidiaries of foreign banks.

The bailout plan follows a wrenching week that transformed Wall Street with Lehman Brothers' failure, the agreed sale of Merrill Lynch & Co and a government takeover of ailing insurer American International Group. It was also possible that within days, Morgan Stanley would accept a partner.

Asia stocks rose Monday as details of the plan emerged, but the US dollar eased and US Treasury debt prices edged up as investors played it safe before the mechanics of the plan are worked out.

On Friday, stock markets worldwide added more than $1.5 trillion in value in their largest one-day gain ever on the news of the bailout plan.

click here (http://business.inquirer.net/money/breakingnews/view/20080922-162147/Fed-to-regulate-Goldman-Morgan-bailout-takes-shape) to continue reading

mwg12a

September 22nd, 2008, 11:07 AM

Why is the US federal government bailing out the banks and the brokerages which are owned by the wealthiest of americans? :ohno: :bash: They are given a free ride and main street is being kick in the azz. Five percent of mortgages have soured then why punish 95% of prudent citizens to help pay for their stupidity.

We better not pay our mortgage and credit cards, the fed will pick the tab anyway. Welcome to socialism....comrade. :) :lol:

It is somehow what got the US economy in mess, had Clinton didn't sign a law during his term in his effort to provide every citizen their own home, these baloon payments on mortages with variable interests rates and with no down payments made a strong impact now after almost 15 years later, when the home owners started failing to afford their monthly mortgages due to inflation, increasing unemployments and high prices of everything from comodities to gas prices, somehow, the then government didn't anticipate a slow in economy and stock market in an event of a 9-11 proportion happened. Now , with an ever increasing gas prices, the stock market is started to plummet. If the US government wouldn't bail these companies out, a chain reaction to international communities would recochets again on to us here in the US.

Christendom

September 22nd, 2008, 01:15 PM

......and yet people by the millions come and wish to live and fullfill their dreams in the land of the United States.

Something is definitely wrong when someone thinks the United States is spritually, morally and financially bankrupt and yet people from all over the world to this day wish to seek a better life in the United States.:ohno:

yes it true! those who are:
1. involved in the gov't. conspirators heirarchy to set up this surreptitious scheme in changing the whole social & economic structure. there are an 1-million freemasons in britain alone

2. those who still persist, in the face of all evidence to the contrary in saying,
- so what? what do i care about a conspiracy, it can't happen in america. this overlooks the fact that it has already happened
- well, how are we supposed to believe that private people can do more than the government does? this overlooks the fact that government is part of the conspiracy

that is excatly the way the general population of america & the world was profiled to react. hard evidence is what they want & hard evidence is the difficult to come by

3. those who knows & ready, & really no need to wonder any longer. it must & will collapse @ the right time. not only the US but the world economies will follow suit, no matter w/c country you belong to. no one can escape from the New World Order system. face it- things are winding down & there is nothing you can do to stop it. we're born, we live, we die, we all go somewhere w/c lasts forever & ever.the most vital aspect is still so do our right decisions. we as a nation ready to accept the demise of the USA & the American way of life, once the envy of the entire world. bcoz the nation was to be programmed already to change & become so accustomed to such planned changes that is would hardly be noticeable when profound changes did occur. the Global Plan 2000 was already set in concrete, following the computer collapsed @ midnight Dec. 31, 1999, the plan will begin to unfold. then the following World Trade Center & Pentagon collapsed (bombing) in 2001 for a very difficult time very shortly. and now the US economic collapse, & so on sooner and later. it is clearly that we are entering through a very serious period

thankfully, some people around the world are beginning to latch onto this information. awaring that some of the folk involved in the upper degrees of masonry

i dunno w/c of these reasons/decisions you belong to. it is up to you, it is yours!

Lili

September 23rd, 2008, 02:09 AM

^^ hmmm... overhaul of the banking industry structure first and then the socio-economic structure -- part of the new New World Order/ Deal?

The next biggest investment banks are absorbed as commercial bank holding companies to be regulated by the Federal Reserve and no longer the SEC.

Fed moves focus on Goldman Sachs, Morgan Stanley amid crisis
by Rob Lever
Mon Sep 22, 1:53 AM ET

WASHINGTON, Sept 22, 2008 (AFP) - The Federal Reserve agreed to allow investment banks Goldman Sachs and Morgan Stanley to become bank holding companies, giving them easier access to credit and help them survive the financial crisis.

The announcement late Sunday completes an overhaul of the structure of the banking industry, which had been broken up in the 1930s into commercial and investment banks under rules to restore confidence in the Great Depression.

Goldman and Morgan Stanley had been the last two independent Wall Street banks, but had been under intense pressure to find merger partners in the face of financial market storm on fears of further collapses in the sector.

The move came as the US Congress considered an unprecedented 700-billion-dollar rescue plan designed to bail out the troubled financial industry reeling under the weight of bad mortgage loans.

The Fed's decision places the last two independent Wall Street investment banks under supervision by bank regulators and opens a wider range of credit to the two firms.

In a statement, the Federal Reserve said its board had approved the applications of Goldman Sachs and Morgan Stanley to become bank holding companies and authorized credit to the two firms "against all types of collateral" that commercial banks can use to get central bank loans.

The Fed also made these collateral arrangements available to the broker-dealer subsidiary of investment firm Merrill Lynch, which was bought a week earlier by Bank of America at the same time that another Wall Street giant, Lehman Brothers, filed for bankruptcy.

The 700-billion-dollar bailout proposal, now in the hands of Congress, comes on the heels of the unprecedented government rescue of giant insurer American International Group and the seizure of mortgage-finance giants Fannie Mae and Freddie Mac, three firms whose failure could likely have led to even more turmoil.

Both Goldman and Morgan Stanley have had access to Fed credit as a "primary dealer" of securities under a temporary program announced by the Fed after the collapse earlier this year of Bear Stearns, another Wall Street firm.

But the opening of this line of credit to non-banks had raised concerns because the institutions had not been subject to the same regulations as banks. Many of the problems of subprime loans have come from what some analysts call the "shadow banking system" which is largely unregulated.

Goldman Sachs said in a statement it would become the fourth largest US bank holding company "and will be regulated by the Federal Reserve."

"We view regulation by the Federal Reserve Board as appropriate and in the best interests of protecting and growing our franchise across our diverse range of businesses," the company said.

Goldman Sachs already has two active deposit taking institutions, Goldman Sachs Bank USA and Goldman Sachs Bank Europe PLC, with a total of some 20 billion dollars in deposits.

Morgan Stanley, which has some 36 billion dollars in bank deposits, said it sought the new status from the Federal Reserve "to provide the firm maximum flexibility and stability to pursue new business opportunities as the financial marketplace undergoes rapid and profound changes."

Some reports said Morgan Stanley was in merger talks with Wachovia, one of the largest US banks, and that China Investment Corp. could take a stake in the company as part of a deal.

Meanwhile, US Treasury Secretary Henry Paulson urged Congress to adopt his financial rescue plan without delay.

"We need this to be clean and quick and we need to get it in place," Paulson said in an ABC television interview Sunday.

The treasury secretary also said the United States was pressing other countries to forge bailouts for their financial institutions similar to the rescue plan.

"I'm also going to be pressing our colleagues around the world to design similar programs for their banks and institutions when they are appropriate," Paulson said on Fox News Sunday.

But while voicing general support for the bailout plan, leaders of the Democratic-controlled Congress said there should be some help for ordinary Americans hammered by the worst housing slump in decades.

Senator Charles Schumer of New York said the rescue was needed but had to be carried out in an open, transparent way and provide some relief for homeowners as well.

"We have to do something about the mortgage crisis, not just foreclosures but the price of housing, which is affecting everyone on Main Street," the influential Democrat told Fox television.

Senate Banking Committee Chairman Chris Dodd agreed that a "clean and simple" bill was necessary, but also called for changes to the proposal to ensure accountability and assistance for homeowners.

Lili

September 23rd, 2008, 02:14 AM

Morgan Stanley to sell 20 pct stake in itself
2 hours, 29 minutes ago
Associated Press

NEW YORK - Investment bank Morgan Stanley said Monday it signed a letter of intent to sell up to 20 percent of the company to Mitsubishi UFJ Financial Group Inc.

Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley's book value after Japan's largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding.

Based on the number of shares Morgan Stanley had outstanding as of June 30 and its midday trading price Monday, Morgan Stanley would raise more than $8 billion by selling new stock equal to 20 percent of shares that would be outstanding after including Mitsubishi's stake.

Shares of Morgan Stanley fell 12 cents to $27.09.

The framework for a deal comes just hours after Morgan Stanley, one of Wall Street's biggest investment banks, received regulatory approval from the Federal Reserve to become a bank holding company — making it a commercial bank and allowing it to receive deposits. Morgan Stanley will also now be regulated by the Fed instead of the Securities and Exchange Commission.
The partnership would allow both banks to expand their global footprint and help Morgan Stanley transition to a commercial bank, John Mack, Morgan Stanley's chairman and chief executive, said in a statement. The deal also provides further financial support to help Morgan Stanley shore up its capital base during the ongoing credit crisis.

Over the past week, as Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp., reports centered on Morgan Stanley selling itself to Wachovia Corp. or another commercial bank.

The changes come as investors worried that Morgan Stanley, like Lehman and Merrill, would face liquidity problems and need to find a new parent with access to deposits or face failure. The change in regulatory status and sale of a portion of the company could provide Morgan Stanley with the capital needed to survive.

Mitsubishi, which has $1.1 trillion in deposits, will be able to add one member to Morgan Stanley's board of directors.

Shares of Morgan Stanley have traded between $11.70 and $69.23 during the past year.

3cr

September 23rd, 2008, 04:43 AM

With Wall Street in turmoil, some turn to religion
By Christine Kearney
Yahoo News
http://news.yahoo.com/s/nm/20080922/us_nm/financial_religion_dc

NEW YORK (Reuters) - As financial workers suffer through tumultuous times on Wall Street, some are turning to an old source of solace: religion.

Religious leaders said attendance was up at lunchtime meetings in New York's financial district last week, with many more people in business attire than usual.

That is hardly surprising, said Reverend Mark Bozzuti-Jones of Trinity Church Wall Street, given that people don't know if their employers will survive from one day to the next.

"The economic financial crisis is a reminder that we cannot put our faith in riches, that we cannot put our faith in money," Bozzuti-Jones said in his sermon at lunchtime on Friday, which he devoted to coping with the financial crisis.

A handful of men in suits and ties and women in business attire were among dozens of people at the Episcopal church, which was hit by debris from the World Trade Center collapse on September 11, 2001.

The church, which normally attracts tourists and a few financial workers, experienced an upturn in visitors this week, Bozzuti-Jones said. In the past few days he had requests for help to pay rent from those who had lost their jobs.

"People are just sitting there, praying or crying and definitely exhausted. There has definitely been an increase in the number of people who have come in," he said in his office after the service.

The church was putting on special workshops and seminars over the next few weeks including "Coping with stress in an uncertain time" and "Navigating career transitions."

Just a few blocks away, St. Peter's Church has seen "a slight uptick in attendance among people in suits," said Father Peter Madigan. St. Peter's, a Catholic church, displays a cross found in the rubble of September 11.

"In the past couple of days there was high anxiety and trepidation," Madigan said. "The situation we are faced with today by economic standards is very much unknown, uncharted territory and faith helps us deal with those situations."

The Wall Street Synagogue is opening its doors nightly starting this week to accommodate Wall Street people. But rather than a rush of people last week, Rabbi Meyer Hager said he has noticed a change in his regular worshippers.

"I can see it on the faces of certain people who come here who are regular people -- some work for AIG and other large banking houses -- I can see the expression of strained concern," he said.

He noted that the synagogue was founded in 1929, the year of the Wall Street crash.

A mosque located in the financial district about a mile from Wall Street did not return a call seeking comment.

Lou Janicek, who works as a financial adviser on Wall Street, said he had not considered attending a religious service, but said Wall Street would benefit if people applied the same morals they learned in church to the workplace.

"What you do at work matters as much as whether you regularly attend church or the synagogue or whatever," said Janicek, who was brought up as a Christian. "If you are an accountant or you find yourself in an unethical situation, you can't just stand by and let it happen -- then you have another Enron.

3cr

September 23rd, 2008, 04:44 AM

G.W.Bush has had a brain fog for a while now. Imagine all that money wasted in Iraq would have really come in handy in this economic fiasco America is now facing. He could very well be the worst President the U.S. has had so far and could very well be the main reason and root cause for McCain losing to Obama in this Presidential race. Bush really ruined it not just for the Republicans but also the American people. I can only imagine how things could have turned out differently if he choked on that peanut (or was it pretzel) and died... :bash: :bash: :bash:

Bush seeks to assure leaders about bailout plan
By TERENCE HUNT, AP White House Correspondent
Yahoo News
http://news.yahoo.com/s/ap/20080923/ap_on_go_pr_wh/bush

NEW YORK - President Bush sought to assure anxious world leaders on Monday that the United States is taking "bold, aggressive, decisive action" to rescue the crisis-ridden economy with a $700 billion bailout package. "The whole world is watching to see if we can act quickly," Bush said, prodding lawmakers in Washington to approve his plan.

Bush balanced the economic meltdown with foreign policy problems from Pakistan and North Korea to Russia and Iran as he opened three days of diplomacy with presidents and prime ministers assembled for the annual ministerial meeting of the U.N. General Assembly.

The activities were opening with a reception Monday night for foreign delegations hosted by Bush and his wife, Laura, at the Waldorf-Astoria Hotel.

After seven years of criticizing the U.N. for its huge, costly bureaucracy and indecisiveness in the face of grave problems, Bush will make his final address to the General Assembly on Tuesday. His speech, scheduled to last 15 minutes, was to stress the need for multinational diplomacy .

The nation's burgeoning financial crisis, anchored on Wall Street not far from Bush's hotel, overshadowed his U.N. visit. Bush is in the awkward position of advocating capitalism, free-trade and deregulation throughout this presidency but then overseeing a costly government takeover of failing financial institutions.

White House press secretary Dana Perino, explaining Bush's turnabout, said "this was not the president's first instinct; that he would not have wanted to take this action to help these companies if he wasn't convinced by the considered judgment of his senior economic team that it was critical in order to protect the American taxpayers and the American economy as a whole."

With the U.S. economy inextricably intertwined with the finances of other countries, the turmoil from Wall Street to Main Street will naturally be a topic of Bush's discussions in New York, Perino said.

Before leaving Washington, Bush said differences over details of the administration's bailout plan were understandable. But he warned lawmakers not to bog down.

"Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants," Bush said. "Indeed, the whole world is watching to see if we can act quickly."

In the diplomatic world, it is a time of usual turmoil.

North Korea is backing away from pledges to abandon nuclear weapons, and Iran is pursuing a nuclear program in defiance of U.S. and international demands. Russia has drawn condemnation from the West for its invasion of U.S.-backed Georgia. Violence is mounting in Afghanistan, and Pakistan is reeling from a weekend truck bombing at the Marriott hotel that killed 53 people, including the Czech ambassador and two U.S. Defense Department employees.

Bush, on his way to New York, stopped in New Jersey to raise money for two GOP congressional candidates. About 200 people attended the event in an affluent area of Colts Neck, N.J., that benefited Chris Myers and state Sen. Leonard Lance. Tickets ranged from $1,000 to $10,000 for a photo with the president.

icarusrising

September 23rd, 2008, 06:07 AM

http://blogs.gmanews.tv/jun-mercado//templates/nmi/header_junmercado.jpg

Monday, September 22. 2008

A $700-billion bailout (http://blogs.gmanews.tv/jun-mercado/archives/22-A-700-billion-bailout.html)

The current financial tsunami inundating the world stock markets following the collapse of financial giants does affect the Philippines, regardless of the denials and counter claims by government and local financial experts. The Philippines is extra-vulnerable and sensitive to any financial movements and shocks, particularly in the US economy. In the first place, our financial system is merely a “footnote” in the overall financial system that dominates the world. London, New York and Tokyo constitute the three pillars of the present world financial system that makes and unmakes nations and the world order. No doubt, the Philippine financial system is not only “jittery” in the face of this collapse but also “tottering” as more revelations of exposures unfold.

The collapse of Lehman Brothers, Merrill Lynch, AIG and HBOS (to name a few) is a simple indicator of the nearing collapse of the western financial system that now threatens the whole world. The biggest consideration is a bailout of the financial system that seems to disintegrate before our very eyes. Is this a classic case of simply “postponing” the inevitable collapse of the western financial system similar to the total collapse of the USSR almost 20 years ago?

The New York Times (September 21, 2008) speaks of the $700 billion bailout proposed by Treasury Secretary Henry Paulson as “bold” action to meet the current financial crisis. There are some sectors that disagree and criticize the planned bailout. In lieu of the bailout they propose a radical "freeze” of all the speculative paper, for purposes of auditing. The Economic Intelligence Review (EIR) goes against any kind of bailout on the basis that if government does, it loses control over the situation. The EIR claims that "The nation is being screwed. These guys don't have anything coming to them. Poor people have been denied health care because of these swine. Let's start frog marching them off to jail, where they belong."

EIR claims that Paulson's bank bailout is not bold and innovative action to the financial crisis but the “biggest swindle being pulled against the people and taxpayers”. The plan, presented by Treasury Secretary Paulson and supported by Fed Chairman Ben Bernanke, President George W. Bush and a group of international bankers, would transfer most of the enormous losses incurred of the global financial system, from the books of the banks to the Federal government, and the U.S. taxpayers.

This scheme is being marketed to a frightened public as a "bold'' plan to "solve'' the financial crisis once and for all. It is really the biggest theft in history, an act of monumental stupidity which will destroy everything in its path - the economy, the nation, and the people. "This is the biggest swindle ever pulled,'' EIR said. “It is absolute insanity. The public is being duped.”

The proponents of the “freeze” solution say that nothing Paulson has said is true – “it is all lies designed to dupe Congress and the American people into believing that this gigantic ‘rip-off’ is both necessary and in the public interest, when neither is true.” The lies began well before Paulson, when we were told that finance, not production, was the road to wealth. For the past four decades, we have seen the systematic dismantling of American industry and agriculture, and the turning of our economy into a giant casino. Our banking system has been turned over to the speculators, and we have watched a relatively small portion of our population get rich - some obscenely so - while a growing portion fell into poverty, and others were pushed over the edge. Every protection put into law to stop such looting has been systematically repealed, including the Glass-Steagall Act which forbade commercial banks from engaging in investment banking. Now that system has collapsed, and we are being told that the people must bail out the crooks.

The final phase of this collapse began last year, with the mythical "subprime crisis,'' a deliberate misnomer. Then this "subprime crisis'' somehow morphed into a "credit crunch,'' infecting an "otherwise healthy'' banking system. It was, from start to finish, a lie carefully constructed to support the ultimate demand for a bailout.

According to EIR, here's what really happened. It all started with the banking system. The banks built up a huge derivatives bubble in the 1990s, a pyramid scheme which constantly needed more money fed into its maw to keep it going. One of the prime sources of fuel was mortgages, which were used to spawn mortgage-backed securities and even wilder forms of casino chips like CDOs. The more mortgage money came in, the larger the profits that could be made from speculating in the securities, yielding more money for new mortgages. It was this securities machine which drove housing prices - and the mortgages on those houses - into the stratosphere. However, the machine worked so well that it drove housing prices beyond the reach of many Americans, so, in order to keep the mortgages flowing in, the banks began to relax loan standards, and in the end were selling homes to people who could not afford them, just to keep the game going. It finally got to the point that prices were so high, that even with the lax lending standards they couldn't keep the game going, and the whole house of cards collapsed. The subprime loans collapsed first because they were the shakiest, made at the top of market, so the banks painted the subprime lenders and borrowers as the villains, as a way of covering up their own role. It was a classic "blame the little guy'' scam.

Now we see Paulson asserting that the banks have been infected by this "housing crisis'' and that in order to protect the American people we must launch the biggest bank bailout in history. But it was Paulson, a former investment banker, and his investment banking buddies and their predecessors, who created this mess in the first place, and are now demanding that they be saved from the consequences of their folly, and handing the bill to the people they have been victimizing for decades. The foxes are demanding that the chickens pay for cleaning up the blood in the chicken coop.

(The analysis being quoted here are taken from EIR & Lyndon LaRouche’s critique of the present financial tsunami.)

le Reine

September 23rd, 2008, 07:57 AM

It’s not the first time: A list of US gov’t bailouts (http://business.inquirer.net/money/breakingnews/view/20080923-162320/Its-not-the-first-time-A-list-of-US-govt-bailouts)
Associated Press
First Posted 03:01:00 09/23/2008

WASHINGTON — A look at some us government interventions and bailouts in the past century:

1932 — The Hoover administration creates the Reconstruction Finance Corp. to facilitate economic activity by lending money in the Great Depression.

