tagged w/ Global Financial Crisis
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Where is the bottom of this collapse?
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Panic in the economy only makes things worse......
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Video explains what is being done to save our banks from going under.....
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As international leaders gathered here on Saturday to grapple with the global financial crisis, the Bush administration embarked on an overhaul of its own strategy for rescuing the foundering financial system.
Two weeks after persuading Congress to let it spend $700 billion to buy distressed securities tied to mortgages, the Bush administration has put that idea aside in favor of a new approach that would have the government inject capital directly into the nation’s banks — in effect, partially nationalizing the industry.
As recently as Sept. 23, senior officials had publicly derided proposals by Democrats to have the government take ownership stakes in banks.
The Treasury Department’s surprising turnaround on the issue of buying stock in banks, which has now become its primary focus, has raised questions about whether the administration squandered valuable time in trying to sell Congress on a plan that officials had failed to think through in advance.
It has also raised questions about whether the administration’s deep philosophical aversion to government ownership in private companies hindered its ability to look at all options for stabilizing the markets.
Some experts also contend that Treasury’s decision last month to not use taxpayer money to save Lehman Brothers worsened the panic that quickly metastasized into an international crisis.
The administration’s new focus was announced late Friday as part of a rescue plan in coordination with six of the world’s richest nations. It came during a week when the Dow Jones industrial average plummeted 18 percent, one of the worst weeks in stock market history.(More at the link)
I'm all for doing whatever needs to be done to fix the markets( although I'm not sure that is the true aim of this bail-out). I question the legality of switching the rules of the bill after the fact. This bill was passed on the supposition that the government would spend this money to buy these bad mortgage securities which would in theory give the government the leverage needed to possibly alter the terms of the mortgages to help home owners keep their homes. Now they want to invest in the BANKS which would do 2 things: 1) Possibly free up the frozen credit markets by increasing the liquidity of the banks which is the aim of the legislation. But here's where I see the problem. 2) After freeing up credit would the banks then still be willing to sell those securities at the discounted rate the gov. would be willing to pay? I don't think so. They could then foreclose on the mortgages and resell the homes probably for more on an individual basis than they would get letting the gov. buy them en mass. Additionally, If the gov. invests in the banks instead of buying the bundled securities would this release them(the banks) from the statutory obligations of the legislation, IE compensation caps etc.?
Now maybe I'm way off the mark here but if we've learned anything about these bankers in the past it is that they will do anything for a buck. It also brings into question the wisdom of congress in trusting,AGAIN, this administration by rushing this bill into law.As international leaders gathered here on Saturday to grapple with the global... more
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As shell-shocked central bankers and finance ministers gather in Washington to confront the world's financial meltdown this weekend, that grinding noise in the background is the sound of the global balance of power shifting.
In sharp contrast to past crises — from the Latin American debt problems of the 1980s to the Asian and Russian currency collapses of the 1990s — the emerging markets of the developing world boast the strong balance sheets and deep financial pockets while the United States and Western Europe lurch from crisis to crises.
"In a very bizarre way, roles have been reversed in the global economy," said Alex Patelis, head of international economics at Merrill Lynch. "The typical troublemakers of the global economy, the emerging markets, are actually now the world's creditors.
"We do need a new world financial order, and we will probably get one as a side effect of this crisis," he said.
Treasury Secretary Henry M. Paulson Jr. gave a clear signal of the new pecking order last week on the sidelines of the annual Washington meetings of the World Bank and the International Monetary Fund (IMF).
With world financial markets reeling, Mr. Paulson said, he was following up an emergency meeting Friday of finance ministers from the traditional Group of Seven industrial powers — Britain, France, Canada, Germany, Japan, Italy and the United States — with a larger gathering Saturday of the so-called Group of 20, which includes China, India, Russia and Brazil.
Now we've gone and done it! We have allowed countries that are not exactly friendly to us,and countries we have a habit of pissing off on a regular basis,to emerge as financial powers with our poor political and financial policies and corporate and , to a certain extent personal, greed. The problem is it might be too late to correct the problem! I sure hope not for our sakes! I for one have no real interest in learning to speak Chinese.(nothing against the Chinese people!)
As shell-shocked central bankers and finance ministers gather in Washington to... more
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Markets around the world hammered by credit crunch as governments move to secure bank deposits.
