STOCK MARKET WATCH, Wednesday September 17

[ozymandius]

Source: du

STOCK MARKET WATCH, Wednesday September 17, 2008

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 123
DAYS SINCE DEMOCRACY DIED (12/12/00) 2796 DAYS
WHERE'S OSAMA BIN-LADEN? 2521 DAYS
DAYS SINCE ENRON COLLAPSE = 2812
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

---

U.S. FUTURES &
MARKETS INDICATORS>
NASDAQ FUTURES-----------------------------S&P FUTURES

---

AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.
$1 USD = EUR 1.06678
$1 USD = JPY 116.6200

AT THE CLOSING BELL ON September 16, 2008

Dow... 11,059.02 +141.51 (+1.30%)
Nasdaq... 2,207.90 +27.99 (+1.28%)
S&P 500... 1,213.59 +20.89 (+1.75%)
Gold future... 780.50 -6.50 (-0.83%)
30-Year Bond 4.10% -0.06 (-1.37%)
10-Yr Bond... 3.49% +0.01 (+0.23%)






GOLD,EURO, YEN, Loonie and Silver

---

PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [email protected]

For information on protests and other actions Citizens For Legitimate Government

---

Read more: du

[ozymandius]

1. Market WrapUp (a few hours old, but somewhat relevant)

What Next for AIG and the Markets?
BY FRANK BARBERA, CMT

For the last few days, the US Financial system and perhaps, the global financial system, has moved to the brink. Events surrounding American International Group (AIG) seem to have brought this crisis to a head. A global titan with operations in over 130 countries, AIG’s insurance business has counter-party risk relationships with virtually every major institution in the world. Words probably cannot accurately depict how serious a problem the implosion of a company this large would be for the greater financial community. Thus, it is putting it mildly to suggest that at the moment, a great deal depends on whether AIG can receive the funding it needs to avoid a further downward spiral. Such a spiral would undoubtedly trigger a torrential chain reaction of counter party defaults in the CDS market which stands at more then 40 Trillion in notional value. In the case of the demise of AIG, the word ‘melt down’ is of the few terms that would apply with ripple affects spanning the globe.

Thus, as markets wait to see if AIG can bypass its liquidity problems, it is very clear that a large move, either straight up (sigh of relief), or straight down (abject terror) is in the offing. At the moment, it is impossible to tell what will happen, although it appears that Uncle Sam has pressed several institutions including Goldman Sachs, Morgan Stanley and JP Morgan, into service in an attempt to provide stop gap measures for AIG. IF this is successful, markets could gap higher in the near term, and shorts could end up being squeezed, and perhaps squeezed in very dramatic fashion. A 500 to 600 point up day in the DJIA would not be out of the question. Looking back, we have seen these types of dramatic short squeezes occur several times in the last few months, most notably in the banks just a few weeks ago.

In the more bullish outcome, where AIG obtains the needed capital, the markets would rally but it would NOT mean that the crisis is over, nor would it even likely mean that the stock market bottom has seen a final low. Hardly. What it would mean is that one bullet among many has been dodged and the ultimate day of reckoning has been postponed; that valuable time has been secured. Former AIG head Hank Greenberg talks of AIG as being important enough to the national interest to preserve the company, and he is probably spot on as for years this institution has been central to the financial world. However, in the end, the problems for a crippled US Financial System will continue to center not around AIG, but around falling collateral values tied to the US Housing sector, which is a trend that is unlikely to reverse for some time to come.

http://www.financialsense.com/Market/wrapup.htm

[Buttercup McToots]

4. Ozy...did you sleep?

Good Morning:donut:

[ozymandius]

8. Good morning

:donut: :donut: :donut:

I slept - but not well. You probably understand the amount of anxiety coursing through my veins at the moment. We're in deep shit. There's no confidence at all that AIG will repay the Fed loan. That's just fancy window dressing to hide a store full of moth-eaten rags.

It feels like he Fed has only delayed the inevitable. There's not enough money in any insurance, or reinsurance policy to cover the massive amount of money that is evaporating as we speak.

So how are you doing after last night's melee?

[Buttercup McToots]

18. Tired...Was thinking about it all night...

The landscape has surely changed, and I don't recognize this world anymore...
:yoiks:

[ozymandius]

20. I scoured about a dozen financial news sites and blogs yesterday.

There were no less than three references to Alice in Wonderland (starting with the WrapUp). Reason: same as what you said. This world bears no resemblance to anything ever taught about market fundamentals and common sense. Nothing makes sense anymore.

[Joe Chi Minh]

44. The simplest metaphor I can think of for their Ponzi feeding-frenzy is an

automatic teller that pays out $50 or $100 bills instead of $10 bills. The equivalent in multiples of £10 pounds occurs here in the UK from time to time, and no action is taken to recover the money or prosecute. People tell their friends and soon car loads of people form a long queue and load up. Incidentally, I read about ATMs dispensing money in much smaller denominations, maybe even coins. I scanned it very briefly.

Unlike with this mega automatic teller, I think most of us are happy with that. The public didn't cause it, even if they exploited it. I would normally have added "dishonestly", but with banks, I think of Berthold Brecht's maxim, "If you want to steal some money, don't rob a bank. Open one."

These hooligans fixed their ATM to do it, before drawing the money, and trillions stolen from the public purse is a whole 'nother matter.

[Joe Chi Minh]

185. $100,000 for every $1000 keyed in.

[Demeter]

30. Anyone Rallying in Stocks Today Deserves What's Coming To Them

[Dr.Phool]

47. There are lot's of fools, with lots of money to be parted.

I'm really happy for this thread. It's time consuming, but you get good information weeks before it hit's the MSM.

I'm going to have to do some more research today, just to check how secure my retirement is. Nothing I could do about it anyway, but at least I won't be blind-sided.

[Alcibiades]

50. We've put our retirement entirely in the government bond fund

since January. Maybe not foolproof, but it would have lost 20% if we'd kept it in global equities, which is where it was before.

[DemReadingDU]

73. I'm worried about pensions

There is so much toxic stuff that pensions have probably been contaminated too. Eventually, I think pensions will need to be turned over to the Pension Benefit Guaranty Corp, and then the PBGC will need a bailout.

add link
http://www.pbgc.gov/

[Dr.Phool]

74. The PBGC has my company pension.

I'm getting about 40% of what I should be getting.

The one that worries me is Railroad Retirement. About 7 years ago, Congress let them invest a percentage in the markets, instead of government bonds.

[DemReadingDU]

85. Uh oh

I expect spouse's pension will eventually be turned over. Already received a
warning letter that details the cents on the dollar that he would get, if pension is turned over. So it's just a matter of time. Not good, Not good at all.

:(

[MilesColtrane]

173. This was posted on my pension fund's front page today.

As you may know, there has been significant turbulence in both the financial services industry and the investment market as a whole. The Fund Office has received various questions regarding the investment of Fund assets in (and whether the Fund has any relationship with) companies that have been particularly affected, as reflected in the news media -- companies such as Bear Stearns, Fannie Mae (Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corp.), Lehman Brothers, AIG and Merrill Lynch.

As many participants are aware, the Fund has retained professional asset managers that invest the Fund's assets in many different types of investment categories and are expected to understand the impact of the current situation and make appropriate investment decisions in the face of it.

Like any investor, the Fund will be affected by the turbulence in the investment market as it relates to some of the companies mentioned above, whether because of possible investments in those companies by the Fund's asset managers or because of the overall effect on the economy and the market. However, you should be aware that the Board of Trustees and the Investment Committee are working with Segal Advisors to continue to monitor the situation and the Fund's asset managers. In addition, the Board of Trustees and the Investment Committee continue to work with Segal Advisors to provide appropriate diversification to the investment portfolio in order to maintain prudent levels of overall risk for the long-term.

I interpret it to say,

1)Don't worry your silly little head. Your money is in the hands of professionals.

2)No one could have anticipated hijackers flying planes into buildings the financial market melt down. So it's not our fault that you're going to have to eat Alpo in your golden years.

[Joe Chi Minh]

186. It was a systemic failure, so non-one's to blame; the customary, official, catch-all blandishment.

Make that "exonerate-all".

[Loge23]

39. The Leaning Tower of DC

The Fed just propped a 2 x 4 under a falling tower - all the better to forestall the inevitable collapse until after Nov.
Of course, Paulson and Bernanke took counsel from famed CEO/MBA GWB first.
It is important for all of us to realize that the dollars we're hearing being thrown around (away?) here have a finite supply - unlike the explanations and lies from the administration.
We are watching a disaster unfolding in front of us.
Today's bailout of AIG is akin to the Titanic finding one more lifeboat to take away the wealthiest still onboard - whew! that was close!
The ship, unfortunately for the rest of us, is going down.

[Tansy_Gold]

46. the image of the Titanic. . . . .

. . .. is perhaps a bit more apt, in a nightmare vision where not only the ship sinks but it takes the whole ocean with it into a deep dark center-of-the-earth hole.


It seems to me -- and I haven't read through the thread yet -- that when an individual has gotten her or himself way deep into debt, the only way out is to stop spending and start paying the debt down over time, or to declare bankruptcy and have the creditors write off (part of) the debt.

What one doesn't do is borrow more money and go deeper in debt -- unless, of course, one borrows money that someone else will have to pay back. Ah, yes, that's the difference.



Tansy Gold, imagining. . . . .

[ozymandius]

2. Today's Reports

08:30 Building Permits Aug
Briefing.com 930K
Consensus 925K
Prior 937K

08:30 Housing Starts Aug
Briefing.com 950K
Consensus 950K
Prior 965K

10:35 Crude Inventories 09/13
Briefing.com NA
Consensus NA
Prior NA

http://www.briefing.com/Investor/Public/Calendars/EconomicCalendar.htm

[UpInArms]

54. Astoundingly bad reports and this: 2Q current account deficit widens to $183.1 billion

01. U.S. single-family building permits down 40% in past year
8:30 AM ET, Sep 17, 2008

02. U.S. 2Q current account deficit equal to 5.1% of GDP
8:30 AM ET, Sep 17, 2008

03. U.S. single-family building permits down 40% in past year
8:30 AM ET, Sep 17, 2008

04. U.S. 2Q current account deficit equal to 5.1% of GDP
8:30 AM ET, Sep 17, 2008

05. U.S. 2Q current account deficit widens to $183.1 billion
8:30 AM ET, Sep 17, 2008

06. U.S. Aug. housing completions fall to 26-year low
8:30 AM ET, Sep 17, 2008

07. U.S. Aug. housing starts weaker than 955,000 expected
8:30 AM ET, Sep 17, 2008

08. U.S. Aug. single-family building permits fall to 26-year low
8:30 AM ET, Sep 17, 2008

09. U.S. Aug. building permits fall 8.9% to 854,000, 17-year low
8:30 AM ET, Sep 17, 2008

10. U.S. Aug. housing starts fall 6.2% to 895,000, 17-year low
8:30 AM ET, Sep 17, 2008

[UpInArms]

91. Housing starts at 17-1/2-year low

http://www.reuters.com/article/ousiv/idUSN1225498420080917?sp=true

WASHINGTON (Reuters) - Construction starts on new homes plunged to a 17-1/2-year low during August as builders scaled back sharply to try to cope with the worst slump in U.S. housing since the Great Depression.

The Commerce Department reported on Wednesday that starts on new homes dropped 6.2 percent to a seasonally adjusted annual rate of 895,000, their lowest since January 1991 and well below the 950,000 rate that Wall Street economists surveyed by Reuters had anticipated.

In a further sign of the severe strain the economy faces, the department also said the deficit on the broadest measure of U.S. trade with the rest of the world widened to $183.1 billion in the second quarter from $175.6 billion in the first three months his year.

The U.S. shortfall on trade in goods with other countries grew and imports of oil were up, the department said.

...more...

January 1991 - hmmmm....

"Ah'm gonna pick up whar ma daddy lef' off!" Dimson campaign 2000

[UpInArms]

100. Petroleum Inventories Report: (all down)

02. U.S. crude supply down 6.3 mln brls last week: Energy Dept.
10:44 AM ET, Sep 17, 2008

03. U.S. distillate supply down 900,000 barrels: Energy Dept.
10:44 AM ET, Sep 17, 2008

04. U.S. gasoline supply down 3.3 mln brls: Energy Dept.
10:44 AM ET, Sep 17, 2008

[UpInArms]

117. API reports 4.4 million-barrel drop in crude supplies

http://www.marketwatch.com/news/story/api-reports-44-million-barrel-drop/story.aspx?guid=%7BC725A34F%2D5589%2D46DE%2D92E6%2D68733019B473%7D&dist=msr_5

SAN FRANCISCO (MarketWatch) -- The American Petroleum Institute reported Wednesday a drop of 4.4 million barrels in crude supplies for the week ended Sept. 12. The Energy Department had reported a decline of 6.3 million barrels for the latest week. Motor gasoline supplies were down 4.3 million barrels, the API said. The government had reported that supplies fell by 3.3 million barrels. Distillate supplies were down 1.7 million barrels, the API said. They were down 900,000 for the week, according to the Energy Department.

[ozymandius]

3. Oil rebounds in Asia after 2-day tumble

SINGAPORE - Oil prices rebounded Wednesday in Asia as traders viewed a two-day $10 drop as overdone and driven more by market jitters than by fundamentals.

Sentiment got a boost on news that the U.S. Federal Reserve agreed to provide an $85 billion emergency loan to rescue insurance giant American International Group, helping stabilize global markets rattled by the failure of U.S. investment bank Lehman Brothers.

Light, sweet crude for October delivery rose $3.50 to $94.65 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore. Overnight, the contract fell $4.56 to settle at $91.15, after dropping $5.47 on Monday.

.....

Investors were also waiting for the U.S. Energy Department's Energy Information Administration to release later in the day its report on U.S. oil stocks for the week ended Sept. 12. The petroleum supply report was expected to show that oil stocks fell 3.7 million barrels, according to the average of analysts' estimates in a survey by energy information provider Platts.

.....

In other Nymex trading, heating oil futures rose 6.17 cents to $2.7814 a gallon, while gasoline prices dropped 6.92 cents to $2.47 a gallon. Natural gas for October delivery fell 12.1 cents to $7.4 per 1,000 cubic feet.

http://news.yahoo.com/s/ap/oil_prices

[ozymandius]

5. Government steps in again, bails out AIG with $85B

WASHINGTON - Another day, another bailout. The U.S. government stepped in Tuesday to rescue American International Group Inc., one of the world's largest insurers, with an $85 billion injection of taxpayer money.

