October 2008 Economic Phenomena

[AlaskaDenise]

Re: October 2008 Economic Phenomena

Reading a report about Asian markets 2 hours before Singapore closes. Rhetoric examples....

Extreme risk aversion strengthened the yen and U.S. dollar as Asian currencies continued to sink, while the Australian dollar and British pound plummeted against the dollar. Credit default spreads blew out while gold gained.

"It's not a meltdown, it's an evaporation," said KR Choksey managing director Deven Choksey in India.

"Shellshocked. That is probably the best way to describe market psychology right now, as defined by Dictionary.com - stunned, distressed or exhausted from a prolonged trauma or an unexpected difficulty," said analysts at RBC Capital Markets.

"It's beyond panic," said Oh Hyun-Seok, manager of Investment Information at Samsung Securities in Seoul. "People are selling whatever they can sell," said a general manager at a brokerage in Japan.

"Until people know what their position is and who is going to survive this, it will keep going. It's total and utter panic," said a senior LME trader in Singapore.

"Everyone who has assets, whether commodities or stocks, wants to exit and change those assets to cash. It's not only a demand issue," said Ken Hasegawa, a broker at Newedge Japan.

http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=65fc30bd-c78f-4fa0-bd72-75163958249b

 

[sharon sanders]

Re: October 2008 Economic Phenomena

See this companion thread for ideas to remediate this financial crisis:

http://www.flutrackers.com/forum/showthread.php?t=82557

 

[Giuseppe]

Re: Global Financial Crisis 2008 - Ideas to Fix This?

Re: Global Financial Crisis 2008 - Ideas to Fix This?

Courtesy, The Nation. (EDITED)

The Woman Greenspan, Rubin & Summers Silenced

posted by Katrina vanden Heuvel on 10/09/2008 @ 11:46pm

"Break the Glass" was the code-name high-level Treasury Department figures gave the $700 billion bailout; it was to be used only as a last- resort measure.

Now millions have been sprayed and damaged by broken glass.

But more than a decade ago, a woman you're likely never to have heard of, Brooksley Born, head of the Commodity Futures Trading Commission-- a federal agency that regulates options and futures trading--was the oracle whose warnings about the dangerous boom in derivatives trading just might have averted the calamitous bust now engulfing the US and global markets.

Instead she was met with scorn, condescension and outright anger by former Federal Reserve Chair Alan Greenspan, former Treasury Secretary Robert Rubin and his deputy Lawrence Summers.

In fact, Greenspan, the man some affectionately called "The Oracle," spent his political capital cheerleading these disastrous financial instruments.

On Thursday, the New York Times ran a masterful and revealing front page article exposing the culpability of Greenspan, Rubin and Summers for the era of dangerous turbulence we live in.

What these "three marketeers" --as they were called in a 1999 Time magazine cover story--were adept at was peddling the timebombs at the heart of this complex crisis: exotic and opaque financial instruments known as derivatives--contracts intended to hedge against risk and whose values are derived from underlying assets.

To cut to the quick, Greenspan, Rubin and Summers opposed regulating them.

"Proposals to bring even minimalist regulation were basically rebuffed by Greenspan and various people in the Treasury," recalls Alan Blinder, a former Federal Reserve board member and economist at Princeton University, in the Times article.

In 1997, Brooksley Born warned in congressional testimony that unregulated trading in derivatives could "threaten our regulated markets or, indeed, our economy without any federal agency knowing about it." Born called for greater transparency--disclosure of trades and reserves as a buffer against losses.

Instead of heeding this oracle's warnings, Greenspan, Rubin & Summers rushed to silence her.

As the Times story reveals, Born's wise warnings "incited fierce opposition" from Greenspan and Rubin who "concluded that merely discussing new rules threatened the derivatives market."

Greenspan deployed condescension and told Born she didn't know what she doing and she'd cause a financial crisis. (A senior Commission director who worked with Born suggests that Greenspan and the guys didn't like her independence. "

Brooksley was this woman who was not playing tennis with these guys and not having lunch with these guys. There was a little bit of the feeling that this woman was not of Wall Street.")

In early 1998, according to the Times story, one of the guys, Larry Summers, called Born to "chastise her for taking steps he said would lead to a financial crisis.

But Born kept at it, unwilling to let arrogant men undermine her good judgment. But it got tougher out there. In June 1998, Greenspan, Rubin and the then head of the SEC, Arthur Levitt, Jr., called on Congress "to prevent Ms. Born from acting until more senior regulators developed their own recommendations." (Levitt now says he regrets that decision.)

