Main number: 202 225 -3121 - ask for your elected officials in D.C. Our elected Senators and Representatives supposedly work for us, the taxpayers! Tell them what YOU think about the Wall Street Bailout.
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. —Thomas Jefferson, 1802
Ron Paul EXPLAINS the underlying problems with the Wall Street Bailout being shoved down our throats by the bureaucrats of Wall Street and Capitol Hill. . . .
Bailout protesters plan day of action Thursday The public backlash against the Bush administration's proposal to use tax dollars to bailout Wall Street spilled into the streets "People all over the country are up in arms about this," said David Elliot, a spokesman for grassroots advocacy group UsAction. "Our members are livid, and they're hitting the streets." TrueMajority.com, an online forum for activists, said its members had organized 251 events in more than 41 states to protest the bailout. Several other grassroots organizations were involved in the protests, including Democracy for America, the Association of Community Organizations for Reform Now (Acorn) and labor unions.
Bailout Idea a Disaster Treasury Secretary Henry Paulson's proposed bailout plan is "astonishing, devastating, and very harmful for America," internationally-known investor Jim Rogers told The New York Sun. Rogers says the current monetary climate in Washington reminds him of when then-Fed Chair Arthur Burns refused to let anyone fail. Rogers insists Washington is making the same mistake again. "We're in for the worst recession since World War II, as well as higher long-term interest rates, higher inflation, higher taxes, a weaker dollar, and substantially lower stock prices," Rogers says. Even worse, Rogers believes it's "embarrassing to see how little the presidential candidates know or grasp what's going on, just like the current administration."
An absence of leadership as Bush fumbles It took President Bush until Wednesday night to address the American people about the nation's financial crisis, and pretty much all he had to offer was fear itself. There was no acknowledgement of the shocking failure of government regulation, or that the country cannot afford more tax cuts for the very wealthy and budget-busting wars, or that spending at least $700 billion of taxpayers' money to bail out Wall Street and the banks should be done carefully and with oversight by Congress and the courts. We understand why he may have been reluctant to address the nation, since his contempt for regulation is a significant cause of the current mess. But he could have offered a great deal more than an eerily dispassionate primer on the credit markets in which he took no responsibility at all for the financial debacle.
A Bailout We Don't Need Now that all five big investment banks -- Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs and Morgan Stanley -- have disappeared or morphed into regular banks, a question arises. Is this bailout still necessary? The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans." With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.
George Soros hates Paulson's bailout George Soros, billionaire financial speculator, philanthropist and liberal boogeyman to many conservatives, doesn't like Treasury Secretary Henry Paulson Jr. $700 billion bailout plan. Indeed, from his Financial Times opinion piece, it doesn't sound like he'd allow Paulson to manage any of his billions of dollars. Here's an excerpt. Pay close attention to what he says about "asymmetric information," one of his favorite subjects. it's the idea that not all parties in financial transactions have equal access to best-informed party usually has the upper hand: Mr Paulson's record does not inspire the confidence necessary to give him discretion over $700bn. His actions last week brought on the crisis that makes rescue necessary. On Monday he allowed Lehman Brothers to fail and refused to make government funds available to save AIG. By Tuesday he had to reverse himself and provide an $85bn loan to AIG on punitive terms. The demise of Lehman disrupted the commercial paper market. A large money market fund "broke the buck" and investment banks that relied on the commercial paper market had difficulty financing their operations. By Thursday a run on money market funds was in full swing and we came as close to a meltdown as at any time since the 1930s. Mr Paulson reversed again and proposed a systemic rescue.
No Blank Check For Paulson Billionaire George Soros says giving a "blank check" to U.S. Treasury Secretary Henry Paulson would be a huge mistake. The $700 billion package as originally proposed is rife with new risks, including the shocking deferral of power directly to Paulson, Soros writes in the Financial Times. "Mr. Paulson's record does not inspire the confidence necessary to give him discretion over $700 billion," Soros writes. Soros charges that Paulson so far has brought chaos, not resolution, to the markets. For instance, Paulson let Lehman fail and then had to be forced to provide $85 billion to AIG, Soros argues. Lehman's end then disrupted the commercial paper market to the point that money market funds were forced to shut down. Commercial banks couldn't get financing.
An inadequate case for the bailout plan Under skeptical questioning in the Senate Banking Committee on Tuesday, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke gave no ground in defense of their $700 billion proposal to bail out the financial system. They also gave little reason to believe that their proposal would protect taxpayers from huge losses. Instead, they said that any eventual loss would be less than the losses that Americans would endure if lending froze up, as it did briefly last week in the panicked aftermath of the failure of Lehman Brothers and the near-death of the American International Group. The candor is appreciated, but it is not a good enough answer for Congress or the American people. Rather than rushing to approve the $700 billion bailout, lawmakers need to examine alternatives. They should look for one that ideally would let taxpayers share in the gains from any post-bailout revival, along with the bankers and private investors who will make money if the bailout succeeds. Several ideas have been advanced that Congress should examine.
US 'will lose financial superpower status' The US is poised to lose its role as a global financial "superpower" in the wake of the financial crisis, Peer Steinbrück, German finance minister, said on Thursday as he called for a regulatory crackdown on financial markets. “The US will lose its status as the superpower of the world financial system. This world will become multipolar” with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. "The world will never be the same again." Mr Steinbrück launched a biting attack at the US government for resisting calls for stricter regulations of financial markets even after the subprime crisis erupted last summer, for which he said Washington was partly responsible. In language that went much further than recent comments by Angela Merkel, Germany’s chancellor, Mr Steinbrück said tougher capital market rules were an urgent necessity. "Crisis management alone will not rebuild the lost confidence," he said. "We must civilise financial markets, and not just through moral appeals against excess and speculation. Self-regulation is no longer sufficient."
Total Bailout At Least $1.2 Trillion The banks will need another $500 billion on top of the $700 billion being requested by Treasury Secretary Henry Paulson, says bond guru Bill Gross. Gross told CNBC that the government's current plan will help clear up bank balance sheets but leaves just $50 billion in free cash to lend out. "The plan goes far but it doesn't go far enough in terms of recapitalization," Gross said. "The banking system and the investment banking system in total really requires about $500 billion more. Where that comes from is still up in the air." Separately, banking experts already predict that the Federal Deposit Insurance Corporation (FDIC) could need an additional $150 billion to cover coming bank failures.
FDIC Could Need $150 Billion The government agency that is supposed to bail out depositors when a bank fails might need a bailout itself — to the tune of $150 billion. The Federal Deposit Insurance Corporation (FDIC) has a "secret list" of 117 banks it is watching, writes David Evans of Bloomberg News. It won't reveal bank names for fear of immediate runs on those banks. So far in 2008, 12 banks with assets of $42 billion have gone under. Indymac, which had $32 billion, was the largest by far. Yet the FDIC has just $45.2 billion to back up its more than 8,000 covered institutions. Meanwhile, Christopher Whalen, managing director of Institutional Risk Analytics in Torrance, California, figures it will need $200 billion during 2009 alone to dig out additional failing banks.
Bosses’ greed releases class war This week, America discovered class war. Newt Gingrich denounced the Treasury’s $700bn plan to flush the toxic debt off Wall Street balance sheets as a "very, very bad idea" and accused the White House of being bamboozled by its ex-Goldman Sachs advisers. John McCain railed against CEO "greed" and said no boss of a corporation bailed out by the government should "be making more money than the highest paid government official". Rupert Murdoch’s New York Post newspaper ran a two inch-high front-page headline yesterday that simply read: "FRAUD ST". And that’s just the voices on the right. For a sense of the discourse on the left, consider the quarter-page ad run this Tuesday in the New York Times by the Institute for America's Future, a progressive think-tank. It accused Wall Street of "extorting” US taxpayers, and asked:"“Rather than just bailing out bankers, shouldn’t we be helping the folks they victimised?"