It was the second time this month the feds put taxpayer money on the hook to rescue a private financial company, saying its failure would further disrupt markets and threaten the already fragile economy.

AIG said it will repay the money in full with proceeds from the sales of some of its assets.

Under the deal, the Federal Reserve will provide a two-year $85 billion emergency loan to AIG, which teetered on the edge of failure because of stresses caused by the collapse of the subprime mortgage market and the credit crunch that ensued. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management.

.....

The central bank also pumped $70 billion into the nation's financial system to help ease credit stresses. In emergency sessions over the weekend, the Fed expanded its loan programs to Wall Street firms, part of an ongoing effort to get credit flowing more freely.

http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/aig

---

Greenscam is burning with envy. Money never flowed so freely under his watch.

[ozymandius]

21. Here's an itemized list of the Fed's AIG bailout reasoning and terms.

The Federal Reserve released:

The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

http://bigpicture.typepad.com/comments/2008/09/aig-bailout-85b.html

[Dr.Phool]

53. Can the Poulson or Bernanke buy a CDS from AIG?

You know. Just in case they can't pay the money back.

:rofl: :rofl:

Besides, some new business might stabilize them.

[Joe Chi Minh]

187. I know Taleb said he wouldn't employ Bernanke to drive his car. "These guys are

dangerous. They’re not qualified in their own field," he added.

[ozymandius]

26. Fact of the matter: AIG will be sold in pieces.

The Fed's bailout makes AIG's disassembly orderly. This deal will also cause havoc in the overnight bank lending rate. Two years (being the length of time AIG will unwind it's dizzying complicated asset chain) is a long time for international banks to fret over their exposure to AIG's most toxic components.

[Buttercup McToots]

6. Courtesy of the sleepless bears on PruBear chat

Another relevant article courtesy of the sleepless bears on PruBear chat:

http://www.ft.com/cms/s/0/87ad5336-8...nclick_check=1


Quote:
Oil falls to $90 as commodities take battering
By Javier Blas in London
Published: September 16 2008 20:36 | Last updated: September 16 2008 20:36
Commodities were hammered for the second day running with oil prices falling below $90 a barrel as investors rushed to unwind trading positions in crude amid worries about AIG, the US insurer and the sponsor of a large commodity index.

West Texas Intermediate prices tumbled more than $5 to an intra-day low of $90.51, firming $4.56 lower at $91.15, leading a broad sell-off in base metals and agriculture commodities. Brent crude lost $5.02 to $89.22 a barrel.

The DJ-AIG commodity index is the second most popular in the asset class, with pension funds and other large investors investing some $30bn in derivatives that track the benchmark. The index fell 2.7 per cent to its lowest level since September 2007.

Bankers said while AIG had not provided all that exposure to the index through derivatives for clients, it was a counterparty for a “significant amount”.

Bankers said investors had moved about $10bn since Monday – more than 5 per cent of the funds tracking commodity indices – because of concerns over counterparty risk from several institutions.

While pension funds were transferring their accounts, hedge funds and retail investors were liquidating positions, they said. The collapse of Lehman Brothers was exacerbating the problem as the 158-year-old Wall Street bank ran an estimated $5bn commodity index business.

Jerome Drouin, head of commodity indices at Credit Suisse said: “Clients are trying to diversify their counterparty risk”.

Evidence of counterparty woes were highlighted by Criterion, a Toronto-based hedge fund, which said it was converting into cash its investment in derivative notes linked to the DJ-AIG commodity index as “a result of uncertainty regarding the note issuer”.

ETF Securities, the London-based issuer of commodity exchange-traded funds, hit problems when several market-makers of its funds stopped trading them amid concerns about AIG counterparty risk. ETF said AIG was its counterparty for about $2bn in some of its DJ-AIG commodity products and that some investors had withdrawn money.

John Reade, a commodity strategist at UBS, said investors in commodity indices were increasingly aware that they did not own hard assets but a swap on an index of commodity futures with counterparty risk.

AIG commodity bankers declined to comment.

Additional reporting by Chris Flood

[Buttercup McToots]

7. AIG fears cause securities trading to halt

AIG fears cause securities trading to halt

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

This could be posted elsewhere (can't keep track lately) but this should be here just in case...

http://www.telegraph.co.uk/money/mai...7/cnetc117.xml


Quote:
AIG fears cause securities trading to halt
By Rosie Murray-West
Last Updated: 9:16pm BST 16/09/2008

Shareholders were left unable to trade popular commodity securities yesterday, due to fears over the future of their backer, AIG.

Banks and brokerages stopped making markets in the Exchange Traded Commodities (ETCs) backed by the troubled insurer and sold by ETF Securities (ETFS). The price of the stocks also plummeted due to the worries over AIG.

ETFS said it was working on providing its customers with liquidity, and added that its other products, which are physically backed rather than backed by futures contracts, were unaffected. These include Metal Securities and Gold Bullion Securities. Shell-backed Oil Securities, is also unaffected by AIG's problems, with ETFS reporting active markets in all of these products.

"The ETFS group is actively working on possible ways of providing investors with liquidity, including arranging suitable collateral for market-makers," the company said in a statement. "However, we can give no assurance as to whether these or other alternatives can be implemented at this stage."

More on insurance
ETCs have become popular as a way of gaining exposure to rising commodity prices without trading in futures. They allow customers to invest in the price of commodities from lean hog to grain. Traditionally they are seen as risky investments suitable only for sophisticated investors. However, investors trying to beat inflation, or who are wary of equity markets, have become interested in ETCs, which can be sold and bought like ordinary shares.

ETFS said in a statement that AIG has continued to honour all its obligations under its agreement, including processing all creations and redemptions in the usual manner and paying all redemptions due on time. Nicholas Brooks, head of research and investment strategy, said he hoped things would be back to normal as soon as possible - adding the bulk of the firm's assets were not exposed to AIG.

[Ghost Dog]

9. GLOBAL MARKETS-Stocks gain, oil rallies on AIG rescue

Wed Sep 17, 2008 2:42am EDT

* Treasury yields up as U.S. gives $85 bln rescue line to AIG

* Crude up $3, yen drops as some risky assets bought back

* Investors still wary about unstable financial sector (Recasts, updates prices, adds European outlook)

HONG KONG, Sept 17 (Reuters) - Asian stocks rose and oil jumped more than $3 on Wednesday after the U.S. government bailed out cash-strapped American International Group in a dramatic about-face to stem further damage to the global financial system.

But gains were cautious in many markets amid fears that the global credit crisis, now in its second year, could claim more victims and choke economic growth.

...

However, indications of fear in financial markets remained elevated, the cost of insurance against defaults was soaring and evidence showed banks were hoarding U.S. dollars, reflecting distrust rather than confidence.

The U.S. Federal Reserve agreed to provide AIG (AIG.N: Quote, Profile, Research, Stock Buzz), once the largest insurer in the world, a bridge loan of $85 billion and take an 80 percent stake in the ailing company to stave off a bankrupcty that would have thrown global financial markets into deeper turmoil.

But the move added to the burden on U.S. taxpayers following the government takeover of mortgage firms Fannie Mae and Freddie Mac about a week ago.

The rescue was a surprise to some since the U.S. government had allowed Lehman to fail only days ago, suggesting how unstable markets have forced consumers, investors and policymakers alike to be more flexible.

"Rescuing AIG itself is a good thing, but we're seeing a double-standard here. Why is the Fed helping AIG but not Lehman? Unless U.S. authorities come up with a clear standard on who to help and who not to, market unrest will continue," said Koichi Haji, chief economist with NLI Research Institute in Tokyo.

Japan's Nikkei share average .N225 rose 1.2 percent but was well off the day's highs, after closing at a three-year low on Tuesday. Shares of Japan's top bank Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) finished up 1 percent.

The MSCI Asia-Pacific ex-Japan stocks index .MIAPJ0000PUS pared early gains and was up 0.8 percent at 0600 GMT, after hitting a two-year low on Tuesday. It is down 37 percent so far this year.

Hong Kong's Hang Seng index .HSI fell 1.85 percent as investors remained wary of bank stocks. Shares of China Construction Bank (0939.HK: Quote, Profile, Research, Stock Buzz), China's second-largest bank, was the biggest drag on the index, slumping 8 percent, followed by HSBC (0005.HK: Quote, Profile, Research, Stock Buzz), Europe's largest lender.

/... http://www.reuters.com/article/marketsNews/idINHKG1053720080917?rpc=44&sp=true

[Ghost Dog]

11. Asia greases money markets, AIG deal fails to soothe

Wed Sep 17, 2008 3:37am EDT

SINGAPORE/TOKYO (Reuters) - Japan, Australia and India pumped $33 billion into money markets on Wednesday as a U.S. government rescue of insurer AIG failed to soothe frayed nerves and ease a funding squeeze triggered by the crisis engulfing Wall Street.

Across Asia, which has been largely shielded from the worst of the credit crisis, central banks were bracing for more market turmoil.

The Bank of Korea warned that foreign funds would keep flowing out of the domestic bond market. India added an extra money market operation to improve banks' access to funds while Taiwan made lending easier by lowering the ratio of time deposits banks must keep in reserve.

A commentary from a Chinese academic in the official newspaper of China's ruling Communist Party, went as far as to suggest that the global financial system was ruptured beyond repair.

"The world urgently needs to create a diversified currency and financial system and fair and just financial order that is not dependent on the United States," Shi Jianxun, a professor at Shanghai's Tongji University said in the overseas edition of The People's Daily.

Asian stocks and the dollar initially rallied on news that the global financial system would be spared the collapse of an insurance giant that operates in 130 countries. But shares gave up their early gains and cash remained tight in money markets with no end in sight to the 13-month old credit crisis.

/... http://www.reuters.com/article/topNews/idUSLG62875220080917

[Ghost Dog]

12. European stocks rebound, led by banks on AIG rescue

Wed Sep 17, 2008 3:30am EDT

LONDON, Sept 17 (Reuters) - European shares rose in early trade on Wednesday with banking stocks rebounding following hefty losses in the previous two sessions as AIG (AIG.N: Quote, Profile, Research, Stock Buzz) got an emerge 1852012832

At 0721 GMT, the FTSEurofirst 300 index of top European shares was up 1.7 percent at 1,109.66 points. The index had lost 2.6 percent on Tuesday and 3.6 percent on Monday.

Banking stocks were the top weighted gainers on the index, whith UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) up 11 percent, Societe Generale (SOGN.PA: Quote, Profile, Research, Stock Buzz) up 5.7 percent and Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), which agreed to buy several p 1634890867

/... http://www.reuters.com/article/marketsNews/idCALH43506820080917?rpc=44

(Garbled in original)

[Ghost Dog]

14. European stocks turn negative; HBOS tumbles

Wed Sep 17, 2008 3:56am EDT

PARIS, Sept 17 (Reuters) - European stocks surrendered early gains and turned negative on Wednesday morning, as the rescue of embattled insurer AIG (AIG.N: Quote, Profile, Research, Stock Buzz) failed to quell credit fears, with UK lender HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) plummeting 42 percent. At 0755 GMT, the FTSEurofirst 300 index of top European shares was down 0.6 percent at 1,084.38 points, after gaining more than 1.5 percent in early trade. A number of banking stocks turned negative, with Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) down 20.7 percent and Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz) down 5.3 percent.

/. http://www.reuters.com/article/marketsNews/idCALH40021420080917?rpc=44

[Ghost Dog]

152. Russia suspends stock, bond trading as market dives

Wed Sep 17, 2008 11:39am EDT

MOSCOW, Sept 17 (Reuters) - Russia halted stock and bond trading on Wednesday amid the worst market falls since the country's 1998 financial collapse and the Finance Ministry pledged a total of $60 billion of funds to help local banks.

Trading in shares, bonds and mutual funds on Russia's MICEX and RTS exchanges was suspended after less than two hours, preventing further selling on top of Tuesday's record-breaking falls. It was not clear when the bourses would reopen.

"The crisis has a shade of panic to it. The decision to stop trading was motivated by the desire to remove this panic element," said Stanislav Ponomarenko, head of research for Russia at ING bank.

Russian stocks, once touted by the government as a safe haven, have now plunged around 60 percent since May. Traders say global financial turmoil mixed with falling oil prices and Moscow's war with Georgia have formed a lethal cocktail.

"We don't give a damn anymore as to what happens in the West. The market is falling as people are in dire need for cash," said Maxim Gulevich, director of equities trading at UBS.

The Kremlin was silent on the crisis on Wednesday but Deputy Finance Minister Pyotr Kazakevich, announcing new measures to boost liquidity, said there was no fundamental problem.

"What we have on the market is mainly a confidence crisis and only secondly a liquidity crisis," Kazakevich said.

As well as pumping billions more state money into the country's cash-starved banking system, Russia's central bank also slashed the amount of money local banks are required to hold as reserves against their loans.

The central bank's chief Sergei Ignatyev said the move, effective Thursday, would release another 300 billion roubles ($11.76 billion) of liquidity.

...

Meanwhile, analysts tried to focus attention on Russia's strong underlying economic position.

"The market is trading as if it is close to a default while in reality it has the world's third largest financial reserves and is still earning about $850 million every day from crude, products and gas exports," said Chris Weafer, chief strategist at local brokerage Uralsib.

"The reason for the market collapse is partly the forced selling on margin calls and fund redemptions but mainly because few...are brave enough to buy," he added.

...

Russia's dollar-denominated RTS index stood at 1,058 points when trading was halted, nearly 58 percent down from its peak of 2,498 points reached in May.

/... http://www.reuters.com/article/marketsNews/idINLH37815520080917?rpc=44&sp=true

[Buttercup McToots]

10. Federal bank insurance fund dwindling

Federal bank insurance fund dwindling
--------------------------------------------------------------------------------

By MARCY GORDON, AP Business Writer Tue Sep 16, 7:49 PM ET

WASHINGTON - Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.

Treasury Secretary Henry Paulson said Monday that the country's commercial banking system "is safe and sound" and that "the American people can be very, very confident about their accounts in our banking system." FDIC officials also have said 98 percent of U.S. banks still meet regulators' standards for adequate capital.