Markets were thrashed again on Monday, as the US credit crisis spreads worldwide. The Dow Jones lost another 370 points and closing at under 10,000 for the first time since October 2004. At one point the Dow was down 800 pts. But managed to recoup half. The day started with reaction to sharp declines in Asian and European markets. Tokyo's Nikkei index fell to its lowest level in four and a half years, sinking 4.25 percent. Hong Kong's Hang Seng index lost 4.3 percent. Markets in China, Australia, South Korea, India, Singapore and Thailand also fell sharply. In Europe the trading was halted twice in Russia with the market closing down 19.1 percent, the DAX in Frankfurt, Germany was down 7.1 percent, while the FTSE 100 index in the UK was down 7.9 percent. Stocks in Paris took a big hit losing 9 percent. Across the Atlantic Brazil lost 5.5 percent; Argentina was off 5.9 percent, while Mexico's index fell 5.4 percent, In Canada the TSX was down 5.3 percent. Faltering confidence in the financial system following a series of bank bailouts forced many European governments to offer deposit guarantees. Expectations are that the US Federal Reserve, the European Central Bank will have a coordinated interest rate cut as early as Monday, the first joint action since the September 11, 2001, attacks on the US.Markets around the world hammered by credit crunch as governments move to secure bank... more
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Leo Panitch: US state plays role of defending global financial system, it had to act in this crisis.
After President Bush signed the controversial bailout bill into law, Senior Editor Paul Jay talked with Leo Panitch to get his analysis of the situation. Leo said it is irresponsible to suggest that the government should have let these banks fail, ultimately advocating for the full nationalization of the troubled banks. Leo then explains the significance of the US treasury bill as the base upon which everything else in the global financial system is valued, as well as explaining the US government's role as the guarantor of the t-bill's value. Finally, Leo criticizes the dominant paradigm that states and markets are separate and opposing forces in the modern capitalist system.
Leo Panitch is the Canada Research Chair in Comparative Political Economy and a Distinguished Research Professor of Political Science at York University in Toronto. Panitch is also the author of "Global Capitalism and American Empire" and his most recent release "American Empire and the Political Economy of International Finance".
See Part 2 at: http://current.com/items/89382669_the_financial_crisis_and_the_real_economy
See Part 3 at: http://current.com/items/89386959_the_financial_crisis_at_the_local_level
Leo Panitch: US state plays role of defending global financial system, it had to act... more
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U.S. Mortgage Meltdown Reported on CBS!!!!
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Since last summer, Americans have seen their investments shrink and their property values plummet. At the heart of the problem is something called the subprime mortgage crisis, which began back then and continues to ricochet through the economy.
It sounds complicated, but it's really fairly simple: banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. If it sounds like a shell game or Ponzi scheme, in some ways it was a house of cards rife with corruption, greed, and negligence.
Real estate agent Kevin Moran gave Kroft a tour of the wreckage in one subdivision called "Weston Ranch," with block after block of vacant and abandoned houses.
"If you see a 'for sale' sign in this neighborhood that probably is a sign of distress, right?" Kroft asks.
"I would say that, yeah. Two out of three of all the sales are probably foreclosed properties, and/or people who are in distress," Moran explains.
The "for sale" signs and the overgrown lawns in Weston Ranch only show part of the picture. To get a real overview, you need to look at a map from Sean O’Toole's Web site, foreclosureradar.com, which tracks distressed properties in Stockton and other California communities.
"The light blue circles are folks that have gone into default. And that means that's the first step of the foreclosure process," O'Toole says, explaining how his maps color-code properties. "The dark blue is auction properties. And the red icons are properties that were sold at auction, had no bid, and therefore went back to the lender."
As of last week, there were 4,200 Stockton homes either in default or foreclosure; $1.4 billion in bad loans in just one California community, and it is far from over.
"Two months from now, what's this map gonna look like? How many of those light blues are gonna be red?" Kroft asks O'Toole.
"We'll probably see at least 60, 70 percent of these light blues turn red. And we'll see at least this many light blues again," O'Toole predicts.
Banks are auctioning off houses all over California and in South Florida, in Nevada, and in parts of Ohio and Texas, the result of a huge real estate bubble that began forming in Stockton back in 2003, when people priced out of the Bay Area and Silicon Valley discovered that you could buy a four-bedroom home there for just $230,000.
Developers started turning asparagus fields into subdivisions, and lenders handed out free money to anyone who wanted to buy.
"What do you mean by free money?" Kroft asks Jim Grant, the editor of "Grant's Interest Rate Observer" and one the country's foremost experts on credit markets.
"I mean free money. I mean you had to apply not to get a loan, almost. Sometimes you have to apply to get a loan, you almost had to apply not to get one," Grant says.
"When you opened your mailbox in 2004, 2005, you could barely -- people were pressing on you, if you were not institutionalized, all matters of schemes in which to expand your personal debt and mortgage debt. You could, and people did, borrow more than 100 percent of the price of a house with the most fragile of financial bonafides," Grant explains.