Banking after the bail-out Who would have ever thought that the most sophisticated financial system in the world – that of the US – would trigger the most dramatic government rescue operation in history? Some may see this as a sad indication of the sharp and rapid deterioration in the standing of the country. More accurately, it speaks to how quickly the cruel realities of an unanticipated deleveraging process can alter the policy and institutional landscape. As is now widely recognised, left to their own devices, US financial markets simply could not accommodate the large and simultaneous shrinkage of multiple balance sheets without major damage to institutions and, critically, the system. Last week, the damage had migrated to the essential component of any financial system – the smooth functioning of cash, collateral and counterparty risk management.
Why Mark-to-Paulson Accounting Won't Save Banks There's one glaring weakness in Treasury Secretary Hank Paulson's plan to save the U.S. financial system: We know what the plan is. Any other problems with it are mere details. Much like the credo of Brad Pitt's character in the 1999 movie "Fight Club," the first rule of market manipulation is you don't talk about market manipulation. Give Paulson a $700 billion check without asking any questions, and the former Goldman Sachs boss might have a shot at kick-starting the credit markets using some mysterious, black- box, trading sorcery. Because the money isn't his, though, he has to give us at least a vague outline of what he's up to. Now, even if Congress approves some form of his proposal, it's far less likely to work because we're all in on the deal. The plan goes like this: Treasury will pay financial institutions above-market prices for garbage assets nobody else wants. Then, through the magic of mark-to-Paulson accounting, everybody else that owns similar stuff will use those same prices, or marks, to value the trash on their own balance sheets.
Dear Hank: Here’s How to End the Credit Crisis at No Cost to Taxpayers While it’s clear from the current credit crisis that our financial system is at a critical juncture, it’s just as clear that there’s no agreement over how we should fix the problems we face. The reality is that neither the plan put forth by U.S. Treasury Secretary Henry M. "Hank" Paulson Jr. - nor any of the addendums offered up by Congress or the lobbyists - will resolve this crisis. The key culprits are the structured financial products that reside on the balance sheets of banks, dead investment banks, insurance companies, hedge funds and all manner of other duped and unsuspecting investor entities worldwide, as well as the proliferation of the unregulated $62 trillion credit default swaps (CDS) market. Because all these securities, and in the case of credit default swaps, bilateral contracts, are impossible to value and impossible to guarantee, no one trusts them. As a result, everyone is afraid of these securities and contracts.
Asia Needs Deal to Prevent Panic Selling of U.S. Debt Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank. "We are in the same boat, we must cooperate,'' Yu said in an interview in Beijing on Sept. 23. "If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.'' An agreement is needed so that no nation rushes to sell, "causing a collapse,'' Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
Senator Bunning Blasts "Financial Socialism" John McCain claims to be a straight talker, but it is Senator Jim Bunning, Republican of Kentucky, who on Tuesday, in front of Treasury Secretary Henry Paulson and Federal Reserve Board chairman Ben Bernanke, labeled the Paulson/Bernanke $700 billion Wall Street takeover plan “financial socialism.” He also called it “un-American.” Bunning’s comments, which have been reported widely, have alerted many Americans to the proposed radical transformation of the U.S. economy that is being pushed by the Bush Administration and mostly Congressional Democrats on Capitol Hill. Bunning’s views are consistent with the 2008 Republican platform, which declares, "We do not support government bailouts of private institutions. Government interference in the markets exacerbates problems in the marketplace and causes the free market to take longer to correct itself. We believe in the free market as the best tool to sustained prosperity and opportunity for all."
Dollar falls as traders fret over rescue plan The dollar took a hit on Thursday after further delays to the US government’s proposed $700bn rescue package for the financial system. As markets grew increasingly anxious over whether the bail-out would pass through Congress undiluted, traders liquidated dollar positions.
The New York Times Spreads Disinformation About the Paulson Plan Vikas Bajaj of the New York Times is an able reporter and I have often enjoyed his work. I was therefore taken aback when I read his article, "Plan’s Basic Mystery: What’s All This Stuff Worth?" since it misleads readers as to the intent and thrust of the so-called Troubled Asset Relief Program. This is part of a disturbing pattern in the mainstream media as far as the plan is concerned. Despite the considerable diversity of opinion and political orientation among economists, the criticism of the plan among economists has been widespread, verging on unanimity (with Alan Blinder a notable outlier). Yet the press has treated the plan with vastly more deference than it deserves. How did this come about? Perhaps select members of the media got a version of the scary talk that Paulson gave to the Congressional leadership behind closed doors. But that still does not explain the obfuscation of how the plan will work. In a nutshell, the article seeks to explain why a lot of the assets likely to be bought by the program are hard to value, and does a good job on that front. Fair enough. But get a load of the premise:
Paulson's vacuum cleaner? Would banks and other financial institutions be allowed to act as conduits to hedge funds selling these securities? Given that Ben Bernanke has conceded that it is the government's intention to purchases assets at a "hold-to-maturity" price rather than at a price near market bids, banks favored by Paulson could earn a nice living serving as a market-maker to any entity in the world holding bad paper. Bank buys "toxic" asset from hedge fund, individual, foreign government, whomever, for something above the market bid and then resells to Treasury for the "hold-to-maturity" price, earning a nice spread. All those "blockages" in the financial system might start flowing real fast, into as well as out of our poor sclerotic banks. This adds to concerns expressed by others that banks would acquire bad mortgages and structure new assets eligible for "hold-to-maturity" sale.
A $700 billion slap in the face The initial Treasury stance on the bailout was one of sheer demand for authority: give us total discretion and a blank check, and we’ll fix things. There was no explanation of the theory of the case — of why we should believe the proposed intervention would work. So many of us turned to our own analyses, and concluded that it probably wouldn’t work — unless it amounted to a huge giveaway to the financial industry. Now, under duress, Ben Bernanke (not Paulson!) has offered an explanation of sorts about the missing theory. And it is, in effect, a metastasized version of the "slap-in-the-face" theory that has failed to resolve the crisis so far.
An inadequate case for the bailout plan Under skeptical questioning in the Senate Banking Committee on Tuesday, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke gave no ground in defense of their $700 billion proposal to bail out the financial system. They also gave little reason to believe that their proposal would protect taxpayers from huge losses. Instead, they said that any eventual loss would be less than the losses that Americans would endure if lending froze up, as it did briefly last week in the panicked aftermath of the failure of Lehman Brothers and the near-death of the American International Group. The candor is appreciated, but it is not a good enough answer for Congress or the American people.
Corruption, Whispers & Receivership The United States has transformed itself, the most radical degraded aspects having occurred in the last eight years. Many might object or cringe at repeated mention of the Fascist Business Model implemented by the Clinton Administration, and carried to extreme by the Bush II Administration. It is a harsh departure from Beacon of Freedom. Too bad, fact of life! This merger of state and big business in the midst of a climax, the biggest display of exported financial toxin in modern history, and the disintegration of the financial structure for the nation owning the world reserve currency. The Fascist Business Model has criminal fraud & corruption as its chief characteristic, alienation & resentment as its chief foreign effect, and systemic failure & collapse as its chief outcome. Broad war often follows.