But fear is growing on Main Street as well as Wall Street about the likelihood of multiple bank failures and the strain that would put on the FDIC.

The fund, which is marking its 75th anniversary this year with a "Face Your Finances" campaign, is at $45.2 billion — the lowest level since 2003. At the same time, the number of troubled banks is at a five-year high.

FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan at some point. But she has said she does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury — something that has never been done.

The FDIC's fund is currently below the minimum set by Congress in a 2006 law. The failure of IndyMac Bank in July cost $8.9 billion.

Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board, which consists of her, Comptroller of the Currency John Dugan, Thrift Supervision Director John Reich and two other officials.

Bair also is considering a system in which banks with riskier portfolios would be charged higher premiums, raising the possibility those costs could be passed on to consumers.

A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets.

By comparison, WaMu and its subsidiaries had assets of $309.73 billion as of June 30 and IndyMac had $32 billion when it shut down.

Arthur Murton, director of the FDIC's insurance and research division, said that when large institutions have failed in recent years, the hit to the fund has been about 5 to 10 percent of the company's assets.

Standard & Poor's Ratings Service late Monday cut its counterparty credit rating on WaMu to junk, action that followed downgrades by both Moody's and Fitch last week. Concern about the Seattle-based thrift, which has significant exposure to risky mortgage securities and other assets, has grown in recent weeks, and the company's stock price has plummeted.

WaMu responded Monday by saying that it did not expect the S&P downgrade to have a material impact on its borrowings, collateral or margin requirements. The bank said its capital at the end of the third quarter on Sept. 30 is expected to be "significantly above" required levels and that its outlook for expected credit losses is unchanged.

Some analyst estimates put the cost of a WaMu failure to the FDIC at more than $20 billion, but other experts say it is very difficult to predict. Unknown, for example, is the amount of advances that institutions may have taken from one of the regional banks in the Federal Home Loan Bank system. Banks and thrifts have significantly increased their requests for advances, or loans, from the 12 regional home loan banks since the mortgage crisis began last year.

These amounts aren't publicly disclosed but must be repaid if a bank or thrift fails, notes Karen Shaw Petrou, managing partner of Federal Financial Analytics.

If the FDIC doesn't have enough cash to cover the initial costs of a bank or thrift failure, one option would be short-term loans from the Treasury. That last happened in 1991-92, during the last part of the savings and loan crisis, when the FDIC borrowed $15.1 billion from the Treasury and repaid it with interest about a year later.

Based on projections of possible scenarios of bank failures, "between the (insurance) fund that we have now and our ability to draw on the resources of the industry ... we do have the resources" needed, Murton said Tuesday.

Though short-term borrowing from Treasury for working capital may be possible, he said, tapping the long-term credit line is unlikely.

But Whalen said the Federal Reserve, the Treasury and Congress should "immediately devise" and announce a plan to backstop the FDIC with up to $500 billion in borrowing authority to meet cash needs for closing or selling failed banks.

"While the FDIC already has a credit line in place and this figure may seem excessive — and hopefully it is — the idea here is to overshoot the actual number to reinforce public confidence," Whalen wrote in a note to clients. "Simply having Treasury Secretary Hank Paulson or Ben Bernanke making hopeful statements is inadequate. Like it says in the movies: 'Show us the money.'"

Before Congress passed the law overhauling deposit insurance in 2006, about 90 percent of all insured banks and thrifts — considered to have adequate capital and to be well managed — paid no premiums to the FDIC. Today, all of them do.

There were 117 banks and thrifts considered to be in trouble in the second quarter, the highest level since 2003, according to FDIC data released last month. The agency doesn't disclose the names of institutions on its internal list of troubled banks. On average, 13 percent of banks that make the list fail. Total assets of troubled banks tripled in the second quarter to $78 billion, and $32 billion of that coming from IndyMac Bank.

Last month, Bair called those results "pretty dismal," but said they were not surprising given the housing slump, a worsening economy, and disruptions in financial and credit markets. "More banks will come on the (troubled) list as credit problems worsen," he said. "Assets of problem institutions also will continue to rise."

http://news.yahoo.com/s/ap/20080916/...eposits_safety

[Dr.Phool]

132. I caught that late last night on MSNBC.

Funny, how we've been discussing this for months.

[ozymandius]

13. Bernanke, Paulson brief Congress on AIG rescue

The official could not immediately provide any details on the plan.

http://news.yahoo.com/s/nm/20080916/bs_nm/aig_treasury_dc_2

---

This is a skeletal story. But it dovetails with Sen. Dodd's reported fit of anger when Fannie and Freddie were nationalized.

[Buttercup McToots]

15. Mish: Fed Rsrv Act Loophole that allows AIG bailout, sorta

Mish: Fed Rsrv Act Loophole that allows AIG bailout, sorta

Honolulu

http://globaleconomicanalysis.blogspot.c....

Quote:
AIG Bailout: Fed Loophole 13.3
from *Mish's Global Economic Trend Analysis* by Michael Shedlock

In light of the Fed sponsorship of AIG to the tune of $85 billion or more at taxpayer risk (See Nationalization of AIG: Treasury to get 80% stake in return for $85 billion), inquiring minds just might be asking "By what authority can the Fed lend to insurance companies?"

It's a good question given that the Fed is widely thought to be authorized to lend only to banks. It turns out the Fed can lend to pizza parlors if it wants to, with a questionable interpretation of the Federal Reserve Act.

Let's start by taking a look at the Fed Sponsored AIG Bailout Press Release.

The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy.

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility.

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

Section 13(3) Explored

Inquiring minds not satisfied with the above press release are looking into Section 13. Powers of Federal Reserve Banks

3. Discounts for Individuals, Partnerships, and Corporations

In unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.

<12 USC 343. As added by act of July 21, 1932 (47 Stat. 715); and amended by acts of Aug. 23, 1935 (49 Stat. 714) and Dec. 19, 1991 (105 Stat. 2386.>

Five Members Of The Board

Click here to see information about the Fed Board of Governors.

Two positions on the board are vacant. It's too bad another one isn't. Although I strongly question the actual intention of section 13(3), a literal interpretation allows the Fed to lend to insurance companies, pizza parlors, casinos, houses of ill repute, or to anyone else the Fed damn well pleases as long as it can muster five votes. Was this really the intent of the bill?

Serious Problem With Regulation

The above points out a serious problem with regulation. The problem is that regulation is never tight enough or it is too tight, or some mind boggling combination of both depending on unique circumstances.

Please remember that is was regulation that created Fannie Mae and Freddie Mac. Also note that regulatory loopholes allowed Citigroup to hide over $1 trillion in off balance sheet SIVs. I am sure the SIV loophole and the creation of Fannie and Freddie seemed innocuous at the time.

When seemingly innocuous regulation can cause such damage, it is imperative to ask if the problem is in the regulation, or if the problem lies in the very existence of the Fed, GSEs, and fractional reserve lending itself.

In light of this fiasco, one can only be terrified of what other loopholes in the Federal Reserve Act that Bernanke may have discovered.

[antigop]

52. Does it really matter whether there are loopholes or not?

Won't these guys just thumb their noses at us and do whatever the hell they want--regardless of whether their actions are legal or not?

:grr: :grr:

[DemReadingDU]

75. Exactly what I think too

They are looking to save their own mansions and yachts. To hell with the rest of us.

:grr: :grr: :grr: :grr: :grr: :grr: :grr: :grr: :grr: :grr: :grr: :grr:

[ronnie624]

182. Absolutely.

The confusion, denial and apathy I see around me over news like this is scary.

Americans are in no way prepared to institute the serious grass roots political organization that is needed to combat the corporatist infestation of our government.

[Ghost Dog]

16. Interbank dollar lending markets remain stressed

Wed Sep 17, 2008 5:13am EDT

LONDON, Sept 17 (Reuters) - Banks continued to face extreme difficulties raising short-term dollar funds on Wednesday, with the cost of borrowing overnight dollars scaling the previous session's Libor fixing and significantly above the Federal Reserve's target rate.

Overnight dollar funds were borrowed at rates as high as 8 percent earlier in the European session, according to prices indicated on Reuters screens, before easing back to anywhere between 3.00 percent and 5.00 percent <USDOND=> later in the session.

There were some signs of relief in that rates were not as high as Tuesday's extraordinary peaks above 10 percent and market participants said liquidity was flowing through the system a little more easily than Tuesday.

But conditions remain strained.

Overnight funds are well above the Fed's target rate, which it kept on hold at 2 percent on Tuesday, dashing market expectations of a cut, and the cost of interbank three-month dollar funds was indicated on Wednesday at its highest level since January.

In addition, activity was still being carried out on a discreet basis, with no benchmark pricing and banks dealing with counterparties only on an ad-hoc basis.

/... http://www.reuters.com/article/marketsNews/idINLH44465720080917?rpc=44

[DemReadingDU]

79. Ted Spread is up to 2.60! FEAR, FEAR, FEAR, FEAR

here's the link
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND


here's yesterday's explanation about the Ted Spread
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3491922&mesg_id=3492004

[DemReadingDU]

107. OMG! Ted Spread up to 2.89!

Widespread FEAR


:scared:

[ozymandius]

17. Barclays snaps up Lehman business for $1.75 bln

LONDON (MarketWatch) -- Barclays said Wednesday it's paying $1.75 billion to acquire the U.S. investment banking and capital markets operations of Lehman Brothers in a cash deal that will safeguard thousands of jobs.

Most of the bill -- around $1.5 billion -- is to pay for Lehman's New York head office at 745 Seventh Avenue and two data centers in New Jersey.

The remaining $250 million will pay for all of Lehman's U.S. fixed income, equities sales, trading and research and investment banking businesses, which employ around 10,000 people. The deal doesn't include Lehman's European operations.

http://www.marketwatch.com/news/story/barclays-snaps-up-lehman-business/story.aspx?guid={8C03B7D7-57FA-41AA-BC7C-9DF27925AE8E}&dist=msr_1

[ozymandius]

19. Cloud over money market funds

BOSTON (MarketWatch) -- As if the financial news wasn't bad enough with the big-name, old-line brokerage and financial services business on the rocks, investors now have one more scary concern to deal with.

After the market closed Tuesday, a money-market mutual fund called Reserve Primary Fund did the unthinkable and "broke the buck." Investors expecting a constant share price and consistent yield finished the day wondering why their shares were worth just 97 cents, and whether the loss could get worse.

Further, The Reserve, which operates the Primary Fund, said it would not send out the proceeds of redemptions for a week after they are processed.

.....

Money market funds are ultra-safe investments, buying interest-bearing securities that mature within a year, and frequently within a week or month. The spectrum of investments runs from certificates of deposit to Treasury securities, from insured notes to asset-backed commercial paper, such as the Lehman notes.

Unlike ordinary mutual funds, money funds try maintain a constant price of $1. Each day, a fund's holdings are "marked to market," meaning the current market value of all holdings is added up, as if they were being sold. Anything above $1 per share basically passes back to the shareholders as interest income.

Anything less than $1 per share has pretty much been considered the death knell for a fund company, which is why, through the years, management firms have stepped in whenever breaking the buck was a real threat. While one small institutional money fund broke the buck in 1994 -- paying 96 cents on the dollar -- there are countless examples of firms eating bad paper to make sure their money funds don't crater. Crane Data, which tracks the money-fund business, counts 20 such bail-outs in the last 12 months, with troubles at Lehman, Fannie Mae and Freddie Mac being the root cause for the most recent deals.

http://www.marketwatch.com/news/story/money-fund-breaks-buck-snaps/story.aspx?guid={1AB6980B-6902-490C-A384-1D7B2C2479A1}&dist=TNMostRead

[radfringe]

22. Ozy, might want to include a daily list of collapses/failures/bailouts

Bailouts, Take-overs:
Bear-Stearns
Countrywide
Fannie Mae
Freddie Mac
Lehman Brothers
Merril-Lynch
AIG

On the Edge:
WaMu
Morgan Stanley
Goldman-Sachs

Bank Failures: http://www.fdic.gov/bank/historical/bank/index.html

September 2008:
Silver State Bank

August 2008:
Integrity Bank
Columbian Bank and Trust
First Priority Bank

July 2008:
First National Bank of Nevada
First Heritage Bank N.A.,
Indymac Bank

May 2008
First Integrity Bank
ANB Financial

March 2008
Hume Bank

January 2008
Douglass National Bank

[ozymandius]

24. Great idea.

This is a solid list you've assembled right here. Edward Harrison does a great job compiling bank failure data and bailouts at his Credit Writedowns blog. I recommend to anyone interested in these developments should bookmark this site.

[radfringe]

27. just asking

how many times have we heard "the markets will take care of it"?

If the "markets will take care of it" why are we bailing out these companies? Seems to me when the repubs say "markets" they really mean "tax payers"

[ozymandius]

32. That rhetorical question would make a great subject for a paper.

It's also good for a manifesto.

These Republicans - it's a belief in the illusory aspects of capitalism. When there's money to be shaken and moved, they're all over it. It's so easy to short-circuit the stops that keep good money from mixing with the bad. The plan looks good for a moment. And that's where Republicans trumpet some great achievement in the realm of economics.

You and I know better. When money flies through the system and the next person to get rich has their picture posted on the cover of Money Magazine (that worthless rag): it's short-lived fame to match the success.

Modest, sustained growth with little fanfare garners little attention. So when I see another Republican proclaim how he has a plan to juice the markets: that is what it is. It's squeezing money from solid growth areas to create an illusion of prosperity. I suppose one can call it the Bonnie and Clyde economic model.

[TalkingDog]

120. Here's my remedy

Wouldn't use it on a child, but lemme at the meat-heads who put us in this situation....

[UpInArms]

157. ?

[Wednesdays]

160. I didn't know Vitter was that short

:evilgrin:

[TalkingDog]

164. No, that looks like too much fun.... Here's what I had in mind.

Or one of my favorite painting's by Max Ernst (quite shocking in it's day)

The Blessed Virgin Chastises
the Infant Jesus Before Three Witnesses:
A.B., P.E. and the Artist, 1926

[Joe Chi Minh]

188. Adam Smith knew better than that. He virtually branded businessmen as

chronic recidivists, and certainly said that they were on no account to be trusted.