Since last summer, Americans have seen their investments shrink and their property... more
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As octogenarian white guys with high-level U.S. foreign policy experience go, Zbigniew Brzezinski and Brent Scowcroft could not be more different. Brzezinski was born in Poland and Scowcroft in Utah. The former made his name as a professor at Harvard and Columbia, the latter as a general in the Air Force. Brzezinski became Jimmy Carter's national security adviser, and Scowcroft was Richard Nixon's military assistant before serving as national security adviser to Gerald Ford and George H. W. Bush. Today, Scowcroft is one of the Republican Party's elder statesmen in the foreign policy arena, while Brzezinski plays a similar role for the Democrats.
one might expect Brzezinski and Scowcroft to disagree vehemently about the challenges America faces abroad, the decisions that have shaped the nation's current travails and what the next president should do. Instead, they seem to see eye to eye on nearly every major foreign policy issue facing the United States. We know this because last spring Washington Post columnist David Ignatius sat down with both men for several days of wide-ranging discussion. America and the World is an edited transcript of their conversations. And, contrary to the operative assumption behind Sunday morning TV talk shows, it turns out that two wise interlocutors who concur can be as interesting and informative as experts with completely divergent views.
Brzezinski and Scowcroft largely agree is Iraq. When the idea of striking Iraq was first floated in the aftermath of 9/11, both voiced doubts about its wisdom. For Scowcroft, criticizing the invasion must have been particularly difficult, given his close ties to the Bush family. Nonetheless, he published a prescient article in the Wall Street Journal titled, "Don't Attack Saddam." In that August 2002 piece, Scowcroft warned that invading Iraq would "seriously jeopardize, if not destroy, the global counterterrorist campaign we have undertaken" and would be "very expensive -- with serious consequences for the U.S. and global economy." But in this book, Ignatius ably steers Scowcroft and Brzezinski beyond criticism of the decisions that led to war and toward consensus on what to do now: Exit slowly -- and only after a more stable regional context has been nurtured, especially by engaging Iran and reinvigorating the peace process between Israel and the Palestinians.
China, Russia and Europe, a central point they repeatedly make is that the United States must shed the bunker mentality that has infused its foreign policy since 9/11. According to Ignatius, both men want "to restore a confident, forward leaning America. . . . Their idea of a twenty-first century American superpower is a nation that reaches out to the world -- not to preach but to listen and cooperate and, where necessary, compel."
Brzezinski calls the global political awakening. "For the first time in history," he contends, "all of the world is politically activated . . . creating massive intolerance, impatience with inequality . . . jealousies, resentment, more rapid immigration." These demands for dignity and higher living standards (which governments often are unable to meet), coupled with the proliferation of weapons of mass destruction, lead Brzezinski to observe ominously that "today, it's much easier to kill a million people than to govern a million restless, stirred-up, impatient people."
The conviction that globalization is spreading not just trade and technology, but also resentment and impatience, is cause "for flexibility, for openness, for a willingness to talk with friends and enemies alike," as Ignatius summarizes their views. Their advice is reminiscent of George W. Bush's remark in a 2000 presidential debate: "If we are an arrogant nation they will resent us. If we are a humble nation, but strong, they will welcome us." The next president would do well to heed their counsel but should not underestimate the difficulty of sticking to it.
As octogenarian white guys with high-level U.S. foreign policy experience go, Zbigniew... more
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Small businesses, without ample capital reserves, are in the most precarious position during unstable economic times. Simultaneously, consumer cutbacks may already be reducing your reserves. Credit is no longer available for many potential borrowers, making access to cash extremely difficult.
A lack of liquidity (cash) has become so severe and widespread that excellent credit scores are required to purchase cars, secure small business loans, or borrow money for college. There is so little cash available that it's only being lent to those with the very best credit histories because banks can't afford to assume any additional risk. Unfortunately, years of negligent government oversight and the repeal of government regulations have resulted in the need for government intervention (now) to prevent our entire financial system from collapsing.
With opinions hovering at 99 percent against and 1 percent for, citizens are contacting Members of Congress strongly opposing the Treasury Department "bailout" plan. The truth about the credit crisis: no one has a clue whether the Treasury "bailout" will be effective or what will happen to the economy over the next week, month or year. We are living in a period of economic uncertainty.
We do know that a lack of regulations and oversight of the financial industry resulted in the mortgage meltdown, which has devolved into this credit crisis. There is a plea to allow the same greed motivated markets, which created the mess, to clean it up. This seems akin to believing a cabal of sloppy train engineers, who ran their trains off tracks into gullies, have the ability to get all the damaged cars back onto the tracks and functioning again while caring for the many injured passengers.