Months later, the huge hedge fund Long Term Capital Management nearly collapsed--confirming some of Born's warnings. (Bets on derivatives were a key reason.)

"Despite that event," the Times reports, " Congress (apparently as a result of Greenspan & Summer's urging, influence-peddling and pressure) "froze" Born's Commissions' regulatory authority. The next year, Born left as head of the Commission.Born did not talk to the Times for their article.

What emerges is a story of reckless, willful and arrogant action and behaviour designed to undermine a wise woman's good judgment.

The three marketeers' disdain for modest regulation of new and risky financial instruments reveals a faith-based fundamentalist approach to the management of markets and risk.

If there is any accountability left in our system, Greenspan, Rubin and Summers should not be telling anyone how to run anything.

Instead, Barack Obama might do well to bring back Brooksley Born and promote to his team economists who haven't contributed to the ugly mess we're in.
-

http://www.thenation.com/blogs/edcut/370925
----

 

[sharon sanders]

Re: October 2008 Economic Phenomena

Paulson endorses bank stock purchase plan

By MARTIN CRUTSINGER ? 16 minutes ago
WASHINGTON (AP) ? Treasury Secretary Henry Paulson said Friday that the Bush administration will move ahead with a plan to buy stock in financial institutions.....

"As we develop plans to purchase equity ... we are working to develop a standardized program that is open to a broad array of financial institutions," Paulson said in a statement....


Paulson said the government's program would be designed to complement the efforts of banks to raise fresh capital from private sources. He said that the government's stock purchases would be of nonvoting shares so that the government will not have power to run the companies.....




http://ap.google.com/article/ALeqM5hQC8hiYQJGPIlP-U7tAZ_9p2Oe2gD93NTOAG0

 

[AlaskaDenise]

Re: Global Financial Crisis 2008 - Ideas to Fix This?

Re: Global Financial Crisis 2008 - Ideas to Fix This?

....reveals a faith-based fundamentalist approach to the management of markets and risk.

What????

Are they saying the source of the distain came from the fundamentalists or that the fundamentalists claimed a religious justification for their philosophy?

Given the usuary laws of the Torah, New Testament, & Koran, how can someone say their actions are based on their religion?

.

 

[sharon sanders]

Beijing Restrains Buying Urge

Beijing Restrains Buying Urge

BEIJING - The Wall Street fire-sale has prompted economic pundits in China and elsewhere to call on Beijing to snap up stakes in United States financial institutions and further China's influence on global financial power.

From Mexico to South Africa, investors and strategists are calling on China's leaders to use the opportunity of the spreading financial crisis to help determine the new set of financial rules that will emerge from it.

"China cannot easily afford to pass up such an opportunity," says Chen Jie, professor of economics at Shanghai Fudan University. "We have been anxiously trying to find investment opportunities for our financial capital but before the crisis there existed a myriad of visible and invisible barriers for Chinese investment overseas, particularly in the United States."

China should lead rescue efforts for the US financial crisis, Mexican tycoon Carlos Sim, one of the world�s richest men, told the press last week.

"China is now the most important country to help responsibly in this crisis," he said. "In the past, developed countries had reserves and financed developing countries, while today developed countries, especially the United States, are being financed with resources from developing countries".

But China's response to expectations at home and abroad has been unassuming. Although fortified with great liquidity and large reserves, Chinese banks and government investors have preferred to sit on their hands rather than go on a shopping spree of tumbling Wall Street firms.

Chinese politicians have expressed support for the US bailout plan to save banks and arrest the financial turmoil but stopped short of pledging to do more than keep their own financial house in order.

Premier Wen Jiabao summed up China's cautious position: maintaining "steady and fast growth" is the "biggest contribution" China can make to help the world overcome the current financial crisis stemming from the United States, he said during an inspection tour of Chinese provinces this week.

Chinese bank officials have dismissed as groundless reports that China plans to buy up to US$200 billion worth of US Treasuries to help Washington combat the deepening financial crisis. In a statement published on the central bank's website this week, governor Zhou Xiaochuan said the bank views a "stable currency and job creation" as priorities in the current situation.

Some of Beijing's conservatism stems from the fact that the global credit crisis has walloped the value of the Chinese government's initial batch of investments in US financial institutions such as Morgan Stanley and Blackstone Group. In Internet forums and the press at home the government has been criticized for taking equity stakes in US financial companies that have nose-dived.