All that spiel about the "free market" put out by far-right wingers as Smith's core belief is palpably utter, utter rubbish. He was merely advocating that businessmen should be treated as truffle pigs (in Roman Catholic parlance, "allowing grace to build upon nature", base though that nature be), exploited but on no account trusted, still less pandered to, because, as he said, they lost no opportunity to conspire against the common good.

Moreover, he said that workers should receive proper compensation for their work - the people who REALLY make the money - and that tax should be paid as far as possible in proportion to a person's income. If the former had been adhered to the money markets would not have been cosseted to the detriment of manufacturing industry, nor outsourcing countenanced; if the latter had obtained, the administration would have prevented this economic cataclysm, because their billionnaire friends would have angrily resented their taxes being used to bail out the spivs of the banking and insurance sector.

This article published by CommonDreams makes interesting reading:

http://www.commondreams.org/archive/2007/09/23/4046/

[DemReadingDU]

86. Direct link to Harrison's Credit Crisis Timeline

Excellent, and he keeps it updated!
http://www.creditwritedowns.com/2008/05/credit-crisis-timeline.html

[UpInArms]

61. After AIG rescue, Fed may find more at its door

http://www.reuters.com/article/newsOne/idUKN1644235820080917?sp=true

WASHINGTON (Reuters) - In one $85 billion (47 billion pound) fell swoop, the U.S. Federal Reserve may have wiped out what credibility it won resisting Lehman Brothers' rescue plea and opened its door to countless other companies to come calling for cash.

By providing a massive loan to American International Group on Tuesday, just two days after refusing to use public funds to save Lehman Brothers from bankruptcy, the central bank also invited tough questions on how exactly it determined whether a company was too big to fail.

Between the $29 billion the Fed pledged to swing the Bear Stearns sale to JPMorgan in March, $100 billion apiece to rescue mortgage finance firms Fannie Mae and Freddie Mac, up to $300 billion for the Federal Housing Authority, Tuesday's $85 billion loan to insurer AIG and various other rescue deals and loans, taxpayers are potentially on the hook for more than $900 billion.

"They pretended they were drawing a line in the sand with Lehman Brothers but now two days later they're doing another bailout," said Nouriel Roubini, a professor at New York University's Stern School of Business.

"We're essentially continuing a system where profits are privatized and...losses socialized," Roubini said, adding that auto makers, airlines and other struggling businesses would no doubt be asking for government help too.

The government was hard pressed to say no to AIG because of concerns that its collapse would harm thousands of companies around the world and cause chaos in the $62 trillion market for credit default swaps, where it is a big player.

...more...

[ozymandius]

23. Lehman Collateral Damage: Some Hedge Funds Have Assets Frozen

The Wall Street Journal tells us that some less-than-nimble-footed hedge funds wound up not moving their prime brokerage accounts quickly enough out of Lehman to avoid having those assets frozen in the bankruptcy.

Most readers will probably find it hard to work up much sympathy for these Masters of the Universe. Despite the name "prime broker", only small hedge funds have only one prime broker, Medium to bigger hedgies have two or three, some even more. So even firms caught are not completely stuck, although not being able to trade out of a position is not where anyone ever wants to be.

.....

From the Wall Street Journal:

The rush to get away from Lehman has involved some of the world's biggest hedge funds, including London-based hedge fund GLG Partners LP, in which Lehman owns a stake. In a statement Tuesday, GLG said it had in recent months shifted assets away from Lehman. "The majority of these transfers have already settled, and we expect the remainder to settle shortly," the statement said. "We believe the residual exposure of the GLG Funds to Lehman will not be material."

http://www.nakedcapitalism.com/2008/09/lehman-collateral-damage-some-hedge.html

---

"Exposure..will not be material" - Where have I read that before?

[Roland99]

25. Read Nouriel Roubini's latest at RGE Monitor last night. yikes!

Don't have the link but got to it from a link on www.bloomberg.com

I remember his 12 steps back in February and thinking it was quite a worst-case scenario. Well, those 12 steps are falling into lock-step.

[ozymandius]

28. Here's a direct link to the original article and the 12 steps.

http://commonsenseforecaster.blogspot.com/2008/02/this-weekends-contemplation-12-step.html

We appear to be somewhere between steps 5 and 6.

Edited to add: we are also seeing aspects of steps 7 & 8. Certainly 8 in the case of AIG.

[radfringe]

29. Roubini's list and link

http://www.rgemonitor.com/blog/roubini/245171

Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.

Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had “reckless or toxic features”, argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks’ ability to offer credit.

Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The “credit crunch” would then spread from mortgages to a wide range of consumer credit.

Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.

Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.

Step six - it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt. Thus some big banks may join the 200 plus subprime lenders that have gone bankrupt. This, like in the case of Northern Rock, will lead to depositors’ panic and concerns about deposit insurance. The Fed will have to reaffirm the implicit doctrine that some banks are too big to be allowed to fail. But these bank bankruptcies will lead to severe fiscal losses of bank bailout and effective nationalization of the affected institutions. Already Countrywide – an institution that was more likely insolvent than illiquid – has been bailed out with public money via a $55 billion loan from the FHLB system, a semi-public system of funding of mortgage lenders. Banks’ bankruptcies will add to an already severe credit crunch.

Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.

Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a “fat tail” of companies has low profitability and heavy debt. Such defaults would spread losses in “credit default swaps”, which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.

Step nine would be a meltdown in the “shadow financial system”. Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.

Step ten would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.

Step eleven would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.

Step twelve would be “a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices”.

[Roland99]

35. Awwww....thanks!

I <3 you all!

(posting from my phone again)

[Demeter]

34. Don't Read It If You Have Just Eaten, or Have a Sensitive Digestive System

Some things it's better not to know. Remember how we used to worry about nuclear war? This is the financial equivalent.

[Tansy_Gold]

56. Your analogy is exactly what I was thinking

This may be worse than the shruggers anticipated????

[TalkingDog]

141. The Law of Unintended Consequences.

Excess Hubris followed at a leisurely pace with a strict thrashing by Karma....
greed becomes balanced out by lack.

Or if we're looking for something with Judaic or Christian overtones: “They sow the wind, and reap the whirlwind. The stalk has no bud; it shall never produce meal. If it should produce, strangers would swallow it up."

Unfortunately, a majority of us didn't ask to participate in the process. But a majority of that number didn't ask questions when they should have.

Those of us who questioned (and tried to signal danger to others) will suffer from the collapse like everybody else. Knowledge only gave us a cushion, not a barrier. And if we try to point out our foreknowledge, we might also suffer the fate of Cassandra.

I truly wish all of you well.

Stay safe.

[Demeter]

156. Tansy, Only a Madman Would Have Deliberately Set This Up or Off

a Dr. Strangelove economic bombing.

[Hugin]

161. What a coincidence!

There are many such mad-persons occupying high offices as we speak!

:scared:

[Tansy_Gold]

168. Exactly.

When I started, some months ago, to examine the correlation between the novel and the reality, my gut fear was that the shruggers in our midst had NO CLUE how fragile a fiction Rand had created. They had suspended their disbelief too far. It's one thing to enjoy the make-believe world of a story and quite another to try to make its fantasy real.

As another writer once said, "A blank piece of paper is God's way of saying it ain't easy being God."

Rand's universe was completely in her control; the real world is in no one's.


As Francisco Domingo Carlos Andres Sebastian D'Anconia said, "You asked for it, brother!"




Tansy Gold :shrug:

[muriel_volestrangler]

31. UK: HBOS in merger talks with Lloyds (would be 2nd largest UK bank, I think)

Lloyds TSB is in advanced merger talks with HBOS to create a UK retail banking giant worth £30bn, the BBC has learned.

A deal would end uncertainty about the strength of the UK's biggest mortgage lender after a run on its shares.

News of a merger, valuing HBOS shares at around 200 pence each could be announced within the next 24 hours, BBC Business Editor Robert Peston said.
...
HBOS shares rose by as much a 15% having earlier slumped by as much as 50% on the London market.

http://news.bbc.co.uk/1/hi/business/7620483.stm

They're not kidding about a 'roller-coaster' - within an hour, the HBOS share price twice dipped below 100p, and twice exceeded 200p: http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/23174/intraday.stm

Not easy to judge market capitalisation without recent data, but a merger at the end of last year would have made the combined compnay the 2nd largest bank in the UK, behind only HSBC: http://en.wikipedia.org/wiki/FTSE_100_Index#Market_capitalisation

[ozymandius]

33. This sentence is starting to sound a little threadbare.

It is impossible to invest in this kind of market. Wild fluctuations like this make designating fair market value impossible.

[Demeter]

36. Another Timely Toon

[ozymandius]

38. Superb!

Now I really have to go. G'bye.

[Demeter]

41. Stay Safe Ozy! And Thanks!

[ozymandius]

37. I'll check in later.

It's time for me to get out the door. Good luck.

:hi:

[Demeter]

40. U.S. regulators try to find WaMu buyer

Crossposted from LBN



http://biz.yahoo.com/rb/080917/washingtonmutual.html?.v=2


(Reuters) - U.S. federal regulators recently called a number of banks asking if they would consider buying Washington Mutual Inc (NYSE:WM - News) should it eventually falter, the New York Post said, citing sources.


Federal banking regulators, in recent days, contacted Wells Fargo & Co (NYSE:WFC - News), JPMorgan Chase & Co (NYSE:JPM - News), HSBC (LSE:HSBA.L - News) and several other financial institutions to gauge their interest in a possible acquisition of WaMu, the paper said.

No merger discussions are currently under way between the Seattle-based bank and anyone else, the sources told the paper.

Washington Mutual could not be immediately reached for comment.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Paul Bolding)



NOTE THAT THIS REPORT CAME TO US VIA BANGALORE! THE POSTER IN LBN MENTIONED THAT IT DISAPPEARED IN MINUTES...BUT THERE'S NO CORRECTION, EITHER.

[DemReadingDU]

42. Jon Markman: Poof! There go Americans' dreams

9/16/08 So much for the fairy tale about the little guy buying stocks for a sweet life and a safe retirement. Now that vision is crumbling along with some of Wall Street's giants.

As one major financial institution after another succumbs to crushing losses this year, it is mourning in America for the hopes of average working people who believed in the myth of stock ownership as a sure path to a better life now and a safe retirement later.

It may sound like a gross exaggeration to say that the dreams of Main Street are dying on Wall Street this week, but it is a fair interpretation of recent events. For the capital that is required to fund businesses, schools, streets, farms, vacations, homes and cars is quite literally evaporating like dew at the start of a summer day with the untimely death of every bank, brokerage and insurance company.

Where did the money come from, and where has it gone? It's an interesting saga, and it will take just a few minutes to tell. Let me warn you first that it starts out like a fairy tale but quickly becomes a horror story, so I'll be sure to tell you when to cover your eyes.


Railroad and shipping barons of earlier times would be shocked to discover how little concern most people have exercised in the past few decades when plunking their salaries into mutual funds or individual stocks. The idea of risk-free investing, to people who really take the risks and thus understand them, is laughable.

It is only now, during this period of acute crisis, that individuals who won't go on a bicycle without a plastic-foam helmet are coming to grips with what business risk really means. And that is why a childlike innocence is dying along with the stock market this week, making people feel as sad, helpless and angry as when they first discovered the truth about other realities of adulthood.

more...
http://articles.moneycentral.msn.com/Investing/SuperModels/poof-there-goes-an-american-dream.aspx?page=1

[Demeter]

43. But This Wasn't Business, Friends. This Was Fraud

And that's the problem. If there's going to be a market, it has to be regulated, policed, and punished for crime.

Otherwise, it's like being in urban crime scene--"what were you doing out of your neighborhood, you idiot?"

[54anickel]

128. Sort of funny to read stuff like this sourced from the same talking heads that

pushed the "buy and hold, invest for your future, this weeks hot tips" folks in the media. People who consistently raised concerns ever since St Ronnie and friends started down the deregulation path were dismissed as doom and gloomers.

[muriel_volestrangler]

45. U.S. Mortgage Rates May Wreak Havoc After Libor Gain

Sept. 16 (Bloomberg) -- The biggest jump in the London interbank lending rate in at least seven years could wreak further havoc on the U.S. housing market and there's nothing the Federal Reserve can do about it.

About 6 million U.S. mortgages, including almost all subprime home loans and 41 percent of prime ARMs, are linked to the London Interbank Offered Rate, or Libor, according to First American CoreLogic in Santa Ana, California. Today's daily rate more than doubled, with smaller gains in the one-week and one-month rates, as lenders demanded higher compensation for risk after Lehman Brothers Holdings Inc. collapsed and the value of American International Group Inc. fell 84 percent in a week.
...
The overnight Libor rate in U.S. dollars soared 3.33 percentage points to 6.44 percent today, its biggest jump in at least seven years, according to the British Bankers' Association. The one-week rate rose by more than a percentage point, to 3.88 percent from 2.49 percent on Monday, and the one-month rate increased to 2.75 percent from 2.5 percent.

http://www.bloomberg.com/apps/news?pid=20601213&sid=aJs41o1Rt_uk&refer=home

The huge government loan to AIG is linked to the 3 month rate:

Saying that a disorderly failure of American International Group would add stress to fragile financial markets, the Federal Reserve agreed late Tuesday to lend the giant insurance firm $85 billion. In return, the U.S. government will receive a 79.9% equity interest in AIG. The two-year loan is secured by all the assets of AIG and its primary non-regulated subsidiaries. the loan will be repaid from the sale of certain of the company's assets. Interest on the outstanding balance will accrue at the three-month Libor rate plus 850 basis points.

http://www.marketwatch.com/news/story/fed-confirms-emergency-85-bln/story.aspx?guid={A69CD430-B549-45C1-B7AA-6B450CE355B5}&dist=msr_1

[Buttercup McToots]

48. Russian bourses halt trading for second day

http://www.ft.com/cms/s/0/6ff9306c-83f1-11dd-bf00-000077b07658.html?nclick_check=1

Russian bourses halt trading for second day
By Catherine Belton and Charles Clover in Moscow, Rachel Morarjee in London

Published: September 16 2008 15:07 | Last updated: September 17 2008 12:02

Russia’s two main bourses, RTS and MICEX, said on Wednesday they were suspending trade until further notice from the state’s main market regulator as shares continued to tumble one day after their steepest decline in more than a decade.