What can you do in the face of these uncertain times?
Audit your expenses. With the eye of the most dispassionate accountant, analyze your expenses. Look for places you can cut without diminishing the quality your customers or clients expect. There can be a tendency to say, "That's only $25.00 a month." or "This never runs more than $50.00 a month." When you're looking for ways to cut expenses, make a notation of all the large and small amounts that could be eliminated. Add them up. You might be surprised by the total.
Add a line of essentials. If your business does not supply essentials that people need during an economic downturn, can you add a line of products or services that will attract people who must take care of basic needs?
Engage in creative rebirth. When sales begin to drop, before your company faces instability, re-think your business. Evaluate your talents and the needs of your market. Talk to your customers about their primary needs today. It's much easier to re-direct your business focus before it tanks than to start over from scratch during a time of economic constriction.
Operate on a lean budget. While you might still be humming along as if there is no recession, it's likely the economic pinch will eventually hit your revenues. Plan for it.
Clean up unnecessary costs.
Pay off debt.
Build up cash reserves.
Delay capital expenses.
Look for opportunities to increase profitability.
Current projections indicate we will not see a widespread economic upturn until into 2010 or later. Businesses that figure out how to fulfill customer needs and eliminate unnecessary expenses during these challenging times will thrive their way through the downturn and soar into greater success when the economy improves.
Small businesses, without ample capital reserves, are in the most precarious position... more
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TOKYO -- Asian stock markets fell Monday amid investors skepticism that the deal reached in Washington over a $700 billion bank bailout would quickly resolve the bad debt crisis.
Adding to concerns of further global financial contagion was news Sunday that Belgium, the Netherlands and Luxembourg pledged more than euro11 billion ($16 billion) to Dutch-Belgian bank and insurance giant Fortis NV to keep it from insolvency.
"There's an increasing realization that the cleanup and the mending of all that's gone wrong is going to take an extended period to work through, and we're going to see an extended recovery period," said Jamie Spiteri, senior dealer at Shaw Stockbroking in Sydney.
TOKYO -- Asian stock markets fell Monday amid investors skepticism that the deal... more
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Global bank HSBC Holdings is cutting 1,100 jobs in its investment banking operation, or 4 percent of the unit's total, as it weathers the global financial crisis.
"We're doing it because of market conditions and the economic environment, and our cautious outlook for 2009," Hong Kong-based spokesman Gareth Hewett told Reuters on Friday.Global bank HSBC Holdings is cutting 1,100 jobs in its investment banking operation,... more
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The world economic crisis must be fought like the war on terrorism, the Chancellor is preparing to say.
In his speech to the Labour Party conference, Alistair Darling will say that Britain must lead the world in efforts to fix the international economy, which has been severely damaged by the credit crisis.
"Just as one government alone cannot combat global terrorism, just as one government alone cannot deal with climate change, one government alone cannot deal with the impact of globalisation," Mr Darling will say.
"This is a global problem - and it will require global solutions."
The world economic crisis must be fought like the war on terrorism, the Chancellor is... more
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Government has throughout U.S. history stepped in, there are some lessons
The stock market plummets, investors pull out money and loans dry up, triggering global financial turmoil. Enter the government, buying up bad mortgages and other problem assets.
This scenario from the 1930s sounds eerily current, in part because the Bush administration is taking pages from the playbooks Herbert Hoover and Franklin D. Roosevelt used to unfreeze credit and keep Americans from losing their homes three-quarters of a century ago.
From the Great Depression to the Chrysler bailout in 1979 to the savings and loan crisis that cost taxpayers $125 billion in the 1990s, the current administration has many government interventions from which to learn. If the history of previous bailouts holds any single lesson, however, it's that the outcomes are unpredictable and the problems will take years to work out.
Government has throughout U.S. history stepped in, there are some lessons
The stock... more
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A financial crisis being described as the worst since the Great Depression has left investors thinking far beyond the realm of whether it’s time to buy or sell.
No matter how close they are to retirement, many are considering getting out of the stock market entirely by shifting to cash or even gold, believing the market is so shaky they’re willing to take the potential tax and inflation erosion they’ll suffer from a quick pullout.
Others are staying in, even after this year’s 14 percent decline to date in the Dow Jones industrial average has eaten away at what they had thought were safe portfolios
A financial crisis being described as the worst since the Great Depression has left... more
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World stock markets swooned again Tuesday as the global financial crisis caused investors to worry that asset prices have yet to hit rock bottom.
World stock markets swooned again Tuesday as the global financial crisis caused... more
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