From the Wall Street Journal:
U.S. to Take Over AIG in $85 Billion Bailout; Central Banks Inject Cash as Credit Dries Up
Emergency Loan Effectively Gives Government Control of Insurer; Historic Move Would Cap 10 Days That Reshaped U.S. Finance
By MATTHEW KARNITSCHNIG, DEBORAH SOLOMON, LIAM PLEVEN and JON E. HILSENRATH
The U.S. government seized control of American International Group Inc. — one of the world’s biggest insurers — in an $85 billion deal that signaled the intensity of its concerns about the danger a collapse could pose to the financial system.
The step marks a dramatic turnabout for the federal government, which had been strongly resisting overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy. Just last weekend, the government essentially pulled the plug on Lehman Brothers Holdings Inc., allowing the big investment bank to go under instead of giving it financial support. This time, the government decided AIG truly was too big to fail.
The U.S. negotiators drove a hard bargain. Under terms hammered out Tuesday night, the Fed will lend up to $85 billion to AIG, and the U.S. government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points. (Libor, the London interbank offered rate, is a common short-term lending benchmark.)
The loan is secured by AIG’s assets, including its profitable insurance businesses, giving the Fed some protection even if markets continue to sink. And if AIG rebounds, taxpayers could reap a big profit through the government’s equity stake.
“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 Fed said in a statement.
It puts the government in control of a private insurer — a historic development, particularly considering that AIG isn’t directly regulated by the federal government. The Fed took the highly unusual step using legal authority granted in the Federal Reserve Act, which allows it to lend to nonbanks under “unusual and exigent” circumstances, something it invoked when Bear Stearns Cos. was rescued in March.
good morning all
Fortune Mag in Dec:
10 Stocks to buy now: AIG
Business Week in April: “Don’t be leery of Lehman”
http://gawker.com/5050946/how-magazines-led-investors-toward-ruin
Forbes in april: Merrill Lynch is in damn good shape (cover story). “No need to brace for disaster.”
Saw Forbes on CNBC last night. He either is a significant liar or doesn’t have a clue.
Wow, only three comments? Guess everyone’s pissed about AIG getting bailed out.
Carly Fiorina, who once won the title of most powerful woman in business during her days as CEO of Hewlett Packard, might need some of that clout to get out of this one.
Fiorina has been one of John McCain’s most active surrogates, particularly on economic issues and reaching out to women.
But asked by a St. Louis radio station today whether she thought McCain’s running mate Sarah Palin could run a big company like her, Fiorina flubbed her answer.
“No, I don’t,” Fiorina replied. “But that’s not what she’s running for. Running a corporation is a different set of things.”
Later on MSNBC, she tried to explain herself, but managed to make things worse. “I don’t think John McCain could run a major corporation,” she said.
Fiorina tried to clarify her remarks, saying that neither member of the Democratic ticket — Barack Obama nor Joe Biden — had the chops to be a CEO, either. “It’s a fallacy to suggest that the country is like a company,” she said.
But the damage was done. Obama’s campaign, jostling with McCain’s over the Wall Street crisis, jumped all over the remark. “If John McCain’s top economic adviser doesn’t think he can run a corporation, how on Earth can he run the largest economy in the world in the midst of a financial crisis?” spokesman Tommy Vietor asked.
The hidden truth exposed here is you no longer have a President and a Country. You have a CEO and International Conglomerate. So when you vote next time, think CEO and the new Business Model (Privatized Profit/Socialized Loss). As an aside, I knew Carly and she wasn’t qualified either, long before HP figured that out.
#3 Since he did run for president either one would fit. Maybe both.
Where can I buy some shares of FedCo? They are huge and getting bigger by the day. Hey, a conglomerate that owns Freddie, Fannie, and the world’s biggest insurance company is quite something. Especially when FedCo can write rules that disadvantage the competition. I hear they may enter the automobile and airline business next.
#6 Shoreguy,
Do you think Fedco is now too big to fail? :)
6- Shore
“I hear they may enter the automobile and airline business next.”
Do we get airline miles with our tax returns?
“As state loses population, it’s gaining brains.”
–Star Ledger article
http://www.nj.com/news/ledger/jersey/index.ssf?/base/news-11/1221625524297340.xml&coll=1
I don’t know if we get miles, inasmuch as the whole miles thing is so 1990s anyway, but I hear you do not have to pay for the first checked bag. I think reservations can be made in any congressional district office.
#9 renter
the results show a 70 percent increase in the numbers of “half-millionaires” in the state between 2002 and 2006, jumping from approximately 26,000 to 44,000 during that time span.
Does this mean there are only 44,000 people worth 500k in NJ? So why are houses so expensive? This is truly bizarre
Forbes is a clown. He was on one of those Fox shows in the spring saying we should just not let the accounting rules require mark to market. So let’s see, you create some CDO and claim it’s worth $100M, you gather your fees, pump up your net income and pay your employees a huge bonus, but the CDO is really only worth $50M. Ah screw it who needs those accounting rules anyway.
Re 6,
I thought if you get paid in dollars you are an unfortunate owner of Fedco?
the brain dead used to state their political position by declaring:
“I won’t vote for them because their party will spend too much tax payer’s money if they get into power”
Some people will have to use their brain Now that W’s party has spent more than anybody in the history of humanity.
HC
HC
So is AIG 79.9% owned by the federal reserve or the US Gov? That WSJ article doesn’t seem to distinguish btwn the 2.
Darn…there goes my retirement plan :(
http://news.yahoo.com/s/nm/20080917/us_nm/costarica_drugs_dc
renter Says:
September 17th, 2008 at 7:52 am
“As state loses population, it’s gaining brains.”
–Star Ledger article
What does this imply about Mitchell?
wamu wednesday.
bairen Says:
Does this mean there are only 44,000 people worth 500k in NJ? So why are houses so expensive?
I’m guessing that is the number of ppl btwn 500k and 1M.
California lawmakers passed a budget after 78 days. Problem is – Arnold says he will veto it (But the Legislature could override any veto.)
The plan? Increase taxpayer’s withholding by 10% – then refund it later.
So borrow from future tax revenues – basically an interest free loan from the taxpayers.
(I was for the 1% increase in sales tax.)
You can’t create money out of thin air and at least a sales tax is more equitable.
Imagine some of these folks, already on the edge, seeing that cut reflected on their paychecks…not good.
BTW, I wonder how many of those ppl became half millionaires because the RE bubble increased their net worth with exaggerated home prices?
FedCo prefers not using the word “dollars” with its employees (a.k.a., citizens if the U.S.A.). FedCo prefers Federal Reserve note, a.k.a. FedCo script. It is good in the FedCo Store (watch out WalMart, K-Mart, etc.).
Forbes is a kook. His Dad Malcom used to frequent leather/heavy metal clubs in NYC back in the 1980s all in leather on his Harley with a new boy toy strapped on his back each week.
#21 repo
plenty.
what a crock
“(I was for the 1% increase in sales tax.)
You cant create money out of thin air and at least a sales tax is more equitable”
Cindy,
What is the current sales tax rate? If it is 6%, an increase to 7% is an 18% increase, not 1%. As for sales taxes being more fair, they are the taxes most unfair to the lower classes.
From MarketWatch:
Single-family building permits fall to 26-year low
Home building tumbled again in August, with the number of new building permits for single-family homes dropping to a 26-year low, the Commerce Department estimated Wednesday. Starts of new homes fell 6.2% to a seasonally adjusted annual rate of 895,000, the lowest in 17 years, and much weaker than the 955,000 rate expected by economists surveyed by MarketWatch. Starts of single-family homes fell 1.9% to a 17-year low of 630,000 annualized units. Building permits for single- and multiple-family dwellings fell 8.9% to a 26-year low of 854,000 annualized units, with permits for single-family homes dropping 5.1% to 554,000, also a 26-year low.
Is that Barclays deal a smokescreen? How’s that going to get done in a week?
From MarketWatch:
U.S. Aug. housing starts fall 6.2% to 895,000, 17-year low
U.S. Aug. building permits fall 8.9% to 854,000, 17-year low
U.S. Aug. single-family building permits fall to 26-year low
U.S. Aug. housing starts weaker than 955,000 expected
U.S. Aug. housing completions fall to 26-year low
U.S. single-family building permits down 40% in past year
From the NY Post:
FEDS TRY TO FIND A BUYER FOR WAMU
The fate of Washington Mutual remained in question yesterday as federal regulators recently called a number of banks asking if they would consider buying the nation’s largest savings and loan should it eventually falter, sources told The Post.
In recent days, federal banking regulators have reached out to Wells Fargo, JPMorgan Chase, HSBC and several other financial institutions to gauge their interest in a possible acquisition of WaMu, but no merger discussions are currently under way between the Seattle-based bank and anyone else, sources said.
The move comes as investors worry that WaMu’s customers could begin pulling their money, which totals about $143 billion, out of the bank should its stock fall further.
That doesn’t appear to be happening now, but several WaMu customers in the New York area told The Post yesterday that they were worried about their cash.
(25) Shore – (no sales tax on food) I pay 8% – Clovis has 1.25% added on to state.
What are we to do here?
We can’t pretend we are bringing in money by borrowing from future taxes?
Something has to give? They have cut – and need more cuts.
Cindy,
They need to CUT year over year budget. This is a REAL cut.
“BTW, I wonder how many of those ppl became half millionaires because the RE bubble increased their net worth with exaggerated home prices?”
Heck, Repo, I wonder how many are NOW half millionaires because their “paper” gain has evaporated and they are no longer “worth” a mil or more.
Question for the fixtures guy from Ocean County, if you’re still around.
I need to get a toilet today, and have approximately twenty minutes to buy one. A cheap one…like under $200. No joke. Can you recommend one available at a big box store?
Hey, Big Ben, you have mortgage underwriters and an insurance company, how about buying a bank with retail outlets so we can use FedCo ATM machines? I hear WaMu is up for purchase.
(31) 31 Shore – “They need to cut year over year budget” …agreed
#34 – Now you’re thinking! FedCo vertical integration & one-stop shopping.
Can someone tell me how to buy gold as an investment?
I’m thinking of cashing out my American Express stock (it’s low, but I was given the stock as part of a bonus, so it was never any money out of my pocket. I’d rather take $35/share than wait til the fate of Lehmans)….. and buy gold instead!!
How does this work??
Mortgage apps jumped in the past week. All refi activity (up 88%) based on the lower rates. Purchases still, lots of inventory, etc.
Cindy, while you’re here, I’ll abuse you with an OT topic, as well. It might help some of the other young parents in NJ, especially since NJ is getting so smart these days.
Daughter is now in public school, 2nd grade, from private/Catholic 1st grade. Two weeks ago, her homework began to seem very difficult (thousands subtraction, algebra topics, pictographs, etc. I went in to ask the teacher to move her back to the 1st grade, since she’s very young anyway (7 in Aug). Teacher told me she’d been moved to 3rd grade for some classes, like math. No need for 2nd grade science, either. She’ll get Social Studies.
WTF?, I thought – a little pissed. I allowed my ego to feel good for a week or so, then noticed she’s only “getting” about half the work. I had to quickly teach her topics like “carry the one” and “take away ten” and she still counts on her fingers, cause she never did the memorization/flash card stuff they do in 2nd. The other kids in this math were also in the advanced class last year, so they’re more up to speed.
Move her back, or let her struggle?
What exactly would happen if Fannie Mae, Freddie Mac, and AIG were not bailed out, in a nutshell? Would there be any type of benefit? Is the tax money used on them going to cause inflation?
My sister in law wanted to skip her daughter a grade and spoke with the teacher about the process. The teacher said that a child would be skipped only if they would be at the top of the next grade. I do not know what measure they were using for “top.”
33
Pat-
Any of the real cheap ones are pretty much the same.
I don’t follow big box pricing too much, but if you can get a Toto with a G-Max flush, an American Standard the with Champion system, or the Kohler equivalent (I forget what it is called) go for one of those. They have a larger trapway and a better flushing system.
confused (3)-
He is both.
We must now assume that anyone in finance or in Washington is part of a cabal of self-serving criminals that will do anything to impoverish the US for their own ends.
bairen (7)-
I think we should start referring to our Social Security numbers as CUSIPs.
Then, we may finally be able to redeem our straw men in due course.
The sad part about the morning toilet recommendations being intermixed with the AIG chatter is that they are both probably more related than we know.
I hear the Fed trapway is MASSIVE.
Cindy (20)-
How hard would it be for you to get Mexican citizenship?
I hear Guadalajara is nice.
check out this artist’s work of lehman’s ceo richard fuld. he perched it outside of headquarters and allowed people to make comments on the painting. click the picture to enlarge.
http://theannotatedfuld.blogspot.com/
John (23)-
Before hitting the leather clubs, he used to have dinner (with his “footman”) at the restaurant I managed.
Although he was charming, knew his food & wine cold and was probably our best customer, the memory of serving ’76 Yquem to an old guy in leather chaps still makes me squirm.
FedCo needs to create an exemption from the Sherman Act for itself.
I’d also like to see FedCo purchase a professional sports franchise. That will take care of the “circus” part of the bread and circus show they seem hell-bent on promulgating.
(39) Pat – I can throw in my 2 cents worth.
It is a huge problem for us all. The standards are being raised and the basics are not in place. Don’t get me wrong, I believe in high standards but you need to build on prior knowledge.
The grade one standards are too low. Students should, though, have their math facts to 18 before moving on to grade 2 with trading (tens and ones.) I have “finger counters” in my class that will be moving on to trading in 2 months. I have sent home flash cards and we work on fact families in class. As long as the students understand the concept of 19 being the same thing as 9 ones and 1 ten – they do progress.
I do not get the 3rd grade math deal. We teach multiplication and division by the end of the second grade here. Our students need to grasp the concept of sets and prealgreba – solving for missing numbers – as well.
Fact families are the key here.
7+8=15
8+7=15
15-7=8
15-8=7
You can even buy triangle-shaped family of facts flash cards so you can cover up one corner and help instill the notion that these numbers “work together.” When you know the addition fact – you also know the subtraction fact. That concept helps tremendously when you progress to the relationship with mult/div. and the entire concept of “sets.”
If they have based their decision to move you daughter up because she scored well on a placement test, you may be at liberty to request the second grade placement. I would. We build on prior knowledge and you want to have a sound foundation. The relationship on how these math facts work is key – place value is key. No expert – opinion only..
(47) Clot – I love my state….no plans for Mexico. I am such a nerd that I have never even been to Mexico –
Cindy (52)-
I cannot repeat any of my Mexico stories in this forum. :)
Oh yeah Pat – Immediately teach all of the double’s facts. 2+2=4 7+7=14 etc. Students can learn to deal with the neighboring facts rather easily that way. Again – it is a building point. Always think in terms of building on prior knowledge… If 6+6=12 then 6+7=13.
That should help some.
Thanks, Cindy. Even though you appear to be a financial pygmalion in the making, I trust your opinion here. Her teacher told me that the placement was based both on her testing results and their obervations that she appeared bored in the first two weeks of 2nd grade math. Reading between the lines, I’m assuming she was making trouble again.
Hughesrep, thanks for the names.
JB, I think the flush capacity metaphor perfectly captures what is needed at this time in banking. A flux capacitor would be a superior remedy, but we’ll have to settle for stink and remediation.
I am so happy to throw in my 2 cents worth regarding primary education issues – please ask. I have no masters – I am no expert… but I have taught for 25 years. If I can be of service (you have all helped me so much) please ask.
Cindy (52)-
“I love my state…”
From what you’ve reported here over the past few months, it does not appear that California loves you.
“How hard would it be for you to get Mexican citizenship?”
Citizenship? How quaint a notion. I thought the exchange of tax units between the U.S. and Mexico mainly involved hoofing it across the border. No? The problem going from the north to the south, though, is that one might find it much like a salmon swimming upstream — what with all of the movement going the other way.
From the Star Ledger:
Marty’s Shoes to close all 47 stores
Marty’s Shoe Outlet says it plans to close all of its 47 stores as part of a bankruptcy reorganization, according to the Record.
The Secaucus-based discount footwear chain filed for Chapter 11 protection last week. As part of that filing, the company said it planned to close its stores and liquidate operations, the Record said. Marty’s has been in business for around 30 years.
Pat (55)-
I’d suggest the time-honored high school prank of an M-80 in FedCo’s toilet.
Ben! Ben! BEN!!!
FedCo can enter the retail trade. Don’t pass up this opportunity.
FedCo should buy Marty’s Shoe Outlet.
Shoes for the people!
It is a shame Crazy Eddies is gone, it would be a prime fit for FedCo’s expansion plans.
Rename it Crazie Benny’s. His actions are in-sa-ne!!!!!!!!!!!
(57) Clot “..it does not appear California loves you…” Well, they’re stuck with me.
Pat (55)-
If I were you, I’d start teaching my kid the concept of compounding, exponential negative interest.
Cindy (64)-
Not even Dr. Phil would touch that one.
Grim…was thinking the same thing
DJIA futures -141.
Looking (from last night): Now that you have made it out from the dark ages, immediately add Adblockpro and Foxmarks addons to Firefox. They are free and will really blow your mind.