Russian stocks had continued to slide on Wednesday morning even as the government unveiled new anti-crisis measures to pump up to $29.5bn in extra budget funds into the three main state-controlled banks.



Traders at Micex, where early trading was suspended temporarily as investors ignored assurances by Russian officials

EDITOR’S CHOICE
Nerves jangle in emerging economies - Sep-16Emerging market stocks take a dive - Sep-15Pre-emerging economies grow increasingly attractive - Sep-07Emerging market IPOs decline - Sep-04The Short View: Emerging markets - Sep-03Insight: There is still strong allure in emerging market equities - Sep-03The dollar-denominated RTS was down 6.4 per cent and the rouble denominated MICEX was down 3.1 per cent when the suspension was enforced with the two main state-controlled banks, Sberbank and VTB leading the slide.

Analysts said state cash being pumped into state banks was not being filtered into the rest of the system, which is being hammered by a liquidity squeeze as domestic investors faced margin calls on loans collateralised by shares. ”Russia doesn’t have a liquidity problem. It has an intermediation problem,” said Roland Nash, head of research at Moscow investment bank, Renaissance Capital.

”You can’t borrow on the interbank market,” he said.

Brokers have been pulling credit lines amid widespread fears of defaults as local clients saw leveraged shareholdings wiped out by the market slide. One Moscow investment bank, KIT Finance, said on Tuesday night it had failed to meet payments on several financial obligations because clients had failed to meet payments to it. The bank said on Wednesday that it was in talks with a strategic investor on stake sale. One potential suitor, VTB, however declined to comment.

In a sign of how the liquidity crunch in Russia is exacerbating the problem on local bourses, Russian depositary receipts traded in London were up on Wednesday morning. ”They have access to funding,” Mr Nash said.

Russian shares suffered their steepest one-day fall in more than a decade on Tuesday, losing up to 20 per cent, as a sharp slide in oil prices and difficult money market conditions triggered a rush to sell.

The heads of the Russian central bank, the finance ministry and the financial market regulator met on Tuesday night for an emergency discussion on ways to halt the crisis.

Earlier, trading had been suspended on both the Micex and RTS stock exchanges as investors ignored assurances by Russian officials and a cycle of distrust set in amid liquidity fears.

Margin calls forced domestic traders to liquidate positions and brokers pulled credit lines. At least one Moscow bank failed to meet payments.

The rouble-denominated Micex Index closed 17.75 per cent down, the sharpest one-day drop since the August 1998 financial crisis, while the dollar-denominated RTS index closed down 11.47 per cent, its lowest lvel since January 2006.

Interbank money market rates climbed to 11 per cent, their highest since a mini-banking crisis in summer 2004.

Chris Weafer, chief strategist at Uralsib investment bank: “We’re in completely uncharted territory where the prevailing emotion is of fear and numbnes. No one knows where this could stop”.

Alexei Kudrin, finance minister, insisted that the financial system was not in a systemic crisis but the central bank injected a record $14.16bn in one-day funds into the money market.

The finance ministry also placed an additional R150bn ($5.8bn) in one-month deposits into the banking system. Konstantin Korishchenko, central bank deputy, told Russian news agencies that the bank and the finance ministry could provide a total of $117.6bn in liquidity to the banking sector.

But market players said banks were ceasing to lend to second and third-tier companies and brokers were pulling credit lines. KIT Finance, big Moscow investment house confirmed rumours that it had been unable to make payment on a series of short-term loans.

It said: “In connection with the fact that a series of our clients did not meet their obligations to our bank, we have not met our obligations to our counterparties.

“We recognise our responsibility to our counter-parties and to the market and we are working intensively to resolve the situation.”

Andrei Sharonov, managing director of Troika Dialog, a Moscow investment bank, and a former deputy economic minister, said: “This is a vicious circle,” said , .

“It is a situation of total mistrust. The liquidity crisis is being caused by a crisis of confidence in which people are frightened to borrow and frightened to lend.”

Shares in Russia’s biggest state-controlled banks led the slide with Sberbank, the state-controlled savings bank, closing 21.72 per cent down and VTB losing 29.26 per cent. The bank was suffered on investor fears about its securities portfolio, which makes up about 10 per cent of its assets.
Copyright The Financial Times Limited 2008

[radfringe]

49. Morgan Stanley weighing possible merger

Morgan Stanley weighing possible merger
Report: Investment bank mulling deal with another institution
http://www.msnbc.msn.com/id/26753521/
MSNBC/REUTERS updated 52 minutes ago 9/17/08

SINGAPORE - Investment bank Morgan Stanley is weighing whether it should remain independent or merge with a bank, give the recent turbulence in the company’s share price, broadcaster CNBC reported on Wednesday.

Morgan Stanley officials were not in merger talks as of late Tuesday, CNBC said, citing unnamed people close to the matter.

“But senior people at Morgan concede that further zig-zags in the company’s stock price could and possibly will force the company to change course and seek a merger partner, probably a well capitalized bank,” CNBC reported on its Web site.

--snip--

Morgan Stanley shares closed down 10.8 percent at $28.70 on Tuesday, having fallen 46 percent so far this year.

Morgan Stanley officials in Hong Kong declined to comment on the report.

In an interview with Reuters on Tuesday, Morgan Stanley’s Chief Financial Officer Colm Kelleher said the No. 2 U.S. investment bank remains confident in its broker-dealer model and dismissed the need to merge with a deposit-taking bank, even as he maintained a cautious stance about the markets.

Traders in Asian said the report weighed on share markets, which pared early gains made on the U.S. government rescue of troubled insurer AIG.

“The U.S. government’s rescue of AIG helped the markets to avoid the worst case scenario, but the fact that only the government was willing to help indicated the gravity of U.S. credit problems,” said Choi Seong-lak, an analyst at SK Securities in Seoul.

“Reports that Morgan Stanley is considering a merger with a commercial bank confirmed such fears, and market participants are now wondering if even Goldman Sachs is safe. Sentiment is extremely fragile.

[UpInArms]

51. dollar watch

http://quotes.ino.com/chart/?s=NYBOT_DX&v=i

Last trade 78.718 Change -0.525 (-0.66%)

US Dollar Could Falter As Federal Reserve Leaves Rates at 2.00%, Signals Neutral Stance

http://www.dailyfx.com/story/bio1/US_Dollar_Could_Falter_As1221607912560.html

The Federal Reserve left rates unchanged at 2.00 percent, as we had anticipated, but subsequent market-wide reaction was mixed as fed fund futures had been fully pricing in a 25bp cut to 1.75 percent. Going forward, though, Credit Suisse overnight index swaps signal that the central bank will leave rates unchanged through the next 12 months - compared to expectations of a 25bp cut earlier today – as the Federal Open Market Committee’s policy statement signaled a more neutral stance. Indeed, it appears that the drop in crude oil from nearly $150/bbl in July down to below $95/bbl has helped to alleviate some of their inflation fears, since even the most hawkish member of the group – Richmond Fed President Richard Fisher – voted for no change. Furthermore, the Committee dropped a line noting “elevated” inflation expectations, suggesting they are a bit more confident that they’ve kept the public’s outlook for inflation in check.

Overall, the Committee’s balance of concerns regarding the “downside risks to growth and the upside risks to inflation” should lead them to leave rates steady through the end of the year. Looking more specifically at the market’s reaction, the US dollar jumped immediately on the news, but subsequently pulled back to pre-FOMC levels. Risky assets – like the JPY crosses – managed to stage a bit more of a recovery, though, amidst speculation that the Federal Reserve would bail out AIG, the world’s largest insurer. Ultimately, my fundamental bias for the US dollar remains bearish this week, as the previous rally was fueled by expectations of future interest rate increases. However, with the FOMC now signaling no change in rates going forward, that impetus has been removed.

...more...

Euro, Pound Gives Back Overnight Gains as Economic Data Fails to Impress

http://www.dailyfx.com/story/topheadline/Euro__Pound_Gives_Back_Overnight_1221647685267.html

The Euro fell back after hitting a high of 1.4268 during the overnight Asian session, and has held within a tight range between 1.4200 – 1.4251 over the last few hours. On the economic docket, the Euro-Zone trade deficit widened to a new record high of 6.4B from a revised reading of 3.5B in June.

The Euro-Zone trade deficit surged to a new record as global trade conditions falter. The deficit increased to 6.4B from 3.5B in June, and may fall further into negative territory as foreign demands fade. Slowing demands paired with stalled growth suggests that that economic activity may continue to falter for the rest of the year, and could force the ECB to lower the interest rate by next year. Meanwhile, construction output fell for the fifth consecutive month, slipping to -3.3% from a revised reading of -3.0% in June.

The pound gave back gains from the overnight session after reaching an intraday high of 1.7978. Cable moved back below 1.7900, and remains range-bound between 1.7810 – 1.7890. U.K. labor market weakened further as jobless claims surged to a fresh record high of 32.5K from a revised reading of 27.8K in July. The claimant count rate increased as well, rising to 2.8% from 2.7%, which suggests that labor demands may continue to falter over the coming months. The ILO unemployment rate ticked higher as firms continued to cutback on employment, rising to 5.5% from 5.4% in June. The bigger than rise in unemployment suggests that economic activity may deteriorate further as firms continue to cutback on employment, which may lead the BoE to reduce the benchmark interest rate by next year.

The USDJPY dipped to an intraday low of 105.14, but bound back to hold above 105.50. The Bank of Japan voted unanimously to leave the interest rate unchanged at 0.50% as the world’s second largest economy continues to face high inflation and slowing growth. The central bank noted that economic activity remains sluggish, and went on to say that ‘tensions in global financial markets have increased and there are downside risks to the world economy.’ With Lehman Brothers filing for bankruptcy and AIG taking a $85B infusion from the Fed, the BoJ has increased their efforts to calm the markets by injecting 5.5 trillion yen in the past two days.

The economic calendar for the U.S. is fairly light compared to yesterday, but may generate volatility for the greenback as the U.S. docket lacks market moving potential until the following week. The current account deficit is expected to increase to -$179.3B from -$176.4B in the first quarter, which could lower growth expectations for the world’s biggest economy as global demands waver. Meanwhile, Housing starts and building permits are anticipated to fall to 950K and 925K from 965K and 937K respectively, which could fuel bearish sentiment for the dollar. However, an unexpected rise in the housing data could provide dollar support, which would allow the greenback to extend its gains against the major currencies.

...more...

[UpInArms]

55. Mayhaps the new US model will be Zimbabwe

Zimbabwe issues new banknote

http://news.yahoo.com/s/afp/20080917/bs_afp/zimbabweeconomycurrency

HARARE (AFP) - Zimbabwe's central bank Wednesday issued a new 1,000 dollar note in a bid to ease widespread cash shortages as the country battles the world's highest inflation rate.

According to the bank, "introducing the new 1,000 Zimbabwe dollar note was for your (Zimbabweans) convenience."

The bank has introduced a series of new notes since August, after the central bank struck 10 zeros off the local currency.

There have been chronic shortages of cash amid hyperinflation which was last reported at 11.2 million percent.

Banks have imposed daily withdrawal limits of 500 dollars for individuals and corporates, which is only enough for a bus ticket from the suburbs to central Harare.

Because of the restrictions, long meandering queues have become a familiar sight outside banks, with some depositors sleeping outside to be at the front of the queue.

Zimbabwe's economy has been on a downturn for a decade with high unemployment and food shortages in a country where at least 80 percent of the population live below the poverty line.

Two weeks ago, the reserve bank allowed selected shops and wholesalers to quote prices in foreign currency, in a bid to curb the burgeoning black market trade in basic commodities.

...more...

[harun]

122. 11.2 million percent inflation rate, WOW

At that rate why even use money. Just barter for everything.

[UpInArms]

57. Sour economy hits paper mills, small-town workers

http://news.yahoo.com/s/ap/paper_woes

KIMBERLY, Wis. - Earlier this month, workers dabbed their eyes with tissue as sheets of paper rolled out of two massive milling machines for the last time.

After a century of supplying jobs to this town of 6,300 and neighboring communities, the paper-making factory has stopped production, leaving residents worried about their community's future now that its key business is gone.

"My grandfather worked there and my father, and I have three brothers that work there," said Rick Hermus, the Kimberly village administrator, of the local NewPage mill. "A lot of people are wondering what's going to happen."

It's a scene that has played out in small paper towns from California to Maine. The number of jobs in the domestic paper industry has shrunk about 20 percent in recent years as costs rise and imports become cheaper. Demand all around has been dampened by the slow economy as well as the shift of eyeballs away from the printed page toward the screens of PCs and cell phones.

The mill was built in 1889 and has been Kimberly's lifeblood ever since, producing the glossy paper used in magazines and slick brochures. But NewPage Corp. of Miamisburg, Ohio, decided to shutter the plant, shedding 475 jobs in addition to 125 cut in May.

"Demand has been going down and costs are going up at extraordinary rates," said NewPage chief executive Mark Suwyn. It's hard to raise prices, he added, because customers see paper as a commodity that should be low-cost.

When Sweet Lorraine and Gingerbelle — the two massive machines named after the wives of former plant owners — ceased production last week, the town fell into mourning.

...more...

[Buttercup McToots]

59. Wow...so sad...

:-(

[UpInArms]

63. remember that "job creation tax cut" dimson did in 2003?

if you want to reflect on how wrong people can be with their predictions, go here:

http://www.heritage.org/Press/NewsReleases/nr031403a.cfm

[Wilber_Stool]

72. I could only read

the first five paragraphs. Think tank?

[Demeter]

166. Imports Won't Be Cheaper Much Longer

So don't dismantle the industrial base just yet.

[UpInArms]

58. US 3-mo TED spread 236 bps, widest in credit crunch

http://www.reuters.com/article/bondsNews/idUSLH51622320080917

LONDON, Sept 17 (Reuters) - The difference between the cost of borrowing three-month dollar funds on the interbank market and three-month U.S. Treasury borrowing rates widened on Wednesday to its highest since the credit crisis eupted in August last year.

The so-called TED spread -- the spread between T-bill yields and comparable eurodollar rates, or London interbank offered rates (Libor) -- widened to 236 basis points <US3MT=RR> <USD3MFSR=> from around 220 basis points on Tuesday.

