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JPMorgan Chase posts surprise profit
Banking giant stays profitable but net income plunges 84% on charge related to WaMu purchase. CEO Dimon warns of 'reduced earnings' ahead. Banking giant stays profitable but net income plunges 84% on charge related to WaMu purchase. CEO Dimon warns of 'reduced earning... more
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What and where is SWFC Media Center?
The Shanghai World Financial Center
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Behind the Bailout...what we SHOULD have known in JUNE and need to know NOW.
Almost 4 months ago, the handwriting was on the wall. And throwing useless liquidity at the problem will only make it worse. To make matters worse, Morgan Stanley and Goldman Sachs have been speculating in commodities, driving the prices up.
Please read the whole article!
Excerpts from the article by Mike Whitney dated 6/17/2008:
The Fed is currently in panic-mode because it doesn't have the tools or resources to fix the problems its facing. Its already eaten through more than half of its $900 billion balance sheet and has traded away hundreds of billions in US Treasuries for worthless MBS and collateralized debt obligations (CDOs) which are steadily losing value every month. The Fed is trying to revive the moribund banking system which has lost its main sources of revenue (structured financial investments) and is teetering on the brink of insolvency from its steadily wilting assets, a collapse in commercial and residential real estate, and a rise in corporate defaults...
...Now the underlying collateral (housing) is quickly deteriorating causing a system-wide deleveraging and a flight to safety (US Treasuries, foreign bonds). The dollar is in free fall, credit is tightening, and the banks are only able to stay open due to the generosity of the Federal Reserve...
...The larger question is whether the investment banks---faced with a frozen bond market and ravaged balance sheets---are diverting the money they're getting from the Fed into commodities (via the hedge funds) driving the prices upward and triggering political turmoil around the world?...
...According to economist and author Henry Liu, the same thing happened just prior to the Great Depression:
"The problem in 1929 was, as it is in 2008, that asset prices buoyant by speculation had outstripped the purchasing power of stagnant income of consumers. Assets and commodities in the economy were valued at price levels that aggregate wage income could not sustain. The solution was not to inject more useless liquidity to sustain inoperative price levels, which will only make the problem worse, but to INTRODUCE DEMAND MANAGEMENT THROUGH FULL EMPLOYMENT AND LET WAGES QUICKLY RISE BACK UP TO THE LEVEL OF WAGE-PRICE EQUILIBRIUM. This was the policy objective of Roosevelt's New Deal Program, an objective not yet recognized by policymakers in 2008 even amid a revival of populist rhetoric....
...There is no way to escape the day of reckoning now facing the financial system; the hundreds of bank failures, the corporate defaults, the meltdown in real estate, the massive loss of jobs, the dreary contraction of credit, the tumbling stock market, and the blow to our national confidence. But there is a way to rebuild, to reassert control over our own currency; to "even the playing field" and recommit to a strong middle class; to smash the system that diverts the greatest portion of the nation's wealth to a handful of unelected oligarchs whose main objectives are to expand their own personal power and subvert the democratic process. The existing system cannot meet the challenges of the new century. It's gotta go. Almost 4 months ago, the handwriting was on the wall. And throwing useless liquidity at the problem will only make it worse. To make m... more -
International Economic Crises in Perspective
12 months of worldwide economic dominoes in simple terms, with visual aids. Will help those of us with an 'average consumer' understanding of economics get our heads around what's going on. 12 months of worldwide economic dominoes in simple terms, with visual aids. Will help those of us with an 'average consumer'... more
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Exclusive: WaMu Insiders Speak Out
WaMu Insiders Claim Execs Ignored Warnings, Encouraged Reckless Lending
With Americans reeling from a global financial crisis, dozens of former Washington Mutual insiders have come forward to expose what they claim were calamitous executive decisions that led to the biggest bank failure in U.S. history.
These former WaMu employees, 89 of them who worked throughout the company and around the country, described a bank eager to profit from a housing boom and lending frenzy that seemed to have contributed to the credit crunch and housing bust now plaguing the economy. Some of them spoke to ABC News, all of them are confidential witnesses in a recently filed shareholder class action lawsuit against WaMu.
In court documents, the insiders said the company's risk managers, the "gatekeepers" who were supposed to protect the bank from taking undue risks, were ignored, marginalized and in some cases, fired. At the same time, some of the bank's lenders and underwriters who sold mortgages directly to home owners said they felt pressure to sell as many loans as possible and push risky but lucrative loans onto all borrowers, according to insiders who spoke to ABC News.
And this is "only the tip of the iceberg,"a former high-level executive claimed in the lawsuit.