1933 — The Roosevelt administration creates the Home Owners’ Loan Corp. to buy $3 billion in bad mortgages from banks and refinance them to homeowners to stem a rise in foreclosures. The government makes a small profit.

1971 — Congress saves Lockheed Aircraft Corp., the nation’s biggest defense contractor, from bankruptcy by guaranteeing the repayment of $250 million in bank loans.

1979 — Congress and the Carter administration arrange for $1.2 billion in subsidized loans to bail out automaker Chrysler Corp., then the nation’s 10th-largest company. There ultimately was no significant cost to the government, since the loans were repaid.

1984 — Congress effectively takes over the ailing Continental Illinois National Bank and Trust, which failed with $40 billion of assets. The Federal Deposit Insurance Corp. injects $4.5 billion to buy bad loans.

1989 — Congress establishes the Resolution Trust Corp. to take over bad assets and make depositors whole. Resolving the savings and loan (S&L) crisis takes six years and $125 billion in taxpayer money—roughly equal to $200 billion in today’s dollars.

1998 — The government brokers a $3.6-billion private bailout in the collapse of the Long-Term Capital Management hedge fund, although no government money is involved.

2001 — Congress authorizes release of $5 billion in cash after the Sept. 11 terror attacks to help shore up the airline industry and follows up with $10 billion in loan guarantees.

2008:

March 16 — The Federal Reserve agrees to guarantee $29 billion of Bear Stearns’ assets in connection with the government-sponsored sale of the investment bank to JPMorgan Chase & Co.

July 11 — Federal regulators seize IndyMac Bank’s assets after the mortgage lender succumbs to the pressures of tighter credit, falling home prices and rising foreclosures. The Federal Deposit Insurance Corp. says it will cost about $8.9 billion out of its $53-billion insurance fund.

Sept. 7 — The US Treasury seizes teetering mortgage finance institutions Fannie Mae and Freddie Mac, temporarily putting them in a government conservatorship with plans to inject up to $100 billion into each.

Sept. 16 — The government announces an $85-billion emergency loan to rescue American International Group Inc. (AIG) in exchange for a 79.9-percent stake in the world’s largest insurance company.

Sept. 19 — The Bush administration announces a plan to let the government buy hundreds of billions of dollars of bad mortgages and other forms of toxic debt that have been weighing down US financial companies.

Christendom

September 23rd, 2008, 11:20 AM

^^ha ha, ako i have my back up plans na rin but i don't want it to be scrutinized by the public so i'll keep it to myself...but first thing is we should be emotionally and spiritually prepared. talagang makasalanan na mga tao, greed already engulfed us humanity kaya ayan kelangan na siguro cleansing:lol:

that's good,,,get yourself right in spritual and emotional- nothing else will do...kaya lang napakahirap:lol:but the biggest reward is ready to crown for it is your life.

DoggMann

September 23rd, 2008, 04:08 PM

... always give me goosebumps everytime i watched this clip ...

Mad As Hell ...
QMBZDwf9dok

"I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's work, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there's nobody anywhere who seems to know what to do, and there's no end to it.

We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TV's while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be.

We know things are bad - worse than bad. They're crazy. It's like everything everywhere is going crazy, so we don't go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is, 'Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won't say anything. Just leave us alone.'

Well, I'm not gonna leave you alone. I want you to get mad! I don't want you to protest. I don't want you to riot - I don't want you to write to your congressman because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street.

All I know is that first you've got to get mad.

You've got to say, 'I'm a HUMAN BEING, Goddamnit! My life has VALUE!' So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell,

'I'M AS MAD AS HELL, AND I'M NOT GOING TO TAKE THIS ANYMORE!' I want you to get up right now, sit up, go to your windows, open them and stick your head out and yell - 'I'm as mad as hell and I'm not going to take this anymore!' Things have got to change. But first, you've gotta get mad!... You've got to say, 'I'm as mad as hell, and I'm not going to take this anymore!' Then we'll figure out what to do about the depression and the inflation and the oil crisis. But first get up out of your chairs, open the window, stick your head out, and yell, and say it:

"I'M AS MAD AS HELL, AND I'M NOT GOING TO TAKE THIS ANYMORE!" "
~ Network 1976

TambayBlues

September 23rd, 2008, 05:54 PM

Evidence of Hyperinflation ?

A key element of financial statements is comparability. The International Accounting Standards (IAS) 29 provides “The objective of IAS 29 is to establish specific standards for enterprises reporting in the currency of a hyperinflationary economy, so that the financial information provided is meaningful. ...The basic principle in IAS 29 is that the financial statements of an entity that reports in the currency of a hyperinflationary economy should be stated in terms of the measuring unit current at the balance sheet date.”

What are the elements and factors for hyperinflation? Under IAS 29.3 the four factors are (1) the general population flees the local currency, (2) dual currency pricing is practiced, (3) prices for purchases on credit incorporate the loss of purchasing power and (4) the cumulative inflation rate over three years approaches, or exceeds, 100%.

First, under IAS 29.3 “the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power.” Under 31 U.S.C. 5112 the Mint is required to provide ‘in quantities sufficient to meet public demand’ gold and silver coins. Due to exceptional demand and contrary to federal law the Mint has suspended both gold and silver coin sales. It appears a significant amount of the United States general population is demanding the inflation hedge currencies, gold and silver, in large amounts. Therefore, it appears this first factor is met.

Second, under IAS 29.3 “the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency.” In New York some merchants have begun pricing in and accepting other currencies. An article in February 2008 reported that "We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank, ... We didn't realize we would take so much in and there were that many people traveling or having euros to bring in. But some days, you'd be surprised at how many euros you get." Robert Chu, owner of East Village Wines, told Reuters television. Gas station owner Gary Mallicoat accepts silver quarters. While the practice of pricing and accepting alternative currencies does not appear widespread among the general population the trend is starting.

Third, under IAS 29.3 “sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short.” One of the easiest ways for businesses to compensate for the loss of purchasing power through the use of credit is to stop extending credit and require cash.

This steep decline in the rate of growth of M3 has likely resulted from lines of credit being tapped out when the credit crisis began, lines of credit being revoked and an unwillingness or inability to borrow or extend credit. Therefore, it appears that, indirectly, the price of both sales and purchases are being modified to compensate for the expected loss of purchasing power of the US$.

Fourth, under IAS 29.3 “the cumulative inflation rate over three years approaches, or exceeds, 100%.” Because central banks have a conflict of interest and often shroud their operations in secrecy the use of their official numbers are unreliable. The only reliable currency is gold. It is subject to only exchange-rate risk and there are large amounts of above ground stockpiles indicating its primary use as money. Therefore, the relative price of national currencies and gold, absent central bank manipulation to the downside, should be a reliable indicator of the national currency’s inflation rate because of the purchasing power difference.

The average price of gold in:

2004 - $409.72

2005 - $444.74

2006 - $603.46

2007 - $695.39

2008 - $912.90 (Jan-Aug)

Thus the inflation rate of the US$, relative to gold, is:

2005 - 8.5%

2006 - 35.7%

2007 - 15.2%

2008 - 31.3% (Jan-Aug 2008)

The cumulative inflation rate from the 2005 average price of $444.74 to the 2008 average price of $912.90 equates to a rate of 105.3%. Because 105.3% approaches and exceeds the 100% required by IAS 29 therefore the inflation rate of the US$ relative to the stable and reliable currency of gold indicates hyperinflation. Additionally, the general commodity index has had similar triple digit changes.

jbkayaker12

September 23rd, 2008, 10:36 PM

When the going gets tough, the tough goes out to eat. Hahahahaha $9.99 for appetizer, entree and a dessert. Expensive for some people, a bargain for us here in Vegas, hahahaha!

3cr

September 23rd, 2008, 11:48 PM

The Wall Street Bailout Plan, Explained
By DAVID STOUT
Published: September 20, 2008
New York Times
http://www.nytimes.com/2008/09/21/business/21qanda.html?_r=1&&partner=yahoofinance&oref=slogin

WASHINGTON — News reports about the upheaval in the world of finance have been full of esoteric terms like “mortgage-backed securities” and “credit-default swaps,” but the crisis has resonated for people who know little about Wall Street and who did not think they would ever have to know. Here are several questions and answers of concern to Main Street Americans:

Q. The bailout program being negotiated by the Bush administration and Congressional leaders calls for the government to spend up to $700 billion to buy distressed mortgages. How did the politicians come up with that number, and could it go higher?

A. The recovery package cannot go higher than $700 billion without additional legislation. As for that figure, it lies between the optimistic estimate of $500 billion and the pessimistic guess of $1 trillion about the cost of fixing the financial mess. But the $700 billion is in addition to an $85 billion agreement on a bailout of the insurance giant American International Group, plus $29 billion in support that the government pledged in the marriage of Bear Stearns and JPMorgan Chase. On top of all that, the Congressional Budget Office says the federal bailout of the mortgage finance companies Fannie Mae and Freddie Mac could cost $25 billion.

Q. Who, really, is going to come up with the $700 billion?

A. American taxpayers will come up with the money, although if you are bullish on America in the long run, there is reason to hope that the tab will be less than $700 billion. After the Treasury buys up those troubled mortgages, it will try to resell them to investors. The Treasury’s involvement in the crisis and the speed with which Congress is responding could generate long-range optimism and raise the value of those mortgages, although it is impossible to say by how much.

So it would not be correct to think of the federal government as simply writing a check for $700 billion. It is just committing itself to spend that much, if necessary. But the bottom line is, yes, this bailout could cost American taxpayers a lot of money.

Q. So is it fair to say that Americans who are neither rich nor reckless are being asked to rescue people who are? What is in this package for responsible homeowners of modest means who might be forced out of their homes, perhaps for reasons beyond their control?

A. Yes, you could argue that people who cannot tell soybean futures from puts, calls and options are being asked to clean up the costly mess left by Wall Street. To make the bailout palatable to the public, it is being described as far better than inaction, which administration officials and members of Congress say could imperil the retirement savings and other investments of Americans who are anything but rich.

But it is a good bet that the negotiations between the administration and Capitol Hill will include ideas about ways to help middle-class homeowners avoid foreclosure and perhaps some limits on pay for executives. And it should be noted that neither party is solely responsible for whatever neglect led the country to the brink of disaster.

Q. How is it that the administration and Congress, which have not tried to find huge amounts of money to, say, improve the nation’s health insurance system or repair bridges and tunnels, can now be ready to come up with $700 billion to rescue the financial system? And is it realistic to think that the parties can reach agreement and get legislation passed in a hurry?

A. The first question will surely come up again, involving as it does not just issues of spending policy but also more profound questions about national aspirations. As for rescuing the financial system, elected officials in both parties became convinced that, while a couple of venerable investment banks could fade into oblivion or be absorbed by mergers, the entire financial system could not be allowed to collapse.

And, yes, the parties are likely to reach an accord. Many members of Congress are eager to leave Washington to go home and campaign for the November elections, and no one wants to face the voters without having done something to protect modest savings portfolios as well as giant investors.

3cr

September 23rd, 2008, 11:51 PM

Experts See a Need for Punitive Action in Bailout
by Peter S. Goodman
Tuesday, September 23, 2008
Yahoo News
http://finance.yahoo.com/banking-budgeting/article/105825/Experts-See-a-Need-for-Punitive-Action-in-Bailout

As economists puzzle over the proposed details of what may be the biggest financial bailout in American history, the initial skepticism that greeted its unveiling has only deepened.

Some are horrified at the prospect of putting $700 billion in public money on the line. Others are outraged that Wall Street, home of the eight-figure salary, may get rescued from the consequences of its real estate bender, even as working families give up their houses to foreclosure.

Most economists accept that the nation's financial crisis — the worst since the Great Depression — has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it. The Treasury's proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.

"At first it was, 'thank goodness the cavalry is coming,' but what exactly is the cavalry going to do?" asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. "What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions."

The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. — himself a product of Wall Street — carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer's bill.

There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions. Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.

But an underlying source of doubt about the bailout stems from who is asking for it. The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.

"This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything," said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington. "It's almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we'd give this money to these guys, no questions asked."

Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.

Some are suspicious of Mr. Paulson's characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress's failure to act. This time, it is financial Armageddon supposedly on the doorstep.

"This is scare tactics to try to do something that's in the private but not the public interest," said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. "It's terrible."

In part, Mr. Paulson's credibility has been dented by his pronouncements in previous weeks that the crisis was already contained. Some suggest this was a well-intentioned effort to stem panic. But the aftermath complicates his quest for the bailout.

"If you view your public statements as an instrument of policy, people don't believe you anymore," said Vincent R. Reinhart, a former Federal Reserve economist and now a scholar at the conservative American Enterprise Institute.

The biggest point of contention is over whether and how taxpayers would benefit if the bailout succeeded in righting the financial system, sending banking stocks upward.

In Mr. Paulson's plan, the Treasury would have the right to buy as much as $700 billion worth of troubled investments, with the taxpayer recouping the proceeds when those investments were sold over coming years. But many economists — Mr. Elmendorf among them — argue that taxpayers should get more out of the deal, securing stock in the banks that make use of the bailout. The government could then sell off that stock at a profit when conditions improve. A similar approach was used successfully in Sweden in the early 1990s when its financial system melted down.

Others argue that any bailout must pinch the people who have run the companies now needing rescue, along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are now stuck with the bill for their reckless ways.

"It absolutely has to be punitive," Mr. Baker said. "If they sell us the junk, then we own the company. This isn't a way to make these companies and their executives rich. This should be about keeping them in business so the financial system doesn't collapse."

Other questions center on how to value what the Treasury aims to purchase — an issue that goes to the heart of the crisis itself.

The financial system got to its dangerous perch by betting extravagantly on real estate. When housing prices began plummeting and borrowers stopped making payments, financial institutions found themselves with huge inventories of bad loans. Not simple loans, but complex investments created by pooling millions of mortgages together and then slicing them into pieces. These were the investments that Wall Street bought, sold and borrowed against in cooking up the money it poured into housing.

The trouble is that these investments are so intertwined and complex that no one seems able to figure out what they are worth. So no one has been willing to buy them. This is why banks have been in lockdown mode: with mystery enshrouding both the value of their assets and their future losses, banks have held tight to their remaining dollars, depriving the economy of capital.

Now, the Treasury aims to clear the fog by buying up these investments. But their value is as mysterious as ever.

"There's a tendency for people to think these are stocks and bonds and you know what the price is," said Bruce Bartlett, a former White House economist under President Reagan. "The problem is people are operating in a world in which nobody knows what the hell is going on. There's some naïve assumptions about how this would function."

If Mr. Paulson pays the market rate — whatever that is — that presumably would not be enough to persuade banks to sell. Otherwise, they would have sold already. For the plan to work, Treasury has to pay a premium.

"It's a straight subsidy to financial institutions," said Martin Baily, a former chairman of the Council of Economic Advisers in the Clinton administration, and now a senior fellow at the Brookings Institution. "You're essentially giving them money."

Mr. Baily favors the basics of the Paulson plan, albeit with some mechanism that would give the government a slice of any resulting profits. And yet he remains troubled by the dearth of information combined with the abundance of zeroes in the bailout request.

"I'd like a clearer statement of what we were afraid was going to happen that requires $700 billion," Mr. Baily said. "Maybe they don't want to talk about it because it would scare everybody, but it's a bit much to ask."

3cr

September 23rd, 2008, 11:55 PM

Fed chairman: Approve bailout plan or risk recession
Dire warnings fail to sway senators on big bailout
By JEANNINE AVERSA, AP Economics Writer
Yahoo News
http://news.yahoo.com/s/ap/20080923/ap_on_bi_ge/financial_meltdown

WASHINGTON - Senators dug in their heels Tuesday, pushing back against dire warnings from the government's top economic officials of recession, layoffs and lost homes if Congress doesn't quickly approve the Bush administration's emergency $700 billion financial bailout plan.

Congressional leaders still predicted passage — with significant changes — but Wall Street's nerves were hardly soothed. The Dow Jones industrials sank 161 points and now are off more than 500 this week after initially surging on the bailout announcement last week.

Deepening market trouble was just one piece of the economic havoc that Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told senators would ensue if Congress lags in acting on the administration's proposal to rescue tottering financial institutions.

"I share the outrage that people have," Paulson said. "It's embarrassing to look at this. I think it's embarrassing to the United States of America. There is a lot of blame to go around."

But without the bailout plan, Paulson and Bernanke sketched out a dire scenario for senators at a contentious daylong hearing: Neither businesses nor consumers would be able to borrow money, and the world's largest economy would grind to a virtual halt.

In public and in private meetings, both Democrats and Republicans said big changes are needed, presaging a difficult road ahead for the measure.

The legislation the administration is promoting would allow the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the national economy that is already sputtering.

Democrats were determined to wrest concessions from the administration on domestic spending and middle-class economic aid. And they said Republicans had to share in the politically tricky task of pushing through a financial bailout six weeks before the elections at a time when millions of everyday Americans are economically strapped.

"It's their problem. It's their bill. And they're going to have to figure out if they can support it," House Speaker Nancy Pelosi, D-Calif., said of Republicans.

"Nobody wants to have to do this," agreed Rep. John Boehner of Ohio, the Republican leader. He said he was hopeful of a quick agreement, despite withering criticism from conservative GOP lawmakers who recoiled at the prospect of federal intervention.

Sen. Jim Bunning, R-Ky., said, "This massive bailout is not a solution. It is financial socialism and it's un-American."

Both parties' presidential candidates also insisted on alterations in the administration's drastic prescription.

Democrats and Republicans alike demanded that the bailout limit pay packages for executives of companies helped by the rescue.

"Clipping executive compensation is easy right now — everybody wants it," said Rep. Jack Kingston, R-Ga.

Democrats also were pushing proposals to let the government take some type of stake in the companies that it helps. The administration has balked at that, fearing it would discourage financial companies from getting the help they need through the bailout, thereby blunting the plan's effectiveness.

Democrats also want to let judges rewrite mortgages to lower bankrupt homeowners' monthly payments, another demand the administration is resisting.

Both Sens. Chris Dodd, D-Conn., chairman of the Banking Committee, and the panel's top-ranking Republican, Richard Shelby of Alabama, said significant changes are needed before the rescue plan can be passed. "We have got to look at some alternatives," Shelby said.

Getting the action right is key, Dodd said: "There is no second act to this." He later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable," he told reporters.

Bernanke's remarks about the risk of recession came in response to a question from Dodd, who seemed eager to hear a strong rationale for lawmakers to act swiftly on the administration's unprecedented request.

"The financial markets are in quite fragile condition, and I think absent a plan they will get worse," Bernanke said.

Ominously, he added, "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."

GDP is a measure of growth, and a decline correlates with a recession.

Across the Capitol complex, Vice President Dick Cheney and President Bush's top advisers met privately with restive House Republicans, some of whom emerged from the session unpersuaded.

"Just because God created the world in seven days doesn't mean we have to pass this bill in seven days," said Rep. Joe Barton, R-Texas.

Added Rep. Darrell Issa, R-Calif., "I am emphatically against it."

Paulson, seated next to Bernanke at the Senate hearing, objected strongly when Chuck Schumer, D-N.Y., asked if $150 billion might be enough to get the program started, with a promise of more to come.

That would be a "grave mistake," and would fail to give the markets the confidence they needed to rebound, Paulson responded.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who is leading talks with Paulson on the plan, also called phasing in the bailout "highly unlikely."

Paulson was asked repeatedly why taxpayers should accept the burdens of a bailout.

"You worry about taxpayers being on the hook?" he replied at one point. "Guess what — they're already on the hook." Paulson suggested that the fallout from the credit crisis would hit almost everyone in the pocketbook unless forceful action was taken. Moreover, the flawed and outdated regulatory system, which didn't catch abuses, needs to be overhauled, he said.

In New York, meanwhile, Bush was telling the U.N. General Assembly that the United States was taking "bold steps" to prevent an economic calamity that would be sure to have major effects around the world.

One of the tricky issues confronting policymakers is how to price the distressed assets that the government would ultimately buy.

Bernanke suggested buying the assets at a "hold-to-maturity" price, which would be based on an estimate of what the securities would eventually be worth as payments came in over the years.

"If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits," Bernanke said. "First, banks will have a basis for valuing those assets and will not have to use fire-sale prices. Their capital will not be unreasonably marked down."

In contrast, if banks use existing "mark-to-market" rules that require them to value the holdings at what similar securities have recently sold for — in some cases pennies on the dollar — it could make the whole bailout futile because it would hurt many banks' balance sheets, causing some to fail. "This creates something of a vicious circle," he said.