Bush and co. talking down economy? Used to be talking down the economy was something government officials weren't supposed to do, especially senior U.S. officials. Conservatives often bashed liberals who they frequently perceived as trying to talk the economy into recession for political reasons. And on occasion liberals even attacked conservatives for allegedly cynically talking down the economy for the same reasons. Now its open season on the economy. Everyone seems to be talking it down, particularly those top government officials who are usually so guarded in their public comments they won't even discuss in detail U.S. policy towards the value of the dollar for fear of affecting markets. From President Bush, to Treasury Secretary Henry Paulson Jr. to Federal Reserve Chair Ben Bernanke, the message is the economy will essentially go down the tubes if Congress don't pass the $700 billion bailout "national rescue plan" quick, fast and in a hurry.
Congress Close to Bailout Deal as Bush Urges Action Congress moved closer to an agreement on a $700 billion financial rescue plan as President George W. Bush urged swift action to help avert "a long and painful" recession. "The package is basically done," Representative Paul Kanjorski, a Pennsylvania Democrat, told CNBC today. "The hard issues are resolved. They have to shake hands. They have to smile and they have to have the photo set." The Bush administration paved the way for a deal by making major concessions. They include curbs on executive compensation, help for homeowners facing mortgage foreclosure and independent oversight of the Treasury-managed program. Treasury Secretary Henry Paulson also agreed to a Democratic demand that the government take equity stakes in companies it assists.
Credit Crisis Update: U.S. Stocks Skid as Bailout Bogs Down, President to Address the Nation U.S. stocks dropped for the third straight day yesterday (Wednesday) on worries that increasingly rancorous debates will squelch a proposed $700 billion bailout of the U.S. financial system even as Federal Reserve Chairman Ben S. Bernanke warned Congressional leaders that the credit crisis was already damaging the American economy. As part of his most dire commentary about the U.S. economy since he became the central bank chief two years ago, Bernanke said the credit crisis posed "grave threats" to American financial stability and urged Congress to pass U.S. Treasury Secretary Henry M. Paulson’s $700 billion plan to excise devalued - and even worthless - assets from the banking system, Bloomberg News reported. Noting that "economic activity appears to have decelerated broadly," Bernanke told members of the Senate’s Joint Economic Committee that "stabilization of our financial system is an essential precondition for economic recovery."
Bernanke Moves Closer to Rate Cut as Risks to Economy Intensify Federal Reserve Chairman Ben S. Bernanke moved closer to cutting interest rates, signaling that risks to U.S. growth are greater than policy makers saw them just last week. The "intensification" of the financial crisis in recent weeks is curbing Americans' access to borrowing, making the outlook for consumer spending "sluggish at best," Bernanke told lawmakers in Washington yesterday. While he noted that risks to inflation remain, the Fed chief's testimony focused on "grave threats" to the banking system.
Bringing Down Wall Street as Ratings Let Loose Subprime Scourge Frank Raiter says his former employer, Standard & Poor's, placed a "For Sale" sign on its reputation on March 20, 2001. That day, a member of an S&P executive committee ordered him, the company's top mortgage official, to grade a real estate investment he'd never reviewed. S&P was competing for fees on a $484 million deal called Pinstripe I CDO Ltd., Raiter says. Pinstripe was one of the new structured-finance products driving Wall Street's growth. It would buy mortgage securities that only an S&P competitor had analyzed; piggybacking on the rating violated company policy, according to internal e-mails reviewed by Bloomberg.
Covered Bonds Head for Worst Month Since 1999 on Credit Turmoil Covered bonds, securities which Treasury Secretary Henry Paulson has advocated to boost U.S. mortgage lending, are poised for their worst month this decade as credit market turmoil erodes investor confidence in the top-rated debt. The bonds have handed investors a 1.12 percent loss this month, the biggest decline since they tumbled 1.41 percent in June 1999, according to Merrill Lynch & Co.'s European Covered Bond Index. Investors are demanding the highest yields, or spreads, to buy the securities relative to government debt in almost eight years.
Libor Soars on Concern Bank Bailout Will Be Diluted Money-market rates around the world soared on mounting concern the U.S. Treasury's $700 billion bailout plan will be diluted as it makes its way through Congress, causing financial institutions to hoard cash. The three-month London interbank offered rate, or Libor, that banks charge each other for dollar loans jumped today by the most since 1999 and the euro rate rose to the highest level since November 2000. Rates in Hong Kong and Singapore climbed as Bank of East Asia Ltd. faced a run on deposits. The difference between the three-month dollar rate and the overnight indexed swap rate, the Libor-OIS spread, widened to the most on record.
New home sales plummet in August, prices tumble New home sales plunge in August to slowest pace in 17 years as prices fall by record amount New home sales tumbled in August to the slowest pace in 17 years, while the average sales price fell by the largest amount on record, demonstrating the depth of the problem that Washington is trying to solve. The Commerce Department said Thursday that new homes sales fell by 11.5 percent in August to a seasonally adjusted annual sales rate of 460,000 units, the slowest sales pace since January 1991. It was a much bigger sales decline than the small 1 percent drop that economists had been expecting. The average price of a new home sold in August dropped by a record amount of 11.8 percent to $263,900, compared to the July average of $299,100. The median price was also down, falling 5.5 percent to $221,900.
Jobless claims pushed to 7-year high Hurricanes Ike and Gustav and weak economy push jobless claims to 7-year high New claims for unemployment benefits jumped last week to their highest level in seven years due to the impact of a slowing economy and Hurricanes Ike and Gustav, the Labor Department reported Thursday. The department said new requests for jobless benefits for the week ending Sept. 20 increased by 32,000 to a seasonally-adjusted 493,000, much higher than analysts' expectations of 445,000. Wall Street was more focused on Washington, though, where lawmakers and the administration appeared to be moving closer to a $700 billion bailout package for the financial system. Stocks rose, with the Dow up more than 200 points in early trading.
GE cuts 3Q forecast, citing financial market woes General Electric lowers profit forecast, plans to boost reserves on financial market woes General Electric Co., whose shares have been battered by anxiety over the health of its big loan and lease business, lowered its earnings forecast on Thursday, saying the unit's profits were falling and that it was taking action to bolster its reserves. The moves, prompted by "unprecedented" weakness and volatility in the markets, come as Wall Street grapples with the collapse of Bear Stearns and Lehman Brothers, the government takeover of insurer AIG, and the fierce debate over a $700 billion plan for Washington to bail out banks weakened by risky mortgage-backed securities.
US Democrats claim Wall St. bailout breakthrough Democratic Rep. Barney Frank said on Wednesday Democrats had reached an agreement to stem one of the worst U.S. financial disasters in decades, and that there would be enough votes to pass the measure and send it to President George W. Bush to sign into law. "We now have between House and Senate Democrats an agreement on what we think should be in the bill, and we have a meeting scheduled at 10 a.m. tomorrow to meet with the Republicans," said Frank, chairman of the House of Representatives Financial Services Committee. Proponents of a rescue plan have expressed hope that a bill could be delivered to Bush within days. While the Bush administration had asked Congress for $700 billion for an unprecedented Wall Street bailout, Frank said that amount might not be delivered all at once. "One tranche doesn't work," he said, adding that "safeguards" were needed.
Bush pitches bailout, calls summit McCain suspends campaign for crisis President Bush said that the U.S. economy is "in danger" but that his administration is responding with "decisive action," during a nationally televised prime time address Wednesday night. Congressional leaders, meanwhile, signaled they were nearing agreement on a rescue package and said they would draft a final bill in the morning. And the president announced he has invited the two presidential candidates and congressional leaders from both parties to the White House Thursday morning "to help speed our discussions."
Fixing the bail-out Wall Street and Washington are never soulmates. Building a coalition to bail out financiers with public money would never be easy, especially when this involves massive spending without clear aims during an election cycle. Last weekend, Hank Paulson, US Treasury secretary, unveiled a plan to save US finance by setting up a $700bn fund to buy mortgage-backed securities. By getting them at a price above current market price but below their “fair value”, the taxpayer should make a profit, the scheme would establish a floor price for these securities, bank capitalisation would improve and banks would have swapped dubious assets for clean cash.