Toilets? I agree with HughesRep. The flusher is the key. Recently installed three new commodes in the abode. The super cheap, $80, all-in-one home depot special had the cheapest flushing mechanism I ever saw. Had to replace it less than a month after it was originally installed.
Cindy? The only reason FNM/FRE are not on Fedco’s balance sheet is to hide the reality of what it costs. Sort of like the war in Iraq that is averaging 300 to 400 million a year. The next administration can do what they want with it, although I don’t see any better options.
At this point, I’m sort of hoping M wins the election. Whoever inherits this craptastic pile of debt is almost certainly going to get destroyed in the ratings.
[49] Clot,
A ’76 Yquem??? Musta been a swanky place. No restaurants I frequent have Yquem on the winelist.
(feel free to bring one to the Brigadoon GTG though)
Sears is in trouble. What can be a better fit for FedCo. Go and buy FedCo clothes there, and get your car serviced there too, just not the breaks — FedCo does not believe in breaks. FedCo-Sears stores could act as branches for FedCo-WaMu, where one can not only get a mortgage but also watch it get sold to the secondary market. Children will find it almost as much fun as watching puppies being born.
!#@$@#$%@#$% I hear FedCo is p!$$ed that Budweiser has already been sold.
The Star Ledger may close. In any event they’re looking to cut/downsize some 1150 jobs.
Perhaps FedCo has a hankering to enter the media biz?
Plume (68)-
Whenever Malcolm had a new toy, he’d step it up a notch and go for a half-bottle of the ’61. That sure as hell beats Cherry Coke.
If Crazie Benny keeps this up, the motto of FedCo will be “All power to the soviets.”
Oh wait, workers are not FedCo’s concern. Hum, what could work…..
Maybe rename the Star Ledger: Fedco-Pravda
“Motto, all the truth you need to know”
Shore (69)-
They can let Eddie Lampert stay on as a store greeter.
Shore (73)-
Motto?
“Me ne frego.”
Clot,
Heck, I think he may end up being the new president that the Comintern appoints down the road.
Brrrroooooocccccckkkk, Marties!
Good riddance to those radio ads.
Make that the Central Committee, as FedCo is run by central bankers.
Pat [39] – I am a little horrified that they moved your child to another level for math without consulting you? Am I missing something? As the parent of an October 8th baby (with the cutoff in many districts being Oct 1), I have been concerned about my kid being the oldest in class so your post caught my attention.
Brrrroooooocccccckkkk, FedCo.
Stu,
I know that you are to the left of me, but I get the feeling we are equally p!$$ed at the actions of the Fed and the Administration.
This financial wheeling and dealing is like watching a family keep the patriarch on life support because when he dies the gravy train is over and they’ll have to fend for themselves.
They are pounding and pounding on a lifeless chest and pumping him with drugs and all that is really happening is premature embalming.
Would be easier just to prop the corpse in the corner and pretend it is still alive a la Anthony Hopkins in Psycho.
Last night, someone posted that the NAV on the Reserve Funds MM fund was .97. Everyone took a 3% haircut. Well, the reserve fund is one of the sweep options for Ameritrade and used to be their default. I don’t use the Reserve Fund as I got out last year at the first sign of the MM funds cracking, but when I go to look up yields and performance on the Reserve Management website, it’s too busy. Crazy! I wonder how many Ameritrade users realize that their cash positions just took a 3% cut?
SEC going after the shorts again.
Sean,
The government and Fed have had their hand in our pockets and wallets long enough, it is about time they reached into our shorts.
Resrve fund article from the NYT:
Money Market Fund Says Customers Could Lose Money
http://www.nytimes.com/2008/09/17/business/17fund.html?_r=1&em&oref=slogin
“The fund said that because the value of some investments had fallen, customers now have only 97 cents for each dollar they had invested.
This is only the second time in history that a money market fund has “broken the buck” — that is, reported a share’s value was less than a dollar.:
September 16, 2008
The Board of Trustees of The Reserve Fund, after reviewing the unprecedented market
events of the past several days and their impact on The Primary Fund, a series of The Reserve
Fund and taking into account recommendations made by Reserve Management Company, Inc.,
the investment manager of The Primary Fund, approved the following actions with respect to
The Primary Fund only:
The value of the debt securities issued by Lehman Brothers Holdings, Inc. (face value
$785 million) and held by the Primary Fund has been valued at zero effective as of 4:00PM New
York time today. As a result, the NAV of the Primary Fund, effective as of 4:00PM, is $0.97 per
share. All redemption requests received prior to 3:00PM today will be redeemed at a net asset
value of $1.00 per share.
Effective today and until further notice, the proceeds of redemptions from The Primary
Fund will not be transmitted to the redeeming investor for a period of up to seven calendar days
after the redemption. The seven-day redemption delay will not apply to debit card transactions,
ACH transactions or checks written against the assets of the Primary Fund provided that any
such transaction from an investor, individually or in the aggregate, does not exceed $10,000.
The Primary Fund will continue to accept purchase orders.
Effective tomorrow, September 17, 2008, the NAV for the Primary Fund will be
calculated once a day at 5:00PM, New York time.
http://www.reservefunds.com/pdfs/Press%20Release%202008_0916.pdf?scp=2&sq=eric dash&st=cse
Pat–Here’s my 2 cents worth as the parent of a bright kid: Second grade seems to be a watershed–be thankful your public school is willing to challenge your daughter. My son (also young for his grade) was bored to tears in a district that insisted on teaching to the bottom of the class. When we spoke to the school, they offered to stimulate him by having him “teach the slower kids.” We moved him to Catholic school in third because of it and have never regretted it. If kids’ minds are not stretched, they get bored and end up finding ways to keep their minds busy–and not all of those ways are desireable. I say get her whatever help she needs to get up to speed, then let her run with it. She will be better off later.
Gold question – does everyone go with ETFs, watered-down mutual funds or is anyone here actually holding bullion. I look forward to both serious answers, and the court jesters who will focus on “is anyone here actually holding bullion”.
electric, you still taking profits and bailing on SKF? when i hit a certain amount, im going to get out.
as others previously said, it’s a bit too druggy for me. seriously – 141 and down to 118 in a day? no thanks.
83- Stu
Sorry, dense question.
To be invested in that fund, you have to select the option enabling your cash reserves to be put into that fund, correct?
Thank god, I did not select that. Hopefully, it is not by default.
d to hear Primary fund only invested in “the most secure investments available today,” and not the risky parts of the economy.
http://www.ther.com/ps_mmf.shtml
Choose from among some of the most secure investments available today:
Primary Fund
Invests in securities issued by the U.S. government and its agencies, corporate debt obligations, prime bank obligations whose issuers are rated AAA, AA or the equivalent, or instruments collateralized by such obligations.
Edumucation:
I was an October 6th baby: I was always the youngest in class. Although I agree that there is a maturity issue, I believe it can be overcome through good parenting.
I don’t believe it impacted me much and I am very in touch with myself. Especially when my wife is away. Then again, maybe you should hold your child back.
Seneca,
Our gold is all physical.
No more naked shorts.
NJCoast,
I felt better back in the day when one was only allowed to short after an uptick.
Victorian,
Look at the bottom of your Balance & Positions page. Below Money Market Assets, it will list the accounts that your cash is in. If it says ‘TDBANK’ or ‘TDAM’ you are fine. If it says ‘reserve’, then you lost 3%.
Naked shorting is mostly bread and circus’ as well.
Hey Stu–I like the way you cover both sides of the issue. Seriously, though, once they pass the earliest years, children’s maturity varies with more factors than birthdates. Some of the biggest babies my my children’s high school classes are among the oldest in the class. A big factor is parental expectations and discipline at home. Spoiled brats are born in all months.
On a more personal note I am getting married on Saturday, and heading off to Europe for a few weeks honeymoon. Great time for a wedding, I am sure many who are attending will need some cheering up.
I am not as nervous about the wedding over what may transpire over the next few weeks with the markets and banks etc.
I have closed out 80% of my trading positions not including 401ks and I have spread out my cash into several banks that are not on the watch list and kept the accounts below 100k, not doing much for inflation but at this point what can you really do to hedge with CD rates as low as they are and many banks teetering on receivership?
On another note my bride to be works for an IB bank that has been mentioned here in passing. Hopefully when we get back from our honeymoon I won’t be the sole earner in the family.
Cheers folks!
Good luck Sean.
Don’t forget to come back after your honeymoon.
soosh (82)-
I prefer the happier metaphor of Weekend at Bernie’s:
“Would be easier just to prop the corpse in the corner and pretend it is still alive a la Anthony Hopkins in Psycho.”
(Apologies if this has already been posted):
New Jersey’s `Wall Street West’ Quakes Amid Namesake’s Turmoil
Sept. 17 (Bloomberg) — Jersey City, where New Jersey bet it could transform warehouse and factory tracts into a “Wall Street West” across the Hudson River from Manhattan, was paying off. That is, until its investment bank tenants started collapsing.
Many of the towers that have sprung up in the past decade on Jersey City’s waterfront are filled with satellite offices for the largest investment-banking firms. More than 3,000 employees of Lehman Brothers Holdings Inc. and Merrill Lynch & Co. work in New Jersey’s second-largest city.
More at: http://www.bloomberg.com/apps/news?pid=20601109&sid=ajRX_QI2ODtw&refer=home
Stu (86)-
Can’t resist:
Brokebuck Mountain
Clotpoll Says:
“I prefer the happier metaphor of Weekend at Bernie’s:”
YES!
Cindy and all, another good article http://www.doctorhousingbubble.com/
Gotta run Pat but one last thought…
Because -as stated – you do not want a bored child. You can do catch-up at home.
A key indicator is writing ability. Many can read above grade-level and handle advanced math. Well organized, thoughtful writing is a bit harder to rush. (And they usually begin state assessments on writing in grade 3.) Let me know what you decide.
Sean,
Go off and enjoy and DO NOT read a newspaper or look at the news whilst gone. Whatever is going to happen will happen.
If you are half as happy as Mrs. Shore and I am, you will be twice as happy as anyone can expect to be.
I still own my shares of AIG and can’t figure out why they haven’t went up since AIG is now a subsidiary of FedCo.
Is FedCo a $2 stock?
Congrats Sean…wish you the best!
Edumacation, I dunno about parental notification. We just moved to MD, and for the first time, use a public system. I guess they do as they please. They seem to teach to test, as this county gets some of the best scores in the nation, but my kid had much more in-depth learning at her little hole-in-the wall Catholic school up North.
Starting, good advice on trying to get her tutuoring. I just need to weigh the pros and cons. She’s also the new kid with new adjustments to deal with. Also, I stopped working because of the move, and if I go back to work soon, I won’t have the time to continue to spend an hour and a half every night with her on tutoring. Those personal factors are making me think that putting her back on age grade might be practical.
Sean,
Best wishes to you.
Cindy, your last comment hit the nail on the head. Her writing is not up to speed for the questions on the tests. She does the math parts, and choses the correct answers, but on the last question, where she is asked to explain herself, she leaves it blank. I think you just fried my egg.
chooses
starting (88)-
I am the most f-ed up person I know. What you see of me here is only about 10% of the nightmare I call my life.
I was promoted one grade early on, and I’ve paid for it the rest of my life. My intellectual development was fine to handle it; socially/emotionally, not so much.
Unless a child showed a full range of advanced development (not just academic), I would never, ever suggest promotion. The unintended consequences are just too great.
There have got to be better ways of challenging a smart kid than just putting him up a grade.
Hello,
The fun never stops at the federal reserve! And, why would it? Those zany central-bankers plan the party, invite the guests (you and I not included on that list), and, choose the venue.
The best part for the fed is that you and I pay the bill. The bar tab is on US. All the party favors, funny hats, and, “spirits” are courtesy our membership dues.
Tonight’s party is in honor of AIG. You know AIG, right? The multi-national insurance conglomerate that is – ahem – “too big to fail”.
The answer? Another bailout. This time it’s $85 Billion. Those are some big numbers – and we thought $30 Billion for Bear Stearns was big. Oh, those were the days. I can remember when a billion dollars got you something.
Now, all you get for a billion dollars is a t-shirt that says, “the fed just bailed out another company and all I got was this lousy t-shirt!”
Sincerely,
Don Harrold
Seneca,
depends on why you hold gold. As an investment (Long term or short term), or for other reasons. As is often stated here. Talk to a professional before you start playing with shiny metal as you could easily get burned.
And if i hold it i hold physical bullion
Yeah, clot, there should be better ways. Like not having 25 kids to one teacher. I think promoting kids is one way to get out of having to challenge the ones who need it.
“the fed just bailed out another company and all I got was this lousy TAX BILL!”
Stu Says:
September 17th, 2008 at 9:52 am
Last night, someone posted that the NAV on the Reserve Funds MM fund was .97. Everyone took a 3% haircut. Well, the reserve fund is one of the sweep options for Ameritrade and used to be their default. I don’t use the Reserve Fund as I got out last year at the first sign of the MM funds cracking, but when I go to look up yields and performance on the Reserve Management website, it’s too busy. Crazy! I wonder how many Ameritrade users realize that their cash positions just took a 3% cut?
Stu: This story is the much bigger one than AIG, and is what a lot of the market is reacting to…..
Pat – My daughter will be 7 in December and just started 1st Grade (she is after the cut-off) so I was interested in your comments. She isn’t challanged much academically yet but on the flip side is perfect in terms of maturity. Being among the oldest makes her very much a leader and that seems to have value too.
I’m just leaving as is in terms of the school to see how things develop.
I’ve seen some comments on Glass-Steagall here recently that I believe miss the mark. I think there is a general understanding that one of the things this act accomplished was to separate commercial and investment banking. the purpose of this was to insulate the broader banking system from the risks associated with underwriting securities, which were perceived as unreasonably high following the 1929 crash.
however, the basic premise of Glass-Steagall was flawed in terms of its application to the modern economy, and this is evident for a couple of reasons.
first, the risks associated with underwriting are reduced to the extent a bank has a large balance sheet. it is not a coincidence that the large commercial banks are left standing in greater numbers today while the independent IBs are failing, even as these large commercial banks have taken to performing many of the same functions in the capital markets as the independent IBs since the 1990s.
Second, the primary systemic risk posed by the IBs today is not from underwriting, it is from prop trading and structured products, much of it taking place in the derivatives market. Glass-Steagall does not address this and as we are seeing now, even though certain IBs operate independently, they are heavily tied to other, non-investment banking institutions via counterparty risk. as long as the magnitude of this counterparty risk remains unknown/unreasonably high, it would cause problems regardless of whether glass-steagall was in place.
bottom line is that glass-steagall was designed to address a problem of the 1930s which is not analogous to the problem we are facing today.
Clotpoll [114],
I got left back six f*cking times. I graduated high school at 23 years old.
This could get interesting:
Creditors Could Go After Lehman Bonuses
http://www.cfo.com/article.cfm/12235543/c_12235784?f=home_todayinfinance
make money Says:
September 17th, 2008 at 10:19 am
I still own my shares of AIG and can’t figure out why they haven’t went up since AIG is now a subsidiary of FedCo.
Is FedCo a $2 stock?
make: because there is a good possibility that equity will be flattened and debt holders will be hit…….the point here was an orderly underwind……please research thoroughly before undertaking further action….
The financial press this morning reports that Daniel Mudd, the retiring CEO of Fannie Mae, is leaving with a severance package of approximately $9.2 million. Richard Syron, the retiring CEO of Freddie Mac, is leaving with a severance package of approximately $14.9 million.
Guess all that hubbub about them not getting the package was just misdirection ans smokescreen!
underwind = unwind
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.
Hey, Ket, relax. I am sure they took a real hit. Maybe something like only 30 hours a year in private jet usage or only getting hot-stone massages every other week. Please takea moment and feel their pain.
laughing –
So far we’ve been lucky. Sold all of our SKF at $124 (bought at $104), then re-entered on a down-slide at $119. Sold the $119 at a profit, and have been playing the volatility intraday for the past few days (skimming off a buck or two profit here and there). The swings are insane.
We missed the low point today at $124, but we’re in at $125 now and are about to take profits in the $132 range.
Funny, sounds like we trade a lot, but this is the only stock we daytrade. It’s more like a sick hobby. :)
chifi 124
you mean to tell me that we bailout AIG just to let it fail slowly. That 85 billion only bought us a few months.
I’m sure the Fed will pump more money into it if it has to.
Chi (124)-
“please research thoroughly before undertaking further action”
Where’s the fun in that? Then, it would be investing, not gambling.
re: Reserve Funds MM fund
Can someone explain in very, very simple terms what this means to six-pack Joe? How is this is bigger than AIG?
“Guess all that hubbub about them not getting the package was just misdirection ans smokescreen!”
I was wondering how the federal government had the power to make their employment contracts null and void.
Wow…Even the bread and circus’ are failing.
sheep (129)-
We should compare brokerage statements. I’m hitting the “buy/sell” button faster than a meth addict playing Halo.
Stu-
The gubmint can’t even run a clusterf*ck right.
For those interested Mudd and Syron made about 7 million a year in all. Just thought you might be interested in knowing.
Wasnt Syron the bad guy in LOTR?