_____________________________________

Can you trust a Wall Street veteran with a Wall Street bailout?
By Kevin G. Hall | McClatchy Newspapers
http://www.mcclatchydc.com/homepage/story/52856.html

WASHINGTON — Making the rounds on the Sunday morning talk shows, Treasury Secretary Henry Paulson repeatedly said today's financial problems were long in the making. He should know. He was part of the Gold Rush that has brought the global financial system to the brink of collapse.

Paulson presided over one of the most profitable runs on Wall Street as chairman and chief executive officer of investment banking titan Goldman Sachs & Co. from 1999 until President Bush nominated him on May 30, 2006 to take over the Treasury Department.

Back then, Bush saw Paulson's Wall Street experience as a plus. "Hank will follow in the footsteps of Alexander Hamilton and other distinguished Treasury secretaries who used their talents and wisdom to strengthen our financial markets and expand the reach of the American Dream," Bush said at the time.

But with Paulson now seeking virtually unfettered authority to administer the largest bailout of the financial industry in U.S. history, many are wondering whether Paulson also doesn't come with enormous potential conflicts of interest.

That was one reason Democrats on Sunday expressed reluctance to approve the administration's draft legislation that would leave to Paulson virtually all authority over the proposed $700 billion bailout. The legislation would allow him to decide which securities to buy, from whom to buy them, and which outside companies and people to hire to help him do so.

"If we grant the Treasury broad authority to address the immediate crisis, we must insist on independent accountability and oversight," said Democratic presidential candidate Sen. Barrack Obama. "Given the breach of trust we have seen and the magnitude of the taxpayer money involved, there can be no blank check."

In recent days, there've been few outward expressions of distrust of Paulson in particular. In fact, many said his long reign on Wall Street make him uniquely qualified to deal with today's problems.

"Hank is the right guy," New York Mayor Michael Bloomberg, who made his millions providing information to Wall Street traders, told NBC's Meet the Press. "If I had to have one person at the helm today I would pick Hank Paulson."

But the conflicts are also visible. Paulson has surrounded himself with former Goldman executives as he tries to navigate the domino-like collapse of several parts of the global financial market. And others have gone off to lead companies that could be among those that receive a bailout.

In late July, Paulson tapped Ken Wilson, one of Goldman's most senior executives, to join him as an adviser on what to about problems in the U.S. and global banking sector.

Paulson's former assistant secretary, Robert Steel, left in July to become head of Wachovia, the Charlotte-based bank that has hundreds of millions of troubled mortgage loans on its books.

The administration's draft law also would preclude court review of steps Paulson might take, something Joshua Rosner, managing director of economic researcher Graham Fisher & Co. in New York, said could be used to mask previous illegal activity.

"The Treasury's ability to, without oversight, determine (that) a financial institution (is) an agent of the government seems like it could be used to serve several purposes, including limiting the potential liabilities of an institution or its executives," he wrote in a note to investors late Sunday.

The Treasury proposal sent to Congress also offers no process to hire asset managers in an open and competitive process. That's particularly questionable given that Wall Street players are now hiring Wall Street players, Rosner said.

"This seems to invite a risk of collusion between sellers and buyers to the detriment of the taxpayer," he wrote.

At a minimum, there's irony in Paulson being in charge of so large a bailout.

In the last annual report at Goldman that Paulson signed off on in November 2005, a year in which he received $38 million in compensation, investors were clearly told that the federal government wouldn't be there to save them from bad investments.

"Goldman Sachs, as a participant in the securities and commodities and futures and options industries, is subject to extensive regulation in the United States and elsewhere," the report said.

But those regulations are designed to protect the interests of clients in the market, it said. "They are not ... charged with protecting the interest of Goldman Sachs shareholders or creditors," it said.

That's a different tune from the one Paulson was singing Sunday.

"Last week there were times when the capital markets or credit markets were frozen," Paulson said on NBC's Meet the press. "American companies weren't able to raise financing. That has very serious consequences. So what we need to do right now is stabilize the markets, and this is for the, for the benefit of the taxpayers we're doing this, the American public. Then, once we get behind this and get this stabilized, there's a lot we can talk about in terms of reform."

What Paulson didn't say is that the excesses that led to the frozen credit markets couldn't have happened without Wall Street. Lenders weakened their standards because loans were sold to investment banks, which didn't much care about the loan quality since they then pooled the loans with thousands of other loans and sold them as bonds to investors. If the whole thing collapsed, it would be the investors who lost out.

Those bonds, called mortgage-backed securities, are precisely the bad assets taxpayers will now be buying back from Paulson's colleagues on Wall Street.

During Paulson's tenure, Goldman was not as big a player in issuing mortgage bonds as two other investment banks that have gone under this year, Bear Stearns and Lehman Brothers.

But the 2005 annual report shows that Goldman was still a significant player. Its trading division, which included the mortgage bonds and complex financial instruments called derivatives, reported pre-tax earnings of more than $6.2 billion, up sharply from $3.5 billion in 2003.

The report also shows that Goldman benefited greatly from the wave that is now being deemed a wave of excess.

Goldman's pre-tax earnings rose from $4.4 billion in 2003 to almost $8.3 billion in 2005. Similarly, its investment banking division had pre-tax earnings leap from $207 million to $413 million.

Paulson's personal fortunes also zoomed in those years.

In 2002, Paulson received $12.1 million in compensation, including a $6.3 million bonus — an improvement over the previous three years when Wall Street accounting scandals unsettled investment banks, including a $1.5 billion settlement Goldman and other banks paid for issuing overly bullish research reports that promoted deals the banks themselves were involved in.

Published reports said Paulson received $30 million in compensation and salary in 2003.

After Paulson left Goldman and mortgage bonds began losing money, the investment bank erased those losses and then some by betting against the very products it had sold, Fortune magazine reported last year.

_________________________

Lawmakers hostile to Treasury bailout plan, insist on changes
By David Lightman and Margaret Talev | McClatchy Newspapers
http://www.mcclatchydc.com/227/story/52956.html

WASHINGTON — Congressional lawmakers grew uneasy Tuesday about the Bush administration's plan to spend $700 billion rescuing America's financial industry, demanding provisions that limit executive pay and assurance to taxpayers that they're not writing a blank check to bail out troubled firms.

Leaders of both parties were cautiously optimistic that they'd be able to pass a plan, perhaps by the end of this week, but they were struggling to iron out details. Republican conservatives objected to the size and scope of the package, while Democrats insisted on adding stronger government oversight and consumer protection. Changes were assured, but in the end the administration is likely to win approval of a massive bailout package.

"We've got to get this right. . . . There is no second act," said Senate Banking Committee Chairman Christopher Dodd, D-Conn. Senate Republican leader Mitch McConnell of Kentucky echoed that thought, adding, "We're anxious to act quickly."

The rank and file was stirring, however. Republican conservatives protested that the bailout is little more than an expensive giveaway to big corporations as well as an irresponsible government intrusion into the private sector.

"This massive bailout is not the solution. It is financial socialism, and it is un-American," Sen. Jim Bunning, R-Ky., said at a Senate Banking Committee hearing at which members of both parties spent five hours grilling top administration officials. Democrats were concerned that chief executive officers and big companies stood to benefit at the expense of middle- and lower-class taxpayers.

"This proposal is stunning and unprecedented in its scope and lack of detail," Dodd said. "It would allow the (Treasury) secretary to intervene in the economy by purchasing at least $700 billion of toxic assets. . . . It would do nothing to help even a single family save a home."

Still, the point man for the package in the House of Representatives, Financial Services Committee Chairman Barney Frank, D-Mass., said he didn't think that the level of dissent on both sides of the aisle was enough to derail a major bailout package, and that "our primary focus at this point is still getting the thing nailed down with the Senate. I think we will be together on everything.

"Am I concerned about all the concerns? You know, this is legislation. There are some people who I think are trying to derail it, but there are a lot of people who honestly want to make this work."

Treasury Secretary Henry Paulson, who appeared with Federal Reserve Board Chairman Ben Bernanke before Dodd's committee, tried to show empathy with the public.

"I share the outrage people have," said Paulson, a former CEO of the huge investment firm Goldman Sachs. "It's embarrassing to look at this. I think it's embarrassing to the United States of America. There's a lot of blame to go around."

In the House, Republican members met privately with Vice President Dick Cheney and White House Budget Director Jim Nussle in what was described as a tense session.

"People want to try to enjoy capitalism on the way up, socialism on the way down, and we know where that is headed," said Rep. Jeb Hensarling, R-Texas. "What we will end up with, I believe, is less freedom, less opportunity for the next generation."

Whether such anger will erupt into the kind of backbench rebellion that forced negotiators in the 1980s and 1990s to make changes in tax and budget deals remained unclear.

House Republican leader John Boehner of Ohio explained the reservations that many GOP members shared.

"It's the size of the solution that causes great concern, and trying to gauge the risk-to-reward ratio," he said. "How serious is the problem, and how imminent is the crisis?"

Still, leaders of both parties in both chambers of Congress remained committed to moving ahead with some substantial financial-system rescue plan.

"It's about saving our economy," Boehner said.

House Speaker Nancy Pelosi, D-Calif., said that Democrats were unified on the need for legislation but that it must show that "the party is over for compensation, for CEOs who take the golden parachute as they drive their companies into the ground."

The House is expected to debate the plan first, perhaps as early as Thursday. "There's going to be a lot of soul searching over the next few days," said Rep. Phil Gingrey, R-Ga.

He — like many others in Congress — saw echoes of other big bills they'd rushed to approve in recent years and later regretted, notably the 2002 measure to give President Bush broad authority to wage war against Iraq and the costly Medicare prescription-drug program.

Many lawmakers were wary of giving Bush what they saw as another blank check.

Rep. Gene Taylor, a fiscally conservative Democrat from Mississippi, said he intended to oppose a bailout on the $700 billion scale that Bush sought. "I'm not willing to do that," he said. "What are the real costs? What do we get for this?"

The path to approval seemed somewhat smoother in the Senate.

"All the Republican senators hate having to deal with this kind of crisis, especially with government involvement in the private sector," said Senate Republican Conference Chairman Jon Kyl of Arizona. However, he added, "Republicans have determined we're going to try our very best to work on this in a constructive way in a very short period of time."

The Bush administration refused to budge publicly from its stance that any legislation should be passed "quickly and cleanly," as Paulson reiterated Tuesday.

Senate staff members said they expected the administration to concede many key points that Democrats were pushing, but that wasn't clear in Paulson's testimony.

Paulson and Bernanke said that without fast congressional action, the nation's financial system faced enormous trouble that could endanger the broader economy.

"At this juncture, in light of the fast-moving developments in financial markets, it is essential to deal with the crisis at hand," Bernanke said.

Democrats want stronger oversight of the rescue plan, limits on executive pay at firms that take bailout money and assurance that consumers who are having difficulty paying their mortgages will get some leniency.

"It seems to me that the proposal rewards the bad actors, those financial institutions that engage in irresponsible lending, have bad assets on their books and need help from the government to stay afloat," said Sen. Tim Johnson, D-S.D.

"What punitive actions are being taken against these companies and their CEOs?" he asked Paulson.

The secretary explained that his plan is "broad based and it is dealing with the root cause" of the problems and that "there have been very harsh consequences," though he didn't specify what they were.

Paulson and Bernanke emphasized that taxpayers probably wouldn't wind up spending $700 billion because, over time, the government would sell off now-unmarketable assets once markets returned to stability, and the Treasury would pocket the proceeds.

Sen. Charles Schumer, D-N.Y., wondered why the entire $700 billion was needed at once. Why not authorize $150 billion now, then re-evaluate after the plan has a track record?

"That would be a grave mistake," Paulson said. "This is about market confidence and the tools to do the job."

Lili

September 24th, 2008, 12:15 AM

McCain Critical of Paulson Plan

From NBC/NJ’s Adam Aigner-Treworgy
PHILADELPHIA, Pa. -- While speaking to a group of Irish-American voters gathered in Scranton this morning, McCain criticized the plan put out by Treasury Secretary Henry Paulson for giving "a single individual the unprecedented power to spend $1 trillion."

"Never before in the history of our nation has so much power and money been concentrated in the hands of one person, a person I admire and respect a great deal, Secretary Paulson," McCain said. "This arrangement makes me deeply uncomfortable. And when we're talking about a trillion dollars of taxpayer money, 'trust me' just isn't good enough."

This problem was caused by poor oversight, McCain said, and it won't be solved by a plan that doesn't include proper oversight.

"I believe we need a high-level oversight board to impose accountability and establish concrete criteria for who gets helped and who doesn't," McCain said. "It must ensure that throughout this crisis the government is a careful steward of the taxpayers dollars. This oversight board should be bipartisan, have qualified citizens who have no agenda but the protection of taxpayers and the financial markets. People like Warren Buffet who supports my opponent, Gov. Mitt Romney, maybe Michael Bloomberg, an independent to oversee this."

On the issue of CEO compensation, McCain said no CEO of a corporation bailed out by the government should "be making more money than the highest paid government official."

"We can't have taxpayers footing the bill for bloated golden parachutes like we see in the Lehman Brothers bankruptcy," McCain said. "My friends, the top executives are asking for $2-and-a-half billion in bonuses after they ran the company into the ground."

Lili

September 24th, 2008, 12:23 AM

McCain, Obama raise doubts about bailout plan
By STEVEN R. HURST, Associated Press Writer
Mon Sep 22, 1:29 PM ET

WASHINGTON - Democrat Barack Obama and Republican John McCain raised doubts about the Bush administration's $700 billion bailout and demanded conditions that could snag its quick passage through the highly partisan Congress.

Less than six weeks remained in the presidential contest as the candidates were preparing for their first debate on Friday, a confrontation on foreign policy and national security. Those issues, despite ongoing wars in Iraq and Afghanistan, have slid to a distant second place behind voter anxiety over the U.S. economy — in the midst of a financial crisis not seen since the 1930s Great Depression.

McCain, who only a week ago said the economy was fundamentally sound, now says the U.S. financial system is facing a major crisis.

Speaking on NBC television, McCain said, "We are in the most serious crisis since World War II."

He also said that despite the ballooning national debt he would not raise taxes if elected president.

Obama and his wife, Michelle, were campaigning in Wisconsin, a battleground state, while McCain planned stops in Pennsylvania, where the race was equally close. He was to be joined there by running mate Sarah Palin, the Alaska governor who has brought new life to the Republican ticket.

The candidates traded charges Sunday, each declaring the other unprepared to handle the U.S. financial meltdown that looms over the next American president. They likewise said there were too few assurances of oversight and guarantees that Treasury Secretary Henry Paulson's unprecedented bailout would assist beleaguered citizens.

McCain cautioned against granting unchecked authority to Paulson, saying he is "greatly concerned that the plan gives a single individual the unprecedented power to spend $1 trillion on the basis of not much more than 'Trust me.'"

In a statement to reporters, McCain urged the creation of a bipartisan oversight board to review the government bailout rather than entrusting Paulson with complete power to craft it. He said the board should be headed by a trusted financial steward like billionaire financier Warren Buffett, and said former Massachusetts Gov. Mitt Romney and New York City Mayor Michael Bloomberg should be involved as well. Both Romney and Bloomberg made enormous fortunes in business ventures before entering politics.

"I believe we need a high level of oversight and an oversight board to impose real criteria for those who need help and those who do not and that we have a careful steward of the taxpayer's dollars," McCain said.

Obama ticked off seven conditions that he believed should be imposed on the Paulson proposal, joining some fellow congressional Democrats in raising warning flags and signaling the bailout mechanism might not make it out of the legislature by week's end as demanded by the Bush administration.

Obama said any bailout must include plans to recover the money, and protect working families and big financial institutions and be crafted to prevent such a crisis from happening again.

"This plan can't just be a plan for Wall Street, it has to be a plan for Main Street. We have to come together, as Democrats and Republicans, to pass a stimulus plan that will put money in the pockets of working families, save jobs, and prevent painful budget cuts and tax hikes in our states," Obama said during a campaign stop in North Carolina.

Aides said Obama had spoken with Paulson, Fed Chairman Ben Bernanke, congressional leaders and former President Bill Clinton and Sen. Hillary Clinton in fleshing out his approach to the bailout.

McCain and Obama each had harsh words for their opponent as well.

At a campaign stop in North Carolina, Obama again blamed the crisis on Republican policies he said McCain was committed to continuing.

"We're now seeing the disastrous consequences of this philosophy all around us, on Wall Street as well as Main Street," Obama said. "Yet Sen. McCain, who candidly admitted not long ago that he doesn't know as much about economics as he should, wants to keep going down the same disastrous path."

Obama said the Bush administration's proposal to put a floor under the dangerous U.S. economic slide — one that many are worried could pull down the world economy — carried a "staggering price tag" but no plan to guarantee the "basic principles of transparency, fairness, and reform" to taxpayers who will pay for the huge and unprecedented government bailout.

McCain, at a National Guard convention in Baltimore, Maryland, said Obama was behaving more like a politician than a leader, faulting him for not offering a plan to stabilize financial markets after the crisis in the mortgage industry led to the collapse of two investment banks and the government bailout of housing lenders Fannie Mae and Freddie Mac and insurance giant American International Group, Inc.

"At a time of crisis, when leadership is needed, Senator Obama has not provided it," McCain said. "Whether it's a reversal in war, or an economic emergency, he reacts as a politician and not as a leader, seeking an advantage for himself instead of a solution for his country," McCain said of his Democratic rival.

Obama had previously declined to offer a financial recovery plan, saying he wanted to allow Treasury Secretary Henry Paulson to address the matter without political intrusion. Obama's advisers criticized McCain's proposals as little more than talking points that lacked any meaningful detail.

Lili

September 24th, 2008, 04:51 AM

FBI Seeks Fraud in Companies' Collapse
LARA JAKES JORDAN, AP
posted: 1 HOUR 4 MINUTES

WASHINGTON (Sept. 23) - The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac , and insurer American International Group Inc. Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

Lili

September 24th, 2008, 04:56 AM

House GOP Revolts Against Cheney
By DANIEL W. REILLY and PATRICK O'CONNOR, Politico.com
posted: 1 HOUR 28 MINUTES AGOcomments:

(Sept. 23) -- There was a time when Dick Cheney could turn back a Republican revolt on Capitol Hill.

That time is gone.

House Republicans, upset over the administration's $700 billion financial bailout plan, rose up against Vice President Dick Cheney during a meeting Tuesday. There was a time when Cheney could easily quell a GOP revolt, but that time seems to have passed.

House Republicans rose up en masse against their vice president on Tuesday morning to blast an administration proposal that would grant Treasury historic authority to start buying hundreds of billions of dollars in devalued mortgage-related assets, according to members present.

The lines to speak were long, the questions many and sentiment in the Cannon Caucus Room Tuesday swayed heavily against the Treasury proposal.
Afterward, Texas Rep. Joe Barton took the unusual step of telling reporters that he had politely given Cheney a piece of his mind -– the sort of dissent Republicans considered unthinkable during much of the Bush administration's reign.

A full-throated Republican revolt could create huge problems for the administration and congressional Democrats scrambling to assemble a package to reassure jittery markets. It could also preserve the Republicans' options after the fact -– if the bailout doesn’t work or proves deeply unpopular with voters, they can say they opposed it.

Some Republicans at Tuesday's meeting suggested Cheney, White House Chief of Staff Josh Bolten and economic policy adviser Keith Hennessey didn't help their case.

"They were in worse shape when they left than when they came in," said one lawmaker who was there. "These were the wrong guys. ... The problem is that they've used up a lot of good will."

Cheney and the White House team made policy arguments for the proposal instead of political arguments that would help lawmakers explain a vote for the plan to voters in their districts. The meeting was almost an hour old when the vice president told the anxious Republicans, in response to a question, that failure to pass this would result in more foreclosures and cause grave hardship for their constituents.

Hennesey and Bolten –- who shares a Goldman Sachs pedigree with Treasury Secretary Henry Paulson -–faced a number of tough questions about why the $700 billion bailout was necessary, how it would actually work and why this particular plan was the best response to the current crisis, according to notes circulated from the meeting.

Conservatives present also grilled the White House officials about what alternatives the administration considered before coming up with this plan.