Win-win? No. The plan has some serious flaws. In particular, there is no reason why public sector buyers should be better at pricing these assets than private bidders. This could, potentially, lead to significant losses. This is the concern of congressional Democrats, who have suggested an alternative model.
Bailout Needs a Bridge to Main Street Although it's bad-mannered to crow when you've been right about something, consumer advocates, civil rights organizations and community housing groups should be shouting, "We told you so!" The Neighborhood Assistance Corp. of America, ACORN, NeighborWorks, the Center for Responsible Lending and the National Community Reinvestment Coalition, to name a few, were screaming about the subprime mess and predatory lending practices before it became prime-time news here and around the world. These organizations long ago predicted that a crisis in the housing market would result in a staggering increase in foreclosures and cause the largest loss of personal net worth since the Great Depression.
Paulson's Panic Why acting too hastily could create even more problems. Call it Paulson's Panic. That's both unfair and accurate. It's unfair because Treasury Secretary Hank Paulson didn't create the underlying conditions that led to today's financial turmoil, and the failure for not quelling it is shared by Federal Reserve Chairman Ben Bernanke. But it's also accurate, because as world financial markets verged on panic, Paulson himself panicked. He saw no remedy except a massive bailout: having the government buy up to $700 billion worth of risky bonds. Historians will judge whether his outsized proposal was necessary, but the notion that its congressional enactment—assuming that happens—would magically end the crisis seems like wishful thinking. Americans often delude themselves that all problems can be "solved" if only government would act "boldly." This may be another example.
Hedge funds move $100bn into safe havens Hedge funds charging hefty fees for sophisticated trading strategies aimed at outperforming the wider market have collectively parked $100bn in simple money market funds typically used by investors seeking safe rather than spectacular returns. Citigroup estimates that hedge funds have now placed $600bn in cash, and that $100bn of this is held in money market funds, normally seen as some of the safest places to invest cash. However, last week, those money funds became embroiled in the wider financial crisis to the point that the US Treasury was forced to offer a blanket guarantee on them as part of its attempts to prevent the spillover of the financial crisis into the $3,400bn sector. The extreme measures taken by the Treasury followed mounting fears that retail investors in the sector could be starting to panic and might withdraw funds on a large scale.
Auto industry to get $25 billion in federal loans U.S. automakers get relief in massive spending bill approved by the House In the next few years, consumers could see the fruits of $25 billion in government loans for the auto industry through a broader lineup of gas-electric hybrid vehicles, new plug-in electric cars and an expansion of fuel-efficient engines. The loans, approved by the House as part of a larger spending bill Wednesday, are intended to help the industry refurbish decades-old plants and develop advanced batteries and gas-electric hybrids. The loans are a major win for General Motors, Ford and Chrysler, who lobbied for the funding as they dealt with a sluggish economy and weak sales.
Jack Welch says U.S. faces "deep downturn" Former General Electric Co Chairman and Chief Executive Officer Jack Welch said the U.S. economy faces a deep downturn in coming quarters, and he supports a proposed $700 billion government rescue package for the financial sector. "I now believe we are in for one hell of a deep downturn," Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 will likely be "brutal." Until recently, Welch said, he had believed the U.S. economy could avoid recession, but he has changed his mind. "I am now caving," he said. "Get ready for real tough times. They're coming. There is no credit available."
Bush warns of 'long and painful recession' Bush warns of 'long and painful recession' if Congress fails to act on financial crisis President Bush on Wednesday warned Americans and lawmakers reluctant to pass a historic financial rescue plan that failing to act fast risks wiping out retirement savings, rising foreclosures, lost jobs, closed business and "a long and painful recession." He spoke just after inviting Democrat Barack Obama and Republican John McCain, one of whom will inherit the mess in four months, and key congressional leaders to an extraordinary White House meeting Thursday to hammer out a compromise.
Bush, candidates, lawmakers to meet on rescue plan Bailout: Bush asks candidates, congressional leaders to meet, yields on 'golden parachutes' President Bush summoned Barack Obama, John McCain and legislative leaders to an extraordinary White House summit, warning Americans and Congress on Wednesday night that failing to act on a $700 billion financial industry bailout could lead to "a long and painful recession." Earlier, Bush bowed to Democratic demands to limit the pay of executives whose tottering companies would be rescued. Democrats and Republicans were nearing agreement on the rescue legislation, the most sweeping government intervention in the market since the Great Depression, and set a meeting early Thursday to draft a bipartisan bill. Bush acknowledged in a prime time television address Wednesday night that the bailout would be a "tough vote" for lawmakers.
Executive pay limits in bailout Paulson gives in to Congress' demand Treasury Secretary Henry M. Paulson Jr. Wednesday agreed to congressional demands to limit the pay of bank executives in one of his biggest concessions to date to try to secure quick passage of a $700 billion bank bailout. The Treasury gave ground on the politically potent executive pay issue after Republicans and Democrats questioned why taxpayers should pay for multimillion-dollar "golden parachutes" and other perks for executives who got their banks into trouble with toxic mortgages. "The American people are angry about executive compensation and rightfully so," Mr. Paulson told the House Financial Services Committee Wednesday. "Many of you cite this as a serious problem, and I agree. We must find a way to address this in the legislation, but without undermining the effectiveness of this program."
Bernanke pledges to 'act as needed' Fed chief tells Congress Fed will act to minimize disruptions to business Federal Reserve Chairman Ben Bernanke said Wednesday that the worsening financial crisis could prove a major weight on U.S. business growth and pledged to “act as needed” to brace the wobbly economy. Bernanke and his Fed associates are fighting the biggest financial debacle since the Great Depression. On Wednesday, the Fed chief faced a second straight day of tough questioning on Capitol Hill about the Bush administration’s proposed $700 billion bailout plan.
Budget panel told of 'chaos' Orszag echoes need for action Failure to pass a substantial bailout package would risk "utter financial market chaos," Congressional Budget Office Director Peter Orszag told the House Budget Committee on Wednesday. The financial markets are expecting "a significant package" addressing the problems of liquidity and solvency, Mr. Orszag said. "If there's no package whatsoever," he told the committee, "it would be a very bad situation" that could produce a "a financial market meltdown, which would cause very severe economic dislocation, which may be on the order of magnitude of Great Depression-type effects." He warned of a "self-reinforcing negative spiral" that would damage the economy, intensify downward pressure on home prices, erode retirement savings and significantly raise the budget deficit.
Faber Says U.S. $700 Billion Rescue Plan Isn't Enough The U.S. government's $700 billion bank rescue plan won't be enough to revive the finance industry, said investor Marc Faber, who forecast the so-called Black Monday crash in 1987. The government should buy out home owners, Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report, told reporters on the sidelines of an investor conference in Hong Kong. He's also predicting Chinese economic growth to "disappoint" and Indian stocks to decline. "The U.S. has many problems," Faber said. "It's a period of hardly any growth in real terms in the economy for several years."
Bailout Plan a Blank Check Yale professor and co-founder of the Case/Shiller housing index Robert Shiller admires Treasury Secretary Henry Paulson. "He's decisive and not afraid to do unusual things," Shiller told The Wall Street Journal. "He's thrown out a plan that none of us understand." What bothers Shiller is that if Paulson's plan goes through, U.S. taxpayers will have effectively given the Treasury secretary a blank check he will then use to pay too much for whatever Treasury buys. "Nobody else can value these securities, how is Treasury going to value them?" Shiller asks. "They'll do it in some crazy and arbitrary way. I don't like the sound of this at all."