"No one can see the light at the end of the tunnel for the US crisis and in view of our past blunders it will be prudent of China to observe more and act less," the Investors Daily said last week.

Several media outlets have engaged in predictions about the decline of US dominance in world affairs, presenting the demise of Wall Street as a retribution for US "arrogance and greed".

"The crisis that befell ordinary American people is caused by the greed of Wall Street bankers," Wang Songqi, financial analyst with the Chinese Academy of Social Sciences, told the China Business Journal.

An editorial in the Economic Observer said: "The United States is no longer the omnipotent savior and global protector of American values ... The demise of Wall Street means that the cornerstone of this global financial empire has been broken and no one knows whether it can ever be repaired."

Officially, few Chinese officials have shared in the European politicians' criticism of the Anglo-Saxon model of capitalism, which they blame for spawning the global financial crisis.

While embarrassed by the nosedive of its initial Wall Street investments, Beijing has more pressing tasks than assigning blame for the crisis. Chinese policymakers have been racing to prevent the country's economy from slowing too sharply because of global economic forces.

The legitimacy of the ruling communist party rests on maintaining a robust economic growth and providing prosperity to its people. Over the past 30 years of reforms, Chinese people have grown richer but not much freer and the country's rulers have staked their future on efforts to preserve the status quo by fueling continuous economic growth.

A survey by the Pew Global Attitudes Project this spring found that 86% of Chinese said they were content with their country's direction, double the percentage who said the same thing in 2002. By contrast, only 23% of Americans polled in the survey said they were satisfied with their country's direction.

Yet China's growth, fueled by foreign investment and exports, is interlinked to the global economy.

Any radical downturn in economic prosperity could undermine the communist party's chance of holding on to its political scepter.

There are already signs of a slowdown. Growth in GDP dropped to 10.1% in the second quarter from 11.9% in all of 2007.

To counter the fallout, in recent weeks Beijing has made a u-turn on its tight monetary policy set last year to fight overheating and inflation. The government relaxed caps on bank lending and approved new tax breaks for textile exporters, which have been hard hit by weakening demand and rising costs.

Experts anticipate that the forthcoming plenum of the central committee of the communist party would approve even more decisive measures of easing fiscal and monetary policies to prevent the global financial crisis from dramatically slowing down the Chinese economy.

(Inter Press Service)

http://www.atimes.com/atimes/China_Business/JJ10Cb01.html

 

[Sally Furniss]

Re: October 2008 Economic Phenomena

Finance Minister Michael Cullen says there is no evidence of any risk to New Zealand's banking institutions - nor is any anticipated. The New Zealand Government on Sunday moved to guarantee all bank deposits for two years, for banks which opt into the scheme.
Dr Cullen says he acted following public concern about the stability of the country's banking sector.
He says New Zealand was in the uncomfortable position of being the only Western country not offering any guarantee on deposits.
Australia has guaranteed deposits in banks, building societies and finance companies for the next three years.
If all banks take up the scheme, Dr Cullen said it will leave the Government with a contingent liability of about $150 billion.
Reaction

The National Party welcomed the announcement, saying it expects the Government to set up a bipartisan process to work through the details.
Finance spokesperson Bill English told Morning Report that now is not the time for either major party to play politics with the issue.
But he said National was not consulted about the Government's move and he would expect to be involved in any further policy discussions on responses to the international financial crisis.
The New Zealand Stock Exchange says events overseas have forced the Government to announce it will guarantee financial deposits.
Chief executive Mark Weldon says it would dent public confidence in this country's banking system if it was not covered by an insurance scheme.
He says customers are likely to leave banks that don't take up the guarantee, in favour of those that do.
Contracts

The guarantee would take the form of a bilateral contractural agreement between the Crown and the individual banking institutions which take up the guarantee.
Banks with deposits of more than $5 billion will be charged to have the guarantee.
A fee of 10 basis points per annum will be charged on total deposits above $5 billion.
This means that a bank with $20 billion in retail deposits would pay $15 million in fees per annum.
If all banks take it up, it will leave the Government with a contingent liability of about $150 billion.
Dr Cullen said the deposit guarantee will be introduced for a two year term in the first instance, which will give time to see how well international financial markets stabilise in the months ahead.


http://www.radionz.co.nz/news/stories/2008/10/13/124379a67780

 

[AlaskaDenise]

Re: October 2008 Economic Phenomena

Here's a site that shows when all markets open and close:
http://www.marketclocks.com/index.php?content=market&region=7

I see NZ is open before Asian markets - and bank stocks are UP.