A company representative told ABC News that Washington Mutual Inc. would not comment for this story. WaMu Insiders Claim Execs Ignored Warnings, Encouraged Reckless Lending ... more -
Record Drop For Gas Prices
Gasoline prices extended their slide, dropping more than 4 cents a gallon and coming within 25 cents of breaching the $3 level, according to a daily survey of credit card swipes releases Sunday.
The average price of unleaded regular fell to $3.247 a gallon nationwide, down 4.4 cents from $3.291, according to the Daily Fuel Gauge Report issued by motorist group AAA. Gas prices have fallen 10.3 in just two days.
The decline comes as hurricane season winds down and oil prices drop because demand is likely to weaken as the economy slows.
Gas prices dropped a record amount in the last two weeks, falling by more than 35 cents a gallon, the publisher of a separate survey said Sunday.
The average price has dropped below $3 a gallon in six states: Iowa, Kansas, Minnesota, Missouri, Ohio and Oklahoma, where gas was selling for $2.83 a gallon, on average.
Gasoline is highest in Alaska, at $4.133 a gallon, with Hawaii - at $4.079 - the only other state above $4 a gallon. Gasoline prices extended their slide, dropping more than 4 cents a gallon and coming within 25 cents of breaching the $3 level, accord... more -
Shocking Video Cover up the Fannie Mae, Freddie Mac Scam that caused our Economic ...
Shocking Video Unearthed in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis
Video is from ....t's from C-SPAN, try not to fall asleep. (smiles and laughs)
But sometimes it's the mundane that is where the truth starts.
The idea here isn't who did what, it is just ... what happened and how do we vow for it to not to happen again... is that not right? Shocking Video Unearthed in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis ... more -
The Great Unwind
In “The Arabian Nights,” the beautiful princess Scheherazade buys one day of life at a time by recounting fantastic fables that entrance the king, who has condemned her to die. Investors and traders are currently telling each other fairy tales to buy one day at a time to stave off the inevitable.
The worldwide economic drama and tumult are not symptoms of the disease but the cure. The “disease” is the excessive debt and leverage in the financial system — especially in the United States, Britain, Spain and Australia. The “cure” is the reduction of the level of debt — the great “de-leveraging.”
In 1931, Treasury Sec. Andrew Mellon explained this process to President Herbert Hoover: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. … Enterprising people will pick up the wrecks from less competent people.” In “The Arabian Nights,” the beautiful princess Scheherazade buys one day of life at a time by recounting fantastic fables that entran... more -
Markets crash: How panic spread around the globe
High anxiety at the Frankfurt stock exchange. Photograph: Kai Pfaffenbach/Reuters
Stockmarkets around the world slumped today as fears of a global recession deepened. After Wall Street fell to a five-year low of 8579 last night, down 7.3% on the day, the rout started in Asia, where Singapore slid into recession, and quickly spread to Europe. In London, the FTSE 100 plunged more than 10% in early trading, and Wall Street is expected to open 306 points lower.
Asia-Pacific
New Zealand
New Zealand's benchmark NZX-50 index fell 4.7%, its biggest one-day fall since October 24 1997, at the height of the Asian financial crisis. The index closed down 139 points at 2,805, its worst performance in six consecutive days of declines. Over the past six trading days the market has shed 427 points, or 14%.
Australia
Australian market watchers called it "Black Friday". In Sydney, the benchmark S&P/ASX200 plummeted 8.34%, or 360 points, to close at 3,960, its biggest one-day percentage loss ever. Together with the 8.2% plunge on the broader All Ordinaries index, today's session wiped A$106bn (£41bn) from the value of stocks. Nearly every stock fell.
Japan
Tokyo's Nikkei plunged 9.6% today to end its worst week in history. It lost nearly a quarter of its value this week. The index tumbled 881 points to 8276, its lowest level since May 2003. It was the biggest one-day percentage fall since the stock market crash of October 1987. At one stage the Nikkei was down more than 11%, and the slump prompted the Tokyo bourse and the Osaka Securities Exchange to briefly suspend some futures and options trading during the morning.
Yamato Life Insurance went bankrupt, the first major Japanese financial firm to collapse in the wake of the global credit crisis. Cash was king, with even Japanese government bonds being liquidated for funding. The Bank of Japan pumped ¥4.5 trillion (£26.97bn) into the money markets to ease liquidity. The yen, regarded as a safe-haven currency, jumped to a three-year high against the euro and a seven-year high against the pound.
South Korea
The Seoul Composite index dropped 4.1% to 1,241 points.