Hank Tries Damage Control After taking a drubbing in the Senate, the Treasury secretary yields on C.E.O. pay curbs Trying to recast the $700 million bailout proposal as a taxpayer rescue package rather than a boon to Wall Street, Treasury Secretary Hank Paulson today appeared to embrace curbs on executive compensation, a hot-button issue among thousands of people who are inundating their lawmakers with complaints about lending moguls at hand at the expense of taxpayers. "The American people are angry about executive compensation and rightfully so," Paulson told a jammed hearing of the House Financial Services Committee. "Many of you cite this as a serious problem. And I agree. We must find a way to address this in legislation without undermining its effectiveness."
U.S. Firms Gird for Hits and Draw On Credit Now $$ Fearful of tightening credit and bank failures, a growing number of companies are hoarding cash by taking the unusual step of tapping credit lines they don't actually need. During the past week, large companies like General Motors Corp. and Texas beauty-care retailer Sally Beauty Holdings Inc. have drawn funds typically set aside for short-term working-capital needs, such as retooling a plant or a product launch. These companies say it is best to get the cash now, for fear that a bank may withhold it or be unable to deliver the funds down the road.
Bailout Pact Gains Momentum Amid Push for Tough Controls $$ A dramatic flurry of activity late Wednesday, including a prime-time address by President George W. Bush, appeared to galvanize efforts to finalize the administration's $700 billion financial-markets bailout, despite continuing tensions and an occasionally heated debate on Capitol Hill. Democratic leaders hope to nail down details of the measure early Thursday, ahead of an extraordinary summit meeting in the afternoon at the White House, which will bring together Republican and Democratic presidential nominees, along with Mr. Bush and top leaders from Congress. Much is still uncertain and the contours of a likely bill could change. But the outlines of a potential compromise began to emerge late Wednesday after congressional leaders started considering restrictions on the bailout plan that could break the pool of money into installments.
SEC Presses Hedge Funds $$ The Securities and Exchange Commission ordered more than two dozen hedge funds to turn over trading information as it ramps up its investigation into whether traders were spreading rumors to manipulate shares, according to people familiar with the matter. The order, dated Sept. 22, identifies six financial institutions the SEC believes may have been subject to such manipulation. The order is akin to a subpoena and requires information to be handed over with a sworn statement attesting to its accuracy. It seeks a wide range of trading data and email communications over a period of three weeks involving American International Group Inc., Goldman Sachs Group Inc., Lehman Brothers Holdings Inc., Morgan Stanley, Washington Mutual Inc. and Merrill Lynch & Co., according to the order, which has been viewed by The Wall Street Journal.
Paulson Seeks Mortgage Value That Eluded Bear, Lehman U.S. Treasury Secretary Henry Paulson's bailout plan hinges on answering the question that has vexed global markets for more than a year and sunk two securities firms: What's a bad mortgage worth? Pay too much for hard-to-value mortgage debt held by banks and recouping taxpayers' $700 billion investment becomes less likely, Merrill Lynch & Co. analysts led by Akiva Dickstein wrote in a Sept. 22 report. Pay too little and the banks may either refuse to sell or be forced to hoard cash to make up for losses, the analysts said. "This pricing thing is the 800-pound gorilla, the absolute core of the whole plan," said Bert Ely, a banking industry consultant in Alexandria, Virginia. "If the government takes an aggressive posture, it benefits taxpayers but it means some of the banks will have serious capital problems. This has the potential of politically being very troubling."
Bailout cost unknown - CBO Budget agency can't give an estimate. But given the assets the Treasury would buy, they would return value. Average Americans aren't the only ones who think they don't have enough information to assess the Treasury's proposal to buy up to $700 billion of troubled mortgage assets. Even one of the country's top bean counters can't say with certainty how much the plan will ultimately cost taxpayers, if anything. The Congressional Budget Office says that it is "impossible" to estimate the bottom line cost of the Treasury's bailout proposal given its lack of specificity. However, in testimony before the House Budget Committee on Wednesday, CBO Director Peter Orszag said that the CBO expects the net cost to be "substantially less" than the $700 billion requested by the Bush administration. "It seems implausible that the U.S. would lose every cent on the dollar for the purchases it made," Orszag said.
Wall Street titans prepare to feel the pain Hank Paulson, US Treasury secretary, on Wednesday acknowledged that his proposed $700bn bailout of Wall Street would have to take aim at executive pay, bending to political anger in Congress. By abandoning his previous assertion that congressionally-mandated curbs on executive compensation would make the bailout less effective, Mr Paulson handed Washington lawmakers their first scalp – Wall Street bankers. “We must find a way to address this in legislation but without undermining the effectiveness of this programme,” he said. At a hearing on Tuesday, Christopher Dodd, the chairman of the Senate banking committee, categorically stated that the administration should “count on” executive pay being a part of any legislation approved by the Democratic-controlled Congress.
A Hole In Henry's Bailout Bucket Congress offered up a menu of grilled regulators on Wednesday, raking Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke over the coals as they questioned the $700.0 billion plan to bail out the American financial system. Paulson and Bernanke struggled to justify the massive expenditure of taxpayer money as legislators grew increasingly aggressive in their rolling interrogation. The two regulators, one with the field marshall manner of a chief executive and the other a contemplative academic, lost footing with politicians as they weakly sold their plan. It was the second day the bailout got a cool reception from lawmakers.
Bailout Not Necessary Banking industry expert Bert Ely has a stellar track record in predicting crises and calling false alarms. Now he says that the banking industry does not need subsidies and can recover fully without government help. "I have run the numbers looking at the capacity of the industry to pay the tab," Ely said during an interview at Institutional Risk Analytics. "It's not going to be cheap, but the banks can handle it and clean up their own mess. The losses will feed back through the industry to depositors and borrowers in the form of lower rates on deposits and higher cost of loans." Ely opposes the idea of the government putting preferred equity into solvent but troubled banks that cannot raise capital on reasonable terms. "There is absolutely no need for the Treasury to have the authority to inject capital into solvent banks that are temporarily unable to raise new capital," Ely asserts.
The Bailout Rush: Time Is Money or Haste Makes Waste? For Some Financial Experts, a Rushed Bailout Has Echoes of Hasty Bush Administration Policies Though the ongoing financial crisis was years in the making and its fallout will undoubtedly shape U.S. fiscal policy for years to come, the secretary of the treasury urged Congress Tuesday to act "quickly and cleanly" on approving a multibillion-dollar bailout measure. Time is money, goes the old proverb, but members of Congress -- both Democrat and Republican -- as well as a chorus of economists have questioned the urgency with which Bush administration officials want to act. They want a measure that would not only allow the federal government to buy up and resell $700 billion worth of troubled mortgages, but also put much of the authority to do so directly into the hands of the treasury secretary. . . . . "Weren't these the same guys who two months ago told us everything was fine? The administration is proposing the biggest bailout in history. Shouldn't we not rush into this?" he asked.
Barrick Sees 'Large-Scale' Gold Buying on Bailout Barrick Gold Corp. Chairman Peter Munk said bullion prices will go higher, driven by large-scale buying by "major, major" holders of dollars who fear the effects of the U.S. government's bailout plan on the currency. Central banks or sovereign wealth funds are among those likely to buy gold to diversify their investments and hedge against the risk of a weaker dollar, given the government's $700 billion plan to support the banking system, Munk said today. "That impact on holders of U.S. dollars in China or Russia or Abu Dhabi or Kuwait is that they're going to say, 'What is that going to mean for the U.S. dollar, and what alternative are we going to have?'" Munk said in an interview in New York. "So gold is going to have very powerful support." Munk, 80, founded Toronto-based Barrick in 1983 and made it the world's largest gold producer.