.

 

[sharon sanders]

Re: October 2008 Economic Phenomena

Thanks AlaskaDenise!

China's Exports May Cool, Adding Pressure for Fiscal Stimulus



Oct. 13 (Bloomberg) -- China's export growth probably cooled, increasing the likelihood the government will step up spending to stimulate economic growth after the global financial crisis prompted two interest-rate cuts in a month.


Exports rose 20 percent in September from a year earlier after gaining 21.1 percent in August, according to the median estimate of 13 economists surveyed by Bloomberg News.


China will boost domestic demand to sustain the nation's ``fast and stable'' economic growth, central bank Deputy Governor Yi Gang said in Washington this weekend. Economists say policy choices include spending on infrastructure, looser restrictions on lending, tax cuts, more reductions in borrowing costs and slower gains by the yuan against the dollar.


``We expect export growth to decelerate sharply in the coming quarters,'' said Wang Tao, an economist at UBS AG in Beijing. ``As the financial crisis develops, the most important concern for China is economic growth and the government will ease both fiscal and monetary policy to protect it.''


China cut interest rates last week as the Federal Reserve, European Central Bank and four other central banks lowered borrowing costs in a failed bid to thaw credit markets.


``Despite the negative shocks of the financial crisis, China will accelerate transformation of the growth model, promote domestic demand -- especially household consumption -- and maintain fast and stable growth,'' Yi said in a statement in Washington, where attended the annual meetings of the International Monetary Fund and the World Bank.


`Greatest Global Contribution'


``For a country with a population of 1.3 billion, its greatest global contribution is to sustain fast and stable economic development,'' Yi said.
Trade figures may be released as early as today. The surplus may fall to $24.5 billion from August's record $28.7 billion, the survey showed.
Export growth is down from 25.7 percent for all of 2007. A central bank index measuring orders for overseas shipments fell in the third quarter to the lowest level since July 2005, when China revalued its currency.
The International Monetary Fund said last week that China's economy can sustain growth of as much as 9.3 percent next year even as a global recession looms.


``In the past China has been successful in responding quite quickly to increase spending, particularly on infrastructure, to offset the decline in export growth,'' said Charles Collyns, deputy director of research at the IMF.


`The Boom Ends'


``The boom ends'' was the heading on a more pessimistic assessment from Royal Bank of Scotland Group Plc last week that cut a growth estimate for next year to 8 percent on slower exports and, mainly, weaker domestic demand. The 64 percent decline this year in the CSI 300 Index of stocks and slumping property prices in some cities are among drags on growth.


China's trade surplus will shrink by 4.3 percent this year to $251 billion on weaker demand, a stronger currency and increases in import prices, the Chinese Academy of Social Sciences estimated in a report last week. That will knock 0.3 percentage point off this year's economic growth, compared with a 2.6 percentage point contribution in 2007, it said.


Imports climbed 22.9 percent in September after rising 23.1 percent in August, the survey of economists showed. Falling prices for commodities such as copper and oil have trimmed the value of inward shipments.

More Rate Cuts


The People's Bank of China may cut rates three or four more times through 2009 and further ease a quota that limits how much banks can lend by year's end, according to Morgan Stanley. The nation's key one-year lending rate is 6.93 percent.


Reserve requirements for lenders are likely to keep falling and the government may cut taxes and increase spending, Merrill Lynch said last week.


The yuan gained 0.5 percent last quarter against the dollar, down from 2.3 percent in the previous three months, helping to shield exporters of toys, shoes and clothes by preventing their prices from rising more quickly overseas. UBS's Wang said she saw little room for more appreciation.
China's economic expansion slowed for a fourth straight quarter to 10.1 percent in the three months ended June 30. Third- quarter growth is due to be announced on Oct. 21.


UBS last week cut its forecast for this year's expansion to 9.6 percent from 10 percent.

http://www.bloomberg.com/apps/news?pid=20601080&sid=ambqF7UDvM1c&refer=asia

 

[sharon sanders]

Re: October 2008 Economic Phenomena

http://money.cnn.com/2008/10/13/markets/markets_newyork/?postversion=2008101315

Raging bulls

Dow jumps 936 points in biggest point gain ever. The Dow, S&P and Nasdaq all gain over 11%.