Clot. It’s funny that you are now trading more frequently. I have slowed down dramatically since last year. Probably have less than 8 trades this year. I look forward to doing my schedule D for a change. Now my shedule E? That’s a whole other story due to all the improvements I’ve made on the abode.
Volatility is my friend.
From the NY Times:
“Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said Mr. Paulson and Mr. Bernanke had not requested any new legislative authority for the bailout at Tuesday night’s meeting. “The secretary and the chairman of the Fed, two Bush appointees, came down here and said, ‘We’re from the government, we’re here to help them,’ ” Mr. Frank said. “I mean this is one more affirmation that the lack of regulation has caused serious problems. That the private market screwed itself up and they need the government to come help them unscrew it.””
Apparently this meeting was without any staffers and this seems unusual from what I know of US political SOP. It seems they want to keep a lid on this shit-storm until the right people get out. What other fabulous plans have the come up with for WAMU, Wachovia and the FDIC bailouts?
I don’t think they will keep the lid on ’till the election. In the next few weeks the systemic instability will start to spread faster than the clowns can…
How many balls can these clowns juggle at once?
Last night in preparation for the Fed deal for AIG, all the politicians that matter gathered in one room, arriving at a $85 billion bail-out for a firm that carries trillions in liabilities, What are the long term implications for legitimacy of the US government.
Not just Bush or Congress, or the Senate, but the entire system. The FED gathering last night, with everyone who counts in Washington, resulted in an outcome that won’t be able to hold off a passing shower much less category 4 storm in the market. But the magnitude of the setting makes it clear that this is all they have.
The government has for all intents and purposes lost control of its economy. What exactly is the legal power of a government that has no control left over its economic system?
I don’t know the answer, but the eventual political consequences of current events can’t be anything short of shattering. Pretending to be in control can last for a long time, but there is a limit. What do you have when you reach that end?
Syron worked with Volcker and the treasury prior to Freddie I thought.
Orion,
Others may have some more indepth analysis for you but here is one man’s view.
Lets say Joe Six Pack puts some money into a savings account at the bank. It pays, what, 1% interest. Then he pays say, an effective tax rate of 18% on the income and inflation takes away another 3-5%. Why bother, he figures might as well spend it. Thus Joe’s dollars are not available to the bank to lend.
So Joe Six Pack learns that he can make a few extra percent return and invests in a money market. Joe may not beat inflation but gets some bit of advantage. And, the money in the MM is available to corporations to use.
NOW, breaking the buck, Joe Six Pack is worse off than he was in the bank. At Reserve, Joe lost to inflation and also 3%. He would have been better off spending it on beer.
Now, if Joe and everyone else sees MM as too risky, it sucks out a lot of capital out of the system, placing further stress on a system having liquidity issues.
So who Replaces AIG in the Dow? How about the Fed?
Embrace the Chaos.
agree with chicago that the AIG loan is to facilitate an orderly unwind. here are the details as reported by Reuters:
*********
*two-year facility secured by all assets of AIG and its primary non-regulated subsidiaries
*U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto payment of dividends to common preferred shareholders
*****
so basically, Gov’t is protected on downside via secured loan and captures almost all of the upside should AIG turn out to be worth more in pieces than as a whole.
There was someone on CNN a few nights back (did not catch the name) who argued BOA’s strategy was to buy a much junk assets as possible so they too would be too big to fail.
Almost vertical.
http://www.kitco.com/charts/livegold.html
#103 Clotpoll
9/15 — The Longest Day
9/16 — A Bridge “Loan” too Far
“The government has for all intents and purposes lost control of its economy. What exactly is the legal power of a government that has no control left over its economic system?”
the gov’t never has and never will control the economy.
There was someone on CNN a few nights back (did not catch the name) who argued BOA’s strategy was to buy a much junk assets as possible so they too would be too big to fail.
Peter Schiff
AIG is falling cause it was not bailed out. Bear basically went to their Mommy and Daddy to get a loan by the time AIG asked for their loan the US Govt were acting more like Vinnie the Loanshark with an office by the payphone somewhere deep in Brooklyn. AIG got charge a high rate, has to pay it back in 24 months and US Govt took 80% of their business. Like the small business owners who turns to the loanshark for a short term loan they are still in trouble.
“The secretary and the chairman of the Fed, two Bush appointees, came down here and said, ‘We’re from the government, we’re here to help them,’ ”
That is one of the scariest statements i have heard in a very long time
another important thing to note (not sure if it’s already been discussed here) is that about 80% of AIG’s business in life insurance and retirement services comes from abroad, primarily Asia. so I think this bailout probably reflects Asian pressure on our gov’t as much as anything else. going forward, I think one has to question whether a policy of greatly expanding our nat’l debt (as Mr. O has proposed) is the right move, given the already obvious influence foreign gov’ts have over our policy right now
skeptic, 149
I agree, but isnt it fair to say that the government does provide the frame work within which the economy works? you have turmoil and chaos when that frame work breaks down. But you are correct that the government never actively controls the economy unless of course it is a command economy.
“I agree, but isnt it fair to say that the government does provide the frame work within which the economy works? you have turmoil and chaos when that frame work breaks down.”
actually, I do not think the framework is breaking down. the framework is performing what it was designed to do– people simply do not like the outcome.
I think it is a fair point to say that we should set up a legal apparatus to reduce the risk that such an outcome can happen again. but if you look throughout history, the law generally lags in development behind markets. that is what has happened here. All of the people criticizing our legal system today– both Mr. O and Mr. M— there is very little evidence that any of them understood the magnitude of the risks present until now.
US embassy in Yemen attacked
http://www.cnn.com/2008/WORLD/meast/09/17/yemen.blast/index.html
MacroBlog:
The left and right of it all.
http://macroblog.typepad.com/macroblog/2008/09/the-left-and-ri.html
“What a wild day it was on Monday in U.S. and global financial markets. We heard it quipped that the problem with financial institution balance sheets is that “on the left hand side nothing is right and on the right hand side nothing is left.” This is clearly an exaggeration, but it does raise the question: What do people look at when gauging the rightness or leftness of balance sheets?”
LEH $0.11
TMA $0.25
Thornburg mortgage is worth double lehman brothers!!!
[97] Stu
Just checked my acct. TDBank. Phew. You gave me a jolt there, boy.
I don’t normally follow gold too closely but Oct delivery is up $52 to $829.
And Morgan is down %30+ right now.
being the youngest in your class isn’t bad. It’s not the best when everyone gets their driver’s license a year before you. But, I ended up in college at 17 and was happy to younger than everyone when I graduate college. Then I made the dumb mistake of going to graduate school.
Skep: Your fibbing again!
“I think one has to question whether a policy of greatly expanding our nat’l debt (as Mr. O has proposed):
Show me where this is proposed please.
Phil Gramm was M’s primary adviser and was a heck of a lot closer to M than the great reverend Wright is to O. Gramm chaired his failed presidential campaign in 2000.
The other resume builder for Gramm in 2000 was to ensure that credit derivatives were kept unregulated as the senator was the key force in the passage of the Commodities Future Modernization Act. This specifically exempted new derivative markets from government oversight. Undoubtedly, leading to the ill decisions causing the collapse of AIG.
Hat tip to Salon for pointing this out 6 years ago.
You can say that O is going to greatly expand our debt, but M’s plan is complete hooey. Earmark reduction to pay for extending Bushes tax cuts? Do you really believe this? Do you really buy this baloney? Didn’t Bush run on the same plan only to double the debt.
I don’t intend to start the political crap on this board again, but try not to slip so many lies into your otherwise well thought out posts. It really makes you look silly.
146, that was Peter Schiff. Go search him on youtube. You’ll get all kinds of great rants.
clot/sheep – how are you doing your trading? All disclaimers assumed.
I’m on E*trade, and I guess due to the 15 min quote delay have not made quite as much as I could have (though I’m not complaining).
On 9/8 snagged 84 shares at $99 (great), sold at $112.20 (kinda panicked and sold at right as it was about to bounce way back up)
couple days later bought 40 @ $113, sold at $120 (delayed quote, thought it was a bit higher).
On monday grabbed 50 @ $126, just sold them for $136.6
So I’m up a few bucks but starting to think like Laughing – my luck’s got to run out, and blackjack is more fun.
But watching it sit in a crummy MMA with the rest of my ~80k “house down payment/emergency nest egg” is less fun, and checking the 401k is too depressing..
DJIA approaching the 52-week low!
Can’t we just let the inevitable happen already?
Stop delaying the agony. The greedy bastards gambled. Let them die. We’ll all be better off the sooner we unwind. Instead, we are transferring the pain we need to experience to our children who had nothing to f’in do with it. I hope they refuse to pay your social security!
via NakedCapitalism – The U.S. Treasury said it will sell bills to allow the Federal Reserve to expand its balance sheet, a day after the government agreed to take over American International Group Inc.
Am I understanding this correctly? Is the Fed out of money, or am I jumping to conclusions?
#165 Amen, Stu.
GS is at 102. Orderly my butt!
http://globaleconomicanalysis.blogspot.com/2008/07/you-know-banking-system-is-unsound-when.html
You Know The Banking System Is Unsound When….
1. Paulson appears on Face The Nation and says “Our banking system is a safe and a sound one.” If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.
2. Paulson says the list of troubled banks “is a very manageable situation”. The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?
3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.
4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier’s checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?
5. Paulson asked for “Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)” just days after he said “Financial Institutions Must Be Allowed To Fail”. Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.
6. Former Fed Governor William Poole says “Fannie Mae, Freddie Losses Makes Them Insolvent”.
7. Paulson says Fannie Mae and Freddie Mac are “essential” because they represent the only “functioning” part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only “functioning” part of the mortgage market is insolvent?
So far we’ve been lucky. Sold all of our SKF at $124
Sold my SKF earlier today and got run over.
Shore,
Thanks for your input.
One more: what triggers the fund to go below $1?
Reuters:
WaMu may seek merger as pressure mounts: Merrill
http://biz.yahoo.com/rb/080917/washingtonmutual_research_merrilllynch.html?.v=1
“Recent markets disruption and lack confidence that Washington Mutual can withstand the credit cycle are increasing the likelihood that it will need to seek shelter from the storm through a merger,” analyst Kenneth Bruce said in a note dated Sept 16.
Rating agency Standard & Poor’s downgrade of the thrift to “junk” status, “is likely to add more impetus to Washington Mutual to act quickly,” Bruce, who lowered his price target on the stock to $1 from $3, said.
166. Stu Says:
September 17th, 2008 at 11:36 am
DJIA approaching the 52-week low!
Can’t we just let the inevitable happen already?
Stop delaying the agony. The greedy bastards gambled. Let them die. We’ll all be better off the sooner we unwind. Instead, we are transferring the pain we need to experience to our children who had nothing to f’in do with it. I hope they refuse to pay your social security!
Social Security is Chump Change versus your children paying Police & Teacher Pensions & Health Care. But they shouldn’t complain, as the UFT says “It’s for the children”.
Stu– clearly, there needs to be more transparency regarding derivatives. but I do not think the problem was so obvious 8 yrs ago. You should keep in mind that this market is opaque the world over and a main justification for leaving it lightly regulated in the U.S. was to not drive this market completely overseas. I’m sure the people in Chicago are grateful for this, and the NYSE is stronger for it as well. you can be sure that there will be reform in this area shortly– the question is what type of reform will it be? Perhaps you disagree, but I think the approach should be cautious, rather than some sort of ill-though-out SOX equivalent. In moments like these, the big gov’t mentality that people like Mr. O espouse sounds reassuring, but in the long run the consequences of this approach are often bad
Where’s Bi today? We need him to say that the market will finish flat again!
Here’s the deal,the Gubbmint bailed out AIG cause of its CDS exposure. Now the hedge funds will short the shit out of any financial company with CDS exposure. Now we see the unintended consequences of the fed and treasury, effin idiots
# 171, investment losses. Read the statement in the link I posted from Reserve Fund.
Stu – I was a Nov. baby and always the youngest and so I sort of laugh when I hear pre-K programs argue with me that I should start my child at the proper time so that they don’t end up repeating Kindergarten.
No one cares but yeah, I went to a snooty liberal arts college and B-school after that and I always felt less mature than the fast friends I hung out with but academically, no issues at all. The worst part was being the last to get my drivers license.
I am all for holding a kid back if they can’t keep up academically but I don’t understand why a district wouldn’t want to at least test a kid who may end up being entirely bored in class and possibly disruptive as a result. I guess I am one of the few people who doesn’t want to hold their child back in order to ensure they are the biggest and strongest on the athletic field. People’s priorities sure do suck.
GS off 20%, MS off 40%. Bonus points to GS for a spectacular waterfall like intraday dive. Keep up the good work boys.
Time for the soundtrack of the day:
Now I’m freee, (Now I’m freee)
Free Fallin. (Free Fallin.)
Now I’m freee, (Now I’m freee)
Free Fallin. ( Free Fallin)
Now I’m free fallin, now I’m free fallin, now I’m free fallin
(Freee, Free fallin)
Carry on.
Skep:
“In moments like these, the big gov’t mentality that people like Mr. O espouse sounds reassuring, but in the long run the consequences of this approach are often bad”
Just like Reagan’s trickle down theory. I’ve got new for you. It trickles up. The American Dream is to be part of the ‘up’ crowd. Unfortunately, the barriers to entry have become so great (wage divide) that the underlings are giving up and with it goes productivity.
All trickle down theory does is increase the likelihood of the masters’ needs for barbed wire fences.
# 179 Song post of the day
Shore,
Thanks. Just read it. Holy cr*p!
-351. yeesh.
I think we are overparenting.
Everyone remembers the hyper kid when they were growing up. We never classified them as anything more than hyper. Treatment? Take away the cocoa puffs. You meet this kid at your 10-year high school reunion and he is as normal can be.
Today, they take the same hyper kid, classify him with some three-letter affliction and he gets a personal aid in school and Zoloft to boot.
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
The hyper kid today doesn’t make it to the ten-year reunion. He is either too embarrassed or in some loony bin.
From Above #185
I can’t fathom to say this but Federal Reserve is Bankrupt.
Not only does their balance sheet contain subprime toxic scum but they have also run out of cash.
Where are the credit agencies with the downgrade.
MM: you’ve got to be kidding.
The yield on the 1 month treasury is now at .08%…
“@174
In moments like these, the big gov’t mentality that people like Mr. O espouse sounds reassuring, but in the long run the consequences of this approach are often bad.”
Insane, absolutely insane. This is the worse crisis since the great depression and the best thing you can offer is an attack on Mr. O?
What evidence you have as proof that Mr. O’s approach is often bad?
I can give you some evidence that Mr. W’s approach has lead us to the greatest financial crisis since the great depression.
HC
The TED spread is at 2.93. Good grief!
Here it comes. Full systemic crash!
#187 – make, thanks. I saw the same in my earlier NakedCapitalism link and thought I was reading it wrong.
I might still have time to high tail it out of this town before it gets really bad.
Stu– productivity continues to rise. also, the income inequality argument is overstated (not saying it is not a real issue, however). there was an interesting article by Laffer within the last week in the WSJ. basically, what he has found is that only about 3% of the population is chronically poor (defined as being below poverty line for at least 3 yrs). most low income people in the U.S. are young. their incomes rise as they get older. also, the incomes of women and minorities have been rising far faster than white men in recent years. bottom line is that there is very real economic mobility for people who work hard and educate themselves.
as for supply side economics, you can look the world over at countries that have low tax rates and see that they grow much faster than countries with high ones where the gov’t takes a heavy hand in redistributing income. the problem in the U.S. has been that tax cuts are not coupled with spending cuts— not that taxes and spending are not high enough.
Better hope we don’t break down below 10K people.
#190
please explain how Mr. O would fix this crisis.
“The problem in the U.S. has been that tax cuts are not coupled with spending cuts— not that taxes and spending are not high enough.”
Bing! Agreement. Neither candidate is cutting spending.
“please explain how Mr. O would fix this crisis.”
He’d bring in Volcker who would stop delaying the pain Skep!
M represents the people that all of us are bailing out, like his friggin second wife.
“Neither candidate is cutting spending.”
true, but one will drastically increase it.
#132 Orion – I think “breaking the buck” is a bigger deal than AIG because this is something that Joe Sixpack can more easily grasp than the failure of AIG. All this AIG stuff is pretty complicated but losing money in a MM fund is simple. This story, if it isn’t buried in the rest of the financial news, might finally bring the Wall Street crisis home to the average person. (I’d say “Main Street” but that phrase has been used so much I get queasy.) Another thing – I think that many people mistakenly think that Money Market funds are federally insured. Some are; some aren’t. That too, could set off some unfortunate behavior.
195 stu
We will
For youy gurus out there, what is the current “technical support level” and what is the next, lower, one?
skep-tic Says:
September 17th, 2008 at 11:12 am
another important thing to note (not sure if it’s already been discussed here) is that about 80% of AIG’s business in life insurance and retirement services comes from abroad, primarily Asia. so I think this bailout probably reflects Asian pressure on our gov’t as much as anything else. going forward, I think one has to question whether a policy of greatly expanding our nat’l debt (as Mr. O has proposed) is the right move, given the already obvious influence foreign gov’ts have over our policy right now
skep: Great piece of analysis.