Christendom

September 25th, 2008, 08:55 AM

^^ yay! the bilderberg group wins! new world order ensues! :lol:
yeah, one of the most important foreign policy arms of the conspirators hierarchy- bilderbergers. another little-known thinks tanks w/ similar ideas w/c many of us would label subversive are the; trilateral, illuminati, mont pelerin, milner, CFR, RIIA & that’s not all were either totally unknown to the masses of people worldwide, or else their true function were at best but poorly understood if at all

surely & it must NWO ensues, bcoz it has been dominant influence in sufficient policy, research & opinion making organizations that it determines the basic direction of America society & the world. the far flung interlocking of banks, insurance, agencies, international businesses, petroleum, media, institutions & educational establishments, political parties & the hundreds of thousands of entities & foundations whose leading lights make up the membership of the conspirators hierarchy- the ultimate controlling body that runs the world has gone so far @ least a hundred years. operate under the unified command covering every conceivable matter of strategy & cohesive action. everything is carefully organized. organized power hierarchy in the whole transcending all governments & individuals, however powerful & secure they may feel themselves, w/ a careful use of language the people can be conned into believing that this is the ultimately a good move

DoggMann

September 25th, 2008, 02:13 PM

Fed Games Wednesday 9/24 - No Banker Left Behind
daOfYmSLW_U

3cr

September 26th, 2008, 01:51 AM

Global financial meltdown exposes chinks in US armor
By Eduardo H. Yap
PhilStar
Friday, September 26, 2008
http://www.philstar.com/index.php?Business&p=49&type=2&sec=27&aid=2008092519

The world came closest to a financial system Armageddon on September 18, 2008, now called Black Wednesday, when markets were faced with the possible collapse of global insurance titan AIG, which followed on the heels of the sale of Merrill Lynch (America’s broker) and bankruptcy of Lehman Brothers, both the 3rd and 4th largest investment banks in the United States, bailout of mortgage giants Fannie Mae and Freddie Mac a few days earlier. The news triggered one of the worst stock plunge and credit seizures since the Great Depression of the 1930s, as banks refused and continue to refuse to lend even to one another, on fears of further bank collapses. Its occurrence exposed the fragility of the US financial system brought about by unfettered laissez-faire deregulation and policy flaws, including a prolonged period of multi-decade low interest rates and Reaganite free-market capitalism anchored on globalization, free trade and deregulation. The emperor is found without clothes and his castle built on a mountain of debt. The changed landscape of the US financial services sector and forthcoming reform measures will have profound consequences on the world.

Free market capitalism under fire

The now assailed Reaganite policy, continued in succeeding Republican and Democratic administrations, allows the weak and uncompetitive to fall or be absorbed in the name of productivity and competitiveness. These policies are made real in the transfer of US manufacturing know-how and capacity to lower cost countries such as China, resulting in a massive transfer of wealth and jobs to the rapidly developing economies. Free trade coupled with deflation from the newly integrated eastern countries into the global economy produced a tsunami of imported cheap goods to feed the insatiable appetite of US consumers that overwhelmed and decimated US manufacturers. Consumption now constitutes two thirds of the US economy. Critics charge that America has become a nation of burger flippers and box-store sales clerks with low paying jobs, inadequate health benefits and low-income growth.

Structural imbalances

A source of instability is the structure of US trade and fiscal policies that results in massive and intractable imbalances. The external trade stubbornly incurs shortfalls that have grown to $800 billion a year. Inclusive of services, the deficit is still $700 billion. Its tax structure is incapable of generating sufficient revenue to cover its massive expenditures and $400 billion a year debt service. In 2008, the projected fiscal shortfall is estimated at $481 billion, excluding the cost of guaranteeing $29 billion in Bear Stearns risk, $85 Billion in bridge loans to AIG, $200 billion to effectively nationalize Fannie Mae and Freddie Mac, plus up to $700 billion to buy illiquid mortgage assets from US financial institutions to unclog credit markets.

Massive transfer of wealth

The twin fiscal and trade deficits have resulted in a massive transfer of wealth from the US to the rest of the world, particularly Asia that is unprecedented in history. Many poor nations have grown rich. China alone has amassed almost $2 trillion in foreign exchange reserves, which it in turn uses to purchase US Treasury bills and bonds the US government issues to fund its funding shortfalls. As a result, the US has become the most heavily indebted country in the world, with a projected $11.8 trillion in public debts. This insatiable need for funding and the willingness of foreign governments with large current account surpluses to supply the US with credit has created imbalances such as record low interest rates that create asset bubbles and stoke inflation, disequilibrium in currency exchange rates, and tension in financial markets and friction with major trading partners of the US. China in particular is under regular pressure to revalue its currency. Providing massive funds to the US diverts resources needed to finance growth in poor countries.

Sensitivity to interest rate movements

The heavy debt load of Americans and reliance on credit has rendered US consumers extremely sensitive to any diminution in their income such as from inflation, taxes and high interest rates. As a result, the US Fed routinely uses monetary tools to regulate the economy and control inflation. The record 40-year low interest rates instituted by Fed chairman Alan Greenspan over a prolonged period after the stock market bubble burst in March 2000, led to uncharacteristically risky behavior by homeowners and financial institutions. This produced a massive housing bubble. The subsequent steep rise in rates burst the bubble in late 2005, producing the toxic mortgage securities and their derivatives that is the primary cause of the massive losses of financial institutions throughout the world, including some Philippine banks.

Recovery hopes dashed by inflation

Inflation reared its ugly head after energy prices spiked up to unseen highs from May to June 2008 and sent a chill on already hard pressed consumers. After the capital markets had shown optimistic signs of being at an inflection point in April, hopes were dashed for an earlier recovery in the housing market and the economy. This development soured the prospect of stability in the prices of mortgage securities. The losses in the financial sector deepened and the meltdown followed in September.

Deregulation and consequences

Due in large part to deregulation, regulators did not put a check to the increasingly reckless behavior of lenders and US homebuyers. The Clinton era Gramm-Leach Biley Act of 1999 repealed the stringent regulations imposed by the Glass-Steagall Act enacted in 1993, after the stock market crashed in 1929, to prevent speculation and safeguard depositors’ funds. Self-regulation allowed mortgage loan originators to adopt imprudent lending practices such as “No Money Down” or “No Income Verification”. Financial services deregulation provided the environment for financial product innovation to package mortgages into increasingly complex financial products and derivatives such as collateralized debt obligations (CDOs) and credit default swaps (CDS) that were developed and traded over-the-counter, Unfettered, US banks established offshore special investment vehicles (SIVs) outside their balance sheet to purchase debt securities until the massive losses forced the banks to absorb them. The unregulated and opaque market in credit default swaps (CDS) reached an astounding $50 trillion and brought the near downfall of an otherwise sound insurance titan AIG. Wall Street firms like the failed Bear Stearns and Lehman Brothers massively leveraged up their balance sheets by buying these securities and funding the purchases with short-term loans that evaporated when counterpart financial institutions balked at lending them more money. This magnified losses when the value of the securities collapsed.

Influence of lobbyists

A weakness in the US legislative process is the influence lobbyists exert on Capitol Hill. The US Congress was repeatedly warned of systemic risk posed by excessive exposure of the undercapitalized government sponsored enterprises (GSE). Despite the warnings, legislators did not exercise the political will to rein in the largest housing GSEs, Fannie Mae and Freddie Mac, and instead raised the loan limit to enable the GSEs to purchase more mortgages until they owned or securitized over 50 percent of outstanding residential mortgages. Reports have it that legislators received large sums donated by registered lobbyists working for the GSEs and implied that this may have been a factor for legislators’ failure to control the GSEs. But it is also clear that doing so would have deprived low-income constituents from the opportunity to buy their home, a prospect that would affect the political fortune of legislators. By Sept. 7, the two debt bloated GSEs were tottering into bankruptcy and the US government was forced to take control with a $200-billion bailout.

Pendulum to the opposite

The crisis, including the staggering $700 billion cost of the latest rescue plan, find US politicians and the public heatedly engaged in the blame game. They are looking for the culprit who was “asleep at the switch”, and examining the policies responsible for their dire straits. Given the dark mood of Americans and a new US administration a few months away, the prospect of reforms looms large in the horizon; some of these may have profound effects on the rest of the world.

The growing chorus to “keep jobs at home” may lead to more protectionist policies, which may cause governments from China and Southeast Asia to further de-emphasize export oriented growth models and rely instead on domestic consumption and intra-region trade to fuel economic growth.

It is also possible to envision further changes in the financial landscape, to the detriment of the primacy of the United States. Already, Goldman Sachs and Morgan Stanley have changed their business models into bank holding companies, accepting US Federal Reserve oversight and lower leverage; while European and Asian financial institutions purchase the remains of Lehman Brothers. The increase in risk aversion and the de-leveraging of financial institution balance sheets will make capital funds harder to source; unless emerging market financial institutions and capital markets mature to provide the needed funds for economic growth and development. At the same time, the recent events in global capital markets may accelerate diversification away from US dollar assets as the reserve currency of choice. All this may signal the end of the US’s dominance as the world’s economic and financial powerhouse.

(The author, a certified public accountant, is a property developer and former chairman and president of the Subdivision and Housing Developers Association (SHDA, member of the Management Association of the Phils. (MAP) and Financial Executives of the Phils. (FINEX) ). He presented an analysis of the 1997 Asian Financial Crisis at a forum by the Human Development Network on Nov. 4, 1998; published “A Tax-less Economic Growth” on Oct. 22, 2004, an analysis of the principal cause of the drastic decline in fiscal revenues that was cited by the Asian Development Bank in its 2004 Philippine Yearend Economic Review and “Is the Economy Overtaxed” on Dec. 1, 2004; featured in “Financial Analyst Proposes Novel Fiscal Measures” on Sept. 30, 2005,”The 1997 Asian Financial Crisis and 10th Anniversary Market Crashes, April 2007, “The Panic of 2007”, Sept. 3, 2007, in The Philippine STAR. Signs of Market Inflection Point after Flirting with Financial Armageddon, April 30, 2008, Phil. STAR and the quarterly July 4, 2008 issue of Zurich based International Association of Financial Executives Institute.] For comments: feedback.edyap@gmail.com

3cr

September 26th, 2008, 02:02 AM

View From Asia
By Walden Bello
The Nation
September 24, 2008
http://www.thenation.com/doc/20081006/bello

Many Asians absorb what is happening in Wall Street with a combination of déjà vu, skepticism and "I-told-you-so."

For many, the Wall Street crisis is a replay, though on a much larger scale, of the 1997 Asian financial crisis, which brought down the red-hot "tiger economies" of the East. The shocking absence of Wall Street regulation brings back awful memories of the elimination of capital controls by East Asian governments, which were under pressure from the International Monetary Fund and the US Treasury Department. That move triggered a tsunami of speculative capital onto Asian markets that sharply receded after sky-high land and stock prices came tumbling down.

Treasury Secretary Paulson's proposed massive bailout of Wall Street's tarnished titans reminds people here of the billions the IMF hustled up after '97 in the name of assisting them--money that was used instead to rescue foreign investors.

So Asian governments and financial players are skeptical about Washington's talk of re-regulating the financial sector, and, although their central banks and sovereign wealth funds are flush with cash, they're wary about being drawn into the Wall Street maelstrom. Among East Asian official funds, only Singapore's Temasek and the China Investment Corporation have stepped up to the plate. Temasek pumped over $4 billion into Merrill Lynch a few months ago, but only after driving a hard bargain. CIC invested $5 billion in Morgan Stanley last December but refused the troubled investment bank's recent desperate plea to increase its share of the firm. Initially seen as a potential savior, the Korean Development Bank turned down the overtures of Lehman Brothers a week before the latter's historic collapse into bankruptcy.

Trillions of dollars of Asian public and private money are invested in US firms and property, with the five biggest Asian holders accounting for over half of all foreign investment in US government debt instruments. Funds from Asia have become a key prop of US government spending and the middle-class consumption that have become the driver of the American economy. With so much of Asia's wealth relying on the stability of the US economy, there is not likely to be any precipitate move to abandon Wall Street securities and US Treasury bills.

At home, however, there are growing worries, and consumer advocates, NGOs and academics are demanding more transparency about how much the local banking system is exposed to Wall Street's toxic assets. In the Philippines, there are calls from civil society groups for the banning of derivatives trading, the return of capital controls and the renegotiation of the country' massive foreign debt now that the international banks are in a weak position.

There is, moreover, resignation throughout Asia about the inevitability of a deep US recession and its likely massive impact on the East: the United States is China's top export destination, while China imports raw materials and intermediate goods from Japan, Korea and Southeast Asia to shape into the products it sends to the United States. Despite some talk a few months ago about the possibility that the economic fate of Asia could be "decoupled" from that of the United States, most observers now see these economies as members of a chain gang shackled to one another, at least in the short and medium term.

Greater regional integration is now seen widely as a healthy antidote to a global integration that has run out of control. Some elements of regional economic cooperation are now in place, notably the so-called "ASEAN Plus Three" formation, which unites the Association of Southeast Asian Nations with China, Korea and Japan in a mechanism to facilitate bilateral exchanges of funds in the event of a financial crisis. Eventually this arrangement could become a full-blown regional monetary fund.

On the other hand, NGOs and social movements, while in theory supportive of integration, distrust a process monopolized by governing elites they view as unaccountable. Active participation of civil society, they insist, must be central to the crafting of such regional formations.

________________________________

Can China, India save the world?
Business World
http://www.bworldonline.com/BW092608/content.php?id=003

IT’S THE KIND OF SALE that becomes a portent of things to come.

In 2004, Chinese computer maker Lenovo announced it was buying the entire PC business of American icon IBM for $1.75 billion, creating the world’s third-largest PC maker. To many in Wall Street, the deal was China’s pink slip to the US that it was taking over as the world’s economic powerhouse.

Since the Lenovo sale, the US government has become increasingly skittish about selling American interest in vital industries such as information technology and manufacturing. Last year, a Chinese firm attempted to buy disk drive maker Seagate Technology. That overture did not prosper but it was enough to further fuel speculations on China’s global ambitions.

Fear of China’s world domination was still thick in the air when an Indian firm announced in early 2006 that it was taking over a home textile maker based in Virginia. What drew interest was not the price tag but the swiftness with which GHCL took over the operations of cash-strapped Dan River. GHCL shut the American firm’s factories and started sourcing its raw materials from India.

The same year, the Tata Group, a major Mumbai-based conglomerate, bought Eight O’Clock Coffee, a venerable US brand. Tata Tea also acquired majority stake in Glaceau, a maker of vitamin water.

With economies that continue to chug along at breakneck speed and flush with foreign exchange reserves that exceed $1.5 trillion combined, China and India are now more in a position to acquire American firms. And as the US falls on harder times, the rest of the developing world is now looking to China and India to save them from a potential global economic meltdown.

"It’s not enough to acknowledge China and India are becoming competitors [of the US] when the future belongs to Asia’s two nascent superpowers, at least in the longer term," wrote columnist William Pesek Jr., who is one of the speakers at the 7th Management Association of the Philippines’ (MAP) International CEO Conference this October 7 and 8 at the Makati Shangri-La Hotel.

The recently released World Investment Report 2008 by the United Nations Conference on Trade and Development (UNCTAD) underscored the role of the two regional economies in sustaining world growth. The report said prospects for foreign direct investments remain promising despite concerns about the impact of the US financial crisis.

While it came as no surprise that China and India remained the top two investment destinations, what is drawing huge interest in the report is the staggering speed by which Asian firms are investing offshore.

In 2007, $150 billion came from Asian investors, of which $89 billion went into cross-border acquisitions. The investment outflow was the highest level ever recorded by the UNCTAD and accounted for the bulk of outward investment from developing countries (59%).

"More Asian firms are engaging in international production for various reasons, including to build or acquire brand names and technology, and to harvest natural resources," the report said. "The region is also home to a growing number of large sovereign wealth funds, reflecting the rapidly rising foreign exchange reserves and proactive government policies of some countries."

Combined outflows from Hong Kong and China reached $75 billion in 2007, while investment from South Asia reached US$ 14.2 billion, mostly from India ($13.6 billion).

"Outward FDI is likely to grow even more as Asian firms are increasingly aspiring to become significant regional and global players in their respective industries — particularly in telecommunications, finance, and manufacturing," the UNCTAD said.

Driving the increased investments by Chinese and Indian companies, targeted mainly at industries like steel, mining, energy property and construction, are their higher corporate reserves and high profitability. The Chinese and Indian governments are also reaping praises for adopting policies that relaxed ownership restrictions on foreign investors, encouraged private-sector investment in infrastructure, and introduced a variety of measures to attract FDI.

At their current feverish pace, China and India are now being seen as the twin anchors of global growth. Even US investment house Goldman Sachs is forecasting that China’s economy — which is now only a quarter of the $14-trillion US economy — will exceed America’s in the 2020s if it is able to sustain its plausible growth.

The emerging roles of China and India in the new economic order will be one of the hottest topics at the 7th MAP International CEO Conference. Several noted speakers will tackle the issue, including: Kevin Hogan, vice-president of the American International Group (AIG), who also serves as AIG’s senior regional life division executive in China and Taiwan; Asian economic relations expert Dr. Dennis Tai Lun Sun, president of the Asian Association of Management Organization and chairman of the China-Hongkong Photo Product Holdings Ltd.; and Harinder Kohli, chief executive of the Emerging Markets Forum and president and chief executive of the Centennial Group.

DoggMann

September 26th, 2008, 03:40 AM

No Bailout For Bankers Update 9/25
qxnKdtm_-cY

DoggMann

September 26th, 2008, 04:04 AM

The Creature from Jekyll Island
A Second Look at the Federal Reserve

http://maps.google.ca/maps?hl=en&q=jekyll%20island&um=1&ie=UTF-8&sa=N&tab=wl

PART 1
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PART 2
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PART 3
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PART 4
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PART 5
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PART 6
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PART 7
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RonnieR

September 26th, 2008, 07:22 AM

Agence France-Presse
First Posted 09:48:00 09/26/2008
NEW YORK -- An angry US public and Congress demanded Thursday to snip the rip cord on golden parachutes used by fat cat CEOs to escape Wall Street's mayhem.

Both Democrats and Republicans in Congress insisted that an emergency multi-billion dollar government bailout for the financial industry include restrictions on executive pay.

Their push caught the mood of a nation sickened at watching the titans of finance walk away from Wall Street disasters not only unscathed, but enriched.

"The wealthiest people, those ... in the best position to pay, are being asked for no sacrifice at all," read a petition to Treasury Secretary Henry Paulson, which on Thursday, after three days, had 32,600 signatures.

The petition, organized by independent Senator Bernie Sanders from Vermont, attacked what it described as the Treasury's attempt to let bungling executives "continue to make exorbitant salaries and bonuses."

Those gigantic pay checks, bonuses, and Midas-like farewells encapsulate what the public sees as Wall Street's greed—is—good philosophy.

For example, the CEO of bankrupt Lehman Brothers, Richard Fuld, was paid $22 million in 2007, including stock options and other compensation, according to a survey published by USA Today.

Martin Sullivan, the chief executive of AIG, who left the insurance giant before it was rescued this month by the federal government, received $14 million, the survey said.

Even punishment for those at the center of the chaos comes with a gold lining.

When the government took over collapsed mortgage giants Fannie Mae and Freddie Mac, ousted bosses Daniel Mudd and Richard Syron were not allowed $12.59 million worth in severance payments.

Yet they still got out the door with $9.43 million in retirement benefits.

Public anger at such figures underlies skepticism about the entire government rescue.

"We'll never see that money again," said Mathew May, a 24-year-old economics student who skipped lectures to attend a small demonstration at the iconic bronze bull statue near the New York Stock Exchange.

"They deregulated the markets and ran wild. Now we're bailing them out."

Leftist activist and writer Naomi Klein said there was "socialism for the rich and dog-eat-dog capitalism for the rest of us."

"Think about it: they said providing healthcare for nine million children, perhaps costing six billion dollars a year, was too expensive, but there's evidently no sum of money large enough that will sate the Wall Street pigs."

But left-wingers are not the only ones speaking out.

Newt Gingrich, the fiercely conservative former speaker in the House of Representatives, wrote in the National Review that the bailouts, likely to top a trillion dollars, smack of "crony capitalism."

"Doesn’t that mean that we’re using the taxpayers’ money to hire people to save their friends with even more taxpayer money?" he asked.

Forbes, the magazine for and about the rich, also says enough is enough.

"The compensation schemes for Wall Street CEOs should be capped to a small fixed amount," wrote national editor Robert Lenzner.

"The rest should be dependent on performance in a way that does not reward taking greater risk than is prudent. If CEOs don't perform, they should get nothing."

One worker in the New York finance sector, who asked not to be named, told AFP that his colleagues are as angry as the general public.

"A lot of people are very upset that managers in their own companies and captains of industry in other areas made some really, really bad decisions," he said.

"The most insulting thing is the golden parachutes where these jackals from Fannie and Freddie, having destroyed the company, walked away with millions ... It all comes down to greed."