By Alexandra Twin, CNNMoney.com senior writer
Last Updated: October 13, 2008: 4:22 PM ET

NEW YORK (CNNMoney.com) -- Stocks rallied Monday afternoon, with the Dow up 976 points during the session, as investors bet that the worst of the credit crisis is over, following a series of global initiatives announced over the last few days.
The Dow Jones industrial average (INDU) ended 936 points higher, after having risen as much as 976 points during the session. The advance was the largest ever during a session on a point basis. The point gain was equal to 11.1%, the fourth-best day ever on a percentage basis.
The Standard & Poor's 500 (SPX) index added 11.7% and the Nasdaq composite (COMP) added 11.8%.
Stocks were buoyant Monday as investors welcomed a global effort to unfreeze the credit market and get money flowing through the system again. Although stocks reacted positively, credit markets barely budged.
"We had some good news this morning from the Fed and the other central banks, but we were also oversold on an historic level and due for a big bounce," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
Last week was the Dow's worst ever, ending a stunning eight-session selloff that seared 2,400 points off the blue-chip indicator. That represented a 22% decline in the Dow, something not seen since at least the '30s, wiping out $2.4 trillion in market value, according to losses in the Dow Jones Wilshire 5000, the broadest measure of the market.
Detrick said that not only had the Dow fallen for eight-straight sessions, but it had also fallen for eight-straight weeks.
"We basically saw a crash, and so you're going to see a big bounce off that," he said.
Whether the rally can continue beyond the short-term is unclear, as analysts debate whether the market really put in a bottom on Friday.
Christopher Colarik, portfolio manager at Glenmede Investment Management, said he thinks the market likely put in a bottom Friday when it touched session lows.
"We saw a lot of desperate selling over the last few weeks and at some point, these stocks start to look attractive," he said.
Previous efforts to get the credit markets moving again had failed to reassure investors, but the latest developments seemed to provide reassurance.
"Seeing that there's going to be more of a global commitment to resolving the financial crisis has given confidence to investors and gotten them to put some money to work," Colarik said.
Gains were broad based, with 29 out of 30 Dow stocks rising. Highlights included: GM (GM, Fortune 500), up 33%; Alcoa (AA, Fortune 500), up 22%; Chevron (CVX, Fortune 500), up 21%; American Express (AXP, Fortune 500), up 20%; and MIcrosoft (MSFT, Fortune 500), up 18%
96 of the Nasdaq 100 (NDX) gained, as did 472 of the S&P 500 components.
Market breadth was positive. On the New York Stock Exchange, winners topped losers 10 to 1 on volume of 1.14 billion shares. On the Nasdaq, advancers beat decliners 5 to 1 on volume of 1.84 billion shares.
The latest: On Monday, Neel Kashkari, assistant Treasury Secretary and interim head of the $700 billion bailout program - outlined some of the steps the government will take in the weeks and months ahead. The program includes buying soured mortgage assets from banks and buying stock in a number of financial institutions. (Full story)
Meanwhile, House Democrats are meeting Monday to put together a second economic stimulus package that could be worth $150 billion, although House Republicans are reportedly skeptical, CNN reports.
World leaders met over the weekend to come up with solutions. After an emergency meeting Sunday, 15 European nations agreed to help their troubled banks by adding capital and guaranteeing inter-bank lending. (Full story)
Additionally, the British government said it would pump $63 billion into three of the country's banks.
And the U.S. central bank said it will offer an unlimited amount of dollars to three other central banks in an effort to keep money flowing. (Full story)
The Fed announced an emergency rate cut last week, has pledged to help U.S. companies by buying short-term debt directly from businesses and has made billions available to banks in return for damaged assets.
Morgan Stanley: The company said it has completed plans to sell part of itself to Japanese bank Mitsubishi UFJ. The $9 billion deal gives the company a 21% stake in Morgan Stanley. Morgan (MS, Fortune 500) shares jumped 55% and topped the NYSE's most-actives list.
It was one of many bank stocks gaining. Other advancers included Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and Merrill Lynch (MER, Fortune 500).
Automakers: General Motors (GM, Fortune 500) surged 32% and Ford Motor (F, Fortune 500) gained 27%, after the automakers had been among the hardest hit stocks in the recent selloff. Reports surfaced over the weekend that GM has held talks with Chrysler about a possible merger, although analysts say GM would need to raise cash ahead of any potential deal.
Credit markets still frozen: The recently announced initiatives made a small dent in the lending freeze Monday, although conditions remained tight.
The three-month Libor, or what banks charge each other to borrow for three months, eased to 4.75% from a 2008 high of 4.82% Friday.
The Libor-OIS spread, a measure of cash scarcity, eased to 3.61% from a record 3.67% Friday, suggesting cash is more available than at the end of last week.
The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, fell to 4.57% after spiking to an all-time high of 4.65% Friday.
The wider the spread, the more reluctant banks are to lend to each other, rather than from the federal government. When markets are fairly calm, banks charge each other premiums that are not much higher than the U.S. government.
Treasury bond markets are closed Monday for Columbus Day. (Full story)
Other markets: U.S. light crude oil for November delivery gained $3.50 to $81.20 a barrel on the New York Mercantile Exchange. On Friday, oil prices plunged more than $8 to a 13-month low.
Oil prices have tumbled on bets of slowing demand since the price of crude hit an all-time high of $147.27 a barrel on July 11.
The price of gas decreased for the 26th consecutive day, according to a survey of credit card activity by motorist group AAA.
COMEX gold for December delivery tumbled $24 to $835.80 an ounce.
In currency trading, the dollar slumped against the euro and the yen.