Stu,
Dont you mean FLCLTF?
“FDIC’s Bair: Reserves Are ‘Ample’ to Cover Needs”
If by “ample” one means “not nearly enough”?
187- Stu
We are spending on the wrong stuff – All the budget surplus being wasted on tax cuts for the rich and the insane war.
The Iraqi govt now has a surplus. WTF are we doing paying the Sunni tribes $300 a month/person?
do you see any pain being delayed today? I do not understand this argument that all losses have to be realized in a day or a week. If you look at the bankruptcy process as an example, there is the concept of the automatic stay. all creditors are held at bay once a bankrupcty petition is filed. this is designed to prevent assets being seized and sold off at distressed prices and usually results in creditors being better off than if bankruptcy were not an option. what we need right now (and what Treasury and the Fed are groping toward) is a similar process for orderly unwinding of these financial institutions. we have nothing legally in place currently to achieve this because what is happening today is unprecedented
Who knew there was such an offense in nj: “disobeying the duty of a bicyclist.”
http://www.app.com/apps/pbcs.dll/article?AID=/20080917/NEWS/80917023
Here is an example of the embedded carnage that can unravel if unchecked……multiply this exponentially…..
WALL STREET JOURNAL
COMMERCIAL REAL ESTATE SEPTEMBER 17, 2008
For Canary Wharf, Bank Crisis Hits Home
London’s Financial District Faces Empty Towers as Lehman, Others Fold
LONDON — Canary Wharf has been on a roller-coaster ride since construction of its towers began in 1988. Now it appears to be in for another bump.
The bankruptcy of Lehman Brothers Holdings Inc. is threatening more trouble for the financial district, which is already jittery as banks cut back on expansion plans amid the year-old credit crunch. The 30-floor glass tower that Lehman rents in Canary Wharf could be on the market soon, putting more downward pressure on rents that have already softened substantially over the past year.
Adding to the concern: If Lehman defaults on the rent on its lease, which runs through 2033, landlord Canary Wharf Group PLC is protected by an insurance policy with AIG Financial Products Corp., a division of American International Group Inc., the U.S. insurance titan facing a cash shortage and rattling markets globally. Under the contract, AIG would step in and pay the rent for “up to four years from default,” said Canary Wharf Group’s majority shareholder, Songbird Estates PLC, in a statement Tuesday. That’s another layer of worry given AIG’s precarious position.
[edit]
#204 – Give her a break Shore, it’s such an easy mistake to make.
Disobeying one’s duty to a gerbil?
http://www.app.com/apps/pbcs.dll/article?AID=/20080917/NEWS/80917014
162 stu
Don’t forget that Mrs. Gramm was on the board of directors of Enron.
Top 5 % Movers on NYSE
AIG: -45.33%
C: -9.90%
MS: -31.99%
WB: -21.63%
GE: -8.22
Top 5 % Gainers on NYSE
MKS: +38.98%
KNO: +34.78%
XFP: +31.63%
XFD: +19.05%
TRR: +16.05
Top 5 % Decliners on NYSE
FRE-PF: -74.00%
VSE: -61.11%
TMA-PD: -48.15%
LEH-PP: -46.67%
AIG: -45.33%
make, thanks. I saw the same in my earlier NakedCapitalism link and thought I was reading it wrong.
I might still have time to high tail it out of this town before it gets really bad.
I’m right behind you. Where are we going? Can we bring Clot with us as we gonna need someone with guns and amo.
Breaking news: US treasuries are now trading at close to worthless levels.
Tosh,
$10 billion here, $100 billion there. My mistake, Tosh, you are right. She should not be held to the standard of knowing the meaning of adequate.
I hear the president thinks it is a term meaning “I had to quit.”
#173 Confused
Don’t worry, we can tell the retired teachers we are cutting their pensions to pay for the current staffs health care. They shouldn’t complain, as “It’s for the children”.
Where are we going? Can we bring Clot with us as we gonna need someone with guns and amo.
I was thinking Belize/Honduras/Costa Rica, they look pretty.
Just let me stop & B&H before we got so I can max out my credit cards buying Zeiss lenses for my cameras.
Victorian 205
From a lifelong Republican I say to you:
You are right on.
Skep…Enough.
Vic 205:
“The Iraqi govt now has a surplus. WTF are we doing paying the Sunni tribes $300 a month/person?”
That’s an easy one. We are making the surge look justified!
More deceit and lies!
# 219
Right again.
“WTF are we doing paying the Sunni tribes $300 a month/person?”
Did they move to Alaska?
Shore Guy Says:
September 17th, 2008 at 12:17 pm
For youy gurus out there, what is the current “technical support level” and what is the next, lower, one?
Shore: I don’t really review this stuff, but I think the local purveyor in my office said 10.8 on the Dow…oooops….
Next!
#211
don’t forget that your guy currently running for VP is in MBNA’s back pocket
206 skep
“do you see any pain being delayed today?”
Yes
Instead of bankrupt conpanies-i-can’t-mention we’re sitting around waiting for a bankrupt Fed.
Instead of higher rates today, we’re sitting around waiting for higher taxes tomorrow.
Tax cuts without spending cuts are a null set. They are merely tax deferrals.
I recall wondering quite some time back whether the Dow would be under 11,000 by the time of the election and then seeing it come to pass fairly quickly. Then I began to wonder if it might be possible to see 10k, by the election. D@mned if it might not happen.
Whilst it might be good for the country in the long run, it sure does hurt to see ones pension accounts dropping by hundreds of thousands in the span of a couple months.
It will be interesting to see what happens when Joe Main Street realizes that the foundation has been crumbling and nearly everyone in a position of power has been lying to him and the promises can’t be kept. When that happens, the stores that sell pitchforks, sythes, torches, and torch oil will do a bang-up business.
“Tax cuts without spending cuts are a null set. They are merely tax deferrals.”
Agree– so let’s settle this argument. Cut taxes and spending. Certainly, do not raise either.
A Republican majority passed the Gramm Leach bill back in 1999, nearly all the Dems voted against it, and back in 2006 Phil Gramm was busy lobbing against reforms in lending.
http://www.youtube.com/watch?v=0F-LVfcbOxs&feature=related
Remember in November folks they surely want you to forget who set up this fall.
Shore…I’m just eyeballing and I really don’t know my stuff, but I think the next area of support is 10.1 / 10.2……
Actually, I think you can see the market trying to hold 10.8…..
Tax cuts without spending cuts are a null set. They are merely tax deferrals”
If Joe and Jane Main Street do not open their FRIGGEN EYES to things and start demanding the town council, the freeholders (or county legislature, depending on the state), the state legislature, and federal government to start lowering SPENDING, not slow the increase, but LOWER the cost of the budget YoY, we are so seriously fcked.
Tax cuts without spending cuts is luike an hourly worker cutting back his or her hours without cutting spending. The credit cards might work for awhile but….
Chi:
“Shore…I’m just eyeballing and I really don’t know my stuff, but I think the next area of support is 10.1 / 10.2……”
What are you doing?
Politically, if the Dow drops below 10k, does O benefit because my party blew it so badly or does M benefit because people will conclude that things are so bad we can’t grow ourselves to pay for O’s promises without resorting to new taxes?
It was said in ’04, if the Dow did not recover to 10k Bush would likely be beaten, and, dang it, it went higher.
May you live in interesting times.
229. sean Says:
September 17th, 2008 at 12:43 pm
A Republican majority passed the Gramm Leach bill back in 1999, nearly all the Dems voted against it, and back in 2006 Phil Gramm was busy lobbing against reforms in lending.
Remember in November folks they surely want you to forget who set up this fall.
It did have a veto proof majority but the Senate Nay’s were only eight;
NAYs —8
Boxer (D-CA)
Bryan (D-NV)
Dorgan (D-ND)
Feingold (D-WI)
Harkin (D-IA)
Mikulski (D-MD)
Shelby (R-AL)
Wellstone (D-MN)
Vote against everyone who signed this bill including Kennedy & Kerry.
“What are you doing?”
Besides buying torches? Trying to get our broker out from under his desk.
I wonder if Ron Paul doesn’t have a certain feeling of satisfaction right now.
#234
Confused,
I need to remember to hug Boxer next time I see her.
Dealbreaker is reporting rumors of a 1/2 pt emergency cut.
Just rumors.
227. It will be interesting to see what happens when Joe Main Street realizes that the foundation has been crumbling and nearly everyone in a position of power has been lying to him and the promises can’t be kept. When that happens, the stores that sell pitchforks, sythes, torches, and torch oil will do a bang-up business.
True, a lot easier to suffer a Depression, if those who caused it, also suffer.
Reid Says Congress Won’t Act Because `No One Knows What to Do’
By James Rowley
Sept. 17 (Bloomberg) — Congress is unlikely to pass new legislation to overhaul financial regulations this year “because no one knows what to do,” Senate Majority Leader Harry Reid told reporters today.
“We are in new territory, this is a different game,” Reid said at a briefing in Washington. Neither Federal Reserve Chairman Ben Bernanke nor Treasury Secretary Henry Paulson “know what to do but they are trying to come up with ideas,” Reid said.
Illinois Senator Dick Durbin said in a speech on the Senate floor that President George W. Bush isn’t in a position to propose regulatory overhaul legislation because he is close to leaving office “and the Congress is not in a position to pass it.”
Durbin said that Bernanke told lawmakers last night that an overhaul of government regulations was needed to solve the current financial crisis. Bernanke made the comments when he and Paulson told lawmakers of the Fed’s plans to take over American International Group Inc.
Congress is planning to adjourn Sept. 26 and other Democratic leaders have said they hope to avoid a post-election session.
Reid and Durbin’s comments come as White House spokeswoman Dana Perino said the administration is willing to consider proposals being suggested in Congress to have the U.S. buy distressed mortgages, akin to the role the Resolution Trust Corp. played in disposing of bad debts of from savings and loan associations in the late 1980s and early 1990s, she said.
The Federal Reserve Board, with support of the U.S. Treasury, invoked emergency powers last night to lend as much as $85 billion to American International Group Inc. to save the firm from collapse. At the start of the week, Lehman Brothers Holdings Inc. filed for bankruptcy. That followed the bailout of Bear Stearns Cos. in March, and the takeover of Fannie Mae and Freddie Mac earlier this month.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDXSrZc6VWYw&refer=home
I would like someone to explain to me how the GLBA is responsible for what is happening today. Since so many of you seem convinced of this, someone must understand the bill.
Scary that they are talking about Money Markets breaking the Buck, spreading. That would be a reason to appropriate ill gotten gains retroactively.
OT Quality Quotes of the Day:
“This was different, though. Hochuli wasn’t making a judgment. There’s no way he could look at what Jay Cutler did from any angle and conclude that he threw a forward pass, any more than you could watch Ryan Seacrest wax his chest and then conclude that mashed potatoes are delicious. It just couldn’t happen.”
Congress is planning to adjourn Sept. 26 and other Democratic leaders have said they hope to avoid a post-election session
Maybe they all caught Brain Cancer from Kennedy. Maybe times call for a new form of Government. This one is too lazy and doesn’t have a clue.
Could we please have a thousand point drop on the Dow and get it over with already??
Stu,
the ADD thing is more of an excuse to mask the fact that their kids are not the sharpest tools in the shed. I have bad ADD and was diagnosed with it in high school. I can’t pay attention to a teacher for more than 5 minutes unless they are actually interesting. I was a C minus average student my first 3 years of high school. I turned it around, got straight As and scored a 1380 on the SATs with a 790 in the math to get into college. That being said, I skipped all my classes in college and learned on my own. Graduated with a 3.6 barely trying. The thing about ADD is that you have an ability to hyperfocus on something that interests you. On about 2 cups of coffee, I can sit and read an entire Chemistry textbook in a day and retain all the info. It actually works out to my advantage. I’ve met plenty of other kids in graduate school who are the same way. The majority of parents want to believe their child has ADD because they have trouble learning. Usually, it’s because they don’t have the brainpower. ADD has no affect on a child’s ability to learn. It only affects their ability to pay attention to things they have no interest in.
I do not know nearly as much about finance as you folks, but I am blown away by the lazy azzed media’s inability to at least mention the OTHER recent financial scandal, Enron, World Com and Arthur Anderson. Remember? Books cooked, big CEO bonuses, people lost their shirts, we won’t ever let this happen again,blah blah
Ben,
I was a very mediocre HS student but a straight A college student. College format worked for me. I was faster so I didn’t get bored, the subjects were of my choosing and cramming was allowed. I could read through an entire semester of course material in one night and get an A the next day on the exam.
I don’t know if I have ADD but I was a serial daydreamer in grade and HS.
It’s ironic that the people who championed free markets and deregulation are now desperately trying to take control of the economy.
It’s like a wild animal with rabies that is going around biting everyone in the a$s
all of the reporters are in Alaska trying to uncover the really important news
Barbara,
probably. It’s obvious that it wasn’t a problem. I remember them asking me if I wanted unlimited time on the SATs because I was supposedly “learning disabled”. I had friggin ADD. I can imagine nothing more boring than unlimited time on a math exam.
129 – But between the cost of the trade and the cap gains on profits … is it really that much money? Is it worth the hassle and worry to make 5k?
I mean, i have no clue if you’re clearing 25k or whatever here, but it just seems like undo stress.
best case scenario is that i take a 1k profit and that pays for the xmas gifts and the entertainment portion of a weekend trip we’re taking to chicago.
skep – there is an important change embedded in Gramm-Leach which authorized the Federal Reserve and the U.S. Department of the Treasury to periodically update a list of activities in which federally regulated financial holding companies and national bank subsidiaries could legally engage.
For example, the Federal Reserve and the Treasury Department accordingly put out regulations in 2001 that would allow holding companies and subsidiaries (as opposed to the banks themselves, a fine legal distinction) to engage in several financial activities including real estate brokerage and property management activities.
The passage of the Gramm-Leach-Bliley Act, more than any other causal factor, destroyed the due diligence and integrity of the entire financial sector, and paved the way for rampant and outrageous fraud by dismantling the usual system of checks and balances.
Rampant fraud and outrageous conflicts of interest developed between different financial sectors, which is now resulting in a breakdown of confidence and trust.
No trust skep, think about what that really means.
“When that happens, the stores that sell pitchforks, scythes, torches, and torch oil will do a bang-up business.”
That’d be Home Depot :-) they also sell ropes and chainsaws…
Just sayin’ :-D
sl
#252
the GLBA made possible universal banking in the U.S., which is the model in the rest of the world.
if you look at the large financial holding companies that the GLBA made possible, they are the ones who are surviving right now, while the stand alone IBs which were products of a more segmented financial sector are failing.
universal banks were around for decades in Europe and Japan before the GLBA. they did not destroy the diligence and integrity of the financial systems in those countries and I do not see any evidence that they have done so here– actually, the evidence is to the contrary as these institutions are the ones currently picking up the pieces (e.g., BofA)
233 shore
“people will conclude that things are so bad we can’t grow ourselves to pay for O’s promises without resorting to new taxes”
Who says we’ll pay? We’ll just borrow, won’t we? Like we did to cover all of GWB’s expenditures?
“Sept. 17 (Bloomberg) — U.S. Treasury three-month bill rates dropped to the lowest since at least 1954 as a loss of confidence in credit markets worldwide prompted investors to abandon higher-yielding assets for the safety of the shortest- term government securities.
Investors pushed the rate to 0.0304 percent on concern that credit market losses will widen after the bankruptcy of Lehman Brothers Holdings Inc.”
[Snip]
skeptic,
BofA has had to have the FED suspend standard rule sin order for it to cover MER liabilities. They could not stand without what amounts to a FED Bailot.
question: I have watched CNBC for the last few weeks and i cannot recall one person talking about SKF. not once.
for the last two weeks, almost everything has been down, but SKF has soared.
what gives? and when SKF soared to 200 in july, shouldn’t CNBC have said ‘well, a lot of people think some big dogs are going to fail.’
(as a CNBC newbie, i assume it plays favorites, or what is has to for various reasons.)
227 skep
“Agree– so let’s settle this argument. Cut taxes and spending. Certainly, do not raise either.”
Sure, but because we’re running massive deficits (e.g., the real federal deficit for this year is ~$1 trillion), we have a lot of spending cuts to be done before we can cut taxes.
additionally, the GLBA provides strict guidelines for transactions between banks and their affiliates. these provisions are specifically designed to limit conflict of interest of financial holding companies’ dealing within their disparate divisions
http://www.bankersonline.com/regs/223/223.html
I say we scrap the dollar, and move to the, ummm, FedColar. Lets set the initial price of a FedColar at $1trillion dollars, then exchange 1 for 1 with dollars held in banks by American citizens, and then anyone can just pay off the former debt with what is in their pocket.
Sept. 17 (Bloomberg) — Former U.S. Treasury Secretary John Snow said credit markets are almost “frozen” and called the government takeover of American International Group Inc. a “huge” failure of risk management and regulation.
Snow, chairman of private-equity firm Cerberus Capital Management LP, said today in a telephone interview that capital markets are on the verge of seizing up.