3cr

September 27th, 2008, 02:40 AM

"Now is not the time to play the blame game. There's plenty of time to analyze the situation." ~ Bush

^^ Hehehe... Aminin na kasi eh! Of course Bush/Republicans also don't want to incriminate themselves and be blamed for their continued support of deregulation programs of our economy sectors until this Financial mess blew up on our faces and whose bailout will be at tax payer's expense which would have adversely affected their fellow Republican John McCain's chances of becoming President. Afterall birds of the same feather flock together. :lol:

The mortgage crisis in the US was caused by pure unmitigated greed.
^^ Yup it's definitely due to greed alright and no sufficient checks and balances only made it inevitable to eventually fail. :bash:

S.E.C. Chief Says Deregulation Fueled Financial Crisis
By STEPHEN LABATON
Published: September 26, 2008
http://www.nytimes.com/2008/09/27/business/27sec.html?ref=business

WASHINGTON— Christopher Cox, the chairman of the Securities and Exchange Commission and a longtime proponent of deregulation, acknowledged on Friday that the voluntary supervisory program of Wall Street’s largest investment banks had contributed to the global financial crisis and abruptly shut the program down.

The agency’s oversight responsibilities will now largely shift to the Federal Reserve.

The commission’s inspector general, in a report also released on Friday, strongly criticized the agency’s performance in monitoring Bear Stearns before it collapsed in March. Mr. Cox said he agreed that the oversight program was “fundamentally flawed from the beginning.”

“The last six months have made it abundantly clear that voluntary regulation does not work,” Mr. Cox said in a statement. The program “was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily,” he added. “The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate” of the program, and “weakened its effectiveness.”

The commission’s decision to end the regulatory program was somewhat academic. The five biggest independent Wall Street firms have all disappeared. The Fed and the Treasury Department forced Bear Stearns into a merger with JPMorgan Chase in March. And in the last month, Lehman Brothers went into bankruptcy, Merrill Lynch was acquired by Bank of America, and Morgan Stanley and Goldman Sachs changed their corporate structure to become bank holding companies, which the Fed regulates.

The retreat on investment bank supervision is a heavy blow to a once-proud agency that has seen its influence over Wall Street steadily erode as the financial crisis has exploded over the last year.

Because it is a relatively small agency, the S.E.C. tries to extend its reach over the vast financial services industry by relying heavily on self-regulation by stock exchanges, mutual funds, brokerage firms and publicly traded corporations.

The program abolished by Mr. Cox was unanimously approved in 2004 by the commission under his predecessor, William H. Donaldson. Known by the clumsy title of the “consolidated supervised entities,” the program allowed the S.E.C. to monitor the parent companies of major Wall Street rirms, even though technically the agency only had authority over the firms’ brokerage firm components.

At the time, the commission’s decision followed heavy lobbying for the plan from all five big investment banks. At the time, Goldman Sachs was headed by Henry M. Paulson Jr. He left two years later to become the Treasury secretary and has been the architect of the administration’s bailout plan.

The investment banks favored the S.E.C. as their umbrella regulator because that allowed them to avoid regulation of their fast-growing European operations by the European Union. Facing the worst financial crisis since the Depression, Mr. Cox has begun in recent weeks to call for greater government involvement in the markets. He has imposed restraints on short-sellers, market speculators who borrow stock and then sell it in the hope that it will decline.

On Tuesday, he asked Congress for the first time to regulate the market for credit default swaps, financial instruments that insure the holder against losses from declines in bonds and other types of securities.

The commission will continue to be the primary regulator of the broker-dealer units of the companies, and will work cooperatively with the Fed in supervising holding companies even though the Fed is expected to take the lead role.

The Fed had already begun regulating Wall Street firms that borrowed money under a new Fed lending program, and the S.E.C. had entered into an agreement under which its examiners worked jointly with Fed examiners, an arrangement that is expected to continue.

The commission will continue to have primary responsibility for regulating securities brokers and dealers.

The announcement was the latest illustration of how the turmoil in the markets was rapidly changing the regulatory landscape. While Congress considers over the coming months how to overhaul the regulatory structure, the markets and the regulators are already transforming it in response to events.

Still, the inspector general’s report made a series of recommendations for the commission and the Federal Reserve that could ultimately reshape the way the nation’s largest financial institutions are regulated in the future. The report recommended, for instance, that the commission and the Fed consider imposing tighter limits on borrowing by the companies to reduce their heavy debt loads and risky investing practices.

The report found that the S.E.C. division that oversees trading and markets had failed to update the rules of the program and was “not fulfilling its obligations.” It said that nearly one-third of the firms under supervision had failed to failed to file the required documents. And it found that the division did not adequately review many of the filings made by other firms.

The division’s “failure to carry out the purpose and goals of the broker-dealer risk assessment program hinders the commission’s ability to foresee or respond to weaknesses in the financial markets,” the report concluded.

The Consolidated Entities Program was approved by the commission in 2004 after several important developments in Congress and Europe. In 1999, the lawmakers adopted the Gramm-Leach-Bliley Act, which broke down the Depression-era restrictions between investment banks and commercial banks. As part of a political compromise, the law gave the commission the authority to regulate the securities and brokerage operations of the investment banks, but not their holding companies.

In 2002, the European Union threatened to impose its ownrules on the foreign subsidiaries of the American investment banks. But there was a loophole: if the American companies were subject to the same kind of oversight as their European counterparts, then they would not be subject to the European rules. The loophole would require the commission to figure out a way to supervise the holding companies of the investment banks.

In 2004, at the urging of the investment banks, the commission adopted a voluntary program. In exchange for the relaxation of capital requirements by the commission, the banks agreed to submit to supervision of their holding companies by the agency.

RonnieR

September 27th, 2008, 04:14 AM

When will the bad news end? In the news, the planned $700B bailout deal breaks down. Sigh.... I hope they put their act together.

TambayBlues

September 27th, 2008, 11:12 AM

WaMu becomes biggest bank to fail in US history

By MADLEN READ, AP Business Writer Fri Sep 26, 4:00 PM ET

NEW YORK - As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks — Washington Mutual Inc. — has collapsed under the weight of its enormous bad bets on the mortgage market.
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The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse those of Continental Illinois National Bank, which failed in 1984 with $40 billion in assets; adjusted for 2008 dollars, its assets totaled $67.7 billion. IndyMac, seized in July, had $32 billion in assets.

One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.

Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion — a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.

"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.

WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.

JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.

JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital. Its stock rose in midday trading Friday on the New York Stock Exchange, gaining $1.90, or 4.37 percent, to $45.36.

The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.

The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which led a $7 billion cash infusion in the bank this spring, on the sidelines empty handed.

WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

The bank in July reported a $3 billion second-quarter loss — the biggest in its history — as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.

JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.

The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.

jbkayaker12

September 27th, 2008, 11:40 AM

^^^^^Im banking with Citibank hahahaha! Next!!!!

Christendom

September 27th, 2008, 12:11 PM

Yes, and that is where the conspiracy theories (although some don't call them that) come in with the Amero first and eventually a one world currency.

http://video.google.ca/videoplay?docid=-1355300745194023737&hl=en

Will be interesting to see what comes of it.

Fed Up

there is a new int'l. financial system,,,a new world money standard & a new world money market...the 1-unit monetary system under permanent non-elected hereditary oligarchists who self-select from among their members in the form of feudal system...it is ruled by the IMF surreptitious grave-robbers...IMF staff members constantly roam the globe, visiting countries & meeting w/ presidents, finance ministers & central bank governors...the goal was to build a new int'l. economic order (loans, conditions, reforms, privatising-sell out sovereingty, & trap)...as for central banks essential in the planning of new world order, private banks are fast disappearing in preparation for the Big Ten banks that will control banking the worldwide over under the guidance of Banks for Int'l Settlement & IMF...no central banks save the BIS & the World Bank shall be allowed to operate

the plan was highly complicated & even politicians who are involved in implementing it are either unaware of it,,,or show their lack of knowledge by labelling the whole thing - a Conspiracy Theory...those who read & listen to the ancient revelations find them to be 100% accurate...listen to the accuracy of it & marvel & the conclusion,,,you will delete the word theory & insert the word fact...thankfully some people around the world are beginning to latch onto this information...awaring that some of the folk involved in the upper degrees of freemasonry

jbkayaker12

September 27th, 2008, 12:28 PM

^^^^^hahahahaha and the plot thickens, hahahhaaha!

Christendom

September 27th, 2008, 12:39 PM

it sounds so obvious & smelly ^^ but sorry i shall not bow to them

jbkayaker12

September 27th, 2008, 10:47 PM

^^^^^^^Hehehehe not surprising at all, typical hahahaha! Next!!!!

-TC-

September 28th, 2008, 07:28 AM

BREAKING NEWS:

http://biz.yahoo.com/ap/080928/financial_meltdown.html

Deal reached on financial markets bailout
Sunday September 28, 1:23 am ET
By Charles Babington and Alan Fram, Associated Press Writers

Congress leaders, Bush administration reach tentative deal on financial bailout deal

WASHINGTON (AP) -- Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.

House Speaker Nancy Pelosi announced the $700 billion accord just after midnight Saturday but said it still has to be put on paper."We've still got more to do to finalize it, but I think we're there," said Treasury Secretary Henry Paulson, who also participated in the negotiations in the Capitol.

"We worked out everything," said Sen. Judd Gregg, R-N.H., the chief Senate Republican in the talks. He said the House should be able to vote on it Sunday, and the Senate could take it up Monday.

The plan calls for the Treasury Department to buy deeply distressed mortgage-backed securities and other bad debts held by banks and other investors. The money should help troubled lenders make new loans and keep credit lines open. The government would later try to sell the discounted loan packages at the best possible price.

At the insistence of House Republicans, some money would be devoted to a program that would encourage holders of distressed mortgage-backed securities to keep them and buy government insurance to cover defaults.

The legislation would place limits on severance packages for executives of companies that benefit from the rescue plan, but details were sketchy.

Also, the government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.

To help struggling homeowners, the plan requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

The measure's main elements were proposed a week ago by the Bush administration, with Paulson heading efforts to push it through the Democratic-controlled Congress. Democrats insisted on greater congressional oversight, more taxpayer protections, help for homeowners facing possible foreclosure, and restrictions on executives' compensation.

To some degree, all those items were added.

At the insistence of House Republicans, who threatened to sidetrack negotiations at midweek, the insurance provision was added as an alternative to having the government buy distressed securities. House Republicans say it will require less taxpayer spending for the bailout.

But the Treasury Department has said the insurance provision would not pump enough money into the financial sector to make credit sufficiently available. The department would decide how to structure the insurance provisions, said Sen. Kent Conrad, D-N.D., one of the negotiators.

Money for the rescue plan would be phased in, he said. The first $350 billion would be available as soon as the president requested it. Congress could try to block later amounts if it believed the program was not working.

The president could veto such a move, however, requiring extra large margins in the House and Senate to override.

Despite the changes made during an intense week of negotiations, the heart of the program remains Bush's original idea: To have the government spend billions of dollars to buy mortgage-backed securities whose value has plummeted as hundreds of thousands of Americans have defaulted on their home loans.

Senate Majority leader Harry Reid, D-Nev., said Saturday that the goal was to come up with a final agreement before the Asian markets open Sunday night. "Everybody is waiting for this thing to tip a little bit too far," he said, so "we may not have another day."

Hours later, when he and others told reporters of the plan in a post-midnight news conference, Reid referred to the sometimes testy nature of the negotiations.

"We've had a lot of pleasant words," he said, "and some that haven't always been pleasant."

"We're very pleased with the progress made tonight," said White House spokesman Tony Fratto. "We appreciate the bipartisan effort to deal with this urgent issue."

RonnieR

September 29th, 2008, 03:42 AM

^^ what a relief... a breakthrough.

Christendom

September 29th, 2008, 07:51 AM

delete

jbkayaker12

September 29th, 2008, 09:41 AM

^^^^^^^Many olid characters here lately and it's more than the usual, hehehe!:)

DoggMann

September 29th, 2008, 10:30 PM

Bailout Fails!
lFh6PU6qM9Q

mwg12a

September 30th, 2008, 12:23 AM

Alarming, this is a period of uncertaity. We don't know if tomorrow we can still use our ATM card to get some cash. It will be a big pandemonium . It's like, what do we do next?

TheRick

September 30th, 2008, 12:33 AM

-TC-

September 30th, 2008, 12:35 AM

:ohno:

http://biz.yahoo.com/ap/080929/wall_street.html

Stocks tumble as bailout plan fails in House
Monday September 29, 5:52 pm ET
By Tim Paradis, AP Business Writer

Stocks plunge as financial bailout plan fails in House vote; Dow fall 777, biggest drop ever

NEW YORK (AP) -- Wall Street's worst fears came to pass Monday, when the government's financial rescue plan failed in Congress and stocks plunged precipitously -- hurtling the Dow Jones industrials down nearly 7 percent. The almost 780-point decline was the largest one-day point drop ever for the index.

The percentage declines for the Standard & Poor's 500 and Nasdaq composite indexes were even larger. And credit markets, whose turmoil helped feed the stock market's angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down in midafternoon the administration's $700 billion plan to buy up distressed mortgage securities. Activity on the floor became frenetic as the "sell" orders blew in.

The Dow told the story of the market's despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.

The selling was so intense that just 162 stocks rose on the NYSE -- and 3,073 dropped.

It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the rescue plan's fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover.

While investors didn't believe that the plan was a panacea, and understood that it would take months for its effects to be felt, most market watchers believed it was a start toward setting the economy right after a credit crisis that began more than a year ago and that has spread overseas.

"Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that," said Chris Johnson president of Johnson Research Group. "This isn't a market for the timid."

The plan's defeat came amid more reminders of how troubled the nation's financial system is -- before trading began came word that Wachovia Corp., one of the biggest banks to struggle due to rising mortgage losses, was being rescued in a buyout by Citigroup Inc. It followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies -- Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc.; all of them were felled by bad mortgage investments.

And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. has a list of over 110 banks that were in trouble in the second quarter, and that number surely has grown in the third.

Traders on the floor were stunned by the House vote.

"How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty," said Gordon Charlop, managing director with Rosenblatt Securities. "The bailout not going through sends a signal that Congress isn't willing to do their part."

Wall Street is contending with all these issues against the backdrop of a credit market -- where bonds and loans are bought and sold -- that is barely functioning because of fears that anyone lending money will never be paid back.

The evidence of the credit markets' ills could again be found Monday in the Treasury's 3-month bill; investors were stashing money there, willing to take the tiniest of returns simply to be sure that their principal would survive in what's considered the safest investment. The yield on the 3-month bill was 0.15, down from 0.87, and approaching zero, a level reached last week when fear was also running high.

Analysts said the government needs to find a way to help restore confidence in the markets.

"It's probably fair to say that we are not going to see any significant stability in the credit markets or the stock market until we see some sort of rescue package passed," said Fred Dickson, director of retail research for D.A. Davidson & Co.

Treasury Secretary Henry Paulson indicated that the government would try again.

"We need to put something back together that works," Paulson said. "We need it as soon as possible."
On Wall Street, the Dow fell 777.68, or 6.98 percent, to 10,365.45. The decline also surpasses the 721.56-point intraday decline record also set during the first trading day after the terror attacks.

Still, it was the 17th biggest percentage decline for the Dow and remained well below the more than 20 percent drops seen on Black Monday of October 1987 and the Depression.

Broader stock indicators also tumbled. The Standard & Poor's 500 index declined 106.85, or 8.81 percent, to 1,106.42. It was the S&P's largest-ever point drop and its biggest percentage loss since the Oct. 19, 1987, crash.

The Nasdaq composite index fell 199.61, or 9.14 percent, to 1,983.73, the third worst percentage decline for the index.

The Russell 2000 index of smaller companies fell 47.07, or 6.68 percent, to 657.72.

A huge drop in oil prices was another sign of the economic chaos that investors fear. Light, sweet crude fell $10.52 to settle at $96.36 on the New York Mercantile Exchange as investors feared that energy demand would continue to slide amid further economic weakness.

And gold, where investors flock when they need a relatively secure investment, rose $23.20 to $911.70 on the Nymex.

Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.

"Things are dying and breaking apart," he said.

The federal Office of Thrift Supervision, one of the government's banking regulators, indicated that the market was overreacting to the House vote and that its fears about the financial system are misplaced.

"There is an irrational financial panic taking place today, and we support and applaud the continuing efforts of Secretary Paulson and congressional leadership to restore liquidity and public confidence," John Reich, Director of the federal Office of Thrift Supervision, said in a statement. "We will continue to work diligently with our institutions to ensure they operate safely and soundly, and to restore stability to the marketplace."

Spokesmen for the Treasury Department's Office of the Comptroller of the Currency and the Securities and Exchange Commission had no immediate comment after the House voted against the bailout package.

Lawmakers voted down a plan that was different than what the Bush administration had originally proposed. There were restrictions allowing Congress to limit how much of the money goes out the door at once. It also included caps on pay packages of top executives as well as assurances that the government also would ultimately be reimbursed by the companies for any losses. The Treasury would have been permitted to spend $250 billion to buy banks' risky assets, giving them a much-needed necessary cash infusion. There also would be another $100 billion for use at president's discretion and a final $350 billion if Congress signs off on it.

But Wall Street found further reason for worry overseas, as the fallout from U.S. economic problems kep spreading. Three European governments agreed to inject Fortis NV with a $16.4 billion bailout. Fortis, with has headquarters in Brussels, Belgium and Utrecht, Netherlands, is Belgium's largest retail bank.

The British government, meanwhile, said it is nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.

The economic news in the U.S. only made matters worse. The Commerce Department said consumer spending fell in August to its lowest level in six months, while analysts expected it to edge up slightly.

With consumers already uneasy and the uncertainty from the financial markets likely to spill over to the rest of the country, the outlook for spending remains bleak -- and consumers are the biggest driver of economic growth.

Business Writers Joe Bel Bruno in New York and Christopher S. Rugaber in Washington contributed to this report.

-TC-

September 30th, 2008, 12:48 AM

http://biz.yahoo.com/ap/080929/financial_meltdown.html

House nixes $700B bailout bill in stunning defeat
Monday September 29, 6:09 pm ET
By Julie Hirschfeld Davis, Associated Press Writer

House rejects $700B emergency bailout bill in stunning defeat, leaving both parties scrambling

WASHINGTON (AP) -- In a vote that shook the government, Wall Street and markets around the world, the House on Monday defeated a $700 billion emergency rescue for the nation's financial system, leaving both parties and the Bush administration struggling to pick up the pieces. The Dow Jones industrials plunged nearly 800 points, the most ever for a single day.

...

In the House, "no" votes came from both the Democratic and Republican sides of the aisle. More than two-thirds of Republicans and 40 percent of Democrats opposed the bill. Several Democrats in close election fights waited until the last moment, then went against the bill as it became clear the vast majority of Republicans were opposing it. Most vulnerable Republicans refused to back the bill.

In all, 65 Republicans joined 140 Democrats in voting "yes," while 133 Republicans and 95 Democrats voted "no."

mwg12a

September 30th, 2008, 12:57 AM

Dow down by 750 points (From 14,000 pts now to 10,365 pts...)

House rejected the bailout... Nice work Congress... Blood Bath...
Time to buy stocks!

Or wait somemore...
At this rate Dow might hit the 7500 mark just like when the Internet Bubble burst...

Wonder what McCain and Obama's thoughts on this...

I think both candidates don't even know what to do about this crisis as well if you ask me. They are both not an economic major.

I think they should of went through with the bail out plan and should earn interest on it to be given back to the American people OR? they should of given an interest free loan to the effected home owners, create a new policy for the lendEE or mortgage companies, restructure the mortgage plan of the lenders/homeowners.
But somehow, I also blame Nancy Palouski influence on the fall out. They all put their parties career first than thinking of the American people.

Maxxclip

September 30th, 2008, 01:22 AM

as i said... better pack your things:lol:

mwg12a

September 30th, 2008, 01:36 AM

Maxxclip

September 30th, 2008, 01:41 AM

^^ok, fine. just stay there and hold your breath;) and dont you ever dare to move coz im gonna shoot you:lol:

mwg12a

September 30th, 2008, 01:43 AM

As if you can really shoot. With what? Paltik??LOL

Ma-OT tayo dito sige ka !! LMAo

Maxxclip

September 30th, 2008, 02:02 AM

just to remind you guys:D the "Big Turn" of event is an aide-memoire...

sana nga, makaahon si Uncle Sam sa putikan:D

masyado na tayong nagpapa-alila sa pera. alalahanin ninyo na ang tao ang nagbigay ng kapangyarihan sa pera ano pa't ang Nasa Taas ang nagbigay sa tao ng kapangyarihang ito:)

crappypants

September 30th, 2008, 02:34 AM

i bought wachovia shares last week I'm :gunz::badnews:

jbkayaker12

September 30th, 2008, 02:43 AM

^^^^^^The strong gobbling the weak. Im with Citibank, I would be rejoicing if my bank account doubled because of Citigroup's acquisition of Wachovia. :) Life goes on.......