China
The Shanghai Composite index fell 3.6% to 2,000.
Hong Kong
The Hong Kong stockmarket closed on a three-year low. The benchmark Hang Seng index was down 1146 points, or 7.2%, to 14,796 after falling by more than 9.5% at one point. It is the first time the index has fallen below the 15000-level since January 2006.
Singapore
News that Singapore slid into recession for the first time since 2002 drove the Straits Times index lower by 162 points, or 7.7%, to 1940. The economy shrank 6.3% during the third quarter. Singapore's central bank responded by easing monetary policy for the first time in five years.
Taiwan
Markets were closed for a national holiday.
Indonesia
Share trading was suspended for a third day.
India
India's central bank slashed its cash reserve requirement to free up some $12bn in funds and ease a squeeze that drove overnight rates in money markets to a 19-month high and forced the government to cancel a bond auction. The rupee hit an all-time low and the main stock index plunged more than 9%.
Middle East
Egypt
The Egyptian stockmarket fell 4.6% to 1,993 points, after plunging 16.4% to a two-year low on Tuesday.
Israel
The Tel Aviv stock exchange was shut for the Yom Kippur holiday. High anxiety at the Frankfurt stock exchange. Photograph: Kai Pfaffenbach/Reuters ... more -
Central banks slash interest rates
The Bank of Canada, in a co-ordinated effort with other major central banks, has cut its short-term interest rates by half a point in response to the global economic crisis. The Bank of Canada, in a co-ordinated effort with other major central banks, has cut its short-term interest rates by half a point in ... more
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Pakistan Faces Bankruptcy, Wants $100bn Handout | Crooks and Liars
Demonstrators outside the Islamabad Stock Exchange in July
The UK's Daily Telegraph reports that Pakistan may be the first nation to go bankrupt as a result of the continuing global financial meltdown.
Officially, the central bank holds $8.14 billion (£4.65 billion) of foreign currency, but if forward liabilities are included, the real reserves may be only $3 billion - enough to buy about 30 days of imports like oil and food.
Nine months ago, Pakistan had $16 bn in the coffers.
The government is engulfed by crises left behind by Pervez Musharraf, the military ruler who resigned the presidency in August. High oil prices have combined with endemic corruption and mismanagement to inflict huge damage on the economy.
Given the country's standing as a frontline state in the US-led "war on terrorism", the economic crisis has profound consequences. Pakistan already faces worsening security as the army clashes with militants in the lawless Tribal Areas on the north-west frontier with Afghanistan.
... Mr Zardari told the Wall Street Journal that Pakistan needed a bail out worth $100 billion from the international community.
"If I can't pay my own oil bill, how am I going to increase my police?" he asked. "The oil companies are asking me to pay $135 [per barrel] of oil and at the same time they want me to keep the world peaceful and Pakistan peaceful."
The ratings agency Standard and Poor's has given Pakistan's sovereign debt a grade of CCC +, which stands only a few notches above the default level.
The economic crisis might yet end Pakistan's newly elected government, which is facing a crisis of confidence already as it battles 25% inflation, a drowning currency and a President with a reputation as "Mr 10%" for past corruption. It's also unclear that even a $100 billion bailout would be enough to stave off Pakistan's money woes, since the security situation is itself feeding the economic crisis there - investors don't want to know about a nation so obviously on the verge of failure.
Nor is it certain that even the US and Western allies will care to throw such a large sum of money into Pakistan. Sure, they could probably secure protestations of working harder to enact economic reforms after the mismanagement of the Musharraf years and to more strongly pursue the War on Terror, but what would those promises be worth? The question "whose side is Pakistan on?" is being asked in NATO circles nowadays, and more are coming to the conclusion that the Pakistani feudal elite are content to play the West for all it is worth while caring precious little for their own people's fate. Then again, Pakistan has nukes and the prospect of a truly failed state there is a terrible one to contemplate. As usual with that nation, the situation is a Gordian Knot created by decades (dating back at least to Reagan and the Russian invasion of Afghanistan) of local and Western leaders ignoring very real problems. It's a knot with no easy, or short-term, solution. It will take decades of strategic containment, careful stick and carrots, law enforcement outwith Pakistan to catch the terrorists it gives safe haven to and some simple truth-telling to roll all that back. There are no fixes with a timeline of less than decades.
And, as John Robb at Global Guerrillas writes, don't expect Pakistan to be the last nation to find itself on the financial brink.