“Our debt markets are close to frozen” he said. “Unless we get this fixed pretty soon, we’re in for a big, big, deep slowdown.” The economy faces a “a tough year” in 2009 followed by a “good upward swing” in 2010, he said.
[snip]
http://www.bloomberg.com/apps/news?pid=20601087&sid=axkBHAtF70vQ&refer=home
Ben:
On the ADD thing. I felt like I was reading my biography. I too was a C student and turned it around in college. I never attributed it to ADD though. I also thought I was just simply a day-dreamer. I was also able to skip most of my classes and still finished my undergrad with a 3.6, which was tough because I partied so hard to the tune of a 2.1 as a frosh.
Interesting take on the subject. I thank you for it.
The average millionaire in his 40’s in the US had a 2.9 GPA. As luck would have it I was in the same mgt training program as the salutoiran of my college, (can’t even spell it), I blew the doors off her at work as I knew every short cut to getting things done, was used to working on things last minute, knew when good enough was good enough. HR person at old company favorite interview question was who won last year’s superbowl? Lotta eggheads are just book smart with no common sense. Pretty much the folks at Lehman brothers.
Barbara Says:
September 17th, 2008 at 1:16 pm
Ben,
I was a very mediocre HS student but a straight A college student. College format worked for me. I was faster so I didn’t get bored, the subjects were of my choosing and cramming was allowed. I could read through an entire semester of course material in one night and get an A the next day on the exam.
I don’t know if I have ADD but I was a serial daydreamer in grade and HS.
shore 261,
dont you mean the Amero? ;)
Do we still own the name? Or,like Ford has done, have we mortgaged it? Maybe it should be the Sino.
Oct gold is now up $82. Wow.
Blood in the streets yet?
Shore
A slightly personal question. Feel free to ignore.
You said yesterday that the recent comments from McCain gave you some remorse for writing your 2k check. Could you write the same check today if it was made out to SP.
A lot of talk has been made over the years about “Reagan Democrats”. Are we starting to see the same phenomena in your party where things have got so bad in the country/ticket that McC/SP looks worse than O. Will there be life long (R) voters holing their nose and pulling the handle for O, because they can’t take the thought of McC continuing the W path. I can’t help but think that Roves comments over the weekend were a silent signal to the base, to start backing away from the ticket.
I heard your comments that the BC years were not the economic miracle they were made out to be. I put it in simple terms.
1) Reagan started the ball rolling with the move towards the service sector economy and ramped up defense spending.
2) GHWB continued the deficit with Gulf War. He focused too much on foreign policy and lost the election on domestic issues.
3) BC had no war so could cut defense spending. With a hostile congress there was no spending so he ended with a surplus.
4) GWB started 2 wars and fell asleep at the economic switch which is were we were today.
I am pretty much a hyperactive ADD type and have the attention span of a small gerbil. I find it hard to believe that any of you have ADD, A true ADD person would never get a good GPA, school is for fools I say!!! That said I have a MBA and a few certifications only because I pity the fool and I need the sheepskins to get a good paycheck. I did teach a college finance class once and your car gets less nicks in Faculaty parking and the guards call you professor so that was pretty cool.
Judge Andrew Napolitano say’s the AIG aquisition is patently unconstitutional, and recommends Greenberg file a Federal lawsuit to stop the Government aquistion immediately. Interesting, Founding Fathers won’t allow you to pick and choose who to save, it’s all or nothing.
“BofA has had to have the FED suspend standard rule sin order for it to cover MER liabilities.”
yes– this is disturbing, but as of now it looks better than the alternative. also, at least this maneuver is within the Fed’s current authority (a lot of what the Fed has done recently is not), and incidentally, it is also provided for by the GLBA.
“FHCs are subject to the Federal Reserve’s holding company capital guidelines, which set forth minimum capital ratios that serve as tripwires for additional supervisory scrutiny and corrective action. The [Agency] will review these requirements as they apply to FHCs and may, if warranted, adapt the manner in which they apply to FHCs that engage in a broad range of financial activities.” Federal Reserve “Bank Holding Company Supervision Manual,” sections 3900.0.4.2.2 and 3900.0.4.2.3
http://www.federalreserve.gov/boarddocs/supmanual/supervision_bhc.htm
I’ve got some excess physical if anyone wants to buy at spot. Cash, let me know.
skep (153)-
How kindly will our Asian creditors treat us in the future, when their population’s first taste of our great country is having to stand in line during a run on local AIG branches?
Shame on us. Every single one of us. Even if we didn’t commit the crimes, we let them occur.
Grim:
I bet Mr. T is happy. I pity the fool…
#262
“Snow said the U.S. needs to revamp the structure of financial services regulations. Still, he warned against moving so quickly that there are unintended consequences. “There’s a huge danger that needs to be guarded against — that we’ll have a tremendous overreaction in regulations,” Snow said. “
it’s a common myth that the people working on Wall St are smart. Back in the day, I’m sure there were plenty of smart people there. My experience with anyone I’ve met from Wall St. has left an impression of me saying “I can’t believe people let this person manage their money”. Wall St abandoned hiring smart hard working people and replaced it with nepotism and cronyism. They also commonly held the false assumption that if someone came from an Ivy League school, they were the cream of the crop. I’ve met too many Ivy League kids who have the IQ of dust to make such an assumption. A lot of the kids in Ivy league schools are there because their parents went there and donated money. These companies were filled with people who had no business in the industry. In fact, one of my best friends was working for Bear. He’s a really sharp guy and I’m sure he was capable, the fact of the matter was, he was a 23 year old with a political science degree who was doing construction for 2 years. I’m wondering how many burger flippers turned into financial advisers at these companies.
Tax Cuts – MythBusters.
It seems like tax cuts are the largest contributor to the budget deficit – 48%!!!
Now, people who say we need to cut spending. Here are the contributions of entitlements and domestic discretionary programs.
Entitlements – 10%
Dom. Discretionary – 7%
Next biggest contributor – Defense – 35%!!
http://www.cbpp.org/9-27-06tax.htm#m2
simple solution to budget problems:
eliminate social security and medicare over a 20 yr period. done.
Skep (278) – Amen.
Skep?
How wealthy are you?
You are beginning to sound like my brother who coined such popular phrases like, “Global warming is good for global farming.”
#278 It would benefit my family to do that. At least trim back, I dont want old folks homeless.
via Reuters:S&P:Pressure on AAA rating Knowing S&P, they’ll finally downgrade after we default.
#277 And debt service as a percentage of the budget????????? Eliminate the debt and free up lots of room to both cut taxes and increase infrastructure spending.
Entitlements are 2/3 of our budget. they are by far the largest source of our future unfunded liabilities. anybody who is serious about restoring financial sanity in gov’t understands that social security and medicare are #1 place to start.
for those who don’t frequesnt DB.
Check it out, CDS spreads blowing through the roof….
http://ftalphaville.ft.com/blog/2008/09/17/16026/the-cost-of-protection-on-the-street/
Grim 269 in mod. Darn filter.
there is no reason we cannot keep welfare for the truly destitute. however, the gov’t does not need to be in the business of providing pensions for everyone, and certainly not as they are currently doing so.
278 skep
“eliminate social security ”
without the massive SS surplus, just imagine how big the GWB budget deficits would have been!
“Entitlements are 2/3 of our budget. ”
In the current age of the $1 Trillion Deficit, what concerns me most are the things that are NOT in the budget.
“without the massive SS surplus,”
?
China: Third baby dies from tainted milk formula
http://www.cnn.com/2008/WORLD/asiapcf/09/16/china.tainted.formula/index.html
This is why refuse to buy any food that does not list its country of origin.
From the articles I’ve read it seems China knew about this a week before the olympics and did nothing.
Anyway the US can default only on our debts that China owns?
And GW’s crew wants or has already allowed chicken to be importedfrom China, home of the bird flu. Even though there are tons of small chicken farmers going bust in the south every year.
Skep,
SS has been bringing in far more than is going out. The SS surplus has been offsetting budget deficits. SS takes Treasury IOUs.
Listening to the Money Honey screech into a speaker phone about how Greenberg would never have let this happen to AIG this afternoon was too much. Got me thinking about the big picture. A book titled “All That Is Solid Melts Into Air” (I forget the author) was based on a quote by Marx (Karl, not Groucho) and maintained that one of the fundamental tenents of capitalism was creative destruction. Are we witnessing the destruction of the current framework of our economy and is it is necessary in order to purge it of its excesses? Another book by the 20th century French historian Ferdinand Braudel from his trilogy on the history of capitalism maintained that from the 1500s on, money demonstrated that it moved globally to where it was safest, and could be put to the most efficient use. The discussion on the illusion of national government’s ability to control its economy reminds me of his thesis. No point to this other than it will be interesting to see what will be left after the deleveraging and asset deflation have run their course.
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.
272 Grim, good day to sell at spot price. Do you have a preferred dealer that you work with?
290 skep
you weren’t aware that SS has been in surplus all these years and will continue to be for some years further?
We collect more SS taxes than we pay in SS benefits. Surplus.
hype (176)-
I have read your words 10 times…each time with mounting glee.
Stu (180)-
Hey, it worked pretty well in Colombia. And, we can re-employ a lot of dispalced financial services types in the personal defense and security field:
“All trickle down theory does is increase the likelihood of the masters’ needs for barbed wire fences.”
Skep-
Would you mind listing prosperous countries who have no “pension” plans as you call it?
#293 DL
I remember seeing her roll her eyes and say in disgust that there was no housing bubble. I think that was in the fall of 06 or Jan of 07 during one of my trips back to the US.
Can someone tell me how to invest in CNBC. Their ratings must be through the roof!
Shore (201)-
Tim McCarver once asked another catcher how to catch a knuckleball. The other catcher replied, “Watch it go by you. When it stops rolling, walk over and pick it up.”
‘For you gurus out there, what is the current “technical support level” and what is the next, lower, one?’
The irony of the whole financial debacle is that it could end up being the ultimate national security threat. The more dangerous threat may end up being Wall Street rather than the Arab street.
update from naked capitalism
the Treasury is applying some elbow grease too. From Bloomberg:
The U.S. Treasury said it will sell bills to allow the Federal Reserve to expand its balance sheet, a day after the government agreed to take over American International Group Inc.
“The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve,” the department said in a statement today. “The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program.”
Needless to say, expanding the Fed’s balance sheet is inflationary. The Federal Reserve chairman is employing the remedy he has long recommended, that a determined central banker can always reflate. If he is right, bye bye dollar, but in 1930, the central bank increased bank reserves but money supply contracted nevertheless because consumers and business hoarded cash due to distrust of failing banks. If the run on the shadow banking system continues, we may see similar results even though traditional bank will (hopefully) not see a cash exodus.
Update 11:30 AM: FT Alphaville, putting none too fine a point on it, calls its post “The Fed’s run out of money,” and provided the text of the Treasury’s press release. This bit caught my eye:
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.
“Temporary”. If you believe that, I have a bridge I’d like to sell you….
In all seriousness, just like the Term Auction Facility and the other supposedly temporary special facilities, it will be very hard to wean the financial system off central bank support.
“Finance Ministry pledged a total of $60 billion of funds to help local banks.”
The really sad thing is that they can do so with reserves from a vault and we need to sell bonds to Russia, China, et al., to raise the money to rescue the Fed. I doubt that we have faced a similar crisis in funding the government since Franklin was begging hat in hand for the French to save our a$$es.
Temporary, as in “temporary heroine addiction.”
I can quit anytime I want, really.
The next tune in our list may be Bowie’s: Waiting For The Man
In this case The Man will be whatever foreign invester we think will give us our fix.
For this group of losers running the country my ancestors fought a revolution and a civil war? They are pathetic and do not recognize it.
Debt binge over, it’s time to pay
http://www.smh.com.au/news/national/its-payback-time/2008/09/17/1221330929849.html
AUSTRALIA’S decade-and-a-half-long debt binge is coming to an end and a new era of austerity, in which consumers pay down their debts, live within their means and save for the future, is beginning, the Reserve Bank governor, Glenn Stevens, has predicted.
This guy also told young people to flee Sydney since the cost of living was so out of wack they would never be able to buy a home, and if they did they would be house poor. He recommended they move to Brisbane.
Can we fire Bergabe and bring in Stevens?
skep & stu-
Please understand that unless we dig up Thomas Jefferson’s remains (not to further stretch the Weekend at Bernie’s metaphor), no candidate can be found who isn’t beholden to some giant supporter or another.
ben Says:
September 17th, 2008 at 1:58 pm
Wall St abandoned hiring smart hard working people and replaced it with nepotism and cronyism. They also commonly held the false assumption that if someone came from an Ivy League school, they were the cream of the crop. I’ve met too many Ivy League kids who have the IQ of dust to make such an assumption. A lot of the kids in Ivy league schools are there because their parents went there and donated money. These companies were filled with people who had no business in the industry. In fact, one of my best friends was working for Bear. He’s a really sharp guy and I’m sure he was capable, the fact of the matter was, he was a 23 year old with a political science degree who was doing construction for 2 years. I’m wondering how many burger flippers turned into financial advisers at these companies.
ben: I cannot say you are entire wrong, but to make such a complete blanket statement is a best insulting…..at worst it makes you look ignorant or jealous….
If people would like some comic relief today, it seems that a German state-owned bank (KfW) sent €300m to Lehman by mistake on Monday, which now joins the queue as a senior, unsecured creditor. It made a mistake on its calculation of a swap payment. Story is here, only in German at the moment http://www.sueddeutsche.de/,tt2m1/finanzen/600/310528/text/
ben: I cannot say you are entirely wrong, but to make such a completely blanket statement is at best insulting…..at worst it makes you look ignorant or jealous….
#310 kettle1
That’s too funny.
Good thing it’s a state owned bank otherwise someone could get in trouble.
I got this spam, reminds me of the pinkslips parties from the dotcom crash that was networking parties where unemployed people could network with other unemployed people.
Contacts and Cocktails Finance, Legal and (Buy Side) Real Estate Professionals Event September 24
The C Squared Group cordially invites you to another installment of our quarterly Finance, Legal, and Real Estate series at Mantra (986 Second Avenue) on Wednesday September 24th (9/24) at 6:30pm.
Tickets are $20 in advance and are available at http://www.contactsandcocktails.com. A limited number of tickets will be sold for $30 at the door.
We will have exclusive use of the entire downstairs — The event will run from 6:30pm – 10:30pm.
– Vodka Open Bar for all guests from 6:30-7:30
– $3 draft beers from 6:30-7:30
# 310 Spokswoman Grete Klemphorn said, “we have identified the source of the mistake, one Homer Simpson, and he is being dispatched as we speak.”
I can picture the people involved sitting in a brauhaus one day and looking at someone talking about how they made a mistake buying the wrong cell phone, or car, or something and saying the German equivalant of, “Dude, you think that is bad….”
#306 – Bowie’s: Waiting For The Man
I hate to be a weasel, but Velvet Underground (with Nico)did I’m waiting for the man.
Unless you mean a Bowie cover.
Apologies.
300M euros. In Germany that’s still real money. In the U.S. it’s a rounding error.
laughy (258)-
The day I hear Becky Quick start talking about SKF on Squawk Box is the day I cover my shorts.
The current crisis:
I caught you knockin at my cellar door
I love you, baby, can I have some more
Ooh, ooh, the damage done.
I hit the city and I lost my band
I watched the needle take another man
Gone, gone, the damage done.
I sing the song because I love the man
I know that some of you dont understand
Milk-blood to keep from running out.
Ive seen the needle and the damage done
A little part of it in everyone
But every junkies like a settin sun.
Repost due to filters and to try and get the conversation away from Capital Markets.
hore
A slightly personal question. Feel free to ignore.
You said yesterday that the recent comments from McC gave you some remorse for writing your 2k check. Could you write the same check today if it was made out to SP.
A lot of talk has been made over the years about “Reag@n Democrats”. Are we starting to see the same phenomena in your party where things have got so bad in the country/ticket that McC/SP looks worse than O. Will there be life long (R) voters holing their nose and pulling the handle for O, because they can’t take the thought of McC continuing the W path. I can’t help but think that Roves comments over the weekend were a silent signal to the base, to start backing away from the ticket.
I heard your comments that the BC years were not the economic miracle they were made out to be. I put it in simple terms.
1) Reag@n started the ball rolling with the move towards the service sector economy and ramped up defense spending.
2) GHWB continued the deficit with Gulf War. He focused too much on foreign policy and lost the election on domestic issues.
3) BC had no war so could cut defense spending. With a hostile congress there was no spending so he ended with a surplus.
4) GWB started 2 wars and fell asleep at the economic switch which is were we were today.
What the current chaos means is the start of what you might call finance anarchy. The US government has lost control, that much is clear to everyone now, or at least those who’ve been paying attention. The companies will now be picked off one by one through shorting and swapping. The free market reaches its self-chosen and inevitable climax.
AIG has liabilities that run into the hundreds of billions of dollars, if not thousands. The vultures know this, make no mistake about it. So an $85 billion rescue is but a joke. It lifted nothing for more than a few hours, The Dow is falling off a cliff, and the next group of financial institutions are lined up to be the fastest to fall. Do note, please, that today can be pinned down as the first day that the financial crisis spills over into corporate America for real. There is blood in the water, and it’s feeding time.”