DoggMann

September 30th, 2008, 03:20 AM

The inevitable collapse of the dollar
4n3g5lUgkWk
http://ca.youtube.com/watch?v=4n3g5lUgkWk

RonnieR

September 30th, 2008, 03:53 AM

And where are we going? Philippines??LOL There US still have money in it's copper, heck the Bush administration was planning on handing out $700Million to the corporates. Does Philippines have that money??LMAO Okay enough of that, it could lead to more bashing... he he

I'm for bailout just to prevent economic chaos and ripple effect. It's US$700B (not US$700M), mind boggling figure esp. for the Filipinos. Imagine, total external debt of Philippines is $54B!

Yes, you're right politics played a great deal on the junking of the deal. The intention is good but i'm not sure why it was junked by US Congress. They claimed they listened to their constituents.

Bush was confident that the measure would pass since before it was presented to Congress, the gut feel is "it's in the bag". I'm not sure what happened along the way. I was closely monitoring the debates, etc. etc.

RonnieR

September 30th, 2008, 03:53 AM

RonnieR

September 30th, 2008, 04:06 AM

The party is over’
TAKIN’ CARE OF BUSINESS By Babe Romualdez
Tuesday, September 30, 2008
US Speaker Nancy Pelosi’s message to Wall Street was a fitting warning to executives whose “greed” and “excesses” may have led to the US financial turmoil: “The party is over.” Even as the White House and US Congress agreed to a $700 billion bailout plan for the beleaguered financial sector, the FBI had started widening its probe of some 26 major companies believed to have “misstated” their assets. Sources say these companies resorted to “creative accounting” methods to hide the extent of their financial problems, understating debts and risky investments.

It’s understandable why Pelosi was particularly emphatic that the era of “golden parachutes for high-flying Wall street operators is over,” adding that “no longer will the US taxpayer bailout the recklessness of Wall Street.” Even while problems with subprime mortgage loans were already mounting, with borrowers unable to pay for their housing loans, five of the biggest US firms reportedly paid more than $3 billion to their executives over the last five years in perks like signing bonuses and hefty retirement packages. Employees also shared in the bounty, with salaries pegged at an average of $350,000 per employee and bonuses totaling $39 billion from 2003 to 2007 – which critics say were at the expense of American taxpayers.

This is probably why Democrats, most especially, placed tighter conditions on the amount of federal money for the rescue plan, with the caveat that it will only be open to companies that will limit pay packages and will not give “golden parachutes” to top executives. At least one consolation is that these erstwhile high rollers can still keep their jobs. On the other hand, among the potential winners are homeowners facing foreclosures since the rescue plan can help them sleep a little better at night, knowing they will not lose the roof over their heads after all.

Maurice “Hank” Greenberg must be enjoying his sweet revenge over those who booted him out as AIG CEO. Hank sold off five million AIG shares worth $18.8 million while Starr International Company, an outfit he heads, sold off 35 million shares worth $107 million. AIG was on the verge of collapse, and was only able to keep its head above water after getting an $85 billion loan from the Federal Reserve. But Hank Greenberg’s move to sell is being seen by other shareholders as a signal that perhaps they should do the same – which might in the long run pose additional problems for the beleaguered company.

Obviously, the current financial crisis carries echoes of the Great Depression where unemployment reached its peak and production levels fell by as much as 62 percent in the US. Even other countries were not spared from the effects of the downturn, with production in Canada, Germany, Czechoslovakia, France and Italy going on rapid declines. While the cause of the Depression is still the subject of considerable debate, among the notable parallels with the current crisis include the rapid growth of debt, with the value of outstanding real estate urban mortgages increasing from $11 billion in 1920 to $27 billion in 1929. Consequently, the crash in October 1929 created a lot of uncertainty among investors and consumers, and the consequent banking crises triggered widespread panic as deflation took hold.

At the time, the Federal Reserve was “unwilling to increase money supply to meet the demand for liquid assets,” which experts say was also responsible for the deflation. This is probably why the US government has seen fit to step in and engage in a massive rescue plan – said to be the biggest in US history – to avert an all-out economic disaster.

But while the Philippines had not been overly affected by the US financial crisis, we’re not still fully insulated. As some labor groups have pointed out, the $386 million exposure of local banks still has the potential of dragging down the economy and triggering more unemployment. Data from the National Statistics Office disclosed that the unemployment rate as of July 2008 stood at 7.4 percent, or some 2.75 million Filipinos going totally jobless. Obviously, the $386 million could stretch these banks’ capital reserves and could mean a reduction of funds for credit.

Whether we like it or not, the US also remains one of our top trade partners, and whatever happens to their economy could have an impact on our local economy considering that a large part of our exports are intended for the US market. Add to that the foreign investments coming from US firms. Naturally, America will be focused on fixing its domestic situation first before giving its attention to other countries. Even the rest of Asia has been haunted by the unfolding US financial crisis, particularly in light of an energy and food crisis. And it wasn’t too long ago when the 1997 financial crisis almost put Asia down on its knees. As Indian Prime Minister Manmohan Singh had pointed out, developing countries could hardly afford periods of slow growth as a result of upheavals in international financial markets.

The collapse of Lehman Brothers and the subsequent US financial crisis has certainly given a lot of people bitter lessons. In their desire to keep the profits coming, these banks and other lending institutions became reckless, giving credit to people who could not really afford to buy houses and pay the interest rates on their loans. At the end of the day, excessive greed can lead to recklessness. Some people think there is no limit to making money, but in the end, the never-ending search for profit will not only destroy you – it will ultimately choke you.

* * *

Askal82

September 30th, 2008, 04:46 AM

US is still rich, they have huge US$ reserves.

I hope so.

When the Dow plummeted by almost 800 points and lost over $1 trillion!!.......

Hay naku, I dunno how to continue it as the words to follow won't be sufficient to describe the situation right now. :ohno: :ohno:

I guess getting the bail out package done is the only way to go although it will cost a lot of money from the American taxpayers.

Weina

September 30th, 2008, 04:51 AM

down to an interesting number 777 dapat 666 na lang para lalong mag panic:nuts:

Congrats Tambayblues if only people here listen to all your doom and gloom predictions:lol:

TambayBlues

September 30th, 2008, 05:56 AM

Like some people already mentioned, this thread is merely speculative and I agree. But what has not been mentioned is foresight and the ability to see the forest from the trees as events unfold. Here is another interesting "PALAISIPAN" para sa mga nagpapakahirap magtrabaho sa America at nagko contribute sa Social Security at balak mag retire someday. Assuming maipasa nila itong Bailout Bill na to Is it safe to buy stocks once again when the market rallies or real estate picks up? What's in store for America three years down the road? Here is an article that was written in 2004 that might give a clue and the proposed solutions.

Saturday, September 18, 2004

Baby Boomers and U.S. Debt
Speeches ignore impending U.S. debt disaster
No mention of fiscal gap estimated as high as $72 trillion
- Carolyn Lochhead, Chronicle Washington Bureau
Sunday, September 12, 2004

Washington -- The first of the 77 million-strong Baby Boom generation will begin to retire in just four years. The economic consequences of this fact -- as scary as they are foreseeable -- are all but ignored by President Bush and Democratic challenger John Kerry, who discuss just about everything but the biggest fiscal challenge of modern times.

Yet whoever wins the 2004 race will become the first U.S. president to confront what sober-minded experts across the political spectrum describe as an impending "fiscal catastrophe" lying right around the corner.

Astronomical federal debt, coming due as the Baby Boom generation collects Medicare, Medicaid and Social Security, is enormous enough to swamp the promises both candidates are making to voters, whether for tax cuts, health care, 40,000 more troops or anything else.

"Chilling" is the word U.S. Comptroller General David Walker uses to describe the budget outlook.

"The long-term budget projections are just horrifying," added Leonard Burman, co-director of tax policy for the Urban Institute. "I've got four children and it really disturbs me. I just think it's irresponsible what we're doing to them."

What these numbers portend are crippling tax increases on workers, slashed benefits for retirees, gutted budgets for homeland security, highways, research and everything else, and an economic decline or a financial collapse that devastates the middle class, as happened recently in debt-strapped Argentina. Eventually, analysts insist, someone -- today's children or tomorrow's elderly or both -- will pay this debt.

Traditional budget measures used by politicians and the press give what Walker and many others call a highly misleading view of the U.S. debt. These focus on publicly held debt already incurred, now at $4.5 trillion, or 10-year budget forecasts like the one released last week by the Congressional Budget Office showing a record $422 billion deficit this year and a $2.3 trillion 10- year deficit.

'Fiscal gap' in the trillions

But these figures, worrisome enough, are deceptive because they ignore future liabilities such as Social Security and Medicare payments to the Baby Boomers. An array of government and private analysts put the actual U.S. "fiscal gap," which means all future receipts minus all future obligations, at $40 trillion (Government Accountability Office) to $72 trillion (Social Security Board of Trustees).

These are not sums, but present-value figures, heavily discounted to show in today's dollars what it would cost to pay off the debt immediately. The International Monetary Fund estimates the gap at $47 trillion, the Brookings Institution at $60 trillion.

"To give you idea how big the problem is," said Laurence Kotlikoff, economics chairman at Boston University, who has written extensively on the subject, to close a $51 trillion fiscal gap, "you'd have to have an immediate and permanent 78 percent hike in the federal income tax."

These obligations are not imaginary. And unlike the 1980s and 1990s, economic growth cannot bail out the government because the Baby Boom retirement is at hand. Those born in 1946 will reach age 62 in 2008, allowing them to take early retirement and receive Social Security benefits.

"It's a number that's so large that people find it implausible, and so they don't think about it," said Alan Auerbach, a UC Berkeley economist who studies the issue and consults for the Kerry campaign. "But it's based simply on the projections we have for Social Security and Medicare. People aren't making these numbers up."

A pathbreaking study by Jagadeesh Gokhale of the Federal Reserve Bank of Cleveland and Kent Smetters, a former deputy assistant secretary at the Treasury -- commissioned by former Treasury Secretary Paul O'Neill -- estimated a $44 trillion fiscal gap. It laid out a few painful options on how to meet the liabilities:

-- More than double the payroll tax, immediately and forever, from 15.3 percent of wages to nearly 32 percent;

-- Raise income taxes by two-thirds, immediately and forever;

-- Cut Social Security and Medicare benefits by 45 percent, immediately and forever;

-- Or eliminate forever all discretionary spending, which includes the military, homeland security, highways, courts, national parks and most of what the federal government does outside of the transfer of payments to the elderly.

Such corrective actions grow more severe each year. Waiting just until 2008, the end of the next presidency, would mean raising the payroll tax to 33. 5 percent instead of 32 percent, the study found.

Gokhale said that fresh numbers from the Medicare trustees show the fiscal gap has since grown to $72 trillion, $10 trillion of that for Social Security and an astonishing $62 trillion for Medicare, the government health care program for the elderly.

"The long-term picture is pretty bad," Gokhale said.

Election's absent issue

These numbers are seldom discussed, least of all in the 2004 presidential race. Ironically, as the Baby Boom retirement has neared -- and the remedies grow more painful -- political discussion has faded. Gone is Ross Perot's anti-deficit crusade. Gone is Newt Gingrich's call for Medicare restraint. Gone is Al Gore's "lockbox" for the Social Security surplus.

Instead, Kerry and Bush promise only to halve the current deficit in four years -- "both (of them) relying on pretty imaginative accounting to get there" said Burman -- while promising more spending and more tax cuts.

Yet today's deficit is a tiny fraction of the government's actual liabilities, which are so daunting they promise to make Bush's tax cuts a distant memory and Kerry's health care plan a fantasy.

While Bush and Kerry propose to address parts of the problem, "the numbers don't add up on either side," Walker said.

Medicare makes up the bulk of these liabilities, driven mainly by the expanding elderly population and rapidly rising health costs. Social Security, more often discussed as a looming problem, actually accounts for far less in future debt.

While Congress squabbles over whether the administration hid the new prescription drug benefit's 10-year cost -- pegged by the White House at $534 billion versus CBO's $395 billion -- the actual liability incurred by the new drug benefit is estimated at $8 trillion to $12 trillion.

Kerry and Democrats call the drug benefit inadequate. They would do little to restrain Medicare costs other than allowing the importation of price- controlled drugs from Canada.

Bush and Republicans added the drug benefit along with costly subsidies to providers. Even optimists do not expect their modest market reforms to cut costs.

Promises, promises

Kerry has promised not to cut Social Security. "I will not cut benefits," he said recently. "I will not raise the retirement age."

Democrats generally cite "trust fund" numbers that show Social Security - - and Medicare to a lesser extent -- remaining solvent for decades, even though government officials repeatedly call the numbers an accounting fiction. CBO director Douglas Holzt-Eakin last week said the funds contain nothing but "electronic chits" that measure government obligations to itself.

Bush proposes adding private accounts to Social Security for younger workers, which could reduce future government obligations, but would do so by diverting a portion of the payroll tax, adding $1 trillion to the short-term deficit. That might have been feasible when Bush took office in 2000 facing a projected $5.6 trillion surplus, but the surplus is gone. Similar plans in Congress that instead rely more on benefit cuts have gone nowhere.

"The country's absolutely broke, and both Bush and Kerry are being irresponsible in not addressing this problem," Kotlikoff said. "This administration and previous administrations have set us up for a major financial crisis on the order of what Argentina experienced a couple of years ago."

If this sounds far-fetched, former Bush Treasury Undersecretary Peter Fisher and former Clinton Treasury Secretary Robert Rubin both alluded to such a scenario at a June budget forum in Washington.

"Having been involved in markets for a long, long time," Rubin said, "I can tell you these things can change unexpectedly and without warning," referring to potential financial market reactions to the U.S. fiscal position.

Fisher warned of a "pivot point" when "the collective wisdom of bond traders thinks that the deficit horizon has turned," adding, "Both Bob and I are nervous."

The world has seen fiscal imbalances of this sort before, in Asia and Russia in the late 1990s and more recently in South America. Such financial panics can be triggered by any number of events -- a flight from Treasury bonds by the foreigners who buy much of the U.S. debt, for example -- if investors' views of the market, which are focused on the short term, suddenly change.

"If you look at financial crises, they occur seemingly overnight," said Kotlikoff. "More and more pieces of straw drop on the camel's back, and all of a sudden, the camel collapses. ... Nobody knew exactly what day Argentina was going to go south or exactly what day Russia was going to default. The timing is up for grabs."

But early signs of a problem are now appearing, analysts said, starting with the mounting deficits under Bush caused not just by the recession and terrorist attacks, but also by enormous spending increases and tax cuts. The brief window of surpluses that appeared during the late 1990s economic boom offered a chance to address long-range liabilities, but those surpluses now are gone.

"Maybe the public doesn't want to hear it," Kotlikoff said. "Maybe politicians think ... the American public can't understand the truth or hear the truth or bear the truth. I think this is garbage. I think that people care about their kids and grandchildren and need to know the dangers facing them and us."

E-mail Carolyn Lochhead at clochhead@sfchronicle.com.

RonnieR

September 30th, 2008, 06:08 AM

^^ Am I right? It was discussed in 2004? So it means, they predicted this thing to happen

TambayBlues

September 30th, 2008, 06:44 AM

^^ Am I right? It was discussed in 2004? So it means, they predicted this thing to happen

Predictions made by Peter Schiff 5 yrs in advance

Here's Peter Schiff in 2002 Predicting the Mortgage Meltdown Part 1
rhJaVEWAG24

Here's Peter Schiff in 2002 Predicting the Mortgage Meltdown Part 2
emvMqjtcO7o

Here's Peter Schiff - Ron Paul's Economic Adviser in 2006 Reiterating His Predictions with Remarkable Accuracy. Guess who won the Penny. :)

LfascZSTU4o

Here's David Walker on the Glen Beck Show tackling the Impending Baby Boomer Retirement crisis.

I-16u9x3tfE

bitoy

September 30th, 2008, 06:47 AM

Bagsak yung Magellan ko ng -6.53 (9.83%)

Aray!

crappypants

September 30th, 2008, 07:07 AM

i guess i can not eat for ten years . at least mamayat ako.
sad for the 401s of the soon to retire people.

davaob4now

September 30th, 2008, 10:03 AM

OMG! the biggest drop in the US economy since the last decade...

US government's 700+ billion dollars bailout was rejected...:ohno:

an expert economist, expect more problems pa daw sa US finance later on...

mwg12a

September 30th, 2008, 10:19 AM

I'm for bailout just to prevent economic chaos and ripple effect. It's US$700B (not US$700M), mind boggling figure esp. for the Filipinos. Imagine, total external debt of Philippines is $54B!

Yes, you're right politics played a great deal on the junking of the deal. The intention is good but i'm not sure why it was junked by US Congress. They claimed they listened to their constituents.

Bush was confident that the measure would pass since before it was presented to Congress, the gut feel is "it's in the bag". I'm not sure what happened along the way. I was closely monitoring the debates, etc. etc.

Actually, the republican cam has an alternative plan but McCain did not use that in his last friday night's debate, he would of lambasted Obama on that issue..

To me that $700M bail out plan is an option, but it's not the best measure and that it will take a chunk of funds in the US treasury. Wall Street can very well fund the big time corparations that are all going bankrupt, the private sectors just wanted the easiest way out and to the taxpayer's expense which is not right. What would happen to goverment's allocation to different branches that is meant for the people? Bush's plan is to hand it to these corporations with no interests what so ever and without anything that would protect the taxpayer's money.

jbkayaker12

September 30th, 2008, 10:32 AM

They are better off giving 20,000 dollars each to the American Taxpayers than bailing out Wall Street. I'd say thanks Lou Dobbs Im with you on this one. Keep repeating this on your show, perhaps it'll knock some sense to those in Congress. Bailout, hell no, $20,000 for each American taxpayer now we're talking. Hehehehe, another check in the mail, maybe!!!! Hahahahaha!!!!

Interest on my credit card with Citibank went up so what did I do, I transferred my balance to another bank for a 12 month 0% interest. Spending with credit cards will not stop here in the United States or elsewhere but of course paying with Cash is always better but then again, having a good line of credit is nice as long as it is not abused.:)

mwg12a

September 30th, 2008, 10:42 AM

There sure is a better alternative other than that 700M bailout. Republicans had another alternative plans for it that's why they rejected Bush's plea to approve that bailout.

Added: ugh, I guess I said that already up there, I just noticed ....

c0kelitr0

September 30th, 2008, 11:24 AM

guys, uhm... it's $700 billion ;)

RonnieR

September 30th, 2008, 11:45 AM

guys, uhm... it's $700 billion ;)

Yeah, mwg12a still typed $700M , typo error lang yan...I really hope that there is a settlement between the executive and congress. It's going to be bloody worldwide.

c0kelitr0

September 30th, 2008, 11:47 AM

but we all shouldn't panic. just save save save. and throw away your credit cards now :D

bitoy

September 30th, 2008, 10:15 PM

Stocks surge higher; credit worries persist

NEW YORK (AP) -- Wall Street has ended sharply higher as investors bet that lawmakers will salvage a $700 billion rescue plan for the financial sector. The Dow Jones industrials surged nearly 500 points to the 10,860 level.
The rally offset Monday's 778-point rout, one of the biggest selloffs in years. The recovery wasn't unexpected as carnage on Wall Street often attracts bargain hunters.

However, the seized-up credit markets where businesses turn to raise money showed no sign of relief. A key rate that banks charge to lend to one another shot higher, a tightening of the availability of credit that could cascade through the economy.

http://us.news2.yimg.com/us.yimg.com/p/fi/18/57/42.jpg
Trader Bryan Cooley watches the markets in the S&P 500 futures trading pit Tuesday, Sept. 30, 2008,

Monkey see, Monkey do, monkey think... :D

Rene Ybardolaza

September 30th, 2008, 11:22 PM

I saw something funny from the WSJ a couple of days ago....

Warren Buffett, being the moneyman that he is, has been approached by many who needs funding among them, Lehman Brothers before the filing of bankruptcy.

One private investor began telling him the details on Bear Stearns. Half way through the presentation, Warren Buffett, when asked, “Should I go On?” by the private investor, recalls thinking: “It’s like a woman taking off half her clothes and asking, ‘Should I continue?’ Even if you’re a 90-year-old eunuch, you’d let them finish.” :lol:

bitoy

September 30th, 2008, 11:26 PM

^^ :lol:

RonnieR

October 1st, 2008, 03:12 AM

Weina

October 1st, 2008, 03:13 AM

RonnieR

October 1st, 2008, 03:27 AM

WASHINGTON—Brother, can you spare a billion? More like $700 billion, to be precise.

With Washington trying to put together a $700-billion rescue for the nation’s financial system, the federal money sought by other projects is starting to look like small change.