That's wider than the two previous peaks of around 220 basis points in the 13-month old crisis seen after the initial blowout in August last year and December last year as banks scrambled for cash to bolster their year-end balance sheets.

...more...

[DemReadingDU]

82. FEAR, FEAR, FEAR - Ted Spread 2.89 now

A high Ted Spread indicates FEAR
check my post #79 above for explanation
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3494254&mesg_id=3494613


add link for Ted Spread
http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND

[UpInArms]

60. FDIC's Bair says needs to be a process in place for bailing out non-bank entities

07:59 ET
FDIC's Bair says needs to be a process in place for bailing out non-bank entities

:woohoo: :bounce:

FREE MONEY FOR EVERYBODY!!!!

[Tansy_Gold]

62. I need a bail-out.

Where do I apply for mine?



Tansy Gold, whose needs are very modest

[Hugin]

66. No bailout for you!

Unless you're one of the 9,000 financial workers Barclays picked up or already at the spanking new AIG Privatized
Jobs Program.

I wonder how the money guys looking after their own is going to sell with the 445,000 newly unemployed people last
week or the Millions who've lost jobs and benefits since the Republican Banana Republic started in earnest when
Saint Ronnie began the tear-down?

Not so well, I'd think.

Anyway, after the events yesterday, I don't think I'll be here in the SMW too much anymore. The whole thing is
so nakedly corrupt, anything I'd say here is preaching to the choir and those few who don't 'get' that the
system is a total farce built upon a swamp... Well, there's no hope for them.

I need to gather my cot, a few books, and record albums... Take down my pictures of JFK and FDR then I'll
be on my way.

:hi:

Nice to meet you Tansy_Gold... Demeter... UpInArms... antigop... DemReadingDU... McToots... Dr.Phool... Watcher...
Talking Dog... Ghost Dog... Roland99... Tandalayo_Scheisskopf... radfringe... and all the rest who have shown they care by posting here.

and a special thanks to AnneD and Ozy!


:grouphug:

[UpInArms]

77. Dear Darling Prag

The SMW would not be the same without you here -

Anyway, after the events yesterday, I don't think I'll be here in the SMW too much anymore. The whole thing is so nakedly corrupt, anything I'd say here is preaching to the choir and those few who don't 'get' that the system is a total farce built upon a swamp... Well, there's no hope for them.

we do not do this for "them" - we do this for us.

There are days that seem so dark and as if the the light of the sun can never penetrate the opacity of the inner workings of the den of thieves that I, too, think I should just go away and eat mice in the desert.

But then I realize that our "choir" singing is the clearest and purest voice and my "ears" would wither without the sound of fury and passion from any who can carry the "tune".

:grouphug:

UIA

[Hugin]

94. Well... okay.

:blush:

But, as Jewel says: "I'm Sensitive, and I'd like to stay that way."

So, from here on out... I'm all business! :|


:grouphug:

[Wednesdays]

99. Yea!

:woohoo:

[Tansy_Gold]

109. Please stay, Prag. We need you.

When the darkest days come, we need each other. We need our own choir, to remind us we aren't lost, we aren't crazy.

:hug:

[Hugin]

136. I have a certificate somewhere declaring me sane...

(true story)

I'm not so sure about the rest of the world, tho.

:hug:

I'll stay.

[TalkingDog]

149. I have a certificate that Exempts me from Enlightenment....

That's almost the same thing. Right?

[Hugin]

158. As I'm not an expert on such things... I'm not sure.

My certificate was issued after an exhaustive litany of psychometric, medical, and physical tests were administered by
a group of highly trained professionals... Because someone had thought, I didn't seem, "Quite right."

Turned out... I was average, but, sane. It was the rest of the world that wasn't, "Quite right."

[antigop]

163. HA! Reminds me of Star Trek quote:

"There's nothing wrong with me. There must be something wrong with the universe."

[Hugin]

174. Then there is the story of a friend of mine who was called in because of a failed 'Personality Test'

Now, I think that one is funny! :lol:

Hmm... I'll have to file that 'Star Trek' quote away. It's a good one. :D

[TalkingDog]

172. ah.... in the parlance of the Appalachian Hill Folk,

you were a bit "Quair".

Having been labeled thusly by my very own kin, I can stand in solidarity with you, my brother.


There is nothing wrong with being so far outside the sphere that you can say with certainty: "the earth is not flat". Even though it marks you crazy.

[Hugin]

175. Solidarity!

:raisedfist:

[Joe Chi Minh]

190. "Solidarnos!", even, I venture. Except it's against plutocratic Communism.

[Wednesdays]

97. Yeah, let's make that "choir" bigger and bigger

...until our circle is so large it can't be ignored. And those who choose to ignore us do so at their own peril.

[antigop]

125. Prag, you are a gem. I need a daily dose of your humorous cynicism.

I appreciate your posts.

Truth be told, I've almost crawled into a cave myself.

I think we need to keep getting the truth out.

Please continue to provide your valuable input.

Pretty please???

[Hugin]

140. Okay...

But, only because you said Please!

:7

[Buttercup McToots]

154. Pleeeeeeeeeeze...

Pretty Please?

[Hugin]

179. Said so nicely...

How can I refuse.

:stackingsandbags:

[Roland99]

148. UIA is right...we're all here to help us make sense of the crazed lies and machinations.

But take care and don't be a stranger!!

[Hugin]

178. It would seem I'm here for the long haul.

:worry:

[Demeter]

169. Oh No You Don't, Buster!

You are the official Weekend Economist mascot. You don't get to fade into the sunset.

Besides, my brothers are too far away to bust heads with.

[Hugin]

176. But... But... But... The last lifeboat is leaving!

And... And... I'm not a Celine Dion fan!

(Just give me three steps toward the door...)

[UpInArms]

64. U.S. shoppers to cut back holiday gifts: Reuters poll

http://www.reuters.com/article/domesticNews/idUSN1641434720080917?sp=true

many U.S. shoppers say they will cut back on gift-buying this holiday season than those who plan to spend more, according to a Reuters/Zogby poll released on Wednesday.

Retailers are gearing up for what may be their worst holiday season in years. Consumers pressured by high fuel prices and a U.S. housing slump are focusing on paying only for essentials and cutting back discretionary items.

Growing fears over the health of Wall Street since investment firm Lehman Brothers filed for bankruptcy protection early this week will likely erode consumer confidence even further.

More than 44 percent of people surveyed by the monthly Reuters/Zogby poll say they will spend either a little less or a lot less on gifts this year than in 2007.

<snip>

"This a staggeringly bad number," said pollster John Zogby, referring to the number of people who said they would spend the same amount on gifts this year. He noted that with inflation, even flat sales means retailers won't be making as much.

...more...

[Buttercup McToots]

65. Holiday season?

Christmas is postponed this year...:eyes:

[antigop]

129. Funny you should mention Christmas.

I had decided last night that I would buy Christmas presents now.

If my money isn't worth anything come December, I'll at least have a little Christmas spirit to share.

Bye..I'm off to go shopping.

[Wednesdays]

155. We might need to stock up on brandy

I think people will be hitting the eggnog pretty hard this holiday season. :(

[Demeter]

171. We Could Combine Xmas With Obama's Inauguration. and Call It Fitzmas

And maybe Fitzgerald would give us something besides a lump of coal, this time,


It may take 4 terms to turn this ship of state around--like FDR.

[Wednesdays]

67. Nearer My God, To Thee...Nearer To Thee...

The sinking continues. Dow is down 200 already.

Edit: After Tansy Gold's "Titanic" reference, I think that would be an appropriate song for the day.

[radfringe]

69. keep playing that song, to the lifeboats

repubs, bushies, and fatcats first... :p

[Hugin]

78. The Titanic is sinking, but, ******* The Pool Is Open *******

Since we'll all be wet (except for approx. 1% of us) in a few, anyway.

_________________________________________________________________________________________________________________________
Guess the date the DJIA rolls back to the level it was when the chimp took office-10,578.24. You can revise your dates until the DJIA hits(IMPORTANT CHANGE) 10700 (got to have a cut off). Anyone can join, just give a date and your reasoning for that date. Note the change on the cut off. That should make for a good horse race. I will check the post date/time for last minute posters but those that guessed the date way in advance get extra points. The earlier posters are at the top in the cases of multiple guesses on the same day.

Prag... 9/17 (Note: I'll update this until I get it correct!)

Ghost Dog ....9/18 (You may just get it GD!)
uppityperson... 9/18 (Note: Because it's a special day.)

Ozy.....9/19 (Note: Ozy picked this date a couple of months ago.)
AnneD..... 9/19 (Like the quadruple witching thang.)
readmoreoften... 9/19
Karenina.... 9/19

Demeter.....9/22
Buttercup McToots ... 9/22 (Note: Said Please.)
ozone_man.....9/23
JuneBourder.....9/29
radfringe.... 10/09/08 (Countdown!)
Birthmark....10/10
Mojorabbit.... 10/11
Tansy_Gold.....10/13
DemReadingDU.....10/16
Roland99.....10/17
AnneD....10/24
Neshanic.....10/24
UpInArms.....10/30
MsLeopard.....10/31
Wordpix.....11/3
Passingfair.....11/4
Ship wrack.....11/5
Wednesdays.....1/16/2009

Remember-you can change the dates as we learn more. If your date isn't on the list, e-mail me and I'll add it the next time I post. I erased expired dates so you can guess again. I post about one a week-more often the closer we get to the number. The winner get the praise and admiration of those on the Stock Watch Thread. We have also kicked in for a years worth of bragging rights and Karl Rove as you own pool boy if we can find Speedos to fit. There is still time to place your bets.....And please-no Reggie bars in the pool.

IMPORTANT ADDENDUM: I believe, as an investor, one day does not a trend make. So as activity coordinator of the pool, additional guesses are allowed should it dip down but pop up above the cut off. Call it the Indian Summer Clause. I personally think that 11000 is their PIN, but the fact that it cannot be pumped up any further anymore points to weakness in the system-for my $0.02.
__________________________________________________________________________________________________________________________

[Neshanic]

115. I think the people that have 9/22 to 10/17 may have the best shots, about the fabulous prize? It's

a trip to AIG headquarters to take anything you can load on the back of a pickup truck in 1 hour!

[Hugin]

142. Good plan! n/t

[Tandalayo_Scheisskopf]

68. Can someone tell me...

Why the phrase "Mussolini-style Facism" keeps running through my head?

[radfringe]

70. McCain says LET IT FAIL, NO BAIL OUT... but that was yesterday

today it's a different story

McCain softens his opposition to AIG bailout
By GLEN JOHNSON – 13 minutes ago
http://ap.google.com/article/ALeqM5iE2JCSH5p9r2GBkQWS9TWAMzmuvQD938GE2O0

WARREN, Ohio (AP) — Republican presidential candidate John McCain, struggling to strike the right note amid roiling financial markets and a Wall Street restructuring, on Wednesday softened his opposition to a bailout of mega-insurer AIG that he had flatly ruled out a day earlier.

Before the Treasury Department proposed an $85 billion loan to keep afloat American International Group Inc., the country's largest corporate insurer, McCain said he wouldn't support any bailout for AIG or any other company. "This is something that we're going to have to work through," he said Tuesday. "There's too much corruption, there's too much excess."

On Wednesday, McCain repeated that he didn't want to bail out AIG and knew of no one else who did. But, he told "Good Morning America" on ABC, millions of people with retirements, investments and insurance tied to AIG were "going to have their lives destroyed because of the greed and excess and corruption."

Elaborating on the charge of corruption, McCain said that many Wall Street executives had claimed "everything's fine, not to worry" and that Congress and regulators had paid no attention. "All of them were asleep at the switch," he said, and went on to blame special interests and lobbyists as well.


----

and then there was this story - but it was disappeared - before I had a chance to read it

McCain Blames Regulatory Agencies For AIG Bailout
CNNMoney.com - 35 minutes ago
http://money.cnn.com/news/newsfeeds/articles/djf500/200809170844DOWJONESDJONLINE000585_FORTUNE5.htm
Scrambling to try to avert a new global economic shock, the Federal Reserve agreed late Tuesday an unprecedented $85-billion rescue loan for AIG. ...

[Yo_Mama_Been_Loggin]

146. McCain's new nickname

Flip flop

:hurts:

[GliderGuider]

71. Perhaps a bit melodramatic, but these days seem to call for it:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all around it
Reel shadows of the indignant desert birds.

The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

[DemReadingDU]

98. Thank you, appropriate poem for these days

and thanks for pointing me to http://theautomaticearth.blogspot.com/

This was last spring, and since then, ilargi & stoneleigh have shared with the readers there, more info about this financial crisis and global meltdown.

[shrike]

113. Eliot?

I'm familiar with all the cultural references, but have never read the verses before. They make me shiver.

[shrike]

114. Eliot?

I'm familiar with all the cultural references, but have never read the verses before. They make me shiver.

[GliderGuider]

116. William Butler Yeats, "The Second Coming"

[shrike]

119. Thanks, my first guess was actually Yeats (really), then I thought, "No, it's probably Eliot."

Still makes me shiver.

[TalkingDog]

151. Thank you. One of my favorites. n/t

[Dr.Phool]

76. WTF just happened?

I slept an extra half hour this morning, started on the thread. The Fudd demanded to go to the dog park, and I left for about an hour.

I come back home, and gold has jumped nearly $30 in the hour I've been gone.

[UpInArms]

80. Transfer of every taxpayer dollar in Treasury in progress:

01. Treasury cash management bill to fund Fed liquidity moves
10:11 AM ET, Sep 17, 2008

02. Treasury offers $40 bln of 35-day cash management bills
10:11 AM ET, Sep 17, 2008

05. Treasury says auction program requested by Fed
10:00 AM ET, Sep 17, 2008

06. Treasury says cash to help Fed manage balance sheet
10:00 AM ET, Sep 17, 2008

07. Treasury will raise cash for Fed from auction of T-bills
10:00 AM ET, Sep 17, 2008

08. Treasury to provide cash to Fed market liquidity operations
10:00 AM ET, Sep 17, 2008

[UpInArms]

83. Treasury to provide cash to Fed market liquidity operations

http://www.marketwatch.com/news/story/treasury-provide-cash-fed-market/story.aspx?guid=%7B4CE4C5D0%2D57A8%2D4EB0%2D85F7%2DE346035085AE%7D&dist=hplatest

WASHINGTON (MarketWatch) -- The Treasury Department announced Wednesday that it would provide cash to the Federal Reserve to fund the central bank's operations to provide liquidity to financial markets. In a statement, Treasury said that it would raise the cash in a program of Treasury bill auctions, known as a temporary Supplementary Financing Program. The auctions would be kept apart from Treasury's current borrowing program. Agency officials gave no details of the timing, size and maturity of any bills to be auctioned. The cash will help the Fed better manage its balance sheet, which has been shrinking. The Fed has been accepting lesser quality collateral from cash-strapped financial firms in the wake of the crisis. Immediately after this announcement, Treasury said it would auction $40 billion of 35-day cash management bills to fund the SFP.