PotashCorp was downgraded by S&P today as it lost its title as the the world’s largest producer of fertilizer. PotashCorp has fallen to the third largest and has been eclisped in size by Lehman Brothers and AIG.
Just don’t pitch a pup tent in your shorts when you are watching Becky.
Clotpoll Says:
September 17th, 2008 at 2:58 pm
laughy (258)-
The day I hear Becky Quick start talking about SKF on Squawk Box is the day I cover my shorts.
Pressure building on US Government AAA rating
Pressure is building on the pristine “AAA” rating of the United States after a federal bailout of American International Group Inc, Standard & Poor’s sovereign ratings committee chairman said on Wednesday. The $85 billion bailout of AIG on Tuesday by the U.S. Federal Reserve “has weakened the fiscal profile of the United States,” S&P’s John Chambers told Reuters in an interview.
“Lack of a pro-active stance could have resulted in further financial stress and put pressure on the U.S. triple-A rating,” Chambers said. “There’s no God-given gift of a AAA rating, and the U.S. has to earn it like everyone else.”
S&P earlier this month affirmed the “AAA” sovereign rating of the United States, noting risks to the U.S. credit profile including the deteriorating credit profiles for most U.S. financial institutions over the past 12 months, S&P said in a September 3 statement.
Potential up-front costs to the government of maintaining financial stability could reach 24 percent of gross domestic product in the case of a “deep and prolonged recession,” the report said. Chambers on Wednesday compared the U.S. rating to a lobster cooking in a pot of cold water.
“The lobster is still in the AAA pot and still moving,” Chambers said. “The heat is turning up, but the water is still AAA stable.” Chambers also called the AIG bailout “a signal event without precedent,” adding: “This will be case studied for decades to come.”
Some Seek Agency to Buy Bad Debt as Long-Term Answer
As the Bush administration has lurched from pillar to post in the financial crisis, some lawmakers and experts were considering a longer-term legislative solution that would create a new agency to dispose of the mortgage-related assets at the core of Wall Street’s woes.
http://www.nytimes.com/2008/09/17/business/17resolution.html?_r=2&hp=&adxnnl=1&oref=slogin&adxnnlx=1221674635-wj0Z9cuH4vlBCbWq9l2yEA
Q for the finance crew, regarding the last comment.
Would the sovereign ceiling rule apply in this case?
ANyone calling this a bottom ;)
Housing Starts Lowest in 17 Years, Current Account Deficit Widens
Home construction tumbled a second month in a row during August, falling below expectations to the lowest level in 17 years. Separately, the U.S. current account deficit widened in the second quarter, pushed higher by rising oil imports.
http://online.wsj.com/article/SB122165409820947685.html?mod=googlenews_wsj
That would be #323, not #324.
I don’t know about anyone else here, but I’ve totally lost my desire to buy a house. I don’t even care to look at real estate listings. Even lowballs don’t get me excited any more. The thrill is gone. I wonder when it will come back.
Federal bank insurance fund dwindling
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……
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……..
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.
http://www.msnbc.msn.com/id/26747301/
James, could you give me a call or email.
– I am Charlie from Clifton.
Wow, the $hit is getting deep
JPMorgan (or the Fed?) Gave Lehman $138 Billion After Bankruptcy
JPMorgan Chase & Co. gave $138 billion this week in Federal Reserve-backed advances to the broker dealer unit of Lehman Brothers Holdings Inc. to settle Lehman trades and keep financial markets stable amid the biggest bankruptcy in history, according to a court filing.
One advance of $87 billion was made on Sept. 15 after the pre-dawn bankruptcy filing, and another of $51 billion was made today, Lehman said in court documents. Both advances were made to settle securities transactions with customers of Lehman and its clearance parties, according to the filing. The advances were necessary “to avoid a disruption of the financial markets,” Lehman said in the filing.
link for 331
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX7mhYCHmVf8&refer=home
HAHAHAHAHAH ROFLMAO
Ford Chair Seeks To Distance Car Makers From Financial Crisis
Bill Ford Jr. came to Capitol Hill Tuesday to make sure that lawmakers don’t confuse the loans that U.S. automakers are seeking with discussions of bail outs for the companies in the troubled financial services sector. Ford, the executive chairman of the auto company founded by his great grandfather, met with several members of the Michigan House delegation, as well as members from the five other states the company has factories in.
“I really think this is a very separable thing from Wall Street,” said Ford, speaking to reporters after the meeting. “This is something that was already passed but unfunded. There was great familiarity among the membership long before we got into the” last few days, he said. Ford’s message was echoed by lawmakers representing states that have significant auto industry presences.
OOPS, to bad no one warned them of this…… But hey its just like drilling off the east coast will solve all of our oil problems!
Tar sands – the new toxic investment
Shell and BP have been warned by investors that their involvement in unconventional energy production such as Canada’s oil sands could turn out to be the industry’s equivalent of the sub-prime lending that poisoned the banking sector and triggered the current financial crisis.
The criticism came as a report was released yesterday warning of the potential financial risks of tar sands, and members of the UK Social Investment Forum met in London to consider a Co-op Investments campaign on halting oil industry involvement in the carbon-intensive oil projects.
The report, BP and Shell, Rising Risks in Tar Sands Investment, co-authored by Greenpeace and fellow campaign group Platform, argues that oil majors are trying to make up a shortfall in conventional reserves by an irresponsible dash to extract oil from bitumen and other sources.
http://www.guardian.co.uk/environment/2008/sep/17/fossilfuels.carbonemissions
vodka (333)-
What a pluperfect scumbag.
vodka (334)-
Seen the nuke that SA Total is building in Canada to power their tar sands extraction?
Tosh,
Right you are on both counts. I stand chastened.
“Reid Says Congress Won’t Act Because `No One Knows What to Do’”
Hair Plugs Biden knows what happened – says the AIG meltdown was caused by tax cuts for individuals who earn money.
“We should try to correct the problems that caused this. And what’s caused this? The profligate tax cuts to the very, very wealthy that John wants to continue.”
Been in the Senate for 600 years, has no clue.
From my post at 329, the FDIC borrow 15 billion form the treasury. Wamu has approx 130 billion in insured deposits while the FDIC has about 40 billion on hand.
The FDIC is on the hook for a lot more then 20 billion if (when) Wamu goes down. And Wamu would only be bank #11 or #12 to fail with what most likely number sin hundreds of smaller banks that will fail.
During the S&L crisis the FDIC had to borrow 15 billion only after close to 1000 banks failed, not bank #11 or 12.
The FDIC is going to be borrowing hundreds of billions from the treasury.
Clott 336,
the height of insanity, hubris, and greed
This guys podcast is worth a listen.
http://www.money-guy.com/news-nightmares-bank-debacles
New Jersey’s `Wall Street West’ Quakes Amid Namesake’s Turmoil
http://www.bloomberg.com/apps/news?pid=20601109&sid=ajRX_QI2ODtw&refer=home
I got good news, the TED spread is down from 3.02 from 3.04. We are saved!
Treasury will, in a last gasp, bail out the FDIC as early as this weekend.
Well, bringing it back to Real Estate,
New Jersey’s `Wall Street West’ Quakes Amid Namesake’s Turmoil
By Stacie Servetah and Terrence Dopp
Sept. 17 (Bloomberg) — Jersey City, where New Jersey bet it could transform warehouse and factory tracts into a “Wall Street West” across the Hudson River from Manhattan, was paying off. That is, until its investment bank tenants started collapsing.
Many of the towers that have sprung up in the past decade on Jersey City’s waterfront are filled with satellite offices for the largest investment-banking firms. More than 3,000 employees of Lehman Brothers Holdings Inc. and Merrill Lynch & Co. work in New Jersey’s second-largest city.
Lehman this week filed for the biggest bankruptcy, while Merrill agreed to a takeover by Bank of America Corp. Those firms joined Bear Stearns Cos. and at least 20 banks and credit unions nationally that couldn’t survive this year’s credit crunch.
“It’s basically a disaster for tri-state real estate,” said Andy Merin, vice chairman at Cushman & Wakefield in East Rutherford, New Jersey. “Financial companies drive this region. Clearly of all the markets in New Jersey, Jersey City is the most dependent on New York City and the financial arena.”
I thought WS was going to save NJ Gold Coast.
#17 chicagofinance
It means its a good time to raise those NJ state taxes again. Yeee Hawww Go Corzine!
New Jersey Edges New York for Nation’s Highest State-Local Tax Burden
New Jersey residents paid 11.8%, topping the charts. New Yorkers were close behind, paying 11.7%
You should have read the peoples comments after the article.
http://www.nj.com/news/index.ssf/2008/09/study_jersey_undergoing_brain.html
Guy Fawkes Says:
September 17th, 2008 at 3:40 pm
Treasury will, in a last gasp, bail out the FDIC as early as this weekend.
_________________________________________________
That is the truth. Very well said Mr. Fawkes!
In more important news…..
Italian model offers virginity for $1.5M
An Italian model and former “Big Brother” cast member says she is selling her virginity for nearly $1.5 million. Raffella Fico, 20, an aspiring actress who appeared on the Italian version of “Big Brother” this year, told the celebrity magazine Chi she will have sex for the first time with a man willing to pay $1,419,595 for the honor, ANSA reported Tuesday.
http://mysterytopia.com/2008/09/italian-model-offers-virginity-for-15m.html
AIG
http://www.flickr.com/photos/30581266@N06/2864507526/sizes/o/
Star-Ledger warns employees of possible sale, closing
by The Star-Ledger Continuous News Desk
The Star-Ledger today warned employees that the paper will be sold or closed by January if the drivers’ union does not ratify an agreement by Oct. 8.
A Palin Must see
http://i35.tinypic.com/nxs785.png
Tab for Government Rescues Rises to $900 Billion
By Reuters
Reuters
| 17 Sep 2008 | 03:44 AM ET
The U.S. Federal Reserve stepped in to rescue insurance giant American International Group from bankruptcy with an $85 billion loan on Tuesday, the latest in a series of bailouts and loans for the financial and housing sectors.
The action brings the total tab for government rescues and special loan facilities this year to more than $900 billion. Following are details of actions and amounts:
– $200 billion for Fannie Mae and Freddie Mac . The Treasury will inject up to $100 billion into each institution by purchasing preferred stock to shore up their capital as needed. The deal puts the two housing finance firms under government control.
– $300 billion for the Federal Housing Administration to refinance failing mortgage into new, reduced-principal loans with a federal guarantee, passed as part of a broad housing rescue bill.
– $4 billion in grants to local communities to help them buy and repair homes abandoned due to mortgage foreclosures.
– $85 billion loan for AIG , which would give the Federal government a 79.9 percent stake and avoid a bankruptcy filing for the embattled insurer. AIG management will be dismissed.
– At least $87 billion in repayments to JPMorgan Chase for providing financing to underpin trades with units of bankrupt investment bank Lehman Brothers . U.S. Treasury Secretary Henry Paulson said over the weekend he was adamant that public funds not be used to rescue the firm.
– $29 billion in financing for JPMorgan Chase’s government-brokered buyout of Bear Stearns in March. The Fed agreed to take $30 billion in questionable Bear assets as collateral, making JPMorgan liable for the first $1 billion in losses, while agreeing to shoulder any further losses.
– At least $200 billion of currently outstanding loans to banks issued through the Fed’s Term Auction Facility, which was recently expanded to allow for longer loans of 84 days alongside the previous 28-day credits.
Copyright 2008 Reuters. Click for restrictions.
URL: http://www.cnbc.com/id/26751385/
– $400
“The action brings the total tab for government rescues and special loan facilities this year to more than $900 billion.”
Ah.
$1.45 trillion federal deficit, then. My bad.
– $450
Market puking it up on the way to the bell. Got shorter into the mid-afternoon fake rally.
Dinner out tonight! Wonder which empty restaurant my wife and I will hit???
Which empty restaurant will allow me to become the most intoxicated before they cut me off?
[348] Ket is she on ebay?
christ! DJIA -447
Nom
check your e-mail, a gift given the theme of the day
on reforming soc security, what many eastern european countries have done over the past 10-15 yrs is promising (gradually replacing a portion of pay-as-you-go government pension schemes with private accounts):
http://knowledge.allianz.com/nopi_downloads/downloads/Allianz_pensionstudy_cee.pdf
# Nom Deplume Says:
September 17th, 2008 at 4:04 pm
christ! DJIA -447
Nom, everyone always tells me don’t worry about it, its long term, for when you retire. Now, since we won’t be able to retire, you don’t have to worry at all.
kettle1 Says:
September 17th, 2008 at 3:15 pm
Wow, the $hit is getting deep
JPMorgan (or the Fed?) Gave Lehman $138 Billion After Bankruptcy
JPMorgan Chase & Co. gave $138 billion this week in Federal Reserve-backed advances to the broker dealer unit of Lehman Brothers Holdings Inc. to settle Lehman trades and keep financial markets stable amid the biggest bankruptcy in history, according to a court filing.
One advance of $87 billion was made on Sept. 15 after the pre-dawn bankruptcy filing, and another of $51 billion was made today, Lehman said in court documents. Both advances were made to settle securities transactions with customers of Lehman and its clearance parties, according to the filing. The advances were necessary “to avoid a disruption of the financial markets,” Lehman said in the filing.
ket: Are you trying to prove my point?
Clot (114) (a belated comment but I was called away from my desk for most of the day):
Just to be clear, I didn’t put my guy up a grade. I just switched him to a tougher school the following year. So he has been with peers but more challenged. And we escaped all the “mainstreaming” that was a nightmare in public school. I guess maybe the public school did us a favor by not offering to skip him up. On the other hand, turning him into a “teacher’s assistant” was not good for peer relations, either.
Before the cascading failures start, we will see a round of consolidations. We have today arrived at that point. Wachovia and Morgan Stanley are in merger talks, the US government seeks a buyer for WaMu, Lloyds buys UK mortgage lender HBOS
chifi, 363
I dont disagree with how highly interconnected all the different entities are. Our differences lie in the philosophical view of the events at hand.
Thanks for the toilet and teaching talk, folks. Both of the dirty deeds are done.
Hughesrep, you never told me there would be a customer service crisis huddle at the big box if you go tell them to give you a specific toilet (I handed them your list), but you don’t tell them round or oval. They freaked. Apparently, it’s a big thing.
Pat (367)-
Thanks for that report from the front lines of the culture wars.
I’ve been stepping back and watching you all bumble about over current financial events. It’s almost like the end of the Wizard of Oz, when the footsoldiers realize the Wicked Witch is dead.
Remember when all the testosterone around here was expended by making predictions?
Anybody want to make a prediction on the $ amount they will spend for an RTCII house?
Pat (369)-
“Anybody want to make a prediction on the $ amount they will spend for an RTCII house?”
I’m too busy looking for a place I can turn into a soup kitchen.
kettle #351, it swings both ways…
the top google result for pigs is O now
Rent,
no agenda on my part, they are 2 heads of the same snake ( Dem, Rep)
holy sheet! i got a haircut, hit the gym, and went to the grocery store and the markets went in the crapper. eager to read the comments here …
laughy (373)-
That’ll teach you to try and have a life.
JC in the crapper
http://www.bloomberg.com/apps/news?pid=20601109&sid=ajRX_QI2ODtw&refer=home
I have not looked back at the posts, has anyone heard about a GS MM fund that either did or is close to breaking the buck?
Can somebody here forward post #375 to pret?
This is old news.. but did anyone here notice this among all the noise?
http://money.cnn.com/news/newsfeeds/articles/djf500/200809170849DOWJONESDJONLINE000591_FORTUNE5.htm
“Can somebody here forward post #375 to pret?”
I’d been thinking of digging up some of his old posts about how gold coast RE would never fall because bonuses at places like, say, Bear, Lehman, Merrill, etc., would always be great, and they’d never lay anyone off.
Or maybe that was Manhattan.
Re Aig, did they or Treasury post anything other than the cursory news releases re the deal?
376 shore
I had heard that, but not that it was a GS fund.
(282) John Chambers of S&P needs to STFU!
The financial sector is already in deep distress without this guttermouth talking about the credit rating of the US gov’t.
Is his questioning the stability going to help the stability? No!
Can he do anything about it? No!
Is he saying something of value? No!
Is he saying something that other governments haven’t thought of already? No!
Can it create further instability? Yes!
STFU.
Orion (382)-
Here’s what really needs to be said:
The US is now officially a Third World country.
Any word on whether the night-stalking vampires from FedCo will be acquiring any other companies tonight? Or are they on an alternate night schedule?
Clot,
And what also needs to be said is that without a strong economic base we will not be able to keep buying aircraft carriers, stealth bombers, etc.
#383
Got Mandarin or Arabic?
#375 RemainCalmALLISWeLL unfortunately NYC, Hoboken and JC housing markets still priced like we will receive 40% bonuses when all I see people receiving are pink slips.
Since my car is now worth less the the loan amount, can I sell it to Fedco for what I originally paid?
I’m a renter and think if FBs, IBs,and insurance companies are getting hand outs, why not me? Isn’t that how democracy works/ The tyranny of the masses
Anybody seen Pret?