You could buy yourself a war with that kind of money—the United States has spent $648 billion on Iraq war operations so far.

You could match Franklin Roosevelt on his New Deal to help Americans during the Great Depression of the 1930s and raise him billions more.

Even in a town where billions come and go without anyone blinking, the money that could go into the Wall Street rescue is eye-popping. The House of Representatives on Monday voted down a proposed $700-billion bailout package, but congressional leaders said they were committed to trying again.

What else could the government do with a $700-billion blank check? There are, well, billions of possibilities.

It could ensure universal healthcare coverage for six years, for example, or upgrade the country’s most deficient bridges four times over.

All the work to upgrade coastal levees that’s been done since Hurricane Katrina? It’s a mere drop in the proverbial $700-billion bucket—$7 billion, or just 1 percent.

Twice Denmark’s GDP

You could run an entire country. Seven hundred billion dollars is more than twice the size of the economy of Denmark, which had a gross domestic product (GDP) of $312 billion in 2007.

Seven hundred billion dollars would buy 70 Hubble-type space telescopes. Or about seven international space stations. It would finance the National Institutes of Health, the premier US medical research institute, for two decades. Or pay the US national intelligence budget for 15 years.

According to the Wall Street Journal, half the money Roosevelt spent on his New Deal program to lift the country out of the Great Depression and banking crisis was for public works projects. For $250 billion in today’s dollars, the nation got 8,000 parks, 40,000 public buildings, and 72,000 schools.

But that’s thinking small.

Can fix nature

Presented with the presumptuous question of what could be done if the government suddenly came into a spare $700 billion, scientist M. Sanjayan said he would “re-envision how we live on the planet sustainably.”

“Instead of bailing out corporations with $700 billion, we could be bailing out nature,” said Sanjayan, lead scientist for the private Nature Conservancy.

“We could fix all the harm we’ve done in the past but also get it right going into the future,” in the ways that people get energy, use water and procure food. Sanjayan was talking about everything from creating green jobs to boosting solar energy and protecting watersheds.

“I think you could do it for that kind of money,” he said.

Or, on a more mundane level, $700 billion could pay the wages of 22 million average Americans for a year.

(According to the labor department, the average non-supervisory, nonagricultural wage was $612 a week in August.)

Shoot for the moon

You could even shoot for the moon. The Apollo program that put man on the moon in 1969 cost roughly $164 billion in today’s dollars.

Truth be told, the government doesn’t really have this kind of money lying around to spend hither and thither.

But there are plenty of other possibilities for the pondering:

$700 billion would cover one year’s healthcare bills for more than 85 million seniors, disabled people, children and low-income Americans enrolled in the two giant government healthcare programs, Medicare and Medicaid. This includes the elderly in nursing homes and many of the frailest people in the country, whose care is the costliest to provide.

The government could pay off the $550 billion in outstanding student loan debt in the United States, and then some. That’s from both government and private lenders.

7 more years of war

$700 billion could cover the entire US national intelligence budget for more than 15 years. Annual intel spending is about $44 billion, for about 100,000 personnel across 16 agencies, an armada of satellites and technical programs to collect electronic signals, environmental samples, imagery, computer and phone communications, and a small fleet of armed unmanned aerial vehicles, among other weapons.

$700 billion is five times what the federal government has devoted to Gulf Coast recovery in emergency funds and tax credits since Hurricane Katrina struck in 2005.

$700 billion would allow the Pentagon to spend another seven years at war, fighting on two fronts, and still have enough money left over to cover the cost of the Army’s annual budget of more than $140 billion.

How about a state-of-the-art nationwide communications network for emergency workers? The Federal Communications Commission has been working for more than a year to create one, but Congress has not forked over any money for construction.

Estimates of the cost range upward of $15 billion. Seven hundred billion dollars would buy a premier communications system. Actually, it would buy about 47 of them.

Associated Press

Weina

October 1st, 2008, 03:58 AM

Tectonic shifts create New World Economy

How distressed is the US economy?

One indicator is to look at Korea Asset Management Corp., which helped clean up South Korea’s banking system after the 1997 Asian financial crisis. All eyes are now on the state-run firm after it offered to buy as much as $900 million of bad loans in the US, including those of major investment bank Merrill Lynch & Co.

And it’s not the only one flush with cash to inject into failing US companies. For many investors in Asia and the Middle East, a fire sale is on in the US and now is the best time to shop for cheap corporate buys. Such a reversal of fortune is creating a New World Economy that has become the center of talk in business circles.

These "shifts" in the global economic landscape are "looking nothing less than tectonic," wrote William Pesek Jr., Asia-Pacific columnist of Bloomberg News.

Economists say the dramatic shift has profound implications, not just for the US.

For one, India and China’s recent emergence as superpowers has already cut the share of the world’s population living in extreme poverty to 20% in 2001 from 40% two decades earlier, according to the World Bank.

As both nations’ populations comprise a third of humanity, however, analysts say their burgeoning consumer base could also lead to more competition for resources, raising pressures on world prices. This in turn creates concerns over the ability of the planet to keep pace.

The shift also has far-reaching effects on technological innovation. China and India graduate a combined half a million engineers and scientists a year versus just 60,000 in the US. Western scientists attest that China and India are making great inroads in medicine as well. Given the US’ current economic stagnation, the balance of power in many technologies is moving from West to East at a frenetic pace, economists say.

Right now, Chinese and Indian brains are young, cheap and plentiful. But with rising consumerism that is driving innovation in both nations, it is still uncertain how long its wage workers will stay cheap for companies in the West.

The growing economic might of China and India is being felt in geopolitics as well. The US-dominated International Monetary Fund recently convened an eight-man committee to discuss how to remain relevant to its members in the light of pressures to recognize the growing role of China and India in world economic affairs. Both nations are also pressing their interests in the Middle East and Africa, and China’s recent achievements in space and its capability to knock off satellites in orbit are being seen as threats to US dominance.

Recent global events have also prompted many to rethink if the US economic prescription for success still works.

"These events are disorientating for Asia, a region long told that the free-market gospel preached by the US was the ticket to prosperity," said Mr. Pesek, who will be in Manila for the 7th Management Association of the Philippines (MAP) International CEO Conference on October 7-8 to discuss how the US is coping with its diminished power in world economic affairs.

To get to the road of prosperity, China and India took divergent paths. India travelled the path of democracy and initiated economic reforms rather belatedly in the 1990s. China has a communist system that began reforms in 1979, and rapidly grew with increased globalization.

But the bitter lessons of the East Asian crisis in 1997 may have served the nations well as they heeded calls to work on their economic weaknesses and invest in the future.

"The 1997 crisis was a useful wake-up call to remind people that the East Asian miracle is not ordained, that the region was not on autopilot, that you must earn your success every day," said Harinder Kohli, chief executive of the Emerging Markets Forum and presidential and chief executive of the Centennial Group.

"I think a very important lesson [from the Asian crisis] is that despite your successes, you need to keep your eyes on the fundamentals — good macroeconomic policies, good investment in people, in entrepreneurship, high savings rates, high investment rates. And yet, you need to invest in the future," stressed Mr. Kohli, former World Bank senior operations adviser for the East Asia and Pacific region and also one of the speakers at the MAP conference.

In the 19th century, Europe woke up to the reality that a new economic giant — the US — had arrived. Now, economists say the US will have to deal with the trauma of having China and India as the 21st-century heavyweights.

"It is up to America to manage its own expectation of China and India as either a threat or opportunity," says corporate strategist Kenichi Ohmae. "America should be as open-minded as Europe was 100 years ago."

How these two Asian giants integrate with the rest of the world will largely shape the New World Economy.

Asian Development Bank Managing Director-General Ragat Nag, who is also one of the speakers at the MAP conference, said economic policymakers must begin finding a "more appropriate regulatory environment".

As far back as 1959, then US President John F. Kennedy spoke of the importance of China and India’s rivalry, according to an article in the International Herald Tribune in 2005. The late American leader said the two nations’ competition is one "for the leadership of the East, for the respect of all Asia, for the opportunity to demonstrate whose way of life is better."

http://www.bworldonline.com/BW100108/content.php?

Rene Ybardolaza

October 1st, 2008, 04:41 AM

anyone can confirm if this rumour about GSIS having a tremendous losses in their foreign investment is true or not. I hope this is only stays as rumour as this is people's hard earned money we're talking here. I hope GSIS can be transparent with its books also.

I read somewhere that BDO, Metro and RCBC suffered losses from the Lehman collapse. There's probably more out there keeping quiet to prevent a run on the bank.

RonnieR

October 1st, 2008, 04:42 AM

I read somewhere that BDO, Metro and RCBC suffered losses from the Lehman collapse. There's probably more out there keeping quiet to prevent a run on the bank.

These banks made disclosures to PSE and reported in the newspapers, a day after Lehman brothers closed. They claimed their total exposure is only 1% of the total assets, thus there was no panic among the depositors....

icarusrising

October 1st, 2008, 06:17 AM

RP can ride out US financial crisis: experts (http://www.abs-cbnnews.com/business/09/30/08/rp-can-ride-out-us-financial-crisis-experts)

by LALA RIMANDO, abs-cbnNEWS.com/Newsbreak | 09/30/2008 2:58 PM

While the financial markets in the US and Europe go through days of wild roller-coaster ride as they seek solutions to trillion dollar-worth toxic mortgages, Philippine analysts and regulators continue to hammer messages that could be summed up with this: Relax.

Markets all over the world, especially in the US, Europe, and some Asian exchanges, plunged immediately after the US congress thumbed down Monday the proposed $700 billion bailout plan that was supposed to solve the core of the mortgage problem that rippled to various financial players beyond the banking system.

Yet, the Philippine Stock Exchange, an indicator of investor sentiments, ended its Tuesday trading only 1.4 percent lower, better off than other markets, some of which ended in historic lows. The Dow Jones, an index that tracks financial performance heavy industries in the US, was down by as much as 7 percent overnight, wiping out up to $1.2 trillion in a single day. Britain's FTSE index was down 5.3 percent to a three-year low, while Asian markets, like Japan and Hongkong, were lower by 4.6 and 2.5 percent, respectively.

The immediate impact of the US Congress' vote on the bailout to the Philippines would be more of a knee-jerk reaction, analysts said. But while there will be long term consequences to the Philippines, Nestor Espenilla, Deputy Governor of the Bangko Sentral ng Pilipinas (BSP), said "It’s nothing that financial markets in the country can’t handle."

According to the BSP, about 7 Philippine banks have a total exposure of $386 million to bankrupt Lehman Brothers, one of the giant US investment banks that tumbled amidst the panic over toxic US housing debts. That accounts for less than one percent of the entire banking system, which, through the years, has been buffed up so it could withstand shocks.

“In terms of direct impact on our financial system, it’s still very minimal," Espenilla said in an interview at ABS-CBN News Channel’s News at 8. "As we’ve earlier pointed out, we are coming into this crisis relatively well-prepared in terms of capital adequacy, liquidity, and asset quality."

Jojo Gonzales, Chief Analyst of Philippine Equity, also noted in the same cable show, that there is no credit crunch in the country, unlike how it is in the US and Europe where investors and bankers are hardly transacting or lending, thus their economy is in a virtual standstill.

"To illustrate the fact that there is no credit crunch in the Philippines, the auction yesterday for Treasury Bills (indicator of cost of borrowing among banks) was two times oversubscribed. That hardly qualifies as credit crunch," Gonzales stressed.

In other words, the Filipinos will not have to go through a similar decision of whether any local players in the financial system would need to be bailed out too.

Philippine politicians will also be spared with a similar task of voting on whether taxpayers' money should be spent to stem a gaping hole that the rich have created. Unlike their US counterparts, who decided 208 to 205 in favor of thumbing down the bailout plan, the US congressmen have an upcoming elections to think about when deciding whether common Americans should shoulder the losses that high flying Wall Street executives created.

Not now but later

So far, there are anecdotal indicators of Filipino consumers spending less on their mobile phones and retail purchases. Still, according to Gonzales, there is no reason to fret, since it's the Philippine companies that are absorbing most of the US crisis impact now.

"I imagine the impact at this point is not so much on end consumers. Much of what we are seeing right now is pressure on profit margins of corporates because of inflation." Gonzales said.

Filipinos, however, would have to still keep their eye on the goings on in the financial markets abroad, especially in the US, since the consequences to the Philippines will be felt later.

One indicator would be the impact of what's happening in US financials to the credit market. The Philippines is one of the biggest debt issuers in Asia, and several Philippine companies have issued foreign debts to raise funds too. Benchmark interest rates, which banks all over the world use as guide in pricing debt instruments, will affect the cost of debt instruments that the Philippine government and companies have or will issue.

"Right now, we are just spectators watching what’s happening in the US. [And the] Philippine companies and the government don’t have to borrow right now. But 3 or 6 months from now, if the benchmark rates don’t come down, I think it will ultimately impact RP as well," Gonzales pointed out.

PJ Garcia, Chief Investment Officer of ING Bank Philippines, also noted that while some are reacting out of knee-jerk impulse, down the road there could be an impact on the fundamentals of the Philippines as well.

For one, exports volume and value could be affected as Americans, who are still the world's biggest group of consumers, hold on to their cash to cope with the credit crunch.

To Garcia, what this means to the Philippine companies is that “There will definitely be some downward revisions on growth assumptions for the next 12 to 18 months. There would have to be some review on earnings assumptions [of companies] for next year if you see a slower economic growth and lower domestic demand or, in this case, possibly slower export growth."

With the US now facing a possible recession, the impact to the Philippines will ultimately depend on how long and how deep the US economy will be in the doldrums.

The first to be hit will be the pace of our economic growth.

"It is fair to assume that the rates of [economic growth] will slow sharply," Gonzales warned.

Based on a best-case scenario of a "short and shallow" recession in the US, Gonzales projects that the local economy's growth will slow to about 4 percent this year. That's a far cry from last year's economic growth rate of more than 7 percent.

"The worse it gets in the US, the lower number you will see in the Philippines," Gonzales stressed.

Earlier, the range of estimates for economic growth in 2008 was between 4.5 to 5 percent. Gonzales noted, however, that these projections were made a couple of months back, long before Monday's shocking outcome of the US congress vote on the bailout.

"Nobody envisioned what's happening now. So there is room for those [growth] estimates to come down a bit further," Gonzales said.

Ride it out

Whether the current goings on will eventually translate to a major pinch to Filipino's income--and if ever, how much it will hurt--is yet to be seen.

Meantime, the message from analysts and regulators remain: Relax. It's all part of business and economic cycles.

According to Espenilla, these are cycles the Philippines could confidently ride out.

"In the end, these are really businesses that have ups and downs. Right now is really a clear 'down' scenario. We have the capacity to withstand this. We can ride this out."

as of 09/30/2008 3:31 P

-TC-

October 1st, 2008, 06:32 AM

Added link and full article...

http://biz.yahoo.com/ap/080930/wall_street.html

Stocks surge higher; credit worries persist
Tuesday September 30, 10:57 pm ET
By Joe Bel Bruno and Tim Paradis, AP Business Writers

Investors snap up beaten down shares after Wall Street's big sell-off, credit concerns linger

NEW YORK (AP) -- Wall Street snapped back Tuesday after its biggest sell-off in years amid growing expectations that lawmakers will salvage a $700 billion rescue plan for the financial sector.

But the seized-up credit markets where businesses turn to raise money showed no sign of relief.

One day after the biggest point drop in its history, the Dow Jones industrial average rose 485 points, or more than 4.5 percent -- the latest in a string of extraordinarily volatile days in the stock market. It was third-biggest point gain in the Dow's history and the biggest percentage climb in the Dow in six years. The recovery in stocks wasn't unexpected as carnage on Wall Street often attracts bargain hunters, though questions remain about how investors will proceed. Without a bailout plan in place to absorb soured mortgage debt and other bad loans from battered banks, investors are left wondering what might restore confidence in lending.

Major stock indexes were almost a sideshow during the session, with the credit markets as the main event. A key rate that banks charge to lend to one another shot higher, a tightening of the availability of credit that could cascade through the economy.

Traders on the floor of the New York Stock Exchange, still stunned from Monday's 778-point rout in the Dow, warned that the government needs to approve a plan that will sweep away the fears that hobbled the credit markets. While U.S. political leaders have vowed to revisit the issue, the House isn't slated to meet again until Thursday.

"If it doesn't pass, then look out below," said Jason Weisberg, an NYSE trader for Seaport Securities. "It could get ugly."

Though the blue-chip index rose nearly 500 points by late afternoon, the main worry for traders is that a lack of a plan will make it nearly impossible for some companies to fund basic operations like making payroll. Participants in the credit market buy and sell debt that companies use to finance operations.

The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another, rose sharply Tuesday, making it more expensive and difficult for consumers and businesses to borrow money. In addition, credit card debt and more than half of adjustable-rate mortgages are tied to LIBOR, so an increase isn't welcome for many consumers.

LIBOR for 3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday. LIBOR for 3-month euro loans, meanwhile, rose to 5.27 percent, from 5.22 percent Monday.

Critics of the bailout package believe that it was too costly and wouldn't have done enough to jump-start lending. To maintain pressure ahead of Thursday's likely vote, President Bush said in a statement from the White House early Tuesday that the damage to the economy will be "painful and lasting" unless Congress passes the bailout measure.

On Wall Street, many traders likely will proceed cautiously while they gauge prospects for resurrecting the bailout effort, which was backed by leaders of both parties.

"I'm not getting the sense that investors are going to be jumping in with both feet until there is some kind of resolution on the plan," said James Maguire, an NYSE floor trader with Christopher J. Forbes. "If there's a no vote, we're going to see a lower overall drift in stocks. It will be a slow bleed."

Traders also will likely focus on how the bloodshed will look on paper. Tuesday marks the final session of the third quarter -- and what is typically the worst month for the stock market -- so some portfolio managers might try to do what they can to dress up their performance. Others might simply wish to dump holdings in an unpopular corners of the market like the financial sector.

The Dow rose 485.21, or 4.68 percent, to 10,850.66 after falling nearly 7 percent on Monday to its lowest close in nearly three years. It was the largest point drop and 17th largest percentage drop in the blue chip index. The percentage decline was far less severe than the 20-plus-percent drops seen in the stock market crash of October 1987 and before the Great Depression.

Broader stock indicators also bounced higher. The Standard & Poor's 500 index recovered 58.35, or 5.27 percent, to 1,164.74, and the Nasdaq composite index rose 98.60, or 4.97 percent, to 2,082.33.

The S&P fell 8.79 percent Monday, while the Nasdaq lost 9.14 percent.

The yield on the 3-month Treasury bill rose Tuesday to 0.89 percent from 0.14 percent late Monday. The yield fell Monday as investors clamored for the safety of government debt. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.58 percent late Monday. The dollar rose against other major currencies and gold prices advanced.

While investors focused on what might come from Washington this week, Wall Street was cheered by several economic readings.

A private research group reported that consumer confidence rose unexpectedly in September. The Conference Board said Tuesday its Consumer Confidence Index rose to 59.8 from a revised 58.5 in August; Wall Street had expected a reading of 55.5, according to Thomson/IFR. The reading, which doesn't reflect attitudes following Monday's steep stock market sell-off, remains near a 16-year low.

The Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana, came in at 56.7 compared with 57.9 in August -- a second straight month of a strong reading.

Light, sweet crude rose $4.27 to settle at $100.64 on the New York Mercantile Exchange. Oil fell more than $10 a barrel Monday as investors worried that a weaker economy would curtail demand.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 5.84 billion shares by the closing bell.

The Russell 2000 index of smaller companies rose 21.86, or 3.32 percent, to 679.58.

Stocks surge higher; credit worries persist

NEW YORK (AP) -- Wall Street has ended sharply higher as investors bet that lawmakers will salvage a $700 billion rescue plan for the financial sector. The Dow Jones industrials surged nearly 500 points to the 10,860 level.
The rally offset Monday's 778-point rout, one of the biggest selloffs in years. The recovery wasn't unexpected as carnage on Wall Street often attracts bargain hunters.

However, the seized-up credit markets where businesses turn to raise money showed no sign of relief. A key rate that banks charge to lend to one another shot higher, a tightening of the availability of credit that could cascade through the economy.

http://us.news2.yimg.com/us.yimg.com/p/fi/18/57/42.jpg
Trader Bryan Cooley watches the markets in the S&P 500 futures trading pit Tuesday, Sept. 30, 2008,

Monkey see, Monkey do, monkey think... :D

icarusrising

October 1st, 2008, 06:42 AM

One year after: RP largely unscathed from US subprime mess (http://www.abs-cbnnews.com/special-report/09/01/08/one-year-after-rp-largely-unscathed-us-subprime-mess)

By Judith Balea, abs-cbnNEWS.com | 09/01/2008 10:12 PM

More than a year after the US sneezed from its subprime mortgage troubles, the Philippines, unlike other Asian countries, did not catch a cold, local financial experts said.

