tagged w/ Global Economy Crisis
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NEW YORK (CNNMoney.com) -- Somber. Sobering. Warnings of an economic "meltdown."
That's how participants described an emergency meeting held Thursday night between leaders of Congress and Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke.
The meeting was followed by an announcement from Paulson that he was preparing a far-reaching program - on a scale seen rarely in American history - to intervene in the shaky financial markets.
NEW YORK (CNNMoney.com) -- Somber. Sobering. Warnings of an economic... more
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NEW YORK (Fortune) -- No shortage of villains stand accused of igniting the brushfire raging across Wall Street: greedy lenders, gullible home buyers, negligent regulators, numbskull credit ratings agencies, and vicious short-sellers, for starters. Maybe they share the blame. But what if the underlying problem goes deeper? What if the reality is that the US economy has been a lot worse than was thought for a long time, and now the chickens are finally coming home to roost?
That's the dark thinking beyond what is known as "Pollyanna creep," a phrase coined by an economist named John Williams and supported by a cadre of other macroeconomic dissidents.
NEW YORK (Fortune) -- No shortage of villains stand accused of igniting the brushfire... more
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NEW YORK (CNNMoney.com) -- The federal government is on the verge of instituting the most sweeping intervention in the financial markets since the Great Depression.
Details remain scarce as the Bush administration and Congress work to hammer out the final plan, which is aimed at stemming the credit crisis that's roiling Wall Street and threatening the global markets.
It was reported late Friday that the Bush administration had sent those details to members of Congress.
Here's what we know so far:
The plan: The federal government would buy up "hundreds of billions of dollars" of illiquid mortgage assets at a deep discount from banks. The Treasury Department is likely to run the program directly, unlike the savings and loan crisis of the 1990s that led to the creation of the Resolution Trust Company.
"The federal government must implement a program to remove these illiquid assets that are weighing down our financial institutions and threatening our economy," said Paulson.
What remains to be seen is how the Treasury Department will structure the purchases and what price they'll pay.
The cost: While the proposal calls for the purchase of "hundreds of billions of dollars" of bad loans, it's unknown what taxpayers will ultimately pay for the bailout.
The government will likely buy the assets at below-market rates and hold onto them until the market recovers. Ideally, the loans could then be sold at a gain.
"The government could make a profit, a substantial profit," said Jaret Seiberg, a financial services analyst at the Stanford Group, a policy research firm. "The pricing mechanism is going to be central."
Will it work: The jury is still out, although experts are cautiously optimistic the plan will help the housing crisis.
The plan will help banks shore up their balance sheets by removing hard-to-value assets. This would address the seemingly endless rounds of writedowns and capital raising that have been rocking the financial sector.
Without these bad loans weighing on their books, banks may be more willing to lend. Or at least that's the goal.
The problem is that the bailout will not automatically make banks profitable, nor will it stop the slide in home values that is wreaking havoc on the economy.
Will it help homeowners: It's unclear at this point. If the government buys an entire securitized loan, it could opt to help struggling homeowners by modifying the terms. This could include reducing a loan's interest rate or principal balance.
But it could prove difficult to snap up all the securities sold on a mortgage, experts said. And as long as investors still hold a piece, they could block any changes to the loan.
If the plan doesn't stem the tide of foreclosures, home prices will not stabilize and the economy will not recover, experts said.
Next steps: Lawmakers have said they'll review the plan over the weekend and plan to hold hearings on the matter next week. A deal could be hammered out as soon as next week
NEW YORK (CNNMoney.com) -- The federal government is on the verge of instituting the... more
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House Speaker Nancy Pelosi Wednesday evening unleashed a stinging attack on the Federal Reserve's decision to rescue the giant insurance firm American International Group Inc.
The Federal Reserve is purchasing an 80 percent stake in AIG and will lend $85 billion to AIG to avert its collapse.
House Speaker Nancy Pelosi Wednesday evening unleashed a stinging attack on the... more
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In a brief White House statement Thursday, President Bush said he shares the American people’s concern about the situation in U.S. financial markets and the economy.
Bush said the markets are adjusting to “extraordinary measures” the government has taken to stabilize the economy
In a brief White House statement Thursday, President Bush said he shares the American... more
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