MarketWatch reporting WaMu put itself up for sale:
http://www.marketwatch.com/news/story/wamu-puts-itself-up-sale/story.aspx?guid=%7B95475577%2DD0E8%2D407B%2D9B28%2DD302430FE9BB%7D
Lost: you out there?
Depeche Mode will be at Berlin’s Olympiastadion on October 6th to announce the details for their upcoming 2009 tour.
In the early 2000’s I saw a chart that had stock prices superimposed over home prices. Every downturn in stocks was followed by a downturn in home prices about a year or 2 later. The chart went back to the early 1900’s.
The first exception to the this rule happened in the early 2000’s when the current bubble was created. Normally, home prices should have peaked about 2001 and dropped about 20%-30% or so from there.
Instead, an artificial environment was created to counter normal economic cycles. The normal cycle would have dropped home prices to maybe 1997-98 levels by about 2004. The recession would have lasted longer because it would not have been bailed out by the housing sector, but we would have been in much better shape going forward.
The question is if home prices will still drop to 1997 levels or even lower because we are in much worse shape now than we would have been. I have a feeling that ppl buying homes now thinking they are getting a bargain will be in for a shock in years to come. Many of them could end up in foreclosure despite having bought after the peak.
This is what I got from ING today..
“As we enter the final few months of 2008, I want to thank you for your continued confidence in ING DIRECT. Over 700,000 new Savers have joined us so far this year strengthening the bank and their own financial footing through our savings, home mortgage and ShareBuilder investment accounts. Despite a challenging economic climate, our Customer base is 7 million strong and growing.
The consequences of the mortgage meltdown on financial institutions and individuals continue to erode many Americans’ dreams. We will continue to stress the right way to achieve home ownership – buying only as much house as you can afford and paying off your mortgage as fast as possible. In return for good credit and prioritizing home investment, ING DIRECT mortgage Customers are rewarded with exceptional rates and a transparent, direct administration process. Rather than selling your mortgage to another bank or investor the minute you get it, we keep your mortgage and service it here. Doing so gives us flexibility to find innovative solutions to help Customers keep their homes during unexpected financial downturns.
While we don’t have an Orange crystal ball, we do expect the economy to remain fragile through 2009. The best course of action for our Customers is to be disciplined: avoid splurging; identify and cut out unnecessary expenses and save for what’s essential; and hedge against those tough times. We can all benefit by developing good spending habits: confront – and cut up – credit cards; use your home as a savings vehicle – not as an ATM; and establish and contribute regularly to an IRA or 401(k).”
And this is what I got from Citibank..
“Get $100 when you open a Citibank regular checking account and perform qualifying activities.*
Here’s how:
1. Open and fund your new checking account with $1,000 or more by 10/31/08.
2. Make a direct deposit to or at least 2 electronic bill payments from your new account each month for three consecutive months. Get $100.”
yes. we all wait and wonder.
Also, foreclosures seem to be considered best left to the experts. But I wonder, if foreclosures will become easier to negotiate in the metro area in the next 2 or 3 years with the big increase in them to come. Will short sales of homes be more common?
any thoughts?
394 vic
Better than getting a notice from C that your next withdrawal has to be from the (bankrupt) FDIC.
Wondering how re-assuring the following statement from a regulatory agency could be(Note the solvency date). The news is dated Sep 17th 2008 :
IRDA, on Wednesday, had issued a press release, saying, “Life and general insurance companies promoted by Tata Sons and Tata AIG Life are registered under Indian Companies Act and are bound by the provisions of the Insurance Act and other Regulations. The accounts of these two companies as on March 31, 2008, indicate that both companies have satisfactory solvency margins which are adequate to meet liabilities.”
say goodbye to WaMu…..say goodbye my baby!
sas
gwen (395)-
Yes to all. In fact, those days are here now. I do a lot of short sale/foreclosure/REO work, and just this week I got my first short sale approval- ever- from Fraudy Mae.
This is remarkable, because Fraudy has a big, longstanding rep for demanding the highest payoffs on short sales (talk about an oxymoron!). They are also known onion-busters, but they gave in pretty easily- and quickly- on a deal that represents a staggering loss.
WaMu can suck it.
People with WaMu accounts, read below asap:
http://tinyurl.com/22gv5e
SAS
http://www.treasury.gov/auctions/treasury/rp/realprop.shtml
NOW I know where the Fed’s gonna get all the bailout money…
sl
Clot (400) – Thanks… needed that. What empty restaurant did we hit this evening?
Now looky here:
O is back ahead in the polls.
http://tinyurl.com/biwaswrong
Wag (403)-
Thai Kitchen in Bridgewater…with a bottle of liquor store red.
Sorta lost the taste for the high life at the end of the afternoon. I realized that all it takes for me to lose everything is the PPT busting a move overnight. Those SOBs have one more shot they’re gonna fire at some point, and even though it won’t work, it will sting plenty when it hits.
Besides, you can’t beat a $9.95 drinks tab and a gutful of good Thai for two at less than $20 a head.
The restaurant was even full!
I am still wondering when Citibank folds?
but I am still sticken to my guns on this one… citibank collapse.
SAS
seriously, guys. What are you doing with your cash? Lots of drama on this board, bank and FDIC bashing so……where’s you cash?
For serious.
#392 repo:On the train home to my Bergen Co. train town tonight. I heard 2 guys talking. One guy’s brother in law,30 year Bergen Co. realtor broker/owner, told him that in his opinion houses prices will go back to 97/98 levels. Sooner rather than later.
sas (401)-
The ultimate negative feedback loop.
And C can suck it, too.
In other interesting anecdotal news. I was checking my net worth in Yodlee tonight and it said I had a late payment on one of my credit cards. Since I always pay in full and on time, I checked my Chase bill pay and lo and behold, the payment was supposedly made on time. I called the credit card company and they said that Chase paid late. I had to play a little hardball and she came back and said something about the FDIC performs the transfer and this has been happening all week. I was fully credited, but let it be a warning to all. Either prepare to argue or send your electronic payments a little earlier these days.
Crazy I tell ya.
Wag (403)-
Besides, I can’t blog when I’m smashed.
I get all Depeche Mode and stuff.
stu (410)-
A foreshadowing of Armageddon?
“where’s you cash?”
sadly, if one wanted to move cash and investments, it should have been done by now.
but with that said, its not all doom and gloom, there are some really…really good bargains in the stock market and RE right now.
just don’t panic.
SAS
“sadly, if one wanted to move cash and investments, it should have been done by now”
actually, I take that back, I still think silver is way undervalued.
SAS
Morgan Stanley is in talks to possibly be acquired by Chinese bank Citic, sources in the U.S. and China have told CNBC.
…
Meanwhile, Washington Mutual has put itself up for auction, people briefed on the matter also told the Times.
h++p://www.cnbc.com/id/26763431a
sas, I was just refering to commercial banking, not investing.
Barbara,
I think we have all this discussion before on these boards and this is in “general terms” what we agreed upon, and that is to get a ratings of your local bank.
If it doesn’t have a high rating, get the hell out.
BC & Kettle have made good recomendations for banks, but I can’t remember the names.
I would still conider a certain % in silver (poor mans gold).
If your net worth is over a million, consider foreign currency.
But, this is just SAS’s thoughts off the top of my head. Always do your own research, but quesetions are always welcomed here.
SAS
A few hundred in a checking account, a few hundred at home (in a safe; said safe protected by a well-armed and unstable me).
Everything else short a variety of stuff in a brokerage accoutn.
And I mean, everything.
Barbara, Hudson City Bank for me.
good point Clot…
a handgun in the home never hurts.
(in an instant access pistol safe, and after a firearm safety course).
All disclaimers you never know. But from the info I have ok.
sas,
thanks. I’ve never banked at locals. I have accounts at Citi and BOA. I was thinking about commerce but yes, I need to check out the ratings first.
Barbara Commerce on my good list to split between two.
to = too the two
I heard through the grapevine that Corzine will go back and review his recent budget. He said they used a worse case scenario when the recent one was formulated…but need to back and factor in Armageddon. Layoffs for NJ on the horizon
Mike,
Thanks. I grew up in south jersey and had my first passport savings with them. I liked them at 7 yrs old because they gave out red lollis.
Now they are up here in middlesex county and they still give out the red lollis.
Not exactly a sound financial indicator :) They also have a kick azz coin machine, free to use for anyone, non account holders too
but, as I’ve said before on these boards…
today and what is happening to the investment banks is just background noise.
Who cares about Lemon brothers, Goldmans, Bear… they were nothing but panty wastes who deserve to hit the pavement and hang from a noose.
what really people should pucker about is the failures and collapse of pension funds.
when you hear “privitazation”, you better pay attention.
just my thoughts
SAS
Citic sounds better than Wachovia. Why the hell they’d want to merge with the home of the pick a payment mortgage is beyond me?
So the Chinese are buying MS?
Barbara They were bought by a Canadian bank
all the better.
Review the Argentinia crisis.
and yes, this is all by design.
and if you think O_Bama~ will bring “change”, your slinging cain.
Change comes from the bottom up, not top down. You want change… look in the mirror and change it yourself.
and forget Songbird Mc_Same and McC_ain~.
he dead and circling in the drain in the nexy 2-3 years.
Cheerio.
SAS
Brother at MS I said the same thing to him about Wach but the Chicoms that hurts.
408.Barbara Says:
September 17th, 2008 at 8:36 pm
seriously, guys. What are you doing with your cash? Lots of drama on this board, bank and FDIC bashing so……where’s you cash?
For serious
Hudson City Savings
Joint Account, Tiered Interest 3%, $200K FDIC
Individual Accounts, MM Interest 3.5%, $100K ea FDIC
IRA Accounts CD’s $250K ea FDIC
Merger Arbs Balking at Merrill/BofA Deal
http://seekingalpha.com/article/96000-merger-arbs-balking-at-merrill-bofa-deal
I call bs too. This deal was just a smokescreen to buy time and prevent the embarrassment of having two brand name brokerages enter bankruptcy in the same week. Offer some crazy ass premium to stop the shorts in their tracks and essentially pull Merril off the market until things calm down. If it does get done it will probably be down in the $2-5 range.
I’d imagine Chinese banks have something US banks don’t, lots of frigging deposits.
Somber:
http://market-ticker.denninger.net/archives/584-The-Potential-End-Of-Americas-Government.html
As I’ve said before confused is not confused at all. I however am still in waiting.
“seriously, guys. What are you doing with your cash? Lots of drama on this board, bank and FDIC bashing so……where’s you cash?
For serious.”
Zero in fractional reserve banking, actually a small checking account, short consumer discretionary/long consumer necessities, short malls, long grains,long metals, long Japanese Yen. Hedged on short stocks, the masters will go all out to stem this. That’s OK, gives all an opportunity to sell at higher prices.
Yes, we are turning Japanese, I really think so.
Disclaimer, not a recommendation by any means.
Hey Kettle check it out this guy stole my theory:
If I were a large financial institution with a critically hemorrhaging balance sheet due to massive losses created from insane foolish and risky bets on MBS (mortgage backed securities) and CDOs (collateralized debt obligations), and I wanted the quickest way to recapitalize my balance sheet, how would I do it? Through gross manipulation of commodity markets, in particular the gold, silver, oil and agriculture markets. Of course, I would need the help of certain regulatory agencies to achieve this and wouldn’t be able to accomplish this on my own, but I’m going to speculate that this is exactly what just happened. This correction was not only just about shoring up the U.S. dollar and U.S. Treasuries, but also about recapitalizing Wall Street and huge banking institutions. Though I haven’t covered the oil and agriculture futures markets, there is more than ample evidence that the same thing has occurred in these markets as of late as well (and again, the evidence is blatant enough that U.S. Senators have demanded investigations into much of the curious behavior I have delineated in this article). Again, if you are someone interested in putting an end to the regulatory and government schemes that continue to reward CEOs for their incompetence, dishonesty, and disloyalty to shareholders, and you care about the future of the United States, I urge you to forward this article to everyone you know.
http://seekingalpha.com/article/95496-law-of-supply-demand-is-dead-for-gold-silver?source=front_page_most_popular_articles
“Zero in fractional reserve banking”
yes. if you blokes want real “change”
dismantle the fractional banking system.
SAS
he [436],
Something’s fishy. I commented on Sunday night, why would BOA strike a deal then? It would have been much cheaper on Monday morning.
BC,
Yeah, and a deal at a 17% premium on a company that had to pay a private equity firm to take a bunch of crap off their books at like 22 cents on the dollar.
It’s like one of those paintings with a hidden picture, take a step back and you can see it.
Stu,
I have really been considering voting for Mc, I just want the party to clean up it’ own mess, and get totally trashed in the process. The next president is doomed.
KL
wait a minute…
i thought RE always goes up?
and because of Wall St. bonuses, they are always buying houses and will just drive prices up, so you better get in now, before you get priced out!!
oh ok, its 2008
not 2004 or 2005.
my mistake.
SAS
Lemon brothers…
10 cents/cup.
SAS
Sas speaking quantities of truth yet again
443 BC bob
You’re applying logic. Stop that.
We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit
http://www.nytimes.com/2008/09/18/business/18wall.html?_r=1&oref=slogin
418 clot
“a few hundred at home (in a safe; said safe protected by a well-armed and unstable me)”
If you weren’t unstable, I wouldn’t hire you. What are you charging?
I use Apple Bank of NY and TD Ameritrade MM for my cash positions.
sas (422)-
I’ve always found things work better when you equally arm all the individuals in the household.
That way, in case of conflict, everyone has a fighting chance. :)
Even the Mets’ wins suck the life out of you.
Mike (434)-
Meet the new boss…same as the old boss…but he speaks Mandarin.
blood (452)-
Once I tell you, I then have to kill you. :)
Hey BC-
Having fun yet?
Fits the vibe…..
Fly On The Windscreen by Martin L. Gore
Death is everywhere
There are flies on the windscreen
For a start
Reminding us
We could be torn apart
Tonight
Death is everywhere
There are lambs for the slaughter
Waiting to die
And I can sense
The hours slipping by
Tonight
Death is everywhere
The more I look
The more I see
The more I feel
A sense of urgency
Tonight
There are flies on the windscreen
There are lambs for the slaughter
There are flies on the windscreen
Did you guys see this yet??
Forget Japanese…we are turning Pakistani. Free markets, my a$$!!
http://www.bloomberg.com/apps/news?pid=20601087&sid=azN7IA9Y_nZo&refer=home
“Democratic New York Senators Hillary Clinton and Charles Schumer urged the SEC today to impose a temporary ban on short- selling of all financial stocks, saying it would “help restore a measure of stability to our financial markets.” “
vic (460)-
I’ll buy puts, then.
“The next president is doomed. ”
Rhyming,
I believe you are correct. Since last autumn, I have been saying to friends that I believe that whomever wins the White House this November will regret having run and won.
vic (460)-
That’s just great. Create a situation in which these companies can go to 0 in one trading session.
When investors can’t sell short, they just plain sell.
If we can convict Clinton, Schumer et al of treason, I want to be the guy operating the gallows. Please.
“. In a memo to employees, Chief Executive Officer John Mack said the management committee is “taking every step possible to stop this irresponsible action in the market.”
“There is no rational basis for the movements in our stock,” wrote Mack, who added that he was in contact with Cox and Treasury Secretary Henry Paulson. “We’re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down.” ”
– Yo, Why dont you check your balance sheet for a change?
clot: I like you better drunk. Instead of focused and acerbic, you are just random and beligerent……I can hear your slurring words through the Internet…
463- Clot.
Wouldnt the volume go to zero when this happens? I mean, who in their right mind would want to buy these leveraged pieces of shiite.
THE FIRST MONEY-MARKET MUTUAL fund in history became the first one to “break the buck” — that is, have its share price fall below $1 a share — in more than a decade.
The Reserve Primary Fund with $65 billion in assets as of Aug. 31, delayed redemptions as long as seven days after slashing the value of its $785 million of Lehman Brothers commercial paper and medium-term notes, Bloomberg News reports.
The fund touts its status as the creator of the first money-market fund in 1970. It’s now the first to break the buck since 1994, when the Community Bankers Mutual Fund was liquidated.
The “difference is that in 1994 it was a tiny fund (that went under),” writes Banc of America Securities bond analyst Michael Cloherty in a note to clients.
The Reserve Primary Fund has $65 billion in assets under management.
“What we are waiting to see is how this impacts people’s perception of money market funds: investors always looked at money market funds as offering principal protection and same-day liquidity,” Cloherty writes. “Depending on how that perception changes, we could see massive withdrawals from the $4.6 trillion money market fund industry with the money going to bank deposits and Treasury bills.”
The financial system is dependent on borrowing by institutions in the repurchase agreement market, Cloherty continues. The main lenders in the repo market are money funds. If these funds face big withdrawals, repo borrowers would have to turn to banks for credit. The banks’ balance sheets already are stretched.
“Liquidity could get worse,” he adds.
“So, the key thing to watch in the coming days is whether there are large redemptions from money funds. The money funds are likely to be very protective of their liquidity until the dust settles– look for little activity beyond overnight in the [repo, commercial paper] and other money markets. And look for overnight rates to be very high in the morning while money funds are concerned about liquidity, followed by very low rates at the end of the day when they invest the cash.