Two factors explain why the twin impact of collapsing real estate and banking sector did not reach our shores: Our overseas workers, and to an extent, the outsourcing companies, kept buying or leasing real estate products no matter what. With the real estate market still vibrant, the local banks, already equipped with lessons during the hubris lending in the nineties, have remained healthy and liquid.

In a forum last August 29 entitled "The US subprime meltdown: Will the fallout hit RP?" attended by local financial sector experts, Danilo Antonio, managing director of Credit Rating and Investors Services Philippines Inc., gave assurance that since the subprime blowout, the Philippine property sector as well as capital markets stayed healthy.

"The boom is far from over because there's a huge backlog in demand for housing in the country," he said.

In mid-2007, fears of the end of the country's property boom began to escalate due to tightening access to mortgage loans not only in the US, then a major market for local real estate developers, but also globally.

The seriousness of the US subprime mortgage trouble was realized in June 2007 following the collapse of two hedge funds managed by New York-based Bear Stearns, which at that time, was one of the world's largest investment banks. The rippling effects required the injection of billions of dollars into the system for liquidity.

Stable OFW and BPO markets

Antonio expounded on reasons why effects of the subprime crisis are hardly felt here. For one, he said the Philippines has reduced dependence on the US and started to diversify markets. The country is now heavily marketing its property products to buyers in Asia, the Middle East and Europe.

Antonio further said that rather than building high-end projects catering to the few elite, most property firms have embarked on an aggressive expansion in the middle-income and low-cost housing segments that have wider market reach.

He said affordable houses priced from P1 million to P2.5 million and medium- and high-density condominiums that cost between P2.5 million and P5 million are considered as "hot items" today.

"Cheap housing has unlimited demand," he said.

Antonio emphasized that this buoyant demand particularly comes from more than 10 million overseas Filipino workers (OFWs) who send home at least $1 billion in remittances monthly.
He said majority of customers buy homes for "end use" and not as an investment which they could sell at higher rates.

Not even rising loan interest rates could hurt this demand. "These OFWs really want to buy so they save. If in case they need to borrow, a point or so difference in rates doesn't really matter. They'll still take whatever funds are available," Antonio pointed out.

Apart from OFWs, he said the burgeoning business process outsourcing industry also has strong appetite for property developments.

More capital as RP banks stay liquid

The continued growth in the real estate sector is bolstered by ready credit lines provided by the country's highly liquid banks.

Antonio said Philippine banks could well weather a global financial turmoil, set off by problems with subprime mortgages in the US.

Subprime mortgages are loans granted to homeowners who have poor credit standing. Real estate agents in the US enticed customers to avail of homes through loans from banks that carry adjustable interest rates.

These homes also had minimal down payment requirements that spurred more demand, which in turn, led to an increase in housing prices.

Banks and other financial institutions repackaged the subprime loans with less risky ones, spawning the so-called collateralized debt obligations, and sold them to investors such as mutual funds and hedge funds worldwide. These high-risk instruments were attractive because they had higher yields.

However, when more and more borrowers defaulted, investors started to dump these assets, pushing their prices down. Homes were foreclosed and many mortgage lenders filed for bankruptcies. The backlash was global.

Only, here in the Philippines, "there is really no evidence" that any of the financial institutions were exposed to these soured debts, according to Gamaliel Pascual, senior advisor at Regina Capital Development Corp.

"Our banks seem to be healthy and liquid," he said.

Pascual also said that the Philippine mortgage market is "primitive," meaning banks still need to fully utilize the securitization law, which is still at its infancy. The law allows the transfer or sale of assets and asset-backed securities of banks to a special purpose vehicle.

Lastly, Pascual noted that local banks are more cautious with their lending and have stronger capital bases that equip them to withstand massive loan defaults.

Indirect effect on stock market

Pascual pointed out that the subprime crisis so far affected the domestic equities market only indirectly, in the form of risk aversion.

The possibility of a global credit squeeze, leading to an economic recession in the US, Asia's vital trading partner, sent jitters to stock markets in the region including the Philippines.

As a result, investors started pulling out, sending the markets to their worst levels. The Philippine Stock Exchange, for one, entered into bear territory as early as January 22, when the key index settled at 2,978.41, down 24 percent from its peak of 3,896.74 last October 8, 2007. A bear market is defined as one that falls by more than the threshold of 20 percent from record high.

In the first half, the local bourse lost 32 percent to 2,459.98 due to continuous flight of institutional foreign investors.

Pascual said these investors opt to put their money in more appealing investments like commodities.

"The thinking of investors is to go out of the Philippines first and speculate in commodities like oil and metals," he said.

Pascual added that speculation in oil, which factors in dwindling supply or any threats to production, is partly to be blamed for the sharp spike in crude prices, another whammy for the equities market.

"When oil prices are high, inflation gets higher too. This is another thing that investors are scared about in the Philippines."

as of 09/01/2008 10:12 PM

icarusrising

October 1st, 2008, 07:00 AM

Philamlife, whose parent company is AIG, is the biggest insurance company in RP....

Philamlife assures it is insulated from parent AIG's woes
abs-cbnNEWS.com | 09/16/2008 5:22 PM (http://www.abs-cbnnews.com/business/09/16/08/philamlife-assures-it-insulated-parent-aigs-woes)

The head of the Philippine American Life & General Insurance Co. (Philamlife) assured its policy holders Tuesday that the troubles facing its parent firm, American International Group Inc. (AIG), will not affect the local operations of the insurance company.

“While AIG is our parent company, we are separately capitalized so we have our own capital base," said Philamlife president Jose Cuisia Jr. in an ANC interview.

Cuisia stressed that Philamlife has “strong capital base and we have always maintained a very conservative investment policy.”

Considered the a Goliath in the Philippine insurance industry, Philamlife has a capital base of P1.65 billion as of December 2007, topping all 36 insurance companies operating in the Philippines, a report in the website of the Insurance Commission said.

US-based AIG is struggling to survive after losing 92 percent of its value this year as ratings agencies downgraded the insurer's debt and the global financial sector meltdown spread.

Reports said AIG plunged nearly 61 percent on Monday and the US Federal Reserve hired investment bank Morgan Stanley to review its options.

AIG's ratings downgrade could also force it to post more collateral and nullify insurance contracts, possibly setting in motion a chain reaction that could threaten its survival.

Biggest in the Philippines

The Philippines is the AIG’s oldest market. AIG’s American founder, C.V. Starr, established Philamlife in 1947 on the heels of the devastation of World War II to provide an alternative to traditional foreign aid. It grew rapidly. Philamlife's endowment policies mobilized savings from the local population and provided funds to promote national development. In the 1950’s, when there was a acute housing shortages, Philamlife was involved in developing middle income housing.

Philamlife is currently the largest life insurance company in the Philippines and a household name. Its total assets of P108.3 billion as of December 2007 account for one-third of the entire industry’s P367 billion.

Trailing behind are Sun Life of Canada (Phils) Inc. (P67 billion), Filipino-owned Insular Life Assurance Co. Ltd (P57 billion), Philippine AXA Life Insurance Corp (P33 billion) and Manufacturers Life Insurance Co (Phils) (P20 billion).

Philamlife also has the highest capital base (P1.65 billion), most investments (P86 billion), and highest networth (P21 billion).

With Philamlife’s size, prospects of its instability could send chills to the entire industry.

But the industry’s regulator issued a statement to assure the public that Philamlife is financially safe and stable.

Insurance Commissioner Eduardo T. Malinis said in the statement that “Philamlife is adequately capitalized and its customer' and policyholders' interests are protected with the company's financial strength. With its vast resources, Philamlife is capable of meeting its commitments and obligations to its clients."

"Philamlife remains to be the largest insurance company in the Philippines with the strongest balance sheet in the industry,” Malinis wrote.

Separate companies

Karen Liza M. Roa, President & CEO of Philam Asset Management, Inc., said in a statement that each financial product--the Philam Bond Fund, Philam Dollar Bond Fund, Philam Managed Income Fund, Philam Fund, Philam Strategic Growth Fund, GSIS Mutual Fund, and the AIG Global Bond Fund Philippines—are legal entities on their own since "each Fund is an investment company registered with the Philippines ' Securities and Exchange Commission, with separate and distinct Board of Directors."

“The [investors] are shareholders of the fund [where they invested]. The Board of Directors are separate and independent. The fund will follow investment restrictions of the Securities and Exchange Commission and the Philippine’s Investment Company Act. [The investors’] money is not co-mingled with AIG. They do not capitalize our funds.”

Unlike bank depositors whose P250,000 are covered by deposit insurance, policy holders or investors in insurance companies are not. However, the Insurance Commission provides guidelines on where the insurance companies could invest the funds they accept from the public.

These guidelines take into consideration how easily these investments could be converted to cash. For example, the Insurance Commission puts a cap on how much of an insurance company’s assets could be invested in real estate, which are not considered liquid.

“Every investment we make is approved by the regulator and precisely they make sure that these investments are intended to meet the obligations of the local company to its policy holders,” Cuisia said.

Thus, Cuisia said he is confident that Philamlife “can meet all our obligations to our policy holders and our clients.”

Roa said Philamlife's investments are concentrated in marketable Philippine government securities, corporate bonds, and blue chip equities.

Roa added that their financial products “are invested in Philippine Government securities, fixed income securities of strong local corporations and blue chip stocks. Our newest fund the AIG Global Bond Fund Philippines is invested in low risk, investment-grade global fixed income securities.”

Thus, while the financial health of the US-based parent company, AIG, is in peril, the Philamlife officials are more focused on the performance of their current investments.

The officials are basically monitoring the impact of the goings on in the US financial market on the capital markets where their investments are currently placed.

The local stock market was down by 144 basis points Tuesday, in tandem with the bloodbath in most Asian and European bourses.

With Lehman Brothers filing for bankruptcy protection and rival Merrill Lynch agreeing to be sold to Bank of America for $50 billion, Cuisia admitted that investors would now be more wary to take risks amid US financial crisis.

Cuisia acknowledged that Asian stock markets could not be insulated from the US crisis although he noted that the economies in the region, including the Philippines, are doing quite well compared to more developed countries.

as of 09/17/2008 7:42 AM

Weina

October 2nd, 2008, 03:03 AM

I read somewhere that BDO, Metro and RCBC suffered losses from the Lehman collapse. There's probably more out there keeping quiet to prevent a run on the bank.

yeah sir just like what Ronnie has said these banks made disclosures already that they have a limited exposures to this crisis. Just don't know though what's really the real score.

Lehman Brothers has at least 8 special purpose vehicles (SPVs) in the Philippines that local creditors are now running after. It disclosed that it owes P2.4bn of current loans to Metrobank and P1.2bn to Standard Chartered Bank.

Metrobank's total direct exposure to Lehman is US$71m, US$51m (P2.4bn) of which was used for the SPVs.

BDO disclosed that it would set aside 3.8 B for it's exposure in Lehman. The value is equivalent to its 7% 1H08 book value.

RCBC prepared 980M as buffer for Lehmans exposure.

BPI and SECB do not have direct exposure to Lehman.

These loans of Lehmans from local banks were used to purchased NPLs and foreclosed assets of local banks. That means Lehman didn't brought in money/ fresh USD capital to the philippines instead loaned from local banks to buy their assets. Quite intersting now is the claims of different parties to ownership of these properties as these corporate bonks issued to banks by Lehman are now worthless:|

so far this is just what i can recall reading from different sources.

RonnieR

October 2nd, 2008, 03:32 AM

What a relief for the Philippine Economy!!!!

WASHINGTON - After one spectacular failure, the $700 billion financial industry bailout found a second life Wednesday, winning lopsided passage in the Senate and gaining ground in the House, where Republicans opposition softened.

Senators loaded the economic rescue bill with tax breaks and other sweeteners before passing it by a wide margin, 74-25, a month before the presidential and congressional elections.

In the House, leaders were working feverishly to convert enough opponents of the bill to push it through by Friday, just days after lawmakers there stunningly rejected an earlier version and sent markets plunging around the globe.

RonnieR

October 2nd, 2008, 03:40 AM

yeah sir just like what Ronnie has said these banks made disclosures already that they have a limited exposures to this crisis. Just don't know though what's really the real score.

Lehman Brothers has at least 8 special purpose vehicles (SPVs) in the Philippines that local creditors are now running after. It disclosed that it owes P2.4bn of current loans to Metrobank and P1.2bn to Standard Chartered Bank.

Metrobank's total direct exposure to Lehman is US$71m, US$51m (P2.4bn) of which was used for the SPVs.

BDO disclosed that it would set aside 3.8 B for it's exposure in Lehman. The value is equivalent to its 7% 1H08 book value.

RCBC prepared 980M as buffer for Lehmans exposure.

BPI and SECB do not have direct exposure to Lehman.

.

Further to their disclosures to PSE:

Banco de Oro (BDO) is the local bank worst hit by this crisis, as it disclosed setting aside P3.8 billion ($80.7 million) to cover possible losses in its investments with Lehman Brothers.

Metropolitan Bank and Trust Co. (Metrobank) announced it is making P658 million ($14 million) in provisions for $20.4 million worth of bonds issued by Lehman. It also disclosed loan exposure to a Lehman subsidiary in the Philippines amounting to P2.4 billion. The subsidiary, however, is currently operating normally, according to Metrobank.

Rizal Commercial Banking Corp. (RCBC), on the other hand, said it is allocating P980 million ($20.8 million) to cover for possible write-downs in its investments in structured products having exposure to Lehman.

In recent disclosures submitted to the Philippine Stock Exchange (PSE), the Bank of the Philippine Islands (BPI), UnionBank of the Philippines, Philippine Savings Bank, and Security Bank announced they have no direct or indirect exposure with Lehman Brothers and are thus not making any provisions.

Metrobank, the country's largest bank has total assets of US$15+ Billion.
BDO, the country's second largest bank has total assets of US$13+ Billion

barukdok

October 2nd, 2008, 04:21 AM

the country's banking system is a lot stronger now, thanks to the Asian financial meltdown a decade ago.

anyway, i always love it when some people speculate and end up falling flat on their faces. anyway here's some really good news...

Just this hour: Singapore-based Channel News Asia reported that the PHILIPPINES is the HOTTEST REAL ESTATE MARKET in SOUTHEAST ASIA!

:banana::cheers::banana::cheers:

Christendom

October 2nd, 2008, 10:49 AM

A secret meeting of Congress discusses immanent martial law.

B.A. Brooks
The United American Freedom Foundation
March 13, 2008

On March 13th 2008 there was a secret closed door meeting of The United States House Of Representatives in Washington. In the history of The United States this is only the fourth time a secret meeting was held by the house. Even though Representatives are sworn to secrecy by House Rules XVII, some of the members were so shocked, horrified, furious, and concerned about the future of America by what was revealed to them inside the secret meeting, that they have started to leak this secret information to independent news agencies around the world. The mass media said almost nothing about the secret meeting of the House, mentioning only one of the items being discussed. (The new surveillance techniques that are going to be used by the U.S. Government to watch all American citizens). The story was first released in a newspaper out of Brisbane, Australia revealing the contents of the secret U.S. Government meeting and plans for America including all of it’s citizens. Shortly there after, David J. Meyer from Last Trumpet Ministries found it and made it more available for the world to see.

Here is what was revealed:

* The imminent collapse of the U.S. Economy to occur sometime in late 2008
* The imminent collapse of the U.S. Government finances sometime in mid 2009
* The possibility of Civil War inside the United States as a result of the collapse
* The advance round-ups of “insurgent U.S. Citizens” likely to move against the government
* The detention of those rounded up at The REX 84 Camps constructed throughout the United States
* The possibility of public retaliation against members of Congress for the collapses
* The location of safe facilities for members of Congress and their families to reside during massive civil unrest
* The necessary and unavoidable merger of The U.S. with Canada and Mexico establishing The North American Union
* The issuance of a new currency called the AMERO for all three nations as an economic solution.

Except for a few hundred thousand U.S. Patriots, most Americans have no clue what has really been going on within The United States over the past 100 years, and the sad thing is that most do not want to know the truth. The further you look into the rabbit hole, the deeper it gets. Go to any currency conversion site and convert U.S. dollars to Euros so you can see for yourself the massive decline of the dollar. Look at how much money is and has been spent on the Iraq War to date, ($12 billion per month). Look at our currency and when it stopped being backed by gold.

The Federal Reserve is not federal but a private bank who does not have Americans best interests at heart. We no longer have any manufacturing really based out of America and there is no way that our economy can survive this incredible strain very much longer. The IRS strong arms every American yearly with income taxes, yet there are no laws saying an income tax is to be paid.

The CIA is involved in everything from global drug trafficking and covert military missions, to assassinations around the world and including U.S. Soil. Look at JFK for instance. It did not take long after JFK announced that he was going disband the CIA that he was shot in Texas. America’s new StasiThe Department Of Homeland Security is and has been slowly eradicating our rights for a few years now. based organization called

House Bill H.R. 1955/S-1959 was read by the senate and then sent to DHS for some reason, but is now back and sure to pass. Once passed, this bill introduced by Jane Harman (D/CA), will be the proverbial last nail hammered into every American patriots coffin. H.R. 4279 or the Prioritizing Resources and Organization for Intellectual Property Act of 2008 which was recently passed by the U.S. House of Representatives, will give the government draconian powers to do just this. This legislation gives the government the power to seize property that facilitates the violation of intellectual property laws. The legislation also mandates the formation of a formal Intellectual Property Enforcement Division within the office of the Deputy Attorney General to enforce this insanity…

It has been revealed that F.E.M.A. has been building internment camps all over America granting Halliburton a massive $385 million dollar construction contract to make this happen. Most of these sites only need refurbished because they are mostly closed prisons, old WW2 internment camps still intact and other facilities taken over by the government. Some people have referred to them as F.E.M.A. Death Camps where the infamous Red list/Blue Lists will be used to decide who goes where.

Whether you believe that The NWO/Illuminati/Globalization is real or not, there is a lot of proof that exposes definite plans or plots by the rich, political and religious elite to bring on an era of the end times. It is almost like some individuals are trying to make bible prophecy come true in their own sick and twisted ways. Not to mention that the world only has about 10 to 15 years of drinking water left before the wars fought for oil today will be fought for water in the near future. It has been said that these powers want to depopulate the planet of over 30% of it’s human inhabitants in the coming years. Examine all of the executive orders that have been signed into place allowing the president to basically become dictator in control of all government from tribal to federal in the event of any national emergency.

If you did not know, In late 2006, Congress revised the Posse Comitatus Act and the Insurrection Act to make it far easier for a president to declare martial law. Those changes were repealed at the end of this January as part of Public Law 110-181 (HR 4986), the National Defense Authorization Act for Fiscal Year 2008 (signed into law by President Bush on January 28, 2008). Unfortunately it is not the great victory in which one might think because of the total militarization of all local and State police forces all across America.

Will there be martial law? Is martial law coming soon to America? When you see law enforcement being armed with automatic weapons, bullet proof vests and riot gear in small towns that have not had a murder or crime in years, then you have to ask yourself why.

The United States has more people locked up in prisons today than Russia and China combined. It comes out to one in every hundred Americans is behind bars. Our once great country that our ancestors fought and died for has become exactly the tyrants they were fighting. Fascists! When has America ever used words like Homeland? Never!

If you spend a few weeks reading all the info, watching the videos and following the links at The U.A.F.F., you will then have a better understanding of what has led to The Decline And Fall Of America. Remember that Knowledge is power! Learn, look, listen, read, share, prepare, train, stock up on food and water supply for one year.

Fill your pantry with non perishable foods, medicines, cooking oils, tinned meats and veggies. Flour, oats dried corn peas, beans and lentils.. Teach your self how to preserve food for storage. Check out your local potable/ drinking water supplies, non perfumed chlorine bleach is a good sterilizer for water, about 2 teaspoons full per 2 gallon bucket, stirred well and allowed to stand for at least 24 hours with a lid on it or until it no longer smells of bleach. Boiling water helps but it is not always enough to kill off the bacteria which can resist high temperatures.

Americans have been warned for years of the things to come, but have blindly looked away from the truth, which has been available for all to see. There are no more excuses not to prepare for the possible future. The time to act is now before it is too late. Check The United American Freedom Foundation for daily updates and news you won’t see in the mainstream media.

on oct 1982, there is an ultra-secret meeting was attended by representatives of 36 of the world's top banks who meet @ the new york vista hotel. security for the oct 22-27 seminar was a tight as anything even seen in the big apple...addressing the meeting "it was essential that national sovereignty as an archaic hang-over must be ended before the y