[UpInArms]

84. Fed Now Advertising Free Money: NY Fed - reserve levels "abundant"

http://www.reuters.com/article/bondsNews/idUSN1741662520080917

NEW YORK, Sept 17 (Reuters) - Levels of reserves in the banking system are estimated to be "abundant" for today, said the New York Federal Reserve in a statement about its open market operations on its website on Wednesday.

The U.S. central bank stands ready to conduct open market operations later today if needed, the statement said. So far on Wednesday, the New York Fed has refrained from any open market operations, it said.

Typically the New York Fed conducts open market operations at 9:30 a.m. Eastern time (1330 GMT). The regional Fed conducts these operations for the central bank system to meet its bank reserve and interest rate targets.

The Federal Reserve, along with some other global central banks, has injected huge amounts of extra temporary liquidity to the financial system so far this week, in response to what market analysts and traders say is a near paralyzation of interbank lending markets.

The New York Federal Reserve Website statement said: "Estimates show that reserve levels for today are abundant. The Desk stands ready to arrange operations later in the day if needed."

...more...

[DemReadingDU]

118. Transfer in progress

That's what I think...They're transferring the rest of our taxpayer dollars to finish bailing out their cronies. Mission Accomplished.

[Buttercup McToots]

88. The Fed’s run out of money.

http://ftalphaville.ft.com/blog/

The Fed’s run out of money.
Sep 17 15:15
by Paul Murphy
Seriously. It’s broke. Here’s the statement from the US Treasury:

The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, More…
Seriously. It’s broke. Here’s the statement from the US Treasury:

The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week. To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.
The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve. The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.
Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules. Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.'’
Related link:
http://www.marketwatch.com/news/story/treasury-provide-cash-fed-market-liquidity/story.aspx?guid=%7B4CE4C5D0%2D57A8%2D4EB0%2D85F7%2DE346035085AE%7D&dist=hplatest
Treasury to provide cash to Fed market liquidity operations - MarketWatch

[DemReadingDU]

131. Karl Denninger today

9/17/08 Lucifer Pokes His Head In The Tent

some snippets...
this morning Treasury announced that it is going to issue a "special auction" of T-bills for the explicit purpose of adding to The Federal Reserve's balance sheet, which is a clear statement that The Federal Reserve is out of money.

But The United States doesn't have any money!

We are the largest debtor nation on the planet and we must stop this RIGHT NOW!

The United States Government must step in here and now, in all of its regulatory arms and forms, and insist on the following from all financial institutions:

* An immediate end to all "Level 3" asset marking, with all claimed "assets" marked to the market, so that investors and regulators can determine the state, today, of every firm's balance sheet.
* An immediate repatriation of all off-balance-sheet vehicles, without exception.
* All banks and other regulated entities, including investment and commercial banks as well as insurance companies, must be forced to de-lever to no more than 12:1 via asset sales or other forms of balance-sheet shrinkage, as necessary, with that process beginning now, with criminal penalties for failure to comply.
* A federal law must be passed to prohibit granting of mortgages with less than a 20% cash down payment. All forms of "gaming" this system including FHA, VA and "Down Payment Assistance" must be terminated immediately. It is absolutely critical that consumer balance sheets be protected in this fashion because we need consumers to remain solvent or we run the risk of a 1930s style depression setting in as consumers bankrupt en-masse.

The extra liquidity added since August must be withdrawn now. If this causes failures in the financial system then it does.

WE MUST PROTECT THE FEDERAL GOVERNMENT'S CREDIT AND ABILITY TO RAISE FUNDS.

The game-playing must stop RIGHT NOW.

We are literally on the precipice of a global financial meltdown and the regulators and government have ignored the risks, attempting to "paper them over" with "rate cuts" and "liquidity injections."

more...
http://market-ticker.denninger.net/archives/583-Lucifer-Pokes-His-Head-In-The-Tent.html

[GliderGuider]

81. I'm seeing a trading halt on Fannie Mae, but can't find any news about it. ???

[jdog]

87. No naked short selling.

from another forum:

http://www.sec.gov/news/press/2008/2008-204.htm

[Robbien]

124. Yeah right. The SEC is trying to set down rules for hedge funds?

Since naked short selling is illegal for everyone except hedge funds, this rule would only effect them. However, hedge Funds do not answer to the SEC.

Good luck with that SEC.

Over at a hedge fund site
http://www.hedgefund.net/publicnews/default.aspx?story=9256
SEC: ‘Zero Tolerance’ on Naked Shorting

They say that SEC Chairman Christopher Cox said in a statement that the policy will “make it crystal clear” that the commission is against naked shorting.

Concern has arisen that short-selling by hedge funds has hurt the market by spreading false information and attacking businesses.

No discussion on the site of whether anyone on that side of the casino plans to play along with Cox.

[Robbien]

137. From the UK: HBOS brought to its knees by hedge funds hunting in a pack

Commenting on the news that HBOS are in advanced merger talks with Lloyds TSB, Liberal Democrat Shadow Chancellor, Vince Cable said:

“It is shocking to see a major British bank brought to its knees by an attack by hedge fund speculators engaged in ‘short selling’.

“They were only able to speculate because they knew HBOS had a government guarantee and would be bailed out by the taxpayer. If Lloyds hadn’t stepped in, the Government would have had to take over.

“Who is next? It looks as if they may now be turning their attention to other banks.

“The Government must make sure that the FSA gets its act together.

“The FSA must insist that the hedge funds declare their position. It must also outlaw collusion between the hedge funds because they are now hunting in packs.

“These ‘masters of the universe’ must be tamed in the interests of the ordinary families whose jobs and livelihoods are being put at risk.

“The Tories won’t say anything about the current crisis as they are completely in the pockets of the hedge funds.”

http://www.libdems.org.uk/home/hbos-brought-to-its-knees-by-hedge-funds-hunting-in-a-pack-%E2%80%93-cable-2192268;show

"Hunting in packs"
That's it. That is exactly what is happening.

[Buttercup McToots]

106. Gold up $50...

I'm afraid to breathe...

[Buttercup McToots]

111. FOR IMMEDIATE RELEASE

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

http://www.sec.gov/news/press/2008/2008-204.htm

FOR IMMEDIATE RELEASE
2008-204
Washington, D.C., Sept. 17, 2008 — The Securities and Exchange Commission today took several coordinated actions to strengthen investor protections against “naked” short selling. The Commission’s actions will apply to the securities of all public companies, including all companies in the financial sector. The actions are effective at 12:01 a.m. ET on Thursday, Sept. 18, 2008.

“These several actions today make it crystal clear that the SEC has zero tolerance for abusive naked short selling,” said SEC Chairman Christopher Cox. “The Enforcement Division, the Office of Compliance Inspections and Examinations, and the Division of Trading and Markets will now have these weapons in their arsenal in their continuing battle to stop unlawful manipulation.”

In an ordinary short sale, the short seller borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market (hopefully at a lower price). But in an abusive naked short transaction, the seller doesn't actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions.

Today’s Commission actions, which are the result of formal rulemaking under the Administrative Procedure Act, go beyond its previously issued emergency order, which was limited to the securities of financial firms with access to the Federal Reserve’s Primary Dealer Credit Facility. Because the agency's exercise of its emergency authority is limited to 30 days, the previous order under Section 12(k)(2) of the Securities Exchange Act of 1934 expired on Aug. 12, 2008.

The Commission’s actions were as follows:

Hard T+3 Close-Out Requirement; Penalties for Violation Include Prohibition of Further Short Sales, Mandatory Pre-Borrow

The Commission adopted, on an interim final basis, a new rule requiring that short sellers and their broker-dealers deliver securities by the close of business on the settlement date (three days after the sale transaction date, or T+3) and imposing penalties for failure to do so.

If a short sale violates this close out requirement, then any broker-dealer acting on the short seller’s behalf will be prohibited from further short sales in the same security unless the shares are not only located but also pre-borrowed. The prohibition on the broker-dealer’s activity applies not only to short sales for the particular naked short seller, but to all short sales for any customer.

Although the rule will be effective immediately, the Commission is seeking comment during a period of 30 days on all aspects of the rule. The Commission expects to follow further rulemaking procedures at the expiration of the comment period.

Exception for Market Makers from Short Selling Close-Out Provisions in Reg SHO Repealed

The Commission approved a final rule to eliminate the options market maker exception from the close-out requirement of Rule 203(b)(3) in Regulation SHO. This rule change also becomes effective five days after publication in the Federal Register.

As a result, options market makers will be treated in the same way as all other market participants, and required to abide by the hard T+3 closeout requirements that effectively ban naked short selling.

Rule 10b-21 Short Selling Anti-Fraud Rule

The Commission adopted Rule 10b-21, which expressly targets fraudulent short selling transactions. The new rule covers short sellers who deceive broker-dealers or any other market participants. Specifically, the new rule makes clear that those who lie about their intention or ability to deliver securities in time for settlement are violating the law when they fail to deliver. This new rule is effective immediately.

[Dr.Phool]

139. I was going to transfer my money from Wachovia to gold this morning.

But, the dog demanded to go to the park first.

The fat fucker cost me over a grand, just taking a shit. If he wasn't so lovable and loyal, I'd have his ass put down.

But, he might be the only friend I have left.

[Joe Chi Minh]

191. The best laugh I've had all day!

[UpInArms]

147. Gold surges over $50 on safe-haven buying

http://www.marketwatch.com/news/story/gold-surges-over-50-safe-haven/story.aspx?guid=%7BC8F8F10A%2D8DE5%2D4318%2DAF44%2DE6052D748FEF%7D&dist=msr_1

NEW YORK (MarketWatch) -- Gold futures rallied more than $50 in late morning trading Wednesday, as demand for the precious metal as a safe haven surged amid deepening financial turmoil on Wall Street. Gold for December delivery jumped $53.7, or 6.9%, to $834.20 an ounce on the Comex division of the New York Mercantile Exchange. Gold's rally "stems from safe-haven buying as investors look to protect their wealth," said David Beahm, vice president at precious metals retailer Blanchard & Co.

[UpInArms]

89. 10:30 EST looting of treasury fails to stem stock market losses

Dow 10,848.14 210.88 (1.91%)
Nasdaq 2,164.55 43.35 (1.96%)
S&P 500 1,187.79 25.80 (2.13%)
10-Yr Bond 3.439% 0.052

NYSE Volume 1,740,586,250
Nasdaq Volume 495,951,562.5

10:00 am : Stocks have halted their decline, but continue to post a large loss. All ten sectors are in the red, with the most weakness in industrials (-3.2%) and telecom (-1.5%).

The SEC issued a new short-selling rule, which will apply to all public companies. Rules are tightened, requiring a firm to deliver securities by the settlement date, according to reports.DJ30 -132.06 NASDAQ -26.93 SP500 -15.86 NASDAQ Adv/Vol/Dec 594/271 mln/1768 NYSE Adv/Vol/Dec 466/205 mln/2435

09:40 am : Stocks tumble at the open after a government plan to save AIG (AIG 2.60, -1.15) does little to calm market fears. The TED spread, which is the difference between the three month Treasury bill and the three month Libor -- spiked to its highest level since the crisis began, indicating tighter credit conditions.

To prevent an AIG bankruptcy filing, the Federal Reserve agreed to provide a $85 billion two-year loan in exchange for a 79.9% stake in the insurance giant. The Fed felt a disorderly failure of AIG could add to already significant levels of financial market fragility.

In attempt to quell some fears, Morgan Stanley (MS 24.52, -4.20) announced its third quarter earnings a day early. The company earned $1.32 per share, which blew past expectations by $0.54. Despite the earnings beat, the stock is trading 14.5% lower as Morgan Stanley's credit default swap -- which is the cost to protect debt -- traded at 728 yesterday. By comparison, Lehman Brothers' (LEH 0.17, -0.13) swap traded at 707 before it filed bankruptcy. DJ30 -186.21 NASDAQ -39.71 SP500 -23.80

09:20 am : S&P futures vs fair value: -25.10. Nasdaq futures vs fair value: -29.30. S&P 500 futures extend losses, falling to session lows. Despite Morgan Stanley's (MS) better-than-expected third quarter earnings and revenue, the stock is down 17% in premarket trading. Yesterday, Morgan Stanley's credit default swap -- which is the cost to protect debt -- traded at 728. By comparison, Lehman Brothers' (LEH) swap traded at 707 before it filed bankruptcy. There is also concern with the TED spread -- the difference between three month Treasury bill and three month Libor -- spiking 30% to 2.83%, which is a higher spread than when Bear Stearns collapsed.

[dweller]

90. $85 billion just doesn't go as far these days

AIG trading at ~45-46% down presently.

dp

[Wednesdays]

104. And Lehman's trading at 14 cents

There isn't even bones left on that carcass.

[Dr.Phool]

143. Some moron on another thread the night before last wanted to buy it.

At $.20.

I worked for a company that filed chapter 11 twice (LTV Steel). Both times common share holders lost EVERYTHING. But, there were plenty of sharks out there selling the stock for a quarter. And more idiots buying it.

[Wednesdays]

92. dupe

[UpInArms]

93. 10:40 EST falling faster - no net to stop it now

Dow 10,808.16 250.86 (2.27%)
Nasdaq 2,150.15 57.75 (2.62%)
S&P 500 1,184.04 29.55 (2.43%)
10-Yr Bond 3.421% 0.07

NYSE Volume 1,998,385,625
Nasdaq Volume 576,279,250

10:35 am : The Treasury is setting up a temporary financing program at the Fed's request. The program will auction Treasury bills to raise cash for the Fed's use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.