Dollar Falls Before Home Sales, Traders Raise Fed Rate Cut Odds The dollar ended two days of gains against the euro before a U.S. government report that economists estimate will show new home sales dropped and as traders raised bets for a Federal Reserve cut in interest rates next month. The dollar declined versus the British pound and Swiss franc as President George W. Bush said the U.S. is in the "midst of a serious financial crisis" and "our entire economy is in danger." Futures show 80 percent odds the Fed will lower borrowing costs in October compared with 58 percent on Sept. 23 as Congress delays a $700 billion bailout proposal.
Debt and the dollar “How are you, comrade Bush?” When Hugo Chãvez, Venezuela’s left-wing leader, cheers from the sidelines, the US government must be acting radically. The financial rescue plan is still being hammered out on Capitol Hill, but early estimates put next year’s fiscal deficit at about $1,000bn; a doubling of this year’s, to perhaps 7 per cent of GDP. Adding in the need to roll over existing borrowing, the Treasury will have to raise about $1,500bn in 2009. Yet the implications for the dollar are not all bad, if only because prospects are little better elsewhere. Indeed, when the last financial lifeboat – the Resolution Trust Corporation – began to buy bad assets in 1989, economic growth, house prices and equity markets did not bottom out for another 12-18 months. The dollar, however, traded sideways.
Clients of troubled money-market funds get help Two brokerage firms told their customers Wednesday that they will cover up to $83 million of losses in a fallen money market fund, while clients of a Putnam Investments fund that suddenly closed last week were told their assets will be moved to another firm. The moves came a week after the Reserve Primary Fund's underlying assets fell below $1 for each investor dollar put in. The extremely rare instance of a fund "breaking the buck" exposed investors to losses of pennies on the dollar, triggering fears that prompted the government on Friday to take emergency steps to prop up the more than $3 trillion money-market mutual fund industry. TD Ameritrade Holding Corp. said that it will cover up to $50 million of losses in the Primary Fund. Ameriprise Financial Inc., meanwhile, said that it will commit up to $33 million.
Bernanke stays neutral despite slowdown Inflation and slowdown are both "significant" concerns Despite signs of a broad economic slowdown, and historic upheaval in the U.S. financial industry, Federal Reserve Chairman Ben Bernanke seemed in no mood to step on the gas a bit and lower interest rates. In testimony prepared for the Joint Economic Committee, Bernanke said that risks of higher inflation and risks of a serious downturn were both "significant" concerns. For Fed watchers, this keeps the Fed stance on rates in balance, or "neutral," toward future interest rate moves. Many financial market participants were looking for signs that Bernanke may cut rates again soon. Investors in the futures market have increased the odds that the next move by the central bank would be a rate cut. The Fed has kept its benchmark short-term interest rate at 2% since April. The majority of the central bankers have agreed that is the proper level that provides some support for growth but is not so low as to spark inflation. Prior to the dramatic events in financial markets over the past month, there was a vocal minority on the central bank pushing for a rate increase.
'Trust me' on the bailout? That's just not good enough America's financial mess was caused to a great degree by a culture of lax regulation and even less oversight, in which ordinary Americans were told to trust the government and Wall Street to do the right thing. President Bush's proposed solution, which he wants Congress to authorize immediately, tells taxpayers to write a check for $700 billion and trust the government and Wall Street to do the right thing - with inadequate regulation and little oversight. We agree with Barack Obama that the administration's plan lacks regulatory muscle, and we agree with John McCain when he said: "When we're talking about a trillion dollars of taxpayer money, 'trust me' just isn't good enough."
The Rescue Needs Rescuing The rescue needs rescuing. And here's the deal. No deal, unless we change the deal, and fast. That's not democrats saying that about a $700 billion rescue package that looks like an increasingly fragile package. That's the republican presidential candidate John McCain. He's heading back to Washington. Suspending his campaign, and promising to roll up his sleeves. And get this, calling for cancelling Friday's big debate with Barack Obama to cobble together something...anything...to get this financial bailout off life support. President Bush himself set to address the nation tonight. He too sensing this thing ain't looking like quite a sure deal anymore. Treasury Secretary Hank Paulson got a clear sense of that in testy hearings today. So too fed head Ben Bernanke. They pitched. Congress bitched.
Washington Mutual May Be on Block Even as Washington moves to bail out financial institutions, the fortunes of Washington Mutual have spiraled downward. On Wednesday, Standard & Poor’s, a major credit rating agency, downgraded Washington Mutual’s debt further into junk territory, citing the increased chance that the company might have to be split up to facilitate a sale. Washington Mutual insists that it is well-capitalized and has adequate access to funding and noted “the rating actions do not affect the safety of customer deposits, which are insured up to the limits allowed” by the federal government. Brad Russell, a Washington Mutual spokesman, declined to comment on speculation about a possible sale. Still, shares fell 94 cents, or 29 percent, to $2.26 a share on Wednesday, leaving them down 83 percent this year.
Community banks react to rapid industry changes As Congress and the Bush administration spar over the proposed $700 billion bailout of troubled financial firms, small town bankers are making sure they're not forgotten. Community bank groups responded quickly as policy makers devised solutions that could cost some banks millions of dollars or create unfair competition between hometown banks and Wall Street investment firms. A central problem: About 800 banks nationwide have invested heavily in preferred stock in the mortgage companies Fannie Mae and Freddie Mac, said Paul Merski, the chief economist at the Washington-based Independent Community Bankers of America. The preferred stock was believed to be a safe investment for banks because it had the backing of the government and it provided a reliable revenue stream through quarterly dividends.
Mortgage Probes Focusing on How They Were Valued The FBI now says 26 companies are being investigated. Several ongoing investigations into the Wall Street crisis are increasingly focusing on asset valuation: the question of whether firms properly reported the value of their mortgage assets on their balance sheets, as well as whether mortgage-related securities were properly marketed to investors, sources have told CNBC. While sources describe asset valuation as a fertile area for investigation, they also say it's difficult to prove. With the market itself having trouble valuing the assets, it may be difficult to prove that firms intentionally overvalued them. "That's the million dollar question," one investigator said.
Goldman and Morgan Stanley prepare for battle Wall Street's two largest investment banks are girding themselves for a long battle. In the past three days, Goldman Sachs Group Inc and Morgan Stanley became bank holding companies after investors last week lost confidence in their freewheeling, high-risk broker model. They're also busy stockpiling capital, sacrificing near-term results as they focus on getting through the downturn. Goldman announced deals that will raise $15 billion from Warren Buffett's Berkshire Hathaway and public investors. Morgan Stanley plans to sell as much as a 20 percent stake for roughly $8.5 billion to Japan's Mitsubishi UFJ Financial Group, one of the world's largest banks.
Traders await bailout decision Tension grew in the financial markets Wednesday, sending stocks mostly lower as investors worried about the effectiveness of a still-emerging government plan to rescue banks from crippling debt. The credit markets also showed added strain, with rising demand for short-term Treasury bills, considered the safest of investments. Wall Street was calmer than during the first two days of this week, with stocks meandering in and out of positive territory while investors tried to determine what shape the $700 billion plan might take. But the atmosphere was uneasy enough to erode the market's initial enthusiasm over investor Warren Buffett's decision to invest $5 billion in Goldman Sachs Group Inc.
The power of negative thinking Greed - and its crafty sibling, speculation - are the designated culprits for the financial crisis. But another, much admired, habit of mind should get its share of the blame: the delusional optimism of mainstream, all-American, positive thinking. As promoted by Oprah Winfrey, scores of megachurch pastors and an endless flow of self-help best sellers, the idea is to firmly believe that you will get what you want, not only because it will make you feel better to do so, but because "visualizing" something - ardently and with concentration - actually makes it happen. You will be able to pay that adjustable-rate mortgage or, at the other end of the transaction, turn thousands of bad mortgages into giga-profits if only you believe that you can. Positive thinking is endemic to American culture - from weight loss programs to cancer support groups - and in the last two decades it has put down deep roots in the corporate world as well. Everyone knows that you won't get a job paying more than $15 an hour unless you're a "positive person," and no one becomes a chief executive by issuing warnings of possible disaster.