The global financial system is much LARGER, FASTER, and COMPLEX than the nation-states that are trying to bail them out. As a result, nation-state intervention won't return things to the status quo. What it will do, however, is tightly couple western nation-states to the now inevitable failure in the financial system (this is akin to lashing a dingy to the Titanic to prevent it from sinking). The rampant proliferation of bankrupt and hollow states is now likely inevitable. Demonstrators outside the Islamabad Stock Exchange in July ... more -
GMAC dramatically cut back on leases in September
Leasing is down industry-wide by about 50% from 2007 levels, but General Motors' captive credit arm took an even bigger bite out of its vehicle leasing in September. GMAC leased only 2% of all GM products in September, and the decision to do so had everything to do with the recent events of the financial markets. While leasing was down GM-wide in September, GMAC and Chevrolet were hit the hardest. The General's two volume brands accrued only .6% and .7% of its sales through leasing, compared to 11.2% and 13.6% respectively last year. Leasing is virtually non-existent for vehicles with low residuals, and Cadillac, which typically leases over 40% of its vehicles, leased at an 8.4% clip last month.
Nobody on Wall St. is purchasing securities right now, giving GMAC very little money to offer leases to its customers. A controlling interest in GMAC was purchased by Cerberus well before the private equity firm took control of Chrysler. Chrysler stopped leasing all together on August 1 in response to the huge losses it took on returned leases of SUVs and trucks. Both GM and GMAC say the break from leasing is only temporary, but with the financial markets still in flux, don't expect this trend to reverse itself any time soon. Leasing is down industry-wide by about 50% from 2007 levels, but General Motors' captive credit arm took an even bigger bite out ... more -
FULL 110 page bailout plan.
See in black and white how we are getting Skrewed. Downloadable in PDF format to print for all of your toiletry needs.
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Zeitgeist: Addendum (we are slaves to money)
We the human race, the people of the earth, have everything we need to live in a society free from currency, slavery, and debt.
Our society only functions because of debt that can and will never be payed back. It is a cycle where the amount of money available in our society in no where near equivalent to the amount of debt we owe.
This movie shows how our society is controlled not by the government, but by the privately owned companies that control the currency.
This video is relevant to what we are seeing now with how we have fallen into this Financial Crisis.
If you ever wanted to know how our Financial system really works this is the video to watch.
VIDEO: http://video.google.com/videoplay?docid=706520527769592... We the human race, the people of the earth, have everything we need to live in a society free from currency, slavery, and debt. ... more -
Michigan house sells for $1.75 on eBay
The housing market is in shambles. So much so in fact, it is not clear if this lady actually got a deal or bought unreasonable debt for a mere $1.75. We are scrambling to protect future consumers from making outrageous loan mistakes, but what about protecting the consumer from these new pit falls that are so abundant because of this crisis? Any house for a $1.75 sounds like a steal... but who's getting robbed? The housing market is in shambles. So much so in fact, it is not clear if this lady actually got a deal or bought unreasonable debt fo... more
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The Wile E Coyote Government
Why does the American government consistently fail to foresee the future results of its own actions? Because it is incompetent. It is managing the financial crisis Wile E Coyote style. Why does the American government consistently fail to foresee the future results of its own actions? Because it is incompetent. It is ... more
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Businessman Has $17 Billion, Drives Old Toyota : TreeHugger
This story on TreeHugger was originally about consumption, but it's more appropriate now from a financial stan point.
Azim Premji is an Indian businessman and he makes a lot of really good points. Seriously, how much do you need to consume?
"Frugal Green Living is hot these days as we try to consume less and save more. The former Masters of the Universe on Wall Street did not, and one of the contentious issues in the bailout is whether they should have their salaries capped. Perhaps they would not have got into such trouble had they lived a more frugal lifestyle and set better examples for their companies." This story on TreeHugger was originally about consumption, but it's more appropriate now from a financial stan point. ... more -
Soros' alternative bailout: Recapitalise the banking system
The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all. As Congress tried to improve what Treasury originally requested, an amalgam plan has emerged that consists of Treasury’s original Troubled Asset Relief Programme (Tarp) and a quite different capital infusion programme in which the government invests and stabilises weakened banks and profits from the economy’s eventual improvement. The capital infusion approach will cost tax payers less in future years, and may even make money for them.
Two weeks ago the Treasury did not have a plan ready – that is why it had to ask for total discretion in spending the money. But the general idea was to bring relief to the banking system by relieving banks of their toxic securities and parking them in a government-owned fund so that they would not be dumped on the market at distressed prices. With the value of their investments stabilised, banks would then be able to raise equity capital.