The money markets already are struggling with banks hoarding cash and being reluctant to lend, resulting in rates trending far above the Federal Reserve’s target for federal funds of 2%. The Fed, in concert with foreign central banks, have acted aggressively to bring money rates down.
But news of a money fund breaking the buck, especially a high-profile one that has paraded its experience and conservatism in its marketing, could undermine confidence among individual investors –just at a time they may be flocking to money funds for safety.
http://online.barrons.com/article/SB122160459019445225.html?mod=googlenews_barrons
clot will have a busy job at the gallows
did tard hitch a ride to fla yet?
I saw this a few hours after we pulled every last dollar out of MM funds and moved them to FDIC insured (Yea I know the problems there) accounts.
ple lose faith in MM, it is going to be like throwing sand into an engine, and will gum up the works.
Reserve Money Fund Falls Below $1, Delays Withdrawals (Update1)
By Christopher Condon
Sept. 17 (Bloomberg) — Reserve Primary Fund, the oldest U.S. money-market fund, became the first in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc.
Shareholders pulled more than 60 percent of the fund’s $64.8 billion in assets in the two days since Lehman folded. Losses on the securities firm’s debt forced the fund to break the buck, meaning its net asset value fell below the $1 a share price paid by investors, New York-based Reserve Management Corp., its closely held owner, said yesterday in a statement. Redemptions will take as long as seven days.
Assets in money-market funds, considered the safest investments after cash and bank deposits, rose to a record $3.59 trillion this month as stock and commodity markets fell. Investor confidence has been shaken by the subprime-mortgage collapse, the demise of Lehman and Bear Stearns Cos., and the failure of 11 U.S. commercial banks. The first money-market fund to break the buck was the Community Bankers Mutual Fund in Denver, which had $82.2 million when it was liquidated in 1994 because of losses on interest-rate derivatives.
“This is going to unsettle investors and probably create further runs on other money funds,” Geoff Bobroff, a mutual- fund consultant in East Greenwich, Rhode Island, said in an interview.
Widespread withdrawals from money-market funds would aggravate the global credit crunch because they are major buyers of short-term debt issued by corporations and financial companies. Today, the cost of borrowing in dollars for three months jumped the most since September 1999 as banks hoarded cash. The London interbank offered rate, or Libor, rose 19 basis points to 3.06 percent, the British Bankers’ Association said. A basis point is one-hundredth of 1 percent.
`Massive Withdrawals’
“We could see massive withdrawals from the money-market fund industry with the money going to bank deposits and T- bills,” Michael Cloherty, a New York-based analyst with Bank of America Corp., wrote in a research note yesterday.
Standard & Poor’s lowered its principal stability fund rating on Reserve Primary and the company’s International Liquidity Fund Ltd. to Dm, the lowest, from the top AAAm, citing their Lehman debt holdings. Nine other Reserve funds were put on CreditWatch for possible downgrade, New York-based S&P said yesterday in a statement.
The $260 million Colorado Diversified Trust has also fallen below $1 a share because of losses on New York-based Lehman’s debt, according to the S&P statement. The fund pools investments for state and local governments and schools, according to its Web site. All assets, excluding Lehman commercial paper, are set to be transferred today to the Colorado Local Government Liquid Asset Trust, S&P said.
Limited Impact
The ratings firm said none of the other 525 money funds it tracks will be affected by Lehman’s bankruptcy. Those funds oversee $2 trillion.
Reserve Primary held $785 million in Lehman commercial paper and medium-term notes. The fund’s board decided yesterday that the debt was worthless. That pushed the fund’s net asset value to 97 cents a share, the company said in the statement. Investors who requested redemptions by 3 p.m. New York time yesterday will get all their money back.
Ming Lee Hatch, a spokeswoman for Reserve Management, said she couldn’t immediately comment on whether the company planned to secure credit to support the fund or wind it down.
Reserve Management probably was unable to prop up the fund before temporarily halting redemptions because it lacked the backing of a large institutional owner, said Peter Crane, president of Crane Data LLC in Westborough, Massachusetts, which tracks money-market funds.
“Reserve just didn’t have the deep pockets to buy troubled securities out,” he said.
Evergreen Supports Funds
Boston-based Evergreen Investment Management Co. said yesterday it had secured support from Wachovia Corp., its parent, to protect three money-market funds from losses linked to debt issued by Lehman. The funds’ held $494 million of Lehman debt.
Money managers including Legg Mason Inc. and Bank of America, propped up money funds in the past year because of losses on debt issued by structured investment vehicles. Baltimore-based Legg Mason lined up $2.15 billion in financing to prevent money funds from breaking the buck.
Bruce Bent, chairman of Reserve Management, is credited with inventing the money-market fund with his opening of Reserve Primary in 1970. He often said the best money-market funds should be “boring.” He derided other funds that invested in securities linked to subprime mortgages and other risky debt.
High Yields
The fund’s institutional share class ranked second among top-yielding institutional money funds as of Sept. 15 with a yield of 2.82 percent. Touchstone Institutional MMF was first at 3.10 percent. Reserve Management’s assets rose 95 percent in the year ended June 30 to $125 billion. Banks and other institutions accounted for 65 percent of assets.
Other fixed-income funds that ran into trouble earlier this year included enhanced cash funds and ultra-short bond funds. Both invest in short-term debt, usually less than one year, and aim to provide a higher return than money-market funds by taking more risk. Neither category of funds aims to maintain a $1 a share net asset value.
Evergreen liquidated the $403 million Ultra-Short Opportunities Fund in June after it fell 20 percent this year. San Francisco-based Charles Schwab Corp. is being sued by investors over losses in its Yield-Plus Fund, which is down 30 percent.
SEC Oversight
Money-market funds, which are regulated in the U.S. by the Securities and Exchange Commission, strive to preserve the $1 a share net asset value, meaning that investors can always get back their principal, as well as interest earned by the fund on its investments. They are required to hold debt that matures in 13 months or less, with a weighted average maturity of 90 days or less. The securities must have top short-term corporate debt ratings.
“The company and its counsel apprised staff of the fund’s situation earlier today and discussions between staff and the company and its counsel are continuing,” Andrew J. Donohue, director of the SEC’s investment management division, said in a statement. “SEC examiners are on-site at the fund to monitor activities.”
U.S. money-market mutual-fund assets were $3.58 trillion as of Sept. 10, just below their peak of $3.59 trillion set a week earlier, according to the Investment Company Institute, a Washington-based trade group.
Sound Structure
ICI President Paul Schott Stevens released a statement attempting to bolster investor confidence in money-market funds.
“The fundamental structure of money-market funds remains sound,” he said in the statement. “These funds are subject to strict regulation governing credit quality, liquidity, diversification and transparency.”
Federal Reserve spokesman David Skidmore declined to comment.
“We’d all forgotten that any investment comes with risk and we’re learning it the hard way now,” said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. “Even the safest investments, like the money-market funds, are starting to pose risks and that shouldn’t be a surprise given the crisis in the financial industry.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLwxHK3Ygc8s&refer=home
GMAC Short-Term Debt Costs Soar as Fund Breaks Buck (Update1)
By Bryan Keogh
Sept. 17 (Bloomberg) — Short-term debt costs for GMAC LLC, UBS AG and Sears Holdings Corp. soared as the oldest U.S. money- market fund saddled investors with losses, sapping confidence in assets once considered among the safest.
GMAC, owned by Cerberus Capital Management LP and General Motors Corp., is willing to pay the most to borrow in the commercial paper market since Dec. 31, 2007. The rate for Zurich- based UBS jumped to the highest since March 4. Sears, the biggest U.S. department-store company, is offering the most in six months to sell the debt.
The Reserve Primary Fund suspended redemptions and its net asset value fell below $1 a share, eroding confidence in money- market funds, which invest in commercial paper. That could drive up financing costs for companies, said Ajay Rajadhyaksha, head of fixed income strategy at Barclays Capital Inc. in New York. Companies rely on access to the commercial paper market to finance day-to-day expenses such as payroll and rent.
“That unfortunately can spiral in the sense that it makes it more difficult for all companies to raise short-term money,” Rajadhyaksha said.
Widespread withdrawals from money-market funds would aggravate the global credit crisis because they are major buyers of short-term debt issued by corporations and financial companies. Average yields on top-rated seven-day commercial paper jumped 0.56 percentage points today to 3 percent, the highest since March 6, Bloomberg data show.
Panic
U.S. Treasury three-month bill rates dropped to the lowest since World War II as investors abandoned higher-yielding assets for the safety of the shortest-term government securities. That followed the bankruptcy filing of Lehman Brothers Holdings Inc. and a government takeover of American International Group Inc.
“The sort of panic going round the money market world is what they’ve been investing in is not as safe as they thought it would be,” said Dominic Konstam, head of interest-rate strategy in New York at Credit Suisse Securities USA LLC, one of the primary securities dealers that trade with the Federal Reserve. “The only thing they want to invest in is Treasury related.”
GMAC, which is 51 percent controlled by Cerberus with the rest held by former parent GM, today posted a rate of 5.25 percent for seven-day commercial paper, 1.25 percentage point more than yesterday. Detroit-based GMAC and other direct issuers of commercial paper post rates of how much they’re willing to pay to issue the debt.
UBS, Sears
UBS, Switzerland’s biggest bank, is offering a rate of 3 percent on the seven-day paper, up 1 percentage point, Bloomberg data show. Hoffman Estates, Illinois-based Sears is offering 3.63 percent, or 0.33 percentage point more than yesterday, to issue 30-day commercial paper.
Societe Generale SA, France’s second-largest bank, posted an offer rate of 4.23 percent, the highest since Jan. 15, up from 3.58 percent yesterday and 2.12 percent on Sept. 12.
Reserve Primary Fund became the first money-market fund in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman. Shareholders pulled more than 60 percent of the fund’s $64.8 billion in assets in the two days since Lehman folded.
Losses on the securities firm’s debt forced the fund to break the buck, meaning its net asset value fell below the $1 a share price paid by investors, New York-based Reserve Management Corp., its closely held owner, said yesterday in a statement. Redemptions were suspended for as long as seven days. The fund’s net asset value fell to 97 cents a share, the company said.
Colorado Fund
The $260 million Colorado Diversified Trust has also fallen below $1 a share because of losses on New York-based Lehman’s debt, according to Standard & Poor’s. Money-market funds, which are regulated in the U.S. by the Securities and Exchange Commission, strive to preserve the $1 a share net asset value, meaning that investors can always get back their principal, as well as interest earned by the fund on its investments.
They are required to hold debt that matures in 13 months or less, with a weighted average maturity of 90 days or less. The securities must have top short-term corporate debt ratings.
U.S. money-market mutual-fund assets were $3.58 trillion as of Sept. 10, just below their peak of $3.59 trillion set a week earlier, according to the Investment Company Institute, a Washington-based trade group.
TED Spread
U.S. Treasury three-month bill rates dropped 65 basis points to 0.04 percent and the so-called TED spread, the difference between what the Treasury pays to borrow for three months and the amount banks charge each other for loans, widened by 84 basis points to 302 basis points, the highest since at least 1984. A basis point is 0.01 percentage point.
“Cash requirements have increased markedly as financial firms reel from losses, and fears of counterparty risk have caused sharp jitters in interbank lending markets globally,” Diane Vazza, managing director and head of global fixed-income research at New York-based S&P, said today in a report. “Meanwhile, equity markets and other segments of the credit markets continue to crater, raising fears of systemic risk.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=ajhFF2lQvSBc&refer=home
Damn! Just saw this, over at CR.
“Seeking to avoid the kind fate that led Lehman and Bear Stearns to collapse, John J. Mack, Morgan Stanley’s chief executive, made an unsuccessful effort on Tuesday evening to persuade Citigroup’s chief executive, Vikram S. Pandit, to enter into a combination, according to people briefed on the talks.
“We need a merger partner or we’re not going to make it,” Mr. Mack told Mr. Pandit”
Clotpoll Says:
September 17th, 2008 at 8:38 pm
sas (401)- The ultimate negative feedback loop. And C can suck it, too.
Clotpoll Says:
September 17th, 2008 at 10:29 pm
Even the Mets’ wins suck the life out of you.
There is some mathematical equivalence here, but it eludes me how to represent it……some kind of Nashville Prep School Tobacco Road Calculus, but I’m lost.
Victorian:
I guess we know who Fedco is buying tomorrow night.
I thought Wachovia were so far into Prudential to merge with anyone else. Thinking about that, Pru and the other Insurance companies have been very quiet.
I’m getting an interesting ring side seat for some of the fall out from this week. It will make a good conversation at the next GTG I get to.
vic (466)-
The volume will cascade, as desperate sellers pile on, create gapping bid/ask spreads and drive the price to 0.
Barney Frank just said that “Foreclosures started this crisis.” He does not seem to understand that foreclosures were a symptom of the problem.
The mechanics of short selling create a floor under share prices.
Take away short selling, and that floor disappears…and is replaced by a vacuum.
Hang Seng off over 5%. One wonders whether this is following what happened here today or whether it is pointing to what we can expect tomorrow.
Chi (472)-
Nope. Just an old-fashioned brain explosion.
From now on, I will never be able to meet anyone named Ayala without beginning to foam at the mouth like a rabid cat.
Shore Guy Says:
September 17th, 2008 at 11:16 pm
Barney Frank just said that “Foreclosures started this crisis.” He does not seem to understand that foreclosures were a symptom of the problem.
The freightening think about Barney Frank is that he is actually as unintelligent as he sounds….and he doesn’t even seem to have any sense of his blatant deficiencies…
Got Gold?
At the end of the day the Bullion in Australia is not exactly going to be a liquid asset. GLD is probably worth the paper its written on.
Those holding ingots or coin may be in a slightly better position, but will have to defend their holdings or spend a lot of effort moving it, Thinking about that should make you think of “The Good, the Bad and the Ugly.
I think my Mantra is still “Got Groceries”. It will be tradable for your gold and will follow inflation both up and down. Inflation may take the loaf of bread to $1000, but I would rather be the one holding the loaf at that point.
Instead of burying ingots in the back yard, invest in getting yourself self sufficent and build up your knowledge of the old arts baking sewing and the like. For those with kids, go join the scouts or brownies and educate yourself and your kids. It makes more sense in the long run.
All disclaimers.
chi (480)-
Yeah, but you gotta love the male ho@ker ring that was being run right out of his apartment…without his knowledge.
I don’t think Frank is fit to be hung at the gallows. I suggest we use him as the feature event in a good, old-fashioned bear baiting tournament.
By the looks of it, the firm I work for is in deep doo-doo.
Hmmm, will have to start looking for a job soon.
PGC (481)-
Gonna be hard to learn how to sew in 10 days.
Vic (483)-
Can you start sabotaging stuff while you wait for your firm to die?
Seriously, good luck to you. Please keep us posted.
#485 Clot
If your looking at that short a time frame, may I suggest this.
http://www.amazon.com/Build-Your-Own-Earth-Oven/dp/096798467X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1221708807&sr=8-1
One big sack of Flour from Costco and you’re set.
You can barter for the sewing… :*)
Thanks Clot.
I think once all of this is over, an entire generation of people are going to swear off of stocks.
I wonder what will happen to all the mutual fund companies.
PGC (486)-
Baking? That I can do.
Vic (487)-
Once all this is over, it’s time to buy all the stocks you can get your hands on.
When you wake up, turn on the telly and see Becky touting SKF, it’s time to get long.
Or, just come here and do the opposite of whatever bi says (assuming that his margin clerk hasn’t taken his fingers as collateral).
#489
The first step grasshopper.
Here’s my Nirvana.
http://www.amazon.com/Preserved-Nick-Sandler/dp/1904920012/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1221709790&sr=1-1
I didn’t realise it was out of print. I’m trying to get up the courage to try making Bresaola.
474 PGC
You and me both
May be too close to the middle of the ring – taking punches.
477 clot
Wish you could talk to the gang at my shop about that
#489
Nirvana Part 2
http://www.amazon.com/Charcuterie-Craft-Salting-Smoking-Curing/dp/0393058298/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1221710924&sr=1-1
Does anybody know how to make alcoholic peaches?
I don’t know the real name. When I was a kid, my oldest bro had a peach orchard that came free with his house.
My depression era mother would go and pick up all the scummy ground ripe peaches he didn’t want, and make this canned stuff. Then there was some kind of alcoholic stage.
Then, over cream or ice cream.
Pat (494)-
In my NC days, I encountered a drink made of peaches that had been allowed to partially ferment. Then, the fermentation was arrested by plunging the peaches into moonshine.
I attribute many of my mental and emotional problems to having drunk this stuff.
Well, I’m going to try to cook it up. We now live in the agricultural preserve or reserve or something.
There are “honor” stands. You take stuff and leave the money. Hah. right-oh.
So, there are all these peaches on the ground. ;)
Besides, Gomer Pyle, our plumber, just put in the new terlet downstairs. It only took him from 6 until 9.
But he has to come back for something. And I want to test my theory that he will work faster and talk less and I will understand his accent more easily on a good dose of booze.