 

[sharon sanders]

Re: October 2008 Economic Phenomena

• <small>OCTOBER 14, 2008</small>

<!-- ID: SB122390023840728367 --> <!-- TYPE: Economy --> <!-- DISPLAY-NAME: Economy --> <!-- PUBLICATION: The Wall Street Journal Interactive Edition --> <!-- DATE: 2008-10-14 00:01 --> <!-- COPYRIGHT: Dow Jones & Company, Inc. --> <!-- ORIGINAL-ID: --> <!-- article start --> <!-- CODE=SUBJECT SYMBOL=OSTX CODE=SUBJECT SYMBOL=OUSB CODE=SUBJECT SYMBOL=ONEW CODE=STATISTIC SYMBOL=FREE CODE=SUBJECT SYMBOL=OECN --> U.S. to Buy Stakes in Nation's Largest Banks

Recipients Include Citi, Bank of America, Goldman; Government Pressures All to Accept Money as Part of Broadened Rescue Effort

By DEBORAH SOLOMON, DAMIAN PALETTA, JON HILSENRATH and AARON LUCCHETTI



WASHINGTON -- The U.S. government is expected to take stakes in nine of the nation's top financial institutions as part of a new plan to restore confidence to the battered U.S. banking system, a far-reaching effort that puts the government's guarantee behind the basic plumbing of financial markets.

<cite>Getty Images</cite>Morgan Stanley CEO John Mack (L) and Citigroup CEO Vikram Pandit leave a meeting at the Treasury Department.



To kick off Tuesday's expected announcement, the government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. -- including the soon-to-be acquired Merrill Lynch -- Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street Corp., according to people familiar with the matter.......

snip


Other elements of the plan, which will be announced Tuesday morning, include: equity investments in possibly thousands of other banks; lifting the cap on deposit insurance for certain bank accounts, such as those used by small businesses; and guaranteeing certain types of bank lending. It builds on an earlier plan to buy up rotten assets dragging down banks, which failed to calm investor fears, and follows similar moves by major European countries.....

Among the other key components of the plan: The FDIC is expected to offer to temporarily guarantee, for a fee, certain types of new debt called senior unsecured debt issued by banks and thrifts. This would apply to debt issued by June 30 with maturities up to three years. One problem plaguing credit markets has been a fear among financial institutions that it is unsafe to lend to each other even for periods of a few days. U.S. officials hope this guarantee removes that fear, which could bring down short-term lending rates, such as the London interbank offered rate, or Libor, a benchmark for consumer and business loans.


more.....



http://online.wsj.com/article/SB122390023840728367.html

 

[AlaskaDenise]

Re: October 2008 Economic Phenomena

One tonight's Charlie Rose interview of Ralph Nader, Mr. Nader suggested that one way to re-coup the bailout cost and rein in future speculative transactions, is to levy a "Speculation Tax," as first proposed by Dean Baker in 2002 and currently in place in many countries. Mr. Nader said a .5% tax on derivitives would bring in $500 billion - to defray bailout costs. The "fairness" would compare it to the average consumer, who pays taxes when they buy retail items.