The news gives a boost to gold prices (+3.0%), as investors seek to preserve their assets in the perceived value of the precious metal.

The stock market falls to fresh session lows, with the S&P 500 down more than 2%.

Just reported by the Department of Energy, crude inventories for the week ended Sept. 12 fell by 6.3 million barrels, which is a larger drop than the expected decline of 3.5 million. Gasoline inventories fell by 3.3 million barrels. Oil prices were up 3.1% to $94.01 just prior to the release.

In corporate news outside the financial world, flash memory maker Sandisk (SNDK 21.95, +6.90) rejected a $26 per share offer from Korean conglomerate Samsung, despite the offer representing a 93% premium over SNDK's closing price on Sept. 4, the day before media reported the possible takeover. Sandisk, which traded at $55.98 in Oct. 2007, said the offer undervalues the firm.

Nortel (NT 3.39, -1.91) gave a preliminary third quarter view of $2.3 billion in revenue, which falls short of the $2.7 billion consensus. Nortel, which provides networking solutions, expects customers to cut back on spending.

Software developer Adobe Systems (ADBE 33.39, +1.22) is trading higher after topping Wall Street's forecast, helped by sales of Adobe Acrobat.

[Hugin]

95. "perceived value of the precious metal"

Cute... Very cute. :eyes:

[UpInArms]

101. I'm "perceiving" that those dollars in my pocket are getting

more and more worthless.

:hi:

[UpInArms]

96. Second money fund breaks the buck

http://www.marketwatch.com/news/story/second-money-fund-breaks-buck/story.aspx?guid=%7B0CD4735F%2D48EF%2D4EB1%2DBA77%2D54F7FE321A3F%7D&dist=hplatest

NEW YORK (MarketWatch) -- As The Reserve cut the net asset value of its flagship money market fund to 97 cents a share, Standard & Poor's Ratings Services said Tuesday that it had also downgraded the Colorado Diversified Trust to Dm from AAAm due to exposure to Lehman Brothers Holdings (LEH: 0.15, -0.15, -49.6%) commercial paper. S&P said the Trust, which had about $200 million as of March 28, fell below the $1 net asset value per share and will liquidate Wednesday. The Trust held money from local schools and governments. Its remaining assets will be transferred to the Colorado Local Government Liquid Asset Trust.

[DemReadingDU]

103. Uh oh

I hope my money market fund of entirely of Treasury Bills is safer

http://www.bogleheads.org/wiki/index.php?title=Vanguard_Treasury_Money_Market_Fund

[54anickel]

138. Probably - it's been blocked from hubbies group, can't get into it. That's one of the things that

really pisses me off about corporate 401Ks. Bozos in HR decide which funds are available in your "plan".

[Buttercup McToots]

105. Oh! Shyte!!

:wow:

[lisainmilo]

102. K&R n/t

[Amonester]

108. Yikes! Where's the FLOOR! Where is the FLOOR!

> AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24

:crazy:

[radfringe]

112. could hit that floor of "$10,578.24" and keep

going through --- kinda gives a whole new meaning to drill baby drill

make the hole "higher"

[UpInArms]

110. Fed has "injected" $600 Billion since January!

At the start of the year, the Fed had close to $800 billion on its balance sheet. Tony Crescenzi, bond analyst for Miller Tabak & Co, estimated that following the rescue of American International Group, the Fed may only have $195 billion left.

:faint:

[Wednesdays]

121. I figure that 195 billion to run out, oh, around November 5th or so

After which the chimp will turn to us and say, "Oops, sorry...there ain't no more. Tough luck."

[Pale Blue Dot]

126. ... and it did NOTHING. $85B into AIG did NOTHING.

This is truly frightening.

[RedEarth]

123. Baltimore utility company Constellation Energy Group seeking a buyer, merger or acquisition

Utility company Constellation Energy Group Inc. on Wednesday said it has retained Morgan Stanley and UBS to act in an advisory capacity to evaluate "strategic alternatives," and reaffirmed its third-quarter and full-year guidance.

The Baltimore-based company and its advisers are in active discussions with potential strategic partners, Constellation Energy Group said.

The phrase "strategic alternatives" is often used by companies seeking a buyer, merger or acquisition.

In late August, Constellation Energy announced its intention to sell its upstream gas assets.

The company on Wednesday also confirmed a previously announced bank commitment for an additional $2 billion credit facility. Constellation Energy said its credit exposure to financial institutions is limited to about $120 million, with no single financial institution representing more than $28 million.

http://www.businessweek.com/ap/financialnews/D938HCQ80.htm

Constellation stock falls 36% on vague worries
Company says there's no danger from business with Lehman
By Hanah Cho | [email protected]
8:38 PM EDT, September 16, 2008
1 2 next Reflecting how the financial sector's meltdown has reverberated beyond Wall Street, investors wiped out about 70 percent of the value of Constellation Energy Group's stock at one point Tuesday, despite little information about how or whether the Baltimore energy company's trading operations are affected by the demise of Lehman Brothers and other firms.

Constellation shares lost nearly 36 percent, or $17.23, to close Tuesday at $30.76 on the New York Stock Exchange.

http://www.baltimoresun.com/business/investing/bal-constellation0916,0,1354816.story

[Wednesdays]

127. Let's see how the M$M's stocks are doing...

Oh look. The Chimperor's cheerleaders aren't doing so well.

GEN ELECTRIC CO (NBC)
(NYSE: GE)

NEW Real-time: 23.07 Down 1.99 (7.94%) 11:24am EThelp
Last Trade: 23.09
Trade Time: 11:09AM ET
Change: Down 1.97 (7.86%)

VIACOM INC CL A (CBS)
(NYSE: VIA)

NEW Real-time: 24.89 Down 0.81 (3.15%) 11:22am EThelp
Last Trade: 25.00
Trade Time: 11:07AM ET
Change: Down 0.70 (2.72%)

WALT DISNEY-DISNEY C (ABC)
(NYSE: DIS)

NEW Real-time: 32.18 Down 0.33 (1.02%) 11:26AM EThelp
Last Trade: 32.21
Trade Time: 11:11AM ET
Change: Down 0.30 (0.92%)

NEWS CORP (Faux News)
(NYSE: NWS)

NEW Real-time: 12.78 Down 0.78 (5.75%) 11:28AM EThelp
Last Trade: 12.86
Trade Time: 11:13AM ET
Change: Down 0.70 (5.16%)

I'll bet they're thrilled they've propped * up all this time. :sarcasm:

[antigop]

135. Oh, poor dears. The execs might not get their year-end bonuses.

Oh, wait. Silly me. I'm sure they'll find a way.

[harun]

145. They'll still get them. They will pat themselves on the back for such a sweet

deal they got from the gov't and how that justifies their bonus's.

[UpInArms]

130. 11:28 EST 300 points down - 3 billion shares traded on the Dow

Dow 10,728.94 330.08 (2.98%)
Nasdaq 2,127.78 80.12 (3.63%)
S&P 500 1,175.25 38.34 (3.16%)
10-Yr Bond 3.396% 0.095

NYSE Volume 3,000,893,000
Nasdaq Volume 921,604,625

[Wednesdays]

133. Methinks we're gonna need a 2nd thread today

How about it?

[Pale Blue Dot]

134. Another credit union has failed: Interfaith Federal Credit Union of New Jersey

September 17, 2008, Alexandria, Va. -- The National Credit Union Administration (NCUA) placed Interfaith Federal Credit Union of East Orange, New Jersey, into liquidation yesterday.
The NCUA Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the Interfaith Federal Credit Union within one week. Through the NCUA National Credit Union Share Insurance Fund, credit union members’ deposits are insured to at least $100,000 on regular accounts and $250,000 on certain retirement accounts.

NCUA made the decision to liquidate Interfaith Federal Credit Union and discontinue its operation after determining the credit union is insolvent and has no prospects of restoring viable operations. At the time of liquidation, the credit union served 370 members and had assets of approximately $388,000.

NCUA chartered Interfaith Federal Credit Union in1982 to serve members of the New Hope Baptist Church in East Orange, New Jersey. Interfaith Federal Credit Union is the10th federally insured credit union closure to take place in 2008.

The National Credit Union Administration is the independent federal agency that charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates the National Credit Union Share Insurance Fund, insuring the savings of nearly 89 million members in all federal credit unions and most state-chartered credit unions. NCUA operations are funded by credit unions, not tax dollars.

http://www.ncua.gov/news/press_releases/2008/MR08-0917.htm

[54anickel]

144. I just can't, much as I'd like to comment - I'm not going there. n/t

[UpInArms]

150. you've always been much nicer than I am - so I'll make that comment for you -

It looks like those sheep got fleeced!

[Hugin]

165. Did any of you look closely at the write-up on 'Integrity Bank' which failed a couple of weeks ago.

According to what I saw, it was another 'Faith Based Initiative' which set sail early in the current Administration.

Hmm... Are we being robbed?

[happyslug]

180. Integrity Bank was a BANK not a Credit Union.

The rules are similar, but the CEO of a Credit Union must serve without pay and the members of the CU are its owners. Integrity Bank had five branches and substantial assets. It was closed by the State of Georgia banking regulators NOT the NCUA:

http://www.myintegritybank.com/locations.cfm

This Credit Union, unlike Integrity Bank, only had one branch and one full time employee. Total Assets never exceeded $455,000 (And as far as I know may have been run out of a Pastor office, this is a very small bank, see my comment below for access to NCUA data on this Credit Union).

[Hugin]

181. I was commenting on the religious overtones in "Integrity Bank's" charter.

"However, the matter may not be over. The FBI, which investigates possible financial crimes, is looking into the situation, said agency spokesman Stephen Emmett. The “FBI is working with the FDIC” on the case, but it “is not prepared to discuss Integrity Bank at this time,” he said.

The Alpharetta-based bank, which opened its doors in 2000 with a Christian-centered philosophy, is the 10th U.S. bank to fail this year and the second Georgia institution to fail in the past 12 months.

As ranked by its total assets of $1.1 billion, Integrity becomes the third-largest bank failure in Georgia history.

Integrity fell on hard times over the last year after its strategy of funding construction in Atlanta’s booming northern suburbs backfired amid the real estate downturn. In June, Integrity topped a list of 25 troubled banks across the country published by research firm SNL Securities.

Eight other Georgia banks were on that list, and experts have said more failures in metro Atlanta and the state are possible as home values fall and builders and other borrowers default on loans."


http://www.ajc.com/services/content/business/stories/2008/08/29/integrity_bank_fails.html

[happyslug]

183. And that struck me as odd, why set up a bank when a CU will suffice

The only reason I can think of is whoever set up the bank did not want to serve without pay (A CU requirement) and he did not want to deal with users of the banks as co-owners of the bank (Members of a CU are viewed as owners of the CU). Thus my point, a church setting up a CU for its members makes sense, Everything Integrity Bank said it wanted to do it could do with a CU (With the exception of tenthing a part of the profit back to the Church, such profits would have to be given the the CU members and then the members could tenth it to their church).

This CU seems to have been willing to leave the CU members get any profit AND leave it up to the member to give or not to give to the Church. That seems to be the difference, the Church behind the bank wanted to be the sole stockholder so all profits went to it, while this Church (or Churches, the term "interfaith" implies more then one church) was willing to leave the member have the "profit" to do as the member saw fit.

[antigop]

153. The INTERFAITH Federal Credit Union. I guess we now have a faith-based economy, huh? n/t

[Tansy_Gold]

159. I think we should be telling them

it was their god's will that their money disappeared.

no :sarcasm:


Tansy Gold, who has been accused (not here on SMW!) of not being nice and has decided she may as well live up to her reputation.

[happyslug]

184. From what I understand the money still exist, but the assets over Liability had dropped

Thus the National Credit Union Association stepped in and closed down the Credit Union. For a CU with less then $455,000 in assets in the beginning of the year and only $380,000 now, something went wrong, and I suspect a drop in Deposits because some of its 374 member lost their jobs.

[happyslug]

177. Not a large CU, one full time employee

National Credit Union Administration (NCUA)
http://www.ncua.gov/

List of National Credit Unions and their assets:
http://www.ncua.gov/data/directory/2008/CUDirectory2008.pdf

At the beginning of the year this credit union had only $455,000 in assets with only $223,067 in outstanding loans. Something caused the assets to drop (I suspect some layoff in the area) and with the drop in deposits the assets to loan ratio exceeded some pre determined number by the NCUA so the credit union was closed. In simple terms it may have been run perfectly but something caused the assets to drop to $388,000. I suspect the loans were not repaid at the same time deposits dropped. Does not look like anyone lost money but NCUA stepped in and closed the Credit Union before that could happen. I wish the FDIC would work as fast when outstanding bank loans exceed 50% of assets.

Please note this is the 10th Credit Union to fail this year, compared to 11 banks (and that 11 does NOT count what has happened since Friday).

[antigop]

162. Time Mag: Why the government wouldn't let AIG fail

http://www.time.com/time/business/article/0,8599,1841699,00.html

The particular risks that brought the company to the brink of bankruptcy seem to lie not with its core insurance businesses but with its derivatives-trading subsidiary AIG Financial Products. AIG FP, as it's called, merits a mere paragraph in the nine-page description of the company's businesses in its most recent annual report. But it's a huge player in the new and mysterious business of credit-default swaps: derivative securities that allow banks, hedge funds and other financial players to insure against loans gone bad.

AIG generally sells credit-default swaps, thereby promising to insure others against defaults. It's a great business when defaults are low; when they rise it can turn toxic. AIG FP lost more than $10 billion in 2007 and $14.7 billion in the first six months of this year. That, along with losses in other investment portfolios, has cut deeply into the parent company's capital reserves. The credit-default-swap contracts decree that if AIG's credit rating drops below a certain level, it has to fork over $13 billion in collateral to the buyers of the swaps. Monday night, because of the losses at AIG FP and in AIG's investment portfolios, Moody's and S&P cut the company's ratings. After that, the consensus was that the company could survive only another day or two. <[/div>

[UpInArms]

167. I'm going to start Thread #2 - link here

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3494922

[Dr.Phool]

170. We just dipped below the magical 10,700 level. 10,698

I'm gonna go invest in Vodka futures.

[Joe Chi Minh]

189. I think all this may have come at a good time for our friend Jerome Kerviel

(and obviously his "petites amies").