The idea was fraught with difficulties. The toxic securities in question are not homogenous and in any auction process the sellers are liable to dump the dregs on to the government fund. Moreover, the scheme addresses only one half of the underlying problem – the lack of credit availability. It does very little to enable house owners to meet their mortgage obligations and it does not address the foreclosure problem. With house prices not yet at the bottom, if the government bids up the price of mortgage backed securities, the taxpayers are liable to loose; but if the government does not pay up, the banking system does not experience much relief and cannot attract equity capital from the private sector.
A scheme so heavily favouring Wall Street over Main Street was politically unacceptable. It was tweaked by the Democrats, who hold the upper hand, so that it penalises the financial institutions that seek to take advantage of it. The Republicans did not want to be left behind and imposed a requirement that the tendered securities should be insured against loss at the expense of the tendering institution. The rescue package as it is now constituted is an amalgam of multiple approaches. There is now a real danger that the asset purchase programme will not be fully utilised because of the onerous conditions attached to it.
....more.... The emergency legislation currently before Congress was ill-conceived – or more accurately, not conceived at all. As Congress tried to... more -
Worst Dow drop in history as bailout defeated
The House failed to pass a $700 billion economic bailout package Monday, sending lawmakers back to the drawing table to try to stave off an economic collapse, and the stock market plummeted on the news.
The package failed on a 228-205 vote after Congressional leaders held the vote open for a half-hour after time had expired as they tried to persuade lawmakers to change their votes. CNN reported that lawmakers wouldn't hold another vote on the bailout Monday as Congress prepared to adjourn for the Jewish holiday of Rosh Hashanah, which begins at sundown.
The failure -- after lawmakers remained in Washington over the weekend to negotiate a compromise -- essentially sends Congress and the White House back to the drawing table as they try to craft a compromise.
The Dow Jones Industrial Average was down nearly 600 points as traders worried the vote would go down in defeat. The Dow dropped as much as 778 points at one point.
It was unclear how long Pelosi would hold the vote open to try to persuade lawmakers to shift their votes. House rules allow leaders to hold the vote open indefinitely.
Lawmakers on Monday debated the bailout plan for struggling Wall Street banks as US President George W. Bush appealed to Congress to quickly approve the deal to free up frozen credit markets.
"I fully understand that this will be a difficult vote," Bush said at the White House before the House of Representatives began debate on the proposal amid stiff opposition from some members of his Republican party.
But he said the rescue package "will help keep the crisis in our financial system from spreading throughout our economy."
The US president spoke after a compromise proposal was hammered out in high-stakes negotiations between rival party leaders in Congress and White House officials over the weekend before global markets reopened on Monday.
The plan would mark the largest government economic intervention since the Great Depression of the 1930s, and is designed to shore up a troubled economy suffering from a burst US housing bubble that has ravaged the global banking system.
The proposal grants the Treasury secretary authority to buy up toxic mortgage-related assets in troubled banks in hopes of easing the flow of credit and reviving the moribund housing market.
As the pivotal debate began in Congress, the shakeup of the US banking sector continued with Citigroup on Monday agreeing to takeover Wachovia Bank. US regulators backed the deal that grants the government a stake in one of the nation's biggest banks.
The takeover came as Wachovia faced a near collapse of its share price and weakening confidence because of its exposure to troubled mortgage assets.
Congressional leaders, mindful of the approaching November 4 general elections, acknowledged the vote could be close while some conservative Republicans and liberal Democrats vowed to oppose the measure.
"We now have a deal that promises to bring near-term stability to our financial turmoil, but at what price?" Republican Congressman Michael Pence, a critic of the bailout, asked in a letter to colleagues.
...........more............... The House failed to pass a $700 billion economic bailout package Monday, sending lawmakers back to the drawing table to try to stave o... more -
House defeats $700B financial markets bailout
WASHINGTON - The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipartisan congressional leaders to quickly bail out the staggering financial industry.
Stocks plummeted on Wall Street even before the 228-205 vote to reject the bill was announced on the House floor.
When the critical vote was tallied, too few members of the House were willing to support the unpopular measure with elections just five weeks away. Ample no votes came from both the Democratic and Republican sides of the aisle.
Bush and a host of leading congressional figures had implored the lawmakers to pass the legislation despite howls of protest from their constituents back home.
The overriding question for congressional leaders was what to do next. Congress has been trying to adjourn so that its members can go out and campaign. And with only five weeks left until Election Day, there was no clear indication of whether the leadership would keep them in Washington. Leaders were huddling after the vote to figure out their next steps. WASHINGTON - The House on Monday defeated a $700 billion emergency rescue package, ignoring urgent pleas from President Bush and bipar... more
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