The article below shows rates charged by other countries:

<CENTER>The Feasibility of a Unilateral
Speculation Tax in the United States

By Dean Baker

Center for Economic and Policy Research (CEPR)
July 26, 2000
</CENTER>There are many potential benefits from a modest tax on financial transactions, such as the buying and selling of shares of stock and blocks of foreign currencies. Such a tax would have the effect of reducing short-term speculation in these markets, thereby making them somewhat less volatile. It would also cut back some of the economic resources that are wasted in these transactions, since if the number of trades declines, the money spent on these trades would decline as well. In addition, it would make the tax code fairer, since most financial speculation is conducted either directly or indirectly by wealthy people. Just as poor and moderate income people pay taxes when they gamble at a casino or buy a state lottery ticket, a financial transactions tax would simply be applying a comparable tax to gambling in financial markets. Finally, a speculation tax could raise an enormous amount of revenue. A tax which was applied to all financial assets, which was equivalent to 0.25 percent on the purchase or sale of a share of stock and 0.10 percent on the purchase or sale of a bloc of currency, could raise close well over $100 billion a year in revenue.

continued: http://www.globalpolicy.org/socecon/glotax/currtax/baker1.htm

.

 

[sharon sanders]

Re: October 2008 Economic Phenomena

Where is support for consumers? There is no recovery until consumers start to spend....

VIX Options Index Surges to Record as Stocks Rout Intensifies

By Jeff Kearns


Oct. 16 (Bloomberg) -- The benchmark index for U.S. stock options reached 80 for the first time in its 18-year history, driven higher by equities extending the biggest slide since 1987 on concern the economy will continue deteriorating.


The VIX, as the Chicago Board Options Exchange Volatility Index is known, increased 17 percent to 81.13 at 11:14 a.m. in New York after earlier rising to 81.17. The index measures the cost of using options as insurance against declines in the Standard & Poor's 500 Index, which lost 4.5 percent. The S&P 500 tumbled 9 percent yesterday. Today's VIX record eclipsed the peak of 76.94 on Oct. 10, when U.S. stocks completed their worst week since the 1930s.


``It's absolutely uncharted territory,'' Matt Shapiro, a VIX options trader at Stutland Equities LLC, said in an interview from the CBOE floor. ``It's very frightening and there's a huge explosion to buy any options on the VIX, especially 70 and 90.''


snip



http://www.bloomberg.com/apps/news?pid=20601087&sid=a4w5wW5agB3Y&refer=home

 

[sharon sanders]

Re: October 2008 Economic Phenomena

Come on banks - lend!

October 18, 2008, 5:20 pm
Can the Government Force Banks to Lend?

The U.S. government is putting up $250 billion from the $700 billion financial-system rescue plan to inject capital directly into banks. Officials hope banks will turn around and start lending more freely to consumers and businesses. But what if the banks simply hoard the capital?


?That is a concern,? said Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee. But, he added, ?we know that replenishing capital is going to at least lay the foundation for them loaning.?


Because of the credit freeze, many businesses and consumers with good credit still can?t get loans. ?If those loans don?t begin to break loose,? Mr. Bachus said, ?there?s going to be criticism. ? If the public response isn?t enough, there has to be a role for Congress? starting with hearings.

more....

http://blogs.wsj.com/economics/2008/10/18/can-the-government-force-banks-to-lend/

 

[mixin]

Re: October 2008 Economic Phenomena

Come on banks - lend!

Yes!!!

I didn't read this whole thread or the blog but surely there was some sort of stipulation that this rescue plan isn't just money in the banks' pockets!! There must be something in writing somewhere that states how the money is to be used and when?

Please don't tell me our govt turned over billions of our money to the banks to use as they please, no questions asked.

there?s going to be criticism.

:banghead: :taz:

 

[sharon sanders]

Re: October 2008 Economic Phenomena

The Golden Rule - "Them who gots the gold - makes the rules."


Paulson Lacks Leverage to Make Banks Put Cash to Work (Update1)

By Robert Schmidt and Rebecca Christie



Oct. 15 (Bloomberg) -- Treasury Secretary Henry Paulson persuaded nine major U.S. banks to accept $125 billion in government investment. Getting them to lend it out may prove a tougher sell.

The equity stakes the government is purchasing in Citigroup Inc., Morgan Stanley and seven other big institutions come with no guarantee that the investments will spur lending and unfreeze credit markets. Nor do they give the government board seats or any other leverage to demand that that the firms actually use the money to help the economy.


``The truth of the matter is, they can't put a gun to their head and say you have to lend this money,'' said Charles Horn, a former official at the Office of the Comptroller of the Currency, part of the Treasury Department, and now a partner at the Mayer Brown law firm in Washington.


Treasury officials acknowledge they can't force banks to get the taxpayer money into the hands of their customers. Instead, officials are betting that the government's investment will create conditions where banks have a greater incentive to earn profits from lending than to hoard money to shore up their balance sheets.