The Panic of 1907 There was more than a little déjà vu in the dead-tired appearances of Treasury Secretary Henry Paulson and Ben Bernanke of the Federal Reserve, the desperate late-night meetings, and the dramatic scenes in New York board rooms as the assets drain began to gurgle on Wall Street. It is said to be the worst financial crisis since 1929, and no one today can say whether anything will work, or whether another Great Depression is about to descend. But I am thinking of a financial crisis 101 years ago, the "Panic of 1907," as it was called. In late October of that year, the greatest banker of his day, and perhaps any day, J.P. Morgan, 70 years old but at the height of his power, returned early from a meeting of Episcopalians in Virginia to gather titans of Wall Street together in the red room of his famous library. He was suffering from a bad cold, but got through the following days and nights on heavy doses of Havana cigars. All around him markets were crumbling, venerable companies were going into receivership, banks were about to go under as crowds of people lined up to get their money out before the entire edifice collapsed.
U.S. gasoline inventories lowest since 1967 U.S. gasoline inventories shrunk to the lowest level since 1967 after Hurricanes Gustav and Ike shut Gulf Coast oil refineries, but the Bush administration said there is still no need to ask for emergency fuel supplies from European allies. The drop in fuel stocks has caused long lines at service stations in southern cities. Retail outlets, including those in Atlanta and Memphis and as far away as Ohio, have run out of fuel. Nonetheless, U.S. Energy Secretary Sam Bodman said on Wednesday the Bush administration would not reconsider making a request to the International Energy Agency for emergency gasoline supplies. Bodman said last week the Energy Department was "reasonably satisfied" with the recovery of the U.S. oil sector after the hurricanes.
GMAC's Future May Hinge on Inclusion in U.S. Government Rescue GMAC LLC's best chance of riding out the financial crisis intact may involve the lender finding its way into the U.S. government's $700 billion bank-rescue plan, analysts say. While Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke try to sell the package to Congress, Detroit-based GMAC is burning through cash and its bonds have fallen to a record low. The biggest drain is GMAC's Residential Capital LLC home-lending unit, which lost $1.9 billion in the second quarter -- 2-1/2 times more than the auto loan unit.
GM to put French factory, Hummer brand up for sale General Motors Corp.'s treasurer said Wednesday that the automaker is planning to put its Strasbourg, France, manufacturing operation and its Hummer truck brand up for sale, and it may announce more asset sales later this year. Company Treasurer Walter Borst said in a slide presentation at the Deutsche Bank Leveraged Finance Conference that the company expects to distribute marketing materials for both operations in October. The slides posted on GM's Web site Wednesday say the assets under review are worth $2 billion to $4 billion. The presentation also says GM continues to review other asset sales and will make more announcements in the fourth quarter.
Daimler in talks to sell the rest of Chrysler German carmaker says talking with private-equity firm Cerberus Germany's Daimler AG said Wednesday that it is in talks to sell its remaining stake in Chrysler LLC to private-equity firm Cerberus Capital Management LP. Daimler spokesman Han Tjan confirmed a report in Germany's Manager Magazin that the company is in talks to sell the 19.9 percent it owns in the U.S.-based automaker, but he would not say how long the discussions have taken place or give other details. Cerberus said in a statement that it approached Daimler about the purchase. If the transaction is successful "all existing industrial relationships between Daimler and Chrysler would continue," the statement said, giving no details.
Fitch downgrades GM's 'junk' rating further Analyst sees company struggling with demand, raw materials, capital Fitch Ratings downgraded General Motors Corp.’s credit rating deeper into junk status Monday, saying the automaker faces headwinds in almost every direction and its liquidity could drop to "minimum required levels" within the next year. The credit ratings agency said it reduced GM’s issuer default rating one notch to "CCC" from "B-." Both ratings are noninvestment, or junk, grade. Fitch analyst Mark Oline said GM faces pressures from tightening credit in the U.S., weakening overseas sales, rising raw materials prices, continued sales declines in North America and the need for a large amount of capital spending to transform its lineup from trucks and sport utility vehicles to smaller, more fuel-efficient models.
Managing the Bailout: He’d Do It for Nothing One of the chief concerns about the Treasury Department’s $700 billion bailout plan is that the same Wall Street firms that helped create the crisis could make a killing cleaning it up. William H. Gross, the manager of the country’s largest bond mutual fund, has a solution: he is offering to sort through the toxic assets — free. “We have a large and brilliant staff that can analyze and has analyzed subprime mortgages that can help the Treasury out,” Mr. Gross, the co-chief investment officer for the Pacific Investment Management Company, said in an interview at the company’s headquarters here. He added, "And I’d even be willing to say that if the Treasury wanted to use our help, it would come, you know, free and clear."
Buffett Considering Buying AIG Assets Bottomfeeder's bold buys with taxpayers playing backstop Billionaire investor Warren Buffett said on Wednesday his Berkshire Hathaway Inc insurance and investment company would consider buying some units from American International Group Inc, the insurer bailed out by the U.S. government. Buffett said he expressed interest in buying parts of the giant insurer over the September 13-14 weekend, when regulators and financial industry executives were holding emergency talks on problems that included the fate of Lehman Brothers Holdings Inc, which filed for bankruptcy protection on September 15. Speaking on CNBC television, Buffett said he "expressed an interest in one or two" AIG units that weekend, "but the pressures were such and the hole was deep enough that they simply couldn't get it worked out.
Credit crunch freezes hiring, expansion When small businesses can't get loans, job growth and economic expansion stall. After 41 years in business, Hull Printing shut down its printing presses for good in March, laying off 19 workers and closing one of the oldest family-run businesses in Barre, Vt. The catalyst: Hull Printing's bank slashed its line of credit, kicking off a death spiral that led to the company's collapse. "All of the equipment's gone and been liquidated," said Jon Hull, 32, whose grandparents started the commercial printing business in 1967. "The bank got all of their money back, but it left a lot of unsecured creditors that will never be paid back, including many other small businesses in town."
House approves bill to curb credit-card abuses House lawmakers on Tuesday voted to 312 to 112 to approve credit-card legislation that would curb fees and practices that critics have called unfair to consumers. The bill would ban retroactive interest-rate increases on existing balances and require advance notice of interest-rate hikes to cardholders, among other moves. "Amidst the financial turmoil on Wall Street, today the House took steps to help those on Main Street," said Rep. Carolyn Maloney, D-N.Y., who has spearheaded the legislation. "It's now abundantly clear that in the area of consumer credit, the same lack of reasonable regulations, transparency and prudent lending has led to a level of pain on Main Street that matches or exceeds the pain on Wall Street." Consumer advocates say the bill is needed to protect cardholders from overly aggressive fees. "We consider winning a House vote ... to be an important milestone because it sends a clear message to the Fed not to weaken proposed rules. Banks are begging the Fed to weaken rules," said Ed Mierzwinski, consumer program director with U.S. Public Interest Research Group.