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``The bully pulpit doesn't really work with banks, but capital does,'' said Ryan, who directed the U.S. Office of Thrift Supervision in 1990-1992.
The government is providing banks with ``quite a war chest that they were not expecting,'' Ryan said. ``They need to put it to work. The only way you put it to work is to lend.'' (err - Has anyone noticed that interest rates on credit cards have not gone down? Fla1)


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Senator Charles Schumer, a New York Democrat, called on the Treasury to issue guidelines on how banks should use the new funding, saying he's worried institutions may put the extra money into ``exotic financial instruments and experiments'' rather than consumer loans.


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``What you'll see most large institutions saying is, `We will certainly listen to the government but our decisions are what's in the best interest of our shareholders,''' said John Coffee, a securities law professor at Columbia University.

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Bank executives know that the Treasury and members of Congress are going to monitor the situation, said Scott Talbott, chief lobbyist for the Financial Services Roundtable.


``Policy makers will watch closely to insure that the money is used for credit,'' he said.


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http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=amZ3uCIUB8GQ

 

[mixin]

Re: October 2008 Economic Phenomena

then I think the American people will think this is a worthwhile program,'' Schumer said at a Capitol Hill press conference today.

Obviously Schumer hasn't been reading some of the net forums It will have to be a smashing success to change some peoples' minds about the bailout.

``On the other hand, if they benefit executives, shareholders or the bank balance sheet, and don't get money churning out into the economy, the program will be regarded as a failure.''

Very much an understatement. If the banks do not use the money for the purpose it was intended, the public will be very, very unhappy.

 

[sharon sanders]

Re: October 2008 Economic Phenomena

* OCTOBER 23, 2008

Currencies in Turmoil; Dow Nears Its 5-Year Low

The stock market and currency markets both sent a loud warning Wednesday that investors believe the global economy is heading into a deep recession.

The fears drove down currencies and stocks around the world, while the U.S. stock market touched a five-year low.

The declines were broad, including most commodities. Oil dropped 7.5% to its lowest point since June 2007. Copper's price fell to its lowest level since 2005. The British pound is now trading at the same level versus the dollar as it did in 2003.

Shares fell on the New York Stock Exchange on Wednesday on concerns over a worsening world-wide economic slump.

The dollar, to which many investors retreat in times of stress, gained. So did the Japanese yen, as traders who had borrowed yen to invest elsewhere unwound those bets and sent the cash back to Japan.

The Dow Jones Industrial Average posted its seventh-biggest point drop in history, tumbling 514.45 points, or 5.7%, to close at 8519.2. It is down nearly 40% from its record about a year ago.


more...

http://online.wsj.com/article/SB122471854655160557.html

 

[Treyfish]

Re: October 2008 Economic Phenomena

EU, Asia leaders discuss financial meltdown in Beijing


By CHRISTOPHER BODEEN, AP
Thursday, October 23, 2008 5:34 pm


BEIJING –– EU Commission President Jose Barroso called Thursday for unprecedented levels
of global coordination to deal with the financial meltdown, saying the current oversight model needs to be revamped at the international level.

Barroso said the economic turmoil would dominate discussions at the two-day, 43-nation, Asia-Europe Meeting, a summit that opens Friday in the Chinese capital. Leaders hope the summit will help build consensus on a response to the crisis before a Nov. 15 meeting in Washington.

snip


:tiphat: http://www.chinapost.com.tw/china/local-news/beijing/2008/10/23/180077/EU-Asia.htm
_________________

 

[sharon sanders]

Re: October 2008 Economic Phenomena

groan......

* OCTOBER 24, 2008, 2:32 P.M. ET

Treasury Considers Stakes in Insurance Companies


snip

The availability of government cash is drawing requests from all corners (I am going to send in a request too! - Fla1), with insurance firms, automakers, state governments and transit agencies lobbying for a piece of Treasury's pie. While Treasury intended for the program to apply broadly, the growing requests could rapidly deplete the $700 billion, an amount that initially stunned many as being quite large.

Among those expected to benefit from Treasury's program are insurance firms. Most insurance companies are financially sound but have seen their long-term investments and stock prices hurt by the recent market turmoil.

snip

Insurers would also be able to sell its bad assets to the government under a separate element of the program.

Write to Deborah Solomon at deborah.solomon@wsj.com


http://online.wsj.com/article/SB122487244838367321.html?mod=testMod