Credit card insiders tell of deceptive practices Two former employees of credit card issuer MBNA, now owned by Bank of America, said on Wednesday they were forced to use aggressive and deceptive practices with customers in order to boost revenues. Cate Colombo, from Maine, said she signed up for a customer service job but was instead instructed to make insistent sales pitches aimed at getting MBNA customers deeper into debt. "I was hired to sell money," she said on a conference call organized by Americans for Fairness in Lending, an advocacy group. "We had a goal of selling $25,000 an hour, $4 million per month. And I was one employee among hundreds, just at this one site." To meet these goals, Colombo said she was told to turn every regular call from a customer into a sales call. She would do this by running the customer's name through the computer and finding out every possible line of credit they had ever obtained through MBNA.
U.S. Economy Faces Deep Downturn Former General Electric Co Chairman and CEO Jack Welch said the U.S. economy faces a deep downturn in coming quarters, and he supports a proposed $700 billion government rescue package for the financial sector. "I now believe we are in for one hell of a deep downturn," Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 would likely be "brutal." Until recently, Welch said, he had believed the U.S. economy could avoid recession, but he has now changed his mind. "I am now caving," he said. "Get ready for real tough times. They're coming. There is no credit available." Welch said mortgage lenders, legislators, investment bankers and others are all to blame for the crisis, which stemmed from easy credit and investors' appetite for yield. "The problem was money didn't cost anything," Welch said. "People took swings."
Occidental to buy Midwest oil fields for $1.25B Occidental Petroleum to buy rest of Plains Exploration's stake in Midwest oilfields for $1.25B Occidental Petroleum Corp. said Thursday it will buy out Plains Exploration & Production Co.'s stakes in two jointly operated Midwest oil and gas fields for $1.25 billion. Los Angeles-based Occidental currently owns 50 percent of the properties, which include the Permian Basin in west Texas and New Mexico, and the Piceance Basin in Colorado. The deal is expected to close in the fourth quarter, pending government approval. The facilities currently produce about 13,000 barrels of oil equivalent per day, and have about 92 million barrels of oil equivalent proved reserves. At the Piceance Basin alone, Occidental said that during the first half of 2008 it produced 50 million cubic feet of natural gas per day, and expects to hit 200 million cubic feet per day by 2010.
Precursor to WAR? . . . or an excuse to take focus off of Wall Street Bailout?
Pentagon Says Pakistan Fired on U.S. Aircraft, Expects Explanation Pakistani troops fired on U.S. helicopters patrolling eastern Afganistan Thursday, the Pentagon said, adding that it expects an explanation Two American OH-58 reconnaissance helicopters, known as Kiowas, were on a routine afternoon patrol in the eastern province of Khost when they received small arms fire from a Pakistani border post, said Tech Sgt. Kevin Wallace, a U.S. military spokesman. There was no damage to aircraft or crew, officials said. "They did not cross the border and they did not fire back," Wallace said. The Pakistani military disputed that assertion, saying its troops fired warning shots when the two helicopters crossed over the border — and that the U.S. helicopters fired back.
Pakistan Said to Fire on U.S. Copters Pakistani troops fired at American reconnaissance helicopters patrolling the Afghan-Pakistan border Thursday, heightening tensions as the U.S. steps up cross-border operations in a region known as a haven for Taliban and al-Qaida militants. Two American OH-58 reconnaissance helicopters, known as Kiowas, were on a routine afternoon patrol in the eastern province of Khost when they received small arms fire from a Pakistani border post, said Tech Sgt. Kevin Wallace, a U.S. military spokesman. There was no damage to aircraft or crew, officials said. ''They did not cross the border and they did not fire back,'' Wallace said. The Pakistani military disputed that assertion, saying its troops fired warning shots when the two helicopters crossed over the border -- and that the U.S. helicopters fired back.
Pakistani Troops Fire on US Helicopters at Border Pakistani troops fire on US helicopters at Afghan border; US demands explanation Pakistani troops fired at American reconnaissance helicopters patrolling the Afghan-Pakistan border Thursday, heightening tensions as the U.S. steps up cross-border operations in a region known as a haven for Taliban and al-Qaida militants. Two American OH-58 reconnaissance helicopters, known as Kiowas, were on a routine afternoon patrol in the eastern province of Khost when they received small arms fire from a Pakistani border post, said Tech Sgt. Kevin Wallace, a U.S. military spokesman. There was no damage to aircraft or crew, officials said. "They did not cross the border and they did not fire back," Wallace said. The Pakistani military disputed that assertion, saying its troops fired warning shots when the "When the helicopters passed over our border post and were well within Paskitani territory, own security forces fires anticipatory warning shots. On this, the helicopters returned fire and flew back," a Pakistani military statement said. The Pakistani military said the matter was "being resolved" in consultations between the army and the NATO force in Afghanistan. A NATO statement said the militaries were "working together to resolve the matter.
Israel's Peres calls Iranian leader a "disgrace" Israeli President Shimon Peres called Mahmoud Ahmadinejad a danger and a disgrace on Wednesday, rebuking the Iranian president for his vitriolic condemnation of Israel and Zionism at the United Nations. Taking the podium a day after Ahmadinejad's speech blaming "Zionist murderers" for everything from the Wall Street crisis to Russia's invasion of Georgia, Peres said: "His appearance here is already a shame." This week's annual General Assembly gathering of world leaders was the latest setting for a long-running war of words between Israel and Iran as Tehran presses ahead with its nuclear program in defiance of U.N. sanctions. Israel's Peres says Ahmadinejad 'taking world for a fool' Israeli President Shimon Peres sharpened his attack on Iran's President Mahmoud Ahmadinejad on Thursday, accusing him of "taking the world for a fool" in his statements to the UN General Assembly. "(Ahmadinejad) has committed a fatal error, and is taking the world for a fool. He thinks he is an absolute prophet, proclaiming that there is no more hope for the United States or Israel," Peres told Israeli public radio. "It is shameful to Islam, to all religions, to the United States, and to democracy. His voice does not come from heaven but hell and one day it will pass away like a breeze," he said in the interview conducted in New York. Israel has long considered Iran its greatest threat, both because of Tehran's accelerating nuclear programme and repeated statements by its leaders predicting the demise of the Jewish state.
Russia will not meet with U.S. on Iranian nuclear program Russia said that it would not participate in a meeting with the United States this week to discuss Iran's nuclear program, the most significant indication yet of how Russia's war with Georgia has spoiled relations regarding other security issues. Russia's move apparently effectively scuttled the meeting. The Russian Foreign Ministry issued a biting statement Tuesday that criticized remarks made last week by the U.S. secretary of state, Condoleezza Rice, who declared that Russia had taken "a dark turn" away from democracy and respect for international norms. "We would very much like Washington, in the end, to make up its mind what kind of relations they want with Moscow," a ministry spokesman, Andrei Nesterenko, said in the statement. "If they want to punish Russia, that is one thing. If they agree that we have common interests that need to be jointly advanced, then that's another."
Pentagon: crashed "drone" in Pakistan not from U.S. The Pakistani military said on Wednesday a pilotless aircraft that crashed in the northwestern region of South Waziristan had been recovered, but the Pentagon denied any U.S. drone had been lost in the area. Other countries with troops in the NATO-led force in neighboring Afghanistan use unmanned aerial vehicles, but the United States is the only one known to fly them inside Pakistan. Britain also said none of its aircraft operating in Afghanistan were missing. A spate of recent missile attacks by unmanned U.S. aircraft in Pakistan has strained ties between the allies. Pakistan has said such attacks are a violation of its sovereignty and the army has vowed to defend Pakistani territory. The U.S. military said on Wednesday one of its aerial vehicles had gone down with engine problems in Paktika province in eastern Afghanistan, about 60 miles west of the Pakistani border on Tuesday, but U.S. forces had immediately recovered the aircraft. Pentagon spokesman Bryan Whitman said there were no reports of any downed unmanned aerial vehicles in Pakistan. It was not immediately possible to reconcile the Pakistani and U.S. statements.
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